Pajala iron miners battle financing woes

The mining company Northland Resources has failed in its bid to bring in extra investment to its new iron ore mine in Pajala, northern Sweden, which employs more than 800 people.

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"We face a temporary liquidity challenge," CFO Peder Zetterberg told the TT news agency after negotiations with an investor fell through. He said there was no immediate threat to the mine's operations, which began in October.

An iron ore shipment next week could solve part of the cashflow problem, Zetterberg said.

"We can manage operations for a time, and it's positive that we have begun shipping."

The iron ore mine in Kaunisvara in Pajala municipality employs some 800 people, of which 450 work directly with extraction, the rest in logistics. There are also mechanics and other auxiliary staff at the site.

"The saying is that for every miner, there are an additional three jobs created, so of course we are talking about a lot of people," Zetterberg said.

The union is keeping an eye on the company's financial woes.

"Of course we feel worried when this type of things happen, but if you open a mine at record speed with all the infrastructure it requires, it isn't surprising that your original cost calculation is wrong," the local IF Metall union ombudsman Tomas Nilsson told TT:

"Although, we're not talking about peanuts here, we're talking about 2.4 billion kronor ($380 million), which is a lot even for an established company."

He said the union had faith in Northland Resources solving the problem.

"We know that the demand for iron ore is bigger than supply so we hope this will sort itself out," Nilsson.

The company has denied that it would file for bankcruptcy once it became known that the project went over budget. In late January, its investor relations head, Anders Antonsson, said such speculations, and any questions about whether the company would be sold, were simply rumours.

"There's a lot of chatter, but we are not in that position," he told TT at the time.

Despite putting on a brave face, Antonsson and his colleagues saw the company's share price on the Oslo Stock Exchange take a beating. When it became known that they faced a financing shortfall, the price tumbled by 90 percent in a few days.

Stock broker Oskar Rönneman runs a Facebook group for Northland Resources shareholders.

"The company faces a crisis of confidence and the market is not willing to invest more," he told TT. "Northland hasn't proven that it can complete a project within budget."

He urged the company management to sell to an investor with enough cash and knowledge to run a mine.

Local politician Kurt Wennberg remained sanguine about the mine owners' woes.

"Of course it's a shame, but the mine will live on. It's there now and it's not going to just disappear from the municipality."

TT/The Local/at
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