VANCOUVER (miningweekly.com) – Project developer Alderon Iron Ore has settled a dispute with Newfoundland and Labrador Hydro regarding a C$21-million letter of credit it posted for the construction of a new transmission line to the Labrador West area.
Under the settlement, Alderon subsidiary Kami Mine Limited Partnership will receive an C$11.5-million refund, plus accrued interest, as well as a C$750 000 restart credit should it decide to proceed with the flagship Kami project within the next five years.
Alderon further said it has enlisted the expertise of consulting engineering firm BBA to update the re-scoped preliminary economic assessment (PEA) on the project, which was completed in February.
The Wabush Scully mine was recently acquired by a third party that has stated its intention to reopen the mine. As a result, Alderon and BBA will be updating the PEA to remove the components related to the Wabush Scully mine. The use of the depleted pit at the Wabush Scully mine was just one of the several cost savings that were identified as part of the re-scope of the Kami project and the updated PEA will still encompass the other cost savings as outlined in the previous PEA.
Alderon, nevertheless, stated that the Kami project remains an attractive development prospect owing to its high-grade iron-ore concentrate, containing few impurities.
Stricter environmental regulation has driven demand for the premium product that will be produced from Kami, as it allows end-users to meet more stringent environmental standards. In particular, China's bid to reduce emissions is seeing an increase in domestic steel mills switching to high-grade iron-ore products with fewer impurities.
For the type of iron-ore concentrate that the Kami project will produce (65% iron content), there is already a spread to the Platts iron-ore index price, currently pegged at $21/t above the benchmark product. This spread has widened over the last 18 months and prices for high-grade ore are expected to continue to increase as environmental regulation becomes more stringent, Alderon noted.