Alderon Announces Investment Transaction with Tunghsu Group

MONTRÉAL, Feb. 18, 2020 (GLOBE NEWSWIRE) -- Alderon Iron Ore Corp. (TSX: IRON) ("Alderon" or the “Company”) is pleased to announce that it has entered into a letter of intent (the “LOI”) with the Tunghsu Group Co., Ltd. (“Investor”) with respect to an investment transaction pursuant to which the Investor will acquire a 26%-38% interest in The Kami Mine Limited Partnership (“Kami LP”) for consideration of between US$15 million to US$23 million (the “Transaction”). A portion of the funds received from this investment will be used to repay the US$14 million loan facility (the “Loan Facility”) due to Sprott Resource Lending (“Sprott”). As a result of the LOI, Sprott has agreed to a further extension of the maturity date of the Loan Facility to March 31, 2020. Based on transaction progress, Sprott will consider in its discretion a further extension beyond March 31, 2020.

The terms of the Transaction provide for Investor to acquire a 26% to 38% interest in the Kami LP from Alderon for consideration of between US$15 million to US$23 million. The exact percentage interest acquired will be determined prior to entering into a definitive agreement (the “Definitive Agreement”) for the Transaction. The consideration paid by Investor will be based on the percentage interest that is acquired. The parties intend to conclude the Definitive Agreement by March 15, 2020 and close the Transaction by April 30, 2020. The other material terms of the Transaction are as follows:

• Alderon, Investor and HBIS International Holding (Canada) Co., Ltd. (“HBIS”) will negotiate amended versions of the existing Limited Partnership Agreement and Shareholders Agreement (the “Amended Partnership Agreements”) to reflect the participation of a third partner in the Kami LP.
   
• Each of the parties shall contribute its pro rata share of any actual incurred pre-production expenditures before commercial production of the Kami Project, including capital expenditures, operating expenditures, interest and financing charges, working capital and general and administrative expenditures. Any party that does not provide its pro rata share shall be diluted in accordance with a dilution formula.
   
• Investor agrees to use best efforts to obtain debt financing for the Kami Project from banks, including Chinese banks with support by other parties.
   
• The Board of Kami General Partner Limited, the managing general partner of Kami LP, shall be increased to five and the Investor shall be entitled to nominate two Board members or three Board members if it acquires a 38% interest in the Kami LP.

Adding a second Chinese partner, and thereby increasing Chinese content of the Kami LP, will much better position the Kami Project to obtain financing from Chinese banks and institutions. The removal of the Loan Facility will also remove the associated debt overhang.