Profiles: PROSPECTIVE IRON ORE PRODUCERS
Champion Iron Mines Limited (TSX:CHM) is an iron exploration and development company with development projects located in eastern Canada. It has significant interests in several projects in the prolific iron ore-producing Labrador Trough located in northeastern Quebec. Champion owns two major properties, namely its Fermont Holdings (100 per cent ownership) which hosts its flagship Consolidated Fire Lake North (CFLN) project, and its Attikamagen project, which is located some 15 kilometres east of Schefferville, and is a joint venture partnership with Century Iron Mines Corporation.
This consists of 14 iron-rich projects, totaling approximately 751 square kilometres in the Fermont Iron Ore District of Quebec, located 250 kilometres north of the town of Port Cartier, and about 60 kilometres southwest of the town of Fermont. The company’s flagship CFLN project is contiguous and to the north of ArcelorMittal’s operating Fire Lake mine, and 60 kilometres to the south of Cliffs Natural Resources’ Bloom Lake mine. The Fermont Holdings Mineral Resource Estimate identified a resource totalling 5.1 billion tonnes of iron ore, consisting of 27 million tonnes grading 35 per cent total iron ore in the Measured category, 883 million tonnes in the Indicated category grading 30.9 per cent, and an Inferred Resource of 4.2 billion tonnes grading 27.6 per cent.
In the two designed open pits included in the CFLN prefeasibility study, hematite is the main mineral present in the East and West deposits, and the mineralization is of high quality with impurities below typical steel mill specification limits. The final product will be upgraded to 65-66 per cent iron ore.
Based on the February 2013 Prefeasibility study, CFLN could produce 9.3 million tonnes of iron concentrate per year during its anticipated twenty-year mine life. Projected capital costs are $1.4 billion (potentially up to $1.6 billion), with operating costs fob Sept-Îles estimated at $34.58/tonne. For the purpose of releasing the Prefeasibility study, $9.47/tonne was added to finance $1.7 billion in capital cost repayments and interest charges associated with the cost of building a 310-kilometre railway from Fire Lake North to the port of Sept-Îles.
The payback period is anticipated at 3.4 years, based on anticipated revenues of $115/tonne fob Sept-Îles for the first five years and $110/tonne for the final 15 years.
Along with other stakeholders, the company is actively engaged in developing plans for a multi-user railway to the port of Sept-Îles. Alternatively, Champion could connect its mining operations to existing railways, but such links would involve higher operating costs and lower efficiencies. At this time, Champion is keeping its options open.
As of August 2013, Champion had cash and receivables of $16 million, and no current liabilities. On August 1, Champion closed a $3-million investment from Baotou Chen Hua Investments of Hong Kong, which has strong industrial and financial contacts in China. The management anticipates its relationship with Baotou Chen Hua will facilitate raising capital and negotiating offtake contracts with financiers and industrialists in China.
Once decisions have been made with regard to rail transportation to port, a CFLN Feasibility study is planned to start this year. Environmental studies and public consultations for permitting are expected by Q1 of 2015, and production is planned to commence in Q2 of 2016.