BARRIE, Ontario (miningweekly.com) - TSX-listed Baffinland Iron Mines is hoping to secure a strategic partner for its $4,1-billion Mary River iron-ore project within the next two to three months, chairperson and acting CEO Richard McCloskey said on Tuesday.
Baffinland is looking to accelerate production at the project, located in Baffin Island, Nunavut, with first production planned for 2013.
The company last month appointed Amec Americas to study the feasibility of hauling some three-million tons of iron ore yearly with trucks to a port 100 km away before an 18-million ton a year rail and port facility is commissioned five years from now.
Baffinland would have the results of this study by November, McCloskey said in an interview.
“At this point, the study is looking good, we could be exporting three-million tons in 2014,” he added.
The company completed a feasibility study in 2008 that determined it would be viable to build a 18-million ton a year mine, plant, rail and port facility at an estimated cost of $4,1-billion.
The plan now is to start production earlier, and use trucks to haul the ore to the port. While this could cost as much as ten times as much as rail transport, it made sense to get early cash flow while iron-ore prices were high, McCloskey said.
State-owned paper China Daily reported on Tuesday that iron-ore prices were expected to drop 10% in October, as Chinese production increased and steel demand dropped.
Prices were still around $145/t – significantly higher than the lows of 2009.
Earlier this year, Baffinland said that it had received interest from 20 companies interested in participating in the Mary River project.
McCloskey said Baffinland was currently in talks with potential strategic partners.
“We are talking to large mining companies. We are also talking to European steelmakers,” he told Mining Weekly Online.
On Tuesday, Reuters quoted Jennings Capital analyst Peter Campbell as saying Baffinland could lead the charge in a new wave of Canadian iron-ore juniors partnering with overseas steelmakers.
“The fact that Baffinland has shipped test cargoes to ArcelorMittal and ThyssenKrupp in Germany makes them the leading candidates," said Campbell.
Japan’s Mitsubishi Corp already has a shareholding of less than 5% in Baffinland, McCloskey said. The TSX-listed company has already signed letters of intent with future customers, mainly in Europe.
Baffinland, however, aimed on building the road haulage part of the mine by itself, which McCloskey estimated could cost around $500-million.
The company is currently sitting without a permanent CEO after Gordon McCreary stepped down from the post in March.
McCloskey had been serving as interim CEO since then, and said the company was not in a rush to appoint a successor until it had a clearer idea on what direction it would take with regards to a strategic partnership.
“A lot of our work is done by our consultants. The most important work we’re doing right now is looking for money,” he said.
Rio Tinto in May said it was restarting a C$445-million investment in its Labrador, Canada, iron-ore assets to lift production by four-million tons to 22-million tons by 2012.
Baffinland’s output is expected to be 75% quality lump ore and 25% premium quality fine ore grading over 66% iron. This ranked it among the highest quality iron-ore deposits in the world.
The company had a 2010 budget of $37-million focused on exploration drilling and advancing permitting.
Baffinland was trading at C$0,47 a share on Tuesday afternoon, giving it a market capitalisation of C$160-million.
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