Dannemora Mineral: Revised investment program will require more equity

By Caroline Salls

Pittsburgh, Oct. 22 - Dannemora Mineral AB's short-term capital requirement will increase, triggering a need for additional equity, according to a company news release.

The company said the first stage of its investment program has produced a sustained increase in recovery levels, but recently completed tests show that it is likely that the planned investment in the next stage will not result in a sufficient further increase.

According to the release, Dannemora's crushing currently takes place on the surface, which is not an optimal arrangement, either in terms of cost or respect for the environment.

Dannemora said preparations to place the crushing operation underground have been in progress for a long time, and completion of this process will require further preparation, mainly in the form of underground work.

Although annual cost savings from the changed crushing operations are estimated at SEK 50 million, the company said full-scale tests and evaluations of the planned second investment stage completed during the third quarter show that it is likely that the improvements in recovery levels will not be large enough to guarantee a profitability improvement of the size that would enable it to finance the subsequent investment in a wet stage of the process with its own cash flow.

As a result, the company said it is considering bringing forward the wet stage investment in one large investment program.

Compressing the investments will not only result in a larger current capital requirement, but will also help Dannemora's full profit potential to be achieved, according to the release.

Financing

The company said the revised investment program means that, in addition to a previously announced short-term financing requirement of SEK 120 million in working capital for the remainder of 2013 and SEK 80 million for investing in stage two, there will also be a financing requirement for the wet stage investment, the completion of the work to place crushing operations underground and working capital during the investment period.

Dannemora said financing of the expanded investment program is part of negotiations that have been in progress with bondholders.

Specifically, the company said it needs a substantial increase in capital in the form of equity and a financial structure that allows for that capital to be raised.

The bondholders have approved waivers that are conditional on Dannemora being able to present a solution to its financing needs by the end of November.

The company said extensive efforts to secure financing and a capital structure have been in progress for some time, led by financial adviser Swedbank First Securities.

In addition, Dannemora said its entire organization has undergone a review aimed at reducing costs and increasing efficiency and productivity.

Dannemora is an iron ore producer based in Danderyd, Sweden.

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