Alderon Iron Ore Corp. (AXXDF)

[LGL8054]

Haywood Securities Inc.

Kami: A Growing Fe Ore Property
Nestled Between Four Mines

Geordie Mark and Colin Healey

We are initiating formal coverage of Alderon Resource corp. (ADV-TSX-V) with a 12-month target price of C$3.40 per share. The 62% projected return justifies a SECTOR OUTPERFORM rating. Alderon has a SPECULATIVE risk rating due to the early exploration stage of the Company’s Kamistiatusset (Kami) iron ore property, which is on the door step of four operating iron ore mines in the Fermont district, Labrador Trough, Canada. Company highlights include:

Kami is ideally positioned to make use of the existing infrastructure established for the neighboring Labrador City, Fermont and Wabush townships that service several iron ore mines within 10-20 kilometres from Alderon’s property.
A maiden resource estimate on Kami is due in Q1’11, and is based primarily on 25,000 m drilling to be completed in 2010. An additional 5,000m drilling will be undertaken on Rose Lake North staring late January 2011, and will be incorporated into a revised resource update in Q2?11 where Alderon has a target resource estimate of 600-800 Mt at 28 to 32% Fe. Our estimates are for an exploitable resource of 300 Mt @ 30% Fe, which is expected to be primarily derived from the Rose Lake Central and Mills Lake areas. These resources are expected to be magnetite dominant with lesser specular hematite, and are anticipated to contain low S, P and Mn. Additional resource potential is also expected from the Rose Lake North area of the property.
Our model scenario for Kami employs a conceptual production rate of 8 Mtpa of 65% Fe magnetite-rich concentrate, which is estimated to have an average production cost on the order of (~US$43/t). This model uses an exploitable resource estimate of 300 Mt @30% Fe, and by inputting our commodity price assumptions the operation could generate 1st and 2nd year cashflow of $164 and $288 respectively for a ~17 year Life-of-Mine.
Alderon has a clear strategy to advance Kami towards a production scenario, and host a strong board and management team that were in part responsible for progressing Bloom Lake through the development corridor and into production.

Valuation: Our DCF 12% analysis of the Kami Property produces an NPV of C$733 million, with adjustments for resource growth potential provides a total corporate NAV of C$749 million.

To recieve a copy of the full coverage on Alderon, please contact:
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Web: www.alderonmining.com
Vancouver Office
Suite 1240-1140 West Pender Street
Vancouver, BC V6E 4G1
Phone: [phone]
Fax: [phone] Toronto Office
65 Queen St. W., 8th Floor
Toronto, ON, M5H 2M5
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