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Preliminary reorganisation plan Northland Resources AB Northland Sweden AB Northland Logistics AB August 4, 2014. Definitions. ” NRSA” Northland Resources S.A., reg.no B 150.150 ” NSAB ”: Northland Sweden AB, reg.no 556767-8254 ” NRAB ”:

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Preliminary reorganisation plan

Northland Resources AB

Northland Sweden AB

Northland Logistics AB

August 4, 2014

definitions

Definitions

”NRSA”

Northland Resources S.A., reg.no B 150.150

”NSAB”:

Northland Sweden AB, reg.no 556767-8254

”NRAB”:

Northland Resources AB (publ), reg.no 556656-1675

”NLAB”:

Northland Logistics AB, reg.no 556656-1717

”NLAS”:

Northland Logistics AS, reg.no 997 117 050

”The Companies”:

NLAB, NRAB and NSAB

”The Administrator”:

Advokat Lars Söderqvist, Hökerberg & Söderqvist Advokatbyrå KB

about the companies

About the Companies

The Companies are included in a group in which NRSA, with its registered office in Luxembourg, is the parent company. NRSA’s shares are listed on the Oslo Stock Exchange.

Operations within the group essentially comprise mining and prospecting and commercialising mineral deposits. Since 2010, work has been taking place on completing the facility for the mining of iron ore concentrate in Kaunisvaara outside Pajala.

The holding of the shares of the Companies as well as that of the other companies in the Northland Resources group is shown in the figure on the opposite.

Until further notice, the operational activities in the Finnish companies are canceled. The Finnish Group companies are however reportedly not insolvent. Northland Exploration Sweden AB does not conduct any business.

Northland Resources S.A.

Northland Sweden AB

Northland Mines OY

Northland Resources AB (publ)

Northland Exploration Sweden AB

Northland Exploration Finland OY

Northland Logistics AB

Northland Logistics AS

northland resources ab publ

Northland Resources AB (publ)

The business in brief

NRAB is the holder of the concessions under the Minerals Act which constitute the basis for the Companies’ mining operations. NRAB also conducts business related to the mines in Kaunisvaara. NRAB works the iron ore, which is thereafter hauled to the surface and processed into the iron ore concentrate which NRAB offers for sale.

NRAB does not conduct any transportation activities under its own management. NRAB shares management and staff functions with, among others, NSAB, NLAB and NLAS. Thus, NRAB is dependent on the logistics provided by NLAB and NLAS (see below). NRAB has joint financing together with NLAB, NLAS and NSAB.

NRAB’s financial position as per 30 June 2014 is shown in the letter to the creditors dated the 18 July 2014, available at www.northland.eu.

Company officers etc.

Board of Directors

Sissel Danielsen, Olav Fjell, Stefan Månsson, Runar Nilsen, Peter Pernlöf, Leif Salomonsen and Olli Tapani Vaartimo

Managing director

Johan Balck

Auditor

Ernst & Young AB

northland sweden ab

Northland Sweden AB

The business in brief

NSAB owns all of the shares in NRAB.

Since NSAB does not conduct any of its own operational, revenues-generating business, NSAB is dependent on, among other, NRAB, NLAB and NLAS. NSAB has joint financing together with NLAB, NLAS and NRAB.

NSAB’s financial position as per den 30 June 2014 is shown in the letter to the creditors dated the 18 July 2014, available at www.northland.eu.

Company officers etc.

Board of Directors

Johan Dagertun, Tomas Gustafsson and Johan Balck

Managing Director

Johan Balck

Auditor

Ernst & Young AB

northland logistics ab

Northland Logistics AB

NLAB’s operations are focused on handling logistics relating to the business conducted by NRAB. Accordingly, NLAB is responsible for transporting iron ore concentrate from Kaunisvaara to the port in Narvik. In an initial stage, transportation takes place by truck from Kaunisvaara to Pitkäjärvi. In Pitkäjärvi, the iron ore concentrate is loaded onto railway cars for transportation on the Malmbanan line to the port in Narvik.

Operations at the port in Narvik are conducted by the Norwegian subsidiary, NLAS. Thus, among other things NLAS is repsonsible for the iron ore concentrate being loaded onto the ships which transport the iron ore to the customers.

For its operations, NLAB is dependent on the operations conducted by NRAB, and is likewise dependent on NSAB with respect to management and administration matters. Furthermore, NLAB is dependent on NLAS’ operations since it is from the port in Narvik that the iron ore is shipped out to customers. NLAB has joint financing together with other group companies, including NLAS, NRAB and NSAB.

NLAB’s financial position as per den 30 June 2014 is shown in the letter to the creditors dated the 18 July 2014, available at www.northland.eu.

Company officers etc.

Board of Directors

Hans Nilsson, Klas Olsson, Krister Winsa and Johan Balck

Managing Director

Hans Nilsson

Auditor

Ernst & Young AB

the financial situation of the companies and the background of their payment difficulties

The financial situation of the Companies and the background of their payment difficulties

The background to the Companies' payment difficulties is attributable to the significant decline in the price of iron ore that have occurred in recent time.

The funds raised during the previous reorganisation were based on the assumptions of a realized iron ore price of USD 120 per ton, and an exchange rate of SEK 6.45 per USD. During the previous reorganisation the Companies have obtained a buffer by the making of the rate of instalment of long term debt dependent on the cash flow, which among other things is affected by the iron ore price and the USD exchange rate.

The Companies have not had the financial capacity to manage the loss of revenues due to the decline in iron ore prices. The additional funding the it was assumed that the Companies would receive after the completion of the previous reorganisation has only to a minor part benefited the Companies.

In order to meet the changing conditions that have arisen after the completion of the previous reorganisation, the Companies have sought to increase their capital strength and liquidity by raising additional capital. Due to, among other things, further declines in the iron ore price, these attempts have not been successful.

the financial situation of the companies and the background of their payment difficulties continued

The financial situation of the Companies and the background of their payment difficulties, continued

Following the aforementioned difficulties, the Companies and Northland Logistics AS, on 30 June 2014 decided to enter into an informal reorganisation and to suspend their payments until further notice.

The Companies assigned the Administrator to administer the suspension of payment and the informal reorganisation.

The majority of the suppliers declared themselves to be in favour of the suspension of payments and the informal reorganisation. However, all suppliers, whose continued supply are necessary to continue the operational business, did not agree to continue deliveries to the Companies.

In the light of the above, and in order to secure the continued production of the Companies, it became necessary for the Companies to apply to the District Court for reorganisation. The applications were granted 14 July 2014.

account of the previous reorganisation

Account of the previous reorganisation

The Companies have during the year 2013 been subjects of a formal reorganisation. In parallel, an informal reorganisation has been carried out in Northland Logistics AS, the creditors of which have been treated correspondingly and have been offered the same terms as the creditors in the Swedish companies.

The reorganisation work begun on 8 February, 2013 and the reorganisation was completed through composition proceedings in Luleå District Court on 12 July, 2013, with the decision to confirm the composition proposal for the three Swedish companies. Agreements with similar content were met between Northland Logistics AS and all the company's creditors.

To sum up, the causes of the insolvency have been that the Companies' operating costs have become higher than budgeted, that changes in the exchange rates have resulted in reduced revenues and increased costs, that the price of iron ore has been lower than budgeted, that significant cost increases and further investments incurred attributable to Companies' supply chain, and that increased costs for the installation work, including the enrichment plant have arisen.

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Account of the previous reorganisation, continued

The measures taken within the framework of the reorganisation process to revoke the insolvency has included the preparation of proposals for new funding for the Companies, including both alteration of the terms and conditions relating to existing debt as well as raising new loans.

The basis of the new funding was a revised project plan which was developed and existed in May 2013. Among the assumptions that formed the basis for the revised project plan are the above mentioned regarding the iron ore price and the exchange rate for USD in SEK.

the previous reorganisation continued

The previous reorganisation, continued

The funding proposal essentially entails

that the new creditors agree that the interest on the new funding being raised is payable in 2017 at the earliest,

that intra-group debts (i) receive interest payments starting 2016, (ii) receive principal payments only after all other creditors (except for the new creditors) are paid in full in 2020, and (iii) that the quarterly payments may be deferred if the Companies' cash flow is not sufficient,

that creditors with principal claims in excess of SEK 2 600 000 (i) receives an instalment of SEK 2 600 000 no later than 31 December 2013, (ii) that the interest and repayment of instalments on the remaining outstanding claim is due to payment quarterly for a period up to the year 2015 (respectively for some in 2020), and (iii) that the quarterly payments may be deferred if the Companies' cash flow is not sufficient, and

that all the creditors with principal claims up to and including 2 600 000 shall receive payment in full no later than 31 December 2013.

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The previous reorganisation, continued

The proposal has been accepted by the creditors. As mentioned above, the condition relating to the right to defer the payment date forward if the Companies' cash flow was not enough has meant that the Companies has had some protection against macroeconomic changes, and to some extent been able to handle negative changes in the iron ore price compared to the underlying assumptions.

In the line of the supervision of the performance of the composition, it has been noted that the Companies have fulfilled all of their obligations towards the majority of the creditors since the Companies have paid all claims up to and including SEK 2 600 000 in full and has paid the sum of SEK 2 600 000 to the creditors with claims in excess of the stated amount.

More information regarding the previous reorganisationcan be found in the reorganisationplan, which can be downloaded at http://www.hsa.se/wp-content/uploads/2013/07/Reorganisaton-plan-with-appendicies-ENGLISH.pdf

the companies operational development after the ceasing of the reorganisation

The Companies' operational development after the ceasing of the reorganisation

During the period following the completion of the reorganisation, the Companies have followed the revised project plan.

The Companies and a strategic partner have also signed ​​a non-binding letter of intent, entailing that the Companies can defer CAPEX regarding completion of production line 2.

the companies financial performance after the ceasing of the reorganisation

The Companies' financial performance after the ceasing of the reorganisation

In the previous reorganization plan, Section 7.6, some special funding is mentioned, which was expected to be secured. The Companies have only to a limited extent managed to secure such special financing, depending among other things on changing requirements from prospective lenders.

In order for the Companies to meet the needs brought about by the lack of special funding , and to increase the capital strength and the preparedness for adverse macroeconomic changes, the Companies have attempted to obtain additional funding but without result. The financing need the Companies thereby assumed was based on an unchanged operational strategy compared to the one the reorganisationplan was based on.

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The Companies' development after the ceasing of the reorganisation, continued

As a result of new financing not being obtained, the Companies have taken the following measures

  • Decision on a new operational strategy.
  • Suspension of payments.
  • Reorganisation.
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New operational strategy

Northland’s new strategy is based on reaching maximal flexibility in operations and cost structure to be able to cope with the high volatility of world iron ore prices. Through a focus, at this point, on production from the existing processing line significant cost reductions can be made, while simultaneously preserving ore resources and retaining long-term flexibility.

With the new strategy, Northland will complete construction of the second processing line but not take this line into production at current price levels. As remaining expenditure to complete the second processing line is limited, this will enable the Company’s to maintain optionality to ramp up when market conditions improve. Until the, the strategy gives Northland the opportunity to preserve liquidity and at the same time avoid depleting reserves and resources in periods of low prices.

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New operational strategy, continue

A Secure the production in accordance with the new strategy

B1 Adjustments of existing agreements due to the new strategy

B2 Risk attributable to macroeconomic factors shall be allocated between the Companies and their partners, entailing the Companies to become less sensitive to changes in the iron ore price.

C Due to the changes made, revise the Companies' financing needs in the long term.

The above stated are prerequisites for payment of the creditors’ claims in the reorganisation proceedings.

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Suspension of payments

On 30 June 2014, the Companies together with Northland Logistics AS decided to suspend their payments until further notice.

The suspension of payments provides a respite and ensure equal treatment of the creditors.

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Reorganisation

The current work with the reorgansation includes two main elements:

  • Advising the Companies regarding the implementation of the new operational strategy, which includes, inter alia, ensuring the production, renegotiation of existing contracts and issues regarding the new financing.
  • Safeguarding of the collective interest of the creditors, which includes inter alia, to establish routines for the handling of payments during the reorganisations, to continually answer questions and otherwise be in contact and conduct negotiations with the Companies‘ partners with the goal of continuing the Companies' operations during the reorganisationperiod. The same applies to NLAS.
measures taken

Measures taken

In the time after the decision to initiate an informal reorganization and until further notice suspend payments, analyses of how the Companies newly adopted operating strategy affects the continued operation has been performed.

A number of new guidelines regarding the mining operations have been developed.

After investigations, it has been announced that the Company shall utilize its personnel and equipment in a cost optimal way. Negotiations with relevant unions has been held and organizational changes and productivity improvements have been announced by the Companies.

measures taken continued

Measures taken, continued

Wage guarantees

In accordance with the provisions of the Wage Guarantee Act, the Administrator has taken decisions regarding wage guarantees for personnel in the Companies.

Until 30 July, 2014, the county administrative board has paid wage guarantee up to a total amount of SEK 19,185,247, including social security and preliminary tax.

The wage guarantees only has a limited impact on the Companies cash flow.

measures taken continued1

Measures taken, continued

Investigation regarding collateral

The Administrator has commenced investigation measures aimed at clarifying which of the of the Companies’ assets constitute collateral for the Companies’ debts.

The investigation involves a review of various types of collateral, including property mortgages, retention of title clauses, floating charges etc. which the Companies have carried out, and includes reviews of executed agreements, investigations regarding measures for the perfection of security interests, etc.

The aim of the investigation is to establish a basis for making assessments as to the extent to which the various types of collateral might be asserted in full against other creditors, and to delineate between the bases for the different types of collateral.

The starting point is the investigation regarding collateral which was carried out within the framework of the previous reorganisation and the changes that have occurred thereafter.

timetable

Timetable

The timetable regarding the implementation of the new operational strategy can be generally described as follows

A Securing the continued production

Continued production is assured.

B1och B2Adjustments of existing contracts and allocation of risk

Negotiations regarding adjustments are currently ongoing with Peab, Metso, Grieg, Pon, Atlas Copco and Green Cargo, and are expected to be completed in August. After this is done, an assessment of how the new agreements affect the Companies' cash flow and earnings shall be done. That work is expected to be completed by August/September.

C Revised assessment of the companies' long-term financing

The work with revising the assessment of the Companies’ need of long-term financing is conducted parallelly with the negotiations and assessment according to B and is also expected to be completed by August / September.

contact details

Contact details

This preliminary reorganisation plan can be downloaded from the following websites:

www.hsa.se

www.northland.eu

Fore more information, please contact

Lars Söderqvist, +46 70 581 71 81, lars.soderqvist@hsa.se

Bill Kronqvist, + 46 70 204 78 47, bill.kronqvist@hsa.se

Nicolina Hallerby, +46 76 525 16 91, nicolina.hallerby@hsa.se

Andreas Nordberg, +46 70 584 71 18, andreas.nordberg@hsa.se

Contact person at Northland

Johan Balck, managing director, +46 920 779 00, jbalck@northland.eu