Alderon ready to start con­struc­tion on Kami mine pend­ing fi­nanc­ing

CEO says con­di­tions are right to move for­ward

The Aurora (Labrador City) - - Front Page - BY THOM BARKER

For Tay­fun El­dem, CEO of Alderon Iron Ore, bring­ing the com­pany’s new Kami iron ore mine into pro­duc­tion in Labrador West is per­sonal.

“This is not just a project for me that’s be­ing de­vel­oped, it’s a project that’s be­ing de­vel­oped in an area I have very fond mem­o­ries of and a fairly strong per­sonal at­tach­ment to and that is also a strong fac­tor in driv­ing me for­ward,” he said, not­ing his only child was born in Labrador City.

The Kami project has been on hold since iron ore prices tanked in 2014-15, but with an uptick in prices and in­creas­ing de­mand for high-grade iron ore, par­tic­u­larly in China, El­dem said his com­pany is on track to move for­ward sooner rather than later.

“Our ob­jec­tive is to com­mence con­struc­tion in early 2020, if not sooner,” he told The Aurora. “It’s highly con­tin­gent on fi­nanc­ing, but the way we’ve struc­tured our fi­nanc­ing ef­forts, the way we’ve re-struc­tured our plans to re­group the project team and re-ini­ti­ate de­vel­op­ment and ul­ti­mately start con­struc­tion, that sees us go­ing into Q1 2020.”

For min­ing projects that may seem like a tight time­line, but El­dem pointed out the com­pany is re-start­ing from a fairly ad­vanced stage.

“When we put the project on hold, we had ad­vanced it to a point where we were re­leased from en­vi­ron­men­tal as­sess­ment, so we’re fully per­mit­ted, we have the min­ing and sur­face leases in hand,” he ex­plained. “Ul­ti­mately we’re green-lighted to start con­struc­tion.”

Fur­ther­more, he said, the com­pany has com­pleted over half the en­gi­neer­ing, has key in­fra­struc­ture agree­ments in place and has pre-sold 100 per cent of the es­ti­mated 517.2 mil­lion tonnes of ore.

Alderon has been de­vel­op­ing the Kami project on a prop­erty just south of Wabush for nearly a decade and now El­dem be­lieves con­di­tions are com­ing around to where se­cur­ing the needed fi­nanc­ing is pos­si­ble.

“The market has sta­bi­lized, but there’s a new phe­nom­e­non where the higher grade prod­ucts are fetch­ing a large pre­mium,” he said.

At 65.2 per cent iron con­tent, Kami is top-grade and Alderon is now po­si­tioned to take ad­van­tage of that phe­nom­ena. A re­cently-re­leased up­dated fea­si­bil­ity study has El­dem con­fi­dent the money will fol­low.

“When you look at the fea­si­bil­ity study, which ob­vi­ously con­firms the ro­bust eco­nom­ics of the project, that then sets the way for fi­nanc­ing,” he said. “The in­vest­ment com­mu­nity has pretty much turned away from iron ore and bulk com­modi­ties in the last two to three years, but what has hap­pened is, I think, they’re start­ing to come back re­al­iz­ing there’s an op­por­tu­nity.

“Are they ready to jump with both feet in the way they did back in 2010-2011? Not yet, but I think there is a growing ap­pre­ci­a­tion for projects like Kami.”

Ear­lier this month, Alderon and rep­re­sen­ta­tives of the pro­vin­cial gov­ern­ment, in­clud­ing Premier Dwight Ball, were in China on a trade mis­sion that in­volved dis­cus­sions with Alderon’s Chi­nese Part­ner HBIS, which owns 25 per cent of Kami and thus far has in­vested some $180 mil­lion in the project.

“The out­come of th­ese dis­cus­sions at this stage was that (HBIS) chair­man Yu (Yong) ar­tic­u­lated his com­pany’s com­mit­ment to the Kami project, so in other words, re-af­firmed their sup­port for the project and their con­tin­ued in­ter­est to de­velop it,” El­dem said.

“In re­sponse, Premier Ball ex­pressed that the prov­ince is es­sen­tially open for busi­ness, that they sup­port HBIS’s pres­ence as a for­eign in­vestor and that they were will­ing to work and fa­cil­i­tate the ad­vance­ment of the project.”

In ad­di­tion to those high-level meet­ings, Alderon and HBIS also rolled up their sleeves and got down to work on some de­tails.

“The other dis­cus­sions that we had off­line, one-on-one with HBIS, were all around how to struc­ture the fi­nanc­ing and it’s too early for me to com­ment on what that looks like,” he said.

While El­dem is not ready to com­ment on specifics, he said the com­pany is con­sid­er­ing all op­tions, up to and in­clud­ing sell­ing.

“My job is to max­i­mize share­holder value,” he said. “If that comes by way of us po­ten­tially sell­ing some of the project to some­body else, so be it, we’re open to that.”

The cur­rent ver­sion of Alderon’s eco­nomic as­sess­ment in­di­cates New­found­land and Labrador will re­al­ize a $5 bil­lion ben­e­fit over the 26-year life of the project, $2.2 bil­lion in di­rect and in­di­rect em­ploy­ment in­come and $2.3 bil­lion in taxes.

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