Troubles at Northland Resources deter Nordic mining investment – by Silvia Antonioli and Simon Johnson (Reuters India – July 16, 2013)

LONDON/STOCKHOLM, July 16 (Reuters) – A financial crunch at iron ore miner Northland Resources demonstrates the impact of metal price falls on small-scale mine exploration in the Nordic region and is scaring away already rattled investors.

The sector had been flourishing since the mid-2000s, drawing in foreign and domestic companies and investment, until the price falls of the last two years in iron, base metals such as nickel, and more recently in gold. The reversal in fortunes was driven home when the Swedish unit of Norway-listed Northland Resources, one of the region’s best-known new iron ore miners, filed for bankruptcy protection in February.

In January it revealed a $425 million funding shortfall, about four times its then market capitalisation, to cover higher than expected capital and operating costs for its Swedish mine. Small Nordic miners and explorers found their efforts to raise funds suddenly got much harder, threatening to cause serious delays or even halt some projects completely.

“It doesn’t help at all. It certainly affects local confidence, adding to the lack of confidence worldwide across the industry in terms of return of capital,” Michael Hudson, the CEO and President of Mawson Resources, a Canadian firm operating in Sweden and Finland, said of Northland’s difficulties.

“People who invested will be gun-shy, of course,” he added, underlining that a lot of the funds for Northland came from Norway and London and those flows were being affected.

Northland’s situation became critical in late May, when a group of bondholders, unhappy with debt restructuring proposals, froze its bank accounts, forcing it to halt operations for days.

The company’s share has fallen 92 percent to 0.48 Norwegian krona so far this year.

The Northland crisis has hit various Nordic and international financial institutions such as banks and fund managers as well as suppliers.

“A lot of shareholders at Northland got their fingers burnt and this brought a lot of uncertainty to the market,” said Paul Marsden, sales director at Nordic Iron Ore, a company aiming to reopen and develop two iron ore mines in Sweden that were shut in the late 1970s by steelmaker SSAB due to low iron prices.

“We certainly felt that Northland was grabbing all the attention and we found it really difficult to get much. Hopefully this situation will change quickly.”

Northland’s creditors on Friday approved a proposed reorganisation.

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