NOT FOR DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED
STATES, AUSTRALIA, HONG KONG OR JAPAN OR ANY OTHER JURISDICTION IN WHICH THE
DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL. OTHER RESTRICTIONS ARE APPLICABLE.
PLEASE SEE THE IMPORTANT NOTICE AT THE END OF THIS PRESS RELEASE.
THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN OFFER OF ANY OF THE SECURITIES
DESCRIBED HEREIN.
Northland Resources S.A. (OSLO:NAUR)(FRANKFURT:NPK)(OMX:NAURo) (together with
its subsidiaries "Northland", "NRSA" or the "Company") announces that it
supports a bondholder-led restructuring of Northland. The contemplated bond
offering enables the Company to complete its Kaunisvaara Project.
The Company has reached agreements with representatives of the holders of the
USD 370 million senior secured bonds issued in March 2012 by Northland Resources
AB (publ), as well as the bondholders financial advisor, to restructure the
existing bonds into a new second lien convertible bond with 4% interest p.a.
(payable semi-annually) interest and maturity in 2020, and release the remaining
amounts on the Debt Service Accounts ("DSA") to the Company
-- The Company expects to launch a new USD 362 million senior secured bond
offering with 12% interest and an Original Issue Discount ("OID") of 7%.
Three existing restricted bondholders have signed commitment letters for
an aggregate amount totaling approximately one quarter of the
contemplated bond issue
-- A bondholder meeting is to be held on May 3, 2013 to approve the terms
of the Reorganisation and the main terms of the contemplated new bond
-- The Company and the Administrator have also finalized a proposal
regarding the repayment in part of the outstanding accounts payable in
2013, and the remaining outstanding amounts becoming interest bearing
and repaid in accordance with a repayment plan. It is a condition to
implementation of the proposal that the Reorganisation will have pre-
acceptances from the requisite trade creditors in numbers and volume,
needed to approve the reconstruction plan.
-- Suppliers who has provided for short term credit after entering into
Reorganisation and thereby being entitled to super priority right will
be repaid in full on the implementation date which is scheduled to occur
by May 24 (together with any interest accrued thereon) or as otherwise
agreed.
-- The Company is agreeing on fixed price contracts for the majority of
outstanding capital expenditures with key suppliers
-- The Company's Board of Directors will see certain revisions as part of
the Reorganisation. Three existing Directors will resign from the Board.
In the interim, Mr. Leif Christian Salomonsen and Mr. Runar Nilsen will
be appointed to the Board of Directors as observers. Following
completion of the reorganisation four new Directors are expected to be
proposed by bondholders and key suppliers
-- Based on the anticipated long term financing the Company will be fully
funded and reach full production in second half of 2014
-- The Company expects to be able to emerge from Reorganisation around
early July 2013 following the completion of these actions
-- Following the restructuring, existing shareholders will retain
approximately 5.14% of the fully diluted equity of the Company. In
addition the Company expects to offer existing shareholders the
opportunity to participate in a repair issue of up to USD 25 million at
the conversion price applicable to the new second lien convertible bond
-- Discussions with key suppliers are at an advanced stage and the Company
expects to receive their formal support for the proposals before the
Bondholder meeting on May 3
Northland's President and CEO, Karl-Axel Waplan stated: "These proposed measures
represent the best available source of financing to resolve Northland's short
and long term liquidity requirements on a timely basis, and are expected to
provide the required financing to bring the Kaunisvaara Project to full
production in the third quarter of 2014. We are very grateful for the support
offered by our existing bondholders, suppliers and employees which demonstrates
their confidence in our business."
Conference Call
Today, Monday April 29, 2013, at 12:30 am CET / 06:30 am EST, Northland will
host a webcast presentation and conference call in Swedish.
At 3:30 pm CET / 09:30 am EST, the Company will host a webcast presentation and
conference call in English.
The conference calls will be webcasted at:
http://northland.eu/en-us/investor-relations. A presentation in the form of a
slideshow will be available in PDF format for download from the Company website:
http://northland.eu/en-us/investor-relations.
The webcasts will be chaired by Mr. Anders Hvide, Executive Chairman, and Mr.
Karl-Axel Waplan, Chief Executive Officer together with Eva Kaijser, CFO. The
Administrator, Mr. Lars Soderqvist and Mr. Leif Salomonsen from Recore, advisor
and nominated as future Director to the Board, will be present to answer
questions.
Call-in details:
International Dial-in: +1 855 753 2230
Local UK: +44 20 336 453 74
Local Sweden: +46 8 505 564 74
Local Norway: +47 23500210
Please call in 5 to 10 minutes before the conference starts and stay on the line
(an operator will be available to assist you).
Live audio cast on www.northland.eu - Investor Relations. A replay of the
conference call will be available approximately one hour after the completion of
the conference call.
Bondholders that have not yet registered with Bingham McCutchen should get in
touch with Margaret Murray at Bingham McCutchen to obtain voting materials at
tel: +44 20 7661 5478, fax: + 44 20 7657 3134, email:
margaret.murray@bingham.com
Background
As stated in the press release dated January 24, 2013, Northland identified a
significant additional funding need, and the planned equity and bond offerings
in January 2013 were subsequently cancelled. On February 8, 2013, the Company's
subsidiary Northland Resources AB (publ) filed for reorganisation with the Lulea
District Court in Sweden based on a liquidity shortage, to allow Northland
sufficient time to finalize negotiations for a long term restructuring solution
(the "Reorganisation Proceedings"). Subsequently the Company's two other Swedish
subsidiaries filed for reorganisation (Northland Sweden AB and Northland
Logistics AB) on February 12, 2013. An administrator was appointed to all
Northland's Swedish subsidiaries pursuant to the Swedish Act on Reorganisation
(Sw.: Lag (1996:764) om foretagsrekonstruktion) (the "Administrator"). Since
filing for reorganisation, the Company has reduced operations and investments in
order to retain the available cash for as long as possible.
Since the commencement of the Reorganisation Proceedings, Norsk Tillitsmann
("NTM") has made advances to the Company of a total of USD 16 million. In
addition, key suppliers have each provided an amount of USD 5 million. This
funding has provided Northland with sufficient liquidity to allow time to
investigate restructuring options.
The Strategic Review
The Company initiated a broad strategic review in order to raise new capital and
negotiate terms with its suppliers and creditors with the aim of securing
stakeholders and the future of its Kaunisvaara project.
Immediately following the cancelled January 2013 offerings, the Company and its
advisers engaged in discussions with potential third party financing sources,
with a view to securing the funding needed to find a long term restructuring
solution and completing the Kaunisvaara Project; all in a timely manner in order
to avoid prolonged delays. The Company has run a competitive bidding process,
with numerous potential third party financers conducting due diligence,
performing site visits and discussing with Company management.
As part of this process, an informal ad hoc group of three bondholders holding
approximately 25% of the principal amount of the bonds, agreed to sign
confidentiality agreements with Northland, and has received confidential
information in relation to Northland. Accordingly these bondholders have been in
a position to indicate the extent to which they would support proposals for a
restructuring of Northland (the "Restricted Bondholders").
By April 12, 2013, the Company had received final proposals from three
interested parties, plus a further proposal formulated by the financial and
legal advisors to the Bond Trustee in conjunction with the restricted
bondholders (the "Bondholder-led" proposal).
Following consultation with Northland's key stakeholders, including the
Restricted Bondholders, main suppliers, the Administrator and further
discussions with the interested parties, the Company has determined that the
other proposals it had received would either not be supported by bondholders, or
were not capable of being delivered in the time available, relative to
Northland's liquidity needs. Accordingly, it was decided to pursue the
Bondholder-led proposal as the overall proposed restructuring solution for
Northland (the "Restructuring Proposal"), on the basis that, relative to the
alternatives, it is, in management's view, the most likely deliverable solution
in the available time that would be accepted by the bondholders.
The Restructuring Proposal
In summary, the Restructuring Proposal provides (amongst other things) that (i)
the funding shortfall affecting Northland will be addressed by the provision of
long term first lien debt financing into Northland and (ii) the principal amount
of the bonds will be retained in full on a second lien basis in the
post-restructuring capital structure of Northland, subject to certain amendments
to their terms, including the possible future conversion into equity. Each of
these elements, together with other key terms of the Restructuring Proposal, is
summarized below.
The implementation of the Restructuring Proposal is intended in the first
instance to be undertaken on a fully consensual basis between all stakeholders,
and therefore seeks certain approvals from the existing shareholders of
Northland required to implement its terms (the "Shareholder Approvals").
However, if the Shareholder Approvals are not forthcoming, the Restructuring
Proposal will be implemented without Shareholder Approval by way of enforcement
of the share pledge over the shares in Northland Sweden AB, which have been
pledged in favor of NTM on behalf of the Bondholders (the "Share Pledge
Enforcement"). Thereafter, the Restructuring Proposal will be delivered on terms
that substantially achieve the economic and legal framework envisaged by the
Restructuring Proposal.
The Bondholder-led proposal requires the consent of the bondholders, expected to
be obtained in a Bondholder meeting on May 3, 2013. However, further time is
required to implement the principal elements of the funding structure of the
Bondholder-led Proposal, which are scheduled to occur by May 24, 2013 (the
"Implementation Date"), and the Company will require bridge financing to meet
its short term liquidity needs during the period up to the Implementation Date.
With this in mind, the Company has asked NTM on behalf of the bondholders to
make available all funds held to the credit of the DSA in order to fund the
ongoing liquidity needs of the Company through to the Implementation Date (See
detail in point 4 below).
The Bondholder-led Proposal will provide Northland with funding in an amount of
approximately USD 497 million, which will be constituted by the following
elements: A new First Lien Bond with expected proceeds of USD 337 million, USD
114 million (exclusive of VAT) in supplier credit, USD 30 in DSA release and USD
16 million previously released by the bondholders from DSA.
1. "First Lien Bonds" with expected proceeds of USD 336.6 million
Bondholders expected to be offered the opportunity to participate in a new issue
of First Lien Bonds with the following structure:
-- Issue size: USD 362 million
-- Original Issue Discount: 7% discount to principal amount yielding net
proceeds of USD 336.6 million
-- Issuer: Northland Resources AB (publ)
-- Maturity: July 15, 2019
-- Interest: 12% per annum
-- Paid on Payment In Kind ("PIK") basis until and including 2015
-- In 2016 optional cash interest on a "pay if you can basis", at the
discretion of the Company, otherwise the interest will be
capitalized
-- From 2017 interest will be mandatorily payable in cash
-- Call option: Non-call 3 years, callable at 107.5% in year 4, 105% in
year 5, and 102.5% in year 6
-- Warrants: Investors to receive warrants exercisable for (in aggregate)
14.2% of the post-restructuring pro forma equity of NRSA (the
"Warrants"). Warrants to be issued as soon as practically possible after
shareholder approvals are obtained
-- Guarantors: In each case to the maximum extent permitted by law in each
jurisdiction, Northland Resources S.A. ("NRSA"), Northland Sweden AB,
Northland Logistics AB, Northland Logistics AS, and Northland
Exploration Sweden AB
-- Security: First-ranking fixed and floating security package that
substantially replicates most of the elements of the security package
currently securing the existing bonds (Additional security over
Northland's Finnish assets expected to be granted)
-- The First Lien Bonds will benefit from Super Priority Status during the
continuance of the Reconstruction Proceedings
-- Tap issue: A further tranche of First Lien Bonds may be issued by NRSA
at any time after the issuance of the First Lien Bonds, in an aggregate
principal nominal amount of USD 50 million with a similar warrant
structure
-- Board representation: Holders of the First Lien Bonds may vote to
propose one candidate as Director of the Board of Directors of
Northland, the appointment of whom will be subject to approval of the
shareholders of Northland.
-- Listing: Intention to list the First Lien Bonds on the Oslo Bors
-- Rating: The Company will seek to obtain ratings of the First Lien Bonds
from Standard & Poor's and Moody's by December 31, 2013.
The Restricted Bondholders have indicated their intention to make significant
investments in the First Lien Bonds and have signed commitment letters for an
aggregate amount totaling approximately one quarter of the issue.
2. Rollover of the Existing Bonds into Second Lien Bonds
The existing USD 370 million senior secured bonds will be amended into a new
second lien convertible structure, with the following expected key structural
steps and terms:
-- Existing 12.25% bonds and 13% bonds consolidated into one
-- Existing bonds amended so that they first become second lien bonds, then
shareholder approval will be sought for the convertible element
-- Borrower to be changed to Northland Resources S.A. ("NRSA") from
Northland Resources AB
-- Second Lien bond convertible into equity of NRSA at CAD 0.047 per share
-- Maturity on October 15, 2020
-- Interest: 4% per annum with effect from (and including) March 7 2013,
payable semi-annually
-- Will be paid on a PIK basis in 2013, 2014 and 2015 and, thereafter,
in cash and/or PIK in accordance with a waterfall structure, which
provides for the use of free cash as defined (the "Waterfall"). In
any case, payment of interest in cash in 2016 would only be allowed
if interest on the First Lien Bonds has been paid in cash
-- Conversion: Convertible on any interest payment date during the period
commencing on their creation until their maturity date
-- A majority of holders of the Second Lien Bonds will have the power
in a bondholders' meeting to force the conversion of all of the
Second Lien Bonds
-- Once two thirds of the Second Lien Bonds have been converted, the
remainder will be subject to mandatory conversion
-- Assuming full conversion, and the exercise of the Warrants, the
Second Lien Bonds will be convertible into shares equating to 80.53%
of the post-restructuring pro forma equity of NRSA
-- The Company may trigger a mandatory conversion of all Second Lien
Bonds at any time on or after July 16, 2018, in the event of a full
refinancing of the First Lien Bonds.
-- Guarantees: In each case to the maximum extent permitted by law in each
jurisdiction, Northland Resources, NRSA, Northland Sweden AB, Northland
Logistics AB and Northland Logistics AS.
-- Security: A second-ranking fixed and floating security package over the
same assets securing the First Lien Bonds. The Second Lien Bonds will be
subordinated to the First Lien Bonds
-- Board Representation: Following their creation, the holders of the
Second Lien Bonds may vote to propose two candidates as Directors to the
Board of Directors of Northland, the appointment of whom will be subject
to shareholder approval
-- Listing: The Issuer will use its reasonable endeavors to maintain the
listing and admission of the Second Lien Bonds to trading on the Oslo
Bors
3. Debt Service Account Release of USD 30 million
Approximately USD 33 million currently remains in the Debt Service Accounts (the
"DSA") for the bonds. In order to address the Company's immediate liquidity
needs pending the Issuer's receipt of the other sources of funding pursuant to
the Restructuring Proposal, the Company has requested that approximately USD 30
million standing to the credit of the DSA that currently secure the bonds be
released from the DSA and made available to the Company immediately after the
bondholders' meeting. Thereafter, the DSA will not be replenished and the DSA
collateral structure currently benefitting the Bonds will be cancelled.
It is proposed that the remaining USD 3 million released from the DSA and not
advanced to the Issuer shall be retained for use by NTM to cover any costs and
expenses it may have in connection with the implementation of the Restructuring
Proposal (including the Share Pledge Enforcement).
4. Supplier credit of USD 145 million (USD 114 excluding VAT)
Northland has accrued substantial liabilities of approximately USD 200 million
including VAT owing to its trade creditors with respect to services and supplies
provided to Northland as at the date of commencement of the Reorganisation
Proceedings. The reorganisation plan that has been developed by the
Administrator proposes that the liabilities of each trade creditor of Northland
be repaid by December 31, 2013 up to a maximum, in respect of each creditor, of
SEK 2.6 million.
In addition, a further USD 30 million will be available to repay trade creditors
with claims exceeding SEK 2.6 million, who will each be repaid out of such funds
on a pro rata basis by December 31, 2013. The total amount to be paid to trade
creditors in 2013 is approximately USD 50 million.
The remaining trade claims (and accrued interest on such trade claims) will be
subdivided into two categories:
-- Remaining trade claims that are owed to main suppliers, which together
represent approximately 93% of the remaining trade claims (the "M/P
Outstanding Trade Payables"); and
-- Remaining trade claims that are owed to other trade creditors (the
"Other Outstanding Trade Payables" and, together with the M/P
Outstanding Trade Payables, the "Outstanding Trade Payables").
The Outstanding Trade Payables are, subject to agreement with main suppliers,
proposed to be as follows:
-- Final Repayment Date:
-- M/P Outstanding Trade Payables: July 15, 2020, being three month
before the maturity date of the Second Lien Bonds.
-- Other Outstanding Trade Payables: January 15, 2017.
-- Repayment:
-- M/P Outstanding Trade Payables: 10 installments on each of the
Payment Dates beginning on the January 15, 2016 Payment Date,
subject to free cash flow as defined and in accordance with the
Waterfall; final payment to be made on the July 15, 2020 Payment
Date.
-- Other Outstanding Trade Payables: four installments on each of the
Payment Dates beginning on the July 15, 2015 Payment Date, subject
to free cash flow as defined and in accordance with the Waterfall;
final payment to be made on the January 15, 2017 Payment Date.
-- Interest: 4% per annum (calculated on a 30/360 basis) with effect from
(and including) February 8, 2013. Interest will accrue from February 8,
2013 but will only become payable on the Payment Dates in accordance
with and subject to the Waterfall.
Creditors who do not vote in favor of the plan to accept payment over a period
exceeding one year as set forth above, will instead receive payment of 35% of
their claims, minimum up to SEK 2.6 million by December 31, 2013 of the
abovementioned USD 30 million by December 31, 2013 and any excess claim amount
to be paid within 12 months of the approval of the plan by trade creditors.
Key suppliers would be able to propose one candidate as member of the board of
directors of Northland, the appointment of whom will be subject to shareholder
approval.
5. Fixed Price Contracts
The Company is in agreement with key supplier on fixed price contracts for the
majority of outstanding capital expenditures. Approximately 75% of all
contracted Capex from January 1, 2013 to December 31, 2014 will be fixed.
Company Update Since January 2013
The Company has produced 135,000 dry metric tonnes ("dmt") of high quality iron
ore concentrate until March 31 2013. The first vessel departed Narvik during
first quarter 2013 carrying approximately 54,000 tonnes of concentrate. The
second vessel departed Narvik in the beginning of April carrying 54,000 tonnes
of concentrate.
Production at the mine and the plant has been satisfactory and ramp up has been
successful despite the company being in Reorganisation. The supply chain
capacity continues to increase gradually according to the original ramp up plan.
The permanent storage building in Narvik has been completed
Further, certain major contracts related to both Capex and Opex have been
reconfirmed.
Opex Update
Adjusted for a USD/SEK exchange rate of 6.45, the Life of Mine ("LoM") operating
cost has been estimated to USD 71.1/dmt, compared to the DFS update in 2012 of
USD 55.4/dmt and January 2013 update of USD 67.1/dmt as shown in the table
below:
---------------------------------------------------------------------
DFS 2012 Jan 2013 April 2013
update update update
(USDSEK 8.125) (USDSEK 6.90) (USDSEK 6.45)
---------------------------------------------------------------------
Mining 18.4 21.9 23.4
---------------------------------------------------------------------
Processing 12.5 14.4 15.0
---------------------------------------------------------------------
Maintenance 0.4 0.9 1.0
---------------------------------------------------------------------
G&A 1.4 1.3 1.4
---------------------------------------------------------------------
Logistics 22.4 28.3 30.0
---------------------------------------------------------------------
Royalties 0.4 0.4 0.4
---------------------------------------------------------------------
Total 55.4 67.1 71.1
---------------------------------------------------------------------
The Company's budget supports the long-term operating cost (in SEK) from the DFS
and the Royal Haskoning DVH report published on the Company's webpage; LoM
operating cost is close to DFS cash cost adjusted for USD/SEK exchange rate.
Currency split for Opex is expected to be:
-- SEK 85-90%
-- NOK 5-7%
-- USD 5-7%
Operating cost excludes corporate G&A which is expected to be USD 15-20 million
per annum with 60-80% in SEK, and approximately USD 10 million corporate G&A
related to Finland in 2013-2014.
Budgeting Update
The underlying budget assumptions used to estimate total capital need have been
revised. Key assumptions are:
-- Iron ore price USD 120/dmt realized FOB Narvik
-- FX: USD/SEK 6.45
Changes in Capex/contingency - reduce risk and increase production
Key changes are:
-- USD 37 million increased Capex due to converting open book and target
cost for process line 2 and port construction together into fixed price
contracts, substantially reducing over-run risk
-- USD 10 million investment to upgrade process line 1 to increase capacity
by approx. 30%
-- USD 10 million additional contingency due to Reorganisation
-- USD 10 million from additional costs incurred due to the Reorganisation
-- USD 10 million in extra Capex due to the investment in upgrading of the
first process line at Kaunisvaara to increase capacity by approximately
30%
Compared to the 2012 DFS update, the increase in Capex is USD 278 million until
end 2014 to a total of USD 1,153 million. The increase in Capex consists of USD
257 million in Capex, USD 11 million in additional contingency and USD 10
million in possible costs related to the Reorganisation.
USD 655 million in Capex had been spent by year end 2012. A total of USD 498
million will be spent in 2013 and 2014 (USD 359 million in 2013, and USD 139 in
2014) for a total of USD 1,153 million. For a full breakdown of expected
remaining Capex until end 2014, see below:
Contract Additions
Logistics Currency USDm USDm
----------------------------------------------------------------------
Civil works Narvik NOK 46 5
Norwegian rail upgrade NOK 25
Shiploader EUR 12
De-icing and unloading station SEK 3
Reloading terminal and access road SEK
Pitkajarvi 5
Railway Cars paid to YE - to be SEK
reimbursed -8
Miscellaneous USD 5
----------------------------------------------------------------------
Total committed 88 5
Kaunisvaara
----------------------------------------------------------------------
Process systems and electrical USD
installation 135 10
Process systems installation increased USD
cost 31 36
Mobile mine equipment USD/EUR 58
Civil works Kaunisvaara SEK 41
Tapuli Mine Overburden SEK 14
Miscellaneous USD 8
----------------------------------------------------------------------
Total committed 287 46
Water Systems phase 2 EUR 4
Tailings Management Facility SEK 15 (6)
Civil works line #2 SEK 10 2
Investments Operations SEK 14
Project team USD/SEK 12
----------------------------------------------------------------------
Total uncommitted 55 (4)
Possible costs related to the
Reorgansation 10
Additional contingency 11
----------------------------------------------------------------------
Total 451 47
Comments to the breakdown of Capex until end 2014:
-- Incl. USD 10m upgrade of first process line
-- Additional contingency of USD 11million, equivalent to 13% of
uncommitted Capex
-- Possible costs related to the Reorganisation of USD 10 million
-- Exchange rates for the committed Capex have not been fixed, and USD
amounts are based on the following exchange rates assumptions:
-- USDSEK: 6.90 (SEK denominated Capex represents 22% of expected
Capex)
-- USDNOK: 5.73 (NOK denominated Capex represents 16% of expected
Capex)
-- FX adjustments for USD/SEK to 6.45 adds USD 7 million of Capex up to
year end 2014
-- Capex excludes rail cars cost of USD 32 million, assumed to be financed
on an operating lease for which a term sheet has been provided
-- Sustaining Capex expected to be about USD 7-10 million p.a. post
completion of Sahavaara
Additional Capex in 2015 and 2016 related to the development of Sahavaara mine
(including flotation circuit, overburden removal, civil works, crushing station
and conveyors and mine equipment) is estimated to be between USD 165-175
million.
Sources and Uses
See below for an updated overview of expected sources and uses from Jan 1, 2013
to end 2014:
Jan 2013 - Dec 2014
Funding Requirements - Pre Financing USDm
Opening Cash at January 1, 2013 54
Capex excl. Contingencies but including Tapuli process line
upgrade (477)
Operating Cash Flow & Group Costs 79
Railcar Leases (5)
----------------------------------------------------------------------
Funding Need Pre-Adjustments, Contingencies, Trade Payments
& Fees (349)
Adjustments
FX (USDSEK 6.90 -greater than 6.45)(1) (31)
FOB Sales Price Adjustment (USD 130/dmt -greater than USD
120/dmt) (40)
----------------------------------------------------------------------
Funding Need Pre-Contingencies & Trade Credit Payments &
Fees (420)
Contingencies
General Capex contingency (11)
Possible costs related to the Reorganisation (10)
----------------------------------------------------------------------
Funding Need Pre-Trade Credit Payments & Fees (441)
Payments to Trade Creditors
Cash Collateral for main suppliers, Letter of Credit (10)
Funding Need Before Fees (451)
Q4 2014 cash flow backed out to arrive at Funding Need at
Minimum Cash Point(2) (23)
Transaction expenses (16)
----------------------------------------------------------------------
Gross Funding Need (at Minimum Cash Point) (490)
DSA Funding to Date 16
Available DSA Release 30
Supplier credit, exclusive VAT(3) 114
----------------------------------------------------------------------
Net Funding Need (330)
Cash Funding from New Money (1st lien senior secured bond) 337
Cash cushion 7
Notes to expected sources and uses from Jan 1 2013 to end 2014:
(1) USD 14 million upside if USD/SEK rate stays at current level of 6.65
(2) Cash flow generated during Q4 2014 (USD 23m of free cash flow (sales
less Opex and Capex)
(3) Supplier loan breakdown:
USDm
Parked debt inclusive of VAT 207
Adjustments supplier cost that cannot be deferred -13
Payments to be made to suppliers on claims less than SEK
2.6m -10
Payments to be made up to SEK 2.6m to suppliers with larger
claims -6.4
Payments to be made up to SEK 2.6m to main suppliers -2.6
Payment pro rata to all suppliers above SEK 2.6m -30.0
----------------------------------------------------------------------
Parked debt inclusive of VAT net of 2013 payments 145
VAT adjustment for payments -31
----------------------------------------------------------------------
Parked debt exclusive of VAT for supplier loan 114
Items not included in the sources and uses table above:
-- USD 50 million Stemcor prepayment facility potential upside
-- Signed term sheet for a prepayment facility of up to USD 50 million,
subject to achieving specified production and delivery milestones
-- Currently not included in the Sources & Uses
-- USD 6 million Atlas Copco lease potential upside
-- Facility in place, draw down has been done during Reorganisation.
Available but not included in the Sources & Uses.
-- USD 35 million Caterpillar Finance lease potential upside
-- Draw stop. Needs to be reconfirmed after Reorganisation
-- Currently not included in the Sources & Uses.
-- USD 22 million ship loader lease potential upside
-- Signed term sheet in place, awaiting credit committee approval and
documentation.
-- Currently not included in the Sources & Uses
Comments regarding the report from Royal Haskoning DHV available on the
Northland website
Royal Haskoning DHV has issued a Technical Report which the Company has made
available to the public on its website. The Company wants to make certain
comments in order to clarify the numbers reported in the Royal Haskoning DHV
report versus the numbers presented in this release.
Capital to end of the project reported as being USD 1,338 million will increase
to USD 1,416 million subject to finalizing fixed commercial agreements on
previous open book and target cost arrangements. The main updates are:
-- USD 37 million fixed cost for previous open book arrangements and the
Sahavaara delay
-- USD 10 million capacity upgrade of first processing line
-- USD 16 million for Sahavaara delay installation and erection
-- USD 5 million fixed price for main parts of Narvik port construction
-- USD 4 million related to construction of temporary tailings management
facility phase II
Table 4.3 - CAPITAL TO END 2014 on p. 46-47 has since the report was compiled
been updated to reflect new commercial agreements being negotiated that will
result in fixed contract cost compared to previous open book arrangements.
-- Additions in Capex and phasing of cash flow differences are in total USD
37 million
-- USD 10 million investment for the first process line capacity upgrade
has also been included in the updated Capex estimate
-- Details of the USD 47 million total changes are discussed above under
"Capex Update"
Issues with Mining equipment available on site but not in production consisting
of CAT 6060 excavator and CAT 793F truck that is mentioned in several places
within the report has been resolved. The equipment will be in production May 1,
2013.
Reorganisation Process
The Company's Swedish subsidiaries entered Reorganisation in early February 2013
(Northland Resources AB on February 8, 2013, and Northland Sweden AB and
Northland Logistics AB on February 12, 2013). The Norwegian subsidiary Northland
Logistics AS is part of the Reorganisation process, although on an informal
basis and on and on the same assumptions as applies for the Swedish entities
being part the Reorganisation. The Reorganisation process has allowed the
Company time to develop a composition proposal for the unsecured creditors of
the Swedish subsidiaries. The reorganisation proposal is expected to be
distributed to creditors by the Administrator in the week starting May 13, 2013.
A request for composition proceedings is expected to be made to the Court in the
week starting May 13, 2013, and if adopted, a creditors meeting will be held
within 3-5 weeks, in which unsecured creditors will vote on the composition
proposal.
The proposal is approved if three-fourths of voting creditors by number and by
aggregate claims vote in favor. If the proposal is approved by the requisite
majority, it will bind all unsecured creditors of the Swedish subsidiaries. An
application to terminate the Reorganisation will be made once the proposal is
approved. Depending on the timing of the creditors meeting, the Swedish
subsidiaries are expected to emerge from Reorganisation around early July 2013.
Creditors not approving the proposal may file complaints with the Court, any
such complaints may delay the process above.
The creditors in Norway have accepted the reorganisation plan in bi-lateral
agreements.
Timeline
Below is the expected timeline for completion of the restructuring and Northland
to emerge from restructuring:
---------------------------------------------------------------------------
Date Event
---------------------------------------------------------------------------
Monday, April 29 Summons to bondholder meeting and public announcement
---------------------------------------------------------------------------
Bondholder meeting, subscription period expected to
start, planned release of first portion of USD 30 million
Friday, May 3 DSA funds
---------------------------------------------------------------------------
Invitation to Extraordinary General Meeting of Northland
Monday, May 6 Shareholders
---------------------------------------------------------------------------
Expected closing of subscription period for contemplated
Friday, May 10 bond offering
---------------------------------------------------------------------------
Implementation Date: Funding and Issue of contemplated
new first Lien Bond, anticipated amendment of Existing
bonds into Second Lien bonds, and expected repayment of
Friday, May 24 the Trade Supplier Liquidity Funding
---------------------------------------------------------------------------
Extraordinary General Meeting of Northland Resources S.A.
to seek certain approvals from existing shareholders
needed for the Restructuring Proposal.
If the EGM cannot be held due to quorum not being
achieved, repeat notice to be distributed for an EGM to
be held June 28, 2013.
Friday, May 24 Dates to be confirmed
---------------------------------------------------------------------------
Early July Expected emergence from Reorganisation
---------------------------------------------------------------------------
If the Shareholder Approvals were not obtained in the
Extraordinary General Meeting, implement the Share Pledge
Monday, July 8 Enforcement
---------------------------------------------------------------------------
Northland following Reorganisation
Following completion of the expected offerings, the Company expects to be
financed until the Kaunisvaara process facility, and the logistics chain from
Kaunisvaara to Narvik are completed, and to reach full production of approx. 4
dmtpa of concentrate based on ore from the Tapuli pit during the third quarter
2014 (excluding the capacity increase from the upgrade of the first process
line.
The Company would also complete and announce the DFS for Hannukainen and
Pellivuoma as soon as reasonably practical.
Both the new issue of First Lien Bonds, and the rollover of existing bonds have
an equity element that requires shareholder approval.
Assuming shareholder approvals are forthcoming, all warrants exercised and the
second lien bonds are fully converted into equity, the post restructuring pro
forma equity of the Company will be held as follows:
---------------------------------------------------------------------------
No. of shares,
Investor Instrument m Ownership
---------------------------------------------------------------------------
Current shareholders Common shares 514.2 5.26%
---------------------------------------------------------------------------
Current bondholders, Conversion rights
Second Lien CB 7,866.9 80.53%
---------------------------------------------------------------------------
New First lien Warrants
Subscribers 1,388.3 14.21%
---------------------------------------------------------------------------
Total 9,769.4 100%
---------------------------------------------------------------------------
The above share count is shown before consolidation of shares, and may be
increased by:
-- Shares corresponding to 5% of fully diluted share capital which can be
issued at the discretion of the board
-- Any warrants in any tap issue of the new First Lien Bond
-- Any shares issued in the contemplated repair issue
The Company has suggested that a post restructuring repair issue of shares
directed at existing shareholders will be carried out for up to approximately
USD 25 million.
Based on the Restructuring Plan (and subject to final agreements being reached),
four new board members are to be appointed, complemented by three of the
existing board members. Thus the Composition of Northlands Board of Directors
will be:
-- Two board members to be nominated by holders of existing bonds
-- One board member to be nominated by holders of the new senior secured
bond
-- One board member to be nominated by the holder of the Supplier Credit
-- Three existing board members
-- In the interim, Mr. Leif Christian Salomonsen and Mr. Runar Nilsen will
be appointed as board advisors
Arctic Securities ASA and Pareto Securities AS are acting as financial advisers
to the Company, while Blackstone is acting as financial advisers to NTM on
behalf of the bondholders.
For further information on the Company, the Kaunisvaara project, and the
background for the additional funding need, please refer to previous press
releases which has been posted on the Company's website: www.northland.eu.
ON BEHALF OF THE BOARD
Karl-Axel Waplan, President & CEO, Northland Resources S.A.
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 is also preparing a Definitive Feasibility Study ("DFS") for
its Hannukainen Iron Oxide Copper Gold ("IOCG") project in Kolari, northern
Finland and for the Pellivuoma deposit, which is located 15 km from the
Kaunisvaara processing plant.
Cautionary Statement
This press release may include "forward-looking" statements within the meaning
of applicable securities laws. These forward-looking statements 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. These forward-looking statements include 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, projected capital and operating expenditures, production
and price forecasts, assumed exchange rates and the company's anticipated
funding requirements and sources thereof. By their nature, forward-looking
statements involve risks and uncertainties because they relate to events and
depend on circumstances that may or may not occur in the future. Such factors
include, among others, those factors discussed in the section entitled "Risk
Factors" in the Company's annual information form dated March 23, 2012, and the
management's discussion and analysis of results of operations and financial
condition ("MD&A") for the year ended December 31, 2011, and the MD&As for
subsequent interim periods, and as updated in this press release. Readers are
cautioned that forward-looking statements are not guarantees 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 statements 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 statements contained in this press release, those results or
developments may not be indicative of results or developments in subsequent
periods.
The distribution of this press release may be restricted by law in certain
jurisdictions. The Company assumes no responsibility in the event there is a
violation by any person of such restrictions. Persons into whose possession this
announcement should come are required to inform themselves about and to observe
any such restrictions.
This announcement is not for distribution, directly or indirectly in or into any
jurisdiction in which it is unlawful to make any such distribution or where
prior registration or approval is required for that purpose. No steps have been
taken or will be taken in any jurisdiction outside of Norway or Canada in which
such steps would be required. The publication of this announcement shall not
under any circumstances imply that there has been no change in the affairs of
the Company or that the information contained herein is correct as of any date
subsequent to the earlier of the date hereof and any earlier specified date with
respect to such information.
This press release is not an offer to sell, or the solicitation of an offer to
buy or subscribe for securities in the United States. Securities may not be
offered or sold in the United States absent registration under the U.S.
Securities Act or an exemption from, or in a transaction not subject to
registration. The offer and sale of any securities referred to herein has not
been and will not be registered under the Securities Act or under the applicable
securities laws of the United States.
This press release does not constitute an offering circular or prospectus in
connection with any offering of securities of the Company. Investors must
neither accept any offer for, nor acquire, any securities to which this
announcement refers, unless they do so on the basis of separate documentation
prepared for the purpose of such offerings. This press release does not
constitute an offer to sell, or the solicitation of an offer to buy or subscribe
for, any securities and cannot be relied on for any investment contract or
decision.
This information is subject of the disclosure requirements according to section
5-12 of the Norwegian Securities Trading Act (Norwegian: verdipapirhandelloven)
as well as the requirements of the Luxembourgish Transparency Law.
FOR FURTHER INFORMATION PLEASE CONTACT:
Northland Resources S.A.
Anders Hvide
Executive Chairman
+47 92 88 9858
Northland Resources S.A.
Karl-Axel Waplan
President and CEO
+46 705 104 239
Northland Resources S.A.
Eva Kaijser
CFO
+46 709 320 901
Northland Resources S.A.
Anders Antonsson
Vice President - Investor Relations
+46 709 994 970
www.northland.eu
Hokerberg & Soderqvist
Lars Soderqvist
Administrator
+46 705 817 181
Hokerberg & Soderqvist
Andreas Nordberg
Lawyer
+46 705 847 1183
Hokerberg & Soderqvist
Bill Kronstrom
Lawyer
+46 702 04 7847
Hokerberg & Soderqvist
Erik Stromqvist
Lawyer
+46 705 70 2514
Blackstone
David Riddell
Senior Managing Director
+44 20 7451 4000
Blackstone
Shirish Joshi
Director
+44 20 7451 4000
Arctic Securities ASA
Arctic Fixed Income Sales
+47 21 01 32 31
Pareto Securities AS
Pareto Fixed Income Sales
+47 22 87 87 70
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