Profiles: PROSPECTIVE IRON ORE PRODUCERS
New Millennium Iron Corporation (TSX: NML) controls the vast Millennium Iron Range and is presently active on three projects: development of direct shipping ore (DSO), development of a comprehensive feasibility study of two taconite deposits – KéMag in the province of Québec and LabMag in Newfoundland and Labrador – called the Taconite Project; In addition, the company has an active drilling program aimed at identifying deposits that could rival KéMag and LabMag.
New Millennium has formed a Joint Venture company with Tata Steel of India to operate the DSO project. Known as Tata Steel Minerals Canada (TSMC), Tata Steel owns 80 per cent of TSMC and NML owns 20 per cent. Tata Steel of India is Tata Group’s flagship company. It ranks among the ten largest global steel companies with operations in 26 countries and a commercial presence in 50. For the year ended March 31, 2013, it recorded sales of US$ 24.8 billion, and has 81,000 employees across five continents.
In March of 2011, Tata Steel and NML entered into an Agreement that, subject to a positive feasibility study, gives Tata Steel the right to an 80 per cent interest in the Taconite Project, in exchange for financing of up to $4.85 billion. NML negotiated a set of circumstances under which it might increase its interest in the Project from 20 to 40 per cent. The parties agreed to conduct a $50 million Feasibility Study, the results of which are due by the summer of 2013. Within four months of the release of the Study, Tata must decide if it is interested in developing both of the Taconite properties (LabMag and Kémag), or only one of them.
In addition to its interests as above, Tata Steel has a 26.3 per cent interest in New Millennium.
In addition to its Taconite and DSO projects, New Millennium owns a portfolio of additional prospects in the vicinity of its Taconite deposits, which are not part of its Joint Venture interests with Tata. Combined, these properties have indicated reserves of 14.4 billion tonnes grading more than 30 per cent Fe.
The DSO project, owned by TSMC, contains proven and probable resources of 64.1 million tonnes grading at 58.8 per cent Fe, measured and indicated resources of 21 million tonnes at 59.2 per cent Fe, as well as inferred resources of 10.3 million tonnes at 58.3 per cent Fe. The DSO operation is on track to produce 2 million tonnes of ore in 2013, with production rates gradually being ramped up to 6 million tonnes by 2015. Operations consist of open pit mining on a property that was once owned and operated by Iron Ore Company of Canada (IOC). New Millennium has an off-take agreement in place with Tata for 100 per cent of DSO production for the life of the mine.
The Taconite Project
The Taconite Project consists of two iron ore deposits: the LabMag deposit located in Newfoundland & Labrador and the KéMag deposit located in Quebec. The LabMag deposit is owned 80 per cent by NML and 20 per cent by Naskapi Nation of Kawawachikamach. The Labmag deposit contains 3.5 billion tonnes of proven and probable Fe grading 29.6 per cent, 1.0 billion tonnes of measured and indicated resources grading 29.5 per cent Fe, and 1.2 billion tonnes of inferred resources grading 29.3 per cent Fe. In 2004, NML acquired the KéMag deposit, which deposit is 100 per cent owned by NML. The Kémag deposit contains 2.1 billion tonnes of proven and probable Fe grading 31.3 per cent, 0.3 billion tonnes of measured and indicated resources grading 31.3 per cent, and 1.0 billion tonnes of inferred resources grading 31.2 per cent Fe.
Prefeasibility studies were completed for each of the LabMag & KéMag Projects in order to provide development flexibility. The two projects involve essentially the same type of ore and the same major project components. Annual production of 22 million tonnes was anticipated to produce 15 million tonnes of pellets and 7 million tonnes of concentrate. Concentrates would be pumped via a 700-kilometre-long slurry pipeline to the port of Sept-Îles. Slurry transportation is being used in many iron ore projects located in Brazil, India and Australia, because of its low cost advantage compared to rail transportation. This has the potential to make KéMag among the lowest cost pellet producers in North America. A pellet production plant would be built at the Pointe-Noire dock area, with pellets to be stockpiled and loaded into ships in a deep water port.
The prefeasibility study determined that at a capital cost of $4.4 billion, and a selling price of US$90/tonne , the internal rate of return (IRR) was calculated to be 21 per cent with a payback period of 4 years.
Environmental field work is essentially complete. The project description is expected to be filed shortly with the concerned agencies. The Environmental Impact Study is being prepared and will be submitted to the various government authorities in 2013. NML has obtained environmental releases for the first two phases of the DSO Project from the governments of Newfoundland and Labrador and Canada. The environmental assessment of the first phase of the DSO Project in Quebec is at an advanced stage and progressing smoothly.
As of June 30, 2013, NML had cash and receivables on hand of $69.4 million, and current liabilities of $6.6 million.
With the Taconite Feasibiliy Study to be released shortly, a development decision regarding LabMag and Kémag is expected by the end of 2013.