TORONTO Hebei Iron &
Steel Group Co. Ltd., Chinas largest steelmaker, plans to
invest Canadian $194 million ($194.6 million) in Alderon Iron
Ore Corp. and its Kami iron ore project in the Canadian
province of Newfoundland and Labrador.
Under the terms of the deal,
Hebei will acquire 19.9 percent of Alderons outstanding
common shares, as well as a 25-percent interest in a newly
formed limited partnership that will own the Kami project,
Montreal-based Alderon said.
Hebei also has agreed to buy
iron ore produced from the Kami project, Alderon said. That
amounts to 60 percent of annual production from Kami, up to a
maximum of 4.8 million tonnes for the first 8 million tonnes of
iron ore concentrate produced from the project annually.
In addition, Heibei has agreed
to help obtain financing from Chinese banks for the Kami
project, Alderon said, adding that the Chinese steelmaker has
the right to nominate two directors to Alderons
"China continues to be one of
the strongest and most dynamic economies globally with
significant expertise in the iron ore and steel industry,"
Alderon executive chairman Mark Morabito said in a statement
Friday. "Alderon now has both the capital and the China market
access to build a world-class company."
Alderons Kami project
should give Hebei Iron & Steel access to high-quality iron
ore in a strategic location, Hebei chairman Wang Yifang said in
a statement. "This is an important transaction in the push of
Chinas iron and steel enterprises to invest in overseas
mining assets," Wang said, noting that the deal would allow his
company to "lock up" a long-term supply of ore and to improve
the steelmakers operational performance.
The transaction with Hebei
"validates and materially derisks" the Kami project, Alderon
president and chief executive officer Tayfun Eldem said. With
financing from Chinas largest steelmaker and potential
access to Chinese banks, he said the company was poised to
become "the next significant iron ore producer in Newfoundland
The transaction remains subject
to approvals from the Chinese government, as well as the
Toronto Stock Exchange (TSX) and the New York Stock Exchange
Alderons shares, which are
listed on both exchanges, jumped early Friday even as markets
generally trended downward. The companys shares hit an
intraday high of $3.83 each on the NYSE Amex before edging back
to $3.50, up 0.6 percent from the previous day. On the TSX,
Alderons shares shot as high as C$3.83 ($3.84) apiece
before stepping back to C$3.50 ($3.51), up 1.7 percent vs.