In 2008, Mark Morabito had a lot of rocks on his hands, but business-wise he was in a hard place.
First, the Labrador Inuit had placed a three-year moratorium on uranium mining in their territory.
That effectively shut operations for Morabito’s uranium-focused exploration company, Crosshair Exploration & Mining Corp. (TSX:CXX).
Then came the worst global financial collapse since the Great Depression.
“That really chased away all the capital for the area and the analysts that were covering Crosshair’s project wrote them down 90% and discontinued their coverage,” said Morabito, “so we were really kicked in the groin.”
That left him with two options.
He could pack it in and move on or he could find another project in Labrador and make use of his exploration team.
Fortunately, it wasn’t long before an early-stage iron-ore deposit called Kami came to his attention in Canada’s premier iron district.
Around that time, Stan Bharti was calling it quits at Consolidated Thompson Iron Mines Ltd. (TSX:CLM).
Bharti had helped found Thompson and transform it into Canada’s newest iron producer, which, these days, has a market capitalization that exceeds $2 billion.
In addition to Bharti, chairman Bruce Humphrey and CFO Brad Boland had resigned from Thompson.
Morabito saw an opportunity.
“So I was introduced to them and say, ‘Hey, I’m putting together this iron-ore deal just down the street from where you were. Why don’t you take a look … and join?”
And that’s how Alderon Resource Corp. (TSX-V:ADV) was born.
Morabito would lead the company as president and CEO, while Bharti became executive chairman and Humphrey and Boland adopted director roles.
Morabito moved the company to a Vancouver office, where it could have access to the West Coast’s massive exploration and mining community.
Meanwhile, Bharti stayed in Toronto, where he could pull strings for the company through his Forbes & Manhattan Inc. private merchant-banking firm.
Alderon sunk its first drills into the ground in June and has yet to establish a firm resource at Kami, but Morabito said the venture’s heavyweight management team has already begun to raise some eyebrows.
“Stan opens the door to Bay Street, Wall Street, Boulevard Rene Levesque, all of the funds that don’t normally look at projects at this stage, but because of Stan’s history with Thompson they’re coming in now … they’re looking at us.”
Kami is less than 10 kilometres from Thompson’s Bloom Lake deposit, where Alderon hopes to drill a 400 million to 500 million tonne resource grading between 28% and 34% iron.
The property is also near the Iron Ore Co. of Canada’s Carol Project, which has produced more than one billion tonnes of crude ore since 1962.Like many other projects in the mining industry these days, Kami is one of those ventures that have effectively become known as a “China bets.”
In other words, the Asian giant’s insatiable appetite for natural resources is stirring demand from Canadian mineral producers.
Iron ore is chiefly used to make steel, a commodity that’s become essential for developing nations. According to the World Steel Association, China’s apparent steel use in 2011 could be 42% above 2007 levels and account for 45% of the world’s steel use. Earlier this month, the association improved its outlook for the commodity, saying world use would increase 13.1% this year compared with an earlier forecast of 8.4%.
Yet, it remains “cautious” and said 2011 steel demand in development economies could still be well below pre-financial-crisis levels.
Ron Watkins, president of the Canadian Steel Producers Association, said Canada’s steel producers are operating at 70% capacity these days compared with 80% or 90% prior to the recession. That means steel requirements in North America aren’t likely to grow as fast as in China, making Alderon’s Kami project all the more dependent on Asia.
But all that focus and competition for China doesn’t have Morabito worried.
In fact, he thinks Alderon may be able to get Kami in production sooner than Thompson did Bloom Lake, and China is as sure a bet as anything.
In other words, he has rocks but now he’s in a good place.
“It is an unstoppable juggernaut … that country can’t be turned,” Morabito said. “They’re on a path to development of the entire country and that’s a 50- to 100-year project.”
Vancouver
CEO: Stewart Wallis
Employees: N/A
Market cap: $29.6m
P/E ratio: N/A
EPS: $(0.01)
Sources: Stockwatch, TSX