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.

Pajala iron miners battle financing woes

“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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‘Klondike laws’ spur Swedish fury at miners

Lax prospecting laws and among the world's lowest mining taxes has 'unserious companies' frothing at the mouth over Sweden's untapped mineral and metal resources, angering residents across the north, explains author Po Tidholm.

'Klondike laws' spur Swedish fury at miners

“Hydroelectric dams, forests, and ore built this country,” Tidholm tells The Local. “But when Sweden was modernizing in the 1900s, the northern communities got a lot back from local industries, because at the time they were labour intensive.”

The Local reported earlier this week how police in Jokkmokk had to dig up protesters at a proposed new iron mine in Kallak, which has the local community, including the indigenous Sami, up in arms. A company called Beowulf, listed in London and Stockholm, has its sights set on a new mine.

“Kallak is traditional reindeer grazing land for the Sami, who for many and historic reasons don’t own their land,” Tidholm explains. “But even if they did, it wouldn’t make any difference.”

Sweden is known internationally for its welcoming laws on prospecting. If there are minerals in the ground, any company, Swedish or other, has the right to take samples – the landowner can do nothing about it.

Yet this law in conjunction with highly-mechanized mining and Sweden having the second lowest mineral tax in the world, has turned Sweden’s north into Klondike, Tidholm says, attracting gold diggers as there are quick profits to be made.

“There are companies being investigated for financial crimes and shady dealings worldwide ready to extract Norrland’s resources, he says. “It is utterly absurd. People are really angry.”

While there are concerns about the business practices of some of the companies heading north, another problem is that they offer little income to local communities.

“While the dams have been built and are now run remotely from Stockholm, and machines fell trees, the mining companies are registered outside the municipality in question, and workers are flown in,” Tidholm says. “These mines are virtually like oil platforms. The communities get no money from income tax.”

Tidholm says the municipalities have been slow to accept that the industries that once formed their backbone can no longer hold them upright financially.

“The penny is starting to drop, slowly,” he says. “I’ve spent years crunching numbers. There is no money to be had from these industries any longer.”

READ ALSO: “For some unfathomable reason, Jokkmokk municipality is sacrificing its population’s well-being to make some rich person even richer.”

Tidholm also says a mineral tax of 0.05 percent – compared to about five percent in the US, and between six to 14 percent across Canada – means the national coffers aren’t replenished either.

“In 2011, Sweden got 400,000 kronor from the minerals extracted here. It’s enough change for a coffee!” Tidholm says. “It is truly absurd that Sweden doesn’t charge the mining companies.”

Po Tidholm is the author of Norrland – Essäer och reportage (Teg Publishing 2011).

Ann Törnkvist

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