“We believe,” Morabito says, “in issuing equity at the highest possible prices in the latest possible stage of development. It doesn’t make the investment bankers happy, but it does make the shareholders happy. Which is good for Alderon but also makes us a pretty appetizing target. Imagine you’re a big company looking for a good iron-ore asset, what do you see here? A company with a blue-chip offtake partner for 60% of the existing production. A company fully permitted with rail, power and port contracts in place. That’s where we’re aiming to sit in six to eight months. Alderon looks pretty attractive to investors who invest at this stage of the project.”
As for a possible takeover, Morabito believes it’s early days yet. He explains, “Our experience with the bigger companies is that they will pay a premium in today’s market for a project to be completely derisked. You can see evidence of that with Cliffs and Consolidated Thompson. [The former bought the latter for $4.9 billion in January 2011.] It is common knowledge that Cliffs had the opportunity and thought seriously about buying Consolidated Thompson at many junctures during its development. They waited until it was in production, and they could have had it for one-half or one-third of that price earlier.”
With Kami so close to production, Morabito contemplates the process that led to Alderon‘s achievement. “I brought together a great group of people that had a history in Labrador. I secured the asset, and we then partnered, myself and my group, with [merchant bank] Forbes & Manhattan, the driving force behind Consolidated Thompson. We enjoyed working together so much that my group of 60-some people joined Forbes & Manhattan and became Forbes West.”
Morabito argues, “At the end of the day, what is in the ground is important, but the human element is equally important. [F&M Chairman/CEO] Stan Bharti and I both took turns recruiting top people to the company, and most of those people came from Rio Tinto or Cliffs or other iron-ore companies. As they came on, we were able to increase the pace even more aggressively. Now that Bharti and I have joined forces, we can work on other projects as well, as our involvement in this one winds down.”
We believe in issuing equity at the highest possible prices in the latest possible stage of development. It doesn’t make the investment bankers happy, but it does make the shareholders happy —Mark Morabito
He is not about to rest on his laurels, “I have involvement in the Cap-Ex TSXV:CEV iron-ore project and Ridgemont Iron Ore TSXV:RDG, which are [like Alderon] in the Labrador Trough. Our exploration team from Alderon, which was part of Forbes West, has now moved over to those companies. We’ll continue to staff up Alderon and see it on its way but, as these things mature, and if you’re successful, they don’t need you anymore.”
Morabito is perhaps proudest of the part Alderon‘s success will play in the economic regeneration of the Province of Newfoundland and Labrador. “For Labrador, in particular,” he stresses. “Sept-Îles sits in the Province of Quebec and it belongs to the federal government through a crown corporation. But in reality it’s a Labrador port, and I say that because the railway that comes down from the north is primarily handling material that comes out of Labrador.
“[Kami] will result in significant employment benefits and tax revenues [to Newfoundland] just on Phase 1: $1.6 billion in direct, indirect and induced income to workers and local business; $2 billion in local tax revenues; a $13-billion contribution to provincial GDP; and 24 person-years of direct and indirect and induced employment. If [Kami] goes to 16 million tonnes, those benefits will increase exponentially. Newfoundland and Labrador have two sources of future income: onshore resources and offshore resources. The last 20 years have seen tremendous advancement in the offshore but not so much in the onshore. I think now you’ll see more of a focus there.”
At press time, Alderon had 100.2 million shares trading at $2.29 for a market cap of $229.4 million.