TSX-IRON:
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Kami Project

With the recent completion of an updated Preliminary Economic Assessment and Economic Impact Assessment, Alderon is re-booting its Kami Project to take advantage of improved iron ore prices, reduced CAPEX requirements, and available infrastructure. With its access to skilled labour, quality infrastructure, and a high-grade deposit, Kami will deliver a quality product that is cost-effectively shipped to customers around the world.

Location: Ideally situated in the Labrador Trough, Canada’s premier iron ore district

Infrastructure: Year-round access to the global market through via nearby railway and deep-water dock facility; paved highway and powerlines are also easily accessible

Partnerships: Strategic partnerships with 100% off-take agreements in place

Product: High-grade iron ore with low deleterious elements will fetch a premium price

The Kami Property is strategically located next to the mining towns of Wabush, Labrador City, and Fermont, near the provincial borderline between Quebec and Labrador

  • Paved highway only 2.5km away
  • Access to low-cost electricity with powerlines 15.5km away
  • Common carrier railway, with over 50 million tonnes of capacity, 14.5km away to transport material to deep water port
  • Multi-user deep-water port  provides access year-round to global markets

Kami Location Map LandStatusRoads Inset v4

The mineral resource estimate is effective December 17, 2012. For further information, please refer to the Company’s February 28, 2017 news release (also available on SEDAR at www.sedar.com).

NI 43-101 Mineral Resource Estimate
(15% cut-off grade)

Zone Category Tonnes (Million) Tfe%
Rose Central Measured 249.9 29.4
  Indicated 294.5 28.5
  Total M&I 544.4 28.9
  Inferred 160.7 28.9
       
Rose North Measured 236.3 30.3
  Indicated 312.5 30.5
  Total M&I 548.8 30.4
  Inferred 287.1 29.8
       
Mills Lake Measured 50.7 30.5
  Indicated 130.6 29.5
  Total M&I 181.3 29.8
  Inferred 74.8 29.3
       
Total Measured & Indicated 1,274.5 29.8
Total Inferred 522.6 29.5

Click to view the NI 43-101 Technical Report, “Re-Scoped Preliminary Economic Assessment of the Kamistiatusset (Kami) Iron Ore Property, Labrador”

Click to view the February 28, 2017 news release announcing the PEA

Alderon released highlights of the updated Preliminary Economic Assessment (PEA) for its Kami Project on February 28, 2017.  The PEA was prepared as a result of a re-scoping exercise to identify cost savings for the development of the Kami iron ore project. 

Completion of the updated PEA marks the re-booting of the Kami Project; key project metrics, including operating costs and CAPEX, show a marked improvement from the company’s 2012 Feasibility Study. Cost savings were identified based on optimization initiatives to account for new market conditions and the availability of new infrastructure in the Labrador Trough.

The updated PEA economic analysis is based on an FOB concentrate iron ore price of US$69.40/tonne for 62% Fe. The results of the PEA, and a comparison to the 2012 Feasibility Study, are shown in the table below (pre-tax, USD):

    2017 PEA 2012 FS(1)
NPV at 8% discount rate US$ 1,377 M  3,244 M 
IRR   23.8%  29.3% 
Total Initial Capital Cost US$ 897.5 M  1,273 M 
Average Estimated Operating Costs (loaded in ship Port of Sept-Îles) US$ 31.08 42.17 
FOB Concentrate Sales Price Forecast Per Tonne US$ 65.30 102 - 107
Estimated Mine Life   24 years 30 years
Projected Years to Payback   3.9 3.1
  1. The 2012 Feasibility Study used an exchange rate of $1.00CDN = US$1.00 and was in constant Q4-2012 dollars. No escalation or inflation was applied to costs to bring them to Q1-2017 dollars.

On a post-tax basis, the PEA shows a NPV of US$712 million at a cash flow discount rate of 8%; the post-tax IRR is 17.9% and the payback period is 4.7 years. (See PEA report for complete post-tax analysis assumptions.)

Despite the significant reduction in initial and sustaining capital costs as well as operating costs, the NPV and IRR are lower and the payback period is longer than in the 2012 Feasibility Study, in large part due to the 36% reduction in the long-term FOB concentrate sales price forecast per tonne.

The PEA was completed by BBA Inc. (“BBA”) located in Montreal, Quebec, Gemtec Limited (“Gemtec”) located in St. John’s, Newfoundland & Labrador, and Watts, Griffis and McOuat Limited (“WGM”) located in Toronto, Ontario.  

Conceptual Site Plan with claims v2
Conceptual Site Plan with claims

Figure 16
Selling Price Sensitivity (discounted pit shells section N1860m)

Click to view the Economic Impact Analysis of Alderon’s Kami Iron Ore Project

Alderon released highlights of the updated Economic Impact Assessment (EIA) for its Kami Project on April 5, 2017.  The Economic Impact Assessment was based on the production profile, operating cost assumptions and capital cost projections included in the updated PEA: “Re-Scoped Preliminary Economic Assessment of the Kamistiatusset (Kami) Iron Ore Property, Labrador”, effective February 28, 2017. All figures include direct, indirect and induced effects from the Kami Project.

july31 2017 chart1

july31 2017 chart2

Alderon was released from both the Federal and Provincial Environmental Assessment (EA) Processes for the Kami Iron Ore Project in Q1 2014. A timeline of the EA process milestones is shown below. Alderon engaged with stakeholders throughout the EA process and public input influenced the resulting project plan. 

project_timeline.jpg

EA process documentation is available for viewing using the links below:

Environmental Impact Statement Plain Language Summary, Labrador (September 2012) - English
Environmental Impact Statement Plain Language Summary, Labrador (September 2012) - French
Environmental Impact Statement Plain Language Summary, Quebec (September 2012) - English
Environmental Impact Statement Plain Language Summary, Quebec (September 2012) - French

Kami Project Site Plan, Labrador (June 2014)

The Kami property includes 305 claims in Labrador for a total of 7,625 hectares.

Alderon acquired a 100% interest in the Kami Project from Altius Minerals Corporation by issuing 32,285,006 common shares to Altius as well as appointing John Baker (Chairman of Altius) and Brian Dalton (CEO of Altius) to the Alderon Board of Directors.  Altius will also retain a 3% gross sales royalty on iron ore concentrate from the Kami Project.

In March 2013, HBIS Group Co. Ltd. (formerly Hebei Iron & Steel Group) contributed C$119.9 million in exchange for a 25% interest in the Kami Limited Partnership which was established to own the Kami Project.  Alderon has the remaining 75% interest.

The Sokoman Formation, also known as the Wabush Iron Formation, is the ore-bearing formation in the Wabush Lake-Mount Wright area. It consists of mainly semi-massive bands or layers and disseminations of magnetite and/or specular hematite in recrystallized chert and interlayered with bands of chert with iron carbonates and iron silicates. The Sokoman Formation is subdivided into Lower, Middle and Upper Members.

The Lower Member (LIF) consists of a 0 - 75 m thick sequence of fine to coarse grained banded quartz-carbonate, and/or iron-carbonate (i.e. siderite, ankerite and ferroan-dolomite), and/or iron silicate ( i.e. grunerite, cummingtonite, actinolite, garnets), and/or iron-carbonate-silicate units. Mixtures of these units can occur both vertically and laterally. This member may contain iron ore locally.

The Middle Member (MIF) forms the principal iron ore unit and consists of a 45 - 110m thick sequence of quartz-magnetite, and/or quartz-specularite-magnetite, and/or quartz-specularite-magnetite-carbonate, and/or quartz-specularite-magnetite anthophyllite gneiss and schist units. Actinolite and grunerite rich bands can be present in this member. Martite can also occur in weathered zones by alteration of magnetite.

The Upper Member (UIF) consists of a 45 - 75 m thick sequence similar in composition to the Lower Member and can generally only be differentiated through their contact relationships with the overlying and underlying formations supported by detailed structural interpretations.

The hydrous iron oxides, limonite and/or goethite, have been observed in all members of the Sokoman Fm. Limonite and/or goethite are present in weathered and fractured zones and are derived primarily from the alteration of iron carbonates. Pyrolusite (MnO2) was also observed in all members of the Sokoman Formation and is typically associated with surficial or supergene enrichment, extending to depth along and adjacent to fault and fractured zones.

1970's: airborne surveys

1978: lake bottom sediment geochemical program by LM&E

1979: limited four line (3,500m) ground magnetic survey in Mills Lake area; one hole (28m) in Elfie Lake area by LM&E

1982: 51m hole drilled with 2m of iron oxide formation intersected

1985: limited field work by LM&E in northern part of Altius ground

2001: airborne geophysical survey by IOCC; although the Altius claim area was recommended by SRK as a high priority area, no follow-up work is recorded

For information on the Qualified Person, as defined by National Instrument 43-101, who has reviewed and approved the disclosure above, please click here.