TORONTO (miningweekly.com) – Maritime Canada-focused direct shipping iron-ore project developer Alderon Iron Ore on Tuesday slammed on the brakes on its flagship Kami project, implementing a comprehensive cash preservation programme that would allow the company to maintain a healthy working capital position into 2017 without the need to access equity or debt financing, aside from the financing required to start project construction.

The programme included workforce reductions, payment deferrals and relief from debt-servicing requirements.

Slowing economic growth in China impacted on demand growth for iron-ore and steel, driving iron-ore prices to five-and-a-half-year lows, dampened by surging output from Australia and Brazil, the world's two biggest suppliers.

The Vancouver-based company said it had kept its core team of executives intact, which would allow the company to continue to advance the Kami project construction financing efforts and to start construction in a rapid and seamless manner once such financing had been obtained.

"These cost savings measures do not mean we are now on care and maintenance. We are working more closely than ever with our partner Hebei Iron and Steel on increasing Chinese participation in the project in order to increase access to available capital from China.

“Earlier this year, The China National Development and Reform Commission (NDRC) said Chinese steelmakers should keep building up stakes in global iron-ore assets in the interests of China's strategic security and ‘speaking rights’, or influence, in global trade,” Alderon executive chairperson Mark Morabito said.

China's ore imports rose 10% in 2013, to a record 819-million metric tons, according to customs data. The NDRC also said that China's iron-ore demand would still rise, its reliance on imports would not change, and the degree of monopoly in global iron-ore resources would still keep increasing.

Morabito noted that the continuing commitment from the firm’s Chinese partners under NDRC mandate gave the company confidence that it would be able move the Kami project into construction.

A critical aspect of the cash preservation programme was the deferral of semi-annual interest payments on its $22-million loan from Liberty Metals & Mining Holdings (LMM).

LMM had agreed that the payments totalling $1.79-million, with $880 000 payable on December 31, and $915 200 payable on June 30, would be added to the principal amount of the LMM loan and paid at maturity on December 31, 2018.

In return for deferring the interest payments LMM would receive share purchase warrants, to be calculated by dividing the amount of the interest payment by the volume weighted average trading price of the Alderon common shares on the TSX for the five trading days prior to the date of each interest payment, plus a 10% premium. Each warrant would be exercisable until December 31, 2018, to acquire an Alderon common share at the warrant price.

Other project hopefuls were also progressing their direct-shipping iron-ore projects in the region, including Champion Iron Mines, which was continuing to progress work on the feasibility study for the Consolidated Fire Lake North project, in the Labrador Trough.