INTERIM REPORT PER 30 SEPTEMBER 2012
www.nordicmining.com Nordic Mining ASA – Group interim report per 30 September 2012
Nordic Mining ASA (“Nordic Mining” or “the Company”) is a resource company with operating activity and focus on high-end industrial minerals and metals in Norway and internationally. The Company’s project portfolio is of high international standard and holds a significant economic potential. The Company’s assets are mainly in the Nordic region.
Nordic Mining produces anorthosite at Gudvangen in Sogn and Fjordane through its subsidiary Gudvangen Stein AS (“Gudvangen Stein”). Through the subsidiary Nordic Rutile AS (“Nordic Rutile”) Nordic Mining is undertaking large-scale project development at Engebøfjellet in Sogn and Fjordane where the Company has rights to a substantial eclogite deposit with rutile and garnet. Nordic Mining has rights for exploration and production of high-purity quartz in Kvinnherad in Hordaland and develops the project through its subsidiary Nordic Quartz AS (“Nordic Quartz”). Nordic Mining holds explorations rights in the Seiland region in Troms and Finnmark where the Company in 2012 has detected a prospective area of sulphide mineralization. Through its associated company Keliber Oy (“Keliber”) in Finland, Nordic Mining plans to start mining of lithium bearing spodumene and production of lithium carbonate.
Nordic Mining is listed on Oslo Axess.
Important events year-to-date:
Indication of a larger and homogenous deposit of high-purity quartz in Kvinnherad Test work has confirmed highest quality and indicates homogeneity for the Kvinnherad quartz deposit. Geophysical measuring indicates that the deposit may be larger than previously anticipated. A scoping study for an industrial quartz project will be completed in November 2012.
New financing secured for Keliber New equity of EUR 4 million has been secured for further development of Keliber’s lithium project. New shareholders in Keliber are i.a. Finnish Industry Investment Ltd. and Ilmarinen Mutual Pension Insurance Company. Nordic Mining remains the largest shareholder with 38%.
Keliber has acquired two new lithium deposits Keliber has entered into an agreement with the Finnish government related to acquisition of two lithium deposits adjacent to the company’s other activities. The deposits have previously been investigated by the Geological Survey of Finland (GTK). Around 9,400 meter of core drilling has been executed by GTK on the two deposits. Keliber will continue the exploration with the purpose to increase the resource base for future lithium production.
Good results from processing tests for production of alumina from anorthosite Nordic Mining and IFE are proceeding with development work related to optimization of the leaching process for alumina. Positive results have been achieved with effective leaching of approximately 95% alumina within a few hours.
Positive drilling results at the Øksfjord Peninsula Chemical analysis of assays from exploration drilling at Reinfjord on the Øksfjord Peninsula show metal containing zones that are wider than previously indicated. The metal content of the best assays is comparable with mines in commercial production.
Further progress on the Engebø rutile project Consideration of a remark related to the industrial area plan for Engebø, as well as the
2 application for waste disposal, is ongoing with the Ministry of the Environment (MD). The Ministry of Trade and Industry (NHD) recommends to MD that the industrial area plan is approved and that an initial permit for waste disposal is granted based on tailings disposal up to a threshold level of the fjord at -220 meter. For waste disposal permit extending the threshold level, NHD recommends that additional flow investigations and model calculations are executed, and that supplementary information is submitted regarding processing agents.
Financial performance
For comparison, numbers in brackets relate to the same period 2011.
Nordic Mining’s operational activity relates to production and sales of anothosite in Gudvangen Stein. Sales revenue in the third quarter was NOK 6.4 million (NOK 5.8 million). Sales volume in the third quarter was 55,000 tonnes which is higher than the same period last year (47,000 tonnes). Accumulated sales revenue per 30 September was NOK 20.9 million (NOK 17.3 million) based on a sales volume of 153,000 tonnes (150,000 tonnes).
Operating loss for the Group in the third quarter was NOK -7.0 million (NOK -7.4 million). Accumulated operating loss for the Group per 30 September was NOK -23.7 million (NOK -19.2 million). The operating losses for the quarter and accumulated are related to costs in connection with development of the projects at/in Engebøfjellet, Gudvangen Stein, Nordic Quartz/Kvinnherad and the exploration activity on the Øksfjord Peninsula. Costs related to share-based remuneration of NOK 1.8 million (NOK 0.0 million) in connection with option agreements with leading employees and resource persons are recognized and included in the accumulated operating loss.
As a consequence of the reduced shareholding for Nordic Mining in Keliber following from the private placement in Keliber, which was agreed in September 2012 and completed in October 2012, the Group’s investment in Keliber will onwards be classified as shares in an associated company. For the third quarter reporting, consolidated net loss is reported separately for continuing operations and discontinued operations. Consolidated net loss in the third quarter for continuing operations was NOK -7.4 million (NOK -7.8 million). Accumulated net loss per 30 September for continuing operations was NOK -22.1 million (NOK -18.4 million). Included in the accumulated result for continuing operations is net financial costs of NOK -1.2 million (NOK -1.1 million). Consolidated net loss in the third quarter, including loss from the discontinued operations, was NOK -8.7 million (NOK -8.5 million). Accumulated net loss per 30 September, including loss from discontinued operations, was NOK -25.2 million (NOK -20.5 million).
Cash flow from the Group’s operating activities was negative in the third quarter and accumulated per 30 September with NOK -6.3 million (NOK -6.0 million) and NOK -18.4 million (NOK -18.9 million), respectively. Net cash used in investment activities amounted to NOK -0.5 million (NOK -0.2 million) in the third quarter, and NOK -3.3 million (NOK -2.1 million) accumulated per 30 September. The investments in the quarter and accumulated are mainly related to capitalized drilling expenses in connection with exploration on the Øksfjord Peninsula and in Finland (Keliber); ref. note 5 in the financial statements. Information of the Group’s cash flow for continuing operations and the discontinued operations, respectively, is available in note 2 in the financial statements.
In January 2012, Nordic Mining completed a rights issue with gross proceeds of NOK 36.0 million; ref. note 7 in the financial statements. As per 30 September 2012, the Group’s cash and cash equivalents amounted to NOK 9.4 million (NOK 9.7 million).
Nordic Mining’s balance sheet as of 30 September 2012 was NOK 97.5 million (NOK 99.5 million).
In September 2012, Nordic Mining and the other shareholders in Keliber entered into an agreement with new investors related to a private placement in Keliber with cash proceeds of EUR 4 million. The
3 agreement was conditioned, and the transaction was completed in October 2012. Following from the transaction, Nordic Mining’s shareholding in Keliber has been reduced to 38%. As Nordic Mining no longer has a controlling interest in Keliber, the shareholding will onwards be classified as shares in an associated company. In accordance with IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”, loss of control in a subsidiary and change of classification to an associated company will imply “held-for-sale” classification if the criteria in the standard are met. For that reason, and as per 30 September 2012, all assets and liabilities related to Keliber are classified in the Group’s balance sheet as “held-for-sale” assets and “held-for-sale” liabilities, respectively. Please see note 2 in the financial statements for further information of accounting matters related to the transaction.
As per 30 September 2012, total equity amounted to NOK 53.6 million (NOK 52.3 million). This gives an equity ratio for the Group of 55% (53%).
Main activities in the third quarter 2012 and in the period up till the reporting date
Nordic Rutile / Engebø project - rutile/titanium dioxide
General project information
Through its wholly owned subsidiary Nordic Rutile, Nordic Mining intends to establish industrial production of rutile concentrate (TiO2) based on its rutile deposit at Engebø. The project will represent high standards in modern mineral industry and with regard to utilization of mining technology.
Rutile is an environmentally friendly and a strategic mineral. Rutile is a high-grade raw material for production of environmentally friendly pigments used in i.a. production of paint, plastics and paper, and for production of titanium metal. Rutile has significant industrial importance with several application areas within environmental technologies (“green tech”), consumer products and health and medicine. Due to its high bio-compatibility rutile/titanium is particularly suitable for i.a. prosthesis and implants in the human body.
The mineral deposit at Engebø also contains significant volumes of garnet, and Nordic Mining plans to produce high quality garnet as a by-product. Garnet has various industrial applications and may replace industrial sands with content of free silica which is harmful for health and environment.
Positive climate effects
Nordic Mining will secure an environmentally friendly production process, extraction and shipping/logistics, as well as a sustainable deposit solution for rest minerals. The geographical location of Engebøfjellet and the planned short-distance shipping of products represent environmental advantages with regard to greenhouse emissions compared with current long-distance freight of products into the European market. Further, titanium metal produced from rutile facilitates reduced weight and fuel consumption in modern airplanes, thus reducing negative environmental effects. As a consequence, and in several ways, the Engebø project will contribute positively in a global climate perspective.
Industrial area plan and permit for waste disposal
In May 2011, the municipality boards in Naustdal and Askvoll approved the industrial area plan for rutile production at Engebø. The approvals marked an important milestone in the process to establish long term, profitable and sustainable rutile production at Engebø.
In June 2011 the county governor of Sogn and Fjordane forwarded the industrial area plan, including a remark from the Directorate of Fisheries, to the Ministry of the Environment (MD) for resolution. The county governor recommended approval of the plan. 4 The Engebø project has gained strong political support locally in the municipalities and on county level in Sogn and Fjordane. This provides an important foundation for the project work going forward with the purpose to start construction and production.
Consideration of the remark related to the industrial area plan for Engebø as well as the application for waste disposal is ongoing with the MD. The Ministry has obtained advice from i.a. the Ministry of Trade and Industry (NHD), the Ministry of Fisheries and Coastal Affairs and the Climate and Pollution Agency (Klif). NHD recommends to MD that the industrial area plan is approved and that an initial permit for waste disposal is granted based on a tailings disposal up to a threshold level of the fjord at -220 meter. For waste disposal permit extending the threshold level, NHD recommends that additional flow investigations and model calculations are executed, and that supplementary information is submitted regarding processing agents. The recommendation from NHD coincides well with an alternative solution presented by Klif to the MD.
In Nordic Mining’s opinion, the alternative solution presented by Klif and recommended by NHD will provide acceptable predictability for the further project development work. An initial limited permit for tailings disposal will be sufficient for a production period of minimum 15 years based on conservative assumptions for filling of the fjord disposal. According to Company estimates the Engebø project will be profitable even with a possible life-time limitation of 15 years.
Commercial status
Rutile is an important strategic mineral with significant application areas within the pigment industry, in health and medicine, in environmental technologies and in various consumer products. The market for rutile products has developed very positively the last two years. The price level for rutile is currently in the range USD 2,200 - 2,500 per tonne FOB Australia for bulk products. This is 4 – 5 times the price level by year-end 2010. Rutile for welding applications, which is approximately 10% of the total rutile consumption, is reported with prices around USD 3,000 per tonne.
The markets for titanium feedstock, i.a. rutile, are affected by the general development of the global economy. Compared with industrialised countries emerging economies like for example China and India, have a low consumption of titanium feedstock (TiO2). Future demand for titanium feedstock is expected to be higher than the supply, i.a. because new production capacity is expected to be limited.
Due to its high grade and positive properties in processing rutile is a particularly attractive feedstock. Long-term rutile prices are expected to remain on a high level, however, price variations will occur due to shifting market conditions.
Europe has a significant supply deficit in titanium feedstock. Currently, the main volumes of rutile and other feedstock into Europe come from Australia, Africa and North-America. For industrial customers in Europe supply from Engebø represents a substantial logistical advantage compared to overseas alternatives.
Applications for rest minerals
Nordic Mining evaluates several possibilities and applications for rest materials from the production process at Engebø. The rest minerals are inert minerals without any heavy metals or radioactive elements. The rest minerals have been approved as capping material for contaminated sediments, for instance in harbor areas or other polluted areas. Both in a Norwegian and a European perspective, this can possibly represent a significant market potential for the rest minerals from Engebø. Further, the rest minerals are considered in i.a. various concrete applications, as soil conditioner and as raw material for various construction purposes. The deep-water port facilities at Engebø and the short distance to the European markets represent a significant logistical advantage also for the rest minerals.
5 In the future, various by-products from rest minerals may represent an important additional value for the Engebø project, financially, and with regard to new industrial activity. In addition, tailings disposal from the project can be reduced.
Gudvangen Stein - anorthosite
Current market segments
The sales volume in the third quarter was 55,000 tonnes (47,000 tonnes). The accumulated sales volume per 30 September was 153,000 tonnes (150,000 tonnes).
The stonewool insulation industry is the largest market segment for Gudvangen Stein. There is an increasing focus nationally and internationally on insulation and energy efficiency in buildings and other technical installations. For Gudvangen Stein the target is to be a preferred supplier of quality raw material for stonewool production.
Over the last months, Gudvangen Stein has experienced increasing demand for anorthosite from customers in the European asphalt industry.
The strong Norwegian currency in 2012 has caused weaker margins on sales invoiced in Euro.
Operational issues
The production volume in the third quarter was approximately 48,000 tonnes. Various technical problems i.a. on the primary crusher, have affected production in shorter periods. Preparations for upgrading and new electrical installations are ongoing.
New applications and product development
Nordic Mining and Institute for Energy Technology (IFE) have produced high-grade alumina from the Gudvangen anorthosite. Production has been done in laboratory at moderate process conditions which means low temperature, atmospheric pressure and with moderate acids.
The project continues in 2012 – 2013 with NOK 4.1 million in financial support from Gassnova SF. The alumina content of Nordic Mining's anorthosite is approximately 30%, and consequently anorthosite is potentially a major alumina source. The test results could be a break-through in the efforts to realize the value potential in the anorthosite.
The development work in 2012 has primarily focused on optimization of the leaching process to extract the alumina from the anorthosite. Effort has also been made into testing of by-products from the process stream, and to regenerate acid for recirculation. The results from leaching of alumina are positive, showing effective leaching of approximately 95% alumina within few hours. A silica product with a purity of 75% SiO2 was produced as a by-product. Optimization of the leaching and washing of silica will be tested in the project’s next phase, and is likely to result in a higher grade silica product. Various modified processing routes have been tested for efficient regeneration of acid in order to reduce operation costs. Two processing routes seem particularly promising, and new tests will be carried out in the next project phase.
Preliminary results from complete processing have shown that a purified alumina product can be produced with a total recovery of approximately 40%. The recovery is expected to be significantly higher with optimized conditions. This will be target for more sophisticated tests in the project’s next phase.
6 Other product development
In addition to processing of anorthosite for alumina production Gudvangen Stein is developing anorthosite concentrates as feedstock for various industrial applications; i.a. ceramics, glass related products and as filler in various industries. Dialogue is ongoing with various international companies regarding product development and testing. Test production of anorthosite concentrates is executed in third party production facilities.
Nordic Quartz - high-purity quartz
General project information
In 2011, Nordic Mining entered into an agreement with landowners and secured exclusive rights for investigation and development of a quartz deposit in Kvinnherad municipality in Hordaland in Norway. Studies show that the quartz has a low content of contaminants and therefore can be regarded as high-purity type quartz. Nordic Mining’s wholly owned subsidiary Nordic Quartz is a vehicle for the Group’s development work related to quartz.
New processing tests
A comprehensive analysis and test program was executed in 2011 at Dorfner Anzaplan’s laboratory in Germany. The results confirm the deposit as world class, and indicate potential for several high-value applications and a significant commercial value. The tests have involved various separation methods to remove impurities, including mechanical separation and acid leaching techniques. High-purity concentrate products similar to the highest priced quartz products on the market were produced. Melting tests have demonstrated that the bubble content in glass production is at an acceptable level.
In spring 2012, three new quartz samples for processing tests. The samples were taken from other parts along the whole length of the quartz vein. The aim of the tests was to investigate whether high quality products, similar to the qualities produced from the first sample in 2011, could be reproduced for a larger part of the deposit. Product qualities at the level of the purest and best products in the market were obtained for all the new samples. Melting tests also showed that glass of highest market quality could be produced from the samples.
Geophysical measuring
In October 2012, geophysical measuring has been executed on the quartz deposit. The purpose was to make a 3D interpretation of the orientation, volume and depth of the vein. The magnetic survey aimed at distinguishing between the non-magnetic quartz vein and the more magnetic granitic gneiss side rock. The results from the measuring support NGU’s preliminary (not JORC compliant) volume estimate of 2.7 million tonnes of quartz based on field mapping and indicates an even larger extension of the quartz vein both horizontally and vertically.
The wider parts of the non-magnetic body projected in the magnetic measuring can be related to unexposed quartz that is not yet surface mapped. Depth interpretation shows that it is likely that the vein extends to at least 150 meters depth below the highest surface outcrop. There are also indications of a possible further continuation to about 300 meters depth. The indicated wider parts of the quartz vein will be further investigated by surface mapping. The actual depth of the vein and the down dip quality will be verified by drilling and analysis.
Scoping study
Nordic Mining has initiated a scoping study for an industrial quartz project in Kvinnherad. The scoping study will include market, mining and processing scenarios, together with preliminary economic
7 assessments for the project. The study which is carried out by Dorfner Anzaplan, will be completed in November 2012.
Other exploration activity
Øksfjord; copper, nickel, palladium, platinum
In 2012, Nordic Mining has executed exploration drilling of two bore holes in the Reinfjord area on the Øksfjord peninsula where previous investigations have indicated interesting mineralization (i.a. copper, nickel, cobalt, PGE). Chemical analyses of the drill cores have shown broader metal bearing zones than previously indicated from geophysical measuring. The metal content of the best assays is comparable with mines in commercial production.
In the third quarter 2012, field work with surface sampling within the prospective area has been executed. The mapping has provided increased knowledge of rocks and structures, including the orientation of the various magmatic layers. This will be useful information for the planning of an extended drilling program in the area.
Keliber - lithium/lithium carbonate
General project information
Through Keliber in Finland, Nordic Mining has deposits of high quality lithium mineral suitable for extraction and production of high-purity lithium carbonate. Lithium carbonate has a variety of industrial applications, i.a. for batteries which takes up an increasing share of the total global consumption.
Financing secured for further development
In September 2012, agreements have been made related to a private placement in Keliber with cash proceeds of EUR 4 million. The equity issue was completed in October 2012. The financing will be used for further mineral exploration with the purpose to document a larger resource base for Keliber’s lithium project. Further, new metallurgical test work and preparations for feasibility studies will be executed.
Following from the private placement Keliber has got several new shareholders, e.g. Finnish Industry Investment Ltd. and Ilmarinen Mutual Pension Insurance Company with approximately 15.6% and 13.0%, respectively. Nordic Mining remains the largest shareholder in Keliber with approximately 38.0%; down from approximately 65% before the private placement.
Accounting effects for the Nordic Mining Group accounts following from the transaction are described above under “Financial performance” and in note 2 in the financial statements.
Acquisition of new lithium deposits and new drilling program
In October 2012, Keliber has entered into an agreement with the government of Finland regarding Keliber’s acquisition of the Leviäkangas and Syväjärvi lithium deposits which have previously been offered for sale by the government in an open tender. The two deposits are located adjacent to Keliber’s other activity. The Leviäkangas and Syväjärvi deposits have previously been investigated by the Geological Survey of Finland (GTK), i.a. with a total of 9,400 meter of core drilling. Keliber will have access to the GTK exploration data, including mapping data and related chemical assays, geological maps, drill core logs and assays and local geophysical data, for its further investigations.
8 Keliber will continue the exploration work on the two new deposits and on its other deposits and license areas with the purpose to increase the resource base for future lithium production. A new drilling program is scheduled to start in the fourth quarter 2012, with continuation in 2013.
Oslo, 14 November 2012 The Board of Directors of Nordic Mining ASA
9 CONDENSED CONSOLIDATED INCOME STATEMENTS
2012 2011 2012 2011 2011 01.07-30.09 01.07-30.09 01.01-30.09 01.01-30.09 01.01-31.12 (Amounts in NOK thousands) Unaudited Unaudited Unaudited Unaudited Audited Sales 6 395 5 757 17 988 17 875 25 342 Other income 1 559 13 1 746 228 264 Cost of sales (1 683) (1 141) (4 443) (3 549) (6 577) Payroll and related costs (3 881) (3 421) (12 565) (10 088) (12 679) Office costs and business service fee (450) (681) (1 790) (2 021) (2 691) DD&A (644) (705) (2 051) (2 069) (2 931) Other operating expenses (8 309) (7 230) (19 801) (17 629) (25 464)
Operating profit/(loss) (7 013) (7 408) (20 916) (17 252) (24 736)
Financial income 163 (28) 188 212 453 Financial costs (560) (378) (1 419) (1 324) (1 875)
Profit/(loss) before tax (7 410) (7 814) (22 147) (18 364) (26 158)
Income Tax - - - - -
Loss from continuing operations (7 410) (7 814) (22 147) (18 364) (26 158)
Loss from discontinued operations (851) (688) (2 585) (2 137) (2 486) Impairment -held for sale assets (420) - (420) - - Total - ref. note 2 (1 271) (688) (3 005) (2 137) (2 486)
Loss for the period (8 681) (8 502) (25 152) (20 501) (28 644)
Profit/(loss) attributable to Equity holders of parent (8 359) (8 282) (24 216) (19 817) (27 841) Minority (322) (220) (936) (684) (803)
Earnings per share attributable to ordinary shareholders (Amounts in NOK)
Basic and diluted earnings per share for continuing operations (0,04) (0,05) (0,12) (0,13) (0,18)
Basic and diluted earnings per share for discontinued operations (0,01) (0,00) (0,01) (0,01) (0,01)
Basic and diluted earnings per share (0,05) (0,06) (0,13) (0,14) (0,19)
10 STATEMENTS OF COMPREHENSIVE INCOME
2012 2011 2012 2011 2011 01.07-30.09 01.07-30.09 01.01-30.09 01.01.30.09 01.01-31.12 (Amounts in NOK thousands) Unaudited Unaudited Unaudited Unaudited Audited
Net profit/(loss) for the period (8 681) (8 502) (25 152) (20 501) (28 644)
Other comprehensive income:
Currency translation differences (674) 420 (1 622) 314 (246)
Other comprehensive income directly against equity (674) 420 (1 622) 314 (246)
Total comprehensive income for the period (9 355) (8 082) (26 774) (20 187) (28 890)
Profit/(loss) attributable to
Equity holders of parent (8 872) (7 950) (25 441) (19 569) (28 033) Minority (483) (132) (1 333) (618) (857)
11 CONDENSED CONSOLIDATED BALANCE SHEETS
30.09.2012 31.12.2011 (Amounts in NOK thousands) Note Unaudited Audited ASSETS Non-current assets Goodwill - 7 206 Licences 2, 5 6 077 7 110 Minerals, property, plant and equipment 2 19 405 64 904 Other long-term assets 827 472 Total non-current assets 26 309 79 692
Current Assets Inventory 2 771 3 163 Trade and other receivables 5 705 5 970 Cash and cash equivalents 9 352 3 340 Sum before assets classified as held-for-sale 17 828 12 473 Assets classified as held-for-sale 2 53 351 - Total current assets 71 179 12 473
Total assets 97 488 92 165
SHAREHOLDERS' EQUITY & LIABILITIES Shareholders' equity Share capital 7 18 547 14 547 Share premium 7 206 821 177 416 Other paid-in capital 8 856 7 033 Retained losses (185 785) (161 567) Translation adjustment (1 825) (600) Equity attributable to ordinary shareholders 46 614 36 829 Non-controlling interest 6 982 8 314 Total equity 53 596 45 143
Non-current liabilities Interestbearing loan 6 671 7 421 Deferred tax 2 32 7 686 Lease obligations 4 114 6 085 Other liabilities 2 2 586 10 728 Total non-current liabilities 13 403 31 920
Current liabilities Current portion of long-term debt 3 308 3 554 Trade Payables 4 089 4 509 Other current liabilities 5 249 7 039 Sum before liabilities classified as held-for-sale 12 646 15 102 Liabilties classified as held-for-sale 2 17 843 - Total current liabilties 30 489 15 102 Total liabilities 43 892 47 022
Total shareholders' equity and liabilities 97 488 92 165
12 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Unaudited
Non - controlling Attributed to equity holders of the parent interest Total equity (Amounts in NOK Share Share Other-paid-in Trans l ati on Retained thousands) capital premi um capital adjustment earnings Total Equity 1 January 2011 12 547 153 337 7 033 (408) (133 649) 38 860 7 526 46 386 Total comprehensive income for the period - - - 248 (19 817) (19 569) (618) (20 187) Share issue 2 000 27 000 - - - 29 000 - 29 000 Transaction costs - (2 921) - - - (2 921) - (2 921) Equity 30 September 2011 14 547 177 416 7 033 (160) (153 466) 45 370 6 908 52 278
Equity 1 January 2012 14 547 177 416 7 033 (600) (161 568) 36 828 8 315 45 143 Total comprehensive income for the period - - - (1 225) (24 216) (25 441) (1 333) (26 774) Share based payme n t - - 1 823 - - 1 823 - 1 823 Share issue 4 000 32 000 - - - 36 000 - 36 000 Transaction costs - (2 595) - - - (2 595) - (2 595) Equity 30 September 2012 18 547 206 821 8 856 (1 825) (185 784) 46 615 6 982 53 596
13 CONDENSED CONSOLIDATED CASH FLOW STATEMENTS For the period ended 30 September
2012 2011 01.01-30.09 01.01-30.09 (Amounts in NOK thousands) Unaudited Audited
Net cash used in operating activites (18 438) (18 853)
Purchases of property, plant & equipme n t ( 586) (1 371) Purchases of intangible assets ( 2 667) (771) Cash classified as held-for-sale ( 21) -
Net cash used in investing activities (3 274) (2 142)
Share issuance 33 405 26 079 Payments of loans (750) (666) Payment of contingent liability (3 023) - Principal payments on finance leases (1 907) (1 778) Net cash from financing activities 27 725 23 635
Net change in cash and cash equivalents 6 013 2 639 Effect of changes in foreign exchange rates (1) (5) Cash and cash equivalents at beginning of period 3 340 7 065
Cash and cash equivalents at end of period 9 352 9 699
Non-cash transaction: Change in lease obligation - 830
14 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 SEPTEMBER 2012
Note 1 – ACCOUNTING PRINCIPLES
These interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, “Interim Financial Reporting”. They do not include all of the information required for full annual financial reporting, and should be read in conjunction with the consolidated financial statements of Nordic Mining ASA and the Group for the year ended 31 December 2011.
This report was approved by the Board of Directors on 14 November 2012.
The accounting policies adopted are consistent with those followed in the preparation of the Company’s and the Group’s annual financial statements for the year ended 31 December 2011.
Note 2 – ASSETS AND LIABILITIES CLASSIFIED AS HELD-FOR-SALE
In September 2012, Nordic Mining and the other shareholders in Keliber entered into an agreement with new investors related to a private placement in Keliber with cash proceeds of EUR 4 million. The agreement was conditioned, and the transaction was completed in October 2012. Following from the transaction, Nordic Mining’s shareholding in Keliber has been reduced to 38%. As Nordic Mining no longer has a controlling interest in Keliber, the shareholding will onwards be classified as shares in an associated company. As per 30 September 2012, all assets and liabilities related to Keliber are classified in the Group’s balance sheet as “held-for-sale” assets and “held-for-sale” liabilities, respectively.
In connection with the classification of Keliber as a “held-for sale” entity Nordic Mining has assessed amounts posted in the balance sheet. In order to adjust balance sheet values, “held-for-sale” assets have been written down in the Group financial statements for the third quarter 2012 at an amount of NOK 420,000.
The table below gives information per balance sheet category related to Keliber in Nordic Mining’s Group financial statements per 30 September 2012.
Amounts in NOK thousands 30.09.2012 Goodwill 6 361 Licenses 4 857 Minerals, property, plant and equipment 41 778 Current assets 355 Total assets classified as held-for-sale 53 351
Other long-term liabilities 5 055 Deferred tax liabilities 7 275 Current liabilities 5 513 Total liabilities classified as held-for-sale 17 843
As Nordic Mining, subsequent of the financing transaction in October 2012, no longer has a controlling interest in Keliber, The Group’s equity will no longer include minority interests. As a consequence, total equity will be reduced with an amount which at 30 September 2012 amounted to approximately NOK 7 million. Translation adjustments at an amount of NOK 1.8 million as per 30 September 2012 are related to Keliber, and consequently this amount will be posted in the profit and
15 loss accounts on the closing date for the transaction. Such posting will not affect the Group’s equity due to reclassification in the statement of comprehensive income.
Discontinued operations
The transactions in Keliber leading to loss of control of subsidiary and classification as investment in associate are in the consolidated financial statements presented as discontinued operations.
The following table shows cash flows related to discontinued operations:
01.01-30.09 01.01-30.09 Amounts in NOK thousands 2012 2011 Cash flow used in operations (76) (1 551) Cash flow used in investing activities (1 188) (1 121) Cash flow from financing activities - - Total (1 264) (2 672)
The following table specifies amounts from the condensed income statements that have been reclassified to loss from discontinued operations:
01.01-30.09 01.01-30.09 Amounts in NOK thousands 2012 2011 Ot her inc ome 14 34 Payroll and related costs (1 066) (1 128) DD&A (75) (98) Other operating expenses (1 195) (709) Financial income - 10 Financial costs (263) (246) Loss from discontinued operation before impairment (2 585) (2 137) Impairment - held-for-sale assets (420) - Total loss for discontinued operations (3 005) (2 137)
Note 3 – SEGMENT
The Group shows segments on the basis of products or products under development. The three reportable segments per 30 September 2012 are:
Anorthosite which is produced by Gudvangen Stein AS. Lithium whereby Keliber Oy in Finland owns mineral reserves and is planning production of Lithium carbonate. Titanium feedstock which can be produced by Nordic Rutile from the mineral deposit at Engebøfjellet; the Ministry of the Environment considers the industrial area plan for the project and the application for waste disposal.
As a consequence of the onward classification of the Keliber shareholding as shares in an associated company, the Group’s reportable segments will be changed.
The reconciling column “Adjustments and eliminations” include the Group’s administration costs and other unallocated corporate business development costs as well as elimination entries related to preparing consolidated financial statements.
16 The Group uses the segments’ profit/(loss) before tax as the basis for the segment results including some allocations of corporate expenses but excluding purchase price allocations related to business combinations. All the numbers in the table below are in NOK thousands and present the period 1 January – 30 September.
Adjustments Anorthosite Lithium Titanium and eliminations Consolidated 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
Revenues 18 209 18 103 14 34 - - 1 526 - 19 748 18 137 Segment result (5 660) (4 603) (3 055) (2 392) (8 022) (5 454) (8 414) (8 052) (25 152) (20 501)
Note 4 – TRANSACTIONS WITH RELATED PARTIES
Nordic Mining has a business service agreement with Dag Dvergsten AS for i.a. office rental and administrative support functions. The Company’s board member Tore Viana-Rønningen is employed in Dag Dvergsten AS. In the period 1 January to 30 September 2012, Nordic Mining has purchased services according to the business service agreement for approximately NOK 1.8 million from Dag Dvergsten AS.
In the second quarter 2012, Nordic Mining entered into an agreement with the chairman of the board, Tarmo Tuominen. Tuominen has specific technical competences which Nordic Mining from time to time has a requirement for. The agreement comprises services that are outside the scope of Tuominen’s duties as chairman of the board. As per 30 September 2012, Nordic Mining has purchased services according to the agreement with Tuominen for approximately NOK 20,000 (NOK 0).
Note 5 – INTANGIBLE ASSETS
As per 30 September 2012, Nordic Mining has capitalized approximately NOK 2.7 million related to exploration on the Øksfjord peninsula and in connection with Keliber’s exploration program for lithium minerals in Finland. Amounts related to Keliber posted to the balance sheet have been classified as “held-for-sale” per 30 September 2012.
Note 6 – SHARE BASED REMUNERATION
On 12 June 2012, the general meeting approved a share-based incentive program for leading employees and qualified resource persons. The Board of Directors was authorised to award options that in total gives the right to subscribe for up to 6 million new shares in Nordic Mining.
Nordic Mining has awarded 4,550,000 options to leading employees and resource persons. Exercise price for the options is NOK 1.05 per share. The options have no vesting requirements, and they are valid for two years. As per the date of this report, none of the options have been utilised.
Costs related to share based remuneration; in total NOK 1,822,736 (NOK 0), have been recognized and included in the operating loss for the second quarter and accumulated per 30 September 2012. The costs have no cash effect.
17 Note 7 – EQUITY ISSUE
Ordinary Number of shares in thousands shares
Opening balance 1 January 2012 145 470 Share issuance 40 000 Closing balance 30 September 2012 185 470
In January 2012, Nordic Mining executed a rights issue with gross proceeds amounting to NOK 36.0 million. The net proceeds was approximately NOK 33.6 million after deducting directly attributable transaction costs of NOK 2.4 million. 40 million new shares were issued at a subscription price of NOK 0.90 per share. After the share issue, Nordic Mining has 185,470,091 issued shares.
Note 8 – SUBSEQUENT EVENTS
Annual report on mineral deposits In October 2012, Nordic Mining published a report for 2012 with status for the Group’s mineral deposits, including exploration results, mineral resources and ore reserves. The Company will on an annual basis publish a mineral report with focus on geological information related to the Group’s main mineral projects.
Geophysical measuring of the quartz deposit in Kvinnherad In October 2012, Nordic Mining carried out geophysical measuring of the quartz deposit in Kvinnherad. The results from the measuring support the previous volume estimate from NGU of approximately 2.7 million tonnes of quartz (not JORC compliant). Further, the measuring indicates an extension of the quartz vein both horizontally and vertically.
Completion of new financing in Keliber New equity of EUR 4 million has been secured for further development of Keliber’s lithium project. The transaction was completed in October 2012. Nordic Mining remains the largest shareholder in Keliber with approximately 38%.
Acquisition of two new lithium deposits in Finland In October 2012, Keliber has entered into an agreement with the Finnish government related to acquisition of the Leviäkangas and Syväjärvi lithium deposits. The new deposits are located adjacent to Keliber’s other activities.
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