New Millennium eyes top Canadian iron miner title

13th July 2011 By: Matthew Hill

TORONTO (miningweekly.com) – Companies in Canada’s Labrador Trough could be producing 100-million tons to 150-million tons of iron-ore yearly in the next 10 to 15 years if they carry out their plans, New Millennium Iron CEO Dean Journeaux said on Tuesday.

To put that in perspective, Australia’s massive Pilbara region currently produces around 300-million tons a year of the steelmaking ingredient, and the world’s biggest producer, Vale, mined that amount last year.

And with iron-ore output from the Labrador Trough set to explode over the next decade, New Millennium aims to play a major role in that growth.

Journeaux said the company, which changed its name from New Millennium Capital last month, hopes to become the biggest producer in the Labrador Trough in a decade.

“In ten years or so, we could very well be the biggest producer in the area,” he commented.

That would be no mean feat, seeing as the company is only set to start producing iron-ore next year.

There are already giants such as Rio Tinto and ArcelorMittal established in the area, which are embarking on their own big growth initiatives.

In May, ArcelorMittal said it would spend C$2.1-billion to increase iron-ore production from its Quebec operations by 71%, to 24-million tons by 2013.

Rio Tinto, meanwhile, said in February it would lift production at its Iron Ore Company of Canada operations to 23.3-million tons of concentrate by the end of next year.

US miner Cliffs Natural Resources this year paid around $5-billion for Consolidated Thompson Iron, with assets in Quebec, where it hopes to eventually produce 16-million tons a year.

Adriana Resources earlier this year completed a positive preliminary economic assessment for a 50-million-ton-a-year operation at its Lac Otelnuk iron-ore project in Quebec.

According to Journeaux, New Millennium had enough ore at its KéMag and LabMag deposits to produce 44-million tons of iron-ore a year, but it would likely start off with around half of this.

The main factor here is that the company has a partnership agreement with India’s Tata Steel, which has agreed to stump up the bulk of the financing for the massive project, to the tune of $4.8-billion.

That would pay for a 22-million ton a year mine.

Conveniently, that output would be roughly the same as what Tata, one of the world’s top ten steelmakers, consumes at its mills in the UK and Holland, so any New Millennium production above that would have to be sold on the open market.

“I’m not saying that we couldn’t do it. We just don’t have the financing in place for the second one,” Journeaux said in an interview.

EARLY PRODUCTION

Meanwhile, much water is yet to flow under the bridge before those decisions have to be made.

New Millennium and Tata, which owns 27% of the TSX-V-listed company, are set to start producing iron-ore at their direct shipping ore (DSO) project near Schefferville next year.

The plan is to ramp output up to 4.2-million tons a year, but Journeaux believed the companies could add around one-million tons of additional production through debottlenecking the plant.

“Logically, it’s wise to get this DSO into production and give us some cash flow,” he said.

Tata was also keen to get its hands onto captive supply for its European mills sooner rather than later.

SLURRY PIPELINE

Tata and New Millennium intend on completing a feasibility study into the 22-million-ton-a-year taconite study in early 2013, with Tata to make a final investment decision by April or May of that year.

One aspect that differentiates this iron-ore project from others in the area is that New Millennium is planning to transport the ore from the mine, north-east of Schefferville, to the port at Sept-Iles through a slurry pipeline.

Journeaux said this had major cost benefits, estimating a $2/t cost to transport the slurry through a pipeline, compared with a $10/$15/t price tag for rail.

“This is the trend...companies in Mexico, Brazil and India, they’re all building pipelines where they have fine material, because railroading is just prohibitively expensive,” he commented.

At the port, New Millennium will then pelletize the iron-ore concentrate.

Under an agreement that Tata and New Millennium signed in March, the Indian steel giant gets an 80% stake in the taconite project.

New Millennium can purchase 16% from Tata, for a price relative to the equity component of the project’s financing, which Journeaux anticipates will be about 30% of the total.

The junior also has the option to buy an additional 4% in the project, but only if Tata brings in a third-party to assist with the financing.

If it did, New Millennium would effectively own 40% of the taconite project.

Journeaux, who cofounded New Millennium with Robert Martin in 2003, took over the CEO's seat this month, after Martin retired.