New Millennium Iron Corp.

Issue FallWint12


Celebrating a milestone anniversary in 2013, New Millennium Iron Corp. has been exploring and obtaining extensive properties in Quebec and Labrador for iron exploration, mining and processing for nearly a decade. In a joint venture with Tata Steel, the company began open-pit mining in September of iron ore that will be processed and direct-shipped to Tata Steel for use in its European steel plants.

From the 1950s to the 1980s, direct-ship ore (DSO) was mined and then also shipped as-is after processing from the Menihek Region of the iron-rich Labrador Trough by the Iron Ore Co. of Canada. “In those days, all they did was crush and screen the ore,” President and CEO Dean Journeaux recalls. “Now we’re going to upgrade it from 59 percent to 64.5 percent iron, which is what the steel companies would like to have. The higher the iron content, the better for the steel companies, so 64.5 percent is quite acceptable.”

To supply that higher percentage of iron, a beneficiation plant is being built at a mine site with more than 25 DSO deposits on the border of Labrador near Schefferville, Quebec, by the Tata Steel – New Millennium Iron joint venture, called Tata Steel Minerals Canada (TSMC). The plant – construction of which began in March and will be completed in 2013 – will operate year-round.

Because winter temperatures in the area can drop to minus 40 C to minus 50 C, such operations in the past have been seasonal. But TSMC’s entire plant will be built under a fabric dome measuring 170 meters long by 110 meters wide and 35 meters high that will enable it to operate year-round.

The $475 million project will send 4 million tonnes of ore annually through a series of screens, spirals, jigs and wet high-intensity magnetic separators to remove impurities, mainly the silica. The New Millennium plant sizes the ore coarser for sintering or finer for pelletizing, which Tata performs at its European steel plants.

“Ordinarily in North America, pelletizing is an extension of the mining and beneficiation process,” relates Ernest Dempsey, New Millennium Iron Corp.’s vice president of investor relations and corporate affairs. “It’s the final step in the upgrading of the ore.”

Tata Steel – which owns 80 percent of the joint venture operation with New Millennium – is partnering with New Millennium to gain some captive iron ore supply for its European plants.

“At the moment, they have to buy all their ore on the open market,” Dempsey points out. “Tata would like to have more control of that input cost through owning its own facilities, and that is what’s motivating them to undertake these projects in Canada. The DSO project is a starter project and really is to get Tata oriented to doing business in Canada, to get some mining and operating experience, and to begin the flow of captive ore.”

Was Seeking a Partner
New Millennium Iron was formed in 2003. “We looked at several projects,” Journeaux remembers. “We decided the LabMag taconite deposits were the best ones to go, because in 2002, we were looking forward to a shortage of iron ore around 2015. Of course, it happened much earlier than that because of the Chinese situation, from 2003 to 2005. So then New Millennium bought the properties from Labmag Mining Corp., and New Millennium was formed in November 2003.”

New Millennium’s goal was to enter into a joint venture with a strategic partner that needed iron ore and had the capital to develop the project. “We are a junior mining company with very little in the way of financial resources,” Journeaux concedes. “We’re rich in ore resources but not very rich in money resources. So we needed a partner to raise the kind of funds that we would need to develop this.”

Journeaux lists three types of partners who would be interested in this type of project – steel companies, mining companies interested in iron ore and trading companies that buy and sell iron ore on the market. “We’ve opted for the first one – steel companies – because they’re the ones that had the biggest interest in obtaining strategic long-term captive resources,” Journeaux says. “As a result, they’re not as subject to market swings, and this gives them a more assured and a lower cost product as a raw material feed for the steel plants and iron-making facilities.”

As a partner in the DSO project, New Millennium is contributing its ore to the project, and Tata is financing the plant’s construction up to $300 million. The rest of the plant’s cost is split between the two companies in proportion to their ownership.

Taconite Project
The next part of New Millennium’s three-pronged business strategy is construction of a taconite project that will process the run-of-mine ore to produce mainly high-quality pelletized ore and some pellet feed concentrate, again in a joint venture with Tata Steel. The taconite project will be capable of servicing both the blast furnace market and direct-reduction-based markets.

Two large deposits are involved – the KéMag deposit on the Quebec side of the border and the LabMag deposit on the Labrador side. The two deposits have 9 billion tonnes of certified resources between them, and each deposit can support a 22 million-tonne operation for many years, Dempsey maintains.

Producing taconite requires more processing of the ore, so the overall project – which will be designed to process 17 million tonnes of iron ore pellets and 5 million tonnes of concentrates annually – will cost an estimated $4.85 billion, for which Tata Steel would arrange the financing. A feasibility study of the taconite project is due for completion by year’s end.

“Once the study is completed, Tata has four months to decide whether to move forward with the project or not,” Dempsey declares. “So we would hope to have some direction by the middle of next year.” Completion of the plant facilities – which will use high-pressure grinding rolls to partially replace grinding mills to save energy and larger, more advanced pelletizing equipment than is used in older operations – would occur in 2017.

Drilling Project
The third leg of New Millennium’s business is further exploratory drilling in the 210-kilometer-long Millennium Iron Range the company controls that includes KéMag, LabMag and other promising deposits.

“The New Millennium holdings are so significant that there are other properties that we have been drilling over the period from 2011 that will carry forward and be completed in 2013,” Dempsey relates. “This is to identify other deposits that could form the basis for other strategic partnerships.” One of those is the Lac Ritchie deposit, where data collected from a 40-hole 2011 drilling program of 3,810 meters discovered 3.33 billion tonnes of indicated mineral resources and an additional 1.437 billion tonnes of inferred mineral resources.

“It raised our certified resource base to 14 billion tonnes, which is really significant,” Dempsey emphasizes. “We are talking about at least a century’s worth of iron ore. The exploration project will take a couple of other anomalies – the key ones are Howells River between KéMag and LabMag, Sheps Lake and a district to the south called Perault Lake – to determine exactly what we have in the ground and be able to present these deposits as potential sources for other steel companies who may want to do what Tata is doing with New Millennium.”

The company plans to obtain certified National Institute 43-101 status for the Howells River, Sheps Lake and Perault Lake deposits so they can be marketed to others, including Asian companies.

Rails and Regulations
Among the challenges Dempsey lists are obtaining financing for the capital-intensive projects and working through the regulatory environment. “Respect for the affected First Nations groups is another important consideration,” Dempsey stresses. “There are four affected by the DSO project, and we and Tata have sat down with each to work out an impact and benefit agreement that provides the understanding and compensation for the use of their lands. Infrastructure is a further challenge, but in the case of the DSO project, there was a good nucleus because of the existing rail system.”

That rail system transports the iron ore to the well-established, deep-water port of Sept-Iles, Quebec, where the DSO project is investing in a new, year-round multi-user dock now under construction, to which the Canadian government, the Port of Sept-Iles and other mining companies are also contributing. With an eye to the future taconite project, New Millennium is also investing $38.4 million on its own that gives access to about 40 percent use of the new dock’s facilities, which will be capable of loading the full range of vessel sizes needed to reach global markets competitively.

For the taconite project, the feasibility study is evaluating a pipeline to transport iron concentrate to the port – where it would be pelletized – at lower cost than rail transportation. This would be the first such iron ore slurry transport system in North America, Dempsey maintains. However, in order to fully assess the transportation options, New Millennium has also joined a Canadian National Railway-led feasibility study of a new rail and ore handling system to service the Labrador Trough.

“If we can succeed with introducing a ferroduct, the operating cost is significantly lower than rail and it is a cleaner form of transportation, although the project must bear the capital cost,” Dempsey concedes. The pipeline would be underground below the frost line and insulated and heat-traced when it crossed rivers and streams. Emergency power would ensure minimum flow, and it would be monitored continuously for pressure, temperature, flow and leak detection and rigorously inspected.

Another challenge is obtaining cost-effective electricity. “These projects are very power-intensive,” Dempsey emphasizes. “Fortunately, we’re in an area in both provinces where hydroelectric power is available. That has historically been an advantage for Canadian iron ore.”

Skilled Employees
New Millennium is working to find skilled employees. “There’s a tremendous demand for the skillsets that are needed in iron ore and other types of mining in these remote areas,” Dempsey points out. “So that’s a challenge to find the right mix of people to operate these projects. We are fortunate that two First Nations groups remained in our project area and now number close to 2,000 people. They are seeking jobs, and we are training and upgrading their skills to form the basis of our workforce.”

The town of Schefferville near the mining projects was established in 1954 and prospered until the mines closed due to low iron ore prices in 1982. “Schefferville is a very small town,” Dempsey describes. “It was built by the Iron Ore Co. of Canada as a company town. Since the early 1980s when the mines were closed, the town has really suffered. It’s gradually coming back, but it won’t be the sort of company town it was before – these operations will be fly-in and fly-out for people coming from outside the area.

“In the world today, people are willing to move long distances to work for two weeks and then go back home,” he continues. “It will be the same sort of management arrangement for us with these projects. Schefferville is obviously a very useful resource to have in place. The rail is very useful, but it won’t be like one or two generations ago, where you built a town around the mining operation.”

Future Production
New Millennium anticipates DSO production in 2013 will total 2 million tonnes as it ramps up to a minimum annual production target of 4.2 million tonnes. “We found the drilling has yielded some other resources in the area, so there is the opportunity to increase that production,” Dempsey notes. “Some of the higher grades of ore in the area can be shipped as-is with minor necessary crushing and screening. Some of that ore will be stockpiled so we can get started ahead of when the processing plant is finally completed. Once the processing plant is completed, we will be able to increase the project to the targeted 4.2-milion-tonne level. Then we will look at increasing the capacity to probably the 6-million-tonne level.”

Journeaux estimates that New Millennium has additional projects that have strong potential in the future. “So we are now concentrating on the first taconite project,” he says. “We have enough iron ore resources to develop at least one or more new projects for other iron and steel makers.”

Although the price of iron ore has softened recently, New Millennium anticipates that demand will remain strong in China and recover in Europe when their economic crises are over. There are also market opportunities in North America. “So really our ultimate challenge is to be positioned as favorably as possible on the cost curve,” Dempsey says. “We’ve all been around the industry for a long time. We’ve lived through the cyclicality in the steel business, and we know it’s the low-cost producer that makes it through those tough times.” EMI


New Millennium Iron Corp.