Commodity prices were boiling in March 2008, when little- known Consolidated Thompson Iron Mines Ltd. launched a $650-million Lac Bloom iron ore project about 1,000 kilometres northeast of Montreal.
It was the first new iron ore mine in the Quebec-Labrador Trough - as the region is called - in 35 years, said CEO Richard Quesnel, and the Chinese would buy the annual output of eight million tonnes.
Money was easy to raise and $50 million had already gone on a construction camp.
But by that summer, the giant U.S. investment bank Lehman Brothers had collapsed, sending stock markets into a dive and deepening a global recession.
Thompson couldn't raise more money at reasonable cost and it seemed Lac Bloom might be headed into limbo.
Chairman Brian Tobin, former Newfoundland and Labrador premier and federal industry minister, and Quesnel set about finding a long-term strategic partner.
``We knocked on a dozen steelmakers' doors, from Japan, Russia, Korea and China,'' Quesnel said this week.
``Finally we found Wuhan Iron and Steel Corp., known as Wisco, China's third- largest steelmaker, which wanted to diversify its sources of iron ore away from giants such as Vale of Brazil and Rio Tinto in Australia,'' he said.
``As a big producer of auto sheet, Wisco wanted top-grade ore for its blast furnaces and a long term deal. . . . Lac Bloom could fill that bill.''
Wisco is investing $240 million US for a 20-per-cent equity stake in Thompson and 25 per cent of the Lac Bloom mine.
It will also take half Lac Bloom's annual output of eight million tonnes at market rates.
That money allowed Thompson to complete the mine and save the $650 million project.
About 500 engineers, technicians and construction crews are on site now working on the massive open-pit mine and pushing the crusher and concentrator - the heart of Lac Bloom - toward commissioning and first production in December.
Lac Bloom will have been built in just three years from detailed design and engineering plan to plant construction.
It has state-of-the-art equipment and control systems, sourced in Canada and worldwide. The 240-tonne Caterpillar heavy lifters are up and ready to carry the ore from the open pit two kilometres to the giant crusher.
Then the fine material will move to the adjacent concentrator where a gravity water spiral system removes the contaminants contained in the ore - without chemicals.
The powder concentrates, dried to reduce humidity to near-zero, will be loaded automatically on to railcars heading for the nearby junction with the Quebec North Shore and Labrador Railway.
The concentrates will then travel about 450 kilometres south to Sept ''les, the North Shore shipping terminal, for the voyage to China and other export destinations.
Lac Bloom will provide 250 permanent jobs. Staff will work 12-hour shifts for 12 days and then take 12 days off. Most will live in nearby Fermont, a town built in the early 1970s when the former Quebec Cartier Mining moved its production north from Lac Jeanine to Mount Wright to access better ore.
Lac Bloom has two billion tonnes of ore reserves and exploration will add more, assuring the project a potential lifespan of 100 years or more. Quebec- Labrador has one of the world's largest deposits of iron ore, but climate and remoteness have always made extraction costly.
``We're on schedule and on budget because we've got a top-rate team with broad international experience working with the outside engineers and cost specialists,'' said Quesnel, 54, a Quebecer, mining engineer from McGill University and veteran manager of mines across North America, including the Goldstrike in Nevada, Sigma in Quebec and Gibraltar Mines in British Columbia.
Lac Bloom's operating cash cost per tonne is estimated at $25 US, or under the industry average, but Quesnel agreed its real competitor will be Brazil.
Thompson has negotiated long-term social benefits and employment pacts with the Innu, he said. Water use and tailings have not been big issues with the region's existing mines.
``The bulk commodity business is always high-risk and no-one controls the price of iron ore, so success rests on quality, high iron content, cost control, port efficiency and long-term sales contracts,'' Quesnel said. ``The landed price in China is paramount. ``But understand this . . . we wouldn't be doing Lac Bloom if Quebec-Labrador didn't have two railways to the North Shore available. Otherwise it would have cost at least $2.5 billion - unable to compete with Brazil and Australia and soon India.''
Thompson has moved its headquarters from Toronto to Montreal and Tobin is now executive chairman.
The Montreal office has 20 specialists and many more work at Lac Bloom.
Thompson has raised about $700 million of equity capital since 2007 or enough to see Lac Bloom to full production and profitability. It has no long- term debt and no taxpayer subsidies. Its stock market valuation is more than $1 billion.
The crusher and concentrator account for about two-thirds of the capital cost and the rest is for the mine, the rail spur and the port loading facilities at Sept ''les.
China's growth looked unstoppable early in 2008 and iron ore prices, for immediate delivery, hit $140 US a tonne and about $100 US for contract deliveries. By the fourth quarter of 2008, prices had dropped by almost half.
Now they stand at about $60 US. Thompson disclosed this week it is raising $144 million via a private placement with institutional investors, partly ``for acquisitions and expansion.''
It is studying a doubling of capacity, possibly in co-operation with Wisco, and backs a plan to develop the port at Sept iles to handle 200,000-tonne-plus ore carriers.
``That's infrastructure and there'd be a role for governments in that,'' Quesnel said.
Source: Montreal Gazette/Canada.com
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