alderon_kamiWeak iron ore prices have not stopped Canadian junior miner Alderon Iron Ore Corp from de-risking its Kami project in Quebec's Labrador Trough, Canada's most active iron producing region.

Today the company announced an off-take agreement with mining and metals super major Glencore PLC, whereby Glencore will acquire all of the production from the Kami project that has not already been allocated to Hebei Iron & Steel Group Co. Ltd., Alderon's primary partner on the project.

Under the terms of the deal, upon the commencement of commercial production, Glencore will purchase 40% of the actual annual production from Kami up to a maximum of 3.2 million tonnes of the first 8 million tones of iron ore concentrate produced at Kami. The agreement continues until Kami LP has delivered 48 million tonnes of iron ore concentrate to Glencore, which is expected to last 15 years from the start of commercial production.

Glencore will be paying the market price less a 2% discount (Platts Iron Ore Index for 62% iron content, plus additional quoted premium for iron content greater than 62%).

"With 100% of the initial production from the Kami Project now committed, we believe this enhances Alderon's ability to obtain the requisite financing required to commence construction of the Kami Project," says Tayfun Eldem, Alderon's President & CEO. "The offtake arrangement with Glencore gives Kami concentrates global exposure and the multi-year agreement serves as another significant de- risking milestone for the Kami Project."

Hebei Iron & Steel Group Co. Ltd. has already advanced $180 million to Alderon to advance the Kami project, and owns a 25% interest in the Kami project, as well as 19.9% of Alderon shares.

Capex for the Kami project is estimated at 1.27 billion and is expected to be raised through a combination of mostly debt and some equity. Hebei should step up for 25% of the equity portion.

Next up for the company will be to secure the financing and begin construction of the project.

Shares in Alderon were up 3.7% in the first 45 minutes of trading Tuesday, last at $1.36, giving the company a market cap of approximately $177 million.

Read: Alderon Announces Off-Take Transaction With Glencore

Alderon Iron Ore Corp 5 year quote (Stockwatch)

Alderon Iron Ore Corp 5 year quote (Stockwatch)