Alderon loses stake in Labrador West project
Company owed US$14 million, could not pay
A project that almost got off the ground a couple of times in Labrador West is in limbo once again — Alderon Iron Ore lost its interest in the Kami Mines project on Tuesday after being unable to pay on a Us$14-million loan it owed to Sprott Resource Lending.
According to a news release from British Columbia-based Alderon, president and CEO Tayfun Eldem has resigned, as have the CFO and the board of directors.
Alderon brought in an investor, the Beijing-based Tungshu Group, in February to pay the money it owed. According to the release, the Chinese company withdrew its support in March due to the COVID-19 pandemic, and Alderon had little alternative but to default on the loan. Alderon said Sprott intends to seize the Kami Mines project and all related assets. “We appreciate the efforts of Alderon Iron Ore Corporation that has been advancing the Kami project since 2010,” Natural Resources Minister Siobhan Coady told Saltwire in an emailed statement. “Kami remains a good project; we will discuss next steps with Sprott.”
Coady said her department is in touch with other mining operators in Labrador West daily, and even though markets are volatile right now, the price of iron ore remains resilient.
Alderon has been trying to get the potential iron ore mine outside of Wabush going for almost a decade, and it was cancelled when iron ore prices plummeted in 2014-15.
The project, which is 25 per cent owned by Chinese steelmaker HBIS, has an estimated lifespan of 26 years. Alderon forecast in 2017 the province would realize a $5-billion benefit over the life of the project — $2.2 billion in direct and indirect employment income and $2.3 billion in taxes.
Eldem told Saltwire Network in past interviews Alderon was looking for about $1 billion in investment and was ready to start construction as soon as the money was in place.
BAD TIMING
Toby Leon, president of the Labrador West Chamber of Commerce, said he’s disappointed to hear the news.
“Alderon was probably our best opportunity to see that project happen in the near future. It would have been great to see the economic activity it would have generated — jobs, the constructions phase, it would have been substantial.”
He said the project has been the victim of bad timing since it started, and many were hopeful it could get going. A lot of people in the area owned stock in the company, too, Leon said, and that money is now gone.
Leon said there is more of a market for the higher-grade ore the Kami mine would produce, estimated to be 65.2 per cent iron, so only time will tell if another investor steps in.
“Our ore is now a valuable asset to places that were happy to just buy ore or concentrates from anywhere before. Will someone want to mine that ore and sell it, who knows? It’s a big ore body, but there are other ore bodies. It has to be someone with deep pockets who really wants to do it.”
Saltwire contacted Sprott Resource Lending and Alderon for comment on the announcement, but replies were not received by press deadline.