Alderon Iron Ore Corp. (TSX: IRON) ("Alderon" or the
“Company”) is pleased to announce that it and The Kami
Mine Limited Partnership (“The
Kami LP”) have
received the results of the updated Feasibility Study
(“
FS”) on the Rose Deposit of the Kamistiatusset
(“
Kami”) Iron Ore Project in western Labrador. The
updated FS was completed by BBA Inc. (“
BBA”),
located in Montreal, Québec. The updated FS once again demonstrates
the strong economics of the Kami Project which will produce a
premium-quality iron ore concentrate with higher Fe content and
ultra-low impurities relative to the 62%-Fe grade benchmark.
Coupled with the sustained demand for high-grade iron ores, the
robust project economics form the foundation of Alderon’s relaunch
of its project financing efforts.
The Technical Report (the
“Report”) summarizing the results of the updated
FS and prepared in accordance with National Instrument
(“NI”) 43-101 will be filed on SEDAR and Alderon’s
website within 45 days of this news release. The results of the
updated FS are based on 100% ownership of the Kami Project. The
Kami Project is held through The Kami LP, as to 75% by Alderon and
25% by HBIS Group Co. Ltd. (“HBIS”). The results
of the updated FS disclosed in this news release are expressed in
US Dollars and pre-tax (except where otherwise indicated).
Highlights of the updated September 2018
FS include:
NPV at 8% discount rate |
$ |
1,698 M |
IRR |
|
24.6% |
Projected Years to Payback |
|
4.0 years |
Total Estimated Capital Cost (excluding sustaining capital and
closure costs) |
$ |
982.41 M |
Average Estimated Operating Costs (loaded in ship Port of
Sept-Îles) |
$/dmt |
30.72 |
CFR
Concentrate Sales Price Forecast - based on three year trailing
averageCFR benchmark price of $63.30/dmt @ 62% Fe, adjusted for
Kami Fe grade,and HBIS and Glencore agreement terms |
$/dmt |
CFR
$89.67(FOB $73.17) |
Estimated Mine Life |
|
23 years |
Final Product Iron Grade (%Fe) |
|
65.2% |
Measured and Indicated Resource of the Rose Deposit (COG=15%, 29.6%
Total Fe) |
|
1,093.2 Mt |
Proven and Probable Mineral Reserves (COG=15%, 28.8% Total Fe, 3.4%
Dilution, 2.5% Ore Loss) |
|
517.2 Mt |
Annual Concentrate Production Rate (average life of mine, post
ramp-up year) |
|
7.84 Mtpa |
All of the planned production from the Kami
Project has been pre-sold under the terms of off-take agreements
with HBIS and a subsidiary of Glencore plc. The FOB concentrate
sales price used in the financial analysis in the updated FS
reflects the terms of these off-take agreements. Further details
regarding the concentrate sale price are set out below in this news
release.
“The updated FS is the final de-risking event
prior to project finance that can be added to Alderon’s
achievements, which include release from the Federal and Provincial
environmental assessments, agreements for Power Purchase with
Newfoundland and Labrador Hydro and for ship-loading services with
Port of Sept-Îles, off-take agreements for 100 per cent of
production, and a strategic partnership with HBIS,” stated Tayfun
Eldem, President and CEO of Alderon.
“China’s drive to curb air pollution has led to
significant steel sector restructuring and supply side reforms
resulting in a steady demand for higher-grade and lower-impurity
ores as steelmakers strive to lower emissions and boost blast
furnace efficiency. The projected quality of Kami concentrates with
65.2% Fe-grade and ultra-low levels of alumina and phosphorus is
perfectly positioned to meet the needs of Chinese steelmakers and
serve as a sweetener for the base load of lower-grade ores from
Australia,” explained Mr. Eldem.
“Timing of this milestone for Alderon cannot be
better as it brings us closer to advancing the premium-grade iron
ore project into production, at a time when high-grade material is
selling at a strong premium,” stated Mark Morabito, Chairman of
Alderon.
Financial Analysis
IRR |
|
24.6% |
Payback |
|
4.0 years |
Discount Rate 0% |
$ |
NPV (Million $)5,616 |
5% |
$ |
2,626 |
8% |
$ |
1,698 |
10% |
$ |
1,270 |
Total capital expenditures (including
contingency) are estimated at $982.4 million. The capital cost
estimate excludes closure costs and sustaining capital, which are
expected to be in the order of $42.7 million and $449.1 million
respectively for the life of the project. These costs are included
in the financial analysis for the project. The updated FS capital
cost estimate is based on an EPC (Engineering, Procurement and
Construction) project execution strategy. The EPC portion of the
total capital costs is estimated at $900.74 million. This was
developed in collaboration with Duro Felguera (DF), which is a
potential provider of EPC services to the project should The Kami
LP decide to proceed with this project execution strategy.
On a post-tax basis, the updated FS shows an NPV
of $866 million at a cash flow discount rate of 8%. The post-tax
IRR for the project is 18.2% and the payback period is 4.9
years.
Summary of Estimated Initial Capital Costs (Million
$) |
|
|
|
Mining |
$ |
72.20 |
|
Mineral Processing Area |
$ |
302.81 |
|
TMF Area (Initial Dykes) |
$ |
23.66 |
|
Site Infrastructure and Utilities |
$ |
309.90 |
|
Other EPC Costs (Indirects, Guaranties, Insurance) |
$ |
192.17 |
|
TOTAL EPC COSTS |
$ |
900.74 |
|
Pre-Operational Capitalized Costs |
$ |
26.90 |
|
Owner’s Costs |
$ |
30.98 |
|
Mine (Waste Rock Pre-Stripping by Kami) |
$ |
23.79 |
|
TOTAL |
$ |
982.41 |
|
The updated FS assumes a Concentrate CFR selling
price of $89.67/tonne. This price was calculated at a reference
date of June 26, 2018, using the 3-year trailing average price of
$63.30/tonne for the Platts IODEX 62% Fe, CFR North China, adding
the spot Fe premium of $27.52/tonne and applying the discounts and
premiums allowed by the HBIS and Glencore agreements (60% HBIS -
40% Glencore). The final price of concentrate loaded in ship (FOB)
at Port of Sept-Îles assumed in the financial analysis is
$73.17/tonne. The final price is determined after applying shipping
costs estimated at $16.50/tonne.
Average life-of-mine (“LOM”)
operating costs are estimated at $30.72/tonne of concentrate.
During the life of the project, leased equipment are replaced as
they reach the end of their service life and these replacement
costs are capitalized and reflected as part of the sustaining
capital expenditures. Average LOM operating costs are based on the
following:
Summary of Estimated Average LOM Operating Costs ($/t of
concentrate) |
|
|
Mining (including mining equipment leasing costs) |
$ |
11.25 |
Mineral Processing |
$ |
5.72 |
General Site |
$ |
0.50 |
General Administration |
$ |
2.26 |
Environmental & Tailings Management |
$ |
0.37 |
Rail Transportation and Port Services (including railcar leasing
costs) |
$ |
10.62 |
TOTAL |
$ |
30.72 |
Mineral Resources
The Mineral Resources and Proven and Probable
Mineral Reserves are reported in accordance with Canadian Institute
of Mining, Metallurgy and Petroleum (CIM) Definition Standards for
Mineral Resources and Mineral Reserves and their Guidelines, and
are prepared in accordance with NI 43-101.
The Mineral Resource estimate for the Kami
Project is set out below. Mr. Michael Kociumbas, P.Geo is a
Qualified Person as defined by NI 43-101 and is responsible for
reviewing and approving this Mineral Resource estimate and the
QA/QC associated with the estimate. He has verified, reviewed and
approved the technical data contained in this news release and
underlying sampling, analytical and test data. The Mineral Resource
estimate has been prepared using a 15% Total Fe cut-off grade, is
effective December 17, 2012 and inclusive of Mineral Reserves.
Zone |
Category |
Tonnes(Million) |
TFe% |
MagFe% |
HemFe% |
Rose Central |
Measured |
249.9 |
29.4 |
17.6 |
8.1 |
|
Indicated |
294.5 |
28.5 |
17.7 |
5.9 |
|
Total M&I |
544.4 |
28.9 |
17.7 |
6.9 |
|
|
|
|
|
|
|
Inferred |
160.7 |
28.9 |
16.9 |
7.1 |
|
|
|
|
|
|
Rose North |
Measured |
236.3 |
30.3 |
13.0 |
14.7 |
|
Indicated |
312.5 |
30.5 |
11.8 |
17.1 |
|
Total M&I |
548.8 |
30.4 |
12.3 |
16.1 |
|
|
|
|
|
|
|
Inferred |
287.1 |
29.8 |
12.5 |
15.5 |
|
|
|
|
|
|
Mills Lake |
Measured |
50.7 |
30.5 |
21.5 |
7.0 |
|
Indicated |
130.6 |
29.5 |
20.9 |
3.9 |
|
Total M&I |
181.3 |
29.8 |
21.1 |
4.8 |
|
|
|
|
|
|
|
Inferred |
74.8 |
29.3 |
20.3 |
2.7 |
MagFe% = percentage of the Fe present as
magnetite; HemFe% = percentage of the Fe present as hematite.
The Mineral Resource estimate for the Kami
Project was completed in Gemcom™ using block sizes of 15 m x
15 m x 14 m for Rose Central and Rose North and 5 m x 20 m x 5 m
for Mills Lake and is based on results from 209 diamond drill holes
at Rose Central and Rose North (170 holes) and Mills Lake (39
holes) zones totaling 62,247 m. These holes were drilled within the
iron mineralization for approximately 2,000 m of strike length and
a range of 200 to 400 m of width for Rose Central and Rose North.
The holes were drilled on section lines that were spaced 100 m
apart for both deposits in the main area of mineralization. For the
geological modelling, 3-D bounding boxes defining the maximum
extents of the Rose and Mills Lake deposit areas were created. The
boxes extended approximately 200 m along strike from the outermost
drill holes in each area. Mineralized boundaries extended up to a
maximum of about 400 m on the ends of the zones and at depth where
there was no/little drill hole information, but only if the
interpretation was supported by drill hole intersections on
adjacent cross sections or by solid geological inference.
Proven and Probable Mineral
Reserves
The mining engineering work performed for this
updated FS was based on the 3-D block model provided by Alderon.
Pit optimizations were performed on the Measured and Indicated
Resources and the pit shell that resulted in the maximum discounted
NPV was selected as a guide for the pit design. The final Mineral
Reserves were estimated after applying engineering and operational
design parameters and include mining dilution and ore losses. BBA
is of the opinion that the Mineral Reserve estimate derived in this
updated FS reasonably quantifies the economical ore mineralization
of the Rose Deposit. The Mineral Reserve estimate is effective as
of August 12, 2018. The Proven and Probable Mineral Reserves
presented in the table below are derived from the December 17, 2012
Mineral Resource estimate set out above. Only the Measured and
Indicated Resources within the Rose Central and the Rose North
Deposits have been considered in the updated FS and have been used
for the estimation of Proven and Probable Mineral Reserves. The
Mineral Resources within the Mills Lake Deposit have not been
considered in the FS.
Material |
Tonnes(Millions) |
TFe% |
WREC% |
MagFe |
MAG% |
Proven Mineral Reserve |
392.7 |
29.0 |
34.7 |
15.0 |
20.8 |
Probable Mineral Reserve |
124.5 |
28.2 |
32.0 |
11.1 |
15.3 |
Total Mineral Reserve |
517.2 |
28.8 |
34.1 |
14.1 |
19.4 |
TFe = total Fe grade; WREC% = the weight
recovery; MagFe = Fe present as magnetite;MAG% = the percentage of
magnetite in the Proven and Probable mineral reserves.
Project Summary
The updated FS is based on the same mineral
processing flowsheet as the previous technical reports including
the 2012 FS. The major infrastructure required to support the Kami
Project, as stated in the updated FS, includes the following
components:
- Mining of the Rose open pit and adjacent crushing plant at the
Kami mine area.
- Crushed ore conveyed from the crusher to the crushed ore
stockpile, ahead of the concentrator, to the east of the Waldorf
crossing.
- Concentrator consisting of autogenous grinding, gravity and
magnetic separation and dewatering and utilizing the autogenous and
ball mills that already have been procured.
- Tailings disposal in the designated area on the Kami Project,
in the location which was identified during the 2012 FS. In this
updated FS, the Tailings Management Facility (TMF) and tailings
deposition plan have been redesigned to conform to current industry
standards and in accordance with the Canadian Dam Association Dam
Safety Guidelines.
- Concentrate load-out located at the new Kami rail loop,
connecting to the QNS&L main rail line by way of a new railway
constructed as part of the Kami Project.
- Rail transportation of concentrate from the Kami rail loop to
the common port terminal facilities at Pointe Noire near Sept-Îles,
Québec (owned and operated by third parties).
- Ship-loading services provided by Port of Sept-Îles.
- Electrical power supplied by Newfoundland and Labrador Hydro
(“NLH”) based on the terms set out in the power purchase agreement
between NLH and The Kami LP.
Project Schedule
Prior to construction commencing, the Company
intends to re-assemble the owner’s team, award an EPC or EPCM
contract, resume detailed engineering, and have construction
financing in place. Construction is expected to last 26
months.
Technical Report and Qualified
Person
A NI 43-101 Technical Report is being prepared
under the supervision of Mr. Angelo Grandillo, P.Eng, of BBA, a
Qualified Person as defined by NI 43-101, with contributions from
Mr. Jeffrey Cassoff, P.Eng, of BBA, Mr. James Powell of Gemtec, Mr.
Peter Merry of Golder and Mr. Kociumbas. Mr. Grandillo is a
Qualified Person as defined by NI 43-101 and is independent of
Alderon. Mr. Grandillo has reviewed and approved the technical
information contained in this news release, with the exception of
the Mineral Resource estimate which was reviewed and approved by
Mr. Kociumbas and the Mineral Reserve estimate which has been
reviewed and approved by Mr. Jeffrey Cassoff, as noted above. Mr.
Grandillo has verified all the data underlying the technical
information disclosed in this news release.
About Alderon Iron Ore
Corp.
Alderon is a leading iron ore development
company in Canada. The Kami Project, owned 75% by Alderon and 25%
by HBIS through The Kami Mine Limited Partnership, is located
within Canada’s premier iron ore district, the Labrador Trough, and
is surrounded by two producing iron ore mines. Its port handling
facilities are located in Sept-Îles, the leading iron ore port in
North America. HBIS is Alderon’s strategic partner in the
development of the Kami Project and China’s second largest steel
producer.
For more information on Alderon, please visit our website at
www.alderonironore.com.
ALDERON IRON ORE CORP.On behalf
of the Board"Tayfun Eldem"President &
CEO, Director
Alderon is part of the King & Bay group of companies. King
& Bay is a merchant bank that specializes in identifying,
funding, developing and supporting growth opportunities in the
resource, aviation, and technology sectors. |
Cautionary Note Regarding
Forward-Looking Information
This press release contains "forward-looking
information" within the meaning of the U.S. Private Securities
Litigation Reform Act and Canadian securities laws concerning
anticipated developments and events that may occur in the future.
Forward-looking information contained in this press release
include, but are not limited to, statements with respect to (i)
future demand for production from the Kami Project; (ii) the next
steps in the development of the Kami Project; (iii) the completion
of project financing; (iv) the market and future price of iron ore
and related products; (v) the estimation of Mineral Resources and
Mineral Reserves; and (vi) 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 Project.
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, receipt of governmental and other
approvals, the estimation of Mineral Resources, the realization of
resource estimates, iron ore and other metal prices, the timing and
amount of future 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 Project
in the short and long-term, the progress of exploration and
development activities, the ability of the Company to use the
multi-user terminal facility at the Port of Sept-Îles, the receipt
of necessary regulatory approvals, the estimation of insurance
coverage, assumptions with respect to currency fluctuations and
exchange rates, 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 Project, risks relating to variations in Mineral
Resources and Mineral Reserves, 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 and Mineral
Reserves, 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 Project
may not be available on satisfactory terms, or at all; risks
related to disputes concerning property titles and interest, risks
related to disputes with Indigenous governments and organizations,
risks related to insufficient capacity being available for the
Company to access the multi-user terminal facility at the Port of
Sept-Îles, 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 with 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.
For further information please call:
Mishka Gounden
1-604-681-8030 ext 289
info@alderonironore.com