Something big is happening in Labrador and, according to Alderon Resource (TSXv: ADV) Executive Chairman Mark Morabito, it's part of the most underreported story in mining. ResourceClips feature (September 28, 2011)

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The Iron Hub
Alderon Sees Massive Kami Production
~ By Greg Klein - September 28 2011
Something big is happening in Labrador and, according to Alderon Resource The reigning king of the Labrador Trough, Consolidated Thompson began produc-
TSXV:ADV Executive Chairman Mark Morabito, it’s part of the most underreported tion last year, quickly doubling its initial 8-million-tonne capacity. Last June, it was
story in mining. “Everybody knows Chinese steelmakers want to diversify their iron bought out by Cliffs Natural Resources for $4.9 billion.
ore supply away from the Big Three, which are Vale, Rio Tinto and BHP Billiton. So
the Chinese are out there making deals with earlier-stage companies. But that’s had “We’re re-categorizing and upgrading our resource with definition drilling,” Morabito
a domino effect.” continues. “We’re doing some geotechnical drilling and pit design drilling, but explo-
ration is over.”
Morabito explains that as these steelmakers are making these investments and
securing future offtake, they’re crowding out their competitors. “They’re forcing the Definition drilling continues until March or April 2012, with feasibility slated for
Koreans, Japanese, Turks and Indians into earlier-stage deals as well. So a com- completion in 3Q 2012 and permitting in 3Q 2013. Pilot production begins in 4Q
pany like ours has all sorts of future customers it can choose from.” 2014 and commercial production in 2015.
Alderon is part of a pullulating mining camp. Kami is located fewer than seven kilo-
metres from the Bloom Lake Mine that Cliffs recently picked up. Cliffs also runs the
nearby 5.5-million-tonne Wabush Mine.
Steelmaking giant ArcelorMittal owns the Mount Wright and Fire Lake mines, which
are slated for a $2.1-billion upgrade to raise production from 14 million to 24 million
tonnes by 2013.
Iron Ore Company of Canada plans to increase its 17-million-tonne Carol Project to
26 million by 2013. Additionally, there’s talk of 50 million tonnes by 2016. Rio Tinto
holds 58.7% of IOC, with Mitsubishi Corp holding another 26.2%.
When it comes to talk of Alderon’s management, Morabito’s enthusiasm overcomes
his modesty. “We’ve got the best team of any development-stage iron-ore project in
As a result, Alderon has signed something like 14 non-disclosure agreements with the world, I think,” he says. “I secured the project originally. Directors Stan Bharti and
“primarily Asian steel concerns” interested in its Kamistiatusset Project in Labrador. Bruce Humphrey were two principals with Consolidated Thompson; so we joined up
With iron ore prices projected to stay in the $180-to-$200-a-tonne range and global and brought together people who’ve been working in Newfoundland and Labrador
steelmaking expected to double over 15 to 20 years, Kami’s become a major player for years.”
in the iron ore boom of the Labrador Trough, which straddles the Quebec-Labrador
border. IOC alumni now working with Alderon include President/CEO Tayfun Eldem and
COO Brian Penney and Directors David Porter and Matt Simpson. “Our Executive
“There are no other iron ore projects in Canada that can get to production before us,” VP of Environmental and Aboriginal Affairs is Todd Burlingame,” Morabito adds. “His
says Morabito. “We’ve identified a billion-tonne-plus deposit in an area that has low- last big permitting project was the Lower Churchill hydro project, 3,000 megawatts
cost power, right beside a common-carrier railway leading to a port that’s undergo- and right in the same area with all the same stakeholders. Gary Norris was the for-
ing major expansion. And we’re going to continue our track record of success—we mer head of the Newfoundland civil service; he’s our VP of Government and Com-
under-promise, we over-deliver, and we’re going to continue doing just that.” munity Affairs. Our chief geologist, Ed Lyons, was chief geologist of Consolidated
Thompson and Director Brad Boland was its CFO.”
Anyone troubled by the semantic confusion of promising to under-promise might
consider Alderon’s ambitious timeline compared to a PEA that can, in retrospect, “So we’ve got a mix of operators and mine builders, and it’s a potent mix that gives
seem quaint. us a competitive edge,” Morabito says. “We’re taking this into production ourselves.”
Released September 8, it projected a 2.7-year payback on a $989 million CAPEX Alderon is backed by Forbes & Manhattan, the merchant bank that helped steer
with a 40.2% pre-tax IRR, a US$3.07 billion NPV discounted at 8% and a total op- Consolidated Thompson through the 2008 crisis.
erating cost excluding royalties of US$44.87 per concentrate tonne averaged over
a 15.3-year mine life. The study covers rail facilities, port expansion in Sept-Iles and At press time, Alderon had 82.7 million shares trading at $2.55 for a market cap of
“
an open pit with concentrator producing 8 million tonnes a year of 65.5% iron. $210.9 million. As of September 22 insiders held 11.9%; Altius Minerals TSX:ALS
held 39.3%; and the company had working capital of $16.2 million.
The PEA was based only on one deposit of 376 million tonnes grading 29.8% iron
indicated and 46 million tonnes grading 29.8% inferred.
Just five days later, however, an updated 43-101 reported numbers for all three We’ve got a mix between operators and
Kami deposits, boosting the indicated category to 490 million tonnes grading 30%
and the inferred to 598 million tonnes grading 30.3%.
mine builders, and it’s a potent mix that
gives us a competitive edge. We’re taking
But Alderon’s not stopping there, Morabito says. “If we convert all the inferred from this into production ourselves
the second resource estimate into the indicated, and pick up some additional
tonnage, we’re looking at a resource of 1.2 to 1.4 billion tonnes. That would make it
bigger than Consolidated Thompson.” – Mark Morabito
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