CAT trucks onsite at Bloom Lake
While many developed nations are only just beginning to struggle out of the financial crisis, the large players of the developing world are forging ahead. China and India have both maintained a steady — albeit somewhat diminished — growth throughout the last two years. Now that the global economy is stabilizing, China, in particular, is looking to surge ahead. With much of its internal growth fuelled by infrastructure projects, the country’s industry is starved for steel and its essential feedstock, iron ore. Despite producing enormous quantities of ore within the country, China is eagerly seeking additional sources. This is excellent news for Canada’s newest iron mine, Consolidated Thompson’s Bloom Lake operation, located in Quebec’s Duplessis County, approximately 400 kilometres north of Sept-Îles.
Despite being first discovered in the 1950s, little exploration of the Bloom Lake deposit had taken place until the late 1990s, when well-established iron producer Quebec Cartier optioned the property. Bloom Lake’s location was a major attraction for Quebec Cartier, which had already operated the Fire Lake Mine in the same region. The company conducted a further 18,000 metres of drilling in an effort to further delineate the deposit. The company also did an evaluation with an eye for possible development. However, financial difficulties brought on by rock-bottom iron prices forced Quebec Cartier to let the option go in 2003, when the company made a strategic decision to focus on its Fire Lake property.
The beginning of the Bloom Lake project, as it stands today, dates to 2005. At that time, Richard Quesnel was serving as general manager of Taseko Mines’ Gibraltar project in British Columbia. One day, he recalls, he received a call from Stan Bharti and Gerry McCarvill of Forbes Manhattan, a private merchant bank in Toronto. Quesnel first met the two in the early 1980s when they were working with Barclay Engineering and he at Placer Dome. But this call was not about contract engineering work. Bharti and McCarvill were calling to ask Quesnel to look at a property they were interested in developing — Bloom Lake.
Starting from scratch
Quesnel was familiar with Bloom Lake, having served as the operating manager for Quebec Cartier from 1991 to 1994. Consolidated Thompson had just completed an NI 43-101 review of the property, performed by engineering consultancy Watts, Griffis and McOuat Ltd. Quesnel reviewed the report and was comfortable with what he saw, especially in light of the much improved iron prices of 2005. With the Gibraltar Mine commissioned and operating, he felt that the time was right to be involved in a grassroots project. “I thought to myself — if I am going to lead a team in developing a mine from scratch once in my life, after being involved in four major projects, now is the time,” recalls Quesnel.
Quesnel was employee number one, joining Consolidated Thompson in August of 2005. He formed a Montreal-based team and started the process of building the mine. “We hired a local consulting firm called Breton, Banville & Associates to do the feasibility studies and detailed engineering, since they had people with lots of experience in the iron ore industry,” he says. “The key players had also done some work for Met-Chem, another important consulting firm, as well as for international projects in India, developing iron ore and coal facilities.”
“Everything moved on, from scoping to feasibility through all the stages you’d encounter in mine development, but with the added challenges of doing it all on a fast track,” Quesnel adds. The increased demand for iron ore and the rising price that followed it were advantages Thompson was eager to capitalize on, which meant bringing the project online as soon as possible. The results can be seen today. Bloom Lake is at what Quesnel describes as “very advanced commissioning stages” and is in the process of building product inventory. The mine is expected to reach its peak production capacity by the end of February, delivering an average of eight million tonnes of ore per year. By that time, the company will have grown from having a handful of employees and being financed by about $2 million in private placement capital to having nearly $2 billion in market capitalization and 250 employees. The latest rounds of financing that raised over $875 million are a sure sign of strong investor interest.
Put in context, Bloom Lake’s contribution to Canada’s total iron ore output is very impressive — Natural Resources Canada reported Canada’s 2008 shipments to be 31.3 million tonnes, which the new project is set to increase by 25 per cent. However, the depressed economy in North America and Europe meant that finding customers closer to home would have been a challenge.
“North America is a saturated market,” Quesnel explains. “If you get a customer in North America or Europe, you’re displacing ore from another company feeding them. In the middle of the financial crisis, the steel mills were running at about 40 per cent capacity. Now, they’re at about 70 per cent, but there’s still volatility in the market.” Therefore, instead of focusing on the regional market, Thompson looked to markets where demand was strong, especially for the type of ore they were extracting from Bloom Lake.