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Posts tagged ‘Century Iron Mines Corp (FER)’

Frontier prudence

July 2nd, 2013

Champion Iron Mines steps back from its Labrador Trough rail proposal

by Greg Klein

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Another transportation setback has highlighted the challenges of reaching Canada’s resource-rich hinterlands. Champion Iron Mines TSX:CHM announced July 2 it had terminated an agreement to use facilities at the deep-sea port of Sept-Iles, Quebec. The decision saved the company a $25.6-million payment due to the port by July 1. But it places further uncertainty on transportation proposals to the Labrador Trough straddling northern Quebec and Labrador. The news followed a June 12 announcement that Cliffs Natural Resources was suspending its Ontario chromite project and, along with it, a province-backed road proposal for the Ring of Fire. In February CN TSX:CNR stated it had suspended its feasibility study on an estimated $5-billion, 800-kilometre Quebec rail line to the Trough.

Champion attributed its decision to a failure to gain private and public backing for a new railway. Estimated at $1.33 billion in the company’s February pre-feasibility report for the Consolidated Fire Lake North iron ore project, the 310-kilometre line would connect the southern Trough with Sept-Isles, on the St. Lawrence River’s north shore. The company studied the project despite the fact that Champion had already signed a collaboration framework agreement backing CN’s proposal.

Champion Iron Mines steps back from its Labrador Trough rail proposal

One of two existing railways in the Trough, the Quebec North Shore
and Labrador line runs a 418-kilometre route between
Labrador City and Sept-Isles.

Champion reverted to Plan A following CN’s February decision. Discussions resumed with private and public interests to finance, build and operate a multi-user railway. But they failed to make progress by the July 1 payment deadline.

Of course market conditions played their role. Iron ore prices have been falling since a February high of about $154 per dry metric tonne. The following month the Melbourne Herald Sun reported that Rio Tinto chief economist Vivek Tulpule expected prices to fall to nearly $100 by September 2014. On June 24, however, Platts quoted Macquarie bank analysts who spoke of a potential recovery later this year. A July 2 report from China’s Xinhua news service stated, “Although there might be fluctuations, prices of iron ore imports will see a falling trend in the longer term.”

“The past year has been a very challenging period for iron ore developers,” conceded Champion president/CEO Tom Larsen in his July 2 statement. But he emphasized the company remains committed to its flagship and to “securing transportation and port-handling services that will permit the company to place among the lowest-cost iron producers in the Labrador Trough.”

Even without Champion’s proposed railway, the region benefits from mines, plants, power and two existing rail lines. The Iron Ore Company of Canada owns and operates the Quebec North Shore and Labrador route, which connects its Labrador City facility in the southern Trough to Sept-Isles, 418 kilometres away. As a common carrier, the QNSL is required to ship other companies’ goods as well.

An ArcelorMittal subsidiary runs a private carrier called the Cartier Railway from the company’s Mont-Wright operation, 40 kilometres southwest of Labrador City, to Sept-Isles.

Iron ore prices notwithstanding, Asian investment in the Trough has continued. Chinese companies are said to be looking at Rio’s 58.7% interest in the Iron Ore Company of Canada, of which Mitsubishi holds another 26.2%. The Anglo-Australian giant reportedly wants to sell its stake for up to $4 billion.

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Labrador Trough derailed

February 12th, 2013

CN suspends feasibility for rail link to Quebec/Labrador iron ore range

by Greg Klein

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The Labrador Trough might hold some of the world’s largest undeveloped iron ore resources. But is the market ready? That’s a question some people are asking as CN TSX:CNR shelves a feasibility study to build what might have been a $5-billion, 800-kilometre rail line to the isolated Quebec/Labrador iron ore range.

CN formally announced the decision February 12, citing “current market realities.” The rail giant added that “mine construction schedules and diverging needs for each specific individual project will make it difficult to obtain the critical volumes of iron ore necessary.” Also a factor was “the decision by some miners in the region not to join the group of mining companies supporting the CN infrastructure project.” The study was originally scheduled for release in May.

CN suspends feasibility for link to Quebec/Labrador iron ore range

This Adriana Resources map shows the company’s Lac Otelnuk project,
the Labrador Trough and two existing railways, Cartier to the west and
QNS&L to the east. The latter route now terminates at Labrador City,
not Schefferville.

It began last August under a partnership of the continental railway, pension/insurance fund manager Caisse de depot et placement du Quebec and a group of mining companies.

In separate February 12 announcements, two of those companies announced they were unaffected by the suspension. Referring to its Taconite project straddling the Quebec/Labrador border, New Millennium Iron TSX:NML stated the “base case for product transportation is through a ferroduct and does not depend on a new rail line.”

The project’s KeMag deposit pre-feas suggests pumping concentrate along a 700-kilometre slurry ferroduct to the St. Lawrence port of Sept-Iles. “Slurry transportation is being used in many iron ore projects located in Brazil, India and Australia because of its low-cost advantage compared to rail transportation,” the company states. “This has the potential to make KeMag the lowest-cost pellet producer in North America.”

Another CN partner, Alderon Iron Ore TSX:ADV stated its Kami project “feasibility study capital and operating cost projections are based on using the [Quebec North Shore and Labrador] Railway.”

The region also has a second, private rail line operated by the Cartier Railway Company, a subsidiary of ArcelorMittal. The 420-kilometre route connects the company’s Mont-Wright operation with Sept-Iles.

The 415-kilometre QNS&L Railway links Labrador City with Sept-Iles. Although it’s owned by the Iron Ore Company of Canada (itself owned 58.7% by Rio Tinto and 26.2% by Mitsubishi), Alderon president/CEO Tayfun Eldem emphasized that the QNS&L is “a common carrier that operates with the legal obligation to accommodate third-party traffic. It currently has ample surplus capacity and runs within 15 kilometres of the Kami property.”

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