Good morning, and welcome to Nordic Mining's Presentation of our first quarter results for 2026. With me here today, I have Tord Meling, our Group CFO, as well as Andreas Davidsen, our Chief Commercial Officer. We've decided to let Andrew Templeman focus on operations at Engebø; our plan is to get back to a technical and operational update to the market in the latter half of June to address any outstanding technical issues. In terms of first quarter highlights, what we saw at Engebø was increased uptime and throughput. Key operational challenges were addressed during the first quarter, which gave the significantly improved uptime and throughput; this allows us now to shift the focus towards recovery.
In court proceedings, we won the appeals case brought on by the NGOs against the company. The Supreme Court just finished hearing the case between the NGOs and the state, and we expect a verdict sometime before summer. On the financial side, a more gradual ramp-up in the mineral recovery has shifted the near-term revenue timeline. As a consequence of that, we are actively pursuing a range of measures to strengthen the liquidity position, including a focus on cost and also potential financing options. In the quarter, we also concluded a partnership with Barton for the European distribution of garnet. This is a strategic move for the company to better position us to understand our market. Finally, our quartz project is now advancing.
This is high -purity quartz; we see a potential fast track to the market that we'll discuss in greater detail as we get into the presentation. With that, I leave the word to Andreas Davidsen, our Chief Commercial Officer, who will focus on market developments.
Thank you, Ivar. We see rutile as a strategic raw material with strong long-term growth and demand. Titanium feedstock demand from the pigment sector is largely driven by GDP growth and specifically from residential and non-residential construction activity. Demand from China is reported to be modestly positive for the first quarter of the year. For the Western market, the first two months of the year started well, but the consumer sentiment took a hit in March with the Iran war. Demand from the pigment sector is still expected to be reasonably good for 2026, with around 6% growth year-over-year. Demand from the titanium metal sector is expected to grow modestly in 2026, with the bulk of the growth coming from China, while Western markets are expected to be more or less flat for a year.
We expect the titanium feedstock supply to fall in 2026 compared to 2025, and we, as such, expect the titanium feedstock market to tighten somewhat in 2026. Overall, we therefore expect prices for rutile to be flat or slightly up from 2025. We do not see any new rutile projects coming on stream for the next couple of years. In March, Rio Tinto announced the startup of their Zulti South project in South Africa. Their expectation is that the project will start delivering titanium feedstock in 2029. We do not know if the project will be realized. It has previously halted in 2020 and restarted now, but it is one of the more likely projects that can start production within the next few years.
Moving on to garnet. Not much to say regarding the garnet market in the first quarter of the year, except that shipping costs have gone up. That is important for a product where logistics make up a large part of the cost for the end user. For Nordic Mining, it is a good thing, as we have large logistical advantages to Europe and the Eastern U.S.A. We concluded an investment in Barton Europe in the first quarter. The garnet market is a small and opaque market. It is of strategic importance to us. We have 200,000 tons of garnet per year for the next 40 years. It is important for our risk mitigation to have a good partner and a good understanding of the sales and distribution of garnet. Barton is a key player among not even a handful of global garnet sales and distribution companies.
We are happy that we are now taking one step downstream into an attractive market and that we are strengthening our partnership with Barton. The investment is $2 million. We will get 13.85% stake in Barton Europe. We will also get a $2 million reduction of any potential future liability for breaching delivery terms under the offtake agreement. For the next six months, Barton and Nordic will negotiate a true joint venture for Europe. We will, in case we do not come to a positive conclusion on the joint venture, have the right to sell back our 13.85% stake in Barton Europe to Barton Group for $2 million. I leave the word back to Finn Ivar for an operational update.
Thank you, Andreas. When we look at the first quarter, I think it's important to keep in mind that we made a change in management in the mid- to last half of January. Andrew Templeman came to Engebø and took charge of the operation. His focus was increasing uptime and throughput. This came as a result of plant debottlenecking as well as targeted initiatives. One of them was to address water quality. Water is the means of transporting material through a major part of the plant and is also key to facilitating mineral separation. Improved water quality management has been key to achieving better utilization of the wet plant. Furthermore, the rutile dryer was commissioned, and we made organizational changes at ERG.
Our operations team there has been working really hard with our new manager to achieve these results. To get further support, we brought additional experts on-site towards the back- end of the first quarter. The results of this can be seen in these graphs. On the left, we see a step-up in milling with throughput on a relatively consistent basis now around 70%-90%. The rutile recovery shows a positive trend that reflects the focus we've had on this into the second quarter. Garnet also shows an increase, but with a dip towards the back end of April, and this is a result of bypassing some of the steps in the wet plant to isolate certain streams in order to focus better and better understand the rutile circuit.
That was a conscious decision on our part in order to gain understanding. This is also where our focus is right now. Stable operations allow for the tuning and adjusting of the plant to find the right balance between milling and mineral separation. However, this will be an ongoing process, not only for this year but for the years to come, finding this right balance and optimizing it. In terms of rutile, we are now focusing on the last stages of the process in the dry plant. These are electrostatic and magnetic methods that need to work in the right configuration to increase the recovery and hit the right grade for the final product. This, of course, is where the revenue gets created and where all our focus is right now.
As mentioned earlier, we plan to get back to you with an operational update, with a focus on the technical status at ERG in the latter half of June. More on the technical status at that point. With that, I leave the word to Andreas to focus on quartz.
Thank you, Finn Ivar. In April, we announced that we have signed a new landowner agreement for the Kvinnherad Quartz project, that we have established a project team, and that we are looking to initiate a new drilling program. The landowner agreement is a significant strengthening of the previous exploration agreement. We now have a right to extract minerals for 99 years from the start of commercial production. Quartz is not a scarce resource in itself, but world-class quality deposits of quartz that can be processed to a grade suitable for semiconductors and fiber optic cable are very scarce. We are currently only aware of 1 deposit in the U.S. that can be processed to around the same purity as our quartz deposit. The market for high -purity quartz is attractive and driven by infrastructure around a growing AI industry.
We expect the demand for high -purity quartz to be strong for the foreseeable future. We are currently looking at how to commercialize the quartz deposit, and we are in discussion with partners on the processing stages. We currently have 800 kilos of processed high -purity quartz from the deposit that will be tested with a selected number of customers, particularly in the semiconductor and fiber optic cable sector. We gained a lot of experience through the development of the Engebø deposit, which we will utilize to fast-track the quartz project. The mining project itself has a much smaller footprint than the Engebø project and should be less controversial. We are certain that the development of the deposit can be done much quicker than the Engebø project. We are currently in discussion with potential partners regarding processing and offtake.
We are also in discussion with regulatory bodies. Next will be to do a drilling program, start the process regarding permits, and work on the path to market. It is important to note that progress on this project is dependent on financing and that ramp-up of Engebø is the first priority. A lot of work can currently be done with a limited use of capital. Then I leave the word to the CFO, Tord Meling, for financials.
Thank you, Andreas. This quarter's results have been influenced by increased throughput and improved uptime in the plant. It is important to understand that throughput serves as a key cost driver for the operation. Throughput basically means that we are processing ore through the whole plant. Maintaining high throughput and stable uptime is a priority, and significant progress has been made in this first quarter. This progress has come from a quick turnaround by the new management and the whole team at Engebø from January and onwards, putting in extra effort. This comes with a cost, and we have had to rely on external services as well.
As the throughput has increased, we are still at low levels when it comes to recovery, and recovery is the revenue side, as it reflects how much rutile and garnet we manage to separate as we run ore through the plant. We did not anticipate high recovery for this first quarter, but as pointed out, the expected improvement in the recovery going into the second quarter is behind what we planned for. We believe sustaining a stable and high throughput is essential to achieve better recovery results as we move forward. Over to cash flow. The cash flow in this quarter was negative NOK 169 million, adjusted for private placement of NOK 200 million in January. I will go more into details about the operational cash cost on the next slide.
CapEx is mainly from changes in the process plant in order to achieve stable throughput. Based on input from a new ramp-up team and new management, some fixes have been done in order to reach more stability. We anticipate less CapEx in the coming period. Strengthening of NOK has negatively impacted cash, with NOK 7 million in the first quarter. Going forward, the continuing strengthening of the NOK is giving us headwinds, as our revenue is in US dollars. We also have some cash kept in US dollars today. We are exiting the first quarter with NOK 360 million in cash, and we are addressing an uncertainty with relation to the liquidity going forward. The ramp-up phase is dependent on high activity, and our liquidity reserves are limited.
We are therefore implementing measures to manage and strengthen the liquidity situation, which include measures on the cost side and working capital management, but we cannot rule out other sources of liquidity financing, including equity. About the cash OPEX at ERG, there is a general increase in costs at Engebø as a result of increased throughput and activity. Several initiatives have been implemented by the team, necessary to achieve progress in the ramp-up, and this involves the use of external services. Increased activity is seen across the company, but the biggest cost increase we see is in the maintenance part. Wear and tear increases with throughput, and this is part of the daily operation. In addition, the work carried out by the maintenance team today is also material to achieve a more stable and cost -effective operation going forward.
The increase in G&A is mainly caused by the use of external assistance, including consultants for ramp-up support, Systemex, Doral, Hatch, and legal costs in relation to the court cases. Activity level going forward will be high as well; we, at the same time, expect the recovery to increase and thereby also revenue. With that, I think we can go over to Q&A.
Yeah. Before we do that, let's just quickly review the near-term operational and financial disclosures. Our Annual General Meeting is coming up on the 27th of May. We plan to issue an operational update, as mentioned, with a focus on the technical aspects at Engebø in late June. Supreme Court verdict, we expect pre-summer, sometime mid- to late June. Production updates as per the calendar will be on the 11th of July. Next quarterly report is on the 18th of August. These are our near-term disclosures. With that, we're opening up for questions.
Thank you, Ivar. We do have some questions here, some of which are quite related to each other, so I'll try to group them where relevant. Let's maybe start with the ramp-up at Engebø. Are you still on schedule to reach full design capacity within 2026?
Thank you. This remains our target and ambition; as we've seen from the presentation today, of course, this is not straightforward. Keep in mind that we have a 40-year perspective on this. We have the right team on the ground now, we have the right focus, and we have great confidence in their ability. Again, that remains our target and ambition.
Maybe just to clarify a bit, you mentioned that you will focus on resolving the remaining challenges in the years to come. Does this mean that you are now expecting the production ramp up to be a multi-year process?
Absolutely not. I may have misworded that a little bit. What I was trying to say is that the balancing of the plant between optimal milling and product recovery is something that we have focused on right now in order to get to the capacity numbers. In years to come, I think optimizing that on an ongoing basis is going to be key to getting the most out of the plant and something that actually never stops. That has nothing to do with ramp -up. It's more of optimizing on an ongoing basis.
Thank you. There are some questions on the financial side here, maybe for you, Tord. On the cash position, can you comment on the current cash runway?
We're not out of cash today, and the runway is dependent on the production forecast. What we are addressing is the uncertainty, and we are looking into a range of options available to us, including values that are already extracted and cost optimization, cost-cutting, and working capital management. This does not exclude equity either.
Another question here on the bond. Are you looking for opportunities to refinance the bond?
The bond matures on November 27, and the plan is definitely to refinance well before that.
Thank you. There are a few questions on the legal aspect. Finn Ivar, what happens if the Supreme Court verdict goes against you? Do we risk a full shutdown of production? If so, for how long?
I think it's key to look at the two injunction suits that were brought directly against us, and in both instances we won. The emphasis that the court had was on the fact that the impact on the environment in an 18-month window is extremely small. Both courts indeed said that. I think this carries over to the Supreme Court as well.
If there is a negative ruling at the Supreme Court, I take great confidence in that they'll look at what the two other courts have found, that there's limited impact, and that will lead to providing some time for the government to repair the license issue so that there won't be an additional immediate shut, but rather a requirement to repair within 12 to 18 months. That's my expectation. I am not a lawyer. Certainly I don't lose much sleep over this.
Good. Thank you. Let's move on to a couple of questions here on the quartz deposit at Kvinnherad. Maybe for you, Andreas, first here, what kind of timeline and additional investments are needed to fast-track the quartz deposit at Kvinnherad?
We, we have not decided on how we want to commercialize the project. Therefore, it's too early to say what kind of CapEx we are talking about. What we can say is that it will be very limited CapEx for 2026. We have to prioritize Engebø. We are not expecting to see any major CapEx for 2026.
Thank you; to that extent, maybe for you, Finn Ivar, the quartz project is highlighted as kind of a new ambition. How do you balance this project against the main priority to get Engebø up to design?
I just want to be abundantly clear on this. Our numbers one, two, and three priorities are Engebø and getting that to capacity. The reason why we bring on the quartz project now is that we have internal resources available to pursue this, and we see a window of opportunity as well to get traction on this. It's not detracting any focus from us on the operation at Engebø, and we've set a separate team to do this with available resources. Again, our numbers one, two, and three priorities are Engebø.
Thank you. Then a final question here, let's see, on the government side. Can the Norwegian government help with loans, or slash, take over current loans for this project, as it is regarded as a critical project and of importance to creating a new industry in Norway?
Well, I don't think that is an option. The government doesn't really have those levers and the ability to do things like that. However, I want to emphasize that in conjunction also with the lawsuits , we are indeed experiencing great support from the government. They want this project to succeed. That's why I also take confidence in, you know, the outcome of the Supreme Court either ruling in favor of the government or, if it's against the government, they will indeed repair this.
We've seen nothing that indicates otherwise. I would like to bring everyone's attention to the royal decree that came out on the 23rd of May a year ago, which is an 18-page document that emphasizes the importance of Engebø and also that the government wants this to come into production.
Thank you. Those seem to be all the questions for today. If you have any additional questions, you'll find the contact details at our investor relations site. That concludes our session for today. Thank you.
Thank you.
Thank you.