Mar 18 2013
Alderon Iron Ore Corp. is pleased to announce that Hebei Iron & Steel Group Co., Ltd. ("HBIS") has contributed the remaining C$119.9 million of its initial investment and Alderon has contributed the Kami iron ore project ("Kami Project") to a limited partnership (the "Kami Limited Partnership") which is owned 25% by HBIS and 75% by Alderon. HBIS is China's largest steel producer.
This concludes HBIS's initial strategic investment, first announced on April 13, 2012, into both Alderon and its Kami Project for an aggregate amount of C$182.2 million, in exchange for 19.9% of the outstanding common shares of Alderon (completion announced on September 4, 2012) and a 25% interest in the Kami Limited Partnership which was established to own the Kami Project. Alderon has the remaining 75% interest in the Kami Limited Partnership.
Mark Morabito, Executive Chairman of Alderon, said, "Alderon is very pleased with its long term partnership with HBIS, China's largest steel company and among the largest steel groups in the world. The conclusion of this strategic investment further validates and meaningfully de-risks the project and leads the way to successful development of the Kami Project into a high quality iron ore mine."
The entire C$119.9 million of investment proceeds contributed by HBIS will be used for the continued development of the Kami Project. In addition, Alderon and HBIS will be required to contribute to capital expenditures for the development of the Kami Project not covered by initial capital contributions and project debt financing, in accordance with their respective interests subject to the terms of the agreement governing the Kami Limited Partnership.
In connection with the C$119.9 million contribution, Alderon has provided confirmations to HBIS with respect to certain information rights related to the development of the Kami Project and the expenditure of the C$119.9 million contribution. In addition, Alderon has agreed that in the event that the environmental assessment and related approvals for the Kami Project are not obtained by March 31, 2014, Alderon will be required to pay to HBIS C$3 million per month for each whole month until such approvals are obtained.
Tayfun Eldem, the President and CEO of Alderon, said, "The conclusion of this transaction with HBIS marks a significant milestone in the development of the Kami Project and further strengthens our potential to finance the remainder of the capital for the Kami project through global financial markets, including Chinese banks. Alderon now has both the initial capital and the China market access to build a leading company. We believe that this strategic partnership solidifies our ability to become the next major iron ore producer in the Labrador Trough. In addition, Alderon management is highly confident that the environmental assessment release and related approvals for the Kami Project will be obtained during the current calendar year, well in advance of March 31, 2014."
As part of the strategic partnership transaction, HBIS is obligated to purchase upon the commencement of commercial production, 60% of the actual annual production from the Kami Project up to a maximum of 4.8 million tonnes of the first 8.0 million tonnes of iron ore concentrate produced annually at the Kami Project. The price paid by HBIS will be based on the monthly average price per DMT for iron ore sinter feed fines quoted by Platts Iron Ore Index (including additional quoted premium for iron content greater than 62%) ("Platts Price"), less a discount equal to 5% of such quoted price. HBIS will also have the option to purchase additional tonnage at a price equal to the Platts Price, without any such discount. In addition, HBIS agrees to use its best efforts to assist in obtaining project debt financing for the Kami Project from financial institutions, including Chinese banks, and HBIS has agreed to co-operate with Alderon in its efforts to attract additional off-take partners in respect of the annual production from the Kami Project that has not been committed to HBIS.
Source: http://www.alderonironore.com/