Alderon’s positive PEA for Kami

Alderon Resources (ADV-V) says it has the ingredients in store to launch its Kamistiatusset (Kami) iron ore project in western Labrador by 2015.

That recipe for success as outlined in the company’s recent presentation include a strong market where demand is expected to double in 15 years, an experienced management team, good existing infrastructure, an ideal location, and a “world-class” resource. Kami is estimated to have 490 million indicated tonnes grading 30% iron and another 118 million inferred tonnes at 30.3% iron.

To add to that, Alderon today released a positive preliminary economic assessment (PEA) for Kami’s Rose Central zone, which hosts nearly 80% of the deposit’s current resource. The project’s Mill Lake zone hosts the remainder.

The PEA, prepared by BBA, shows Rose Central has a pre-tax net present value of US$3.07 billion, at an 8% discount, and a 40.2% internal rate of return.

It estimates that the zone can produce 8 million tonnes a year grading 65.5% iron. Commercial production is expected to start in 2015 with a mine life of 15.3 years. To build the mine it would cost about US$989 million, which excludes sustaining capital, leased equipment and closure costs. However, payback is anticipated within 2.7 years.

Now with the PEA checked off, Alderon is preparing to update Kami’s resource, which should be released shortly.

The company has recently completed a 5,000-metre winter program to the tune of $2.5 million, with the goal of outlining 200 to 300 million tonnes grading between 28 and 32% iron ore at the North Rose zone. It’s now in the midst of an $11-million summer/fall program which will include 26,000 metres to upgrade current resources, expand known zones of mineralization and target new areas of potential.

Alderon hopes to boost the current resource to 800 million to 1 billion tonnes at grades of 28-32% iron.

As the company looks to enhance its resource, it has also strengthened its management team to help bring the project online. Former Iron Ore Company of Canada executive, Tayfun Eldem, became the president and CEO of Alderon, effective Sept. 7. Tayfun held several senior roles, including vice-president expansion projects & engineering and vice-president operation & engineering, over his 20-year tenure at IOC.

As Eldem took over the helm, Alderon’s co-founders, Mark Morabito and Stan Bharti, filled the roles of executive chairman and vice chairman, respectively.  

Bharti’s Forbes & Manhattan, not surprisingly, also backs up Alderon. The merchant bank founded Consolidated Thompson Iron Mines, which had its Bloom Lake iron ore deposit some 6 km away from Kami. (Cliffs Natural Resources [CLF-N]  acquired Consolidated Thompson in May.)

Since Alderon’s wholly owned Kami project sits near the mining towns of Wabush, Labrador City and Fermont, it can easily transport material from two railway options to four different ports.

The company recently added Todd Burlingame as executive vice-president environment & aboriginal affairs and Gary Norris as executive vice-president government & community affairs. Combined the two bring a wealth of experience on permitting and licensing major projects and dealing with local, provincial and federal governments. Alderon expects to obtain all the permits for Kami by September 2013, which would be about a year after it releases the feasibility study.

On the PEA news, Alderon shares closed up 4¢ to $3.64.