Nordic Mining ASA

OSE:NOM

Earnings Call Transcript 2020-Q1

[Ivar Sund Fossum, Chief Executive Officer]

Good morning, everyone, and welcome to this first quarter 2020 presentation by Nordic Mining. My name is Ivar Fossum, I'm the CEO. Together with the acting CFO, Lars Grøndahl, we will give you the presentation this morning. Because of the coronavirus, it will be only a webcast, but you will have the possibility to post your questions, which we will bring up under the Q&A session after the presentation. We will follow regular agenda as normal for these presentations. So followed by a brief introduction by myself. Mr. Lars Grøndahl will take us through the figures. And then afterwards, we will have a brief update on the Engebø project and Keliber before we round off with the Q&A session at the end. We remain focused on our main assets. Our 100% owned Rutile and Garnet project on the West Coast of Norway and our stake in the private Finnish company, Keliber Oy, for mining and production of lithium hydroxide. We remain focused on pushing these projects into construction and production. In addition, we are engaged in various R&D projects. The most active one nowadays is the [ Askvoll ] project, an EU funded project, which are researching and piloting and qualifying a new process for production of alumina without CO2 emissions. I'm very pleased to be able to say in the beginning of this presentation that we are well funded as a company going forward. We capitalized in January. And Lars will come back to the status of finance later on today. But we all know that recent events have had significant changes to our outlook for the future. First of all, the corona pandemic has brought tremendous uncertainty to the global economy and the business in general, and I will come back to that. We had a sudden and dramatic collapse in the oil price. We don't know the duration of that. That certainly will impact a lot of the markets for mining minerals, including ours. And finally, we saw the withdrawal of Barton as a cooperation partner on Garnet for the Engebø project. These events have led to a different set of actions from our side. Although we remain ready to move forward and get back on track, we have to adapt to and be prepared to new market conditions going forward. That means that our planned activities and time schedule will have to be revised, and we need to take on cautiousness in how we are spending our capital and resources going forward. So all of these points, we will elaborate more on later in the presentation. I'll just finally say that in the Nordic mining team, we're all well and safe, including our families. And we have followed the national guidelines given by Norwegian authorities with regard to the coronavirus pandemic. So with these words, I'll leave the floor to Mr. Grøndahl, who will take us through the financial figures for the quarter.

[Lars Kristian Grøndahl, Senior Advisor & CFO]

Thank you, Ivar. My name is Lars Grøndahl, and I will present the financial statements of the first quarter for this year. The income statement have 2 takes actually from this quarter. The first is that the operating result of the quarter is mainly affected from all the activities and costs related to finalization of the definitive feasibility study for the Engebø project, which was published late in January, and with expenditures also coming in, in the following months. So the operating result is explained from that. The second take from the income statement is that the investment in Keliber is neutral this quarter compared with a significant gain we experienced in the first quarter last year. That was due to a change of principles in the accounting from consolidation as Keliber as an associate in our group to a fair value measurement as we do today. And with the changes in the markets in the first quarter, we are pleased with a neutral result from the investment in the financial statement. The balance sheet per the end of March has actually also 2 main takes. The first is the confirmation of the neutral valuation of Keliber as the financial asset in our balance sheet. The second is the strengthening of the cash balance of the company, which was due to the successful equity issue that we had late January. So a cash balance of NOK 68.7 million as per end of March is a good position to have these days. It also underscores that we have a solid balance sheet with no interest-bearing debt and about 95% equity as a percentage of the total balance value. As some of you will recall, we had extraordinary general meeting in February, which resolved to give an authorization to the Board to execute a subsequent share issue for those who did not participate in the private placement in January. Due to the unfavorable market conditions that actually was during February and most of March, the Board decided not to utilize that authorization. So the subsequent share issue was canceled in April. So that was actually what I had planned to say about the financial statements. And questions, if any, can be taken afterwards.

[Ivar Sund Fossum, Chief Executive Officer]

Thank you, Lars. We'll move on. I'll start to give an update on the Engebø project before we go into Keliber. It's clear that the global economy, in general, has been heavily impacted by the coronavirus, and that will go on for an uncertain amount of time. And then undoubtedly, that will also impact the markets for industrial minerals globally. We have to expect that also will impact the markets for other industrial minerals, Rutile and Garnet. And today, it's difficult to give clear forecasts on how this will evolve short term, mid-term and long term. In addition, it's also fairly obvious that the conditions for project financing are and will be affected by the corona pandemic. And we will have to see when these markets are bringing themselves back to a healthy state, both with regard to lending capital, but also the equity part of financing. So our focus going forward is to see how we could take a step back and adapt to a different set of conditions going forward, how can we make our projects and assets even more robust in a new set of environment with regard to market, with regard to finance, with regard to global trade in general. So we are doing a kind of overall review of the Engebø project with regard to market strategy to really refocus how could we utilize the strength in the project to adapt to maybe a different market to configure the project differently with regard to combinations of products, the timing of products and the production capacities. Similarly, we will scrutinize CapEx and OpEx to see, can we do things to reduce CapEx to make things more efficiently in terms of operations, et cetera. And finally, as a result of this, we have to see how could we position the project in -- with regard to project financing going forward. And we may also see that there will be other and different tools in the toolbox with regard to how to finance the project in the time to come. But having mentioned all this, we have a competent staff and we are sort of ready to gear up and get momentum into construction period once the markets and the surroundings around us are ready for us to move forward. We had ambitious plans for this year, go into the FEED phase and other preconstruction activities, procurement, to building our owners team at site for Engebø. These activities will be put on hold going forward. We will not reduce the staff, but we will keep it as it is. So we will be 8 people as from August. So quite a few uncertainties. I think everybody is experiencing the same in our industry, and we will see what could bring new and other opportunities going forward for the Engebø project. But there are some activities, which are sort of rolling forward, a little bit -- not so affected maybe by the pandemic. We have had the operational license for processing by the authorities for over a year now, and that's about the time where -- which we were guided from the authorities. And also, the zoning plan for their freshwater supply is moving forward by the local municipality. Similarly, we are continuing part of our ESG preparations for the projects, for example, in structuring and setting up the principles for a local resource group. And we are actively, together with Norwegian Mining Association, working to prepare the Norwegian industry and ourselves to adopt the Canadian system towards sustainable mining also for the Engebø project. The monitoring program, which we plan to kick off this spring will be rescheduled, and we'll get back to the timing of that later on. So that was our somewhat brief update on Engebø for this quarter. As with Engebø, Keliber also secured new capital now in March in a private placement of EUR 5.8 million. And Nordic Mining's ownership in Keliber is 16.3% after that placement, which we did not took part in. Keliber has got a new CEO, Hannu Hautala, which started in office in mid-March. And they have also carried out a significant pilot production of lithium hydroxide as part of their DFS review, which they carried out in cooperation with the Finnish Outotec. They are also undergoing a phase where they are reviewing the projects, many different things. But they are, for example, looking at relocating the concentrator due to the fact that some of the resources have moved. And it's part of an optimization process, and they issued a small press release about that this morning.Tentatively, they have indicated a schedule to start construction in 2021, but I should underline that the uncertainty of the markets, of the financing possibilities are the same for Keliber as all other new junior miners and projects. So I'm sure that, that also will be reviewed going forward. So that was our brief status this morning. Then we move on to Q&A, and then we'd like to answer any questions you have posted to this presentation. Thank you.

[Lars Kristian Grøndahl, Senior Advisor & CFO]

Yes. We are open for questions from the web audience since we have no audience here in Oslo this morning. We have received so far a couple of questions. And the first one is, is Nordic mining currently in discussion with potential offtake partners with regards to Garnet?

[Ivar Sund Fossum, Chief Executive Officer]

Yes, we have a dialogue with the other partners on Garnet.

[Lars Kristian Grøndahl, Senior Advisor & CFO]

We have also received the question, will Nordic mining try to improve building contract offers and CapEx estimates based on the new market conditions?

[Ivar Sund Fossum, Chief Executive Officer]

That's part of our sort of reviewing of the project as such, where CapEx is a part of that, including cooperation with vendors, contract structures and also the overall execution model.

[Lars Kristian Grøndahl, Senior Advisor & CFO]

Are there any more questions from the web audience? We have now received -- answered to the questions received so far. And if there are no further questions, I think we can...

[Unknown Executive]

We can hold on and wait.

[Lars Kristian Grøndahl, Senior Advisor & CFO]

Okay. We can wait a little bit.

[Ivar Sund Fossum, Chief Executive Officer]

So we'll leave a couple of minutes.

[Lars Kristian Grøndahl, Senior Advisor & CFO]

With a minute or two to see what -- if there are any more questions around. Yes. We have received a question. What is the status of the IPO in Keliber?

[Ivar Sund Fossum, Chief Executive Officer]

Yes. That's a good question. To our knowledge, there are no firm plans with regard to the IPO currently, but that will come back when they are approaching project financing again as one of several alternatives.

[Lars Kristian Grøndahl, Senior Advisor & CFO]

Are there any particular reason for the delay of the operating license?

[Ivar Sund Fossum, Chief Executive Officer]

We have no sort of a clear answer to that from the authorities. We think that it's more or less in time. We have not recognized any reasons that it should be any particular delay in the processing of that application.

[Lars Kristian Grøndahl, Senior Advisor & CFO]

In terms of offtake for Garnet, could you be more specific? Is Barton still an option for parts of the offtake?

[Ivar Sund Fossum, Chief Executive Officer]

It's difficult at this time to be specific. We'll certainly come back and give more details, but it's still early. And it's not only about sort of discussing with other partners. It's also about reviewing the market strategy for Garnet. So we will need to get back to you on these issues. But it's certainly an important part of our focus area going forward.

[Lars Kristian Grøndahl, Senior Advisor & CFO]

The topics are shifting a bit. Back to the operating license, do you expect any issues with the operating license?

[Ivar Sund Fossum, Chief Executive Officer]

We don't expect sort of difficult issues. We think we issued a very comprehensive application for the license. We haven't recognized any very sort of difficult topics with regard to the license. But again, on these issues, we don't get too much knowledge before we actually get the final response from the authorities.

[Lars Kristian Grøndahl, Senior Advisor & CFO]

Then the question regarding the environmental permit. What is your opinion on the request for review of the emission permit by the Notre Dame?

[Ivar Sund Fossum, Chief Executive Officer]

Yes. We consider the environmental permit as very solid. It has a lot of flexibility, which is the nature and part of these permits. It's a permit with a very long validation. And naturally, it will be updated and adjusted according to the changes in the project going forward. And that's also part of the guidelines given in the permit itself.

[Lars Kristian Grøndahl, Senior Advisor & CFO]

What about offtake for titanium or Rutile?

[Ivar Sund Fossum, Chief Executive Officer]

Yes. We're continuing our good dialogue with the Japanese trading house to try to comment that, which, again, is speculating. But certainly, titanium feedstock is a more mature commodity compared to Garnet, and Rutile is a particular high-grade feedstock among the families of titanium feedstocks, which are declining in production. It's lesser supply. So we think the demand for Rutile will keep up. That's our sort of broad consideration of that.

[Lars Kristian Grøndahl, Senior Advisor & CFO]

A practical question. With Barton on its way out, is it possible to hold the presentation in Norwegian?

[Ivar Sund Fossum, Chief Executive Officer]

We think it's fair to continue in English. There are a certain amount of foreign shareholders. There are possible financiers and lenders, which follow us going forward. So we believe it makes sense to continue in English.

[Lars Kristian Grøndahl, Senior Advisor & CFO]

Is Keliber in discussions with Northvolt regarding the offtake of lithium?

[Ivar Sund Fossum, Chief Executive Officer]

As far as I know, yes, they are.

[Lars Kristian Grøndahl, Senior Advisor & CFO]

Any more questions from anybody in the audience?

[Ivar Sund Fossum, Chief Executive Officer]

Okay. Then I think we close the Q&A session, and thank you all for attending this presentation. Thank you.