Hannukainen

Location: Kolari district, Northern Finland. 15km to rail line
Minerals: Iron Oxide-Copper-Gold
Ownership: 100% ownership of an exploration permit
Status: PEA complete, likely to seek partner to advance project

 Hannukainen
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PEA Update
On May 12, 2010, Northland was pleased to announce the positive outcome of the Preliminary Economic Assessment (PEA) on its 100% owned Hannukainen Iron Oxide-Copper-Gold (IOCG) Project. Watts, Griffis and McOuat Limited ("WGM"), Consulting Geologists and Engineers of Toronto, Canada, was responsible for the overall PEA, and was supported by Hatch Engineering ("Hatch"), Northland for various aspects of the study and an international accounting firm was engaged to assist with the development of the economic model.

The NI 43-101 Technical Report in support of the PEA will be filed on SEDAR (www.sedar.com) and Northland's website within 45 days.

PEA Highlights:
  • Using a discount rate of 8%, the Project has a potential Net Present Value (NPV) of US $471 million, an Internal Rate of Return (IRR) of 32.5% and a 2.4 year payback period from first production.
  • Total Operating Cost (OPEX) per tonne of iron concentrate, including Cu and Au credits, delivered FOB at the port of Kemi, Finland, is estimated to average US $31.86/tonne for the Life of Mine (LOM), and averages US $26.35 over the first 10 years of operation. The OPEX figures include contingency, royalty, transport and port loading.
  • Capital expenditure (CAPEX) to first production is estimated at US $371M and maximum negative cash is US $382M.
  • The updated Hannukainen mineral resources contained within a US 110 cents/dmtu (dmtu = dry metric tonne unit) Iron (Fe) price, 15% Fe cut off and within an optimized pitshell are 101M tonnes Measured and 9M tonnes Indicated for a total of 110M tonnes grading 33.9%Fe, and 0.17% Copper (Cu).
  • The PEA, based on a more conservative Fe pricing assumption of US 85 cents/dmtu, a 20% Fe cut off and within an optimized designed pit identified 75M mineable tonnes of process plant feed at a grade of 35.7% Fe. This entire tonnage is classified as Measured and Indicated mineral resources.
  • The PEA envisions Hannukainen beginning production in 2014 with an estimated 14 year Mine Life based on the NI 43-101 defined surface mineable mineral resources at Hannukainen.
  • The production rate is planned at 2M tonnes per year of Fe concentrate at approximately 69% Fe. In addition, significant value is derived from the production of a Copper/Gold (Cu/Au) concentrate which is a by-product of the Fe processing. The Cu/Au concentrate is estimated to contain 25% Cu and 5.4 grams per tonne Au with 7.7 grams per tonne Au in the early years. The LOM average annual Cu/Au concentrate production is 35,000 tonnes per year.
  • Additional mineral resources were identified in areas that were not included in the PEA. An underground resource at Hannukainen was estimated at 88M tonnes Inferred mineral resources grading 31.7% Fe at a 20% Fe cut off. A new resource was defined at the nearby (4 kms north) Kuervitikko deposit with Indicated mineral resources of 26M tonnes grading 24% Fe and Inferred mineral resources of 19M tonnes grading 22% Fe at a 15% Fe cut off.
  • WGM completed the mineral resource estimates for Hannukainen and Kuervitikko. Hatch, supported by Northland, developed the capital and operating costs. Raw Materials Group (RMG) developed the Fe pricing assumptions and CRU Strategies (CRU) developed the Cu pricing assumptions. An international accounting firm was engaged to assist with the development of the economic model.
The final PEA report will be posted here and on SEDAR within 45 days.

For more information see the entire Press Release 12 May 2010

A former iron-copper-gold producer, Hannukainen is actually a cluster of five deposits at various depths: Laurinoja, Kuervaara, Lauku, Vuopio and Kivivuopio. Laurinoja and Kuervaara were mined as an open pit during the 1980s. The area is within 15 km of a rail line.

Geology and Mineralization
The Hannukainen deposits are hosted in the Pajala Shear Zone and belong to the iron-oxide-copper-gold (IOCG) class of mineral deposits. Iron-copper-gold mineralization occurs in at least 5 shallow-dipping to flat-lying bodies up to 500 meters in length down dip: Laurinoja, Kuervaara, Lauku, Vuopio and Kivivuopio. The deposits are characterized by spatially interrelated, near-surface, sub-horizontal lenses of magnetite mineralization located within an area measuring approximately 1.3 km by 2.7 km. They are hosted by mafic meta-volcanics and overlain by a monzonite unit.



Resources
The Hannukainen mineral resource was updated with an additional 245 drill holes that have been completed since the initial resource report in 2007. This exploration and infill drilling increased the total global tonnage of Hannukainen by 29%. Due to the 50m centered infill drilling, the proportion of Measured and Indicated tonnage at a 15% Fe cut off also increased by 76% over the previous 2007 estimate.

The mineral resources for Hannukainen estimated by WGM outline a total of 110MT of Measured and Indicated mineral resources. These are stated below at a 15% Fe cut off and are contained within a US 110 cents/dmtu Fe price optimized pit shell.

Category Mt Fe Cu Au PPB
Measured 101 33.8% 0.17% 67
Indicated 9 35.0% 0.13% 23
Inferred Underground 20% cut off 88 31% 0.13% 41

Utilizing the resource above, the PEA was based on a more conservative US 85 cents/dmtu Fe price, US $2.20/lb Cu price and US $850/oz Au price and identified 75M tonnes of process plant feed averaging 35.7% Fe, 0.19% Cu and 78 PPB Au over the life of the mine. This entire tonnage was comprised of Measured and Indicated mineral resources.
In addition, an underground Inferred mineral resource of 88M tonnes grading 31.7% Fe, at a 20% Fe cut off, was identified but not included in the PEA.

The underground tonnage figures shown are stated at a higher 20% Fe cut off to reflect additional underground mining costs.

Kuervitikko
A new mineral resource estimate for the Kuervitikko satellite deposit, located 4 kms to the north of Hannukainen, has the potential to extend the operating life of the processing facilities. The Kuervitikko mineral resource was not included in the Hannukainen PEA. The mineral resource estimate was based on the available historic information and 122 drill holes completed by the Company and is stated at a 15% Fe cut off which approximates what is considered potentially economically viable towards the end of the anticipated Hannukainen mine life.

Category Mt Fe Cu Au PPB
Measured -- -- -- --
Indicated 26 23.8% 0.17% 175
Inferred 19 21.7% 0.15% 165

The total tonnages of contained metals, including copper and gold, have increased considerably from the historic resource estimate. Northland also believes that on-going drilling will continue to expand the resource and move tonnes from inferred into the indicated and measured categories.

It is anticipated that as Northland identifies suitable adjacent resources, they will be developed to provide feed to the processing facility located adjacent to the Hannukainen deposit.

Metallurgy
Initial metallurgical test results have been extremely encouraging and indicate that the project can generate a low-acid gangue magnetite concentrate, potentially suitable as a feed for high quality Direct Reduction (DR) pellets or for sinter feed. The first stage metallurgical tests produced a concentrate with an average composition of:

Element Fe Al2O3 SiO2 MgO S
Sample 71.0% 0.34% 0.61% 0.30% 0.02%

If Northland is successful in manufacturing DR pellets, which command premium prices in the market, it will expand Northland's potential market into North Africa and the Middle East.

Mineralogical examination of the core from Laurinoja has identified no unexpected or unusual mineralogy and confirms that virtually all the Cu occurs as chalcopyrite. Davis Tube Test results show very high recoveries (up to 99%) of magnetite to the concentrates at a variety of grind sizes, demonstrating good liberation characteristics for the magnetite in the Hannukainen resource. Flotation test work to produce a copper-gold concentrate is underway and results will be reported as they become available.

Exploration
Northland believes its Hannukainen resource is likely to grow as it continues to drill. For example, a number of drill holes with ore grade intersections, which were drilled outside of the new resource area, were not included in the NI 43-101 estimate. In addition, there are deeper targets that will be tested in the future.

Ownership
Northland holds a 100% interest in this property.