Hebei Iron and Steel (HBIS) announced today it has completed its initial strategic investment in the Kami iron ore project in Labrador in the amount of $182.2 million.
In April 2012, HBIS — China's largest steel producer — had committed the money under a partnership agreement with Alderon Iron Ore.
A news release today states that on March 15, HBIS contributed the remaining $119.9 million of its initial investment to Alderon Iron Ore in exchange for 25 per cent interest in the Kami Mine Limited Partnership (Kami Project).
Alderon owns the remaining 75 per cent interest.
The investment proceeds contributed by HBIS will be used for the continued development of the Kami Project. HBIS and Alderon will contribute to capital expenditures for the development of the Kami Project not covered by initial capital contributions and project debt financing, in accordance to the terms of the agreement governing the Kami Limited Partnership.
HBIS will also use its best efforts to assist in obtaining project debt financing for the Kami Project from Chinese Banks and financial institutions around the world.
When the Kami mine is operational, HBIS will purchase 60 per cent of the annual production of the first eight million tonnes of iron ore concentrate. HBIS will also co-operate with Alderon in its efforts to attract additional off-take partners for the remaining 40 per cent that has not been committed to HBIS.
“This is our first investment in mining assets in Canada and we are very pleased with our long-term strategic partnership with Alderon,” said Wang Yifang, chairman of HBIS.
“This investment provides HBIS with a long-term supply of high quality iron ores at attractive investment terms and will improve our operational performance and ensure the long term growth of our company.”
HBIS is China’s largest steel producer and the third largest in the world. The company believes that while Chinese steel production may grow at a more moderate rate than in the past, based on infrastructure requirements in large urban centers and under-developed rural areas, China’s iron ore demand will continue to grow for years to come.
Alderon is a leading iron ore development company in Canada with offices in Vancouver, Toronto, Montreal, Labrador City and St. John’s. The Kami Project is located within Canada’s premier iron ore district and is surrounded by four producing iron ore mines.