Without cash, Northland to shutter iron ore operations by Monday
Northland Resources says it won't have enough cash to continue iron ore production beyond the weekend.
Author: Kip Keen
Posted: Friday , 24 May 2013
HALIFAX, NS (MINEWEB) -
Northland Resources, cut off from its bank account, will begin to shut down its Kaunisvaara iron ore mine in Sweden over the weekend unless it finds a funding solution in the interim, said Anders Antonnson, Northland's vice president investor relations, late on Friday
It has been a tumultuous year for Northland after a cost overun at Kaunisvaara - which is just beginning to ramp up as a mine - forced it into insolvency court in Sweden. Early this year Northland said Kaunisvaara would cost about 50 percent more to build than its initial projections bringing the total construction bill to around $1.2 billion.
See: Market leak forces Northland’s hand as iron ore mine costs balloon
Northland has tried to raise funds on the markets twice to cover the overrun, but to no avail. In February it cancelled a $375 million rescue package,which was a mix of loans and equity. Then this month it floated a $375 million bond proposal, subsequently lessened to $335 million, that had the support of its existing bondholders who control $370 million in senior secured loans.
Today Northland said the latest bond effort, the deadline to which it extended a couple times, had failed as well. Northland said it would, to keep operations going, try get a $35 million short term loan instead.
But today, after it announced withdrawing the bond effort, Northland said bondholders had rejected the short term loan plan and cut it off from its bank account through a trustee that controls Northland's finances during its restructuring process.
Now Northland has no cash to buy anything or pay its suppliers.
Antonsson, reached by phone, said that Kaunisvaara was still operating as of late Friday with supplies in and out, but that Northland would begin to slow mills down over the weekend. Beyond the weekend it would cease operations without an influx of cash, he said.
Antonsson added that Northland was considering all options to resolve both short and long term funding needs.