Alderon set to ‘reboot’ Kami project in new iron-ore environment

VANCOUVER (miningweekly.com) – Project developer Alderon Iron Ore has received the updated preliminary economic assessment (PEA) for the Rose deposit, at the Kamistiatusset (Kami) iron-ore property, 10 km from Wabush, setting the stage for the revival of the high-grade project which has been shelved for several years.

"The completion of the PEA marks the beginning of the reboot of the Kami project in the new economic environment for iron-ore," stated chairperson and CEO Mark Morabito.

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 recalibrated the capital and operating costs of the Kami project to identify savings.

The new 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 $897.5-million, the Vancouver-headquartered company said on Tuesday. This is a significant improvement on the 2012 capital expenditure estimate of $1.27-billion.

The PEA calculated a pre-tax net present value, using an 8% discount, of $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 Hesteel Group, China’s second-largest steel producer, who had previously committed to buy 100% of Kami’s output.