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The development puts a question mark over the company's continued 75% ownership claim to the direct-shipping Kami project in the Labrador Trough of Atlantic Canada.
Citing the volatility and uncertainty created by COVID-19, Alderon and prospective Chinese investment partner Tungshu Group announced late last month a proposed $15-$23 million investment in Alderon would not proceed.
Adding a second Chinese partner and increasing Chinese participation in Kami would have better positioned the project to secure financing from Chinese banks and institutions, while removal of the Sprott loan would also have deleted the associated debt overhang. The ball is now in Sprott's court as it can move to realise the value of the loan against Alderon's 75% interest in Kami. Sprott has not decided on enforcement of its security.
Alderon said it continued to evaluate its options.
The $1 billion Kami project is being undertaken under the banner of the Kami Mine Limited Partnership, in which HBIS Group has a 25% stake. Its current funding push is occuring against the backdrop of a world economic slowdown and efforts to stop the spread of the coronavirus that have already seen nearby producers shutter operations, including Champion Iron's Bloom Lake at the south end of the Labrador Trough.
Kami is planned to produce 65.2%-iron-content concentrate with low impurities for shipping through the Port of SeptÎles in Quebec. All production is contracted,
Alderon shares (IRON:TSX) have slipped 76% in the past 12 months, hitting a new low for the period of C6.5c on Wednesday.
The company is capitalisef at $9 million (US$6.4 million).