Miner strikes Chinese off-take agreement – by Ian Ross (Northern Ontario Business – July 2012)

Established in 1980, Northern Ontario Business provides Canadians and international investors with relevant, current and insightful editorial content and business news information about Ontario’s vibrant and resource-rich North. Ian Ross is the editor of Northern Ontario Business ianross@nob.on.ca.

Ironclad deal

When news about slowing growth in China shook down global commodity markets in May, Basil Botha wasn’t the least bit spooked. The president and CEO of Northern Iron Corp. announced this past spring that his company’s inroads into Asia had turned into good fortune.
 
His Vancouver-based exploration outfit received a sizeable order for 900,000 tonnes of hot briquetted iron (HBI) from China Railways Material Import and Export Company.
 
The product is scheduled for delivery in 2016 when Northern Iron’s mining and processing plant should be in operation near Ear Falls in the Red Lake district of northwestern Ontario. The company is advancing a series of iron ore deposits that involves dewatering the former Griffith open pit, once operated by Stelco.
 
This initial off-take agreement will take up two-thirds of Northern Iron’s anticipated annual production of HBI. Payment will be secured by a letter of credit from the prime bank of the People’s Republic of China.
 
If there’s a global panic over dropping iron ore and coal prices, Botha said he’s not seeing it based on his conversations with Chinese and Korean steel producers.
 
“They’re talking about slow growth, but they’re not worried about it.”

Northern Iron has started the environmental assessment process while drilling off a 14,672-hectare property, including the Griffith and four satellite properties.
 
Key to the company’s plans is the construction of the HBI processing mill to feed both international and North American steel makers.
 
“We’re not an iron ore story, we’re a metallic story,” said Botha.
 
Whereas iron ore producers traditionally supply concentrate of 65 to 66 per cent to steel producers, Northern Iron wants to make a briquette of between 94 and 95 per cent iron.
 
“We’re trying to educate analysts that iron ore prices may go up and down, but we’re really linked to the scrap price.”
 
Scrap steel is in demand as many countries have restricted its export to keep for their own use.
 
Premium scrap prices are averaging at $560 a ton, and the primary scrap market at $430, but the HBI price is at the $200 per ton mark.
 
“There seems to be a rush to hedge and put in some forward calls on HBI throughout the world,” said Botha.
 
Like every mine project, Northern Iron has its share of challenges.

Botha wants to set up the HBI processing plant at the mine, but power transmission issues in the area don’t allow it.
 
The current line feeding its project, and the Red Lake gold district to the north, is inadequate at only 115 kilovolts.
 
Ideally, Botha would like to see a 230 kV line run to nearby Ear Falls and into the mine site.
 
He’s ruled out setting up the plant in Thunder Bay, about 480 kilometres away, where there is adequate power, saying it doesn’t make sense to ship a lowvalue commodity that far for processing.
 
Instead, he’s considering extending a slurry pipeline south from the mine to a more favourable plant site at Amesdale, a former junction on the CN line that once serviced the Griffith Mine.
 
“It’s not ideal, but it can be done,” said Botha.

The company still has work to do on the Aboriginal consultation front.

Watching and waiting in the wings is Wabauskang First Nation, about 40 km south of the Griffith pit.
 
Earlier this spring, Chief Leslie Cameron ripped into the Ontario government and area mining companies like Northern Iron for advancing projects without consultation and ignoring discussions with the band of 300.
 
Botha said his company has documentation dating back to 2010 of faxes, unanswered phone messages and face-to-face meetings with the chief and council as late as this past March.
 
“Faxes and phone calls are not consultations,” said Cameron, who grew up in Red Lake and worked underground for Goldcorp for 10 years.
 
Cameron said his meetings with the company amounted to nothing more than project descriptions on what the company’s plans are.
 
“They started reading all the things they were going to do.”

Cameron said his community has environmental concerns about where water from the Griffith pit will be pumped to, and he wants the company to provide funds for the community to conduct its own environmental assessment on the project’s pros and cons.
 
His main gripe is with the province, which, he contends, approves development at industry’s pace.
 
With about 40 active exploration plays in the Red Lake district, Cameron said his small band council is often overwhelmed with the flurry of development.
 
“We’ve never pushed for anything more than we have a right to.”

Cameron said those rights are engrained in their 1873 treaty providing them with a share of the benefits from resources extracted from their territory.
 
“We’re not asking for anything way too high, we’re asking for our share.”

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