Nordic Mining said on Monday that its subsidiary Engebo Rutile and Garnet AS (ERG) has decided to temporarily suspend mining operations at the Engebo project in western Norway. The suspension takes effect until further notice and is explicitly a liquidity measure: with creditor negotiations unresolved, the company is cutting costs to preserve cash pending an outcome.
The stoppage caps a difficult autumn for the company. ERG is the issuer of 12.5 percent senior secured bonds, and in September it obtained an extension to October 15 covering suspension of its minimum liquidity covenant, a waiver on its book equity ratio covenant and deferral of a cash interest payment. By October 15 no new waivers had been agreed, and the company has since been negotiating with creditors in good faith while warning there is no assurance a comprehensive solution will be reached.
The timing is awkward because the project’s regulatory position had just improved. Engebo recently secured a three year temporary permit covering 4.5 million tonnes of mining waste disposal, after Norway’s Supreme Court had earlier invalidated the original permits, and a court recently rejected an injunction bid by an environmental group seeking to halt operations. The constraint on Engebo is now financial, not legal: a lost garnet offtake contract has complicated the sales outlook during ramp up.
Engebo is designed to produce rutile, a titanium dioxide feedstock, and garnet abrasives, both on critical raw materials lists in Europe. A suspension at one of the continent’s few advanced industrial mineral projects underlines the gap between permitting success and bankability for small miners: the orebody and the permits are in place, but the capital structure has to survive the ramp up.