Investor enthusiasm for the soaring iron market is giving another mothballed Canadian project a shot at production.
The LabMag iron ore deposit in western Labrador, a giant on par with
If the campaign is successful, 80% owner
Both juniors are aiming for annual production of 10 million tonnes of product by 2010 in order to take advantage of a robust iron market, which some analysts believe has legs.
The main difference between the Mary River and LabMag deposits is the type of ore. Mary River contains some high-grade hematite (68% iron) that can be shipped directly to market without processing, whereas LabMag is a magnetic taconite containing mostly lower-grade (30% iron) magnetite that must be concentrated and pelletized before shipping.
Another difference is ownership. While Mary River has a single owner, LabMag is a First Nations/industry partnership unprecedented in the North American mining sector. Under an agreement with New Millennium, the Naskapi Nation holds 20% of the project and is entitled to a 30-year training program in exploration and mining.
“Our thinking was that the logical group to help us would be the First Nations because they live in the area and, if they’re working with us, are going to be in favour of the project,” says Robert Martin, president and CEO of New Millennium.
So in exchange for the Naskapi’s contribution to baseline studies, Martin handed over one-fifth of the project. If current negotiations are successful, that share will be distributed evenly among the Naskapi (10%) and the Innu (10%), the other First Nations group in the region.
“I would hope that the Naskapi and Innu eventually become the predominant force in the mine and the management,” says Martin.
Martin discovered LabMag in 1960 when he was working as party chief for Labrador Exploration & Mining Co. Later, Iron Ore Co. of Canada (IOCC) acquired the property, 30 km west of Schefferville, Que., drilled dozens of holes, and performed preliminary metallurgical tests.
But when the iron market plunged into a prolonged global downturn in 1980, IOCC ceased exploration. Apart from sporadic work by a few juniors, the project has been dormant ever since.
As LabMag slept, Martin continued his career at IOCC, eventually becoming executive vice-president responsible for all Canadian operations in the late 1980s. More than a decade later, working as a consultant, Martin was asked to produce an iron ore marketing study. His conclusion: iron prices were about to soar.
That’s when the light bulb went on and Martin’s old discovery, considered a mere curiosity 45 years ago, started to look like a potential moneymaker. When the Newfoundland and Labrador government put LabMag up for auction in 2002, Martin entered three separate applications and won. He later found out he was the sole bidder for the project.
Martin’s ambitious goal is to build an open-pit mine and concentrator connected by a 600-km pipeline to a pellet plant and shipping facility in Sept-les, Que. The mine would produce 33 million tonnes of crude ore, or 10 million tonnes of concentrate, every year for an estimated 20 years.
Once the current drilling is complete and an inferred resource has been outlined, New Millennium will conduct a $4-million prefeasibility study, including further drilling for resources, a 200-tonne bulk sample for metallurgical testing, and a market study to identify potential customers and partners for development.
A feasibility study would follow in 2006. If the results are positive, construction is expected to begin by the third quarter of 2007 and the mine would be in production three years later. Core analysis suggests the deposit could produce a high-quality concentrate in the order of 69% iron and less than 3% silica.
But New Millennium must jump though some big hoops before that happens.
First, the company must secure permits for the mine and supporting infrastructure from four different jurisdictions, including two provinces and two federal groups.
“The duration of the environmental work required is unknown,” says Martin. “We can’t determine how long it will take for these various groups to make their decisions and how many times we’ll have go back and repeat things.”
Second, the company must come up with the roughly $2.5 billion required to bring the project to production.
Last year, New Millennium raised $5 million for drilling and expects to add $9 million more before August as investors exercise warrants attached to that financing. The company will go back to the market to fund the $25-million bankable feasibility study, then turn to end-users to cover the rest.
Martin has already met with several steel companies around the world. With few exceptions, he says, they have expressed an interest in participating in the project financing in exchange for access to a reliable new supply of iron ore from a stable country.
The LabMag property lies on the extreme western margin of the Labrador Trough. Units of the Knob Lake group, including the major iron formation host in the area, underlie most of the property. Iron formation, exposed over the property’s 30-km length, consists mostly of re-crystallized chert and jasper with bands and disseminations of magnetite.
The LabMag deposit itself is a large, shallowly dipping block with predictable stratigraphy but varying magnetite grades. It is covered by a thin layer of overburden and has little internal waste rock, so stripping ratios are expected to be extremely low.
If the mine goes ahead as planned, ore will be mined from a 10-by-1.5-km open pit and transferred to a crusher. From there, it will proceed through grinding and ball mills to a standard magnetic separator that will concentrate the ore to 68-69% iron. The concentrate slurry will be pumped through a 600-km buried, insulated pipeline to a pelletizing plant at Sept-les.
Tailings from the concentrator will be pumped to a dam and the water recycled back to the concentrator, with no surface runoff. When the mine is eventually closed, the tailings will be used to fill in the open pit.
The savings incurred by such a project are significant: lower fuel costs at the pellet plant, owing to the nature of the magnetite ore; lower transportation costs, as a result of transporting concentrate by pipeline ($1.50 per tonne) instead of rail ($10 per tonne in this case); and a relatively small royalty (2.33%). The capital cost of the project and the concentrator’s huge appetite for electricity will be the main competitive disadvantages.
But if the iron market, currently an oligopoly controlled by
— The author is a Toronto-based geologist and freelance writer specializing in mining and the environment. She may be reached by e-mail at heffernan@geopen.com
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