Swedish consortium saves Northland mine

The ailing Northland Resources mining entrepreneurs have secured financing from a consortium of Swedish investors that have stepped in to save the mine in Pajala, northern Sweden.

Swedish consortium saves Northland mine

After several months of financial turmoil, iron mining was finally halted on May 24th. Northland announced late on Wednesday evening, however, that a long-term financial solution has been proposed involving an injection of 335 million into the company through a bonds issue.

A consortium of Swedish companies has now stepped in to prop up the company.

“Folksam, Metso, Norrskenet and Peab (are) investing a total of $100 million – $25 million each – in Northland’s bonds,” the consortium said in a statement.

The investment gives the consortium a majority on the company board, as Northland keeps only three of seven places.

“The aim is to have a controlling interest in the company and to contribute expertise in restoring confidence in the company,” the consortium stated on Wednesday evening, adding that Olav Fjell had been recommended as the new chairman.

“Folksam’s financial strength gives us the opportunity to engage in interesting business arrangements on a regular basis,” said Folksam CEO Anders Sundström.

“In the long run, we believe this will be a good deal for our customers.”

Northland had already been in touch with Folksam after announcing its financial difficulties in January. Folksam then proposed looking into debt restructuring, but Northland decided to turn to its stakeholders for a new bond offer. This offer was not, however, fully subscribed.

As Northland’s attempts to shore up financing fizzled out, Folksom and its consortium partners looked at the bond issue solution and decided to make a new offer.

“This solution was supplemented with a requirement for four out of seven seats on the board in order to ensure that Northland adheres to a realistic plan in terms of finances and production,” the statement read.

Norrskenet is a venture capital firm owned in part by the state-owned mining giant LKAB. They said their decision to prop up the Northland mine was a pure financial investment and they would not be involved in day-to-day operations.

“LKAB is fully focused on getting our mines in the Svappavaara field open and to push through our expansion plans. (Northland) is a financial investment,” said LKAB CEO Lars-Eric Aaro.

The Local/at

Follow The Local on Twitter

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.


‘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

Follow Ann on Twitter here