Alderon Nears Debt Deal for Kami in Labrador Trough

Issue 76, March 2014

Alderon Iron Ore is close to finalising debt funding for its Kami project in the Labrador Trough, president Tayfun Eldem tells Global Mining Observer.

A debt funding deal would trigger construction of Kami, expected to produce an initial 8m tonnes per annum for a minimum of 30 years. The project has won a string of permitting approvals in recent weeks, including government support for a $300m power line.

“Our next milestone will be the completion of the senior debt financing facility,” Eldem said, with final terms expected this month or next. BNP Paribas is leading a syndicate of lenders, with debt expected to cover the bulk of Kami’s $1.3bn headline capital cost.

Alderon is the first of a new wave of would-be producers in the Labrador Trough, alongside Champion Iron and Mamba Minerals, which are currently completing a merger headed by former Glencore boss, Michael O’Keeffe.

The region has garnered growing interest from China, which buys over 60 per cent of all seaborne iron ore but lacks a firm foothold in Australia’s prolific Pilbara. China’s largest steel mill, Hebei, bought 20 per cent of Alderon and 25 per cent of its Kami project in 2012, whilst Wuhan Iron & Steel has been snapping up interests in juniors in the region, including Century Iron and Adriana Resources.

The Trough’s old guard meanwhile appears to be flagging: Rio Tinto plans to offload its 59 per cent stake in the Iron Ore Co. of Canada, which became the Trough’s first producer in 1954, whilst Cliffs Natural Res. has written $1bn off its acquisition of Consolidated Thompson in 2011. Cliffs has since cancelled expansion of Bloom Lake, bought under the deal, whilst shuttering its Wabush mine adjacent to Kami.

Alderon has been touted as a likely bidder for Wabush, swallowing its rail capacity, but Eldem said he could not comment unless Cliffs opened a formal bidding process. “The idling of Wabush mines gives us more options that need to be explored,” he said.

Eldem, Alderon’s chief operating officer Brian Penney and its head of project execution were all lifted from Rio’s iron operations in Canada. Hebei, royalty group Altius Minerals and insurance house Liberty Mutual meanwhile hold nearly 60 per cent of Alderon’s stock. “All three have given us stability in difficult markets,” Eldem said.

“The idling of Wabush mines gives us more options that need to be explored.”

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