Asian Metal: Thank you for accepting this interview. Would you like to introduce yourself briefly?

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Paul: I am a geologist by trade; a specialist in iron ore processing and I have worked in iron ore and steel industry developments around the world , mainly with British Steel Consultants, for over 30 years. I left Chorus Consulting in 2007 and joined Northland Resources, a Canadian based exploration company with potential developments in north Sweden and Finland, and worked with their executive committee in various positions from technical through to commercial to help them achieve a strong position to get into production; which will now happen towards the end of this year. I left my last role as VP business development for Northland Resources in 2011 once most the development work was complete and took some time to decide on my next project to work on.

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Asian Metal: What made you decide to join Nordic Iron Ore?

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Paul: The project in Sweden proposed by Nordic Iron Ore was really a standout opportunity in terms of iron ore developments. It carries a very low risk rating for a project at this stage and a relatively low capex, primarily because it has most of the logistical infrastructure in place; all of the crucial things that tend to trip up bulk mineral projects or cost them a lot of money. The scale of the project is not too large, it can get to production in a relatively short time scale and there is plenty of opportunity for expansion, so, really, it ticked all of the boxes.

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Asian Metal: Do you have any major concerns about the project?

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Paul: The major risks for the project lie in acquiring the project finance in a timely manner; I think some of the banks are slightly misguided and have a lack in-depth understanding of what iron ore project development is all about. The current environment is not helped by the lack of sensible lending policies by banks and other instruments. However The technical issues for NIO are quite limited as the project area has a lot of historical data from previous mining operations to work from. The Vasman target is the least developed mineral body, though it has been a known target for a long time and has historical data as well, including a test mine in the 1960’s. We have now collected most of the historical data and are compiling the database. New expansion drilling data will start to be added from August this year.

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Asian Metal: What exploration are you undertaking?

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Paul: We are now running our drilling programme for the feasibility study to expand and redefine the resources around Bloberget and Haskberg, We are about to start our drilling programme to gather resource and geotechnical data for both the feasibility study and the development of the Vasman target, both on-land and off a barge, in order to define the mineralisation that continues below the lake. The aim is to define a more significant resource in order to increase mine life as well as adding value to the company by better defining and expanding the resources. The total exploration in the Bloberget, Haskberg and Vasman is expected to cost around USD20M, which is very reasonable. This is because of the existing infrastructure; we have a railway network and several ports that can be utilised already.

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Asian Metal: What resource estimate are you targeting with this exploration work?

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Paul: We have 61 million tonnes of defined mineral resource at the moment, giving us around a 12 year mine life of with a production rate of 2.2. To be sensible, and give financiers some confidence, we need to be nudging the 20 year mark. We anticipate that, by defining Vasman, we expect be able to reach in excess of 25 years mine life at a higher production rate.

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Asian Metal: What were the latest exploration results?

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Paul: The magnetic survey indicates the presence of >600 million tonnes of 29%Fe magnetite and further historic data suggests that there is up to a further 20% haematite to add on top, potentially putting the resource in the 750 million tonne mark. This is estimated down to a relatively shallow depth of 300m. The test mine pulled out 8,000t of material that was over 40% iron grade, so we expect the final results to be in the 36-40% iron ore range. Expansion of resources will take place as the drilling programme progresses this year, so expect announcements during this period.

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Asian Metal: What grade will you be able to reach after crushing and washing?

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Paul: With crushing, grinding and magnetic separation we can make a magnetite concentrate, and we can use high gradient magnetic separation and gravity for the haematite, such as cones, spirals, jigs or tables. We know from laboratory based work that we can expect to get over 67%Fe, however if we produce pellet feed we will be targeting a concentrate nearer 69% iron.

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Asian Metal: Will you be producing mostly pellets?

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Paul: No at this stage we will be concentrating on producing either pellet feed concentrates or, if possible, sinter feed. Looking at the market distribution, we will be expecting to sell some pellet feed into Europe. We are also looking at the possibilities of being able to produce a sinter feed suitable for selling to the European steel industry as we believe they are looking to reduce their dependency on Brazilian supply, and improve quality. Additionally we anticipate that some material will also be sold to India, the Middle East, and China. Really the regional sales distribution will depend where we make the better price. Furthermore, any strategic investor attracted to the project could well influence what products are made and where the market is.

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Asian Metal: What mining method will you be using?

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Paul: The mining method will depend what the conditions are in each mine, in the case of Vasman it is likely to be room and pillar because block caving is possibly not appropriate for under a lake, where the bulk of the high grade mineralisation is believed to be located. We will then have more sufficient information on the rock structure via our barge drilling to define the mining method and determine the size of roof we will need to support the Vasman Lake. The iron mineralisation is actually in pods so we are looking to use the waste rock in-between to utilise as support without leaving too much of the valuable resource behind. There are a lot of mines under lakes and the sea so the technology and knowhow is available. The mines at Bloberget, Haskberg are likely to be block-caving as previously operated there.

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Asian Metal: Will underground mining put the operation high up on the cost curve?

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Paul: Actually no, going underground is not always expensive. There are examples where mines with open pit operations with high strip ratios could be mining as much as 60-70 million tonnes of material a year in order to get a similar tonnage of iron ore product out from their operations. In comparison, we are exploring the possibilities of mining out around 12 million tonnes a year in order to get around 4.4 million tonnes of iron product, inclusive of waste dilution. Although it is more expensive to mine underground, per tonne, we can be more selective of what we mine and hence, can expect competitive operating costs when compared with many open pit operations. The other good thing about undergoing mining is that when prices are low, you can often select the high grade mineralization to ensure survival.

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Asian Metal: I understood that the high grade mineralization was the first to be mined, is this not the case?

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Paul: In fact, although this is commonly the case, it is, in my view, a mistake made commonly. When the iron ore boom started there was a shortage of iron products and a lot of companies went straight into mining the high grade material, typically taking the high yielding lump ore out. In some instances this can then completely ruin the longer-term economics of the mine development. The overall growth and development of the mine can be made a much more costly exercise, and in the end the short term game actually can be costly. It is possible to have a good long-term development plan for the mine which provides a good cost effective development, whilst still yielding early high revenues; which, in turn, are required to repay loans and get high cash flow as soon as possible..

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Asian Metal: Is there a minimum iron ore price needed to support the mine economically?

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Paul: Our production costs are reported in our PEA at about USD52/t FOB; however internal studies suggest a redesigned development plan should reduce the cash OPEX below USD50/t FOB. Including all the financing costs, the total cost may reach USD60/t or a little above. We have a far lower capex and opex cost in comparison to many peer developing iron ore mines, mainly because we have access to the existing infrastructure, which we have already got agreements from the government for access to the rail facilities with room for expansions.

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Asian Metal: What infrastructure do you have to develop?

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Paul: We are looking at various methods to develop the mine; one is mining in in the North and South and joining in the middle, and the second is progressively moving towards the Haksberg target in the north from the southern Blotberget target, through Vasman Either way we are likely to develop mine declines in order to haul the ROM material out of the mine instead of using the shaft systems. Similarly one of the ports is in a similar position, as it is essentially designed to export dry bulk cargos and has the capacity to accommodate the larger panamax vessels, and potentially baby cape size vessels, taking up to 130,000t. It is actually restricted as much by the Straights of Denmark as it is by the port infrastructure. It will require some enhancement, such as new loader, which they will be putting in place and are confident that, with the investment, their total capacity will reach 7.5million tonnes a year. This is enough to handle all of our material and still accommodate another mining company that is looking to begin production a few years after us.

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Asian Metal: What is the planned capacity, ramp-up and expansion plan?

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Paul: The new aim for the project is to increase capacity target to around 4.4 million tonnes a year. We plan to start production of the Blotberget target in 2015 with a target rate in the order of 1 million tonnes a year. We will have to enlarge the existing infrastructure as we go, which will depend on how quickly we can develop new faces in the mine, such as the profile of the declines and the drifts. By the second year we expect to reach 2.2 million tonnes and look to bring Vasman online by 2017. By 2018/19 we are targeting to reach the 4.4 million tonne mark.

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Asian Metal: Thank you for the project information, I would like to shift focus to your thoughts on the iron ore market. What are your comments on the iron ore market?

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Paul: The key thing on the market place is that, in my personal view, China cannot keep providing sufficient domestic iron ore material. It is becoming more and more costly and there are less economic resources available, especially near to the steel mills. The only way this will change is if China build more steel mills in Western China, which maybe they do eventually, but all the urbanization tends to be focused in the Eastern side of the country. It is extremely costly for the miners to extract from the West and transport it to the steel mills as the infrastructure needs to be put in place to do it. Many of the new developments in Australia, Brazil and Africa in particularly are running into massive increases in financing requirements, lack of logistics solutions, resource nationalism, taxes etc. These are unlikely to come into production at anywhere close to the targeted rates by the developers. So in real terms, I believe most of the concerns of major oversupply d price collapse in the market prices are misplaced.

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Asian Metal: Do you see the expansion of Electric Arc Furnaces worldwide having a major impact on the iron ore demand in future?

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Paul: Not for 10-15 years. The main consumer of iron ore to be concerned about is China, so even if the US shift to the EA furnaces due to the availability of cheap gas, it will not have a big impact on the iron ore demand. China will start at some time to shift to EA furnaces and reduces their reliance on iron ore as they consume more and products change. In particular recycling of steel from buildings and cars will provide a domestic steel scrap supply and EAF will start to take greater market share, but this will not happen for a while.

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Asian Metal: What are your comments on the difficulty in financing in today’s economy?

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Paul: Mining iron ore is a long term commitment that few new companies have been able to compete in; the problem is that many developers and investors don’t fully understand the financing and patience required in order to complete these projects. Iron ore projects take a long time to complete; Investors have to understand that if they start imposing strict investor requirement onto the developer, they stand the risk of killing the project, which there is indication that this is what’s beginning to happen. In cases where you are dealing with a number of lead banks or other forms of financing, it is possible that feasibility studies become extended, as each will be imposing demands which can lead to a slowing down of the development process. At the end of the day developers can find they will be haemorrhaging money as you will have to continue to pay the lawyers and consultants for each financing house, every month. It is only the big players such as Rio Tinto, Vale, BHP etc. that have ready cash to reduce some of these financing costs. When considering all the small projects going on in Africa and elsewhere in the world, including some cash strapped companies, one of the questions to be asked includes the question as to who will be taken over or bought out next as they are just unable to get financing for the project. In many instances this may be the aim!

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Asian Metal: Speaking of Africa, do you see it as too risky to invest right now?

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Paul: Yes, at the moment I believe that it is potentially a big risk investing in Africa, but this is not the only place with high risks. A study by Ernst Young pointed out the top ten risks to mining and metals, and top of the risk list is Natural Resources nationalism. For example some countries have seen Australia slapping a tax on mines and raw materials exports and they want to copy this. They don’t even have an industry yet but some are ready making indications of high taxes and royalties this in-turn tends to scares off investors. As is well known volatility in parts of Africa is already relatively high, so project development risks are potentially high, even if the potential rewards are also high. When considering the huge investment into infrastructure required to get a new project up and running out there, it makes any project highly speculative, even the ones supported by the big companies.

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Asian Metal: What is your short term view of the market?

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Paul: Of course there appears to be a slowdown in steel demand, but equally behind the scenes there is a lot still going on, such as the car and consumer goods industries that are going well, and a lot of infrastructure still being built in China and other developing countries. Whether infrastructure is all being built on borrowed money or not is unclear, however knowing China, they will “instruct” their way out of it. They react very quickly to managing their economy, unlike the EU and elsewhere, and applying normal economics to China is not always realistic approach. I believe that much of the negative sentiment emanates from this inability to look beyond old economic models to evaluate the situation we are faced with.

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Asian Metal: What about the risk to China’s exports impacting their steel production?

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Paul: I am sure Chinese exports will accommodate any dip in domestic demand. China’s steel exports don’t necessarily focus on US or Europe so the slowdown in their economies is having less of an impact. As China gets more investment out to their natural resource projects in Africa or elsewhere, they will bring with them steel from China. There are already some major rail infrastructure projects that going on, so the investment of Chinese metal into Africa, for example is likely to go up. In addition to this, many of the major investment projects in north-west Australia will almost certainly include investment and supply from China.

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Asian Metal: Will new projects put supply of iron ore in surplus in the near future?

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Paul: I really don’t think the world will be able to produce enough quality iron ores to flood the market. These projects are all getting delayed and I expect supply to remain tight, so I see the prices between USD130-150/t for 62%Fe material will remain for a while. Maybe when some of the big projects come on line we will see a slight depression to a level close to USD120/t, but many will find it financially difficult to produce the additional capacity they are planning to. West African projects have issues that we have discussed; India has limited their exports and slapped on a 30% tax; Brazilian projects suffer from inflationary and logistics costs and legislation changes; Mexico has potential but it is unlikely to immediately start releasing export licences so they will be slow to get into the market. There is a lot of talk, but it is typical that projects get delayed and material does not enter market in the volumes expected. In Australia and Africa we have seen > 20% cash inflation costs and the impact has stalled many projects. It is typical for only 35% or expected production to reach the market so I believe supply will remain tight and prices will continue to be supported.

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Asian Metal: Finally, what are your thoughts on the Euro and how this will impact your project?

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Paul: The Euro has limited effect really in Sweden, which is why a number of potential investors have shown an interest in the project. We are dollar denominated earners, while our operating costs are Swedish SEK, so a bit more stable perhaps. Really it will only impact our European sales and will depend on the strength of the Euro against the dollar. The talk of a doomsday scenario is difficult to accommodate, and I don’t know if it really will be bad for Greece to leave Euro. Yes there will be a political mess for a while and turbulence in the market, but, once it all settles down and Germany is back in the driving seat, we will see a recovery in the Euro. This is spilling into uncertainty here but I would expect the market to have recovered by the time we are in production in 2015.

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Asian Metal: What is the census from investors in the market?

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Paul: There are certainly many investors out there that believe the floor is yet to come and are waiting to get better bargains. The longer the Euro crisis goes on the more they think this. They may be right and once the upside is in sight it all might go crazy again. I don’t know, but I do think there is a genuine chance that there will be a fallout of projects like what happened in 2008, as there are too many poor projects, as it was back then. I think some people’s view that it is very difficult to determine which project is strong until you turn off the tap and see who is still standing. I suspect that some potential investors in the sector are doing just that.

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