Northland Decides on New Strategy and Informal Reorganization

FOR: Northland Resources S.A. 
JUNE 30, 2014 
Northland Decides on New Strategy and Informal Reorganization 
LUXEMBOURG, LUXEMBOURG--(Marketwired - June 30, 2014) - Northland Resources
S.A. (OSLO:NAUR)(FRANKFURT:NPK)(OMX:NAURo) - (together with its subsidiaries
"Northland", "NRSA" or the "Company") announces a
change in strategy and initiates an informal reorganization due to low iron ore
prices. Focus is to maximize operational flexibility. 
Northland's long term strategy has since 2010 been to develop Kaunisvaara
to reach a yearly production of approximately 4 million tonnes of iron ore
concentrate, with two processing lines in use. Over the last years, all
Northland's major business decisions have been made in the context of
implementing this strategy. Such decisions include staffing and organizational
setup, capital expenditures, key supplier contracts and financing. 
The production from the first processing line has gradually improved and during
April and May the production reached targeted levels both in terms of volumes
and cash costs. However, a significant reduction in world market iron ore
prices in 2014 from around $135/dmt in the beginning of the year to a low point
of $89/dmt has made the Board of Directors come to the conclusion that a change
in the Company's strategy is necessary under the prevailing challenging
New strategy and operational implications 
Northland's new strategy is based on reaching maximal flexibility in
operations and cost structure to be able to cope with the high volatility of
world iron ore prices. Through a focus, at this point, on production from the
existing processing line significant cost reductions can be made, while
simultaneously preserving ore resources and retaining long-term flexibility. 
With the new strategy, Northland will complete construction of the second
processing line but not take this line into production at current price levels.
As remaining expenditure to complete the second processing line is limited,
this will enable the Company's to maintain optionality to ramp up when
market conditions improve. Until then, the strategy gives Northland the
opportunity to preserve liquidity and at the same time avoid depleting Reserves
& Resources in periods of low prices. 
With the new strategy fully implemented, the Company is targeting to reach
breakeven cash flow on an operating level at close to prevailing iron ore price
even when operating only one processing line. 
As a consequence of the new strategy, significant changes to the operations of
Northland are required. The lower cost level is expected to be achieved through
organizational changes and productivity improvements in combination with a
review of certain commercial supplier contracts. At this stage it is uncertain
how employees will be affected by this change. The Company has initiated a
dialogue with the relevant labor unions.  
In addition, the Company will seek to improve terms and conditions under its
off-take agreements. As a part of such improvements, Northland has signed a
non-binding Memorandum of Understanding with Mitsubishi Corporation RtM
International for deliveries of a significant part of the production. 
The Company has also entered into a non-binding Term Sheet with a new Strategic
Partner. If materialized, a final agreement with the Strategic Partner would
allow Northland to source iron ore for the second processing line starting in
2016 and continuing until 2018/2020 maintaining an annual production of 4.4 -
5.4 million dmtpa. Upon expiry of the sourcing agreement the second processing
line can be supplied with ore from the Sahavaara deposit. An agreement with the
Strategic Partner is expected to result in a higher operating cost compared to
own mining, but would enable postponing Capex of approximately USD 150 million
required to start production from the Sahavaara deposit. Ramping up production,
whether on Strategic Partner ore or based on development of Sahavaara, would
nonetheless require an improved market for iron ore or seeing the effects of
the new strategy to reduce the cost of production. 
Suspension of payments and informal reorganization 
To implement the new strategy while preserving liquidity, Northland has today
decided to temporarily suspend payments to its suppliers and creditors. The
company will initiate an informal reorganization procedure in which creditors
and suppliers will be presented with a proposal for a settlement. The process
and procedures regarding temporary suspension of payments will be managed by
attorney Lars Soderqvist who also managed Northland's formal
reorganization in 2013. The new strategy will also affect the capability to
keep the repayment time plan for the creditors set up as part of the
reorganization in 2013. 
The current market environment with low iron ore prices does not provide the
basis to secure viable long term financing. Accordingly, the Company's
financing process has not been concluded on schedule but will remain an area of
focus as the new strategy is implemented. Key stakeholders including major bond
holders and key suppliers have indicated their support for the new strategy. 
"The dramatic weakening of the world iron ore prices has led Northland to
revisit its strategy, despite the positive operational development we've
seen during the past months with the existing operations. With the new strategy
that the Board has decided on, Northland achieves a much higher flexibility
which we see to serve best the long term interests of all our stakeholders. In
current market conditions, we will be able to preserve liquidity and strategic
assets allowing Northland to maximize production when iron ore prices are
higher", said Olav Fjell, Chairman of the Board. 
"The new strategy means that Northland needs to go through painful but
necessary changes. This will affect the organization and how we run our daily
operations. Our task ahead is to secure that Northland has a viable future even
in challenging market conditions", said Johan Balck, CEO. 
"Under current circumstances, I believe an informal reorganization of the
Company can be successful. Through an informal reorganization it is possible to
reach the best available solution for all creditors. If the informal process
should not progress as expected the Company will always have the option to at a
later stage enter into a formal reorganization, in order to increase protection
of the company's assets for the long-term benefit of all its
creditors", said attorney Lars Soderqvist. 
Northland is a producer of iron ore concentrate, with a portfolio of
production, development and exploration mines and projects in northern Sweden
and Finland. The first construction phase of the Kaunisvaara project is
complete and production ramp-up started in November 2012. The Company expects
to produce high-grade, high-quality magnetite iron concentrate in Kaunisvaara,
Sweden, where the Company expects to exploit two magnetite iron ore deposits,
Tapuli and Sahavaara. Northland has entered into off-take contracts with three
partners for the entire production from the Kaunisvaara project over the next
seven to ten years. The Company has also finalized a Definitive Feasibility
Study ("DFS") for its Hannukainen Iron Oxide Copper Gold
("IOCG") project in Kolari, northern Finland.  
Forward-Looking Information 
This announcement may include "forward-looking" information within
the meaning of applicable securities laws. This forward-looking information can
be identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "anticipates",
"expects", "intends", "may", "will" or
"should" or, in each case, their negative, or other variations or
comparable terminology. This forward-looking information includes all matters
that are expectations concerning, among other things, Northland's results
of operations, financial condition, liquidity, prospects, growth, strategies
and the industry in which it operates. By their nature, forward-looking
information involves risks and uncertainties because they relate to events and
depend on circumstances that may or may not occur in the future. Readers are
cautioned that forward-looking information is not a guarantee of future
performance and that Northland's actual results of operations, financial
condition and liquidity, and the development of the industry in which it
operates may differ materially from those made in or suggested by the
forward-looking information contained in this press release. In addition, even
if Northland's results of operations, financial condition and liquidity,
and the development of the industry in which Northland operates are consistent
with the forward-looking information contained in this press release, those
results or developments may not be indicative of results or developments in
subsequent periods. 
Northland Resources S.A.
Johan Balck
+46 920 779 00
Jonas Lundstrom
Vice President Investor Relations & Corporate Communication
+46 705 49 33 38
Johan Dagertun
Vice President Financing and Business Control
+46 920 779 00 
INDUSTRY:  Manufacturing and Production - Mining and Metals 
-0- Jun/30/2014 07:22 GMT
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