Projects

Overview: Millennium Iron Range Taconite Properties

LabMag KéMag Lac Ritchie Howells Lake Howells River North Sheps Lake Perrault Lake

The map below shows the Millennium Iron Range – the 210 kilometer long Taconite belt resource base in the Labrador Trough controlled by NML and represented by the dark red areas. These Millennium Range Taconite resources are NML’s principal asset and opportunity for value creation, and have been extensively explored and analyzed, beginning with the LabMag deposit in the Province of Newfoundland and Labrador (NL) and the KéMag deposit in the Province of Québec (QC). Exploration on five additional taconite properties: Howells Lake, Howells River North, Sheps Lake and Perrault Lake (all NL) and Lac Ritchie (QC) has established NML among the largest holders of NI 43-101 magnetite iron ore deposits in the world.

These resources feature Taconite ore similar to that mined in the Mesabi Range in Minnesota, USA, a mainstay of supply to the North American steel industry since the mid-1950s. Processing into high-grade iron ore pellets is based on well-proven and established flowsheet designs.

The taconite deposits controlled by NML have similar characteristics in terms of geology, mineralogy and metallurgical properties. Each is a long-life property that can yield high-quality saleable products, including blast furnace and direct reduction grade pellets, with the same processing technologies. These deposits have been comprehensively assessed for their development potential through a series of studies.


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The Taconite Project - LabMag & KéMag

The LabMag and KéMag deposits underwent pre-feasibility studies completed in 2006 and 2009, respectively, and together were the subject of a comprehensive feasibility study carried out by NML and Tata Steel under a heads-of-agreement (“HOA”) signed in March 2011, and called the Taconite Project. Under the HOA, Tata Steel has an option on either LabMag or KéMag upon completion of the feasibility as defined in the HOA.

LabMag

Although Iron Ore Company of Canada (“IOC”) had explored the LabMag deposit area with drilling between 1960 and 1980, the deposit’s resource potential was not fully delineated. NML conducted detailed exploration of the LabMag property between 2004 and 2006. Based on the 17,576 m of drilling, a resource of 5.7 billion tonnes was certified as NI 43-101 compliant. The deposit is open both to the north and south.

KéMag

The KéMag property, previously known as the Harris Lake area, was periodically investigated by IOC until 1971, but no detailed economic evaluation through drilling was undertaken. In 2004, NML staked claims covering an airborne magnetic survey (1949-50) anomaly in the KéMag area, and started a detailed drilling program in 2006. By the program’s completion in 2008, 10,734 m had been drilled and 3.4 billion tonnes of NI 43-101 certified resources were identified. Like LabMag, KéMag is open to the north and south.

Taconite Project Feasibility Study

Building on New Millennium’s and Tata Steel’s technical expertise, the Taconite Project was to provide innovative and competitive development proposals, aiming for a favorable position on the global cost curve for pellet producers. The operating plan targeted 23 million metric tons per year of pellet feed, of which 17 million tonnes would be pelletized and the remainder sold, and a similar mining, beneficiation, pelletizing and infrastructure blueprint could apply to either deposit.

A distinctive feature of the Taconite Project was the planned transportation of the powdery beneficiated pellet feed from the mine site to a pellet plant at the port via slurry ferroduct, which provided a low operating cost alternative to the region’s then potentially capacity constrained rail system owing to existing and planned operations in the Schefferville and Labrador City/Wabush areas of the Trough.

The Taconite Project feasibility study’s techno-economic results were announced in March 2014 and the related technical reports were published the following May. There were good techno-economic results under either the LabMag or KéMag scenarios, see News Release 14-04. However, the capital cost was high and thus financing would be the main challenge. Accordingly, the split between capital costs for mining and processing components and for infrastructure was split with a view to seeking out partners and financiers for each.

While contemplated in a limited way in the HOA, it became clear to NML and Tata Steel as the Feasibility Study work progressed that additional participation would be needed to facilitate development of the Taconite Project, and discussions were held with interested steelmakers. With iron and steel making markets changing, the assumed initial production scale was also becoming a challenge.

In October 2015, NML and Tata Steel announced a review process for the HOA. As the macro-economic situation poses challenges for development of the Taconite Project as conceived in the HOA, NML and Tata Steel are re-visiting the terms of the HOA. The parties intend to conclude a definitive agreement subject to the respective Board approvals of the parties.

Details of the history, background and results of the Taconite Project Feasibility Study can be found in the May 2014 LabMag and KéMag Technical Reports.

NuTac Project

As shown by the actions of leading companies in NML’s mining, iron and steel product groups in the commodities downturn from 2013 to early 2016, adjustments were required to strategies developed for a market underpinned for a decade by strong growth in China and a tight supply/demand balance for commodities - conditions that no longer existed.

NML was no exception and, over the course of mid-2014 to mid-2015, NML’s Board and management similarly reassessed the Company’s earlier strategy built on participation in the DSO Project followed by large-scale development of the Company’s core Taconite Resource assets.

With the DSO Project already structured and on the path to production through TSMC, efforts turned to finding the right taconite development strategy for the so-called “new normal.”

The result was preparation of a pre-feasibility level study, called NuTac, that re-scoped and re-engineered NML’s Taconite Resources into a project concept that would improve the potential for market entry and value creation with improvement in the cycle.

Building on Earlier Investment, Expanded Resource Options and In-House Expertise

Recent studies and existing know-how enabled this work to quickly proceed.

While the TFS resulted in project alternatives too large in scale and capital intensity for the changed marketplace, this comprehensive undertaking produced state-of-the-art mining, beneficiation and environmental guideline applications transferrable to other taconite development scenarios and therefore of significant ongoing value.

Concurrently with the TFS, which involved only the KéMag and LabMag deposits, NML successfully explored five other deposits and announced the addition of significant NI 43-101 compliant resources to its taconite holdings. This investment resulted in NML having more options for taconite development and project optimization given the location and connectivity of the expanded resource base.

The mining, processing, environmental management and commercial skills needed to adapt the earlier studies to the wider range of taconite deposits now available for development could immediately be drawn from NML’s then existing staff.

Ongoing Market Opportunity

With Australia and Brazil dominant in the internationally traded iron ore market, Canada’s market share is relatively small at 2-3% and fits mainly into the high-quality segment, built on low impurity mineralogy that complements higher gangue ores.

Canada also is a highly regarded supplier of iron ore pellets, which maximize value in blast furnace iron-making operations through productivity improvement and reduced energy consumption. Pellets are also an essential input for the growing direct reduced iron making methodology that feeds electric arc furnace steelmakers. Pellets are increasing as a proportion of iron ore grades consumed.

As with most North American ores, NML’s taconites must undergo concentration and pelletizing to be transformed into saleable products. This upgrading is done with well-established techniques and NML can access the most modern equipment available to maximize production efficiency and reduce operating cost. Investment in extensive test work has confirmed the ability of our taconite properties to produce high-quality, commercial grade pellets.

Availability of Infrastructure

Reduced activity among existing Labrador Trough producers and projects at various stages as the result of market conditions enabled consideration of the use of existing rail infrastructure for the development of NML’s taconites, versus the ferroduct/pipeline slurry transportation concept, a low operating cost but capital intensive alternative set out in the TFS.

The rail network from Schefferville to Sept-Îles, which was potentially capacity constrained when NML’s earlier studies were carried out, links the properties the Company controls to established spur rail line and material handling facilities on Pointe Noire at the Port of Sept-Îles. These facilities will be connected to a new deep-water dock that has been constructed. This infrasctructure optimizes transportation costs to iron ore markets globally and is significant when building a bulk commodities business.

A Considered Response with Clear Objectives

NuTac is a considered response to market conditions aimed at preserving for shareholders a value-producing means of developing NML’s core asset – its Taconite Resources. The NuTac PFS work is sufficiently flexible to respond to new industry developments

DSO Project

NML has a 4.32% interest in Tata Steel Minerals Canada Ltd. (TSMC), which is owner and operator of a direct shipping ore (“DSO”) project near Schefferville. The DSO project produces and ships sinter fines. Subsidiaries of Tata Steel and the Quebec Government’s financing arm, Investissement Québec, own the remainder of TSMC.

For more information, visit the TSMC website:

tatasteelcanada.com