Nunavut
IRON – Advanced Explorations Inc. March 5 said it has engaged ICBC International Capital Ltd. as its lead financial advisor in Hong Kong for the purpose of a proposed capital financing for a joint venture to be set up by Advanced Explorations and XinXing Ductile Iron Pipes Co. Ltd. for the Roche Bay iron project in eastern Nunavut. Advanced Explorations has engaged ICBCI to assist its preparation for a valuation, based on the valuation report to be issued by relevant third-party independent technical experts. ICBCI also will explore with the JV partners the feasibility of consolidating all Advanced Explorations’ iron ore assets (Tuktu, Tuktu-2 and Roche Bay) in Nunavut as part of asset injection into the proposed joint venture. Should this proposal be accepted, an expansion of the financing structure would be required along with a revision to the framework agreement between the JV partners. Advanced Explorations has concluded this engagement with the consultation and support of XinXing. ICBCI’s primary focus is to work within China’s regulatory and financing framework to secure the proposed capital financing. ICBCI is a subsidiary of the Industrial and Commercial Bank of China Ltd., one of the world’s largest banks by capitalization. Given the breadth of ICBCI’s expertise, Advanced Explorations and XinXing will benefit greatly from the advice and development scenarios presented by ICBCI. With global markets substantially discounting resources projects, these advisory services allow an external party to properly value Advanced Explorations’ assets and to put a definitive financing solution in place. The company has been focused on optimizing the feasibility study to further reduce capital and operating cost. Recent announcements with respect to port and LNG power partnerships are but two examples that will have a positive impact on the project financials. Further optimization of the Roche Bay development plans include updating the expected project revenues based on a higher grade concentrate (>68 percent iron) than was used in the feasibility study and to expand the measured and indicated resource base to support a mine life greater than 25 years. The larger resource base will also allow AEI to model a development scenario at an 8 million-metric-tons-per-annum startup which, through improved economy of scale, should further reduce the per-metric-ton FOB operating cost. ICBCI will assist Advanced Explorations in providing the associated updated financial models in connection with the proposed capital financing. Advanced Explorations President and CEO John Gingerich commented: “We are extremely pleased to conclude the engagement with ICBCI that follows from 10 months of discussions on the various strategies/plans in respect to the proposed capital financing for the Roche Bay AEI-XDIP mine plan and potentially larger regional development scenarios. Through this process, a strong working relationship has evolved between the ICBCI and AEI teams. … By engaging one of the world’s largest banks, which has an institutional investor client base in China, AEI will have solid financial guidance so as to move ahead on an expedited basis. We believe this relationship to be the jumping off point from which we can regain significant market capitalization.”
Separately, Advanced Explorations March 1 provided an update on its plans to implement alternative power solutions as part of its Roche Bay iron project development plan. The unique coastal location of the Roche Bay project affords the company the opportunity to utilize a turnkey, modular LNG power and distribution solution with the potential to reduce both AEI’s associated capital requirements while still capturing significant operational savings. These solutions have substantial benefits for the Roche Bay economics, and likewise can be applied to meet the challenges of Canada’s northern resource developments and remote communities. As such, the companies that have been engaged in developing these solutions are anticipated to leverage their knowledge and experience across the North to encourage economic growth and competitiveness for other remote mines and Northern communities. Studies to date indicate that the significant operational benefits both in environmental impact (about 40 percent reduction in CO2 emissions) and operating cost for liquefied natural gas-based power (technical studies indicated potential C$8-per-metric-ton savings that would reduce the total FOB cost to about C$42/t ). These operating cost savings afford the company the opportunity to trade off a turnkey power solution for long-term operating cost, while still retaining a net benefit to operating margins. Other resource companies are now evaluating LNG-based power as there are both advanced turnkey power production and supply and storage models being developed. As currently contemplated, AEI plans to conclude partnership agreements that will include joint LNG feasibility studies (power and LNG supply) based on delivery of a turnkey power solution. There are two independent partnerships being negotiated. The first partner would be granted the exclusive right to build and operate the LNG power facility should turnkey trade-off studies justify the benefits to AEI. The second would provide an LNG supply and storage concept as a turnkey solution to complement the LNG power plant. Given there are business sensitive details associated with these negotiations, details will be released as permitted, once the agreements are final. Studies provided by ArcStar Energy have demonstrated that the wind regime at the Roche Bay site is one of the best it has seen anywhere in the world. The initial economic evaluation for Roche Bay was done on a turnkey wind-power solution whereby ArcStar Energy would capitalize the wind power facilities on a long-term power purchase agreement at an about 40 percent discount to diesel power. Since completing its initial report, ArcStar has further evaluated technical and operational challenges and satisfied itself that a turnkey solution can be delivered upon verification of the wind regime, which is needed for ArcStar’s financing requirements. Wind energy can only be viewed as a means of delivering supplemental power, and in the initial study the business case was done as a diesel displacement benefit estimated to reduce consumption by 30 percent. This plan also can be incorporated into the LNG option as wind-delivered power will reduce consumption of non-renewable LNG, offering a possible hedge against rising future LNG prices. The results from Arcstar’s work may provide an updated perspective on the use of supplemental wind power as a broader solution for northern development. Advanced Explorations believes the alternative power initiatives are economic solutions for remote resource projects and communities and have the opportunity to contribute economic competitiveness and improved environmental stewardship to remote Northern mines. “We are confident that AEI and its stakeholders are at the forefront of the inevitable conversion from Arctic diesel towards LNG and supplemental wind power for resource projects in the Far North,” said Gingerich. “By working with developers on turnkey delivery models, this will provide additional options for communities and developers wishing to avoid the onerous infrastructure burdens when affordable power is the only real objective. AEI believes it will be is able to capture the first mover benefits generated by having motivated partners with a long-term regional focus in mind. We are convinced that the success of our alternative power initiatives will provide a long term sustainable advantage for all stakeholders.”
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