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Nordic Mining ASA
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Good morning, everyone, and welcome to this Fourth Quarter 2020 Interim Presentation for Nordic Mining. My name is Ivar Fossum. I am the CEO. Together with CFO, Christian Gjerde, we will give you the presentation this morning. First of all, be aware that all the presentation material and the full report will be available at our web page. And during our presentation, you can also post your questions, which we will take-up and read during our Q&A sessions by the end of the presentation. So let's move on. After my brief introduction, I will give you an update on our major assets. But I would also like to share a few thoughts with regard to Seabed minerals before Christian will give us an update on the financials. In Nordic, we continue to focus on sustainable production of high-end minerals and metals. First and foremost, over major assets, our Engebø rutile and garnet project on the West Coast of Norway and our stake in the Finnish company, Keliber, for production of lithium hydroxides. But we are also engaged in certain other areas. For example, the AlSiCal R&D projects for greener production of alumina, a project which is fully funded by the EU through their Horizon 2020 program. And we are also engaged in how we may take seabed minerals into a next phase, which might be a future securing of raw materials for the globe. Our vision and our value drivers is producing industrial minerals which have increased demand in a modern society. And this aligns well with the policies which are laid out by the EU Commission. They take action to secure Europeans' supply of raw materials and secure that these raw materials will be produced in a sustainable manner. EU has established, some years ago, a list of what they call critical raw materials. And last year, both titanium and lithium were added to that list. They have also newly formed an alliance called the European Raw Material Alliance, where Nordic Mining is a member. ESG must be an integral part of mining operations in general. Our ESG focus is on the basis of all the 17 UN sustainability goals. But we focus on 4 particular areas which we think are important for our projects and our operations. It's about to take climate responsibility to reduce the impact on environment in total and to ensure health and safety for our workers and for all stakeholders, but not at least to be socially responsible as a citizen in local communities where we operate. We want to make sure that our goals are integrated in product plans and strategies and that are -- they are guided by international principles and standards. We also want to implement specific plans, and I'll come back to that later today, in how we execute our projects. And finally, right now, we are an eager participant in implementing the Canadian scorecard system to sustainable mining in Norway, a system that we think will bring discipline and transparency and also is very much in line with how we operate industry in general in Scandinavia. Before we move on, let me highlight a few of the key points from this presentation. First of all, we see that we are able to reduce the CapEx at Engebø significantly. We have making -- made some significant steps on environment, both with regard to chemical use and environmental impact from those as well as CO2 emissions. Last year, the Directorate of Mining granted our operational license. This was reconfirmed by the directorate in November. And now the final decision is by the Ministry for Trade, Industries and Fisheries (sic) [ Ministry of Trade, Industry and Fisheries ]. And finally, our DFS update for Engebø is moving according to plan, and I'll give you more details on that later on. So let us start on Engebø. And as a courtesy to some of our new shareholders, I'd like to repeat and highlight some of the important parameters around the Engebø resource. It's a special large dual-mineral resource, 2.5-kilometer long, just by the coast of the Atlantic Ocean, the North Sea. It's outcropping on the top of a small hill, and it's next to an ice-free deep-sea quay, which brings fantastic logistics for this specific deposit. It's a 40-minute drive from 2 local airports in each direction, and there is plenty of renewable hydropower, which will fuel the mine and the process plant. Also due to shipbuilding and oil and gas industries, we are in a region where there are skilled labor and also plenty of maintenance and service vendors which can assist us in our operations. With the use of approximately 1/3 of the mineral resource, which are again sort of giving the mineral reserves, we have an indication of an initial mine life of 40 years. Obviously, this might be prolonged with more drilling in the future. We are, as we speak, putting together the updated DFS for Engebø. But already now, we can see that the value engineering exercise and the turn we have taken in the project has given results, mostly with regard to a significant reduction in CapEx. We estimate that to be in the range of USD 100 million, down from the previous DFS estimate of USD 311 million. This stems from many different factors. But let me highlight a few important ones. First of all, we have changed the strategy going from a modular approach with many modules to a stick-built approach, where we have 2 larger process units. And by doing that, we are reducing the physical footprint of the overall plant with approximately 40%. So if you look at illustration and see these 2 modules, in the previous DFS, they represented 5 individual modules each. So tremendous amounts of saving on that area. But there are other factors as well, like, for example, underground infrastructure and the way the masses are flowing from the mine through the plants. We have also changed our execution strategy to base it on individual strong EPC contracts rather than a broad EPCM approach. We have received proposals for all mechanical and infrastructure packages and technical reviews of those are ongoing. And we also received proposals from national and international mining service companies to carry out the mining in the initial years. We have also seen that COVID has impacted, to a certain extent, the demand for minerals, and in particular, garnet, and there will be a certain recovery period, and it's natural for us to revise what should be the right production capacity for garnet in the initial years. Having said that, we see that there are underlying strong drivers for firm markets, both for garnet and for rutile in the future. In particular, on garnet, the waterjet segment is expected to grow healthy in the next decade. On rutile, the demand is driven by the fact that there is very little new supply of rutile and a good forecast of demand for chloride pigment plants. As I said, we are crunching a lot of things together as we speak. And the full results from the DFS will be published in the DFS summary when that is ready. In Engebø, we have focused on ESG as part of the project development. On climate responsibility, we took a turn last year, and we saw that we had the possibility to change the process slightly to allow for using electrical dryers and replace the gas-fueled dryers, which was part of the original design. This has resulted in a tremendous saving on CO2 emissions. We also have changed and reduced the use of chemicals, going from 7 chemicals down to much fewer, around 3 chemicals with a 99% saving on volume. And this new allocation of chemicals have been finally approved by the environment agency in Norway. Also on execution, we have changed the team set up, having a strong owners team strengthened by PMCs and assisted by experts from the EPC contractors. And finally, we have just completed an stakeholder engagement plan, which is a comprehensive plan. We're giving guidelines how we are going to govern our social communication in all aspects of the project through construction and through operations, a very important plan. Part of that plan is the establishment of a resource group, which had their first meeting last year. That's a local stakeholder group, which jointly will monitor the environmental impact from the projects throughout its lifetime. But there are also a number of other plants which are in the making as we speak and which all are in line with the principles given from IFC, International Finance Corporation's, guidelines. So in addition to the stakeholder plan, we are making now the energy management plan, the extractive waste management plan and the closure and rehabilitation plan during this year. And there is a number of other plans, which you can see on the screen, which also will be developed as a part of preparations for construction.Naturally, DFS update is a very, very important milestone for the Engebø project and really sort of the gateway into the area of moving forward on offtake discussions on rutile and garnet and putting together the necessary final factors to prepare the project for financing and construction, very exciting times. We have the ambition to finalize our DFS update in the first quarter. We may see, due to some COVID implications in putting altogether, that it may slip just over Easter into the first part of April. So let me move to Keliber and lithium in Finland. The Keliber project has undergone quite a few improvements and changes over the last years. And they are now developing the product towards finalization of an updated DFS in the second half of this year. The change is, first of all, an increase in production capacity from 12,000 to 15,000 tonnes of lithium hydroxide per annum. But they have also moved the mineral concentrator from the original area closer to one of the mine sites to optimize on logistics and costs. They are carrying out early engineering work and doing important preparations for permitting applications as we speak, both for the chemical plant, but they also finalized impact assessments for the concentrator and for the mining area. Over the years, Keliber have continued to do resource drilling, and we understand that there are also now promising indications from the recent resource drillings. Keliber are in the process of establishing a bridge finance of EUR 30 million scheduled to be closed within this quarter. The project financing is expected to be finalized next year with production start in 2024. It is exciting times. And one of the reasons for that is that the green sentiment really has sort of moved strongly forward in all aspects, but it also strongly fueled by particular plans for a number of new manufacturing plants for batteries in Scandinavia, in Europe and globally. This has resulted in firm demand for lithium, a depletion of stocks, an increase in pricing. And the graph on the screen illustrates, I think, the start of a new era on lithium pricing, the way we see it going forward. Finally, I'd like to share with you a few thoughts on NORA, Nordic Ocean Resources. Nordic Mining was an early pioneer approaching Norwegian authorities back in 2008, addressing the need to carry out exploration at the Norwegian shelf for minerals. We established a scoping study together with Equinor and the Norwegian Technical University in Trondheim in 2012, which kicked off some very interesting perspectives and figures and which was the start of the 4-year R&D project, MarMine, which is partly financed by industrial partners and the Norwegian Research Council. MarMine was finalized by the end of last year. The Norwegian authorities launched a new minerals act for seabed minerals in 2019, and they have now a public hearing for a state-coordinated impact assessment for the Norwegian shelves. So very interesting regulations going forward in this area. And we, in Nordic Mining, we'd like to revise our strategy to see how can we take NORA and our knowledge base and our position in that room forward into the next phase, along with the guidance given from the authorities. So with that, I leave the word to Christian to give us an update on the financials. Thank you.
Thank you, Ivar, and good morning to everyone on the webcast. I will then present the status of the financials for the fourth quarter of 2020. The balance sheet of the group remains solid. As per Q4, we had the cash balance of around NOK 42 million, which is down from NOK 49 million in the third quarter. The net cash outflow of NOK 7.1 million reflects the development activities related to the finalization of the DFS update. We are on target, as previously announced in the third quarter presentation, to achieve the finalization of the DFS study at the budget of NOK 20 million. This means that we remain fully financed for the ongoing and finalization stages of the DFS update, as we guided in the last quarter. The lithium market has, as Ivar stated, had a very positive development over the last months and have continued to outperform also so far this year. This has resulted in a reassessment of the fair value of our investment in Keliber from around NOK 88 million as per the third quarter of this year to around NOK 100 million in the fourth quarter of this year. This fair value assessment includes a translation loss of around NOK 6 million from the weakening of the euro from third quarter then. We remain with no interest-bearing debt in our balance sheet. And as stated, we are fully financed for the ongoing DFS update and further into the second half of 2021. For details related to our financial statements, please see the appendices in this presentation. Or for the full details, you can see the interim report on our website. With this, I will invite Ivar back on stage for the Q&A session.
Okay. Thank you, Christian. We have received several questions already but I think it will be time also for the late movers to post their questions. So please ask questions, and the guys will certainly answer. I will try to sort the questions in the various projects and [ themes ] that are applicable. So we start at Engebø. Regarding the CapEx savings of USD 100 million, how much is the yearly production reduced?
We will give that exact figure in the final report. As I said, we will revise the initial production capacity for garnet. On rutile, it will be unchanged. So the full run-of-mine remains as in the previous DFS at 1.5 million tonnes of ore.
Why wasn't the value engineering and CapEx reduction a part of the original DFS?
Thank you for that question. It's a difficult question to answer. I think the short answer is that it is learning curves. It's always useful to look at things another way. And to be honest, we were surprised in the last round with the level of pricing we got back from the market-based on several factors. But it's clear that we have improved on how to build the project tremendously in this round.
What is the cost consequence of using electrical dryers instead of gas-fueled dryers? And why was gas chosen in the first place?
Historically, and by technology, gas-fueled dryers has been sort of the main way to do it. And natural gas in these dryers is a fully viable and very effective way to dry minerals. We have, during the course of our development, seen that we can stretch existing technology and scale it up to account for the masses we want to dry and that has been the breaking point for us. The economics will not have a big impact for us, maybe a slight change going to electrical drivers, slight improvement.
How likely is a garnet offtake agreement before second half of '20 -- of this year?
We are very optimistic based on the discussions we have with several offtakers on garnet.
Thank you. Then there are a few questions related to the AMR project or project IDs. AMR has asked the Norwegian Ministry of Trade about suspensive effect of the operating license until the complaint has been fully settled, including lawsuits. Has Nordic Mining received any information about this?
We leave these questions basically to the authorities. We're very happy for the firm confirmation by the directorate of the operational license in November.
What are the possibilities for the dispute with AMR will end up in a court decision?
We think that is a question that will remain with the authorities and will be clarified in the final approval of our operational license. So we won't speculate on that today. We are very confident based on the resolutions we have seen from the authorities so far.
A question along the same line. What is the effect for Nordic Mining if a court confirm the garnet belong to AMR for the Vevring side?
We won't speculate on that. It's all positive on our part so far in every resolution from the authorities.
What is status related to the fish monitoring program and how comprehensive will it be?
Yes, the monitoring program for fish is laid out in our discharge permit from the Norwegian authorities. That means that we will, this spring, start monitoring of juvenile salmon out of the fjord. And that is in pipeline. We have received bids and will be put into operation during spring this year.
Okay. And then there are some questions related to Keliber. Any news on Keliber IPO? Has the IPO been sabotaged by majority shareholders?
IPO has been part of the financial scenarios for Keliber and discussed among the shareholders. Right now, there is no specific plans for an IPO in Keliber.
And then a few questions related to the submarine minerals. Did the MarMine project offer any value for Nordic Mining?
The MarMine project offered tremendous value, both specifically in terms of the R&D programs itself but also the knowledge base, which have been established through the PhD candidates, around 20 that participated in the program, and the consciousness about these opportunities at the technical university, among the industry and vendors and among authorities and politicians in Norway. I think it has had tremendous value.
Has there been any activity in the NORA project during the last year? And what is the status of the current exploration applications?
I think that's partly our intention by mentioning NORA today is that we want to revisit and review our strategy how to take NORA forward. It's certainly right that although we had participated in the MarMine project, which has been the main activity, we have not done a lot in NORA internationally or nationally, giving priority to our other assets. Now we think along with the political direction given from Norway, it's the right time to have a look on how we can commercialize, how we can move NORA into the next phase of development.
And then back to Engebø. What is the status of the Japanese rutile offtake partner? When can you name -- can the name be released? And when is offtake expected?
Yes. Thanks for that question. We remain very positive with regard to our partners in Japan, and we cannot disclose any name at this time, and we will come back to that in due time.
Any contact with SeaBird Exploration, who is entering deep-sea minerals?
No, we have no contact with SeaBird Exploration. But we appreciate that there are more companies that are looking into this sector and see the potential opportunities for seabed minerals.
Can't you work to get Keliber listed? And if not, why?
Yes. I won't speculate too much on that. Naturally, we are a listed company. We are positive to IPOs in general. We are a financial holder in Keliber, even though we are the second-largest shareholder. So we're having discussions with the other owners. But currently, there are no immediate plans for an IPO in Keliber, but it will remain as a part of the scenarios.
Have you engaged in talks with Lutelandet Offshore to reduce seabed deposits? If not, why?
We know about Lutelandet. They know about us, and we have had contact through the years. And certainly, that could be a viable option to utilize some of the excess minerals from Engebø if all factors play positively together.
Then is, I think, the -- one of the last questions here. Which role or relationship will LNS have together with Nordic Mining in the coming years?
We have a good relationship to LNS. Apart from that, I wouldn't speculate on anything else.
I think we're about to round it off. Your ambition to reducing the CO2 emission by 80% following the switch to electrical dryers seems more likely now given your recent update. What are your remaining main sources of CO2 emissions? And where do you see potential to reduce these further? Could you reach CO2 neutrality when in production?
Thanks for that. First of all, let me underline that by this change to electrical dryers, the process plant in itself will be completely free of CO2 emissions as such from the process. So the remaining CO2 emission stems primarily from vehicles in the mine and transportation vehicles to and from the process plant as such. We will follow closely what will happen in the scene of electrification for all mining equipment and other things. All the infrastructure needed, and we see that there are tremendous developments on that scene. And that could potentially bring the whole Engebø operation into a neutral sort of era when it comes to CO2 emissions.
Last question. Are you working towards an IPO of NORA?
As I said, we will review our strategy. And I won't sort of exclude or include anything at this point. We will see where that journey will take us in terms of NORA.
Okay. I think we round it off with that. And I thank all that -- the audience that have posted questions. And...
Thank you.
Thank you.