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Nordic Mining ASA
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Good morning, and welcome, everyone, to this third quarter presentation for Nordic Mining. My name is Ivar Fossum. Together with our CFO, Christian Gjerde, who will give you the update presentation this morning. Due to the COVID restrictions, this will be a strict webcast event, but you will find all the presentation material and the full interim report at our web page. So let's move on. A few words about the program. After my brief introduction, we will move on and give an update on our Engebø rutile and garnet project. And then we will do the same for our asset in Finland in Keliber Oy. And finally, Christian will give comments on the financial status for the company. At the end of the presentation, we will arrange a Q&A session. So please post your questions during my presentation or immediately after, and we will read your question here. And Christian and myself will answer those. So let's move on. Nordic Mining strategy is to supply -- to bring new supply of high-end industrial minerals. And we are now engaged in our 100% project for rutile and garnet at the West Coast of Norway. And we have a 16.3% stake in Keliber Oy on the West Cost of Finland for lithium. But we are also engaged in an innovative new R&D project funded by the -- supported by the Horizon 2020 program in EU for production of alumina from other minerals than bauxite, a process that consumes CO2 rather than emitting CO2. Both our project assets are mature and progressing towards construction stage, and they have documented solid value potential through feasibility studies. They are both in stable part of the world with good location and jurisdiction. And in Norway, we have received all major permits to move on. During the last 10, 15 years, we have seen that the use and application of titanium and lithium has developed and widened and gone into many different value chains and ecosystems. Everything from aerospace to mobility to renewable energy and even health, we find titanium in different parts of the value chains. And from the pictures on the screen, you can recognize some of the products, which are becoming daily around us in our social life. And based on this development, EU has renewed their view on what are critical raw materials for Europe. In September, they issued an update of their list where both titanium and lithium are included. And they also, at the same time, founded a new initiative called European Raw Materials Alliance, which shall facilitate and support production of new raw materials in Europe following their focus on what is critical and what is strategic. And the European politicians are naming this as a fundamental shift in the resource basis for their society. Finally, we are engaged in the ESG part of our existence, and we are focusing on 4 major pillars within the ESG area. We are focusing on climate. We want to reduce the environmental footprint in everything what we do. We want to secure, safe and healthy work environment for all of our employees. And we want, in all respects, to be a good neighbor. We are now moving ahead, and as we speak, are about to implement the scorecard system called Towards Sustainable Mining into Nordic Mining, but also into the general mining industry in Norway. So let's move on and give an update on the Engebø rutile and Garnet project. There is no doubt that the COVID pandemic has brought uncertainty and risk. But despite that, we recognize that rutile prices remained stable despite softening demand, probably on a temporarily nature. And still, the prices remained above the price assumptions that we utilized in our feasibility study from January this year. In Asia, in China, we see that they have recovered quite well and fast after their initial pandemic impact. And they have witnessed strong demand from the household sector within paint and restoration. And this has caused the pigment producers in China to increase their prices during September, this fall. On the garnet business, we see a softening of demand but still end-user prices are remaining fairly stable and in line with what we have seen in the first half of this year. We also want to underline that we are now engaged in very positive discussions for garnet offtake and for a substantial part of the volume that we expect to produce in the initial years. Moving on to the project. We are progressing well according to our timetable for the DFS update. We have engaged the engineering company, Hatch, supported by Axe Valley, which will focus on mine design and mine modeling, and they will jointly coordinate and complete the DFS update. We have done several new things in our DFS update. And early engagements with some selected suppliers, specifically focusing on infrastructure and civil works, has provided new solutions and this work has so far indicated material reduction in the CapEx compared to previous figures. On the mining side, we are using a fit-to-purpose approach to focus on high-grade ore and to postpone and minimize the mine of waste rock. The initial design work, which had been started for the process plant layout has indicated significant reduction up to 40% of the physical footprint area for the process plant. Naturally, this will lead to both direct and indirect savings. We are evaluating and moving forward with the use of electrical dryers for the minerals instead of natural gas-fired dryers. This will reduce the CO2 footprint from the project with up to 80%. And we are looking to optimize the mass flow logistics from the mine down through the crushing stages and the process to increase the operational flexibility in the whole plant. And finally, we are also looking to optimize the initial garnet production capacity in the first years and then have an option to boost that capacity in the future. We have taken a new look on execution strategy. We have changed the concept from modularized building to stick-built construction method, which means that we are making a tailor-made solution at the plant sites. And then we are focusing on bundling a number of equipment packages into fewer and larger sub-EPCs. We think this model, in combination with the reduced scope for an EPCM coordinator, will bring stricter control on the CapEx level and also reduce the execution risk for the project as such. And you can see on the right-hand side of this picture the 4 major EPC packages that we will focus on and which will be a basis in the contracting strategy going forward. Our time line is indicating that we are advancing our project towards an updated DFS in the first quarter in 2020. It will be finalized towards the end of the first quarter, and then we will bring the project immediately into the financing phase. The financing will vary in time depending on the solutions and how we are sort of enabling whether we go fast or a bit slower. The construction time for the project is still at around 2 years before entering into production. And finally, we think key to success is, as I said before, to be a good neighbor. And the targets we have for environmental and social performance is very much in line with what we are doing in the DFS update. So a lot of the changes and improvements we are doing in the DFS upset are supporting many of these targets: with regard to electrification, with regard to energy efficiency and with regard to reducing footprint. We are also moving forward with regard to stakeholder engagement, and we have this for launched local stakeholder resource group, which had their first meeting during October. And being in Norway, it's natural to build an operation with a high degree of digitalization and automatization, which we also think will bring improved safety and improved sustainability for the overall operation of the plant. Then we'll move on to Keliber Oy in Finland. We have seen over the last years a softening of the lithium prices around the world. But now we see that the inventories have been reduced and that the lithium prices have started to rebound. We think we are entering a new phase with regard to lithium demand and also the lithium prices. And it seems that this demand change is driven by the manufacturing and planned manufacturing of electrical vehicles, both in Europe and in Asia. And the manufacturing in Europe has really taken momentum and it looks like that is going to overtake the Asian production in volume terms in a couple of years down the road from now. Keliber is moving forward and are now in the process of raising EUR 30 million to finance impact assessment and final permitting, but also early works during 2021 and the first half of 2022. And they are receiving positive interest from investors, existing and new investors, and are expected to close this financing round by the year-end 2020. So that concludes my update on our 2 major assets. I will then hand the word to Christian, who will comment on the financial situation.
Thank you, Ivar, and good morning, everyone. I will then present the financial status for the third quarter of 2020. Nordic Mining's financial position remains solid with NOK 50 million in cash, an attractive financial asset in Keliber and no interest-bearing debt. Net cash outflow in the third quarter was NOK 7.5 million, which is down around NOK 4 million compared to the second quarter this year. This will increase as we progress towards update of the DFS. The expected study costs for external consultants is around NOK 20 million. Based on that and based on our current forecast and plans, we are fully financed for the ongoing DFS update and well into 2021. The Keliber valuation that we updated in Q1 of this year remains around NOK 88 million. For further details on our financial status for the quarter, please see the appendices in this presentation, and for the full disclosure, the interim report is on our website. That is what I was going to say at this point. And I would like to invite then Ivar back up for the Q&A.
Okay. We have received a couple of questions so far, and you are, of course, invited to post further questions, and we will take them one after one. The first one relates to the AlSiCal project. Can you say a little about the development of the AlSiCal project?
Yes. Thank you for that. The AlSiCal project is supposed to document the patented technology that Nordic Mining has, together with the IFE, Institute for Energy, in Oslo. They are now in a phase where they are testing several different mineral deposits of anorthosite of different nature, so that they are able to document that the technology is robust in a wide variety of mineral resources. It's the first year of the project, so it will run for another 3 years.
The next question, I think, Christian already has touched upon. How much will the DFS cost?
As mentioned, we expect the DFS update externally. So the external study to cost around NOK 20 million and to be finalized then, as Ivar said, in the later part of Q1 next year.
Why did not the original DFS include an alternative plan with a lower footprint and lower CapEx?
Yes. That's a good question. We see that there are several ways to make a project. We are also doing some changes in how the process is being carried out. So we are reducing some of the process plant, which will bring sort of a smaller footprint for the process plant, but also related to how the buildings is going to be laid out and how we are doing the underground infrastructure for the projects.
More related to Engebø. Has the complaint about the operating license been sent to the Ministry of Industry and Fisheries? Or is it still being considered by the director at the mining?
We are not being notified that anything has been sent at this stage. That's our knowledge from today.
There has been some media interest around site visit at Engebøfjellet and the meeting with the Ministry of Industry and AMR last week. Is it so that the ministry of Industry will consider the mineral rights at Engebø as part of the -- your application for expropriation of land plots?
We don't see these things really related. Expropriation thing is a smaller thing related to a limited area. We have received the operational license for the whole of the Engebø deposit for both minerals.
The Ministry of Industry is quoted in media that conclusion related to the expropriation earliest will be in the beginning of next year. How will that interact with the update of the DFS that is planned also in the first part of 2021?
We don't see any challenges with the time line from the ministry related to the updated DFS.
More Engebø. Your DFS published in January was delayed compared with the original plans. How confident are you in the guiding for completion of the update now in the first quarter of 2021? And when in the first quarter do you expect this to be ready?
It is a DFS update, not a full new DFS, although it's a lot of work. We have experience and have been through this exercise before, and we have sort of taken into our schedule our experience and also to cater for the current situation with the pandemic and everything. So we are confident that our schedule will stick.
You state that you target a material reduction of CapEx. How much is a material reduction?
From the early initial indications we have received, in particular, for suppliers engaged in infrastructure and civil works, we see a substantial reduction of CapEx. But it's too early to quantify. And I should underline that CapEx is one factor into the overall economic analysis of Engebø. But the overall driver for this is to make the project even more robust with regard to future market assumptions and other factors affecting the project going further. And in such a perspective, a lower CapEx will make the project even more robust.
Are you expecting -- over to financing. Are you expecting more equity issues before a possible equity issue related to the full financing of Engebø?
As Ivar presented, we are targeting financing for the Engebø project in Q3 next year. As also indicated, the time line for that will vary depending on the financing solution that we find most optimal for the project. And really depending on that and the time needed to secure their construction financing, that will decide what additional top-ups might be needed. However, as stated, we are fully financed for the ongoing DFS update and further into 2021.
And then we have some questions related to Keliber. The first is when will Keliber be listed?
That's a good question. The answer is there is no immediate plan for listing of Keliber. But we think that it would be natural for Keliber at some point to get listed, in particular, if they are sort of taking in larger, new industrial investors.
Also related to Keliber, what is the exploration potential for the area? How many years additionally for today's reserves you think we have in the production based on exploration potential?
We shouldn't speculate too much about that. But the track record in Keliber is extremely good with regard to increasing the resource potential based on the drilling campaigns they have had over the years. It has successively increased year by year. And they have reserved a huge area, which we believe holds good potential for the future.
Will Nordic Mining participate in the ongoing equity issue in Keliber? Or if not, what will the possible dilution be?
Keliber is a financial investment in Nordic Mining. We will assess how we deploy capital against also the mission being planned by Keliber. They are currently, as Ivar said, in discussions with both internal and potential new investors. And before we get more firm ground on the valuation indications in those discussions, it's difficult to say what the potential dilution for Nordic Mining would be.
And then back to Engebø. Have you received any feedback related to the use of [indiscernible] in the Engebø processing? I guess the questioner is related to -- from the environmental authority?
We have a very good dialogue with the authorities on how to reduce and optimize the use of additives and chemicals in the process. So there is no final saying in this per se now, but we experienced a very good cooperation with the authorities on this issue.
And then a general question. What is -- what about the exploration potential in Norway, do you have any thoughts around that?
That's a wide story, and we have many thoughts. And we think Norway holds good potential for exploration in general with regard to many of the minerals also within the sector that we are focusing on. We are in the phase where we really want to focus on our main assets. But certainly, there will be times where we will look beyond and look for other new assets in the exploration phase.
One last question related to financing. How do you see the financing of Engebø and the company going forward?
As stated, we are fully financed for the ongoing DFS and further into 2021. So the need for financing in the company as overall will be assessed as we get closer to the construction financing for Engebø. When it comes to the project financing of Engebø, obviously, the update of the DFS will be an important milestone in ensuring that we have a robust financial case for the financing. We are moving along various financing solutions. Traditional project financing that we've discussed in the past is very much still an alternative, but we're also looking at the opportunity of using the Nordic bond market for potential development bonds. But we are quite confident that based on what we currently see in the ongoing DFS update that we will have a robust basis for financing, both debt and equity, when the time is ready for that.
One further question related to the general exploration issue. What about the main assets, what is the exploration potential there?
Yes. We have commented a little bit on Keliber, which have a huge potential in the area. With regard to the Engebø deposit, the big unknown is really toward the depth of the deposit. It has been drilled to minus 200 still being in ore. So we think the deposit is large towards a depth, but more defined in the east west direction.
Okay. I cannot see any further questions from the web audience. So therefore, I suggest that we close this session.
Thank you all for participating.
Thank you, everyone.
Thanks.