For those of you who weren’t able to sit in on Alderon’s conference call this morning, here’s a recap:
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Alderon Reaches Critical Milestone
Alderon released the Feasibility Study (FS) results for Kami’s Rose Deposit early this morning. The company’s President and CEO, Tayfun Eldem, led the conference call.
Last month many people expressed concerns when the FS results were not released in December, as was initially expected. I think it’s safe to say that the one month delay was well worth the wait! The company took the necessary time to optimize the pit which resulted in a lower strip ratio and ultimately led to a lower operating cost of $42.17/tonne, down from the $44.87/tonne reported in the Preliminary Economic Assessment (PEA) released last year. Other highlights include:
The FS results are completely in-line with what the company expected. A general concern when going from PEA results to FS results is that there will be a huge increase in the capital expenditures. Although the CAPEX for the Kami Project did increase slightly, it was largely off-set by the lower operating costs. The main reason that the CAPEX increased is very simple – the overall size of the project’s footprint increased. Due to the success of the 2011 and 2012 drill programs, Alderon was able to greatly increase the size of the overall resource for the project. The PEA results were only based on the Rose Central deposit. With the addition of the Rose North deposit, the size of the project’s footprint increased leading to higher capital expenditures. However based on
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the successful pit optimization that the engineering firm completed, the strip ratio was decreased to 1.66 (from 2.26 reported in the PEA).
Most of the other items, including the size of the deposit, the annual production rate (8 mtpa) & grade (29%), the commercial production start date (Q4 2015) and the flowsheet have remained unchanged. The flowsheet that Alderon intends to use for the Kami project is a very conventional method used throughout the Trough. It includes the standard crushing/grinding of the material followed by the use of gravity and magnetic separation which should result in a quality product of high iron content with low levels of deleterious elements.
Remaining $120 Million Initial Investment From Hebei
According to Tayfun, Hebei will have the final FS report in hand no later than January 31, which is the deadline set out in the agreement between Alderon and Hebei. Within 15 business days of Hebei receiving the FS report that meets certain criteria, Hebei will contribute the remaining $119.9 million of their initial investment and Alderon will contribute the Kami Project and relevant properties to the newly formed limited partnership which is owned 25% by Hebei and 75% by Alderon. This means that by the end of February, Alderon will receive the remaining $119.9 million from Hebei. Since I can already confirm, based on discussions with management, that the FS does in fact meet all of Hebei’s criteria, the only thing I can see delaying Hebei from contributing the remaining $120 million by a few weeks is the Chinese New Year, which of course begins on February 10th and lasts for two weeks. Nothing in this industry is ever easy….
Upcoming Catalysts
Now that Alderon has released the FS results for the Rose Deposit, the company can continue focusing on other aspects necessary to move the project forward towards production. This includes securing the balance of the off-take which, as the company’s President and CEO, Tayfun Eldem, said on the conference call this morning, will likely come from Taiwan, Korea or Japan. Other things to look forward to this year include formal rail and power agreements.
In September of last year, the company filed the Environmental Impact Statement. Based on the typical duration of the various regulatory proceedings, Alderon expects that it will have the necessary permits to begin construction by November 2013. Construction, which is expected to take less than 24 months to complete, should be done by August 2015 followed by commercial production in November 2015.
Bottomline
For several years now, Alderon has been one of my favorite companies to watch, not only because of the management team but also because of the company’s ability to reach and exceed expectations. Despite the tough market conditions that have plagued the industry this last year, Alderon has managed to relentlessly push ahead successfully reaching milestone after milestone. I had no doubt that Alderon’s management team had the right people and experience necessary to move the Kami project forward, but to see a company take a project to development stage as quickly and efficiently as Alderon has managed to do is more than impressive. Alderon reached a critical milestone today with the release of the Rose Deposit Feasibility Study results. By the end of February, the company should have the remaining $119.9 million initial investment from Hebei which will ultimately allow Alderon to remain on course of becoming the next iron ore producer in the Trough.
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Note: Grandich Blog Compensation- $2000 monthly, Options: 225,000 @ $ .30 ( all previously exercised)
Special Note Regarding Forward-Looking Information
This piece contains “forward-looking information” concerning anticipated developments and events that may occur in the future. Forward looking information contained in this presentation includes, but are not limited to, statements with respect to: (i) the estimation of mineral resources and mineral reserves; (ii) the market, demand for and future price of iron ore and related products; (iii) success of exploration activities; (iv) the completion and timing of the permitting and environmental assessment process; (v) the negotiation and conclusion of infrastructure contracts; (vi) expected infrastructure requirements; (vii) potential economic benefits of the Kami Property; (viii) the closing of the Hebei transaction; (ix) future off take agreements; and (x) the results of the FS including statements about future production, future operating and capital costs, the projected IRR, NPV, payback period, construction timelines and production timelines for the Kami Property.
In certain cases, forward-looking information can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved” suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Forward-looking information contained in this press release is based on certain factors and assumptions regarding, among other things, the estimation of mineral reserves and resources, the realization of resource estimates, iron ore and other metal prices, the timing and amount of future exploration and development expenditures, the estimation of initial and sustaining capital requirements, the estimation of labour and operating costs, the availability of necessary financing and materials to continue to explore and develop the Kami Property (as defined herein) in the short and long-term, the progress of exploration and development activities, the receipt of necessary regulatory approvals, the completion of the environmental assessment process, the estimation of insurance coverage, and assumptions with respect to currency fluctuations, environmental risks, title disputes or claims, and other similar matters. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
Forward looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors include risks inherent in the exploration and development of mineral deposits, including risks relating to changes in project parameters as plans continue to be redefined including the possibility that mining operations may not commence at the Kami Property, risks relating to variations in mineral resources, grade or recovery rates resulting from current exploration and development activities, risks relating to the ability to access rail transportation, sources of power and port facilities, risks relating to changes in iron ore prices and the worldwide demand for and supply of iron ore and related products, risks related to increased competition in the market for iron ore and related products and in the mining industry generally, risks related to current global financial conditions, uncertainties inherent in the estimation of mineral resources, access and supply risks, reliance on key personnel, operational risks inherent in the conduct of mining activities, including the risk of accidents, labour disputes, increases in capital and operating costs and the risk of delays or increased costs that might be encountered during the development process, regulatory risks, including risks relating to the acquisition of the necessary licences and permits, financing, capitalization and liquidity risks, including the risk that the financing necessary to fund the exploration and development activities at the Kami Property may not be available on satisfactory terms, or at all, risks related to disputes concerning property titles and interest, environmental risks, and the additional risks identified in the “Risk Factors” section of the Company’s Annual Information Form for the most recently completed financial year or other reports and filings applicable Canadian securities regulators. Accordingly, readers should not place undue reliance on forward-looking information. The forward-looking information is made as of the date of this press release. Except as required by applicable securities laws, the Company does not undertake any obligation to publicly update or revise any forward-looking information.
NI 43-101 Qualified Person
Alderon’s exploration work on the Kami Project is supervised by Edward Lyons, P.Geo., the Chief Geologist for Alderon and a Qualified Person as defined by National Instrument 43-101. Mr. Lyons has reviewed and approved for the technical information contained in this presentation.
Additional Information
