Northern Iron. Investor Update March 2010

Transcription

1 Northern Iron Investor Update March 2010

2 Disclaimer Forward-looking statements This presentation may include forward-looking statements. Forward-looking statements are only predictions and are subject to risks, uncertainties and changes in assumptions which are outside the control of Northern Iron Limited. Actual values, results or events may be materially different to those expressed or implied in this presentation. Given these uncertainties, recipients are cautioned not to place reliance on forward-looking statements. Any forward-looking statements in this presentation speak only at the date of issue of this presentation. Subject to any continuing obligations under applicable law and the ASX Listing Rules, Northern Iron Limited does not undertake any obligation to update or revise any information or any of the forward-looking statements in this presentation or any changes in events, conditions or circumstances on which any such forward-looking statement is based. Nothing in this presentation should be construed as either an offer to sell or a solicitation of an offer to buy or sell securities. 1

3 Project Profile & History Sydvaranger iron mine, Norway Operated in Norway from 1910 to 1997 During that time over 200Mt of ore was mined Well known, high quality product (67.5% Fe) with low levels of impurities Mine closed after end of Cold War NFE commenced redevelopment in 2008, and has invested USD 205M in the restart First concentrate production in October 2009 Expect to achieve nameplate throughput capacity in July 2010, and target quality in February 2011 The project has an estimated mine life of 19 years at an annual production rate of 7Mtpa of mill feed, producing approximately 3Mtpa of magnetite concentrate Potential to double concentrate production with an expansion project 2

4 Location Sydvaranger Iron project Port Mine 8km from Kirkenes, where the concentrator and port are located. Labour force Kirkenes regional population of 12,000 35km from industrial and mining towns in Russia Key markets Short distance to key iron ore markets in Western Europe 3

5 Corporate Board Neil Hamilton Non-Executive Chairman John Sanderson Managing Director 6 Non-executive directors Substantial Shareholders ( > 5.0%) (as at 19 Feb) Felix Tschudi (89.1m -30.5%) OM Holdings Limited (42.8m -14.6%) Westoz Funds Management Pty Ltd (15.2m - 5.2%) Capital Structure Ordinary Shares: 292.2m Options: 4.7m Cash (as at 28th February 2010) AUD 33.4m equivalent Borrowings AUD 135m equivalent Includes mining equipment and port finance lease costs 4

6 NFE Report Card Jan & Feb 2010 Metric Actual Target Result Production Ore Mined (kt) Concentrate Production (kt) Concentrate Quality Shipped (% Fe) 62.0% 62.2% Shipped (kt) Concentrate Price (% of budget) 103% Improvement Program Refurbishment of existing concentrate screens Complete 15th Feb Mar Refurbishment of 5 th secondary mill 35% Complete May On Target Upgrade of secondary and tertiary crusher screen 35% Complete Jun On Target Installation of additional magnetic separators 60% Complete Jun On Target Installation of additional filter 10% Complete Jul On Target Installation of new concentrate screens 0 % Complete Feb 11 On Target 5

7 Mining Mine production matched to concentrate production rate Consistent above plan performance demonstrated in the last 2 weeks of February YTD 2010 Actual Plan49 Ore Mined (kt) Waste Mined (kt) Total Mined (kt) Crusher Feed (kt)

8 Processing Record production rates achieved in the first half of February, equivalent to 68% of nameplate capacity Operational and maintenance issues experienced in the second half of February and into early March impacted production. The main issues were: Reoccurrence of the axial thrust bearing fault on the primay mill. The OEM has provided another solution that has been implemented Damage to the primary mill due to incorrect operation of a crane. The root causes have been addressed A drop in concentrate recovery when screening was started (since fixed) A reoccurence of weather related losses (primary crusher) Nov Dec Jan Feb Mar YTD 2010 Actual Forecast Ore Railed (kt) Fine Crushing (kt) Milled (kt) Concentrate Produced (kt) Tonnes Shipped (kt) d 11n 16d 20n 25d 29n 4d 8n 13d 17n 22d 26n 31d 4n 9d 13n 18d 22n 27d 31n 5d 9n 14d 18n 23d 27n 4d 8n Tonnes per Day Produced Milled 7

9 Quality Refurbished Derrick screens in operation since February 15th So far only 50% of the concentrate is being treated (vs 80% planned), but significant improvements in grade have been realised 25% reduction in Silica compared to previous results In late February the plant was slowed in preparation for a planned shut, and high grade material from Kjellmannsåsen pit was processed. 6% silica concentrate was produced for a 1 week period Nov Dec Jan Feb Mar % Fe % Si Day Moving Averages Fe & Si n 5n 8n 11n 14n 17n 20n 23n 26n 29n 2n 5n 8n 11n 14n 17n 20n 23n 26n 29n 1n 4n 7n 10n 13n 16n 19n 22n 25n 28n 31n 3n 6n 9n 12n 15n 18n 21n 24n 27n 2n 5n 8n 11n Iron Silica Lower milling rates and high grade ore Screens commenced operation 8

10 SVG Key Production Drivers Tonnes per Shift Day Moving Averages 30n 3n 7n 11n15n19n23n27n 1n 5n 9n 13n17n21n25n29n 2n 6n 10n14n18n22n26n30n 3n 7n 11n15n19n23n27n 3n 7n 11n Shift Milled Moisture Si % The increase in tonnes milled late January to early February resulted in an increase in silica grades, highlighting the previously identified issue of mill capacity The introduction of screening resulted in a reduction in silica grade even when milled tonnes reached record levels The reduction in tonnes milled due to operational issues and planned maintenance resulted in a substantial reduction in silica grade, but saw a corresponding increase in moisture The last 3 weeks have demonstrated that the technical solution of increased milling capacity, more effective filtration, and concentrate screening does result in a higher quality concentrate 9

11 Shipping & Marketing Shipping 4 ships in January and February versus 5 planned Expect to ship 6 vessels in the quarter versus 8 planned Some tightness in the shipping market is being experienced during March Marketing Pricing for SVG s high silica product has been increasing with the recent upward movement in iron ore spot prices Prices for cargoes contracted for March loading have been double that received for the first cargo in Nov 2009, and are higher than that budgeted for 2009 benchmark prices for SVG s high quality product Quality for the 5 cargoes sold has been consistent Recent upward movement in freight rates has the potential to erode FOB prices received by SVG. This reaffirms our strategy to focus on producing a quality product acceptable to the European market Cargoes are being shipped under Sinosteel s benchmark contract with the balance sold on a tender basis to the spot market Discussions are continuing with Corus on the ability of their operations to accept higher silica product. Product samples have been sent for technical evaluation 10

12 Operating Costs Operating costs in January and February have been unfavourable against forecast for the following reasons: This year s particurlarly cold northern winter and supply restrictions have pushed energy costs higher The electricity cost in February was 130% higher than forecast Processing operating costs have been impacted by higher than expected contractor costs: Specialist mechanical, electrical and operational contractors have been retained longer than planned to assist SVG to overcome start up issues The cost overruns are not expected to be evidence of a permanent upward movement in forecast operating cost Some positive cost trends have been identified: Grinding media, on a per tonne basis, is being consumed at a lower rate than forecast Heavy equipment tyre life is exceeding plan 11

13 Improvement Program (as at 21st January 2010) Improvement Initiative Estimated Completion Estimated Cost (Sum) Expected improvement following implementation Refurbishment of existing concentrate screens Mar % reduction in Si Refurbishment of 5 th secondary mill May % reduction in Si (July) Upgrade of secondary and tertiary crusher screen Jun % Nameplate achieved Installation of additional magnetic separators Jun % Nameplate achieved Installation of additional filter Jul % Nameplate achieved Installation of new concentrate screens Feb % reduction in Si Concentrator floor concrete refurbishment Jun EPCM and Contingency Total Cost 25.0 With the exception of the new screens all projects have commenced. All projects remain on time and on budget. 12

14 Improvement Program Update (1) Refurbishment of existing concentrate screens Completed 2 weeks ahead of schedule On budget Treating 50% of the concentrate compared to 80% planned. Further work with screen selection to be undertaken to see if 80% can be achieved Refurbishment of the 5th secondary mill Contractor engaged and has commenced work Foundations and base plates are being prepared for lifting of the mill into position expected late March Reinstallation of the mill lining is complete Refurbishment of the mill trunion has commenced Project remains on time and on budget Upgrade of the Secondary and Tertiary Crusher Screen Engineering contractors have been engaged for a redesign Project remains on time and on budget 13

15 Improvement Program Update (2) Installation of additional magnetic separators All components procured and mobilised to site Installation to commence in March, with expected completion June Project remains on budget Installation of additional filter Supply contract signed with Metso Engineering contractor appointed and work has commenced Delays in negotiating the supply contract has resulted in a 2 week delay, expect completion mid-july. Project remains on budget Installation of new concentrate screens Project is waiting until sufficient data is gathered from the operation of the refurbished screens so that the correct configuration is specified 14

16 Future Work Operations Remain focused on completing the improvement project Remove contractor costs from the operating cost structure of the process plant as soon as practicable Complete the ramp up of the mining team to fully utilise all equipment by mid-2010 Expansion Commence environmental study for the expansion case Decision from the Norwegian Environment agency (KLIF) on flotation chemical disposal now not expected until the middle of the year Earnings The annual result will be released to the market by the end of the month and as with the half year will show a substantial loss due to delays in shipment and non cash foreign exchange losses. Changes to the currency of intercompany loans should reduce these foreign exchange accounting losses in the future 15