VANCOUVER (miningweekly.com) – Activities are ramping up at the Bloom Lake mine, in near Fermont, Quebec, with preparations well under way towards the ultimate goal of sending off the first fully laden train of iron-ore by the end of February, or early March.
“The highlights have been coming thick and fast this year,” Champion and QIO executive chairperson and CEO Michael O’Keeffe tells Mining Weekly Online in a recent interview.
The current focus is to upgrade the mill, making use of the spare parts on hand when the company’s subsidiary Quebec Iron Ore (QIO) acquired the then-shuttered Bloom Lake in April 2016.
O’Keeffe said Bloom Lake is positioned to capitalise on a growing premium for the high-grade iron-ore the mine will be producing, based on increased demand from Chinese smelters for higher-grade inputs to help cut pollution and drive down costs, while improving the quality of their products.
A key focus has been to replace the mineral spirals that previous owner and operator Cliffs Natural Resources employed. This, O’Keeffe expects, will help to increase ore recoveries, while helping to drive down operating costs. Where Cliffs’ cost was about $75/t FOB China, the revamped Bloom Lake operation stand to benefit from costs in the range of $40/t, he pointed out.
Ever the iron-ore bull, O’Keeffe shared a strong outlook for the price of the iron-making commodity, expecting the price for 62% benchmark material to continue trading at between $60/t to $65/t for the foreseeable future.
A January 2017 feasibility study on the project outlined a 7.4-million-tonnes-a-year operation. The concentrate, at 66.2% iron content, is obtained with an expected metallurgical recovery that averages 83.3% iron relative to plant feed at the 30% iron average feed grade.
“Demand for higher-grade material is higher than previously expected, and we expect Bloom Lake to fetch market process between $80/t to $85/t in the current market,” he explained.
Champion subsidiary Quebec Iron Ore had on April 11 closed the C$10.5-million acquisition of Cliffs Natural Resources’ Bloom Lake assets and the Quinto claims, located opposite its flagship Fire Lake iron-ore project in the famous high-grade Labrador Trough mining district, straddling the provincial borders of Newfoundland and Quebec.
In contrast, Cliffs had in 2011 bought the mine for about C$4.9-billion from Consolidated Thompson.
Bloom Lake had been placed on care and maintenance since December 2014, when the mine could not compete with collapsed ore prices, which fell from a record high of $180/t to $50/t four years ago. Cliffs was also more than half way through the Phase 2 development of the mine, with many major parts already on site for an expanded operation. QIO bough the distressed operation after Cliffs had placed Bloom Lake and several other associated subsidiaries under Companies’ Creditors Arrangement Act protection in January 2015.
Meanwhile, all equipment required for the mine’s restart is on site, and the company in November announced the official restart of the operation.
At the Port of Sept-Îles, also in Quebec, construction of a 300-m conveyor is progressing, and is expected to cut transhipment costs by $8/t alone.
O’Keeffe pointed out that all facilities it had acquired through the Cliffs deal are now in use, including accommodations in Fermont.
There are about 400 employees and contractors active at site, and more are being hired, he said.
O’Keeffe said plant and processing upgrades are expected to deliver improvements in iron recovery. The upgraded recovery circuit flowsheet replaces the existing three-stage spiral circuit with a new gravity circuit that limits the recirculating process streams and reduces the chance of losses of iron to the rougher stage tailings. A magnetic scavenging circuit will also improve the recovery of additional iron minerals.
He expects the plant upgrades to be commissioned during February, followed by the first shipments late in February, or early in March.
Over the 21-year mine life, the average operating cost of production has been calculated at $44.62 per dry metric tonne (dmt), free-on-board port Sept-Iles. The life-of-mine average iron-ore price for 66.2% iron cost-and-freight China (62% iron index plus premium for extra iron content) has been pegged at $78.40/t, provided by a market study by economics consultancy Metalytics.
The operation comprises a conventional surface mining method using an owner-mining approach, with electric hydraulic shovels and mine trucks. All major mine equipment required for the restart of Bloom Lake is present on site.
Bloom Lake has a compliant proven and probable mineral reserve estimated at 411.7-million tonnes grading 30% iron, based on a cutoff grade of 15%. The mineral resource at a cutoff grade of 15% iron, inside an optimised openpit shell based on a long-term iron price of $60/dmt concentrate for 66% iron content, is estimated at 911.6-million tonnes in the measured and indicated categories, with an average grade of 29.7% iron, and the inferred mineral resource stood at 80.4-million tonnes with an average grade of 25.6% iron.
“Bloom Lake has massive reserves and its inventory of magnetic fines offer opportunities to look into producing pellet feed too,” he said, noting that Phase 2 of the Bloom Lake development already stands three-quarters completed.
QIO previously received conditional commitments for debt financing of $180-million from Sprott Private Resource Lending and Caisse to finance the restart of Bloom Lake. Sprott will provide $80-million through a five-year senior secured loan-bearing interest rate of 7.5% a year, plus the greater of the US dollar three-month London Interbank Offered Rate and 1% a year.
Caisse will provide $100-million through a seven-year subordinated loan bearing interest at 12% for the first year, and, thereafter, at an interest rate linked to the price of iron-ore.
The Glencore debenture can be converted at any time into ordinary shares of Champion, at Glencore’s option, at a conversion price that reflects a 25% premium above the price of the subscription receipts offered under the prospectus offering.
The debenture will include a mandatory conversion clause at a conversion price of C$0.85 a share, which may be triggered by the lenders under the total $180-million loan facilities of QIO, provided that the forced conversion may not have the effect of causing Glencore to own 20% or more of the ordinary shares of Champion.
Glencore has also under terms of the agreement secured global offtake rights for the life-of-mine (LoM), with fixed commercial terms for a ten-year period for all tonnes of future Bloom Lake iron production not sold in Japan, under the existing offtake agreement with Sojitz Corporation.