Modified study lowers Northland’s market cap

Northland Resources (NAU-T) released a final preliminary economic assessment (PEA) study on the Hannukainen Iron Oxide-Copper-Gold (IOCG) project to a disappointed market.

The reason for the disappointment is that the final PEA outlined slightly worse economics for the project than those released by the company back in early May.

The modified report put net cash flow at $988 million compared to the $1.01 billion estimated in the May report. Lower cash flows coupled with a higher estimated capex ($509 million compared to $474 million) and made for a lower IRR of 28.8% compared to the 32.5% in the initial PEA.

In Toronto on June 29, the news had the company’s shareprice off 15% or 34¢ to $1.92 on 78,000 shares traded.

Watts, Griffis and McOuat Limited (WGM), the company that issued both the modified and the initial reports called the final version “conservative” in most areas.

Despite the lower numbers WGM still wrote that Hannukainen is “a viable project worthy of being taken forward to feasibility.”

The report also said that some of the key costs estimates will change favourably due to the conservative approach and that more favourable mining and milling designs that will come with more engineering would improve the economics of the project as well.

Some of the key areas where WGM changed its inputs from the earlier report were: a new price forecast, increased sustaining capital costs, reduced operating costs, and added working capital costs.

Despite the markets harsh reaction WGM said the differences between this and the earlier study were “immaterial for this level of study.”

At full production the Hannukainen Project is projected to produce 2 million tonnes of high quality pellet feed grade concentrate and variable amounts of copper and gold concentrate per year.

The project has 101 million tonnes in the measured resource category grading 33.8% iron and 0.17% copper. It has a further 9 million tonnes grading 35% iron and 0.13% copper and 88 million tonnes grading 31.7% iron and 0.13% copper in the inferred category.

The project sits in the Kolari district of Northern Finland just 15 km away from a rail line.