Northern Iron (ASX: NFE) wholly owns the Sydvaranger Iron Project in northern Norway. The company is currently evaluating the feasibility of doubling production at the project to 5.6Mt dry concentrate per annum.
Northern Iron commences loading of First Iron Ore Concentrate Shipment
Australian-listed Northern Iron (ASX: NFE) has commenced loading of the first commercial shipment of iron ore concentrate from its Sydvaranger Iron Project in Norway, representing a "significant milestone" for the company.
Northern Iron says the vessel is expected to sail from the port of Kirkenes to a customer in China this week, with the departure a major coup for the company as it represented the conclusion of plant commissioning and the commencement of concentrate production.
Difficulties in optimising the concentrator performance during plant commissioning resulted in the first cargo being significantly outside the specifications expected during post commissioning production.
But newly appointed chief executive John Sanderson said it was not uncommon for irregularities to occur in the early stage of commissioning and production ramp up.
Mr Sanderson said he was pleased to report that everything except the iron and silica was within the specified ranges.
“The loading of our first commercial shipment is a significant achievement for the company, one of which our employees, business partners and the local community can be justifiably proud," Mr Sanderson said.
"The journey to production has not been without challenges and obstacles, but we now look forward to focusing on building a solid company supplying high grade iron ore concentrate to the world steel industry.”
The company’s concentrate manufacturing facilities were currently operating at up to 60% capacity, with Northern Iron expectin capacity to reach 80% by the end of 2009.
100% of nameplate capacity of 2.8 Million Tonnes per annum concentrate production is expected to be reached by the end of Quarter 1 2010 after longer term solutions are implemented to address production bottlenecks identified during plant commissioning.
Slower than expected ramp up of production rates from the Company’s facilities has resulted in a revised estimate of concentrate production in 2009 of 280,000 wet metric tonnes.
Northern Iron has identified a number of relatively minor issues that it believes has contributed to the production of lower specification material and the company is working with its engineering consultants to optimise the performance of the system.
Despite the initial lower than expected quality, interest in the company’s product remains high and sales of 100% of the company’s 2009 production is expected. Mining continues to meet planned production rates.
In the final stages of construction and in early commissioning the company has experienced higher cash usage beyond the forecast in the August 2009 Investor Presentation. These relate largely to additional labour costs, creditor pay down and a larger than expected upfront expenditure on consumables.
These items in total represent an additional cash outlay of approximately US$11M of which US$ 5M is a cost overrun due to additional labour cost. It is however worth noting that the construction program is almost complete and by the first week of November the number of construction contractors on site had been reduced to less than 20.
