Alderon Iron Ore Corp has been launching an all out offensive over the last three weeks to get their $300 million transmission lines run from the Upper Churchill facility to Lab West, and of course their Kami mine site. Without the power line, Alderon claims its Chinese financing will dry up within mere weeks, and the project will be moth balled. Alderon has been able to get Loud Labradorian MP Jones to screech for them. They have got the towns on board with agreements, and the hollering that comes from that. They even inked a deal with the Innu. They are crossing their "I's" and dotting their "T's" in a virtual hearts and minds campaign aimed at putting pressure on the ...PC government.
Pressuring the PC government? Aren't they supposed to be allies in the whole Muskrat Falls rah-rah team? That is the way it was til a short while ago. Now suddenly Alderon is threatening the taxpayers that if they don't come up with $240 million (our share of the $300 million) they will take their toys from the sand box and leave. The press are covering the whining. Dutifully printing out Alderon's words. Funny enough not allowing comments on the stories - at the CBC anyway. Yes, all in all, it's a typical Newfoundland railroading job on the taxpayers.
Strange that the media aren't asking a few really pertinent questions of our politicians like: 1. Does the Power Contract allow us to add any transmission systems to the Upper Churchill; Does the Shareholders Agreement of 1999 play a role; and why would we invest in a $300 million line when the Quebec lawsuit will be before the courts until at least 2018? Never hear a single word about these issues in our press. Not a word. Bizarre. Truly bizarre. Do we have an investigative press here at all, or is that simply restricted to why buddy had to wait three hours in the E.R.? Is all about the cat in the tree, or the skater, or the garbage collection? Is there not at least one press person, other than the true giants of media here (the open line show's hosts) that can look and report an issue in depth? Warn the people? Inform the people? Doesn't appear so, and that makes us truly unique in Canada.
Should we place one penny in the Alderon/Lab West transmission line? No. And frankly neither should Alderon's shareholders. Bottom line is without a court tested water management agreement, so there is actually power to send down the transmission line, and until Hydro-Quebec get's on board and allows the modification of the Upper Churchill facilities (which in the Power Contract includes roads, lines, town site, everything) no more power can be sent to Lab West - not one kwh.
It's time the government was honest with the people, and say: " Look we came to an agreement with Hydro-Quebec to swap documents and examine each other's witnesses, and that's agreed by court order to take to August 2015, then we go to court, and then we may have to appeal all the way to the Supreme Court of Canada. We feel it would be irresponsible to spend money on a line like that until we are sure we can send power down it. Wouldn't be fair to taxpayers or Alderon's shareholders."
That would be the truth, but this government isn't known for being truthful. It is known to be manipulative, secretive, and hell bent on screwing us (Abitibi - case in point). If the PCs want to turn things around it will take baby steps with big impact. This will be a test for the "new" leadership. This is also a test for the opposition parties. Why would they promote this line given the circumstances? Is it all about politics or is there a sense of duty. A sense that there is a common sense voice that can be trusted? I guess we'll see, but decision makers be aware. The days of making deals to make the boys happy, and sacrifice the people, are over. Govern yourselves accordingly.
Showing posts with label kami. Show all posts
Showing posts with label kami. Show all posts
Tuesday, February 4, 2014
Friday, January 24, 2014
The Journalism Deficit in Newfoundland and Labrador - Case in Point Alderon Iron Ore
"Only a free and unrestrained press can effectively expose deception in government"
Hugo L. Black - Most influential US Supreme Court Justice in the 20th century
In Newfoundland and Labrador we take for granted that our press is free - whatever that might mean. Perhaps it means they are free to say what they want within the laws of libel. Perhaps it means they are not subject to censorship. Perhaps. But, are they unrestrained? That is a valid question in this province. The press here are routinely criticized for simply regurgitating whatever press release or commentary the provincial government may give them. They are criticized for not questioning, thoroughly enough, politicians. There are exceptions of course. Take Russell Wangersky of The Telegram. Award winning journalist. Deep thinker. Critical thinker. Focuses on the issues of our day, and is not judgmental. He is a professional and recognized nationally as such. Unfortunately, there is the other side of the coin, and in the same paper. Reporter James MacLeod recently published on Twitter that his primary advice to journalism students on the meaning of journalism was to "not be a jerk". There are other professionals at the province's main paper to be sure. There are also many that fall into the other category.
The worst offender in this province, without question, is the local CBC. I've met and worked with CBC reporters all over the country, but never have I seen an operation like this one. Maybe if Harper is looking to privatize a part of CBC it could be this one - save the rest cause CBC is otherwise a great, professional organization. Personally, I've had a number of really amateur experiences with CBC NL. Without going into great detail, this one is my most notorious http://www.cbc.ca/news/canada/newfoundland-labrador/cochrane-the-curious-case-of-brad-cabana-1.1373079
Then there is the case of CBC Labrador. In an interview with a team searching for the Muskrat Falls u-boat a reporter stated I was trying to stop the Muskrat Falls project by involving the fabled sunken u-boat. That was not the case, or ever the case, and I contacted the producer of the show and requested the same time to refute that statement. The producer promised to look into the matter and get back to me - that was months ago. It's part of a pattern, frankly, at the CBC here - lazy journalism, personality framing, and reputation smearing. It's like having your high school rumor mongers in charge of discharging real news to people. The case in point that finally set me off to write this long over due blog is Alderon Iron Ore Inc.
For disclosure purposes, Alderon and Danny Williams are suing me for defamation, and I am counter-suing for the same. When Alderon and Williams sued, their Statement of Claim was published on the CBC website as part of the story. When I counter-sued my Statement of Defence was not published with the story. In other words, the CBC NL allowed Williams/Alderon's statements against me to stand without perspective. They also allowed public commentary on one side's story and not on the other. That prompted a very pointed article by one of the critically thinking bloggers at The Telegram http://www.thetelegram.com/Blog-Article/b/22420/Comment-Disabled . These are just examples that are personal to me.
This, however, is truly bizarre. Check out this story of Alderon demanding a power line for it's mining project http://www.cbc.ca/news/canada/newfoundland-labrador/alderon-says-clock-ticking-on-need-for-hydro-line-1.2509399 . The Minister Derick Dalley said earlier this week that the third power line would have to go through the PUB and that could take 4-6 months. Today, just days later, he says the decision will be next week. In addition, press sources reported Alderon had signed agreements with the Innu Nation and a Labrador municipality for revenue sharing. All positive stories on Alderon.
Now, check out this story from the South China Morning Post: http://www.scmp.com/business/commodities/article/1388556/hebei-iron-may-face-closer-watch
This story was forwarded on to the CBC and other provincial media outlets. Did they publish one word of it to their readership/listeners? No, they didn't. This despite the fact that Hebie Steel's only Canadian business is its investment in Alderon. This quote is a major red flag:
"Hugo Williamson, managing director of Risk Resolution Group, a British consultancy, said such allegations could result in extra scrutiny of a wide range of relationships that foreign firms had with Chinese state-owned enterprises.
Deals with companies in Canada in particular were likely to be examined by domestic investigation agencies if allegations of bribery were involved, Williamson said.
Hebei Iron and Steel did not reply to repeated request for a response to questions from the Post."
Then there is this quote which should concern every person in the province who pays taxes and/or utility bills, and will be forces to pay $300 million for a power line from the Upper Churchill to the mines:
"If there were insufficient funds within the group to make good on any losses sustained, then the parent company might be forced into a fire sale of assets, the lawyer said."
As troublesome and disturbing as it is that our media have not reported this story to the people of the province, there is more. Hebei has been ordered to cut back its production of steel by the Chinese government, thereby reducing demand for iron ore: http://usa.chinadaily.com.cn/epaper/2013-11/26/content_17132724.htm the massive cut back to Hebei raises the very logical question: Why would Hebei need more ore?
While Alderon has put out press release after press release about this agreement or that agreement it has signed with groups in Labrador, it has not uttered one word or printed one release to let shareholders know the situation of their primary partner and investor - Hebei. That may be an issue with folks like the Ontario Exchange Commission. Bottom line is the people in this province deserve to know what their politicians are committing them to, and frankly, CBC NL is being down right negligent in its duty to inform by spinning the positive but ignoring the other. It's a standard of journalism that has tainted the words of Hugo Black noted above. If the press is free, then what is restraining them? We deserve so much better, and thank God we get that from the three open line radio shows in the province run by VOCM. I shudder to think what the democracy of our province might look like without it.
Hugo L. Black - Most influential US Supreme Court Justice in the 20th century
In Newfoundland and Labrador we take for granted that our press is free - whatever that might mean. Perhaps it means they are free to say what they want within the laws of libel. Perhaps it means they are not subject to censorship. Perhaps. But, are they unrestrained? That is a valid question in this province. The press here are routinely criticized for simply regurgitating whatever press release or commentary the provincial government may give them. They are criticized for not questioning, thoroughly enough, politicians. There are exceptions of course. Take Russell Wangersky of The Telegram. Award winning journalist. Deep thinker. Critical thinker. Focuses on the issues of our day, and is not judgmental. He is a professional and recognized nationally as such. Unfortunately, there is the other side of the coin, and in the same paper. Reporter James MacLeod recently published on Twitter that his primary advice to journalism students on the meaning of journalism was to "not be a jerk". There are other professionals at the province's main paper to be sure. There are also many that fall into the other category.
The worst offender in this province, without question, is the local CBC. I've met and worked with CBC reporters all over the country, but never have I seen an operation like this one. Maybe if Harper is looking to privatize a part of CBC it could be this one - save the rest cause CBC is otherwise a great, professional organization. Personally, I've had a number of really amateur experiences with CBC NL. Without going into great detail, this one is my most notorious http://www.cbc.ca/news/canada/newfoundland-labrador/cochrane-the-curious-case-of-brad-cabana-1.1373079
Then there is the case of CBC Labrador. In an interview with a team searching for the Muskrat Falls u-boat a reporter stated I was trying to stop the Muskrat Falls project by involving the fabled sunken u-boat. That was not the case, or ever the case, and I contacted the producer of the show and requested the same time to refute that statement. The producer promised to look into the matter and get back to me - that was months ago. It's part of a pattern, frankly, at the CBC here - lazy journalism, personality framing, and reputation smearing. It's like having your high school rumor mongers in charge of discharging real news to people. The case in point that finally set me off to write this long over due blog is Alderon Iron Ore Inc.
For disclosure purposes, Alderon and Danny Williams are suing me for defamation, and I am counter-suing for the same. When Alderon and Williams sued, their Statement of Claim was published on the CBC website as part of the story. When I counter-sued my Statement of Defence was not published with the story. In other words, the CBC NL allowed Williams/Alderon's statements against me to stand without perspective. They also allowed public commentary on one side's story and not on the other. That prompted a very pointed article by one of the critically thinking bloggers at The Telegram http://www.thetelegram.com/Blog-Article/b/22420/Comment-Disabled . These are just examples that are personal to me.
This, however, is truly bizarre. Check out this story of Alderon demanding a power line for it's mining project http://www.cbc.ca/news/canada/newfoundland-labrador/alderon-says-clock-ticking-on-need-for-hydro-line-1.2509399 . The Minister Derick Dalley said earlier this week that the third power line would have to go through the PUB and that could take 4-6 months. Today, just days later, he says the decision will be next week. In addition, press sources reported Alderon had signed agreements with the Innu Nation and a Labrador municipality for revenue sharing. All positive stories on Alderon.
Now, check out this story from the South China Morning Post: http://www.scmp.com/business/commodities/article/1388556/hebei-iron-may-face-closer-watch
This story was forwarded on to the CBC and other provincial media outlets. Did they publish one word of it to their readership/listeners? No, they didn't. This despite the fact that Hebie Steel's only Canadian business is its investment in Alderon. This quote is a major red flag:
"Hugo Williamson, managing director of Risk Resolution Group, a British consultancy, said such allegations could result in extra scrutiny of a wide range of relationships that foreign firms had with Chinese state-owned enterprises.
Deals with companies in Canada in particular were likely to be examined by domestic investigation agencies if allegations of bribery were involved, Williamson said.
Hebei Iron and Steel did not reply to repeated request for a response to questions from the Post."
Then there is this quote which should concern every person in the province who pays taxes and/or utility bills, and will be forces to pay $300 million for a power line from the Upper Churchill to the mines:
"If there were insufficient funds within the group to make good on any losses sustained, then the parent company might be forced into a fire sale of assets, the lawyer said."
As troublesome and disturbing as it is that our media have not reported this story to the people of the province, there is more. Hebei has been ordered to cut back its production of steel by the Chinese government, thereby reducing demand for iron ore: http://usa.chinadaily.com.cn/epaper/2013-11/26/content_17132724.htm the massive cut back to Hebei raises the very logical question: Why would Hebei need more ore?
While Alderon has put out press release after press release about this agreement or that agreement it has signed with groups in Labrador, it has not uttered one word or printed one release to let shareholders know the situation of their primary partner and investor - Hebei. That may be an issue with folks like the Ontario Exchange Commission. Bottom line is the people in this province deserve to know what their politicians are committing them to, and frankly, CBC NL is being down right negligent in its duty to inform by spinning the positive but ignoring the other. It's a standard of journalism that has tainted the words of Hugo Black noted above. If the press is free, then what is restraining them? We deserve so much better, and thank God we get that from the three open line radio shows in the province run by VOCM. I shudder to think what the democracy of our province might look like without it.
Sunday, October 14, 2012
Expose Alderon Iron Ore Corp - the conclusion
2010 ended with Alderon being in its best cash shape ever. It had $24,376,060.00 in the bank, but a ballooning deficit that reached $32,347,749.00 by year's end. It incurred $4.6 million in administration expenses alone. Rougly $1.3 million went to the Exploration Group(Forbes West)alone. This covered rents, wages, and investor relations among many things. Alderon at this point had almost no staff of its own, and was billed for all these expenses. This, despite the fact that Alderon had only two "offices" at this time: one in Toronto that was in reality the office of Black Iron (Forbes and Manhattan company); and one in Vancouver that belonged to the Exploration Group (Forbes and Manhattan). In addition, large personal contracts for management were signed between Alderon and Forbes and Manhattan interests. The sole primary, physical asset the company had, other than the mine deposit, was a $180,000.00 trailer in Labrador.
2011 was a busy and transforming year for the company. Under the new Forbes and Manhattan direction the company moved ahead with exploration on the Kami site. The company was audited by Revenue Canada for its GST/HST return from April to June, 2011. In September, 2011, the "Forbes Fee" (Forbes and Manhattan)was increased to $40,000.00 per month, plus expenses, from the previous $10,000.00 per month. On a side note, the "Forbes Fee" also provided a lump sum payment of 36 months worth of fees should a change of control result in Mr. Stan Bharti leaving. Exploration Group (now Forbes West) had a contract to provide services and facilities to the company at cost plus 15%. 2011 also witnessed Alderon's stock graduate from the TSX to the TSE - at $2.67 per share.
2011 also marked the year when Alderon started to get a distinct political flavour. Gary Norris, recently retired Clerk of the Executive Council under Danny Williams, signed a personal services contract with Alderon to become Executive Vice-President of Government and Community affairs (after only 7 months from leaving the government). Shortly afterward, Todd Burlingame left Nalcor to become Alderon's Executive Vice-President of Environment and Aboriginal Affairs - a similar position he held at Nalcor.
On September 30, 2011 Alderon's name changed one more time - Alderon Iron Ore Corp. This time there was no reverse share split. Not to be outdone by his former staff, Danny Williams himself was hired onto Alderon with a consulting contract, as Strategic Advisor to the Chairman, on December 22, 2011. His long time communications director while Premier, and confidante Elizabeth Matthews was hired on the same day as a Communications Consultant.
Alderon also hired on 52380 Newfoundland and Labrador Inc to be a consultant for railway development to the mine. 52380 was incorporated September 7, 2005. It was ammended twice and lapsed, but brought back to life again. The company shows two directors - Greg Mercer, and his wife. Mercer served as Special Assistant to Brian Tobin, Fisheries Minister from 1994-1996. In September, 2000 he challenged Gerry Byrne, with the backing of provincial Liberals, for the federal Liberal nomination. He lost, and by November 2000, he was appointed Senior Policy Advisor at Industry Canada under then Minister responsible - Brian Tobin. Mercer is a federally registered lobbyist, and shows Tobin's/Forbes and Manhattan's Consolidated Thompson as his one registered client. He was hired three days after Danny Williams joined Alderon's Board of Directors.
While it was a busy year for Alderon, it was also the most expensive by far. They finished the year down to $7,759,933.00 in the bank and a massive $68,790,827.00 deficit(more than double the year before,and six times the year befor that). Key management personnel received $10,914,462.00 in renumeration. Other big tickets included: $3,567,604 in salaries and benefits; $15,182,005.00 in general and administrative expenses; $21,201,210 in exploration and evaluation expenses; $10,574,640.00 in share based compensation; $1,625,232.00 to Forbes West; and $2,926,997.00 in consulting, professional and legal fees. So much was spent that the company lost $37,506,618.00 on operations in 2011. A year that was very rewarding for insiders, but expensive for the shareholders.
January, 2012 started with a big financial shot in the arm for Alderon when Liberty Metals & Mining Holdings,LLC, a susidiary of Liberty Mutual(USA)took a major position in the company. Liberty pumped $39,999,999.00, less transaction costs of $2,626,000.00, into Alderon in exchange for 14,981,273 shares at $2.67 each - 15% of the company. It was significant as an investment for the credibility it lent Alderon, and of course the cash. Altius was diluted down to 34% opwnership.
On February 23, 2012, Alderon established a detailed Code of Ethics which was a significant departure from the practises of the old days within the company.
On March 28, 2012 Danny Williams joined the Board of Directors. It was an interesting choice as all other members of the Board represented significant shareholders.
On April 13, 2012, the news that Alderon had been praying for was announced. Hebei Iron & Steel Group (China) agreed to purchase 19.9% of Alderon and a 25% stake in a new partnership that was to be established to own the Kami project, for $194-million.
Hebei was to initially buy a near 20-per-cent stake in the Canadian company for $88.3 million at $3.42 a share, or a 0.6-per-cent discount to the day's closing price. Following that, Hebei would invest $105.7-million, giving it the right to a 25-per-cent interest in Kami. The deal also gave Hebei the right to buy 60 per cent of the iron ore produced annually from Kami. Hebei agreed to try and assist in obtaining debt financing for the Kami project from Chinese banks. GMP Securities was Alderon’s financial adviser on the deal and Bank of America Merrill Lynch acted as Hebei’s financial adviser. In a note of interest, the agreement states there were no "finders" except Cuda International Ltd. and GMP Securities L.P. The troubling part of this statement is almost no information exists on a "Cuda International Ltd". The announcement did say that the price per share was discounted 6% from the day's trading price. That may indicate a 6% pay out, or part thereof, to Cuda International Ltd.That represents about $11,440,000.00. There is certainly no record of payments it may have received due to its involvement in this transaction. The only firm of record close to that name the author could find was Cuda Capital Corp, now August metal - previously owned by Reza Mohammed. That's not to say it was the same firm, but the issue is clouded.
On August 9, 2012, Alderon added a significant piece to its infrastructure puzzle by entering into a Port Agreement with the Port of Sept-Ile. The agreement was for 8 miliion tonnes of ore to be shipped annually (although Alderon's plans call for double that ammount). The cost to expand the Port was pegged at $220,000,000.00, and Alderon was required to put in $20.46 million in two payments - $10.23 million on signing and $10.23 no later than July 1, 2013 (interestingly, the federal government added $55 million in as well). Alderon was also required to put up an irrevocable guarantee of the equivalent value. The deal was for 20 years with a 5 year option. Alderon would recieve a discounted rate for shipping until its initial pay-in had been discounted back to the company. Alderon apparently did not have the money for its share, so it turned to Liberty Metals. Liberty provided bridge financing for the first $10.23 million payment, securing it with a mortgage against the Kami project with an 8% interest tag, and promised to front the second half if it was required.
On August 13, 2012 Alderon joined CN Rail's feasability study to develop a rail line from Sept-Ile through to northern Quebec as part of the Quebec government's Plan Nord.
Alderon's stock hit a high of $3.83 on February 22,2012, but started to slide badly from that point on. By late August, 2012 it was at $2.45 per share, a $.97 (32%) drop from the price Hebei had agreed to pay per share. On August 31, 2012, pursuant to the terms of the subscription agreement (as amended) (the "Subscription Agreement"), Hebei acquired 25,858,889 Common Shares at a price of C$2.41 per Common Share for gross proceeds to the Company of approximately C$62.3 million, representing 19.9% of the issued and outstanding Common Shares. Hebei was permitted to change its price per share offering in accordance with a section in the original agreement that gave it flexibility should the value of the Alderon change between the initial signing in April, and the final signing. Concurrent with the Hebei closing, Liberty Metals & Mining Holdings acquired 3,816,181 Common Shares at a price of C$2.41 per Common Share for gross proceeds to the Company of approximately C$9.2 million, allowing LMM to maintain its relative proportionate interest in Alderon. Also concurrent with the Hebei closing, Alderon repayed the $10.5 million bridge loan previously advanced by LMM. Altius also had a pre-emptive right to purchase shares to keep its percentage ownership of Alderon, but apparently did not. The dilution left them at about 25% ownership.
An interesting part of the Hebei Agreement is the formation of a seperate entity to own the Kami project. It appears the old Privco company (0860132 BC Ltd) Mark Morabito used to buy the interest in Kami from Altius may now be the shell company used as this seperate entity. The Agreement awardes 75% ownership to Alderon, and 25% to Hebei. The exact details of the take-off agreement are confidential, but it does remove Kami from Alderon's direct ownership. It also restricts the number of directors in the new company which would tend to benefit Hebei. It does free Alderon up to pursue other mining developments that it may try and capitalize without jeopardizing the financial health of the Kami interest. It may also reduce the over all value of Alderon in the near and long term. Ms. Zheng Liangjun and Mr. Tian Zejun were appointed to Alderon's Board of Directors and, as has been the practise, Stan Bharti of Forbes and Manhattan left the Board - although he kept his lucrative consulting contract. Alderon and Hebei were required to contribute to capital expenditures for the development of the Kami Project not covered by initial capital contributions and project debt financing, in accordance with their respective interests. That leaves it to Alderon to come up with 75% of the projected $1 billion to bring Kami into production. There is a note in the agreement that Hebei, a state owned corporation, would try and facilitate borrowing from two Chinese banks to fund Kami, but no requirement that the funding is mandatory.
In September 2012, Alderon submitted its Environmental Impact Study (EIS) for the Kami project. It outlines a number of challenges facing the development. One such challenge is electrical power. It calls for a new line to built from the Upper Churchill facility that it estimates will cost Nalcor $150,000,000.00 to build. Curiously, it also outlines the use of hydro power and oil-fired power at Kami. The EIS states aproximately one third of the power needed to run Kami at its original output of 8 million tonnes per year would be produced by oil fired generators. The reason given was it was cheaper to use the oil fired generators. This is fascinating when you consider the provincial government's primary purpose for Muskrat Falls was to generate green power and replace Holyrood. The author of that strategy, Danny Williams, now sitting on Alderon's board, is actively involved in promoting the use of oil fired generators, because they are cheaper than electricity. But, I digress.
Alderon's future as a company appears speculative at best. Its stock is now down to $1.73 on the TSX and $1.76 on the NASDAQ. Its cumlative worth has dropped about 60% in the last seven months. China, Alderon's main partner, is facing large over supply issues with iron ore and a slowing economy - domestically and internally. The ore to be produced at Kami cannot be sold in most markets except China due to its make up. So, Alderon and Kami remain almost completely reliant on the whims of China for their success as a company. As Alderon found out, when the original agreement was ammended to drop share purchase prices by Hebei, China has them in a position where they have very few options.
In the end, Alderon remains essentially a "promoter" type company - not unlike its earlier days. It was set up to take an asset, promote it, "de-risk" it, and then allow someone to take it over. That's the way Forbes and Manhattan rolls, and this one is not much different. Forbes group will not take this project to production themselves. We will likely see the same in the projects that Forbes and Manhattan, and Forbes West, are currently involved in within Newfoundland and Labrador: Cap Ex; Ridgemont Iron Ore Corp; Cross Hair Energy Corporation; and Castillian Resources (Hope Brook Gold Project, located in southwestern Newfoundland).
2011 was a busy and transforming year for the company. Under the new Forbes and Manhattan direction the company moved ahead with exploration on the Kami site. The company was audited by Revenue Canada for its GST/HST return from April to June, 2011. In September, 2011, the "Forbes Fee" (Forbes and Manhattan)was increased to $40,000.00 per month, plus expenses, from the previous $10,000.00 per month. On a side note, the "Forbes Fee" also provided a lump sum payment of 36 months worth of fees should a change of control result in Mr. Stan Bharti leaving. Exploration Group (now Forbes West) had a contract to provide services and facilities to the company at cost plus 15%. 2011 also witnessed Alderon's stock graduate from the TSX to the TSE - at $2.67 per share.
2011 also marked the year when Alderon started to get a distinct political flavour. Gary Norris, recently retired Clerk of the Executive Council under Danny Williams, signed a personal services contract with Alderon to become Executive Vice-President of Government and Community affairs (after only 7 months from leaving the government). Shortly afterward, Todd Burlingame left Nalcor to become Alderon's Executive Vice-President of Environment and Aboriginal Affairs - a similar position he held at Nalcor.
On September 30, 2011 Alderon's name changed one more time - Alderon Iron Ore Corp. This time there was no reverse share split. Not to be outdone by his former staff, Danny Williams himself was hired onto Alderon with a consulting contract, as Strategic Advisor to the Chairman, on December 22, 2011. His long time communications director while Premier, and confidante Elizabeth Matthews was hired on the same day as a Communications Consultant.
Alderon also hired on 52380 Newfoundland and Labrador Inc to be a consultant for railway development to the mine. 52380 was incorporated September 7, 2005. It was ammended twice and lapsed, but brought back to life again. The company shows two directors - Greg Mercer, and his wife. Mercer served as Special Assistant to Brian Tobin, Fisheries Minister from 1994-1996. In September, 2000 he challenged Gerry Byrne, with the backing of provincial Liberals, for the federal Liberal nomination. He lost, and by November 2000, he was appointed Senior Policy Advisor at Industry Canada under then Minister responsible - Brian Tobin. Mercer is a federally registered lobbyist, and shows Tobin's/Forbes and Manhattan's Consolidated Thompson as his one registered client. He was hired three days after Danny Williams joined Alderon's Board of Directors.
While it was a busy year for Alderon, it was also the most expensive by far. They finished the year down to $7,759,933.00 in the bank and a massive $68,790,827.00 deficit(more than double the year before,and six times the year befor that). Key management personnel received $10,914,462.00 in renumeration. Other big tickets included: $3,567,604 in salaries and benefits; $15,182,005.00 in general and administrative expenses; $21,201,210 in exploration and evaluation expenses; $10,574,640.00 in share based compensation; $1,625,232.00 to Forbes West; and $2,926,997.00 in consulting, professional and legal fees. So much was spent that the company lost $37,506,618.00 on operations in 2011. A year that was very rewarding for insiders, but expensive for the shareholders.
January, 2012 started with a big financial shot in the arm for Alderon when Liberty Metals & Mining Holdings,LLC, a susidiary of Liberty Mutual(USA)took a major position in the company. Liberty pumped $39,999,999.00, less transaction costs of $2,626,000.00, into Alderon in exchange for 14,981,273 shares at $2.67 each - 15% of the company. It was significant as an investment for the credibility it lent Alderon, and of course the cash. Altius was diluted down to 34% opwnership.
On February 23, 2012, Alderon established a detailed Code of Ethics which was a significant departure from the practises of the old days within the company.
On March 28, 2012 Danny Williams joined the Board of Directors. It was an interesting choice as all other members of the Board represented significant shareholders.
On April 13, 2012, the news that Alderon had been praying for was announced. Hebei Iron & Steel Group (China) agreed to purchase 19.9% of Alderon and a 25% stake in a new partnership that was to be established to own the Kami project, for $194-million.
Hebei was to initially buy a near 20-per-cent stake in the Canadian company for $88.3 million at $3.42 a share, or a 0.6-per-cent discount to the day's closing price. Following that, Hebei would invest $105.7-million, giving it the right to a 25-per-cent interest in Kami. The deal also gave Hebei the right to buy 60 per cent of the iron ore produced annually from Kami. Hebei agreed to try and assist in obtaining debt financing for the Kami project from Chinese banks. GMP Securities was Alderon’s financial adviser on the deal and Bank of America Merrill Lynch acted as Hebei’s financial adviser. In a note of interest, the agreement states there were no "finders" except Cuda International Ltd. and GMP Securities L.P. The troubling part of this statement is almost no information exists on a "Cuda International Ltd". The announcement did say that the price per share was discounted 6% from the day's trading price. That may indicate a 6% pay out, or part thereof, to Cuda International Ltd.That represents about $11,440,000.00. There is certainly no record of payments it may have received due to its involvement in this transaction. The only firm of record close to that name the author could find was Cuda Capital Corp, now August metal - previously owned by Reza Mohammed. That's not to say it was the same firm, but the issue is clouded.
On August 9, 2012, Alderon added a significant piece to its infrastructure puzzle by entering into a Port Agreement with the Port of Sept-Ile. The agreement was for 8 miliion tonnes of ore to be shipped annually (although Alderon's plans call for double that ammount). The cost to expand the Port was pegged at $220,000,000.00, and Alderon was required to put in $20.46 million in two payments - $10.23 million on signing and $10.23 no later than July 1, 2013 (interestingly, the federal government added $55 million in as well). Alderon was also required to put up an irrevocable guarantee of the equivalent value. The deal was for 20 years with a 5 year option. Alderon would recieve a discounted rate for shipping until its initial pay-in had been discounted back to the company. Alderon apparently did not have the money for its share, so it turned to Liberty Metals. Liberty provided bridge financing for the first $10.23 million payment, securing it with a mortgage against the Kami project with an 8% interest tag, and promised to front the second half if it was required.
On August 13, 2012 Alderon joined CN Rail's feasability study to develop a rail line from Sept-Ile through to northern Quebec as part of the Quebec government's Plan Nord.
Alderon's stock hit a high of $3.83 on February 22,2012, but started to slide badly from that point on. By late August, 2012 it was at $2.45 per share, a $.97 (32%) drop from the price Hebei had agreed to pay per share. On August 31, 2012, pursuant to the terms of the subscription agreement (as amended) (the "Subscription Agreement"), Hebei acquired 25,858,889 Common Shares at a price of C$2.41 per Common Share for gross proceeds to the Company of approximately C$62.3 million, representing 19.9% of the issued and outstanding Common Shares. Hebei was permitted to change its price per share offering in accordance with a section in the original agreement that gave it flexibility should the value of the Alderon change between the initial signing in April, and the final signing. Concurrent with the Hebei closing, Liberty Metals & Mining Holdings acquired 3,816,181 Common Shares at a price of C$2.41 per Common Share for gross proceeds to the Company of approximately C$9.2 million, allowing LMM to maintain its relative proportionate interest in Alderon. Also concurrent with the Hebei closing, Alderon repayed the $10.5 million bridge loan previously advanced by LMM. Altius also had a pre-emptive right to purchase shares to keep its percentage ownership of Alderon, but apparently did not. The dilution left them at about 25% ownership.
An interesting part of the Hebei Agreement is the formation of a seperate entity to own the Kami project. It appears the old Privco company (0860132 BC Ltd) Mark Morabito used to buy the interest in Kami from Altius may now be the shell company used as this seperate entity. The Agreement awardes 75% ownership to Alderon, and 25% to Hebei. The exact details of the take-off agreement are confidential, but it does remove Kami from Alderon's direct ownership. It also restricts the number of directors in the new company which would tend to benefit Hebei. It does free Alderon up to pursue other mining developments that it may try and capitalize without jeopardizing the financial health of the Kami interest. It may also reduce the over all value of Alderon in the near and long term. Ms. Zheng Liangjun and Mr. Tian Zejun were appointed to Alderon's Board of Directors and, as has been the practise, Stan Bharti of Forbes and Manhattan left the Board - although he kept his lucrative consulting contract. Alderon and Hebei were required to contribute to capital expenditures for the development of the Kami Project not covered by initial capital contributions and project debt financing, in accordance with their respective interests. That leaves it to Alderon to come up with 75% of the projected $1 billion to bring Kami into production. There is a note in the agreement that Hebei, a state owned corporation, would try and facilitate borrowing from two Chinese banks to fund Kami, but no requirement that the funding is mandatory.
In September 2012, Alderon submitted its Environmental Impact Study (EIS) for the Kami project. It outlines a number of challenges facing the development. One such challenge is electrical power. It calls for a new line to built from the Upper Churchill facility that it estimates will cost Nalcor $150,000,000.00 to build. Curiously, it also outlines the use of hydro power and oil-fired power at Kami. The EIS states aproximately one third of the power needed to run Kami at its original output of 8 million tonnes per year would be produced by oil fired generators. The reason given was it was cheaper to use the oil fired generators. This is fascinating when you consider the provincial government's primary purpose for Muskrat Falls was to generate green power and replace Holyrood. The author of that strategy, Danny Williams, now sitting on Alderon's board, is actively involved in promoting the use of oil fired generators, because they are cheaper than electricity. But, I digress.
Alderon's future as a company appears speculative at best. Its stock is now down to $1.73 on the TSX and $1.76 on the NASDAQ. Its cumlative worth has dropped about 60% in the last seven months. China, Alderon's main partner, is facing large over supply issues with iron ore and a slowing economy - domestically and internally. The ore to be produced at Kami cannot be sold in most markets except China due to its make up. So, Alderon and Kami remain almost completely reliant on the whims of China for their success as a company. As Alderon found out, when the original agreement was ammended to drop share purchase prices by Hebei, China has them in a position where they have very few options.
In the end, Alderon remains essentially a "promoter" type company - not unlike its earlier days. It was set up to take an asset, promote it, "de-risk" it, and then allow someone to take it over. That's the way Forbes and Manhattan rolls, and this one is not much different. Forbes group will not take this project to production themselves. We will likely see the same in the projects that Forbes and Manhattan, and Forbes West, are currently involved in within Newfoundland and Labrador: Cap Ex; Ridgemont Iron Ore Corp; Cross Hair Energy Corporation; and Castillian Resources (Hope Brook Gold Project, located in southwestern Newfoundland).
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