Millennium Iron Range - Our Principal Asset
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 and KéMag deposits, located in the Province of Newfoundland and Labrador and the Province of Québec, respectively.
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.
NML - Taconite Properties
Resource Categories (Millions of tonnes)
The Taconite Project: LabMag and 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.
Significant NI 43-101 Compliant Resources
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.
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 NR1404. 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.
The NuTac Initiative: Optimizing Development of NML’s Greater Resource Options
As shown by the actions of leading companies in NML’s mining, iron and steel product groups, adjustments are being made to strategies developed for a market underpinned for a decade by strong growth in China and a tight supply/demand balance for commodities -- conditions no longer in place.
NML is no exception and, over the course of mid-2014 to mid-2015, the Board of Directors and management similarly reassessed the Company’s earlier strategy built on participation in the direct shipping ore (“DSO”) project followed by large-scale development of our core taconite deposit assets.
With the DSO project already structured and on the path to production through Tata Steel Minerals Canada (“TSMC”), efforts turned to finding the right taconite development strategy for the so-called “new normal.”
The result is a pre-feasibility level study, called NuTac, that re-scopes and re-engineers our taconite properties into a project concept that improves and accelerates the potential for market entry and value creation with improvement in the cycle. NML’s earlier studies and existing know-how enabled this work to quickly proceed.
Building on Earlier Investment and In-House Expertise
As mentioned above, the Taconite Project feasibility Study carried out over the period 2011-2014 by NML and Tata Steel resulted in project alternatives too large in scale and capital intensity for the changed marketplace, yet produced state-of-the-art mining, beneficiation and environmental guideline applications transferrable to other taconite development scenarios and therefore of significant ongoing value.
Furthermore, the mining, processing, environmental management and commercial skills needed to adapt our earlier studies to the wider range of taconite deposits now available for development could immediately be drawn from NML’s existing staff.
Expanded Resource Base Widens Development Options
Concurrently with the Taconite Project feasibility study, which involved only the LabMag and KéMag, NML, for its own account, successfully explored five other deposits and announced the addition of significant NI 43-101 compliant resources to its taconite holdings. These deposits were:
Lac Ritchie (NR1211)
Sheps Lake and Perault Lake (NR1304)
Howells Lake and Howells River North (NR1315)
This investment resulted in NML having more options for taconite development and project optimization given the location and connectivity of the expanded resource base (see table below).
Proven & Probable
Measured & Indicated
Howells Lake & Howells River North
Note: NML owns 100% of the properties mentioned above except for LabMag, Howells River North and Sheps Lake, which are 80% owned through the Company’s interest in LabMag Limited Partnership.
Like LabMag and KéMag, these other taconite properties bring natural advantages. First, the geology is simple, featuring shallow, near surface ore bodies with a low stripping ratios. There is minor overburden and internal waste. The ore is magnetite, which reduces energy costs in the pelletizing process.
Furthermore, they are suited to technologically advanced equipment, such as energy-saving high-pressure grinding rolls to partially replace ball mill grinding, as well as larger, more advanced pelletizing machines, all contributing to economies of scale and better operating costs.
The pellet feed produced will be chemically pure and the pellet grades capable of servicing blast furnace and direct reduced iron making, enabling technical and geographical market diversification and greater opportunity for revenue generation than a single concentrate product project.
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 ironmaking operations through productivity improvement and reduced energy consumption. Pellets are also an essential input for the growing direct reduced ironmaking 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.
Infrastructure: Making Use of What We Have
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 Taconite Project feasibility study.
The rail system in place, which was potentially capacity constrained when the earlier studies were carried out, links NML’s properties to established material handling facilities on Pointe Noire at the Port of Sept-Îles, where NML, other miners, the Port Authority and the Government of Canada have invested in construction of a new, deep-water dock that optimizes transportation costs to iron ore markets globally. This infrastructure availability is significant when building a bulk commodities business.
Allowing Time to Properly Address Environmental and Community Concerns
Building and operating a mine entails a rigorous regulatory process.
The first step in that process is the environmental assessment (EA). EA is typically a lengthy process in Canada. A review of the EA timelines of broadly comparable mining projects shows that, depending on the complexity of the project and the review process, roughly three years, and often more, are consumed in the process.
In addition, the EA process increasingly takes into account social acceptability. It is thus imperative that the proponent builds and maintains constructive relationships with all concerned stakeholders.
Since its inception, NML has built and maintained strong relations with the potentially concerned regulatory authorities, communities and other stakeholders. NML thus has extensive and in-depth experience with the relevant regulatory, biophysical and socio-economic environments. It is vital that the work accomplished to date not be interrupted.
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 our NML’s asset – the taconite deposits. With fresh and transferrable techno-economic results available from the Taconite Project feasibility study and in-house expertise in place to seamlessly adapt these findings to a smaller, more marketable project concept, NuTac prudently carries out the effectively incremental analysis necessary to determine NML’s best possible taconite development option for a cyclical upturn.
The NuTac initiative is practical and capitalizes on NML’s resources and know-how. The plan is adapted to current market realities, but is sufficiently flexible to respond to new industry developments, particularly as iron ore prices recover, while being prepared to adapt further should they lag or decline.
Currently at the pre-feasibility level, further project de-risking and optimization is being carried out. Upon completion of a pre-feasibility study report, the next stage of work will be subject to Board approval, new financing and potential agreements with strategic partners.