Hebei Iron & Steel Group Co., Ltd. (“HBIS”), China’s largest steel producer, is pleased to announce that it has completed its initial strategic investment in the Kami iron ore project for an aggregate amount of C$182.2 million. On March 15, 2013, HBIS contributed the remaining C$119.9 million of its initial investment to Alderon Iron Ore in exchange for 25% interest in the Kami Mine Limited Partnership (Kami Project). Alderon owns the remaining 75% interest in the Kami Mine Limited Partnership.
The entire C$119.9 million of investment proceeds contributed by HBIS will be used for the continued development of the Kami Project. HBIS and Alderon will contribute to capital expenditures for the development of the Kami Project not covered by initial capital contributions and project debt financing, in accordance to the terms of the agreement governing the Kami Limited Partnership. HBIS will also use its best efforts to assist in obtaining project debt financing for the Kami Project from Chinese Banks and financial institutions around the world.
Given the shortage of high quality iron ore, HBIS believes that the Kami project provides a compelling investment opportunity. As the broader market is currently taking a more wait and see approach to iron ore demand, HBIS firmly believes that now is the ideal time to invest in upstream premium assets like Alderon Iron Ore and the Kami project. When the Kami mine is operational, HBIS will purchase 60% of the annual production of the first 8.0 million tonnes of iron ore concentrate. HBIS will also co-operate with Alderon in its efforts to attract additional off-take partners for the remaining 40% that has not been committed to HBIS.
Mr. Wang Yifang, Chairman of HBIS, said “This is our first investment in mining assets in Canada and we are very pleased with our long term strategic partnership with Alderon. This investment provides HBIS with a long term supply of high quality iron ores at attractive investment terms and will improve our operational performance and ensure the long term growth of our company.”
HBIS continues to remain optimistic about the outlook for the Chinese steel industry given the continued economic growth in China. China continues to be one of the strongest and most dynamic economies in the world with significant expertise in iron ore and the steel industry. It believes that while Chinese steel production may grow at a more moderate rate than in the past, based on infrastructure requirements in large urban centers and under-developed rural areas, China’s iron ore demand will continue to grow for years to come.
HBIS was established on June 30, 2008 through the merger of former Tangshan Iron & Steel group and Handan Iron & Steel Group. HBIS is China’s largest steel producer and the third largest in the world. HBIS ranks #269 among Fortune Global 500 in 2012. HBIS has a production capacity of 50 million tonnes. It produced 44.4 million tonnes of steel and generated RMB 250 billion of revenue in 2011. It controls 16 large operations across a number of sub-sectors of steel production, iron ore mining, trading and logistics.
Alderon is a leading iron ore development company in Canada with offices in Vancouver, Toronto, Montreal, Labrador City and St. John’s. The 75% owned Kami Project is located within Canada’s premier iron ore district and is surrounded by four producing iron ore mines. The Alderon team is comprised of skilled professionals with significant iron ore expertise to advance Kami towards production.
For more information relating to the strategic partnership please review news releases issued by Alderon on September 4, 2012 and April 13, 2012.
Cautionary Note Regarding Forward-Looking Information
This press release contains "forward-looking information" concerning anticipated developments and events that may occur in the future. Forward looking information contained in this press release include, but are not limited to, statements with respect to (i) the use of proceeds from the HBIS transaction; (ii) the funding by HBIS of costs of developing the Kami Project; (iii) the terms of the off-take agreement with HBIS; (iv) HBIS’s efforts to assist with project financing; (v) Alderon’s ability to finance the capital required to develop the Kami Project; (vi) the development of and production from the Kami Project; and (vii) the future market for iron ore and Chinese steel.
In certain cases, forward-looking information can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Forward-looking information contained in this press release is based on certain factors and assumptions regarding, among other things, the estimation of mineral reserves and resources, the realization of resource estimates, iron ore and other metal prices, the timing and amount of future exploration and development expenditures, the estimation of initial and sustaining capital requirements, the estimation of labour and operating costs, the availability of necessary financing and materials to continue to explore and develop the Kami Property (as defined herein) in the short and long-term, the progress of exploration and development activities, the receipt of necessary regulatory approvals, the completion of the environmental assessment process, the estimation of insurance coverage, and assumptions with respect to currency fluctuations, environmental risks, title disputes or claims, and other similar matters. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
Forward looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors include risks inherent in the exploration and development of mineral deposits, including risks relating to changes in project parameters as plans continue to be redefined including the possibility that mining operations may not commence at the Kami Property, risks relating to variations in mineral resources, grade or recovery rates resulting from current exploration and development activities, risks relating to the ability to access rail transportation, sources of power and port facilities, risks relating to changes in iron ore prices and the worldwide demand for and supply of iron ore and related products, risks related to increased competition in the market for iron ore and related products and in the mining industry generally, risks related to current global financial conditions, uncertainties inherent in the estimation of mineral resources, access and supply risks, reliance on key personnel, operational risks inherent in the conduct of mining activities, including the risk of accidents, labour disputes, increases in capital and operating costs and the risk of delays or increased costs that might be encountered during the development process, regulatory risks, including risks relating to the acquisition of the necessary licences and permits, financing, capitalization and liquidity risks, including the risk that the financing necessary to fund the exploration and development activities at the Kami Property may not be available on satisfactory terms, or at all, risks related to disputes concerning property titles and interest, environmental risks, and the additional risks identified in the “Risk Factors” section of the Company’s Annual Information Form for the most recently completed financial year or other reports and filings with applicable Canadian securities regulators. Accordingly, readers should not place undue reliance on forward-looking information. The forward-looking information is made as of the date of this press release. Except as required by applicable securities laws, the Company does not undertake any obligation to publicly update or revise any forward-looking information.