By Theo van de Kletersteeg
COULD IT GET ANY BETTER? YOU BET, AND THAT’S WHAT PIERRE GAGNON AND HIS TEAM ARE PLANNING TO SHOW YOU IN FUTURE YEARS. AFTER A GREAT PERFORMANCE IN 2010 WHEN VOLUMES ROSE BY 26.4 PER CENT, 2011 WITNESSED MODEST GROWTH OF 3.7 PER CENT TO 26.0 MILLION TONNES. WHILE THESE VOLUMES ARE WELL BELOW LEVELS THAT PORT MANAGEMENT HAD FORECAST IN 2009, THE INTERVENING TIME HAS ENABLED THE PORT TO BEEF UP ITS INFRASTRUCTURE IN PREPARATION FOR HIGHER LEVELS OF ACTIVITY IN THE FUTURE. IN ADDITION, SOME PROJECTS WHOSE IMPLEMENTATION SCHEDULES WERE SOMEWHAT SPECULATIVE IN 2009, HAVE NOW FIRMED UP, AND ARE CLOSER TO REALITY.
In 2011, shipments of iron ore totalled 22.9 million tonnes, representing 88 per cent of total volumes shipped. For 2012, indications are that iron ore shipments will add up to just under 30 million tonnes, leading Pierre Gagnon, Sept-Îles Port Authority (SIPA) President and CEO, to forecast total tonnage of 32 million for 2012. Currently Canada’s sixth largest port by tonnage, an increase to 32 million tonnes would probably propel Port of Sept-Îles to second place after Vancouver. “It would be a noteworthy accomplishment, but in reality the iron ore market may very well propel us to the number one position by 2020”, Mr. Gagnon said.
Strategically, the Port Authority secured its position as a significant enabler of future growth by expansions of the Pointe-Noire and La Relance terminals. The Pointe-Noire Terminal is used primarily by Cliffs Natural Resources, which uses the terminal to load iron ore pellets manufactured at its pelletizing plant at Pointe-Noire from iron ore mined at its mine site in Wabush, Labrador (Wabush Mines). In addition, the terminal is used to ship iron ore from Cliff’s Bloom Lake mine site. Following completion of the Pointe-Noire terminal expansion, iron ore volumes shipped from that terminal increased by 44 per cent to 9.1 million tonnes.
Five iron ore mining companies have signed up with SIPA for the use of its recently announced Multi-User Terminal, to be located near its existing Pointe-Noire Terminal, to ship iron ore. At present, SIPA is in the initial stages of expanding Port capacity by about 50 million tonnes through Phase I of a projected multi-phase expansion that will eventually see the capacity of the Multi-User Terminal increase by more than 100 million tonnes. Along with a vast increase in capacity of its Pointe-Noire facilities, the new Multi-User Terminal will be able to accommodate large Cape Size vessels with a capacity of up to 300,000 tonnes. The present $220 million expansion project is expected to be completed by the spring of 2014, and will be 100 per cent owned by SIPA. Fifty per cent of the capital cost of phase I of the expansion ($110 million) will be paid for by five end users as prepayments against future wharfage fees, on a pro-rata basis to “reserved shipping capacity” (For example, Labrador Iron Mines has committed to pay $12.8 million to reserve an annual shipping capacity of five million tonnes). The remaining $110 million will be funded by the federal government as a non-repayable grant of $55 million, and by the Port Authority. The Port Authority anticipates that close to 1,000 jobs will be created during the two-year construction phase, in addition to 150-200 indirect jobs in support of various rail transport, storage and port handling activities. Partners in the project are New Millennium Iron Corp. (15 million tonnes), Labrador Iron Mines (5 million tonnes), Champion Minerals (10 million tonnes), Alderon Iron Ore Corp (8 million tonnes), and Tata Steel Minerals.
La Relance Terminal, not far from the Pointe-Noire Terminal, is used primarily by Aluminerie Alouette, the largest and most efficient aluminum smelter on the American continent, to receive alumina and other bulk materials to be transformed or used in its production process, and to export its output of about 575,000 tonnes annually. Alouette is owned by five shareholders, of which Rio Tinto Canada is the largest (40 per cent). The company announced in 2011 that it had been granted access to an additional resource of 500 MegaWatts of electrical power, enabling it to embark on an expansion to increase capacity from 575,000 tonnes to 900,000 tonnes annually.
Financially, the Port Authority put in an impressive performance: revenues amounted to $12.9 million, an increase over 2010 of more than 40 per cent. Before a one-time gain of $7.3 million, the Port Authority’s comprehensive income for 2011 was $4.5 million, compared to a comprehensive profit of $2.0 million in 2010. Preparing for rapid expansion, the Port Authority spent 22.6 million on capital expenditures in 2011 (net of grants of $15.2 million), on the heels of capital expenditures of $39.7 million in 2010 (net of grants of $32.9 million).
In close cooperation with the City and community groups, the Port also successfully hosted the annual conference of the Association of Canadian Port Authorities in August of 2011, which was attended by more than 200 delegates. Port management was justifiably proud of its success, and the cooperation of the community to make all delegates feel welcome. Moreover, in November the Port Authority became the first in North America to get all of its partners – terminals and users – to sign on to the Green Marine environmental stewardship program.
Notwithstanding its highly prospective growth opportunities, in a business environment that is practically tied to only one commodity, Port management will undoubtedly find it challenging to walk the tightrope between risk and reward, managing for sustainability, as global economic conditions change and the demand for steel, and therefore, for iron ore, changes.