Alderon implodes after failing to repay $14M loan, losing control of Labrador project
Company says creditor will seize planned iron ore mine and all related assets
Alderon Iron Ore Inc. has run out of options to repay a $14-million loan, and says it has been told its creditor will seize Labrador's Kami project and all related assets.
In a press release, Alderon announced a spate of resignations, including its CEO, CFO, four members of the board of directors, along with its "remaining officers."
The implosion of Alderon throws into doubt the future of a potential project and economic driver for Labrador West.
"It's going to have a long-term effect on the growth of our community, for sure," Labrador City Mayor Fabian Benoit told CBC News.
Benoit said the project could have created 300 to 400 jobs in the region.
"Hopefully, the economy will pick back up and there will be a great need for the resources, and somebody else will come in and take over where Alderon unfortunately had to leave off," Benoit said.
Alderon had closed the deal to borrow $14 million from Sprott Resource Lending in the summer of 2018.
Early last year, Alderon officials were sounding an optimistic note, saying work was underway to make the $1-billion Kami project a reality. CEO Tayfun Eldem expressed hope that construction would start "sometime early in 2020."
Alderon was supposed to repay the $14-million loan by the end of 2019. But that didn't happen. The deadline got extended until March 31.
In February, Alderon found a potential lifeline, announcing it had inked a letter of intent with Beijing-based Tunghsu Group Co. Ltd. to give up a big chunk of the project in exchange for enough cash to repay the loan.
But that plan fell apart in late March.
In a press release at the time, Alderon said Tungshu terminated the transaction, citing the volatility and uncertainty created by the COVID-19 pandemic — both in global financial markets and the iron ore market.
On Tuesday, Alderon said it couldn't find an alternative solution, and Sprott was moving in to seize the project and its assets.
Sprott Resource Lending did not immediately return a CBC News message Wednesday afternoon about its plans for what comes next.
According to its website, it has financed mining endeavours from Canada to Burkina Faso to Brazil to Australia.
Alderon owned 75 per cent of the Kami project, with the other 25 per cent controlled by HBIS Group Co. Ltd. of China.