Junior iron ore developer Century Iron Mines Corp. has stabilized itself in the industry through strategic partnerships, a hefty iron ore reserve and smart production processes.
The Toronto-based company focuses its interest in the prolific iron ore-producing region of the Labrador Trough in eastern Quebec and western Newfoundland and Labrador. “In the area we are one of three operators,” CEO Sandy Chim says. “We have a very large iron ore resource – we have close to 20 billion tonnes of proven resources.” Century’s goal is to become a significant iron ore exporter to China, which is the largest iron ore buyer from the global market.
The company’s assets are nearly the size of China’s entire iron ore reserves. Century hopes to become a one-stop solution for the long-term supply of iron ore to the country. “China only has 23 billion tonnes of reserves – we have 20 billion tonnes of resources,” CEO Sandy Chim says. “Because of the size of our resource we are ranked in the top 10 in iron ore resource size in the world by one of the big investment banks. That’s important positioning because that makes us very attractive to China.”
Mine development and logistics are in place for Century’s production at Joyce Lake in Newfoundland, which is to begin in 2015. The project will move up to 3 million tonnes of direct shipping ore [DSO] by rail 135 miles to Ross Bay Junction in Newfoundland. From there, the shipment will travel another 220 miles to the province’s Port of Sept-Iles.Joyce Lake is what the company calls “low-hanging fruit” because the area is not highly capital intensive. “We put the low capital project in production first to have a cash flow,” Chim explains. After that project is stable, new developments will begin.
Century is also strategic when it comes to its iron ore mines being DSO projects. “This is very important because it’s high-grade iron ore,” Chim explains. “You don’t need a lot of processing, only crushing and screening is planned. As a result of that, you have lower capital costs and much lower operating costs. Having DSO is very strategic.”
Due diligence, such as conducting a feasibility study, is vital to a successful project and a common practice for Century. The cost of iron ore is $120 to $130 per tonne today, which is historically high and can encourage some operators to rush into production too quickly without performing a complete due diligence on the project, Chim explains.
“There is a lot of engineering and technical work that needs to be done before you go through with a mine,” he adds. “If companies rush into production, they can slip into the fourth quartile and be permanently condemned.”
The most significant market change in recent years for junior mine developers has been the lack of funding resources. Companies had been able to raise some money in the market after achieving milestones in past years, but not in today’s market, Chim attests.
Century’s financial security comes from Wuhan Iron & Steel Co. Ltd., or Wisco, China’s third largest steelmaker. Wisco and Century have formed a 60-percent/40-percent joint venture to develop the Duncan, Sunny and Joyce lakes projects.
The company also has been in contact with commodity brokers and traders in the United Kingdom to source non-equity financing.
Those relationships may help it raise debt financing to build infrastructure at its project locations, says Bob Leshchyshen, vice president of corporate development and investor relations.
“For small companies like ours, the equity markets continue to not be positive,” he explains. “We feel pretty good that by early next year we will get non-equity financing.”