Alderon Iron Ore Corp AXXDF

RE: RE: What CLM did

[greenandgold]

Offtake agreements seem to be very important. Iron ore is not a uniform product: there are differences in concentration, moisture %, and impurity level that different mines produce. A solid offtake agreement with an established steelmaker verifies to the market that your product is desireable, and will be desireable for a long time. The spot market is not a place that either producers or steelmakers like to be.

Why are Chinese steelmakers signing all these offtake deals? To avoid the uncertainties, both of price and quality, of the iron ore spot market.

What's a good offtake deal? I'm going to have to trust Brian Dalton and Stan Bharti on that one.

On the rail issue, I believe the IOC railway now has lots of excess capacity, certainly enough for ADV's production. And some of these other more speculative iron ore projects are in the Labrador region are farther away than they claim with multiple billions in capex to finance. I suspect a number of them will not become economic mines.

Adriana Resources, for example, has 5 billion tonnes of iron ore at Lac Otelnuk in the Labrador Trough, but it's in a bad location. They need 815 km of rail (building rail costs $3 to $5 million per km) and probably $5 billion in total capex. I don't know if this mine is going to come online in this commodity price cycle.