Ore handling underground at the Garpenberg mine. (Photo courtesy of Boliden)
AS EXPLORATION BUDGETS SHRINK AND COMMODITY PRICES DRIFT, MINING AND EXPLORATION COMPANIES IN THE NORDIC COUNTRIES ARE ADAPTING TO NEW CONDITIONS—BUT THEIR COMMITMENT TO THE REGION REMAINS STRONG
By Simon Walker, European Editor
According to SNL Metals and Minerals in the latest edition of its state of the market snapshot on exploration, the worst may now be over. "The long-awaited upswing in exploration has not yet started, but activity has at least been flat for the past five months," the company said.
In relative terms, that is probably the closest to good news that exploration companies working in the Nordic region have heard this year. Activity on the ground may still be low in comparison with recent years, but on the other hand, companies have still been busy acquiring holdings over prospective areas, reflecting the unquestionable prospectivity of large areas of both Finland and Sweden, in particular.
An article published in the U.K. national newspaper, The Guardian, in early September, suggested that despite the shortage of funds for exploration, activity in the Nordic region is far from dormant. "So far in 2014, 349 applications for mining permits have been made, of which 243 have been for Finland," the report stated, citing the anti-mining lobby as its source. "Over one-eighth of Finland has now been designated for mining and hundreds of applications for exploration licenses have been received by the government," it went on.
Reports like that clearly have an axe to grind, and the figures quoted may or may not be wholly accurate, but the overall picture presented is certainly positive from the exploration perspective. In April, Finland's Geological Survey—the GTK—published a map showing the locations of more than 40 current producing metal mines and projects in the country, demonstrating nation-wide interest in the production and development of projects covering commodities ranging from chromite to vanadium and diamonds to zinc.
Hard economic times often give rise for reflection at both corporate and national level, of course, and the current downturn has provided an incentive for the governments of both Greenland and Norway to look at long-term strategies for mineral-sector development. Neither has the developed mining sector enjoyed by Sweden and Finland, yet both have the potential to host important production that can help build and diversify their economies.
IRON-ORE PRICE CUTS TAKE THEIR TOLL
Looking back through recent editions of this report, published each October in E&MJ, the high prices commanded a few years ago provided the incentive for a number of smaller companies to revisit the iron-ore potential of both Sweden and Norway, and of Greenland and northern Finland to a lesser extent. As prices have since slid under the combined influence of reduced demand in China and increasing output from Western Australia—described in detail in the commodity report in last month's E&MJ (p.128)—the economic foundations upon which these projects were developed have come under increasing strain.
Last year's Nordic report (E&MJ, October 2013, pp.28–36) noted that even then, some of the new generation of producers were having to seek restructuring or were otherwise financially embarrassed. The recovery in iron-ore prices that occurred over late 2013 and early 2014 may have provided some respite, but the subsequent slide from more than $130/metric tons (mt) at the start of the year to under $90/mt in September proved to be a hard knock.
Having undergone a restructuring last year, Northland Resources continued with its aim of commissioning a second processing line at its Kaunisvaara operation in far northern Sweden. However, in July, the company decided on a new strategy with the focus on its existing processing unit until market conditions improve.
"We are working at full speed to implement our new strategy, including optimizing production from our existing processing line, while making necessary—and sometimes painful—adjustments to our cost base, contracts, way to operate and organization," the company's CEO, Johan Balck, wrote in its second-quarter report. "Under the new strategy, Northland will produce concentrate only from its existing processing line for as long as iron ore prices remain unfavorable. The company will undergo changes to achieve maximum flexibility in operations and cost structures.
"Northland will not finalize the second processing line during the second half of this year, as was the original plan. However, we will maintain readiness to resume construction and finalize the second line to be able to take it into production at short notice, when iron ore prices are more advantageous," Balck said. "The changes being made are necessary to ensure that Northland has a viable future even in challenging market conditions."
On the positive side, Northland's production has recently been running at an annualized rate of close to its target of 2 million mt of iron-ore concentrate from its first production line, with production having grown consistently quarter-by-quarter since the start of 2013. That, however, has not been enough to maintain the company's financial position, and in July, Northland began a second round of negotiations over long-term financing to support its operations.
At least Northland has been able to keep production going while it has sorted out its strategy. Not so for Dannemora Mineral, which briefly ceased operations and suspended payments in May. The company subsequently resumed work while undergoing restructuring, with an output in the first half of the year of nearly 600,000 mt of finished products. It also received a boost in August with a deal with the Austrian steelmaker Voestalpine for the supply of 300,000 mt/y of fines—about a quarter of its annual output—for at least three years.
A Snapshot From Finland
Hannu Makkonen, chief geologist with the Geological Survey of Finland, told E&MJ that Finland's 46 mines produced a total of 36.5 million mt of ore during 2013, with 34 industrial minerals operations adding a further 15.7 million mt of output. Metal ore production was slightly higher than in 2012, Makkonen said.
Following the global trend, investment in mining and exploration in Finland fell dramatically year-on-year. Mining investment dropped 45% from €320 million in 2012 to €200 million in 2013, while exploration spending was 40% lower at €53 million with 179,000 m of exploration drilling completedcompared with 366,000 m in 2012.
Some metal-mining projects have fallen behind their schedule, although there areseveral still in progress.
In spite of the decline in investment, Finland has kept its position as an attractive country for exploration and mining, mainly because of the high ore potential, Makkonen noted. At present, around 45 companies, most of them international, are working in Finland's mining and exploration sector, with some 15 involved with industrial minerals.
While gold and base metals have been the long-term focus for exploration andmining, interest is now more wide-ranging, including pgms, rare earths, lithium and vanadium-iron-titanium resources. Rising worldwide demand for fertilizers has led to increased interest in Finland's phosphate deposits, and there has also been more interest in graphite.
Northern Finland has been the main area for exploration recently. Agnico Eagle's Kittilä gold mine in central Lapland produces around 5,000 kg/y, and several companies are actively exploring for gold in the region. First Quantum Minerals is mining the Kevitsa copper-nickel deposit, which also contains platinum, palladium and gold, and Anglo American's Sakatti project, close to Kevitsa, is a world-class nickel-copper-pgm deposit. The discovery of Sakatti is significant proof of the good ore potential in northern Finland, Makkonen added.
HIGHEST PRODUCTION EVERFOR LKAB
Also a recipient of good news, in March, Nordic Iron Ore received permits to reopen and operate the old Blötberget and Håksberg mines. The company has subsequently undertaken 7,000 m of core drilling at Blötberget, with the aim of improving knowledge of the deposit and enabling a revision of its mineral resources. A final feasibility study for restarting operations there is expected to be completed later this year or early in 2015.
Speaking earlier this year, the company's CEO, Christer Lindqvist, noted that financial investors have become very selective in their choices within the raw material sector. "Investors have gradually gained greater understanding of which critical conditions result in successful iron-ore projects, which among other things include functioning rail and port logistics in a country with low political risk.
"However, the largest challenge for small mining companies is funding, and the problems of a number of Scandinavian mining projects have contributed to increasing the skepticism of investors," he said. Nordic Iron Ore's recent share offerings have been guaranteed by the state-owned company, Inlandsinnovation, which is also its largest shareholder. "In times like these, it is comforting to know that even the state—for the first time in nearly 60 years—is supporting new iron-ore production," he added.
Despite the weakening international market, overall 2013 was a good year for Sweden's iron-ore miners, at least in terms of tonnage. Output from the five operating mines rose by 17% year-on-year to 37.4 million mt, as the rising production trend of the past several years continued. Sweden's record iron-ore output of 44 million mt/y was achieved 40 years ago, at a time when there were no fewer than 30 mines in the country—with a number of those that were subsequently closed with significant residual resources now forming the focus for junior companies' reopening efforts.
Leading the way by a huge margin, LKAB reported the production of 25.3 million mt of finished products for the year, with deliveries of 25.5 million mt. However, the company noted that this was 800,000 mt less than in 2012, as it lost too much production following pellet-plant problems at both Kiruna and Svappavaara at the start of the year to be able to catch up later on.
Nonetheless, with those problems behind it, the company broke new production records in both November and December, when it achieved an output of 2.55 million mt of finished products, including 2.32 million mt of pellets. LKAB's aim is to increase production to 37 million mt/y, with much of the increase coming fromits three planned open-pit mines at Svappavaara. Operations at the first of these, Gruvberget, recommenced early in 2013 following a six-month hiatus resulting from legal challenges, with permitting for the second mine, Mertainen, being confirmed in July this year. Meanwhile, dewatering is still in progress at the old Leveäniemi open pit, which operated from 1961 to 1983, with the aim of resuming production next year.
At full capacity, Gruvberget will produce 2 million mt/y of ore, Leveäniemi12 million mt/y, and Mertainen 15 million mt/y; equivalent, the company pointed out, to the current output from its Malmberget underground mine. LKAB is investing some SEK10 billion ($1.4 billion) in the open-pit mine project.
And that, of course, is not the only item on the company's capex budget sheet. The new haulage level at Kiruna is now in full operation, with the ability to support production there until at least 2030–2035. So long as the city of Kiruna is moved, that is—with the ground—breaking ceremony for the first of the many new developments that will be needed having taken place in June. LKAB has already put aside some SEK8 billion to cover its commitments for urban transformation at Kiruna and Malmberget.
A Snapshot From Sweden
The Swedish Geological Survey told E&MJ that the country's iron ore producers—LKAB, Northland and Dannemora—increased their output by 3% during 2013, to a total of 27.3 million mt of iron-ore products. Sweden's output of copper, zinc and lead was at the same level as in 2012.
Total production was 83,000 mt of copper, 176,600 mt of zinc and 63,600 mt of lead. The national output of gold rose by 9% year-on-year to 6.5 mt, while silver production increased 11% to 341 mt.
Exploration expenditure in Sweden in 2013 showed a 34% reduction compared with 2012, with a total of around $80 million spent. The decline reflected in part the fact that some major drilling programs were completed, with projects having moved on to the next stage of evaluation, while some junior companies had problems with funding during the year. Another reason behind the fall in exploration spending was that some companies moved their operations to other countries, the SGU said.
Most of the exploration has been focused on existing mine sites, with greenfield projects constituting only a few percent of the total budget. Base metals and gold remained the principal targets, accounting for some 75% of the total effort, while iron-ore exploration added a further 20%-plus. Between them, Boliden and LKAB accounted for 70% of the exploration work undertaken in Sweden during 2013, with 70% of the total spend being targeted in the northernmost counties of Norrbotten and Västerbotten.
There were 959 exploration permits in force at the end of 2013, with 130 new applications received during the year. This compared with 211 new applications in 2012, while the number of exploration permits granted also fell, from 182 to 119.
There were also 205 requests for extensions to existing permits during 2013, down from 258 the previous year. Gold has been the main target, followed by copper, iron and zinc.
SYDVARANGER ACHIEVES NEW RECORDS
In northern Norway, meanwhile, Northern Iron Ore has been pushing ahead with production and deliveries from its Sydvaranger operations, inland from Kirkenes. The company produced and sold nearly 2 million mt of iron-ore concentrate during 2013, and followed that with a further1.2 million mt in the first six months of this year. Its 626,000 mt output in the second quarter was a record for the operation, produced from some 1.6 million mt of ore sourced from four open pits.
Of concern is that the company reported it received an average of just $75/mt for Kirkenes during the period from April to June, down from $95/mt in the first quarter and uncomfortably close to its production cost, despite this having come down over the past six months as stability in the recovery plant has improved.
In March, Northern Iron signed a six-year "rock-on-ground" contract with Orica Norway, under which Orica will provide design, explosives loading, and drill and blasting operations at Sydvaranger. The company noted at the time that this is its largest rock-on-ground services contract anywhere in the world, covering the production of some 140 million mt of ore and waste over the contract period, which began in July.
Northern Iron has also reported that it will be carrying out a yearlong site trial with a Volvo haul truck, with the aim of evaluating its suitability for the operation. "If successful, the use of these haul trucks has the potential to significantly reduce future operating costs," the company said in its mid-year report.
NEW STRATEGIES FOR MINING IN NORWAY...
Compared to Sweden and Finland, Norway has long been regarded as somewhat of a poor relation within the Nordic region. Not, of course, that it is bereft of mineral resources and the energy needed to process them, but for sound geological reasons, the country's mineral sector has focused for several decades on its abundant hydrocarbons and industrial minerals rather than on metals.
All that is set to change, however, with the publication last year by the Ministry of Trade and Industry of a document outlining Norway's new strategy for mineral development. "The government wants Norway to be an attractive country for mining activities," the minister wrote in the introduction to the report. "In 2010, the government presented a new Minerals Act. This was an important step in simplifying earlier regulations in the minerals sector, and in creating transparent and predictable framework conditions for the minerals industry.
"The new Minerals Act was a good start. This strategy is a sound basis for our further work together. With new technology, new market opportunities and new tools, we will build further on the proud history of Norway's mining industry," he said.
The strategy document includes details of some of the measures that have already been put in place. The Directorate of Mining, the central administrative agency for mineral resources in Norway, including Svalbard, is being strengthened, and there has been an increased focus on mineral resource mapping. The Geological Survey of Norway started a four-year geophysical mapping program in northern Norway in 2011, and in the south of the country last year. When completed, about 75% of northern Norway will be covered with geophysical maps.
A Snapshot From Norway
According to the managing director of the Norwegian Geological Survey, Dr. Morten Smelror, recent developments have included projects focusing on new base-metal deposits and targets in historic mining camps, and on Norway's potential for resources defined as being critical in a recent European Union evaluation—such as graphite, phosphate and magnesium. There has also been further development of Norway's industrial-mineral potential, in terms of both new deposits and new applications for current products, such as olivine.
Although several companies with a focus on regional exploration have withdrawn from Norway, Smelror noted, two projects—the Nussir sediment-hosted copper deposit in northern Norway and the Engebø rutile deposit in the west of the country—are in the final stages of permitting.
New projects include Ni-Cu-pgm mineralization in a layered ultramafic intrusive at Reinfjord in northern Norway, where Nordic Mining is the operator, while Drake Resources is drilling deep-seated geophysical targets in historic mining areas at Røros (copper) and Løkken (copper-zinc). Drake also has projects on the Espedalen (nickel-copper), Joma (copper-zinc) and Sulitjelma (copper) mining areas.
Kodal Minerals is assessing the Kodal apatite-iron-titanium deposit as a source of high-quality phosphate and magnetite concentrate, while SilMag is producing magnesium and silica at Herøya, southwest of Oslo, from olivine mined at the Sibelco's Åheim mine. In Svalbard, meanwhile, studies have been carried out on the Operafjellet coal seams, with Store Norske having been granted a permit for developing a new mine that may become the world's most northerly (above 78°N).
Other commodities that have attracted attention from several companies are graphite (Norway is already a producer), highpurity quartz and rare earths, Smelror stated.
The document also provides some details of funding possibilities for mineral development, stating that existing schemes within industry-orientated funding agencies are to be made available for the minerals sector. This, it added, includes measures that will help release funding from other sources.
Aside from aluminum and other energy-intensive smelter products, the country's main mineral-sector exports are iron-ore concentrates, coal, ground calcium carbonate and crushed rock. However, as the document pointed out, Norway has a long tradition of metal mining, including Kongsberg (silver), Trøndelag (copper) and numerous iron-ore operations. Current metal-mining activities are headed by Sydvaranger and Rana Gruber (iron ore) and Titania's ilmenite-nickel production at Sokndal.
Projects under evaluation include Nussir's copper project in the far north, and Engebøfjellet in far western Norway, where Nordic Mining is at the prefeasibility stage on a hard-rock rutile-mining project. Having received preliminary permitting earlier this year, Nussir is now developing plans for an underground mining operation with a projected start date in 2015–2016. However, the company's plans to deposit tailings in nearby Repparfjord have stirred up controversy, with concerns expressed by both environmental and fishing-industry lobbies.
...AND IN GREENLAND
With interest continuing strong in its resource base, Greenland is also in the process of developing a new five-year strategy for mineral development. Issued in February, a document from the Ministries of Industry and Mineral Resources, and Environment and Nature, outlined the key facets of the government's ideas. These cover initiatives for development in minerals, and in oil and gas, taxation, the establishment of GeoSurvey Greenland as a replacement for the existing Copenhagen-based GEUS, and sustainable development.
The document noted that between three and five mines may be opened from 2014 to 2018, and that the government believes that Greenland should always have five to 10 active mines in the long term. Projects that are currently at evaluation stage and could reach production by 2018 include London Mining's Isua iron-ore project, Fiskenæsset (True North Gems, ruby), Killavaat Alannguat (Tanbreez, rare earths), Kvanefjeld (Greenland Minerals and Energy, rare earths and uranium), Citronenfjord (IronBark Zinc, zinc) and White Mountain (Hudson Resources, anorthosite).
Over the next five years, the government will be focusing on the potential for major new deposits of iron alloy and base metals, rare earths, gold and gemstones, the document said, while the zinc potential of northern Greenland is one area that will receive special attention. In this context special, more favorable terms have been granted to exploration licenses for areas north of 81°N since May.
As noted in previous Nordic reports in E&MJ, uranium production has been a particularly emotive issue in Greenland, with the prospect of byproduct uranium from a mine at Kvanefjeld having brought the matter to a head. Last year, the Greenland parliament resolved to abolish its zero-tolerance policy to uranium and other radioactive minerals, a government report having earlier concluded that Greenland should establish a new legislative and administrative framework to cover any future uranium production. However, the strategy document makes it clear that no mining licenses will be issued for uranium or other radioactive minerals until such systems are in place.
OVERCOMING THE CHALLENGES
No one questions that the Nordic countries have an enviable endowment of prospective mineral deposits. Iron ore and base metals have formed the basis for economic production for centuries, and there is good potential for other in-demand commodities, including rare earths, pgms and specialist industrial minerals. Who knows—the region may even host diamond production one day.
Then again, and being realistic, the Nordic region is not normally seen as being elephant country for mineral deposits when taken in comparison with other production centers—especially for copper and iron ore. Mines in the region hold their own in the face of international competition for markets, but often have to target specific product properties or qualities in order to do so. The Nordic countries may be amongst the most stable investment destinations on the planet, but that does not provide marketing guarantees. Mining companies there have to be innovative in order to achieve acceptable profitability while respecting the high levels of social and environmental responsibility that are required.