Alderon Iron adds Chinese partner to Kami mine

The Kami open-pit iron ore mine is located to the south of Labrador City and Wabush in the province of Newfoundland and Labrador. Credit: Alderon Iron Ore

Alderon Iron Ore (TSX: IRON) has entered into a letter of intent with China's Tunghsu Group pursuant to which Tunghsu will acquire a 26% to 38% interest in the Kami Mine Limited Partnership (Kami LP) for consideration of between $15 million to $23 million.

A portion of the funds received from this investment will be used to repay the $14 million loan facility due to Sprott Resource Lending. As a result of the LOI, Sprott has agreed to a further extension of the maturity date of the loan facility to March 31, 2020.

Tunghsu will be the second Chinese partner for the proposed western Labrador iron ore mine, with HBIS Group already owning a 25% interest in Kami LP.

Alderon believes that by increasing the Chinese content of the Kami LP, it will much better position the Kami project to obtain financing from Chinese banks and institutions. The removal of the loan facility will also remove the associated debt overhang.

The Kami project is located in the Labrador Trough and is surrounded by three producing iron ore mines. Once developed, the mine will operate for 23 years, producing an average of 7.84 million tonnes a year of iron ore concentrate.