ALS.TO - Altius Minerals

[bathtime]

Fraser Mackensie Metals & Mines comment June 26, 2012

Alderon Iron Ore (TSX:ADV): Analysing the Impact of a Re-priced Hebei Deal – Still a Compelling Investment

http://www.grandich.com/2012/06/grandich-client-alderon-iron-ore-6/

[beerbaron]

Anybody knows when the Hebei money is suppose to come trough?

BeerBaron

[bathtime]

I think the 90-day timeline for Chinese government approval comes around July 15. My reading of the PR is that if there is no government approval by then, Alderon can do a deal with someone else by paying a penalty fee, but I assume Alderon wants to proceed with Hebei even if approval is delayed.

[LTVALUE]

Alderon off-take partner Hebei Steel gets Chinese government approval


http://in.reuters.com/article/2012/07/08/hebei-invest-idINL3E8I800X20120708

[Liberty]

Alderon off-take partner Hebei Steel gets Chinese government approval


http://in.reuters.com/article/2012/07/08/hebei-invest-idINL3E8I800X20120708

Thanks, that's good news!

[Dazel]

The last line is the most important..."China has urged steel producers to source at least half of their production from chinese owned or Chinese projects"

The Chinese government will be subsidizing these steel companies to help that goal above...look for Kami to be fast tracked after the bankable feasibility study is released and the other Altius projects to get more interest from the Chinese....

The other forgotten factor is that china is going full speed ahead on their nuclear program...the stimulus  they will create are for large infrastructure projects...nuclear, rail etc....not housing.

Dazel.

[Dazel]

The Kami project development costs have dropped significantly in the last 6 months...while iron ore prices while coming down have remained at hugely profitable levels for Kami's economics...we see this team racing to production to take advantage of some of these costs savings for development...
At a cost per ton of below $50 make Kami very very profitable even if iron ore prices were to drop significantly more.

What investors are missing is that china has been in tightening mode for a long time....now they are stimulus focused....with trillions in foreign reserves to secure long term security of their resource needs...Kami et all fit perfectly in their plan

Dazel.


Dazel.

[Dazel]

Hebei iron ore could have used the Chinese approval as a tactic to negotiate with Alderon as we know they have pull with the government....a delay in approval would have done it...late paperwork or whatever.

It shows their commitment to the Kami project and they are likely as eager as Alderon to get to work...and reap the huge benefits of the economics...
At these levels it will be a home run investment for Hebei iron ore and everyone else involved. We expect the bankable feasibility study soon which triggers the money transfer.

After that the project will get great interest from the investment houses because over the next few years they will raise a great deal of debt financing....the investment houses will have to compete fro this financing as Hebei iron ore is huge and has the variability of cheap financing from china....today is a big step.

Dazel.

[Liberty]

Dazel, I was thinking along similar lines. If Hebei had wanted to reprice the deal or squeeze the lemon more, they probably would have done it before government approval.

But the Alderon people aren't patsies, they probably have made it clear to Hebei that if they didn't want the deal, they had other suitors waiting in the wings. So chances are that as much pressure as Hebei can put on Alderon, ADV can dish it back to them, which is why they got the deal they got.

Just speculation, but it sounds likely based on comments from the ADV CEO a few months ago (something along the lines of: "we could get a deal right now if we wanted to, but we're waiting for the right deal").

[Dazel]

Make no mistake we are speculating when we are saying that Hebei even considered anything to do with the terms of the deal...it is more likely they are pleased with being part of the tremendous opportunity in front of them as partners with Alderon...they stand to make a lot of money.

dazel.