TORONTO (miningweekly.com) – While the world worries about the eurozone debt crisis, China’s economic model and US stagnation, mining operators and developers in the Labrador Trough, an iron-ore belt that extends through Canada’s northern Quebec and Labrador, are confident of weathering the storm and continuing to expand.
“Production could grow by a yearly compounded growth rate of 35% over the next five years,” the mines branch of Newfoundland and Labrador’s Department for Natural Resources said in its most recent edition of ‘Minfo’.
The bullish outlook is predicated on China’s desire to extend seaborne trade in iron-ore away from Rio Tinto, Vale and BHP Billiton. More significantly, the nature of the ore itself makes it an attractive drawcard to steelmakers, owing to its holding less contaminants when compared with material from Australia or Brazil.
“Labrador Trough ore remains attractive because it is one of the cleanest in the world; it holds less contaminants such as alumina and phosphates,” Alderon Iron Ore’s VP for business development, Simon Marcotte, explained.
“If you’re a steelmaker you want a ‘sweetener’ ore, such as material from the Labrador Trough. This enables you to blend it with ores from Brazil or Australia and allows for greater volumes to be used.”
Alderon remains confident of success despite the current slide in spot iron-ore prices. Benchmark 62%-grade iron-ore dipped to $114.90/t on August 8, down $1.30 from August 7, Reuters reported on August 9. “The boom is here to stay at $100/t; even at $80/t or $70/t,” Marcotte said. “As long as [Alderon] has something above $62, we have the green light.”
The company is developing the Kami iron-ore project in the Wabush Lake area, near Labrador City. The immediate mining area, which straddles provincial boundaries between Quebec and Labrador, also hosts significant operations and development sites, including those of ArcelorMittal Mines Canada, a division of ArcelorMittal, Cliffs Natural Resources, Champion Minerals and the Iron Ore Company of Canada (IOC), a subsidiary of Rio Tinto.
Based on a cut-off grade of 20% iron (Fe), the total measured and indicated resources for Alderon’s project are 1.1-billion tons, grading 29.8% Fe. Inferred resources are 277.4-million tons at 29.5% Fe. Initial output will be eight-million tons a year and an expansion programme would then take this to 16-million tons a year.
Of the initial eight-million-tons-a-year rate, 60% will be acquired by Hebei Iron and Steel Group, China’s largest steelmaker. Its material will be secured at a 5% discount to the market price. In return, Hebei will buy 19.9% of Alderon for C$88-million ($88.75-million) and buy a 25% stake in the project for C$106-million. Hebei will also assist in debt financing.
“The transaction [with Hebei] will be closed shortly,” Marcotte said.
INFRASTRUCTURE DEVELOPMENT
“Iron-ore is a bulk commodity; the key word being bulk. It’s all about the infrastructure,” he added.
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