TORONTO (miningweekly.com) – The future of Scandinavia-focused iron-ore junior Northland Resources hangs by a thread as a consortium of creditors is scheduled to meet to approve a refinancing – failure of which could result in the company’s liquidation.

Northland last week said a consortium consisting of Folksam, Metso Corporation, Norrskenet and Peab would invest in a $335-million bond offering by Northland.

Following a significant commitment by the consortium, Northland was able to relaunch and successfully close the bond offering, thereby securing a long-term financial solution for the company; however, the refinancing was still subject to the existing bondholders’ approval.

Metso and Peab, Northland’s two critical suppliers, said after “carefully” assessing the various alternatives, the companies had concluded that should the refinancing proposal not be approved, they would likely have no other alternatives than to have the company liquidated in order to minimise losses.

Iron-ore producer LKAB, said that through its ownership in Norrskenet, it was committed to supporting the new board of Northland with members of a new technical committee that would be formed by the consortium members. It would also assist the board in important technical and operational issues, in order to ensure the sound and efficient operational development of Northland's projects.

Regional investor Folksam said it would not be part of an alternative that was value destructive for all stakeholders, and that would create uncertainty for the workers of Northland, suppliers and the local community.

Northland last month said it had to stop operations at all of its assets after its financing problems were not resolved and its creditors moved to block its bank accounts.

“As a consequence Northland lacks the liquidity to make any payments. The board of directors has therefore decided that as of today none of the companies in the group shall order or receive any goods or services,” the Luxemburg-based group said in a statement.

Northland, which has projects in Sweden and Finland, said the decision to block the bank accounts came after a meeting between the trustee, a few larger bondholders and their advisers, where they also turned down a proposed $35-million short-term bridge facility.

Northland’s financial woes began early in the year, when its Toronto-listed shares slid, after the company cancelled its planned $250-million equity issue and $125-million bond tap, which it expected would cover rising capital and operating costs at its flagship Swedish mine, just as it started shipping first ore.