TORONTO – Champion Iron Ltd is thinking small with its plans to bring Quebec’s giant Bloom Lake iron ore mine back to life. Chief Executive Michael O’Keeffe intends to slash costs while cutting millions of tonnes from a planned production expansion. The strategy runs counter to the traditional economy of scale formula, which bumps up production for proportional cost savings.
It may prove a prescient approach as iron ore prices pull back from 30-month highs in February. The recovery sparked signs of life for a handful of hibernating miners in Canada’s metal-rich Labrador Trough, straddling the provinces of Quebec and Newfoundland and Labrador, including Champion, Alderon Iron Ore and Tata Steel Minerals Canada.
Champion is taking a different tack with Bloom Lake than its previous owner and North America’s biggest iron ore producer, Cliffs Natural Resources, beginning with the price tag.
Cliffs paid $4.9 billion for the mine in 2011, near the top of the market. Later it launched a $1.2 billion expansion to make the mine viable by doubling output to 16 million tonnes in a bid to help bring costs down.
But as prices slumped, Cliffs suspended the money-losing operation. It sold the mine to Champion for C$10.5 million in 2015, a year when spot prices bottomed at $37 a tonne, from $190 in 2011. O’Keeffe, a former Glencore executive, believes other miners looking to buy Bloom Lake made calculations using Cliff’s high-volume blueprint and were spooked by the costs.
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