Alderon Concludes Power Purchase Agreement for the Kami Project
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Feb 25, 2014) -
Alderon Iron Ore Corp. (TSX:ADV)(NYSEMKT:AXX) ("Alderon" or the
"Company") is pleased to announce that it has satisfied the
remaining conditions for the confirmed power supply for the Kami
Iron Ore Project ("Kami Project"), as its affiliate The Kami Mine
Limited Partnership ("Kami LP") has entered into a Power Purchase
Agreement and security agreement (the "Security Agreement") with
Newfoundland and Labrador Hydro ("NLH"), a subsidiary company of
Nalcor Energy ("Nalcor"). Additionally, in order to fund the first
security deposit required under the Security Agreement, Kami LP has
received a $22.0 million loan from Liberty Metals & Mining
Holdings, LLC ("LMM").
"The Power Purchase
Agreement was a key infrastructure requirement and is critical in
securing the previously announced debt financing and we are very
pleased to have finalized it," says Tayfun Eldem, President and CEO
of Alderon.
Power Purchase
Agreement
The Kami LP has
entered into a Power Purchase Agreement with NLH pursuant to which
NLH agrees to sell electrical power and energy to the Kami LP and
the Kami LP agrees to purchase the same from NLH in accordance with
the terms of the Power Purchase Agreement. The signing of the Power
Purchase Agreement concludes a process that has been ongoing since
September 2011 where Alderon and the Kami LP have collaborated with
the Province of Newfoundland and Labrador and Nalcor to secure
access to power, including paying upfront engineering costs of $4.4
million.
Power will be
provided based on a rate schedule in line with the Labrador
Industrial Rates Policy published in December 2012.
Security
Agreement
Alderon announced on
February 13, 2014 that the Government of Newfoundland and Labrador
had confirmed that it will proceed with the construction of a third
transmission line from Churchill Falls to Labrador West (the "New
Transmission Line"). As an end user of the New Transmission Line,
the Kami LP will provide security for its commitment to begin
purchasing electrical power under the terms and conditions of the
PPA once the Kami Project is commissioned. Under the terms of the
Security Agreement with NLH, Kami LP has agreed to provide a total
of $65.0 million in security deposits that will each take the form
of a letter of credit that will be released to Kami LP once the
Kami Project is interconnected to the electrical system as
contemplated under the Power Purchase Agreement, and has been
commissioned and the Kami LP loading saleable product produced from
the Kami Project in two consecutive months.
The first security
deposit in the amount of $21.0 million was due on the signing of
the Security Agreement and was paid with the proceeds of the loan
from LMM. The remaining $44.0 million in security deposits will be
provided to NLH at such time as NLH can reasonably demonstrate that
it has additional existing and pending commitments for such amount
to construct the New Transmission Line. NLH is required to provide
sufficient advance notice of the timing and amounts of additional
security deposits and may not request the next security deposit
until after August 31, 2014.
Liberty Loan
LMM, a subsidiary of
Liberty Mutual Insurance and one of Alderon's strategic investment
partners, has provided a loan to the Kami LP in the amount of $22.0
million. $21.0 million of the gross proceeds of the loan will be
used to fund the first security deposit that is required by NLH in
connection with the construction of the New Transmission Line. The
remaining $1.0 million will be used for working capital purposes,
including for the payment of the establishment fee and transaction
costs.
Commencing 12 months
after the issuance of the loan, the principal amount of the loan
and any accrued but unpaid interest, become convertible at LMM's
option into Alderon common shares at a conversion price equal to
$2.376 per common share. The loan is secured with a mortgage over
the Kami Project and bears interest at a rate of 8% per annum,
payable on June 30th and December 31st of each year. A 1.5%
establishment fee is payable to LMM in connection with the loan.
Subject to prepayment in accordance with the terms of the loan, the
maturity date of the loan is December 31, 2018.
About Alderon
Alderon is a leading
iron ore development company in Canada with offices in Montreal,
Vancouver, St. John's and Labrador City. The Kami Project, owned
75% by Alderon and 25% by Hebei Iron & Steel Group Co. Ltd.
("HBIS") through The Kami Mine Limited Partnership, is located
within Canada's premier iron ore district and is surrounded by four
producing iron ore mines. Its port handling facilities are located
in Sept-Iles, the leading iron ore port in North America. The
Alderon team is comprised of skilled professionals with significant
iron ore expertise to advance Kami towards production. HBIS is
Alderon's strategic partner in the development of the Kami Project
and China's largest steel producer.
For more information
on Alderon, please visit our website at www.alderonironore.com.
ALDERON IRON ORE
CORP.
On behalf of the
Board
Mark J
Morabito, Executive Chairman
Cautionary Note
Regarding Forward-Looking Information
This press
release contains "forward-looking information" within the meaning
of the U.S. Private Securities Litigation Reform Act and Canadian
securities laws concerning anticipated developments and events that
may occur in the future. Forward-looking information contained in
this press release include, but are not limited to, statements with
respect to (i) the development of the Kami Project; (ii) the
construction of the new transmission line; (iii) the supply of
power for the Kami Project; (iv) the rate schedule for the supply
of power; (v) the provision of additional security deposits; and
(vi) LMM's conversion rights under the loan.
In certain
cases, forward-looking information can be identified by the use of
words such as "plans", "expects" or "does not expect", "is
expected", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates" or "does not anticipate", or "believes",
or variations of such words and phrases or state that certain
actions, events or results "may", "could", "would", "might" or
"will be taken", "occur" or "be achieved" suggesting future
outcomes, or other expectations, beliefs, plans, objectives,
assumptions, intentions or statements about future events or
performance. Forward-looking information contained in this press
release is based on certain factors and assumptions regarding,
among other things, receipt of governmental and other approvals,
the estimation of mineral reserves and resources, the realization
of resource estimates, iron ore and other metal prices, the timing
and amount of future exploration and development expenditures, the
estimation of initial and sustaining capital requirements, the
estimation of labour and operating costs, the availability of
necessary financing and materials to continue to explore
and develop the Kami Property in the short and long-term, the
progress of exploration and development activities, the receipt of
necessary regulatory approvals, the estimation of insurance
coverage, and assumptions with respect to currency fluctuations,
environmental risks, title disputes or claims, and other similar
matters. While the Company considers these assumptions to be
reasonable based on information currently available to it, they may
prove to be incorrect.
Forward looking
information involves known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by
the forward-looking information. Such factors include risks
inherent in the exploration and development of mineral deposits,
including risks relating to changes in project parameters as plans
continue to be redefined including the possibility that mining
operations may not commence at the Kami Property, risks relating to
variations in mineral resources, grade or recovery rates resulting
from current exploration and development activities, risks relating
to the ability to access rail transportation, sources of power and
port facilities, risks relating to changes in iron ore prices and
the worldwide demand for and supply of iron ore and related
products, risks related to increased competition in the market for
iron ore and related products and in the mining industry generally,
risks related to current global financial conditions, uncertainties
inherent in the estimation of mineral resources, access and supply
risks, reliance on key personnel, operational risks inherent in the
conduct of mining activities, including the risk of accidents,
labour disputes, increases in capital and operating costs and the
risk of delays or increased costs that might be encountered during
the development process, regulatory risks, including risks relating
to the acquisition of the necessary licences and permits,
financing, capitalization and liquidity risks, including the risk
that the financing necessary to fund the exploration and
development activities at the Kami Property may not be available on
satisfactory terms, or at all, risks related to disputes concerning
property titles and interest, risks related to disputes with
Aboriginal groups, environmental risks, and the additional risks
identified in the "Risk Factors" section of the Company's Annual
Information Form for the most recently completed financial year,
which is included in its Annual Report on Form 40-F filed with the
U.S. Securities and Exchange Commission (the "SEC") or other
reports and filings with applicable Canadian securities regulators
and the SEC. Accordingly, readers should not place undue reliance
on forward-looking information. The forward-looking information is
made as of the date of this press release. Except as required by
applicable securities laws, the Company does not undertake any
obligation to publicly update or revise any forward-looking
information.
Alderon Iron Ore Corp.Montreal
Office514-281-9434514-281-5048Alderon Iron Ore Corp.Vancouver
Office604-681-8030604-681-8039Alderon Iron Ore Corp.Evelyn
Cox1-866-683-8030 ext.
223info@alderonironore.comwww.alderonironore.com
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