As Morabito points out, however, “You can have the greatest deposit in the world, but if you’re missing one of the three elements of the holy infrastructure trinity—rail, power and port—you really don’t have anything.” Alderon addressed that need with its July 16 announcement of a deal with the Sept-Îles Port Authority.
Morabito explains, “We secured the right to ship up to eight million tonnes of iron ore annually through the use of a new multiuse deep-water dock facility that the Port is constructing. We’re part of a group of iron-ore companies, including Labrador Iron Mines TSX:LIM, New Millennium TSX:NML and Champion Minerals TSX:CHM, that have all signed agreements with the Port that included an obligation to put up some money towards the construction costs. In our case, about $20.46 million payable in two installments of $10.23 million each. That money goes towards CAPEX on the project and is credited back in terms of the costs that we pay for eventually shipping the ore through the facility.”
The Port agreement demonstrates how Liberty Mines has already stepped up to the plate. “They know that we’re to receive some money from Hebei soon, and they know we needed to get things moving, so the Port could commence with construction. So they decided to provide us with the money to do that.”
A considerable and most timely benefit of the Hebei and Liberty deals is, Morabito says, “We’re not dependent on these horrible equity markets in order to see this project financed and built.” In recent months, markets have not looked kindly upon companies with seven-figure CAPEXs. Based on the 2011 PEA, Kami came in just under that, at $989 million. Morabito comments, “A billion dollars is not small, but it’s not multibillion like a lot of these other iron-ore projects.” Which, he notes, cannot match Alderon‘s holy infrastructure trinity.
You can have the greatest deposit in the world, but if you’re missing one of the three elements of the holy infrastructure trinity—rail, power and port—you really don’t have anything —Mark Morabito
In addition, Hebei’s $400-billion contribution will ensure that Alderon‘s exposure will be continually reduced. Morabito reports, “They have committed, in writing, to attempt to leverage their own involvement in this deal by bringing their bankers, which are the Bank of China and the Bank of Communications in China to support the project with additional debt financing. If they’re able to do that in a timely fashion after they ink the final part of their deal, then once the feasibility is published, we would avoid equity markets not only for the rest of 2012, which is a certainty, but also for 2013. It means not having to go the public markets until the project is in the late stages of construction and completely derisked, which means we’ll get the highest valuation and see the lowest possible dilution.”
Meanwhile, Kami “exploration is over and done. The only drilling going on is as we speak is geotechnical drilling on where the buildings and mine equipment will go. Resource drilling is simply not necessary. We have all the resource we need to put the project into production not only for Phase 1 but for Phase 2.” Alderon will publish a feasibility study at the end of 3Q or beginning of 4Q.
Then, Morabito says, “The path to production is pretty straightforward. 2013 sees the permitting process complete and construction commence, and 4Q 2015 is our target for production.”
He attributes Alderon‘s success to it being a company whose “management is aligned with shareholders. I’m the largest individual owner of stock and founder of the company. The rest of the management team owns stock, and Altius TSX:ALS, our biggest corporate shareholder, will own 25% after the Hebei deal. Hebei will own 19%, and Liberty will own 15%. Together, management and partners own 65% of Alderon.