Cashed-up Century Iron exploring Quebec, Labrador

Backed by deep-pocketed investors, Century Iron Mines (FER-V) has launched as a new iron play in Quebec and the Labrador Trough.

The company ended its first trading day on May 24 at $3 a share after completing a reverse takeover and share consolidation of a capital pool company, but the debut was preceded by three years of deal-making as a private company. Sandy Chim, CEO of Century Iron, spent that time setting up the company for exposure to Chinese capital while retaining Canadian ownership.

As a result, Wuhan Iron & Steel (WISCO) paid $60.9 million for a 25% interest in the newly-structured company, and MinMetals Exploration and Development paid $12.2 million for a 5% stake. The two investments came on top of Century Iron Mine’s brokered private placement at $2.50, netting $32.5 million and a non-brokered $7 million financing. Together, the deals had Century coming out of the gates with a cool $115.5 million.

And while start-up capital can be sometimes difficult to secure, Chim explained in a meeting with The Northern Miner that securing capital to develop projects was his biggest concern. To solve that, Chim signed on WISCO as a 40% joint-venture for a further $120 million, but the key part of the deal was that WISCO has agreed to secure 70% of future capital costs through debt financing.

If Century Iron goes into production, WISCO will get a 40% share of the production plus a 20% offtake at market prices, and MinMetals will have a 10% offtake at market prices.

With full coffers, Century Iron can concentrate on completing its option agreements and moving projects forward.

The company’s most advanced project is Duncan Lake, sitting far from the Labrador Trough at only 120 km east of James Bay. Century Iron has a 51% interest in the project, while joint-venture partner Augyva Mining Resources (AUV-V) holds the rest. Century has an option to increase its stake to 65% by spending $14 million developing the project, or completing a feasibility study.

The 46-sq.-km property, characterized by granite intrusions, hosts 5.7 million measured tonnes and 25.6 million indicated tonnes grading 23.29% and 23.84% iron, respectively, while the inferred resource stands at 821.1 million tonnes at 24.56% iron, all using a 16% cut-off.

The project benefits from the relatively nearby infrastructure of the Robert-Bourassa hydroelectric power plant in Radisson, including a regional airport, a paved highway, which runs from Matagami through the property to the town of Radisson 50 km north, and lots of low-cost electricity.

To get the product to market, the joint-venture partners have proposed a 150-km-long slurry pipeline from the company’s future plant in Radisson to an envisioned deep-water port on James Bay. The pipeline could cost $300 million, but Chim noted that operating costs would be US$1 to US$1.25 per tonne, compared with much higher rail freight costs.

Once on James Bay, the product would need to circumnavigate Quebec and Labrador. In recent decades, all-year shipping channels have been established from Churchill and Deception Bay. The company plans to ship 60% of the concentrate during the 150-ice-free days, while the rest would require more expensive shipping due to the need for stronger ice-breaking ships.

The joint-venture partners completed 8,000 metres of drilling on Duncan Lake and plan for a minimum 50,000 metres in the program. The companies are working to upgrade and expand the tonnage on deposits 3, 4 and 6 of the project.

Century Iron also has an option agreement to earn a 60% interest in the Attikamagen iron project in the Labrador Trough from Champion Minerals (CHM-T), for a total consideration of $13 million. The 310-sq.-km project, sitting 15 km east of Schefferville, is still at an early stage, but Century Iron recently completed 2,000 metres of diamond and reverse circulation drilling.

Results from the Joyce Lake direct shipping target on the project included 139 metres grading 52.8% iron from 3 metres depth, 91 metres averaging 52.46% iron from 12 metres, 111 metres at 37.20% iron from 3 metres and 123 metres carrying 46.64% iron from 2 metres.

At the Hayot Lake taconite targets, drilling returned 111 metres grading 32.3% iron from 87 metres, 72 metres averaging 32.56% iron from 3 metres downhole and 97 metres carrying 32.46% iron from 13 metres depth.

Century’s wholly owned Sunny Lake project covers 240 sq. km in two sections, 40 km northwest of the Attikamagen project. The company acquired the properties by staking in 2009, but is concentrating currently on its other projects.

The company has 92.8 million shares outstanding, with WISCO and MinMetals representing
30% and founding shareholders and management holding 55%, leaving a scant 15% in the public sphere.

The WISCO deal was made possible in part by its successful USS$240-million investment in Consolidated Thompson in 2009. The company cashed out its 20% stake when Consolidated Thompson was bought for $4.9 billion, and kept a 25% interest in the Bloom Lake project. The Chinese steel giant is looking to repeat the pattern with its investment in Century Iron, as well as a $120 million investment in Adriana Resources (ADI-V) for a 60% stake in Adriana’s projects and 20% of its shares.

Since listing in May, Century’s share price has hovered around $3 on thin volume. Chim says he expects the company to move up to the TSX main board shortly.