VANCOUVER, BC --(Marketwired - April 05, 2017) - Alderon Iron Ore Corp. (TSX: IRON) ("Alderon" or the "Company") today released an independent Economic Impact Assessment ("EIA") of the Kamistiatusset ("Kami") Iron Ore Project that indicates significant economic benefits and positive implications for the economies of Newfoundland and Labrador, Quebec and Canada. The Kami Project, which is located in the Labrador Trough, Canada's premier iron ore district, is expected to create more than 100,000 direct, indirect and induced jobs as well as generate $7.6 billion in incomes to workers and businesses, $4.4 billion in total revenue for federal and provincial treasuries and $19.5 billion in GDP over a 26-year period, which includes two years of construction activities. All dollar estimates are denoted in Canadian currency unless otherwise stated.
CEO Commentary
"The release of an independent economic impact assessment represents another significant milestone in our efforts to effectively re-boot the Kami Project and capitalize on improving iron ore market fundamentals," said Mark Morabito, Chairman and CEO of Alderon Iron Ore Corp. "The EIA results provide clear validation that Kami will have a positive economic impact in Labrador and beyond as demonstrated by the more than 100,000 per person years of employment that it is estimated to produce and an estimated $7.6 billion in total incomes expected over the life of the project.
"In Newfoundland and Labrador alone, we expect that Kami will create approximately 32,000 direct, and spinoff jobs, generate more than $2.2 billion in total incomes to workers and businesses and contribute more than $1.8 billion in much needed revenue for the provincial treasury."
The EIA was prepared by Strategic Concepts, Inc. (SCI) and Dr. Wade Locke of Memorial University on behalf of Alderon for the purposes of evaluating the economic impacts expected to emanate from the capital and operating expenditures associated with the development of the Kami Project. The Kami Project's economic impacts were analyzed for the economies for Newfoundland and Labrador, Quebec, Ontario, the other Provinces of Canada and Canada as a whole.
Kami's Economic Impact Estimated for Newfoundland and Labrador
The EIA estimates that the Kami Project will, over the life of the project, generate the following benefits for the people, communities and the Government of Newfoundland and Labrador:
- $2.2 billion in direct, indirect and induced incomes to workers and local businesses;
- Approximately 32,000 person years of direct, indirect and induced employment during construction and operations;
- Approximately $1.8 billion in treasury contributions from total direct, indirect and induced taxes; and
- $14 billion in contribution to the provincial GDP through incomes generation and the production undertaken.
Kami's Economic Impact Estimated for Quebec
The independent assessment anticipates that the Kami Project will generate the following benefits for the people, communities and the Government of Quebec:
- $3.2 billion in direct, indirect and induced incomes to workers and local businesses;
- 42,260 person years of direct, indirect and induced employment during construction and operations;
- $459 million in treasury contributions through direct, indirect and induced taxes; and
- $3.2 billion contribution to the provincial GDP.
Kami's Economic Impact Estimated for Canada
The independent assessment calculates that the Kami Project will generate the following benefits for the people, communities, provincial governments and the Government of Canada:
- $7.6 billion in direct, indirect and induced incomes to workers and local businesses;
- 100,405 person years of direct, indirect and induced employment during construction and operations;
- $4.4 billion in total treasury contributions, including $2.0 billion in total contributions to the Federal treasury, through direct, indirect and induced taxes; and
- $19.5 billion in contribution to the national GDP through income and production.
"Completion of the EIA now paves the way for the next phase of Kami's development," added Mr. Morabito. "Against a backdrop of improving iron ore sector fundamentals, our near-term focus will centre on gaining access to the idled Scully pit for use as a tailings facility and strengthening our leadership team."
The Economic Impact Assessment was based on the production profile, operating cost assumptions and capital cost projections included in the technical report entitled "Re-Scoped Preliminary Economic Assessment of the Kamistiatusset (Kami) Iron Ore Property, Labrador", dated effective February 28 2017 (the "PEA Report"). The economic impacts associated with the development of Kami were analysed from a number of perspectives, including cash-flow, employment, income, GDP, taxation and sensitivity to changes in commodity prices, capital and operating costs.
Wabush Update
The Company has submitted a binding offer (the "Offer") to purchase certain assets related to the Scully Mine that would be required for the Company to dispose of the tailings produced from the Kami Project as described in the PEA (the "Scully Assets"). As consideration for the Scully Assets, the Company has offered to pay $1,000,000 and assume certain liabilities and obligations associated with ownership and operation of the Scully Assets. The Company paid a deposit in the amount of $250,000 which shall be applied against the purchase price on closing.
The Offer was submitted in connection with formal sale procedures developed by Wabush Mines, Wabush Resources Inc., Wabush Iron Co. Limited, Wabush Lake Railway Company Limited (collectively, the "Vendors") in consultation with FTI Consulting Canada Inc. (the "Monitor"). In accordance with the sale procedures, all offers were due before 5:00 p.m. (Toronto time) on March 27, 2017. The Vendors, in consultation with the Monitor, will review all offers that were submitted and determine whether to accept any of the offers. In the event that the Company's Offer is rejected, the deposit shall be returned to the Company.
If the Company's Offer is accepted, the closing of any transaction related to the acquisition of the Scully Assets is subject to numerous conditions including the execution of a definitive agreement on terms acceptable to the Vendors and the Company, receipt of regulatory approvals, receipt of court approval, and other conditions customary to a transaction of this nature. There is no certainty that the Company's Offer will be accepted, or if the Offer is accepted, that a transaction to acquire the Scully Assets will be successfully concluded.
Preliminary Economic Assessment
Based on the PEA Report, it is estimated the Kami project will require approximately 29 months of construction, and is expected to produce 182 million tonnes of iron ore concentrate over a 24 year operational period. Alderon commissioned the PEA Report to identify capital and operational cost savings as a result of the recent state of the iron ore market.
The following highlights of the PEA Report demonstrate the improved market fundamentals of the project (all amounts in US$):
- Estimated pre-tax Net Present Value (NPV) at 8% discount rate is US$1.377 billion based on an average production rate of 7.8 million tonnes per year of iron ore concentrate at a grade of 65.2% iron, over the life of the mine;
- Total estimated capital cost (excluding sustaining capital) is US$897.5 million, reduced from US$1.3 billion in the 2012 Feasibility Study*;
- Average estimated operating cost is US$31.08/tonne, reduced from US$42.17/tonne in the 2012 Feasibility Study*;
- The FOB concentrate sales price used in the PEA is US$65.30 per tonne. This price was derived using an iron ore price that is well below the current spot price;
- Internal rate of return (pre-tax) for the project is 23.8%; and
- Projected payback period is 3.9 years.
*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. The exchange rate used in this current PEA is $1.00CDN = US$0.77.
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 for the project is 17.9% and the payback period is 4.7 years. The post-tax analysis is based on a number of assumptions fully set out in the Report.
The PEA Report was prepared under the supervision of Mr. Angelo Grandillo, P.Eng, of BBA, a Qualified Person as defined by NI 43-101, with contributions from Gemtec and WGM. Mr. Grandillo is a Qualified Person as defined by NI 43-101 and Mr. Grandillo is independent of Alderon. Mr. Grandillo has reviewed and approved the technical information contained in this section of the news release. Mr. Grandillo has verified all the data underlying the technical information disclosed in this section of the news release.