Alderon, Newfoundland and Labrador Hydro reach settlement
Alderon Iron Ore Corp. issued an update Sept.25 on recent corporate developments regarding its interests in Newfoundland and Labrador.
In a news release it stated the Kami Mine Limited Partnership, Alderon’s affiliate and the owner of the Kami Project, has reached a settlement with Newfoundland and Labrador Hydro with respect to the $21-million letter of credit it posted for the construction of a new transmission line to the Labrador West area.
“As a result of the settlement, Kami LP will be returned $11.5 million (plus accrued interest) from the release of the letter of credit,” the release read.
“In addition, if construction of the transmission line resumes within the next five years, Kami LP will receive an additional $750,000 payment as a re-start credit.”
Alderon also announced it is working with BBA, Inc. to update the re-scoped preliminary economic assessment (PEA) that was completed in February of this year.
The Wabush Scully Mine was recently acquired by a third party who has stated its intention to reopen the mine. As a result, Alderon and BBA will update the PEA to remove the components related to the Wabush Scully Mine. The use of the depleted pit at the Wabush Scully Mine was just one of the many cost savings that were identified as part of the re-scope of the Kami Project and the updated PEA will still encompass the other cost savings as outlined in the previous PEA.
The release maintains the Kami Project remains an attractive development prospect due to its high-grade iron ore concentrate with low impurities. Stricter environmental regulation has driven demand for the premium product that will be produced from the Kami Project, as it allows end users to meet more stringent environmental standards.
In particular, China’s bid to reduce emissions is seeing an increase in domestic steel mills switching to high-grade iron ore products with fewer impurities. For the type of iron ore concentrate that the Kami Project will produce (65 per cent Fe), there is already a spread to the Platts iron ore index price, currently pegged at US $21 per tonne above the benchmark product. This spread has widened over the last 18 months and prices for high-grade ore are expected to continue to increase as environmental regulation becomes more stringent.
Two companies reached an agreement with respect to the $21-million letter of credit Alderon posted for the construction of a new transmission line to the Labrador West area.