(TSX: ADV)
VANCOUVER,
Oct. 19, 2016 /CNW/ - Alderon Iron
Ore Corp. (TSX: ADV) ("Alderon" or the "Company") announces an
update on the re-scoping process that it has been undertaking on
the Kami Iron Ore Project located in Western Labrador ("Kami Project"). The focus
of the process has been to re-scope the capital and operating costs
of the Kami Project in order to identify savings that have arisen
from the current depressed state of the market and changes in
ownership and management of assets in the Labrador Trough, the
idling of the neighbouring Wabush Scully Mine ("Wabush") and
evaluating strategic alternatives for the Company. Alderon's
strategic partner Hesteel Group Co. Ltd. ("Hesteel") remains
committed to the Kami Project and has been actively involved in the
re-scoping process and provided its input on key elements. Hesteel
recently changed its name from Hebei Iron & Steel Group Co.
Ltd. to reflect its international focus.
With respect to the current status of the Wabush Mine, since
May 20, 2015 Wabush Mines and related
subsidiaries and affiliates (the "Wabush CCAA Parties") have been
in proceedings under the Companies' Creditors Arrangement
Act (the "CCAA"). Based on filings in the CCAA proceedings,
only four employees have been retained to assist in safeguarding
the assets and no suitors have emerged that are willing to purchase
the mine. Alderon on the other hand has a viable plan to utilize
the Wabush Mine and ensure the future of the region by developing
the Kami Project. Once the Kami Project moves into construction it
will bring much needed construction jobs to the region, followed by
years of employment once mining operations commence at the Kami
Project.
There are several key elements that the Company and its external
technical consultants have been evaluating throughout the
re-scoping process in order to develop a new capital and operating
cost profile for the Kami Project. The most significant changes
that have been examined are with respect to infrastructure
requirements, in particular stockyard and terminal facilities,
tailings storage and related infrastructure. In addition, as part
of the exercise general cost reductions as a result of the
depressed state of the market, reduced freight rates and the
devaluation of the Canadian dollar against the U.S. dollar have
been examined in detail. Alderon has retained BBA, Inc. based in
Montreal, Quebec to complete the
re-scoping process by preparing a new preliminary economic
assessment ("PEA") report on the Kami Project. BBA, Inc. led the
preparation of the Company's feasibility study dated December 17, 2012. The Company expects to release
the results of the PEA and file a technical report prepared in
accordance with National Instrument 43-101 in Q1 2017.
Key Elements of Project Re-scope
The key elements of the project re-scope are port and tailings
infrastructure requirements. With respect to tailings and related
infrastructure, Alderon has been evaluating the use of the pit at
the Wabush Mine that is located in Wabush approximately six kilometers from the
Kami Project. Mining operations at the Wabush Mine were suspended
in March 2014 with the large majority
of the workforce being laid off shortly thereafter. The Wabush Mine
was permanently idled in November
2014.
The existing infrastructure at the Wabush Mine can reduce the
initial and sustaining capital costs of the Kami Project. In
particular, Alderon, Hesteel and others have analyzed the Wabush
Mine in detail and concluded that there are no economic reserves
remaining in the pit. Given that the Wabush Mine is fully depleted
of economic reserves, the remaining pit can be used as a tailings
storage and management facility for the Kami Project. This negates
the need to build an independent tailings deposition facility for
the Kami Project and as a result would significantly reduce the
capital expenditures associated with it.
With respect to the port terminal facilities, on March 8, 2016 the Government of Quebec became the owner of rail, stockyard and
terminal facilities located in Pointe-Noire area of the Port of
Sept-Ȋles. The Government of Quebec acquired these facilities from Cliffs
Natural Resources and has announced its plans to use these assets
to create a multi-user terminal facility at the Port of Sept-Ȋles
that will be open to all market participants. The multi-user
facility may be accessed by participants as either a partner in a
newly formed limited partnership or as a non-partner regular user.
The Company's ability to access the multi-user terminal facility
will result in a significant capital cost savings as it will no
longer need to construct its own stockyard and material handling
facilities. The multi-user terminal facility will allow the Company
to connect to the completed multi-user dock facility that the
Company has an existing contract to ship 8 million tonnes per annum
of material through.
Status of Wabush Mine CCAA Proceedings
In the CCAA proceedings, FTI Consulting Canada Inc. (the
"Monitor") has been appointed as the monitor for the purpose of
overseeing the proceedings and arranging for the orderly
liquidation of assets. The Monitor has established a website where
information regarding the proceedings is publicly available. The
Monitor files periodic reports with the Court regarding the
progress of the proceedings, the most recent report is the
twenty-fourth report to the Court dated October 6, 2016 (the "October 2016 Report").
Based on information on the Monitor's website, on May 19, 2016 a notice was sent to interested
parties confirming that a potential purchaser for the Wabush Mine
would not proceed with the transaction and the Wabush CCAA Parties,
in consultation with the Monitor, started the process of analyzing
liquidation offers for the liquidation of equipment located at the
Wabush Mine and other assets. Subsequent to this notice, the
liquidation of assets at the Wabush Mine commenced. This includes
the completed or intended sale of three Caterpillar generator sets;
104 single family homes; two apartment buildings; a staff house;
nine Komatsu Haul Trucks; and real estate, machinery, equipment and
other chattels used in connection with the Wabush Terminal Station
and Wabush Substation. The Monitor has also confirmed that it has
accepted a proposal, subject to negotiation of a definitive asset
purchase agreement and Court approval, for the sale of the major
mobile equipment at the Wabush Mine.
The Monitor further reports that on August 30, 2016, in anticipation of a further
process to seek proposals for the remaining movable assets at the
Wabush Mine, the Wabush CCAA Parties issued to MFC Industrial Ltd.
("MFC") a Notice of Intent to Dismantle or Destroy Infrastructure
or Fixtures located at the Wabush Mine.
The following excerpts from the October
2016 Report demonstrate that the Monitor has devoted
significant time and effort to find a purchaser for the Wabush Mine
but a purchaser is not forthcoming and the liquidation of the
remaining assets in the only option:
"The Monitor and the Wabush CCAA Parties
expended significant time and effort endeavouring to obtain a
proposal from the Wabush Interested Party. Notwithstanding these
efforts, it became increasingly apparent that it was unlikely that
any proposal for the acquisition of the Wabush Mine would be
forthcoming…"
"The Wabush CCAA Parties, in consultation with
the Monitor, are considering various alternatives with respect to
the Wabush Mine, which alternatives could involve continuing to
hold all or parts of the Wabush Mine to effect the realization of
the remaining assets as described below, terminating the mining
lease between predecessors of MFC and WICL dated September 2, 1959, (the "MFC Sub-Lease"),
abandoning the property or any combination of the
foregoing."
"The Wabush CCAA Parties and the Monitor would
welcome a proposal for the acquisition of the Wabush mine and related assets at an
appropriate price. Regrettably, approximately eighteen months after
the SISP Order was granted, there is no proposal from MFC or from
any interested party."
"While parties have shown some interest in the
Wabush Mine assets, no party has been prepared to proceed with a
proposal to buy those assets. This includes the party with whom MFC
signed a support agreement as discussed earlier in this
report."
"As noted in paragraph 7 of the MFC Stay
Objection, the marketing efforts have clearly demonstrated that
there is no party with any interest in purchasing the mining assets
and reopening the mine in the near future. Furthermore, it does not
appear that MFC intends to restart operations in the near future
even if it acquired the assets…"
Alderon has long recognized that there are no economic reserves
remaining at the Wabush Mine and has not made a proposal in the
CCAA process to acquire the Wabush Mine and operate it as a going
concern. However, as discussed in the press release, it has a
viable plan to use the depleted pit to ensure growth and prosperity
for the region. The PEA will incorporate the use of the pit at the
Wabush Mine into the re-scope of the Kami Project and Alderon will
work with stakeholders to acquire access at the conclusion of the
CCAA proceedings.
About Alderon
Alderon is a leading iron ore development company in
Canada. The Kami Project, owned 75% by Alderon and 25% by
Hesteel Group Co. Ltd. (formerly Hebei Iron & Steel Group Co.
Ltd.) ("Hesteel") through The Kami Mine Limited Partnership, is
located within Canada's premier
iron ore district 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. Hesteel 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
"Mark J Morabito"
Chairman & CEO
E: info@alderonironore.com
W: www.alderonironore.com
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) the
details of the re-scoping of the Kami Project including potential
capital and operating cost savings, (ii) the timing of the
preparation of the PEA, (iii) the ability to access the multi-user
terminal facility and Wabush Mine, and (iv) the development of 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 reserves and resources,
the realization of reserve and 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 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, 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 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 Aboriginal
groups, 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.
SOURCE Alderon Iron Ore Corp.