Mining industry in the high north.. Voksensen conference 2012-11-15

Harald Martinsen

CDO/Utviklingsdirektr

Sydvaranger Gruve AS

Corporate overview

Sydvaranger Gruve AS

3 3

100% owned by Northern Iron ltd.

Operated from 1910 to 1997 (200Mt of ore mined)

Listed on the ASX in Dec 2007

Mining commenced in May and first ship in Nov 2009

High quality magnetite concentrate

Long term offtake contract with key European customer

Long mine life expected even including expansion

Sydvaranger project in Kirkenes

3

4

Open Cut Mine min 25 Yr mine life

8km Railway owner and sole user

Concentrator high quality magnetite concentrate Port efficient and uncongested

Market Overview

Market cap at ASX (Australia) ca. A$ 207m

In NOK ca. 1,25 mrd

Accummulated investments since restart: > 2 mrd

Largest Shareholders

Tschudi Mining: ~20 %

OM Holdings Ltd: ~14 %

Eley Griffiths Pty Ltd: ~8 %

Strategic Review

Process launched Nov 2011 - Goldman Sachs as advisor

Terminated Nov 2012 with no outcome

Owners recently injected AUD 50 million in new capital

Corporate Overview

5

6

Europe uses ca. 20% of the

worlds mineral resources

Europe produces ca. 3 % of

the worlds mineral resources

2012: 1,4 mill t

To Europe

2012: 0,8 mill t

To China

Sydvaranger Gruve AS

Market & Fundamentals

Sydvaranger Gruve AS

Market dominated by 3 huge, global players China dominates the demand side, specially given

the growth of the market In response to Chinese growth, we have seen the

following; Many aggressive expansion plans Old mines are being re-opened or considered New areas considered for development

The market have responded quick & dirty to Chinese growth

Over supply when Chinese growth was reduced Strong pressure on prices

8

9

Europe uses ca. 20% of the

worlds mineral resources

Europe produces ca. 3 % of

the worlds mineral resources

10

RGP4

RGP5

RGP6

Quantum 1

Hope Downs Stg 2Mesa A

Brockman 4

Pilbara 330mt Stg 1

Pilbara 330mt Stg 2

Simandou

Carajas

Carajas

Carajas Serra Sul

Apolo

Vargem Grande Itabiritos

FMG - 55

Sishen

Sishen South

Minas Rio - Phase 1

Sudeste Phase 2

Sudeste Phase 3 Namisa

Casa de Piedra

FMG - 95

FMG - 155

Hope Downs 4

0

20

40

60

80

100

120

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

mt

RIO Vale FMG Anglo American MMX CSN Hope Downs 4

SVG expanded

Sydvaranger

Source: Royal Bank of Canada Capital Markets

Sydvaranger Gruve AS

Sydvaranger Gruve 11

97,50 $US/tonne

(13-09-12)

Also EU have done some important work

A mineral strategy revealed that EU consumes 20% of worlds minerals and produce only 3%

European countries encouraged to reconsider their mineral opportunities

Look to the North

All Nordic countries now working on mineral strategies

Result is a large number of projects in the Barents region

LKAB expansion, Northland, SVG, Rana and many more

12

13

Europe uses ca. 20% of the

worlds mineral resources

Europe produces ca. 3 % of

the worlds mineral resources

41

Kvannevann (Rana Gruber AS)

Kiruna (LKAB)

Malmberget

(LKAB) Kaunisvaara

(Northland Resources Ltd)

Sydvaranger

(Northern Iron Ltd)

Dannemora

(Dannemora Minerals AB)

Port of Narvik

Port of Lulea

Mala

Stockholm

Norway

Sweden

Finland

Oslo

Hannukainen

(Northland Resources Ltd)

Tromso

Grangesberg

(Grangesberg Iron)

Ludvika Mines

(Nordic Iron Ore)

Boliden District

(Boliden AB)

Gruvberget (LKAB)

Kallak

(Beowulf Mining plc)

Kevitsa Project

(International Finance

Corporation)

Kolari (Tertiary Minerals)

Leveniemi (LKAB)Mertainen (LKAB)

Ruoutevare (Beowulf Mining plc)

Talvivaara

(Talvivaara Mining

Company PLC)

Viscaria (Avalon Minerals Ltd.)

Adak

(Avalon Minerals Ltd.)

Bidjovagge

Sakatti

Iron Ore/steel facility

Zinc

Nickel

Copper/Gold

Base Metals

Kola MMC

(MMC Norilsk)

Olkon

(Olenogorsk GOK)

Kovdorsky

(Eurochem)

Karelsky Okatysh

(Severstal)

St. Petersburg

High quality iron ore concentrate

Small operations (LKAB is exception)

Mainly slig producers (- LKAB, Rana)

High cost countries (less Russia)

Challenging market position

Maximize sales to European market

The balance must be shipped to China (- LKAB)

Freight disadvantage to China

The Northern Sea Route

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Global Iron Ore Cost Curve

16

1. Source: AME

0

10

20

30

40

50

60

70

80

90

100

0 200 400 600 800 1 000 1 200 1 400

FO

B C

ost

s (U

S$/

t)

Cumulative Production (Mt)

Sydvaranger Iron

The way forward - improvements

Sydvaranger Gruve AS

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NORTHERN IRON VALUE CREATION STRATEGY

Double the concentrate production capacity to 5.6 Mtpa

Change out the mining fleet with larger equipment

Achieve a 2.8 Mtpa

production rate

during CY12 Achieve sub 5% silica

from April 2012

Achieve sub 4% silica

for blast furnace pellet feed

Achieve sub 2% silica for direct reduced iron (DRI) pellet feed

Upgrade the port to handle cape size vessels

Long life, cost competitive

provider of high quality iron ore

pellet feed to customers in

Europe, the Middle East and Asia.

Currently running

at ~2.1 Mtpa < 4% silica content Iron at ~ 68%

TODAY

ACHIEVE

NAMEPLATE

OPTIMISE

NAMEPLATE

EXPAND

PRODUCTION

VISION

Q4-12 Q1-13 2013-2014 2016

Capital required USD m (expected to be satisfied from operating cash flows)

16.0 16(already

committed)

280.0 50.0 60.0

360.0

Note: capital costs in 2013-2016 are at scoping study level

of accuracy.

Expansion capital costs vary based on

tailings disposal option selected.

Expected LOM operating costs (real) USD / dmt

< 50 < 55 < 40

Expected life of mine sales price FOB (% from base case)

100% 120% 120%

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Logistics Port upgrade & NSR

Three main activities required to enable cape sized vessels to be loaded at Kirkenes: Upgrade the shiploader to fit cape size Dredging the berth to required depth Additional silo to take total storage capacity

to approx. 240,000 dmt

Current Status Basic engineering commenced Expected Capital Cost USD 30m Expected Commissing: 2014

Benefits Lower shipping costs give higher FOB price

realised, especially for Asian sales

Northern Sea Route 40% saving on time, cost and CO2 Who gets the benefits..? Follow development closely Total infrastructure development

Sydvaranger Gruve AS

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HIGHER CONCENTRATE

QUALITY

NFEs and Noramco Engineering have identified conceptual pathways to higher quality products. Estimates are at a scoping study level of accuracy Sub 4% Silica Concentrate

Additional magnetic separaton capacity required Larger tailings thickener required Additional water sources required No additional environmental approvals required,

though local government building approval for the thickener required, and approval for additional water usage required from the National authority

Capital Cost: USD 7m Expected commissing: January 2014 Improved pricing expected, and possible increased

European sales.

Sub 2% Silica Concentrate

All 4% equipment listed above required Flotation plant required Environmental approval required for disposal of

tailings from the flotation plant either marine or dry tailings options

Capital Cost: USD 20m Earliest commissioning: January 2014 Improved pricing expected, plus increased sales to

Europe and the Middle East

Sydvaranger Gruve AS

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SVG requires 2 main approvals to proceed with the expansion project:

Local Government land use approval

Environmental permits for the increase in mineral and other waste emissions (KLIF)

To obtain these approvals the following activities and timeline is expected:

Technical scope has been delivered

Dialogue conferences held and conclusions made

Present proposed planning program to SVK

Public hearing of the planning program

Approval of the Scope of Work for the Environmental and Social Consequences Investigation Q4 2012

Completion of the Consequences Investigation and submission of the applications and reports Q3 2013

Decision from local government and national envirornment agency on land use and emission applications Q4 2013

Expansion - Permitting and Approvals

Tailings Disposal

Objective study

Evaluation of alternatives

Credible monitoring and

control procedure

Resource base (life time)

Upgrade resources

Look outside concession

boarders

Present a credible case

Distribution of financial resources

Social accounting

Federal vs. local taxation

Sponsoring & participation

Document local impact

Human Resources

Most critical resource

Recruiting

Training and competence

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Sydvaranger Gruve AS

The political process

STRENGHT

Ore quality

Close to European market

High social and environmental

standards

WEAKNESSES

High costs

Far from China (dominant

market)

Small operations (less LKAB)

OPPORTUNITIES Commercial & logistics cooperation

Added value production

Northern Sea Route

THREATS NIMBY

Low priority (O&G, Salmon)

Lack of risk capital

Time factor in all decision processes

23

Sydvaranger Gruve AS

Takk for oppmerksomheten..!

Thanks for your attention..!

Sydvaranger Gruve AS