All-Canadian royalty portfolio
Kami Iron Ore Royalty / Alderon Equity (NL, Canada)
Altius entered into an agreement with respect to its Kami iron ore project in November 2009 as part of its merchant-banking like approach to co-found a new public company to explore the project and western Labrador region. The agreement resulted in the restructuring and financing of Alderon Iron Ore Corp. (ADV:TSX) who in December 2010 fulfilled its option agreement terms with Altius to earn 100% interest in the Kamistiatusset iron ore project ("Kami") by issuing Altius 32,285,006 payment shares of Alderon. Altius also retains a 3% gross sales royalty relating to any potential future mining operations.
Since that time Alderon has achieved a significant number of milestones, the most significant of which was the completion of a Feasibility Study Report ("FS") regarding the Kami Iron Ore Property completed by BBA Inc., Stantec, and Watts, Griffis and McOuat Ltd. Consulting Ltd. effective Dec. 17, 2012. The National Instrument 43-101-compliant report summarizing the results of the FS was filed on SEDAR on January 16, 2013.
More recently in March 2017 Alderon filed an updated and revsied National Instrument 43-101 technical report entitled "Rescoped preliminary economic assessment of the Kamistiatusset (Kami) iron ore property, Labrador," dated effective Feb. 28, 2017. The report is with respect to Alderon's preliminary economic assessment (PEA) for its Kami iron ore project and replaces the company's previous 2012 feasibility study noted above.
Highlights of the 2017 Kami project PEA:
• Estimated pretax net present value (NPV) at 8-per-cent discount rate is $1,377-million (U.S.) based on an average production rate of 7.8 million tonnes per year of iron ore concentrate at a grade of 65.2 per cent iron over the life of the mine.
•Total estimated capital cost (excluding sustaining capital) is $897.5-million (U.S.), reduced from $1.3-billion (U.S.) in the 2012 feasibility study (1).
• Average estimated operating cost is $31.08 (U.S.) per tonne, reduced from $42.17 (U.S.) per tonne in the 2012 feasibility study (1).
•The FOB (freight on board) concentrate sales price used in the PEA is $65.30 (U.S.) per tonne. This price was derived using an iron ore price that is well below the current spot price.
•Estimated mine life of 24 years;
•Pretax internal rate of return (IRR) for the project is 23.8 per cent.
• Projected payback period is 3.9 years.
(1) The 2012 feasibility study used an exchange rate of $1 (Canadian) to $1 (U.S.) and was in constant fourth quarter 2012 dollars. No escalation or inflation was applied to costs to bring them to first quarter 2017 dollars. The exchange rate used in this current PEA is $1 (Canadian) to 77 U.S. cents.
On a posttax basis, the PEA shows an NPV of $712-million (U.S.) at a cash flow discount rate of 8 per cent. The posttax IRR for the project is 17.9 per cent and the payback period is 4.7 years. The posttax analysis is based on a number of assumptions fully set out in the report.
For further information on Alderon's development plans at Kami please visit Alderon's website.
Alderon is the third special purpose company co-founded by Altius since 2005 in its proven merchant banking business strategy.