NORDIC MINES AB (publ)
Year-End Report 2016
Fourth quarter of 2016
- Revenues were SEK 0.0 million (SEK 0.0 million Q4 2015) as the Laiva Mine is on care and maintenance and not in production.
- The Company reported an operating loss of SEK -12.3 million (SEK -25.0 million Q4 2015).
- Loss after tax for the period amounted to SEK -12.5 million (SEK 76.1 million Q4 2015), corresponding to SEK -0.02 (SEK 0.36) per share.
- Cash and cash equivalents were SEK 2.8 million (SEK 3.5 million 30 September 2016) at the end of the period. Thus, the Company currently does not have sufficient funds to cover its needs for the next three months starting from the date of this report.
- Equity was SEK 489.7 million (SEK 501.9 million 30 September 2016) at the end of the period.
- Secured shareholder loans of SEK 4.5 million to fund the running costs of the Company.
- On 19 October, the Company appointed Mr.Ola Wahlquist, ex Audit Partner of the Year 2015, Ernst & Young as a Senior Advisor. Mr Wahlquist is a subject matter expert in Risk Management, Compliance and Audit related issues.
- On 25 October, Nordic Mines announced the appointment of Mr Tony Butler as CFO and Mr Rune Nordström, as its Head of Corporate Communications and Investor Relations.
- On 27 October, Nordic Mines appointed Ludmilla Lundberg as Senior Advisor, Compliance & Reporting. Ludmilla comes with 20 years of experience in compliance and reporting
- On 30 November, the Company announced a shareholder loan with Lau Su Holding AB and announced the Company's intention to hold an Extraordinary General Meeting to seek shareholder approval to amend the articles of association in order to create a new preferential class of shares and to approve a placement of USD1.5 million in a combination of preferential and ordinary shares to Lau Su Holding AB. On 9 January the Board of Directors resolved to cancel the Extraordinary General Meeting and the proposed financing in favour of pursuing alternative fundraising, on which see below.
- On 21 December, the Company received assay results from the first batches of the Bjorkdal sorting test sample carried out in September. It is evident that optical sorting systems have the potential to transform the economics at the Laiva mine. Whilst the forecast upgrades to 1.33 g/t were close to our best expectation, it is clear that further threshold optimization work needs to be carried out
Full Year 2016
- Revenues were SEK 0.0 million (SEK 0.0 million 2015) due to the production stop at the Laiva mine.
- The Company reported an operating loss of SEK -37.2 million (SEK -92.3 million 2015).
- Loss after tax for the period amounted to SEK -37.3 million (SEK 0.0 million 2015), corresponding to SEK -0.07 (SEK 0.00 2015) per share.
- Total comprehensive income for the period was SEK -35.2 million (SEK -2.6 million 2015).
Significant events after December 31, 2016
- On 9 January 2017, the Board of Directors decided to cancel the extraordinary general meeting discussed above. The decision was taken because the Board of Directors of Nordic Mines has decided to take necessary steps to carry out a rights issue of common shares to the Company's shareholders of approximately USD 5.0 million, subject to shareholders' approval.
- On 18 January, Nordic Mines appointed the investment bank, Evli Bank plc to lead a rights issue on behalf of the Company.
- On 18 January, the Company announced the resignation from the Board of Directors of Mr Pranay Panda with immediate effect.
- The Company secured a further SEK 2.6 million (USD 0.3 million) in shareholder loans from Lau Su Holding AB.
CEO's Statement
During the fourth quarter, Nordic Mines continued to make progress at the Laiva Project.
The primary Management focus over the past 2 quarters has been twofold. The first has been to explore ways to reduce the mining and processing of waste material, crucial in low grade gold deposits such as Laiva. The second is to plan a drill programme which will a) allow for the mining of wider sections than previously and b) to step out to expand the resource, develop new pits and reduce the strip ratio in the early production years.
Drilling will allow Management to establish the grade of the potentially immediately mineable resource and upgrade an element of the existing resource to mineable. It will also allow for accurate management of bench height and dip together with the associated strip.
Management conducted a lengthy laser optical sorting programme over two years culminating in a large sorting test at Mandalay's Bjorkdal Mine in Sweden in August 2016. Optical sorting, in various forms, has been widely used in mining since the 1990's. Sorting is essentially a secondary strip. We consider the results at Bjorkdal very successful: back calculated grades reporting to the mill have been upgraded by 45%. These results confirm that optical sorting of our quartz diorite and volcanic ores is likely to form an influential element of our plan to return the Laiva deposit to long term profitable production once funded.
The Laiva deposit strike length has been traced for over 8 kms. It is a relatively unexplored deposit to date and management is confident that there is potential to increase mineable resources significantly along strike and at depth; an opinion based on known mineralised and drilled outcrops and drill hole data from the historic 79,000 meters 499 hole drill programmes.
Funding
The Board of Directors of Nordic Mines is examining various strategic options available in order to create shareholder value and expedite taking the Laiva Mine back into production. We anticipate that some of these options will crystallize over the next month or two. The Board will announce the preferred way forward, as soon as possible. The options range from dual listing in a second major stock market, partnering with prominent gold investors, an outright sale, executing a rights issue or a combination. Due diligence is being undertaken on some of these potential options.
In the meantime, Lau Su Holdings AB ("Lau Su") intends to make a further shareholder loan to the Company of USD 0.5 million as a bridge to a larger financing. Subject to terms and board approval, Lau Su has also indicated that it is prepared to underwrite a percentage of a proposed rights issue. All of Lau Su's outstanding shareholder loans would be expected to convert into ordinary shares in the Company on the same terms as the rights issue. Nordic Mines hopes to make an announcement to the market shortly in this regard.
Results, fourth quarter 2016
Net sales were SEK 0.0 million (SEK 0.0 million) during the fourth quarter of 2016 and year to date as the Laiva mine remains on care and maintenance and is not in production.
Production costs amounted to SEK -3.8 million (SEK -2.7 million Q4 2015) during the last quarter of 2016. Even though there has not been any production during the quarter, the Company has maintained some of the organisation around the Laiva mine, for example for maintenance work and environmental supervision. The mine and the plant also have a number of fixed costs, for example balancing the water levels in the mining area, which remain even though the mine is not in production. Depreciation, amortisation and impairment losses for the fourth quarter of 2016 were SEK -3.5 million (SEK -5.8 million Q4 2015).
Sales and administration costs amounted to SEK -4.6 million (SEK -11.1 million Q4 2015).
The Company reported an operating result of SEK -12.3 million (SEK -25.0 Q4 2015).
Net financial items were SEK -0.2 million (SEK 101.0 million, primarily accumulated interest). The Company's income tax for the period has an impact on profit of SEK 0.0 million (SEK 0.0 million).
Loss for the period after tax amounted to SEK -12.5 million (SEK 76.1 million Q4 2015).
Cash flow and financial position
Cash flow from operating activities including changes in working capital for the fourth quarter of 2016 amounted to SEK -7.7 million (SEK -34.3 million Q4 2015). Net cash flow from the financing operations amounted to SEK 7.0 million (SEK 48.9 million Q4 2015) during the same period. Cash and cash equivalents at the end of the period amounted to SEK 2.9 million compared to SEK 3.5 million as of 30 September 2016. Therefore the Company does not currently have sufficient funds to cover its needs for the next three months at the date of this report. If external funds are not provided, it is the assessment of the Board that there is a high risk that the Company will be facing a liquidity deficit. However, the majority owner Lau Su has announced to the Board that they are strongly committed to fulfil the new management's funding needs for the Company going forward. For more information please refer to Liquidity Risks.
At the end of the period, the Group's equity was SEK 489.7 million, compared to SEK 501.9 million as of 30 September 2016. For risks related to the Company's equity, please refer to the Going Concern Principle. The equity/assets ratio was 88.7 per cent compared to 89.8 per cent as of 30 September 2016. Net debt was SEK 8.5 million compared to SEK 0.8 million as of 30 September 2016.
Investments
Since the Company is currently not conducting any mining operations at the Laiva mine, only smaller investments have been made. Net investments during the quarter amounted to SEK -0.0 million, compared to SEK 0.6 million during the same quarter of 2015.
Segment reporting
As per January 2013, the Group stopped using a segment division as there has only been one productive mine in Finland within the Group, and exploration work is currently limited to an administrative scope due to cost savings. The consolidated income statements and balance sheets have been reviewed and valued thereafter.
Employees
During the fourth quarter of 2016, the average number of employees was 16.
No serious accidents were reported during the period.
Exploration
Due to cost savings, Nordic Mine's exploration work was more or less suspended at the beginning of 2013. In total, capitalised exploration expenses as of 31 December 2016 amounted to SEK 64.7 million.
Mineral resource and mineral reserve, 1 January 2015, prepared by SRK Consulting UK Ltd
The tables below shows the most recent update to the Mineral Resource estimate that includes ore sorting that reduces the amount of waste rock and the previous Mineral Resource estimate without sorting.
Laiva Mineral Resource - With sorting (16 May 2016)
| Category | Tonnage (t) | Au Grade (g/t) | Gold (kg) | Gold (tr.oz) |
| Measured | - | - | - | - |
| Indicated | 24,317,397 | 1.13 | 27,535 | 885,000 |
| Measured + Indicated | 24,317,397 | 1.13 | 27,535 | 885,000 |
| Inferred | 4,374,277 | 1.64 | 7,187 | 231,000 |
The mineral resource is reported at a cut off of 0.3 g/t.
The calculation of the mineral resource was based on an assumed five-year gold price of €1,225 per tr.oz (USD 1,400 per tr.oz).
Laiva Mineral Resource - Without sorting (1 January 2015)
| Category | Tonnage (t) | Au Grade (g/t) | Gold (kg) | Gold (tr.oz) |
| Measured | - | - | - | - |
| Indicated | 15,970,000 | 1.52 | 24,300 | 780,000 |
| Measured + Indicated | 15,970,000 | 1.52 | 24,300 | 780,000 |
| Inferred | 3,220,000 | 2.08 | 6,700 | 215,000 |
The mineral resource is reported at a cut-off grade of 0.6 g/t.
The model for the calculation of the mineral resource is limited by an assumed gold price of €1,300 per troy ounce (USD 1,510 per troy ounce).
The reported mineral resource includes the mineral reserve shown below.
Laiva Mineral Reserve - Without sorting (1 January 2015)
| Category | Tonnage (t) | Au Grade (g/t) | Gold (kg) | Gold (tr.oz) |
| Proved | - | - | - | - |
| Probable | 9,367,000 | 1.19 | 11,200 | 360,000 |
| Proved + probable | 9,367,000 | 1.19 | 11,200 | 360,000 |
The mineral reserve is reported at a cut-off grade of 0.6 g/t.
The calculation of the mineral reserve was based on an assumed five-year gold price of €1,020 per troy ounce (USD 1,184 per troy ounce).
For definitions, see the section Definitions in accordance with SveMin.
The gold market and price of gold
According to LBMA (London Bullion Market Association) gold fixing, the price of gold was listed at the beginning of the quarter per troy oz at USD 1,318.65 and EUR 1,175.27, and at the end of the quarter at USD 1,159.1 and EUR 1,100.03.
The Nordic Mines share
The Nordic Mines share has been traded on the Nasdaq Stockholm's Small Cap list since July 2008. The ticker symbol for the share is NOMI and the ISIN code is SE0007491105.
Shareholders
As per 30 December 2016, the number of shareholders in Nordic Mines amounted to approximately 13,000. The ten largest shareholders in the Company are listed in the table below.
| Shareholders as at 30 December 2016 | Number of shares | Holdings % |
| EUROCLEAR BANK S.A/N.V, W8-IMY | 143 801 629 | 25,42 % |
| STATE STREET BANK & TRUST COM., BOSTON | 51 356 381 | 9,08 % |
| CBSG-PHILLIP SEC P/L-CL(INSTI NDVP) | 47 754 771 | 8,44 % |
| FÖRSÄKRINGSAKTIEBOLAGET, AVANZA PENSION | 18 069 220 | 3,19 % |
| NORDNET PENSIONSFÖRSÄKRING AB | 7 084 479 | 1,25 % |
| SWEDBANK FÖRSÄKRING AB | 6 360 547 | 1,12 % |
| HANDELSBANKEN LIV | 4 746 245 | 0,84 % |
| HILMAND, BIRTE | 4 600 000 | 0,81 % |
| CBLDN-UBS FINANCIAL SERVICES INC | 4 129 996 | 0,73 % |
| MENDRIS, NICO | 3 350 000 | 0,59 % |
| OTHER | 274 469 488 | 48,52 % |
| Total | 565,722,756 | 100% |
Source: Euroclear
Share capital
As per 30 December 2016, the market capitalisation amounted to SEK 282.9 million divided between 565,722,756 shares with a quota value of SEK 0.5 each.
Equity amounted to SEK 489.7 million at 31 December 2016, compared to SEK 501.9 million at 30 September 2016.
Significant risks and uncertainties
All enterprise is associated with a certain degree of risk. Nordic Mines' operations must be assessed based on the risk, cost and difficulty that companies in the mining and exploration business often face. The risks in the majority of cases are such that the Company cannot protect itself from them.
The risk faced by mining and exploration companies is mainly associated with the outcome of the exploration itself, the production and the market price on the metal markets, but there is also risk associated with licensing issues related to exploration, processing and the environment.
The Group is also exposed to a number of financial risks: liquidity risk, credit risk, gold price risk and currency risk. The Board and Management attempt to address these risks by identifying, evaluating and mitigating the risks listed above where appropriate.
A more detailed analysis is available in the 2015 Annual Report as well as in the prospectus from 2015, which are available on the Company's website, www.nordicmines.se.
Liquidity risk
The Company currently does not have sufficient funds to cover its needs for the next three months at the date of this report. Cash and cash equivalents totalled SEK 2.9 million at the end of the fourth quarter 2016 and the Company basically does not have any income since production as the plant was closed, albeit there have been some modest timber sales in the fourth quarter. The Company is dependent on external capital contributions for continued operations.
The Company does not currently have the funds to restart operations at the Laiva mine. In order to fund the restart of the Laiva mine, a capital contribution in addition to existing cash and cash equivalents would be required. This capital contribution is intended to fund working capital related to the restart, initial investments and a liquidity reserve for unforeseen costs and administration. This funding is assumed to be a combination of debt financing and additional equity contributions.
If the Company fails to raise additional capital, there is a risk that a liquidity deficit will eventually occur. Given such a development, it is a risk that the Finnish composition plan would default, thus leading to a new reorganisation, bankruptcy or other winding down of the Company.
Composition plan Nordic Mines Oy
On 31 July 2014, the Uleåborg District Court decided to adopt the composition plan proposal filed with the court by the administrator for Nordic Mines' Finnish subsidiary. The composition plan includes conditions that allow the Company's creditors and the composition plan supervisor, attorney Hannu Ylönen from the Krogerus law firm, to apply for the composition to be revoked under certain conditions. Ground for termination include those related to the Group companies not fulfilling their payment obligations under the composition plan.
If Nordic Mines Oy breaches the composition plan, there is a risk that the Finnish composition plan will fail, which could lead to a new reorganisation, bankruptcy or other winding down of the Company. In the event the Finnish composition plan defaults, the relevant creditors' claims return to Nordic Mines Oy, at their full amount, and in the event of bankruptcy all shareholders will lose the entire amount of their previously invested share capital.
A more detailed analysis on the Composition plan in Nordic Mines Oy is available in the prospectus from 2015, which is available on the Company's website, www.nordicmines.se.
Gold price risk
Sales commenced in January 2012 and essentially have consisted of a single product, doré bars, containing gold, silver and copper. A decline in the price of gold could have a negative impact on the Group's future profit as well as a negative impact on the Company's possibilities for restarting operations at the Laiva mine.
Currency risk
Gold is quoted in USD, the majority of the costs occur in EUR and the Group is consolidated in SEK. Accordingly, the Company is directly dependent on exchange rates for these currencies. If USD strengthens against EUR, this has a positive effect. If EUR strengthens against SEK, this has a positive effect on sales, but a negative effect on costs.
Employees
Nordic Mines currently has a small organisation and is dependent on a number of key individuals. A limited expected lifetime and to date weak profitability for the Laiva mine can result in restricted opportunities to recruit key personnel once the mine restarts its operations.
Going concern principle
The Company currently does not have sufficient funds to cover its needs for the next twelve months at the date of this report. The Company basically has had no income since the production at the process plant was closed down, and it is therefore dependent on external capital contributions for its continued operation. For more information please refer to Liquidity Risks above.
There are no guarantees that external capital will be raised for continued operations. There are also no guarantees that, at the point in time when a decision must be made about the restart of operations, Nordic Mines will have sufficient liquidity to finance a restart of operations at the Laiva mine.
In a situation where it can no longer be assumed that the Group is a going concern, there is a risk that the Group's assets and the Parent Company's carrying amounts on receivables to Group companies and participations in subsidiaries will be subject to significant impairment losses.
Accounting principles
The consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS) as endorsed by the EU and recommendation RFR 1 issued by the Swedish Financial Reporting Board on Supplementary Accounting Rules for Groups, which specifies the additions to the IFRS disclosures that are required as stipulated in the Annual Accounts Act. This financial report was prepared in accordance with IAS 34, Interim Financial Reporting. The Parent Company's financial statements are prepared in accordance with the Annual Accounts Act and RFR 2, Accounting for Legal Entities. The Group uses the same accounting principles as those described in the 2015 Annual Report. No new IFRS additions or regulations that affect the Group have entered into force.
Upcoming informational meetings and announcements
Annual Report 28 April 2017
Annual General Meeting 28 June 2017
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Interim report Q1 23 May 2017
Interim report Q2 22 August 2017
Interim report Q3 21 November 2017
Interim report Q4 27 February 2018 (Year-End Report)
The Board of Directors and the Chief Executive Officer hereby confirm that this interim report gives a true and fair view of the Company's and the Group's operations, financial position and results of operations, and describes significant risks and uncertainties faced by the Company and the companies in the Group.
The report for October - December 2016 has not been reviewed by the Company's auditors.
| Stockholm, 28 February 2016 NORDIC MINES AB (publ) | ||
| Vinod Sethi Chairman of the Board | | D. Saradhi Rajan CEO and Director of the Board |
| Hans Andreasson Director of the Board | Torsten Börjemalm Director of the Board | Salim Govani Director of the Board |
| Kari Langenoja Director of the Board | Krister Söderholm Director of the Board |
Note
Nordic Mines is required to publish this information pursuant to the Securities Markets Act and/or the Financial Instruments Trading Act. The information was published on 28 February 2016, at 8:00 a.m. GMT.
For further information, please contact:
D. Saradhi Rajan, CEO, +44 743 271 1564
Rune Nordström, Head of Corporate Communications and Investor Relations, +46 70 602 65 20
Mail: rune.nordstrom@nordicmines.com
info@nordicmines.com
Definitions according to SveMin
A Mineral Resource is a concentration of occurrences of materials in or on the earth's crust in such form, quality and quantity that is of interest financially and for which financially profitable extraction is deemed possible. The location, quantity, grade, continuity and other geological characteristics of a mineral resource are measured, estimated or interpreted based on specific geological facts, tests and knowledge. On the basis of its geological certainty, a mineral resource is classified into the following categories: inferred mineral resource, indicated mineral resource and measured mineral resource.
An Inferred Mineral Resource is the part of a mineral resource for which the tonnage, density of occurrences, form, physical characteristics, grade and mineral content can be estimated with a low level of confidence. This is inferred from geological evidence, tests and assumed but not verified geological or grade continuity. It is based on information gathered using appropriate techniques through exploration and testing of, for example, outcrops, trenches, pits, workings and drill holes. The information is limited or of uncertain quality and reliability.
An Indicated Mineral Resource is the part of a mineral resource for which the tonnage, density of occurrences, form, physical characteristics, grade and mineral content can be assumed with a reasonable level of confidence. It is based on information gathered using appropriate techniques through exploration and testing of, for example, outcrops, trenches, pits, workings and drill holes. However, this information is too inconsistent or inappropriately distributed to guarantee geological or grade continuity.
A Measured Mineral Resource is the part of a mineral resource for which the tonnage, density of occurrences, form, physical characteristics, grade and mineral content can be assumed with a high level of confidence. It is based on information gathered using appropriate techniques through detailed and reliable exploration and testing of, for example, outcrops, trenches, pits, workings and drill holes. This information is sufficiently consistent to prove geological and/or grade continuity.
A Mineral Reserve is the part of a measured or indicated mineral resource that is deemed to be economically feasible for extraction. This includes diluting material and losses which may occur when the material is mined. Appropriate assessments and studies have been conducted and modified taking into consideration realistic assumptions related to mining, metallurgical, economic, marketing, legal, environmental, social and political factors. These assessments show on the reporting date that extraction can be reasonably justified. On the basis of their geological certainty, mineral reserves are classified into the following categories: probable mineral reserve and proven mineral reserve.
When using the term "mineral reserve", there is an expectation that studies have been conducted at the Pre-Feasibility level as a minimum, including a mining plan that is technically appropriate and economically viable.
A Probable Mineral Reserve is the part of an indicated or under some circumstances measured mineral resource for which extraction is economically viable. This includes diluting material and losses which occur when the material is mined. Studies at a minimum of the Pre-Feasibility level have been conducted and modified to take into consideration mining, metallurgical, economic, marketing, legal, environmental, social and political factors. These assessments show on the reporting date that extraction can be reasonably justified.
A Proven Mineral Reserve is the part of a measured mineral resource for which extraction is deemed to be economically viable. This includes diluting material and losses which occur when the material is mined. Studies at a minimum of the Pre-Feasibility level have been conducted and modified to take into consideration mining, metallurgical, economic, marketing, legal, environmental, social and political factors. These assessments show on the reporting date that extraction is justified.
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