Alderon Iron Ore gets favourable study of Kami project

Commercial production may start in 2015-16

Alderon Iron Ore Corp. is moving toward commercial production at its $1.27-billion Kami mining project in Quebec-Labrador in 2015-16, following receipt of a favourable feasibility study.

Capital cost has moved up sharply in the past year, mainly because of big increases in steel and cement prices. The project will produce eight million tonnes annually of high-quality ore grading an average 65.2-per-cent iron content for ship- ment from Sept-Îles to Chinese and global steelmakers.

The average spot (immediate delivery) iron ore price hit $158 U.S. a tonne Wednesday, up from the September low of $87 U.S., as the Chinese economy picks up speed after the 2012 slowdown and steelmakers boost activity and raise imports of top-quality foreign ore.

The key feasibility study by BBA Inc., Stantec Consulting Ltd. and Watts Griffis McOuat covers the Rose Central and Rose North sectors of Alderon’s Kami property. Measured and indicated reserves total 1.1 billion tonnes of ore grading 29.5-per-cent iron. Kami has further potential and could later double output.

The open-pit mine, crusher and concentrator will be located near three other Quebec-Labrador producers. Alderon’s ore will move to Sept-Îles by rail and be loaded on ocean carriers from the PointeNoire multi-user port under construction. But Alderon will have to build its own camp for permanent employees, said CEO Tayfun Eldem — Kami won’t be a fly-in/fly-out operation.

“This milestone feasibility study shows Kami has robust economics and will meet all the criteria set by the investment and offtake agreement signed with China’s Hebei Iron and Steel Co.,” he said. “We’re seeking other partners to back the project financially and take more ore on long-term contract.”

Hebei, under the pact signed last April, will invest $194 million in Alderon and receive a 19.9 per cent equity stake and a 25 per cent interest in a limited partnership owning Kami. Hebei will take 60 per cent of Kami’s production up to a maximum of 4.6 million tonnes of concentrates at a five-per-cent discount and backstop cost overruns. Eldem said Alderon will have to borrow about $1 billion, 60/40 debt and equity, to complete the project. Power access and rail tariffs are being negotiated, and permitting, to cover tailings treatment and environmental factors, is being advanced.

Alderon’s largest shareholder (25 per cent) is Altius Minerals Corp. of St. John’s, which managed Kami’s early exploration and development, with Hebei (19.9 per cent) in second place.