Alderon Iron Ore Corp. has signed a multimillion-dollar deal with Chinese steel producer Hebei Iron and Steel to develop the junior mining company’s Kami project in the Labrador Trough.
The agreement, announced today, sees Hebei acquire 19.9 per cent of Alderon’s outstanding common shares plus a 25 per cent interest in a newly formed limited partnership that will own the Kami project, for C$194 million.
Tayfun Eldem, Alderon’s president and CEO, called the agreement a major catalyst for the company.
“In terms of a junior mining company, where development is concerned, it is one of the most significant steps in the de-risking of a project, where we have a financial partner, as well as a partner that is committed to taking 60 per cent of our production,” he said. “So it essentially says A, we have the financial backing to develop the project, as well as B, once the project goes into operation, there is an outlet for our product, so those are the two most significant parts of our deal.”
Hebei is also China’s largest steel maker, and No. 2 in the world, said Eldem, so the deal also bodes well for Newfoundland and Labrador. Hebei’s commitment to fund 25 per cent of the remaining capital costs of the project — Alderon estimates the project will cost about a billion dollars to build — means the deal is worth more than $400 million from the Chinese company.
“It’s a fantastic day for us and we’re very pleased with the outcome,” said Eldem. “Hebei is a very strong and significant partner for us.”
The Kami property is close to Wabush, Labrador City and Fermont, Que. Spread over 7,625 hectares, the property includes 305 claims in Labrador and five Quebec mining titles. Alderon expects to begin commercial production in 2015 and produce eight million tonnes per year at a grade of 65.5 per cent iron. The company estimates the project will create 1,500 full-time jobs over 20 years, including 268 jobs at the mine and concentrator, with the rest provided indirectly through local service and support industries. The company also estimates the project will create more than 750 jobs during construction.
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