Alderon Iron Ore Corp. says it has secured the power it needs to operate its proposed Kami mine in western Labrador.
The company said Tuesday it's concluded a power-puchase agreement with Newfoundland and Labrador Hydro that will kick in once a third transmission line from Churchill Falls to the region is up and running.
"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," said Alderon's president and CEO Tayfun Eldem.
Alderon said it's contributing $4.4 million toward the engineering costs of building the third transmission line, which was formally announced by the province on Feb. 13.
The company said power will be provided based on a rate schedule in line with the Labrador Industrial Rates Policy effective December 2012. But Alderon first had to provide $65 million in financial security for its promise to purchase the power from Hydro's parent company Nalcor.
Funded with loan
The first instalment of $21 million was due when the security agreement was recently signed, and was paid through a $22-million loan from Liberty Mutual Insurance, which Alderson refers to as one of its strategic investment partners. The remaining $1 million will go toward working capital costs such as payment of establishment fess and transaction costs.
The latest development in the Kami project follows recent environmental approvals from both the provincial and federal governments.
Alderdon noted the project is near the established mining towns of Wabush and Labrador City, and is close to a railway and deep-sea port "which can provide year-round access to global markets."
Alderon owns 75 per cent of the Kami iron ore project. The other 25 per cent is held by Hebei Iron and Steel Group, the largest steel producer in China, and considered the third largest in the world.
Commercial production of ore from the Kami mine is expected to begin in late 2015.
The mine has an estimated life of 30 years.
Kami comes from the Labrador City town motto of Kamistiatusset, a Naskapi word meaning "land of the hard-working people."