By ROBERT GIBBENS, Freelance
April 27, 2011
"It's a very exciting time to be taking part in the extraordinary revival of Quebec-Labrador iron-ore mining," says Zoe Yujnovich, the Rio Tinto Brazil executive who became CEO of the Iron Ore Co. of Canada in Montreal 14 months ago.
IOC is investing almost $1 billion U.S. in a three-phase expansion of its Labrador City mines and processing plants to lift annual capacity from 16 million tonnes (in concentrates) to 26 million tonnes and retain the title of largest producer.
Exploration and mining investments worth many billions have transformed Schefferville, on the border's Quebec side, and Labrador City in Newfoundland, into boom towns in just six years - they're often compared with the frontier days of Fort Mc-Murray, capital of Alberta's oilsands industry.
"Traditionally we've supplied most of our concentrates and pellets to steelmakers in North America and Europe, but the world has changed, and our future lies in the burgeoning Asian markets," said Yujnovich, who holds engineering and management degrees and has held several executive posts at the international Rio Tinto Group, IOC's 58.7-per-cent owner. "That's where our new capacity will be headed."
Driven by soaring world prices that recently hit a record $180 to $200 U.S. a tonne, Quebec-Labrador is bursting with ambitious projects to feed iron ore to steelmakers worldwide, especially Europe, China and India. About $7 billion is committed for three, near-term projects and billions more for others further out.
In 2005 iron ore sold for $35 U.S. a tonne and Quebec-Labrador was on the ropes. But China's steel industry was taking off and scouting longterm, secure and low-cost foreign sources of ore.
Chinese, European and Indian steelmakers were quietly doing the same thing and soon saw the potential of Quebec-Labrador's enormous reserves, and mining and transportation infrastructure. The region's total capacity could double, to 100 million tonnes, within five years, and the Port of Sept-IÎes will be expanded for 300,000-tonne ore carriers.
IOC, then U.S.-controlled, had developed the first mines near Schefferville in the early '50s, building a 565-kilometre railway to haul the ore south to Sept Îles. In 1982 it shut Schefferville, citing economic reasons, and consolidated production at its Carol Lake mines and Labrador City processing plants.
It was Consolidated Thompson Iron Mines Ltd., led by former Newfoundland premier Brian Tobin and mine builder Richard Quesnel, that kicked off the revival in 2005 with the $750 million Bloom Lake project near Fermont, Que. By 2008 Thompson was well into construction when the global financial crisis broke.
Prospective customer Wuhan Iron and Steel Co. (Wisco), China's third biggest steelmaker, stepped up with $240 million U.S. in cash to buy 19.9 per cent of Thompson and 25 per cent of the mine. It eased the way to completion last year, and initial exports to China and Korea. Thompson plans to double capacity, to 16 million tonnes.
Next, Cleveland's Cliffs Natural Resources Inc., snapped up Wabush Mines, IOC's neighbour at Labrador City, partly to get its Sept Îles pellet plant. Then early this year Cliffs bought Thompson for $4.9 billion. If Thompson doubles Bloom Lake, Cliffs' total Quebec-Labrador capacity will hit 23.5 million tonnes.
Tata Steel, a unit of the Indian Tata Group conglomerate, had been examining a 200-km swath of high-grade iron ore just North of Schefferville and straddling the border. The reserves would cover all its European (Corus) steelmaking needs for 100 years.
The property was held by New Millennium Capital Corp., and Tata Steel is committed to finance New Millennium's Taconite project and become its main customer. Taconite would need $5 billion to develop capacity of 22 million tonnes.
Tata is already financing New Millennium's directshipping ore project nearby, starting late this year with annual production of two million tonnes, rising later to four million tonnes.
"We're determined to get free of the huge swings in iron-ore prices of recent years," said Tata Steel's managing director H.M. Nerurker in Montreal recently.
John Leboutillier, former head of IOC and the Sidbec steelmaker, said the projects backed by deep-pocketed Cliffs and the big steelmakers will go ahead at a pace set by supply and demand, but moving the ore from Schefferville to Sept Îles may need creative solutions.
"Adriana Resources Inc.'s Lac Otelnuk project 175 km north of Schefferville, and potentially the largest of the new projects, faces real logistics and cost challenges," he said.
Adriana, with financial backing from Wisco, plans to develop 20 million tonnes or so of capacity at Lac Otelnuk.
Quebec-Labrador's other big established producer is ArcelorMittal Canada with its Mont Wright and Fire Lake mines near Fermont and railway to Port Cartier and 15 million tonnes of capacity. It may expand its Port Cartier pellet plant at a cost of several hundred million dollars and raise mine capacity to 19 million tonnes.
ArcelorMittal, the world's biggest steelmaker, led a group that paid $500 million for the big Baffinland Iron Mines property in Northwestern Baffin Island early this year.
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