Below are responses from Mark Morabito for all three companies to my question, “How has the recent market action impacted your company and what’s your outlook going forward”
Alderon Iron Ore Corp.
Alderon, like every other mineral exploration and development company, has seen its share price decline with the current economic uncertainties; however, it remains the lowest risk iron ore development company in the Labrador Trough. Alderon is in the fortunate position of having secured an off-take partner, Hebei Iron & Steel Group (China’s largest steel producer). This latest achievement has significantly de-risked the Kami iron ore project and has allowed the company to continue developing the project into the next major iron ore mine in the Labrador Trough as well as begin purchasing long lead equipment. The total initial investment from Hebei of $182.2 million, which was completed last month, not only ensures the long term success of Kami, as Hebei is committed to purchasing 60% of the annual production, it also strengthens the company’s potential to finance the remainder of the capital for the project through global markets, including Chinese banks.
Looking forward, the outlook for Alderon remains very positive with the development of the Kami project on track as planned. The company expects to be released from the Environmental Assessment process and have all of its construction permits in hand by Q4 of this year. This will allow mine construction to begin, which is scheduled to be completed in the second half of 2015, followed by commercial production shortly thereafter. Alderon has made impressive strides in a relatively short period of time and in the face of some very difficult markets, which is a testament to both the quality of the Kami project as well as the dedication and experience of its management team.
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Excelsior Mining Corp.
Despite the current market turbulence, our team is confident that our path moving forward is solid and that we will continue to advance the Gunnison Copper project towards our planned goal of production. The fundamentals of the Gunnison project remain very strong. The project has a sizeable resource, which was upgraded last month to 3.21 billion pounds of oxide copper Measured and Indicated (498 million tons at 0.32%) and 0.83 billion pounds oxide copper Inferred (156 million tons at 0.27%), and has the potential to be mined using in-situ recovery methods, which would allow the oxide copper to be recovered at a much lower cost than conventional mining methods. The project also has no royalties and no debt, which affords us the flexibility of a variety of different financing options which is a huge advantage as the company is currently working towards financing the completion of a prefeasibility study.
Another reason that we are optimistic is that the outlook for copper continues to be strong. As summarized in a recent CIBC junior copper report, the long term outlook for copper is quite positive. With declining head grades and the inevitable supply disruptions, new copper projects will need to be developed in order to keep pace with even modest expectations for demand growth. The strength of our company and the Gunnison project was further validated in this report which ranked Excelsior 1st for EV/lb Cu among 32 global junior copper developers and explorers, 6th for net cash costs, 8th for Capex/lb of annual Cu production and 13th overall. In the midst of difficult market conditions, we feel that we are managing everything that is within our control and that our efforts will be rewarded with success.
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Ridgemont Iron Ore Corp.
Ridgemont’s recently announced merger with Castillian Resources is an excellent example of how management teams need to think outside the box in order to preserve shareholder value in the current market. While Ridgemont’s Lac Virot iron ore project definitely has potential, the very early stage of the project has made it extremely difficult to finance in the current climate. This is no more clearly illustrated than the fact that Ridgemont is actually trading below cash value. The proposed merger with Castillian will enable Ridgemont shareholders to realize a potential 62% premium to Ridgemont’s current share price. When all is said and done, Ridgemont will actually close at a premium to cash on-hand, a dramatic reversal to the current situation. The all-stock nature of the merger will afford current Ridgemont shareholders the opportunity to benefit from the advancement of Castillian’s Hope Bay gold project. This project is significantly more advanced than any of Ridgemont’s current projects, with an NI 43-101 mineral resource estimate and the company working towards completing a PEA by early next year. While we certainly would have liked the opportunity to continue to advance Lac Virot, our sub- $0.05 share price was clearly telling us we could not continue alone. The proposed merger will create a more strongly financed company, focused on the Hope Bay gold project, affording the opportunity for Ridgemont shareholders to realize value accretion from their investment.