Nordic Mining ASA — Interim / Quarterly Report 2014

May 16, 2014

INTERIM REPORT

Per 31 March 2014

Nordic Mining ASA – Group interim report for the quarter ended 31 March 2014

Nordic Mining ASA ("Nordic Mining" or "the Company") is a resource company with focus on high-end industrial minerals and metals in Norway and internationally. The Company's project portfolio is of a high international standard and holds a significant economic potential. The Company's assets are mainly in the Nordic region.

Through the subsidiary Nordic Rutile AS, Nordic Mining is undertaking large-scale project development at Engebøfjellet in Sogn and Fjordane where the Company has rights to a substantial eclogite deposit with rutile and garnet. Nordic Mining has rights for exploration and production of high-purity quartz in Kvinnherad in Hordaland and develops the project through its subsidiary Nordic Quartz AS. Nordic Mining's associated company Keliber Oy in Finland plans to start mining of lithium bearing spodumene and production of lithium carbonate. Nordic Mining holds exploration rights in the Øksfjord region in Troms and Finnmark where the Company has discovered a prospective area of sulphide mineralisation. Through the subsidiary Nordic Ocean Resources AS, Nordic Mining is exploring opportunities related to seabed mineral resources.

Nordic Mining is listed on Oslo Axess.

Important events from 1 January 2014 and year-to-date:

• Strategic focus on the Engebø project The Group's near-term strategic focus is to secure permits for the Engebø rutile project.
• Results from ongoing measuring program in line with expectations

Nordic Mining is executing a survey and investigation program to comply with the Ministry of Climate and Environment's request for additional information regarding the Engebø rutile project. The results so far show a moderate water circulation within the area of the planned tailings disposal. The results are in line with the measurements included in the environmental impact assessment for the project. The measurement program will be finalised in August 2014.

• Keliber's lithium resources are steadily increasing In February 2014, the Finnish government accepted Keliber's offer to acquire the Rapasaari deposit. Exploration drilling has been executed in the winter months, and updated resource and reserve estimates are expected in Q2 2014.
• Subsea mineral assessment

Together with its partners in the pre-project study, Nordic Ocean Resources is evaluating a continuation of the project cooperation and a possible expansion of the partner network. Nordic Ocean Resources is awaiting feedback from the Ministry of Trade, Industry and Fisheries regarding its application for mineral exploration rights on the Norwegian continental shelf.

• New Exploration Rights granted and funding secured for Øksfjord exploration In January 2014, Nordic Mining was granted two new Exploration Rights east of the Reinfjord prospect. Electromagnetic data from the Geological Survey of Norway show an anomaly with particularly low resistivity in the granted area. In March 2014, NOK 2 million was granted from NordMin which is funded by the Nordic Council of Ministers.

Financial performance

For comparison, numbers in brackets relate to the comparable period in 2013; the quarter or accumulated year-to-date as the case may be.

Operating loss for the Group in the first quarter was NOK -2.8 million (NOK -4.1 million). The operating loss was mainly related to costs in connection with development of the Engebø rutile project and general corporate expenses. The operating loss in the first quarter was reduced by approximately NOK 1.0 million due to VAT refund from 2013.

The Group's investment in Keliber is classified as shares in an associated company. The net loss from the associated company in the first quarter was NOK -1.2 million (NOK -0.7 million). Keliber's loss in the period was related to costs for i.a. environmental impact assessment and process optimisation studies.

Consolidated net loss in the first quarter for continuing operations was NOK -4.0 million (NOK -4.8 million). The loss from discontinued operations in the first quarter of 2013; NOK -1.4 million, was related to Gudvangen Stein which was divested in June 2013.

Total net loss for the Group in the first quarter was NOK -4.0 million (NOK -6.2 million). The result is in line with expectations, and the Group has achieved an improvement compared with the first quarter last year due to strategic focusing and cost reduction measures.

Cash flow from the Group's operating activities was negative in the first quarter with NOK -5.4 million (NOK -5.1 million). Net cash used in investment activities was NOK -0.1 million (NOK -0.1 million) in the first quarter. The investments were related to the Engebø rutile project.

Nordic Mining's total assets as of 31 March 2014 were NOK 35.4 million (NOK 55.7 million) and the Group's total equity amounted to NOK 32.1 million (NOK 35.0 million). This gives an equity ratio of 91% (63%).

As per 31 March 2014, the Group's cash and cash equivalents amounted to NOK 10.0 million (NOK 4.0 million). The cash balance does not include the abovementioned VAT refund.

Based on current forecasts the Group's cash balance will last till the first quarter of 2015. The Board therefore emphasises that strategies for further financing will be important going forward. Nordic Mining will evaluate alternatives to ensure adequate liquidity for its prioritised projects and to provide for future financial strength and flexibility. Consequently, the Group will need to either raise more equity or to issue debt instruments depending on the development of ongoing projects.

Although there are no guarantees that the Engebø rutile project will be granted permits in 2014, the Board has confidence in the project's material parameters and subsequently the positive outcome of the government's final considerations in the matter. The Board expects that a clarification of regulatory matters for the Engebø project will be positive for the Group's financial flexibility going forward.

Main projects and activities

Introduction

The Group's near-term strategic focus is to secure permits for the Engebø rutile project. For the other projects, alternative financing and cooperation scenarios are investigated in order to continue development work.

Comprehensive information of the Group's main projects is presented in the annual report for 2013 (www.nordicmining.com). An update of the project progress year-to-date follows below.

Nordic Rutile / Engebø project (rutile/titanium dioxide)

General project information

The Engebø rutile deposit is one of the largest unexploited rutile deposits in the world and has the highest in situ grade of rutile compared to current rutile producers and development projects. The deposit also contains significant quantities of garnet, and consequently high quality garnet will be a by-product. Garnet has various industrial applications and can replace industrial sands containing free silica which is harmful for health and environment. Nordic Mining's internal estimate for the NPV of the project is USD 466 million after tax based on an 8% discount rate.

Industrial area plan and discharge permit

The municipality boards in Naustdal and Askvoll approved the industrial area plan for the rutile production at Engebø in May 2011. In June 2011, the county governor of Sogn og Fjordane recommended approval of the plan. However, the Ministry of Climate and Environment in March 2013 requested supplementary information despite the strong local and regional support and the comprehensive environmental impact assessments undertaken by Nordic Mining,

Nordic Mining has assigned DNV GL for a measuring program regarding documentation of water circulations in the fjord and risk assessments regarding the planned sea disposal for the mineral residues. DNV GL also executes additional investigations, e.g. ROV survey and sample fishing of possible spawning grounds for fish and other species in the disposal area.

The measuring program for water circulation started in August 2013 and 11 metering stations were installed in the Førdefjord. The measurement program will be executed for a 12 months period to include seasonal variations. Water currents are measured using advanced profiling metering instruments which record current velocities and directions at different water depths. Further, hydrographic measurements are carried out continuously with recording parameters like temperature, salinity, density, pressure and oxygen content in the water.

DNV GL have so far gathered three datasets from the measurement program, the first in November 2013, the second in February 2014, and the third in May 2014. Data from the survey stations have been collected from selected locations in the fjord. The results from the first two datasets have been published and the results from the third set will be reported later in May 2014. The results so far show that the water circulation is moderate within the area of the planned tailings disposal. The results are in line with the measurements included in the environmental impact assessment ("EIA") for the project. The results reflect the typical circulation pattern for this type of fjord and depth, and indicate that the settling of the inert, nontoxic mineral tailings will be efficient. Nordic Mining considers the results so far as a positive confirmation of the EIA documentation.

In April 2014, DNV GL executed a ROV survey of five transects along the bottom of the Førdefjord. The survey confirmed previous information of a typical sedimentation seafloor in the fjord. No indications of corals or rare species were detected. The report from the ROV survey will be published later.

Activities are ongoing also on the other issues that are subject to supplementary information. Nordic Mining intends to submit the final reports to the Ministry of Climate and Environment when the last dataset from the fjord measuring program has been gathered and analysed. The final reporting will tentatively take place in September 2014.

Nordic Quartz / Kvinnherad project (high-purity quartz)

General project information

Nordic Quartz has exclusive rights for the investigation and development of a quartz deposit in Kvinnherad municipality in Norway. Studies and tests show that the quartz has a low content of contaminants and therefore can be regarded as a high-purity type of quartz. The deposit is considered to contain raw quartz sufficient for minimum 60 years of production of high-purity products at a rate of 5,000 tonnes per year. A scoping study carried out in 2012 outlined an industrial base case with a mine life assumption of 30 years, estimated investments of approximately USD 50 million, a preliminary after tax NPV of USD 60 million based on an 8% discount rate, and an undiscounted payback period of 4.3 years.

Further project proceedings

Nordic Quartz has had limited activity on the quartz project in 2014. The long-term outlook for quartz products in advanced applications is positive and Nordic Mining is, in order to advance project development, investigating possibilities to establish an industrial strategic partnership for the project.

Keliber (lithium/lithium carbonate)

General project information

The associated company Keliber in Finland has deposits of high quality lithium mineral suitable for extraction and production of high-purity lithium carbonate. Lithium carbonate has a variety of industrial applications, i.a. for batteries which takes up an increasing share of the total global consumption. Nordic Mining owns 38% of the share capital and is the largest shareholder in Keliber.

Mineral resources and reserves

Keliber targets to identify additional mineral resources for its planned industrial lithium production. A new drilling program has been executed in the first quarter 2014. Further, the Finnish government has accepted Keliber's offer to acquire the Rapasaari deposit adjacent to the company's other deposits. According to plan, updated resource and reserve estimates (ex. Rapasaari) are expected in Q2 2014.

Other project activities

Environmental impact assessments are ongoing and additional process optimisation studies will be executed in 2014. Keliber plans to compile and conclude pre-feasibility studies before yearend 2014.

Other project activity

Production of alumina from anorthosite

In March 2014, Nordic Mining and Institute for Energy Technology filed a patent application for a new technology for extraction of alumina from alumina/calcium-rich minerals. The new technology is an innovative solution for production of alumina from alternative mineral sources such as anorthosite, with the integrated use and storage of CO2. The technology may represent a global potential for an improved production of feedstock for aluminium production.

Exploration on the Øksfjord Peninsula

In January 2014, Nordic Mining was granted two new Exploration Rights east of the Reinfjord prospect. Electromagnetic data published by the Geological Survey of Norway show that the new Exploration Rights include an area of particular low resistivity. Low resistivity can be caused by metals contained in the bed rock and may indicate existence of a metallic ore body.

In March 2014, a research program coordinated by NTNU, and where Nordic Mining is a partner, was granted NOK 2 million from NordMin, a research network funded by the Nordic Council of Ministers. The program will involve both field mapping and a drilling program in the Reinfjord area.

Oslo, 15 May 2014 The Board of Directors of Nordic Mining ASA

CONSOLIDATED INCOME STATEMENTS

	2014	2013	2013
	01.01-31.03	01.01-31.03	01.01-31.12
(Amounts in NOK thousands)	Unaudited	Unaudited	Audited
Sales	-	-	-
Other income	(4)	-	25
Payroll and related costs	(1 569)	(2 601)	(9 725)
DD&A	-	-	-
Other operating expenses	(1 248)	(1 513)	(8 998)
Operating profit/(loss)	(2 821)	(4 114)	(18 698)
Share of result of an associate	(1 181)	(652)	(2 972)
Impairment of investment in associate	-		(6 523)
Financial income	39	7	114
Financial costs	(5)	(6)	(11)
Profit/(loss) before tax	(3 968)	(4 765)	(28 090)
Income Tax	-	-	-
Loss from continuing operations	(3 968)	(4 765)	(28 090)
Loss from discontinued operations	-	(1 398)	(4 298)
Loss for the period	(3 968)	(6 163)	(32 388)
Profit/(loss) attributable to
Equity holders of parent	(3 968)	(6 163)	(32 388)
Non-controlling interest	-	-	-
Earnings per share attributable to ordinary shareholders (Amounts in NOK)
Basic and diluted earnings per share for continuing operations	(0,01)	(0,02)	(0,14)
Basic and diluted earnings per share for discontinued operations	-	(0,01)	(0,02)
Basic and diluted earnings per share	(0,01)	(0,03)	(0,16)

	2014	2013	2013
	01.01-31.03	01.01-31.03	01.01-31.12
(Amounts in NOK thousands)	Unaudited	Unaudited	Audited
Net profit/(loss) for the period	(3 968)	(6 163)	(32 388)
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Currency translation differences	(245)	421	2 996
Reclassification of translation adjustment	-	-	-
Items that will not be reclassified subsequently to profit or loss:
Changes in pension estimates	-	-	(739)
Other comprehensive income directly against
equity	(245)	421	2 257
Total comprehensive income for the period	(4 213)	(5 742)	(30 131)
Profit/(loss) attributable to
Equity holders of parent	(4 213)	(5 742)	(30 131)

STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

	31.03.2014	31.12.2013
(Amounts in NOK thousands)	Unaudited	Audited
ASSETS
Non-current assets
Licences	6 531	6 451
Investment in associate	15 526	16 951
Other long-term assets	20	-
Total non-current assets	22 077	23 402
Current Assets
Trade and other receivables	3 313	1 119
Cash and cash equivalents	9 986	15 495
Total current assets	13 299	16 614
Total assets	35 376	40 016
SHAREHOLDERS' EQUITY & LIABILITIES Shareholders' equity Share capital Share premium Other paid-in capital Retained losses Other comprehensive income Equity attributable to ordinary shareholders	28 050 227 145 8 893 (234 602) 2 632 32 118	28 050 227 145 8 893 (230 634) 2 877 36 331
Non-controlling interest	-	-
Total equity	32 118	36 331
Non-current liabilities Other liabilities Total non-current liabilities	- -	52 52
Current liabilities
Trade payables	1 435	1 568
Other current liabilities	1 823	2 065
Total current liabilities	3 258	3 633
Total liabilities	3 258	3 685
Total shareholders' equity and liabilities	35 376	40 016

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Unaudited

		Attributed to equity holders of the parent
(Amounts in NOK thousands)	Share capital	Share premium	Other-paid-in capital	Other comprehensive income	Accumulated losses	Total equity	Total equity
Equity 1 January 2013	18 547	206 821	8 856	619	(198 246)	36 597	36 597
Total comprehensive income	-	-	-	421	(6 163)	(5 742)	(5 742)
Share issue	897	5 381	-	-	-	6 278	6 278
Transaction costs	-	(2 154)	-	-	-	(2 154)	(2 154)
Equity 31 March 2013	19 444	210 048	8 856	1 040	(204 409)	34 979	34 979
Equity 1 January 2014 Total comprehensive income	28 050 -	227 145 -	8 893 -	2 876 (245)	(230 634) (3 968)	36 331 (4 213)	36 331 (4 213)
Equity 31 March 2014	28 050	227 145	8 893	2 631	(234 602)	32 118	32 118

CONSOLIDATED CASH FLOW STATEMENTS

For the period ended 31 March

	2014	2013
(Amounts in NOK thousands)	01.01-31.03 Unaudited	01.01-31.03 Unaudited
Net cash used in operating activities	(5 429)	(5 110)
Purchases of property, plant & equipment	-	(296)
Purchases of intangible assets	(80)	(79)
Other	-	-
Net cash used in investing activities	(80)	(375)
Share issuance	-	4 122
Payments of loans	-	(250)
Principal payments on finance leases	-	(575)
Net cash from financing activities	-	3 297
Net change in cash and cash equivalents	(5 509)	(2 188)
Effect of changes in foreign exchange rates	-	-
Cash and cash equivalents at beginning of period	15 495	6 164
Cash and cash equivalents at end of period	9 986	3 976
Paid interest	-	265

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 MARCH 2014

Note 1 – ACCOUNTING PRINCIPLES

These interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, "Interim Financial Reporting". They do not include all of the information required for full annual financial reporting, and should be read in conjunction with the consolidated financial statements of Nordic Mining ASA and the Group for the year ended 31 December 2013.

This report was approved by the Board of Directors on 15 May 2014.

The accounting policies adopted are consistent with those followed in the preparation of the Company's and the Group's annual financial statements for the year ended 31 December 2013.

Note 2 – DISCONTINUED OPERATIONS

2013:

In June 2013, Nordic Mining entered into an agreement to sell all the shares in Gudvangen Stein for NOK 1.00. The sale was completed on 17 June 2013. As part of the transaction Nordic Mining was released from corporate guarantees amounting to NOK 5.7 million.

Discontinued operations

The divestment of Gudvangen Stein in June 2013 is presented as discontinued operations in the consolidated financial statements. In the table below the amounts from the condensed income statements that have been reclassified to loss from discontinued operations are specified for the first quarter 2013 and the full year 2013:

	01.01.-31.03 2013	01.01-31.12 2013
Amonts in NOK thousands
Revenue	4 366	10 807
Expenses	(5 521)	(12 477)
Operating loss	(1 155)	(1 670)
Other costs/income	(243)	(441)
Loss from discontinued operations
before re-measurement to fair value	(1 398)	(2 111)
Impairment		-
Loss on disposal	-	(2 187)
Total loss for discontinued	(1 398)	(4 298)

Note 3 – SEGMENT

The Group shows segments on the basis of products or products under development. The two reportable segments are:

• Titanium feedstock which can be produced by Nordic Rutile from the mineral deposit at Engebø; the Ministry of Climate and Environment considers the industrial area plan for the project and the application for waste disposal.

• Quartz which can be produced from the quartz deposit in Kvinnherad. A scoping study outlines the potential for a profitable industrial quartz project.

As a result of the divestment of Gudvangen Stein in June 2013 anorthosite is no longer a reportable segment in the Group. Further and following from the reduced shareholding and loss of control in Keliber, the investment in Keliber is classified as an investment in an associate and lithium is no longer a reportable segment in the Group. The segment reporting has been updated to reflect the Group's current segment structure.

The reconciling column "Adjustments and eliminations" includes the Group's administration costs and other unallocated corporate business development costs as well as elimination entries related to preparing consolidated financial statements. The Group uses the segments' profit/(loss) before tax from continuing operations as the basis for the segment results including some allocations of corporate expenses but excluding purchase price allocations related to business combinations. All the numbers in the table below are in NOK thousands and present the period 1 January – 31 March.

	Quartz			Adjustments Titanium and eliminations		Consolidated
	2014	2013	2014	2013	2014	2013	2014	2013
Revenues	-	-	-	-	-	-	-	-
Segment result	(41)	(285)	(1 507)	(1 496)	(2 420)	(2 984)	(3 968)	(4 765)

The comparative numbers for the first quarter 2013 have been restated to reflect the discontinued operations presentation of the consolidated income statement related to the disposal of Gudvangen Stein AS.

Note 4 – OTHER OPERATING EXPENSES

Other operating expenses for the first quarter 2014 includes about NOK 1 million of VAT refund for 2013 related to Nordic Rutile AS and Nordic Quartz AS. The retroactive VAT registrations were approved in April 2014.

Note 5 – TRANSACTIONS WITH RELATED PARTIES

Nordic Mining has an agreement with Dag Dvergsten AS for office rental. The Company's board member Tore Viana-Rønningen is employed in Dag Dvergsten AS. For the period 1 January – 31 March 2014 Nordic Mining recorded NOK 0.1 million in expenses related to the agreement with Dag Dvergsten AS (NOK 0.1 million positive cost adjustment for the comparable period in 2013).