With its second offtake in place, Alderon certainly has the sale of its product sorted. "Now, rather than having the uncertainty of whether we can sell the remaining 40 percent, that's completely gone. We've taken away all of that uncertainty," said Eldem.Alderon previously secured an agreement with Hebei Iron & Steel Group (SHE:000709) for production from the Kami mine in 2012, and Glencore will now take on the remaining 40 percent of actual and annual production from Kami. The term for the agreement will continue until the Kami Mine Limited Partnership delivers 48 million tonnes of iron ore concentrate to Glencore; that is expected to happen 15 years after commercial production commences. Securing offtake agreements is an important part of Alderon's strategy, and the company has been working hard to get them. "We have been working on a second offtake partner ever since we concluded the first offtake arrangement with Hebei Iron & Steel Group back in 2012," Eldem said. "In fact, the day after the Hebei agreement was signed and disclosed to market, we started looking for another offtake partner, and as part of that process, we've been working with steelmakers out of Japan, Korea and Taiwan and China, as well as global traders like Glencore." Alderon entertained "a number of different iterations with potential suitors" before eventually settling on Glencore as a partner following a competitive selection process. When asked how the company was able to generate interest from potential offtake partners, Eldem stated, "we've been at this for well over two years. Interest has almost generated itself through introductions at conferences, based on our knowledge of the industry and industry contacts." To be sure, the company's experienced management team appears to have garnered confidence from significant players. "Of course having a name like Glencore interested in working with Alderon means a lot to Alderon in the sense that it speaks highly of the product quality and the project quality. So from that perspective, there's a very strong vote of confidence all around," Eldem said.
Interested investors will definitely want to keep an eye on how things progress at the Kami project. In terms of what the future holds for the iron market and iron ore miners, Eldem believes long-term fundamentals are robust. He stated, "this is still an environment that is very supportive of new projects, provided that the new projects coming along are cost competitive."Notably, Alderon remains poised to weather the current influx of iron ore streaming onto the market from the big three — Rio Tinto (NYSE:RIO,ASX:RIO,LSE:RIO), Vale (NYSE:VALE) and BHP Billiton (NYSE:BHP,ASX:BHP,LSE:BLT) — as it has a very high-quality deposit. "Not every tonne of mined ore is created equally," Eldem pointed out. "What I mean by that is we have a very strong value-use proposition as a result of the quality of the product that we bring to market. We believe very strongly that there is a niche market for it, especially as the end users become more discerning and look for cleaner input into their blast furnaces." Photo credit: Sept-Iles Port Authority. Securities Disclosure: I, Teresa Matich, hold no investment interest in any companies mentioned. Related reading: Century Iron Mines CEO Sandy Chim Sees Healthy Long-term Outlook for Iron Ore Alderon Iron Ore's Offtake with Glencore: 100 Percent of Initial Production Committed from Iron Investing News