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Alderon Concludes Power Purchase Agreement for the Kami Project

February 25, 2014


Alderon Iron Ore Corp. (TSX: ADV) (NYSE MKT: AXX) (“Alderon” or the “Company”) is pleased to announce that it has satisfied the remaining conditions for the confirmed power supply for the Kami Iron Ore Project (“Kami Project”), as its affiliate The Kami Mine Limited Partnership (“Kami LP”) has entered into a Power Purchase Agreement and security agreement (the “Security Agreement”) with Newfoundland and Labrador Hydro (“NLH”), a subsidiary company of Nalcor Energy (“Nalcor”). Additionally, in order to fund the first security deposit required under the Security Agreement, Kami LP has received a $22.0 million loan from Liberty Metals & Mining Holdings, LLC (“LMM”).

“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,” says Tayfun Eldem, President and CEO of Alderon.

Power Purchase Agreement

The Kami LP has entered into a Power Purchase Agreement with NLH pursuant to which NLH agrees to sell electrical power and energy to the Kami LP and the Kami LP agrees to purchase the same from NLH in accordance with the terms of the Power Purchase Agreement. The signing of the Power Purchase Agreement concludes a process that has been ongoing since September 2011 where Alderon and the Kami LP have collaborated with the Province of Newfoundland and Labrador and Nalcor to secure access to power, including paying upfront engineering costs of $4.4 million.

Power will be provided based on a rate schedule in line with the Labrador Industrial Rates Policy published in December 2012.

Security Agreement

Alderon announced on February 13, 2014 that the Government of Newfoundland and Labrador had confirmed that it will proceed with the construction of a third transmission line from Churchill Falls to Labrador West (the “New Transmission Line”). As an end user of the New Transmission Line, the Kami LP will provide security for its commitment to begin purchasing electrical power under the terms and conditions of the PPA once the Kami Project is commissioned. Under the terms of the Security Agreement with NLH, Kami LP has agreed to provide a total of $65.0 million in security deposits that will each take the form of a letter of credit that will be released to Kami LP once the Kami Project is interconnected to the electrical system as contemplated under the Power Purchase Agreement, and has been commissioned and the Kami LP loading saleable product produced from the Kami Project in two consecutive months.

The first security deposit in the amount of $21.0 million was due on the signing of the Security Agreement and was paid with the proceeds of the loan from LMM. The remaining $44.0 million in security deposits will be provided to NLH at such time as NLH can reasonably demonstrate that it has additional existing and pending commitments for such amount to construct the New Transmission Line. NLH is required to provide sufficient advance notice of the timing and amounts of additional security deposits and may not request the next security deposit until after August 31, 2014.

Liberty Loan

LMM, a subsidiary of Liberty Mutual Insurance and one of Alderon’s strategic investment partners, has provided a loan to the Kami LP in the amount of $22.0 million. $21.0 million of the gross proceeds of the loan will be used to fund the first security deposit that is required by NLH in connection with the construction of the New Transmission Line. The remaining $1.0 million will be used for working capital purposes, including for the payment of the establishment fee and transaction costs.

Commencing 12 months after the issuance of the loan, the principal amount of the loan and any accrued but unpaid interest, become convertible at LMM’s option into Alderon common shares at a conversion price equal to $2.376 per common share. The loan is secured with a mortgage over the Kami Project and bears interest at a rate of 8% per annum, payable on June 30th and December 31st of each year. A 1.5% establishment fee is payable to LMM in connection with the loan. Subject to prepayment in accordance with the terms of the loan, the maturity date of the loan is December 31, 2018.

About Alderon

Alderon is a leading iron ore development company in Canada with offices in Montreal, Vancouver, St. John’s and Labrador City. The Kami Project, owned 75% by Alderon and 25% by Hebei Iron & Steel Group Co. Ltd. (“HBIS”) through The Kami Mine Limited Partnership, is located within Canada’s premier iron ore district and is surrounded by four producing iron ore mines. Its port handling facilities are located in Sept-Iles, the leading iron ore port in North America. The Alderon team is comprised of skilled professionals with significant iron ore expertise to advance Kami towards production. HBIS is Alderon’s strategic partner in the development of the Kami Project and China’s largest steel producer.

For more information on Alderon, please visit our website at


On behalf of the Board

Mark J Morabito, Executive Chairman

Montreal Office Vancouver Office T: 514-281-9434 T: 604-681-8030 F: 514-281-5048 F: 604-681-8039

E: [email protected]

For further information please call: Evelyn Cox 1-866-683-8030 ext. 223


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