March/April 2011

Future growth built on iron ore legacy

By Correy Baldwin

The plant is located one kilometre from the first deposit to be mined | Courtesy of Labrador Iron Mines

“The best place to look for a new mine is beside an old mine,” says John Kearney, CEO of Labrador Iron Mines (LIM). Following this strategy, LIM is developing the Schefferville Projects, an area operated by the Iron Ore Company of Canada (IOC) for over 25 years.

The Projects lie in the iron-rich Labrador Trough that runs through western Labrador and northeastern Quebec. The Trough region has long been the centre of iron mining in Canada and is one of the major iron ore-producing regions of the world.

IOC moved into the area in 1950 and over the next four years completed one of the largest civil construction projects in Canadian history. They developed a mine site and the company town of Schefferville, constructed the Sept-Îles shipping terminal on the Gulf of St. Lawrence, and built a 565-kilometre rail line connecting the two sites.

“There was absolutely nothing there before IOC arrived,” explains Kearney. “There was no town; there was not even a camp. IOC built everything – from the roads to the railroad, the power station, the airport, the hospital, the schools and the gymnasium – everything.” But then IOC shut down operations in 1982, leaving behind the extensive infrastructure, as well as 250 million tonnes of mineable reserves.

When Kearney came across the Projects in 2004, he immediately saw an opportunity. “I was attracted to this historic mining area that still had a significant resource and infrastructure and was not mined out,” he says. “I also was intrigued by iron ore. I can’t claim that I foresaw the increase in demand that it has reached today, but I certainly thought the future for iron ore was going to be pretty good.” And he was right. Global demand for iron ore is on the rise, in large part because of growing markets like China and India.

At the time, Kearney was chairman of the UK company Anglesey Mining. After conducting an early exploration, drilling and sampling program in 2005 and 2006, Anglesey set up Labrador Iron Mines, which acquired a 100 per cent interest in the project under an initial price offering in 2007.

Building on a strong foundation

Labrador Iron Mines is set to begin operations in April, and during this initial production year expects to mine about two million tonnes of iron ore. Subsequent years should see this amount increase to about four million tonnes and then later to six million tonnes per year.

The company carried out an extensive exploration program throughout 2008 and 2009, with 5,364 metres drilled and 2,459 metres trenched, increasing the 150 million tonnes of historical resources on the property and qualifying about a fifth of it to date as NI 43-101 compliant. They also completed an environmental baseline analysis, as well as studies on railway and shipping port use.

The environmental assessment and mine permitting process for the first-stage James and Redmond deposits were completed within two years. “A rather remarkable progress record,” says Donna Yoshimatsu, vice-president and head of investor relations for LIM. “Permits for future phases and stages will be sought in due course and NI 43-101 reports will be prepared in sequence.”

The existing infrastructure gave LIM a huge advantage. Access roads, water supply and sewage facilities were already available when LIM moved in, as was access to an airport, railway and shipping port. “The make or break of any bulk commodity mining operation is infrastructure,” says Yoshimatsu. “The existing infrastructure here was put in place by IOC for these very deposits. That’s why we’re here today, and why we can keep our capital expenditures in the lowest quartile.”

Some upgrades have been required. LIM uses expert contractors skilled in construction in the northern climates. The first major construction activity was re-establishing a 4.5-kilometre spur line to connect the processing site to the Schefferville-Sept-Îles main line. Installation of the new track along the existing rail bed was completed in 2010 and then used to bring in the main components of the processing plant and accommodation camp. The track will be used to move the initial shipments of sample ore and to move the iron ore when the mine goes into full production. To reduce capital costs, LIM will lease the railway cars.

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