Alderon Iron Ore Corp AXXDF

Grandich on Alderon and China

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TGR: How should investors get exposure to China without getting exposed?

PG: The simplest, safest way is through exchange-traded funds or mutual funds that specialize in a group of stocks to avoid getting caught in one particular stock or style of business.

TGR: What are some Chinese investment themes that perhaps investors can piggyback on?

PG: China has a tremendous need for resources. That appetite is not going to disappear anytime soon. It's underpinning the commodities bull market, in particular steel and iron ore.

TGR: I read a report recently that said China was seeking alternative sources of iron ore for its smelters as part of an effort to limit its reliance on iron ore from Australia and Brazil. China's looking to northeastern Canada in the Labrador Trough. Do you know anything about that?

PG: A couple of my clients are there and some of my largest personal holdings are there. The Labrador Trough is probably the most interesting play in the world right now. A Chinese company recently did a big deal with Adriana Resources Inc. (ADI:TSX.V; ANARF:OTCBB; A7R:FSE) up there.

I'm very bullish on Alderon Iron Ore Corp. (ADV:TSX; ALDFF:OTCQX). I call it the son of Consolidated Thompson because it has many of the people who were successful at Consolidated Thompson and is following Consolidated's path, but in a more expedited way. I believe it's going to go the same way and be taken over within 12 months.

TGR: Alderon has the Kami iron ore project near to Consolidated Thompson's Bloom Lake deposit in the Labrador Trough. A recent preliminary economic assessment (PEA) on the project reported a pre-tax net present value (NPV) of just above $3 billion (B). How does the Kami deposit compare with its peers?

PG: Alderon should be able to develop Kami at a lower cost, which is key in that area. There's no question that there's a lot of iron ore up there, but success is a question of cost, efficiency and effectiveness. The expectation is that it will get port access in a relatively short period. The last missing ingredient will be an offtake agreement with a Chinese company, and the company seems to be suggesting that it's in advanced talks. All in all, the next big deal in that area appears to be Alderon.

A year from now, Alderon could be worth $10?12/share based on what Consolidated Thompson was worth. It's a legitimate target to have in the back of our minds.


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