TORONTO (miningweekly.com) – US miner Cliffs Natural Resources on Tuesday said there was no future for its Bloom Lake iron-ore mine, in Quebec, if the Phase 2 expansion was not undertaken.

Speaking on his first quarterly results analyst telephone call as chairperson, president and CEO of the company, Laurenco Goncalves said the Bloom Lake operation would be shut down or sold by next year if the expansion did not take place, labelling the Phase 1 project as being in “no man’s land”.

He outlined the company’s development criteria, which would require a minimum of three offtake partners taking up at least 25% of the Phase 2 output each.

The offtake partners would also have to acquire at least a 10% equity stake each in the project to help foot the $1.2-billion development cost.

“If we cannot secure the requirements for Phase 2, we will immediately close the Phase 1 operation. It will not continue selling iron-ore at a loss beyond 2015,” Goncalves said.

With its exceptional high-grade ore containing 66% iron, Bloom Lake was once seen by analysts as a key growth project for Cliffs, but the mine's first phase had been plagued by higher-than-expected costs and Cliffs shelved plans for building a second phase on its own.

The expansion of the Bloom Lake iron-ore mine, which the firm acquired through its buyout of Consolidated Thompson in 2011, was delayed in 2012, resulting in a $1-billion goodwill impairment.

However, Goncalves said the second development phase of Bloom Lake would make economic sense and would subvert the global seaborne iron-ore market.

If Phase 2 were to be completed, Bloom Lake could produce about 13.5-million tons of high-grade iron-ore at about $50/t, a cost profile ranking among the lowest in the world.

Currently, the high-cost operation accounted for less than 20% of Cliffs’ total iron-ore output.

Goncalves underlined his preference for the company to focus on its US iron-ore assets, but stressed that the company was in no hurry to sell any assets, especially not in the current market.

“There is no specific timeline to streamline our asset portfolio. There is no ticking time bomb within Cliffs,” he stated.

Cliffs on Monday reported a third-quarter net loss of $5.9-billion, or $38.49 a share, after booking a $5.7-billion write-down of its iron-ore and coal assets.

The Cleveland, Ohio-based company, which came under new management in July, following activist shareholder Casablanca Capital’s victory in a proxy contest, wrote down $4.5-billion related to the Bloom Lake iron-ore project.

The stock on Tuesday bounced 26% on the NYSE amid heavy trading, and traded around $10.89 apiece late in the morning.