Investor Presentation May 2013 - Northland Resources

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Cautionary Statement This investor presentation (the ”Investor Presentation”) has been prepared by Northland Resources S.A. (“NRSA”, “Northland” or the “Company” and together with its subsidiaries, the “Group”). The Investor Presentation is being furnished for informational purposes only and nothing in here shall imply that the Investor Presentation constitutes an offer to buy, subscribe or sell any securities of the Company. By receiving the Investor Presentation, you agree to be bound by the following terms, conditions and limitations. The information contained in this Investor Presentation has not been independently verified. No representation or warranty (express or implied) is made as to the accuracy or completeness of any information contained herein, and it should not be relied upon as such. None of the Group or its directors, officers, employees, advisors or representatives shall have any liability whatsoever arising directly or indirectly from the use of this Investor Presentation. By receiving the Investor Presentation, you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company, and the restructuring and refinancing, and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the Company, its business and its shares and other securities. The content of this Investor Presentation is not to be construed as legal, business, investment or tax advice. Each recipient should consult with its own legal, business, investment and tax advisers to legal, business, investment and tax advice. This Investor Presentation contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and “forward-looking information” as such term is defined under applicable Canadian securities laws. We have tried, whenever possible, to identify such forward-looking statements and forward-looking information using words such as “anticipates”, “believes”, “expects”, ”plans”, ”intends”, “potential” and similar expressions. Such forward-looking statements and forward-looking information reflect our current belief and are based on currently available information. Accordingly, readers are cautioned not to place undue reliance on these statements as such forward-looking statements and forwardlooking information involve known and unknown risks, uncertainties and other factors which may cause the Group’s actual results, performance or achievements to differ materially from those expressed or implied by such forward-looking statements and forward-looking information. Further, forwardlooking information is disclosure regarding possible events, conditions or results of operations that is based on assumptions about future economic conditions and courses of action and includes future-oriented financial information with respect to prospective results of operations, financial position or cash flows that is presented either as a forecast or a projection. Such risk factors include, among others, those factors discussed in the section entitled “Risk Factors” of this Investor Presentation, the Company’s financial statements as at and for the period ended December 31, 2012, the annual information form for the period ended December 31, 2012, and the management’s discussion and analysis of results of operations and financial condition for the full-year ended December 31, 2012. Except as required by law, we undertake no obligation to update or advise in the event of any change, addition, or alteration to the information contained in this Investor Presentation, including such forward-looking statements and forward-looking information. This Investor Presentation does not constitute an offer of the securities described herein. Technical and Scientific Information Quoted in This Investor Presentation - Qualified Person (QP) Matthew J. Blattman, PE, Managing Director for Blattman Brothers Consulting LLC, the Qualified Person as defined by the Canadian National Instrument 43-101 and the companion policy, has approved the technical and scientific information in this Investor Presentation. Mr. Blattman is a Registered Member of the Society of Mining, Metallurgy & Exploration (SME) (RM #4059667) and Registered Professional Engineer in the State of Nevada, USA (MINE # 015254). Mr. Blattman, a consultant retained by the Company, has verified that the results presented in this Investor Presentation have been accurately summarized from the results reported to the Group. 4
Key Risk Factors Relating to the Group and its Business and Operations Insolvency Potential claims Security risks and restrictions Approval of bond offering Drawdown on Bond during Reconstruction Capital and operating expenditure Iron ore price and currency risk Iron ore processing and logistics solution Breach and loss of material contracts The Group is in severe financial difficulty and is proposing to enter a restructuring (Restructuring) involving an extension and amendment of its existing bonds, restructuring of supplier credit, a capital raising via the issue of new bonds and a court approved reconstruction (Reconstruction). Without the Restructuring, it is likely that the Group will be required to be placed into insolvency proceedings, which may result in a significant loss of value to existing bond holders. The Restructuring is subject to a number of conditions, including the raising of USD337 million of new money (net of Original Issue Discount, USD 362 million gross) under the issue of new bonds and entry into binding documentation to effect the Restructuring transactions. Failure or delay in satisfying the conditions and completing the Restructuring as planned will likely result in the Group entering insolvency proceedings. The Reconstruction only relates to claims of unsecured creditors of Swedish Group companies as at 8 and 12 February 2013. Creditors of other Group companies and subsequent claims will not be affected by the Reconstruction, and such creditors may take action or commence proceedings against the Group. Also, if the Reconstruction is not approved, creditors which have not otherwise entered direct agreements with the Group may take action or commence insolvency proceedings (it being a condition precedent to the Restructuring that no insolvency proceedings have been commenced). Shareholders of the Company may also commence proceedings if the Company is found to have breached its obligations as a listed company in relation to the timing of the Company’s announcement of its financial position. The Group has pledged substantially all the assets of the Kaunisvaara project as security under the existing bond agreements and other debt facilities, and such security will be extended to the new bonds. The extension of the security to the new bonds may be subject to clawback risks. If the security is avoided, holders of the bonds would rank pro-rata with unsecured creditors who have not agreed to be bound by any waterfall or priority arrangements. Also, the terms of the security places restrictions on the Group’s business and its ability to incur additional debt , as well as obligations relating to cash generation. Failure to comply with such restrictions and obligations will result in an event of default, which may require such debts to be refinanced. Certain shareholder approvals are required to complete the planned Restructuring. If shareholder approval is not obtained, the bond trustee will be instructed to enforce share pledges over the entire share capital of Northland Sweden AB, in order to transfer Northland Sweden AB and its subsidiaries - which own the Kaunisvaara project - to the bondholders. The remaining assets of the Company and its other subsidiaries will comprise mostly of nonproducing exploration assets, following which such companies are likely to be wound up. Disbursement of proceeds from the issue of the First Lien Bonds will be made prior to the court’s approval of the composition. While this risk may be deemed as minor, as all creditors with claims above SEK 2.6m have provided written consents or pre-approvals to the proposed composition, a risk remains that no composition would occur subsequent to the disbursement. Failure to obtain the composition would have a material adverse effect on the financial condition of the Issuer and its ability to fulfill its obligations towards the bondholders. The Group has previously experienced significant cost overruns and higher than expected capital and operating expenditures. To reduce the risk of future cost overruns, the Group has renegotiated agreements to convert approximately 75% of all contracted capital expenditure from 1 January 2013 to 31 December 2014 from an open book basis to fixed cost. Such conversion is conditional on completion of the Restructuring and does not eliminate the risk that the scope of work under those contracts may still increase, in turn, increasing costs. The Group may also continue to experience cost overruns in respect of capital expenditure which remains on an open book basis. Any significant or sustained reduction in iron ore prices, or in the reference prices for iron ore concentrates used in the Group’s off-take contracts, could have a material and adverse affect on the Restructuring, the Group’s business, results of operations, financial condition and prospects. The Group’s balance sheet, earnings and cash flow are and will be influenced by movements in the exchange rates of the USD against the SEK. Appreciation of the SEK against the USD could materially adversely affect the Group’s business, results of operations, financial condition and prospects. The Group has no hedging arrangements to limit its exposure against currency fluctuations. The Group may experience problems to or delays in the commissioning of the remaining parts of its processing plant or in the application of its processing technologies to the iron ore, and with respect to the contemplated second processing line, which are under construction and not completed. The Group may also experience delays in the implementation of a permanent solution at the port of Narvik for the unloading, loading and storage of iron ore concentrate and in the delivery of rail wagons specifically designed for the Group's use. A delay in or failure to achieve a permanent solution or delivery of the wagons may have a detrimental impact on the Group's future operating costs and profitability. Any significant delay in the production of iron ore concentrate, failure to produce iron ore concentrate to the required specifications, or any insolvency event may breach and ultimately result in the termination of material contracts to which the Group is a party, including supply and off-take contracts Note: 1) Please refer to Risk Factors section starting on slide 46 for further details 5
Page 1 and 2: STRICTLY PRIVATE & CONFIDENTIAL THI
Page 3: Disclaimer (cont’d) This Presenta
Page 7 and 8: Transaction Background • Budget p
Page 9 and 10: Indicative Commercial Terms of the
Page 11 and 12: Funding Sources and Capital Structu
Page 13 and 14: Governance Changes to Give Creditor
Page 15 and 16: Northland in Transition from Projec
Page 17 and 18: Agenda Investment thesis Northland
Page 19 and 20: Northland is listed in Oslo Share o
Page 21 and 22: First concentrate from Kaunisvaara
Page 23 and 24: Kaunisvaara Project Overview Kaunis
Page 25 and 26: Production to Reach 4 dmtpa in Q3 2
Page 27 and 28: Strong Logistics Partners Ramping U
Page 29 and 30: Kaunisvaara Premium Concentrate Exp
Page 31 and 32: Potential production upside Upgrade
Page 33 and 34: Further Growth Potential - Hannukai
Page 35 and 36: Update on Operating Cost Expectatio
Page 37 and 38: Projected Capital Expenditure Until
Page 39 and 40: Sources and Uses starting 1 Jan 201
Page 41 and 42: Budget Assumptions in a Historical
Page 43 and 44: Forecast Iron Ore Supply Being Revi
Page 45 and 46: Kaunisvaara Concentrate - Quality L
Page 47 and 48: Risk Factors Risks related to the p
Page 49 and 50: Risk Factors (cont’d) Risks relat
Page 51 and 52: Risk Factors (cont’d) Litigation
Page 53 and 54: Risk Factors (cont’d) Other risks
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Risk Factors (cont’d) Other risks
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Risk Factors (cont’d) Risks relat
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Risk Factors (cont’d) Risks relat
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Northland expected to emerge from R
Page 63 and 64:
Main terms of the restructuring of
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Profit & Loss Statement 2012 Year e
Page 67 and 68:
Kaunisvaara Mineral Reserve Stateme
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Management Team Executive Team Karl
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Investor Presentation May 2013 - Northland Resources

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