Nordic Mining ASA
OSE:NOM
Nordic Mining ASA
Nordic Mining ASA engages in the exploration, extraction, and production of industrial minerals and metals. The company is headquartered in Oslo, Oslo. The company went IPO on 2007-09-14. The firm carries out project development activities related to anorthosite in Gudvangen in the Sogn og Fjordane region, Norway, as well as in Engebofjellet in Sogn og Fjordane, where it also has rights to deposits of rutile and garnet. Nordic Mining ASA has established cooperation with the Department of Geology and Mineral Resources Engineering at the Norwegian University of Science and Technology in Trondheim (NTNU) and the Norwegian Geological Survey (NGU). The agreement enables the Company to carry out mapping and prospecting activities for mineral and metal deposits in Norway. The firm is operational mainly in the Nordic region, through a number of subsidiaries, which include Keliber Oy, Nordic Mining America, Inc., Gudvangen Stein AS and Nordic Rutile AS.
Earnings Calls
Nordic Mining concluded the quarter with NOK 467 million in cash, having invested NOK 2.75 billion in the Engebø project. Although there are minor delays in revenue forecasts, the company is still tracking towards positive cash flow, expected in the second half of 2025. The initial shipment of garnet is targeted for Q1 2025, while rutile production is anticipated in Q2 2025. The company remains focused on quality production and sees a potential recovery in both garnet and rutile pricing due to market conditions. They aim to achieve full production capacity by the end of 2025.
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Good morning, everyone and welcome to this fourth quarter interim presentation here at Nordic Mining. My name is Ivar Fossum. I'm the CEO of Nordic. Together with CFO, Tord Meling; and Managing Director of Engebø, Kenneth Nakken Angedal, we will jointly give you the presentation this morning.
As usual, please note that the full interim report and the presentation has been published in our release this morning, and this webcast will be recorded and also published on our web page.
So with that, let us begin. We have a very standard agenda this morning. After my brief introduction, Kenneth will take you through the details of Engebø and where we are at present before I tell you a little bit about the market outlook as well as an update of our Quartz project before Tord will finalize with an update on financials.
As normal, please remember that you can post your questions during our presentation, and we will read them up in our Q&A session towards the -- when we have finalized our presentation.
So let's start. And once again, it's a pleasure to point your attention to the safety records. Once again, we have no lost time injuries in the fourth quarter. And the Engebø construction has been completed without any LTIs. From now on, the overall safety management and focus has been transferred to the NM Organization from the EPC contractors, which have been responsible for this during the construction period.
The fourth quarter brought a number of important and very interesting milestones for Nordic. First of all, we produced the first kilos of mineral concentrate just before Christmas. And since then, we have been working with ramping up the production, doing adjustments to the process, operational learning, and to make the whole plant work towards a production ramp-up plan, and Kenneth will give you more details about this later on in the presentation. But having said that, we target to have the first shipment of product from Engebø during the first quarter, that means towards the end of March.
My successor, Mr. Finn Ivar Marum, will commence his position as new CEO of Nordic on March 1, and we are carrying out onboarding jointly as we speak. We have also strengthened the corporate staff here in Oslo, first and foremost, to support the operation at Engebø, but also to have the resources necessary for the reportings that are coming against us from EU and other places as well as having the foundation for further growth in Nordic going forward. The Engebø organization is now fully operational with five shifts for the process plant as well as the mining operations. And again, Engebø, Kenneth will tell you more about this in a second.
We exited the fourth quarter with a very solid cash position of NOK 467 million. And altogether, we have invested NOK 2.75 billion in Engebø to year-end. Despite some minor delays of revenue forecast, we are fully funded towards positive cash flow for Engebø, and Tord and Kenneth will give you more details.
Before I end, I want to highlight again the health and safety focus in Nordic. And from now on, we will report the safety records on group level. And I'd like to applaud the four EPCs, which until now have worked over 400,000 hours without LTIs in the Engebø project. It's a fantastic achievement, and that has been an extremely strong focus and joint cooperation between we in Nordic and the contractors.
So with that, I leave the word to you, Kenneth, to tell more about Engebø.
Thank you, Ivar. Taking a bird's view at Engebø in a recent picture, we do see that the pit is progressing, and we do see where the material go from the pit into the underground crusher and into the process plants along the fjord. We also see the access road being completed on the way up from the county road through to the mining area. It's a proud moment to say that our construction phase has been completed. It's been a fantastic work by all at site, both our own construction and operative departments, along with the EPCs, both on HSE way, as mentioned by Ivar, but even more on how we have cooperated to meet our deadlines and targets all the way from 2021.
There is some work remaining, but it's only minor balance of plants, which will be dealt with on the side and does not impact our ramp-up. We will have a small project team at site, and at Engebø, to make sure that we verify all the as-built drawings and documentations from both the EPCs and our process equipment suppliers.
We have, by this established punch lists and defects notices that we follow up towards the contractors. We are not yet into full operation, which means that we are still defined as a construction site. So we are also in the parallel, finalizing all the requirements from the Planning and Building Act to close out all these items according to our building applications.
Among that, as Ivar mentioned, the transfer of the HSE coordination is now moved from the EPCs to our operative departments.
Looking at the ore coming from the underground crusher into the first building, which is the comminution and milling building, we do see the crushing rig on the picture, which leads to crushing the material down from roughly 10 centimeters to 9 millimeters. The conveyor on the right side of the picture feeds the ore then to the mill, which mills down to roughly 0.5 millimeter. This guides and leads the slurry, which we introduce water in the mill into our wet plant building. As you can see on the picture, it's a structure focusing on pipes. It is focusing on sumps and pumps and required machinery and separation units to separate the ore into our three main production lines going out of this building.
The process equipment in the wet plant is consisting of gravity separation and magnetic separation along with particle size separation to feed both a coarse and fine process stream. The magnetic separation is used to divide the garnet and the rutile to get three main streams into our final dry plant building.
As you can see on the picture, the dry plant building is also completed, and we see the belt filters on the back, which are then reducing the moist content down to roughly 5% before it goes into our electric dryers and then electrostatic and magnetic separation to upgrade our product into final concentrates. The material goes from the dry plant building and into our product silos.
Looking a little bit closer into the pits. We see that our first benches has been established and are progressing well in the northeast corner of our Pushback 1 plants. We are levying out the area and making sure that we are making progress sufficient to have ore in the future months to come. We have ramped up the mining activities. So we have all primary and secondary machines at site and the staff onboarded to meet the requirements of both ore and waste rock into the waste rock deposit.
We are currently at full capacity on the waste rock, meaning we are using the waste rock deposit according to our permits. And we are feeding the plant with the required ore according to the process plant ramp-up. During this final stage of testing and ramping up, we are producing final concentrates. We are running the plant separately as we have a crushing and the milling and wet separation and a dry plant. These three parts of the plant are running separately and to some extent, in parallel as we move forward. The final products are now being led and produced into the product silos as part of ramp-up and making sure we're meeting the final and quality grade.
When we had these Q&As at the end of the quarterly presentation for the last few years, many times it's been asked what are the biggest risks, what are the main challenges? And our answer has always been, it's not necessary to build the plant, but it is in the stage we actually are now, when we are ramping up and producing our first ore. So this period has been a significant learning period, and we are very motivated to continue the ramp-up with the great team we have at site. We did not achieve our goals as planned for January, because we saw some defects that was unforeseen becoming visible when we ramped up the plant with more capacity. These have been resolved and where we have not resolved them, they have been set in place temporary solutions so we can continue our ramp-up.
So as long as this phase is a bit uncertain, we are very motivated and putting by plants to make sure we continue our plant to ramp up as planned. A big thing that happened in December was our first mineral concentrates. And before that, as announced in the third quarter presentation, we said that we will have two major milestones in the fourth quarter. First one being the first ore to the mill and then the second one being the mineral concentrate, which we announced the 23rd of December last year. The continued plan is to ramp up the capacity of our production facility up to the annual production rate by the end of '25.
We are focusing on the quality of the mineral concentrate, so all our products can be sold what goes through the whole production line. We have, on the basis of the unforeseen challenge in January, updated our ramp-up plans, and we do see that there's a potential delay on our revenue stream of up to 1 quarter. We are still targeting the first shipment of garnet in first quarter and rutile in the second quarter.
On the basis of the successful mineral concentrate, we do not see a current issue with our process equipment. Our process equipment are working as intended and according to our data sheet created in the DFS stage. We are then and by that, remaining our production level on the long term unchanged.
And then back to you, Ivar, on market outlook.
Thank you, Kenneth. A few words on the market outlooks. And again, we see that the metal sector for titanium metal remains strong, and the reports we get is that the producers worldwide are producing at full capacity to maintain the coming demand on metal.
In pigment, the picture is somewhat different as we also reported in the last quarter. Due to conflicts and due to uncertainty, there has been a soft demand during the last half of 2024 and also in the fourth quarter. However, there are been taking some countermeasures in the sense that Europe now has finally sort of resolved import tariffs for Chinese pigment into EU, and that should help the competitiveness for the European pigment producers. It should support their operating rates at their plants. And we would think that, that would lead to also an increased demand for titanium feedstock for this sector.
But it is uncertainties, as you all know, with regard to the global picture in terms of trade, which may well affect us good being the sole producer of garnet and one or two rutile producers in Europe.
Also on the garnet side, we have seen a soft industrial market, both in Europe and North America in the last months. But there are signs that, it will recover throughout 2025. And we are very optimistic introducing high-quality garnet from Engebø into the European market together with Barton, our marketing partner.
A little closer look on the rutile prices, which have gradually inclined from lower levels through the last decades up to the level which we saw in 2022, beginning 2023. And then, we have seen a dip in the both trades of natural rutile. However, we see outlook that the rutile prices again will recover going forward.
For the broad quantities of rutile, we have a market-based pricing mechanism in our contracts. And as you know, we have the full production of rutile covered in contracts for the first 5 years. On garnet, we have a contract with Barton with fixed volume and also fixed prices in dollars for the first 5 years for garnet.
Then some brief comments on the status of the Kvinnherad Quartz project, which you know is in a very, very early phase, but we did extract around 10 tons of quartz ore from the deposit in November in order to carry out a quite comprehensive bulk processing test work to really specifically check the quality of the potential product from this deposit.
Before we enter that bulk processing test work, we had done some variability test work to start with, and they have shown very promising results, reflecting previous test work we have done on the deposit. So that's a very good indication and an important parameter for us to move on with the development of the project. And we will come back and report on progress.
So with that, I'll leave the word to CFO, Tord Melling, to take you through the financials.
Thank you. So we exit 2024 with NOK 467 million in cash. This quarter has also been characterized by significant investments and where a total of NOK 142 million has been invested in the CapEx program at Engebø. NOK 35 million has been used to pay interest on the bond loan.
Operationally, we had a positive cash flow. This stems from reimbursement of VAT from previous periods where the CapEx levels were higher than they are today. We have seen a significant weakening of the NOK throughout the quarter, which has had a positive effect on our liquidity. This effect comes from a U.S. dollar account where we keep the USD 15 million for the minimum liquidity requirement.
The CapEx program is -- from the construction project is coming to an end, and we estimate approximately NOK 100 million remains at year-end 2024. This is an approximate number where we -- there will be some final discussions with various suppliers. So exactly when the last bill is paid, it is still a bit uncertain. We remain fully funded until positive cash flow, but due to the revenue coming later than we earlier planned, the cash flow point will be lower than what we previously expected. We monitor this very closely and expect to move into positive cash flow territory in second half 2025.
Profit and loss in the fourth quarter has been affected by currency fluctuation. While the cash had a positive effect on this, the accounting effect has been negative. Both the bond loan and the royalty agreement is dominated in U.S. dollar and have resulted in a non-cash negative effect on earnings with NOK 135 million.
Other foreign -- we have revised the price estimate on the rutile, which affects the future cash flow related to the royalty agreement and NOK 48 million has been recognized as financial income in the quarter. We have capitalized cost for the development of Engebø project also in this quarter with NOK 147 million.
Finally, the -- I would like to mention that we have expensed the cost for the Quartz project over the P&L, with a total -- where we have a total investment of NOK 10 million in this phase of the project in '24 and '25. So we are about halfway into that now.
So with that, we go over to the Q&A.
Yes. Thank you. We have a few questions, and we will try to merge similar sounding questions. We'll start with the Engebø project. There are some questions about production quantity of garnet relative to rutile. And could you say what kind of volumes that you are planning on producing this year? And how much you're going to produce during first year -- first half and second half of 2025?
It's a little bit too early to guide on quarterly levels for 2025, but we remain on the position as explained, that we are planning to ramp up the full production capacity by the end of 2025.
We have some financial questions. Given you dropped below $25 million, do you expect to breach the $15 million cash bond covenant?
No, we don't expect to do that. We're planning this very thoroughly now, and our job is to maneuver this -- both the ramp-up and also this liquidity.
Is it increased operational cost or the delay that is causing the lowered low point liquidity estimate?
It's a delay.
When do you expect your financial obligations to be covered? And when do you anticipate paying dividends? Are there any shifts in this time line compared to what you mentioned in the report?
No, we haven't changed any views on the long-term plans. So the volumes and the cost in the project are -- remains the same as we have planned out from the UDF. Yes.
Do you have any plan to refinance, especially the loan with the 11% interest rate?
We will come back to that when we are up in operation and in a steady state, we will come back to that.
This might be for you, Ivar. Could you provide information on the discount Iwatani receives on rutile compared to current market prices? And what is the percentage?
I cannot disclose any of that agreement currently.
Ivar, are you worried about [indiscernible] outcome and how it could affect the Engebø project?
Thank you for that. I think, we have commented on this quite a few times. We're very confident on our permits and licenses given by the Norwegian states, and we don't see any risk related to that case.
We have -- we will give them 1 or 2 minutes and see if there are any other questions coming. It doesn't seem so. If you still have any questions, please reach out to the company. But Ivar, perhaps you would like to summarize this session.
Thank you, Morton. Again, it's been a pleasure to present our progress in Engebø, fantastic achievement by the whole team to make the first new mineral industry in Norway for several decades. That's quite an achievement. And -- it's fascinating to see how now we are ramping up production. And to all shareholders out there, I'd like to say thank you for your support and interest in building new mineral industry in Norway over these years. So again, thank you for watching.