VANCOUVER (miningweekly.com) – Securing the closed Wabush mine assets is not a life or death threat to developing Alderon Iron Ore’s flagship Kamistiatusset (Kami) high-grade iron-ore property. Not securing the assets will merely be a setback, chairperson and CEO Mark Morabito told Mining Weekly Online.

In an interview on Thursday, he said the near-term focus for the project developer is to gain access to the Scully pit located, next door, for use as a tailings facility, and the company has made a C$1-million bid to acquire the assets located in the famed Labrador Trough.

“It just does not make sense to have a depleted mine sitting next door in need of remediation and we build a new tailings facility. We trust government and all stakeholders realise it,” Morabito stated, underlining that the demand for its super high-grade and clean manganese ore supports the operation either way.

The Vancouver-based company on Wednesday announced that it had made an offer to acquire the Wabush assets and assume certain liabilities and obligations associated with ownership and operation thereof. The company paid a C$250 000 deposit that will be applied against the purchase price on closing, or refunded should the offer be rejected.

Morabito pointed to the existing 2012 full bankable feasibility study in hand, which, with an update, will provide the alternative route to profitable production, slated for 2020/21. He believes iron-ore will trade at between $75/t to $90/t over the long term, enabling both development strategies.

Alderon was recently denied access to two 2016 reports on the Scully mine relating to its request for access to information under Part II of the Access to Information and Protection of Privacy Act, held by the Newfoundland and Labrador government, following Cliffs Natural Resources declaring bankruptcy of its Canadian business in 2015.

The Department of Natural Resources asserts that the Wabush mine's situation is an ongoing matter and that the disclosure of these reports, which were generated to provide advice to the public body, could negatively impact the management of the file.

"As the public is aware, there is uncertainty surrounding the future of the mine and, as such, releasing these reports at this time would impact government’s ability to proceed in the best interests of the people of the province, the current owners, the government and any possible future development," government stated in its refusal letter.

IMPACT ASSESSMENT
Alderon on Wednesday released an independent economic-impact assessment (EIA) of the Kami project that indicates significant economic benefits and positive implications for the economies of Newfoundland and Labrador, Quebec and Canada.

Located in the Labrador Trough, Canada's best iron-ore district, the project is expected to create more than 100 000 direct, indirect and induced jobs as well as generate C$7.6-billion in incomes to workers and businesses, C$4.4-billion in total revenue for federal and provincial treasuries and C$19.5-billion in gross domestic product over a 26-year period, which includes two years of construction activities.

"The release of an independent EIA represents another significant milestone in our efforts to effectively reboot the Kami project and capitalise on improving iron-ore market fundamentals. The EIA results provide clear validation that Kami will have a positive economic impact in Labrador and beyond as demonstrated by the employment [potential] that it is estimated to produce and an estimated C$7.6-billion in total incomes expected over the life of the project,” Morabito stated.

In Newfoundland and Labrador alone, Alderon expect that Kami will create about 32 000 direct, and spinoff jobs, generate more than C$2.2-billion in total incomes to workers and businesses and contribute more than C$1.8-billion in much-needed revenue for the provincial treasury.

The EIA was prepared by Strategic Concepts and Dr Wade Locke of Memorial University on behalf of Alderon to evaluate the economic impacts expected to emanate from the capital and operating expenditures associated with the development of the Kami project.

Kami will generate benefits for the people, communities and the Quebec government including C$3.2-billion in direct, indirect and induced incomes to workers and local businesses; providing 42 260 person years of direct, indirect and induced employment during construction and operations; C$459-million in treasury contributions through direct, indirect and induced taxes; and C$3.2-billion contribution to the provincial gross domestic product (GDP).

The Canadian economy will benefit through Kami generating C$7.6-billion in direct, indirect and induced incomes to workers and local businesses; 100 405 person years of direct, indirect and induced employment during construction and operations; C$4.4-billion in total treasury contributions, including C$2-billion in total contributions to the federal treasury, through direct, indirect and induced taxes; and C$19.5-billion in contribution to the national GDP through income and production.

RECALIBRATED PEA
Citing an improved iron and steel market outlook after several years of weakness, considering the closure of the nearby Wabush mine, and changes in ownership and management of assets in the Labrador, Alderon has recalibrated the capital and operating costs of the Kami project to identify savings.

The new preliminary economic assessment (PEA) proposed a 29-month construction period, followed by production of 7.8-million tonnes of 65.2% iron concentrate over a 24-year mine life. Total estimated capital cost (excluding sustaining capital) will be C$897.5-million, the Vancouver-headquartered company said on Tuesday. This is a significant improvement on the 2012 capital expenditure estimate of C$1.27-billion.

The PEA calculated a pre-tax net present value, using an 8% discount, of C$1.38-billion and an internal rate of return of 23.8%, with a payback period of 3.9 years. This is based on an iron-ore price assumption that is well below the current spot price, adjusted for 65% iron content and low impurities, Morabito pointed out.

Alderon advised that the PEA replaces the feasibility study completed in 2012. Significant portions of the PEA – geology, exploration, drilling, sampling, data verification and the resource estimate – remain unchanged.

What has changed is the replacement of the port handling and terminal facilities in the Pointe-Noire area of Sept-Îles, Quebec, with proposed access to the new multi-user terminal facility at the Port of Sept-Îles to be open to all market participants and the integration of the Wabush Scully mine property as a tailings solution.

The company now hopes to build its concentrator between the Scully mine and the old concentrator, taking advantage of the tailings management area at the closed mine. Alderon has yet to obtain tailings permits or access to the Scully property.

The Kami project is owned 75% by Alderon and 25% by HBIS Group (formerly Hebei Iron & Steel), China’s second largest steelmaker, which had previously committed to buy 60% of Kami’s output, with Glencore buying the 40% balance of yearly output.

Morabito says management has now started to implement the financing plan. “With 100% offtake for Kami in place, we are able to approach government-affiliated investment capital, which will add up to about C$400-million, giving us a good head start as we seek to secure the outstanding C$500-million,” he stated.