Labrador Iron Mines (T.LIM) plunges as company faces survival questions

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Labrador Iron Mines Holdings Ltd. (TSX: T.LIM, Stock Forum) shares lost 19% of their value Tuesday amid warnings that the company’s ability to continue to operate as a going concern is in doubt.

After Tuesday’s plunge to 15 cents, Canada’s only TSX-listed iron ore producer has seen its stock price tumble all the way from 80 cents in April 2013, leaving a market cap of $18.9 million, based on 126.2 million shares outstanding.

There may be more pain in store as existing shareholders face massive dilution if the company moves to secure equity financing at current levels.

Labrador Iron Mines has iron ore projects, including seasonal mining operations in western Labrador and northeastern Quebec, near the historic mining town of Schefferville, Quebec.

In the quarter ended December 31, 2013, the company posted a net loss of $31. 3 million or 25 cents a share on revenue of $28.4 million, compared to a year ago loss of $16.1 million or 19 cents when revenue was $24.7 million.

During the quarter, Labrador Iron Mines posted negative cash flows from operations of $11 million and an ending working capital deficit of $27.1 million.

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In a research report, Scotia Capital Inc. analyst Mark Turner questioned whether operations can or should resume for the 2014 season given [Scotia’s] bleak outlook for iron pricing and the current operating structure of LIM’s Schefferville operation.

The report said LIM will require working capital of at least $30 million to fund 2014 start-up capital and corporate costs, with an additional $20 million required if the Houston deposit is to be developed in 2014.

[Houston is one of six deposits in the Schefferville area that contain a NI 43-101-compliant measured and indicated resources of 59.5 million tonnes, according to the company].

“In our view, the company’s share price is now so low now that if it chose to seek equity financing to raise the $30 million and was able to complete it – an amount roughly equial to the company’s market capitalization – it would be extremely dilutive to equity holders,’’ Turner wrote in his report

“We are revising our recommendation to ‘Under Review’ from ‘Sector Perform’ pending clarification of the company’s ability to raise the required working capital to restart operations and its implications on capital structure,’’ Turner wrote.

For its part, Labrador Iron Mines has said it can provide no assurances that it will be successful in obtaining any required financing, and that it may be forced to curtail its operations and development activities.

Meanwhile, the company has moved to reduce costs by cutting roughly 30 people last week from its workforce. The company has also indicated that it will be trying to negotiate revised terms with contractors.

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Schefferville enjoys resurgence thanks to iron ore venture

Source: http://www.montrealgazette.com/business/Schefferville+enjoying+resurgence+thanks+iron+venture/9319556/story.html

Schefferville, Québec, Canada

Schefferville, Québec, Canada (Photo credit: Wikipedia)

MONTREAL — In 1982 Brian Mulroney, then head of the Iron Ore Co. of Canada, suddenly announced the shutdown of the company’s Schefferville mines in Quebec-Labrador. The news hit Montreal 1,000 kilometres away like a thunderbolt.

Mulroney said the Schefferville mines, built in the early 1950s, were no longer economic at prevailing prices and IOC would focus on its newer mines and concentrators 217 kilometres south at Carol Lake, near Labrador City.

Now — more than 30 years after Mulroney’s coups de grâce — life is returning to Schefferville and the billions of tonnes of high-grade iron ore deposits lying along the 210-kilometre Millennium Iron Range.

In September, New Millennium Iron Corp. and India’s Tata Steel, through a 20-80 joint venture called Tata Steel Minerals Canada, began shipping beneficiated ore by rail from Schefferville to the Port of Sept-Îles. The ore is loaded into 150,000-tonne ore carriers for delivery to Europe.

This is known as the “DSO Project” and it is the New Millennium partners’ initial iron ore production effort at Schefferville. The direct shipping ore (DSO) is mined, crushed and screened and then loaded into railcars for the journey south to Sept. Iles.

The DSO project will cost $560 million when it reaches commercial production late in 2014. It will be shipping ore from Sept-Îles at an annual rate of 3 million tonnes by the end of 2014, rising to 6 million tonnes in late 2015, and has a mine life of 12 years or more.

“This is a landmark in the resurgence of iron ore mining in the Schefferville region,” said Millennium Iron’s president Dean Journeaux, previously a senior executive with the former Quebec Cartier Mining Co. (now ArcelorMittal Canada).

But the partners have much greater ambitions for their other Schefferville properties: the Taconite Project comprises two main deposits: KéMag and LabMag. When combined with several others in-between and nearby, the total resource is estimated at 29 billion tonnes of ore, including 9 billion tonnes for just KéMag and Labmag combined.

The Taconite Project has reached the advanced planning stage, with about 40 engineers and technicians at the New Millennium offices in Montreal and a dozen contract staffers in the field.

Kémag lies on the Quebec side of the interprovincial border and LabMag is just in Labrador. Each could have annual capacity of 22 million tonnes of beneficiated ore (in concentrates) and would require investment of about $5 billion (based on 2010 estimates), including transportation to Sept-Îles and a pellet plant, the partners say.

But it’s one project at a time, said Journeaux, and the partners must decide whether KéMag in Quebec goes first or LabMag.

Much will depend on the findings of a $50 million two-year full feasibility study due for delivery around this year-end. But decisions may also be influenced by Quebec’s new mining law.

“We don’t like some clauses but at least we know where we stand and we can move ahead with detailed planning and cost comparisons,” said Journeaux. “Tax rates are critical, but with so many variables, decisions will take time.”

The partners may decide to move the Taconite ore (in concentrates) from Schefferville to Sept Iles via a water (slurry) ferroduct, a technology used successfully elsewhere. It would be much less costly than building a new railway.

The existing Labrador City-Sept-Îles line (414 kilometres) owned by IOC and the Labrador City-Schefferville extension (217 kilometres) owned by three First Nations groups, would not necessarily be capable of handling the larger volumes.

Tata Steel is Europe’s second biggest steelmaker and an important part of the Tata Group, India’s leading business and industrial conglomerate.

It will have a strong role in the Taconite Project, but more partners will be needed to advance the planning, raise capital and sign long-term “offtake” pacts.

The partners say Europe, the U.S. and the Mid-East are the “natural” markets for their Schefferville ore, but that doesn’t exclude Asia’s booming economies.

Why do steelmakers the world over seek Quebec-Labrador ores when Brazil and Australia together produce almost 1 billion tonnes annually and may be nearer their steelmaker customers?

“Primarily, it’s because our ores contain extremely low levels of impurities such as alumina and phosphorous,” Journeaux said. “The DSO ore we’re sending to Europe will average 62 to 65 per cent iron content and we can upgrade the Taconite ores to 68 per cent iron. This helps the steel industry to meet its quality and environmental goals.”

Iron ore spot (immediate delivery) prices have swung between a high of almost $200 U.S. a tonne in the commodity boom to a low of $86 U.S. late last year and now stand at $135 U.S., reflecting world economic recovery.

The Taconite feasibility study will run into hundreds of pages, said Journeaux, “but in the final analysis it’ll be future international demand, pricing and local production costs that will decide the project’s scope and timing.”

Sam Walsh, CEO of Rio Tinto Group, the world’s second-biggest iron ore producer and IOC owner, says prices may soften in 2014 “but it will still be a good business to be in.”

Iron ore supplies three-quarters of Rio’s operating profits and it is expanding its Australian capacity to 350 million tonnes. Rio’s main market is China, which accounts for 60 per cent of global demand.

Journeaux said the New Millennium partners see long-term demand growing at an annual average of three per cent as world economic recovery takes hold. Steel is winning market share against concrete and new-age materials because of its high strength, durability and design flexibility.

Transportation is a key cost factor for all Quebec-Labrador producers, including IOC, Cliffs Natural Resources, ArcelorMittal and Labrador Iron Mines, with combined annual capacity of 50 million tonnes.

Next year the DSO Project ore will start using a new $220 million multi-user deepwater dock at Pointe Noire in Sept-Îles Bay. The New Millennium partners have invested $38 million in that project, providing access to storage and initial annual loading capacity of 15 million tonnes in 400,000-tonne ore carriers.

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Uncertainty in iron market derails new Quebec train service

Source: http://www.hilltimes.com/policy-briefing/2013/04/08/uncertainty-in-iron-market-derails-new-quebec-train-service/34253

System map

System map (Photo credit: Wikipedia)

Plans for a new rail line in northern Quebec linking iron mines in the Labrador Trough to the port of Sept-Îles, Que., are still on hold as industry observers predict plummeting iron prices and the first global surplus of iron ore in over a decade.

In August 2012, CN Rail announced it, along with the La Caisse de dépôt et placement du Québec and six mining companies operating in the area, would conduct a feasibility study for an 800 km track between Ungava Bay on the north shore of the province, and the port on the St. Lawrence. There would also be a processing terminal.

The Labrador Trough is a 1,000 km deposit of iron ore running north-south through Quebec and western Labrador. There are scores of mining claims in the region, where the earth when mined is a Martian orange.

Canada is a minor iron producer, while China, Brazil and Australia are leaders. Global production is over one billion tonnes a year. Canada produces about 40 million tonnes.

Under the Plan Nord, launched under former Quebec premier Jean Charest in 2011, mining activities in the north of the province would be expanded. The $80-billion, 25-year, project would see iron production in the province go from 40 million tonnes a year to 100 million tonnes.

While the election of the Parti Québécois last September caused some initial concern about the future of the plan, the minority government has continued to promote it.

At an estimated cost of $4.9-billion, the line was to be in operation by 2016-2017. Desjardins Securities estimated that the new line would generate $1.3-billion in profits for CN.

The project was scrapped in February.

Mining companies had contributed funding to the study. CN Rail had already started the process of regulatory approval for the rail line with the Canadian Environmental Assessment Agency.

“We have invested considerable effort and resources towards the feasibility study, but in light of the circumstances, CN has concluded that it is not advisable to continue,” said Luc Jobin, executive VP and chief financial officer of CN said in a release when the project was cancelled Feb. 12.

Factors in the decision included a drop in the price of iron that will likely delay expansion of mines in the area, lower than expected production, and the “diverging needs” of the mining companies involved.

The project was already nearly shelved once, in July 2012, because of a lack of support from mining companies.

Currently, companies use another rail route and ship their product out of the Port of Sept-Îles. The federal government has invested $55-million in expanding the port.

When contacted last week for further details, CN spokesperson Mark Hallman said the situation hadn’t changed and the company had no further comment.

Iron prices plummeted last August, causing mining companies to suspend processing and Quebec expansion.

An economic slowdown in China has dampened demand for the most commonly-used metal in the world. Morgan Stanley analysts are predicting the first surplus of iron ore in a decade, and another drop in price.

In 2010, iron was trading at nearly $200 U.S. per metric ton. Last fall it dropped to as low as $85 U.S., and though it recovered somewhat in January, the price is expected to decline. As a rule of thumb, prices need to be over $100 U.S. to make production in the Labrador Trough viable.

“As a long term investor, the Caisse remains open to participating in infrastructure projects that will facilitate the development of Northern Quebec. … The Caisse is convinced that the long-term structural trends in the global economy will be favorable to the development of Québec’s natural resources sector,” said Michael Sabia, president and CEO of the Caisse in a statement last February.

The mining companies that participated in the study are: Hebei Iron and Steel Group partnered with Alderon Iron Ore; New Millennium Iron partnered with Tata Steel; Cap-Ex; Labrador Iron Mines and Cliff Natural Resources.

CN Rail is the largest hauler of iron ore pellets in North America.

Meanwhile, a dispute between shippers of hazardous materials and Canadian Pacific Railway over who should foot the bill in case of an accident is progressing at the Canadian Transportation Agency.

Canadian Pacific wants shippers of hazardous materials to bear the liability in all accidents. The lead company arguing against the change is Chemtrade Logistics Inc., a Toronto-based company that is one of the world’s largest suppliers of sulphuric acid and other chemicals.

“Things are progressing, as we understand, through the Canadian Transportation Agency. There has been some activity,” said Frank Reiner, president of the Chlorine Institute. The institute represents more than 200 chlorine producers worldwide, and nearly all of the producers in North America.

The case was filed Dec. 12, 2012. It revolves around a section of the Canada Transportation Act that gives the transportation agency authority to decide if terms or charges from transportation companies like CP onto shippers are unreasonable.

CTA has responsibility for resolving disputes between shippers and transportation companies, and on appropriate fees. It provides arbitration and mediation services, and as a quasi-judicial body can issue formal decisions.

Nearly 25 per cent of chlorine produced in North America is shipped by rail, he noted. In February, the Chlorine Institute filed a brief with the CTA in support of the shippers.

“It’s a big unknown in their business, and it’s a burden that’s really not fairly assessed to them. They have no control over how the railroads operate on their lines. Therefore they shouldn’t have responsibility,” said Mr. Reiner.

Chlorine is used in a variety of everyday objects, from building materials, medical equipment to cosmetics and bullet-proof vests.  It’s shipped by rail in liquefied form in re-enforced cars that are maintained by the chlorine producers, explained Mr. Reiner.

When contacted for comment, Canadian Pacific spokesperson Ed Greenberg said because the dispute is before the CTA, the company has no comment.

Mr. Reiner said that there have been attempts by other rail companies in the U.S., including Union Pacific and RailAmerica to shift liability onto the companies who use their services.

“This particular attempt was one of the most extreme, shifting all liability,” he explained.

In the U.S., shippers have filed a complaint with the U.S. Service Transportation Board.

If the shippers lose the case at the CTA, Mr. Reiner said that there are few alternatives to using CP.

“There would be some incentive to go to other modes. That’s certainly not something that’s considered desirable. There’s really very little ability to substitute,” he said.

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Quebec Innu file $900-million lawsuit against Iron Ore Company of Canada

Source: http://www.montrealgazette.com/business/Quebec+Innu+file+million+lawsuit+against+Iron+Company+Canada/8127966/story.html

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MONTREAL — Two Quebec Innu communities have filed a $900-million lawsuit against the Iron Ore Co. of Canada, claiming the miner has violated its rights for nearly 60 years.

The Innu First Nations of Uashat Mak Mani-Utenam (Uashaunnuat) and Matimekush-Lac John (MLJ) said the IOC, which is majority owned by Rio Tinto (NYSE:RIO), caused harm by operating a large mining complex and railway on traditional territory (Nitassinan) in northeastern Quebec and Labrador since the 1950s without their prior consent.

The mining complex and activities are located in the communities of Schefferville, Labrador City and Sept-Îles.

“IOC and now Rio Tinto are the companies that have inflicted the most harm on the Uashaunnuat and MLJ and caused the most damage to our Nitassinan,” vice-chief Mike McKenzie of Uashat Mak Mani-Utenam said in a statement on Wednesday.

The lawsuit and a motion seeking an injunction to stop all mining activity were filed Monday in Quebec Superior Court. They claim that IOC’s mines and other facilities have ruined the environment, displaced members from their territory and prevented them from practising their traditional way of life.

They also said the 578-kilometre railway between Schefferville and Sept-Îles has opened up their territory to “numerous other destructive development project.”

The allegations have not been proven in court.

IOC and Rio Tinto didn’t immediately respond to requests for comment.

The $900 million being sought represents IOC’s profits at the facilities since 1954, according to Innu calculations.

Innu leaders said they aren’t opposed to mining development, but have failed in their attempts over two years at “reconciliation” with the mining company and its large owner.

“A balance must be achieved, but regrettably, IOC’s practices are of a bygone era. This must stop,” added Chief Real McKenzie of Matimekush-Lac John.

IOC’s operations were recently expanded at a cost of $732 million. Rio Tinto is reportedly trying to sell its 58.7-per-cent stake in the company. Mitsubishi holds a 26.2-per-cent stake and Labrador Iron Ore Royalty Corporation (TSX:LIF) holds the remaining 15.1 per cent stake and receives a seven per cent gross royalty on all IOC iron ore sales.

The Innu communities have reached agreements with miners ArcelorMittal, Cliffs Natural Resources, Tata Steel, New Millennium Iron and Labrador Iron Mines (TSX:LIM) that provide financial compensation for the mining activities.

 

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Mine operations return to normal as blockade ends

So what do you think? Was the blockade productive? Did it achieve it’s goals?

Labrador Iron Mines Property Location Map

Labrador Iron Mines Property Location Map (Photo credit: benjancewicz)

Source: http://www.thetelegram.com/News/Local/2012-07-09/article-3026000/Mine-operations-return-to-normal-as-blockade-ends/1

Mining companies active in the iron ore-rich Labrador Trough are returning to normal operations with the end of a protest that included the blockade of a key route for mine workers moving to and from the Schefferville area.

The blockade on the Quebec-Labrador border led to mine staff living on the Schefferville side being instructed to stay home.

By the middle of last week, companies operating on the Labrador side of the border, including Labrador Iron Mines and New Millenium, reported scaling back select mine operations as a result.

The companies sent emissaries to meet with the aboriginal band councils in the Schefferville area to find out more about the purpose of the blockade and what could be done to resolve any issues relating to mining operations.

The protest action had reportedly not been sanctioned by the councils, but individual members of both the Innu Matimekush-Lac John and the the Naspaki Nation of Kawawachikamach were identified as establishing the barriers.

The protest action was ended Friday.

“As this was a collaborative effort by all parties, Labrador Iron Mines wishes to acknowledge Chief Real McKenzie of the Innu Matimekush-Lac John and Chief Louis Einish of the Naspaki Nation of Kawawachikamach, as well as their respective Band Councils, for their leadership, efforts and support during this time,” stated a Labrador Iron Mines news release, issued this morning.

The company statement notes there has been no impact to the company’s saleable iron ore production target for 2012, of two million tonnes.

“Labrador Iron Mines will continue to work with the residents of Schefferville and the local aboriginal groups to ensure open and honest dialogue to maintain long-term and mutually beneficial positive relationships with all stakeholders,” the release stated.

“Full-scale mining operations will now ramp up to a full production rate over the next few days and the exploration team has resumed its fieldwork program.”

Anglesey Mining reports on second quarter progress at Labrador mining project

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via SmallCapNews

Anglesey Mining, the AIM listed group with a 50% stake in a 90 million ton iron ore project in Labrador, Canada, today said the operation had made steady progress through the first half of the year.

Anglesey was reporting on a management update from its TSX-listed subsidiary Labrador Iron Mines (LIM), which is planning to get production underway at the mine next year.

At September 30, 2009, LIM had cash and cash equivalents in excess of C$28 million (£15.9 million), working capital of C$27 million and no borrowings or debt.

During the period the company has been advancing its Schefferville Project towards production with ongoing active programmes, including drilling, metallurgical testing, environmental permitting and marketing.

Of major significance was the announcement that the regulatory review of LIM’s Environmental Impact Statement had been completed and no further work is required under the Provincial environmental assessment process.

Apart from Labrador, Anglesey Mining also holds the Parys Mountain base metals project in Anglesey, UK, which has a historical resource of 7.7 million tonnes at 9.3% combined copper, lead and zinc.

Labrador Iron Mine's Environmental Impact Study Approved

Labrador Iron Mines Property Location Map

The full copy of the Environmental Impact Study (with many maps and diagrams) is available here.

An environmental impact statement by Anglesey Mining‘s 50%-owned associate, Labrador Iron Mines, for the Schefferville project in Newfoundland has been accepted by the environment minister.

The minister confirmed that the EIS complied with the Environmental Protection Act and required no further work under the Provincial environmental assessment process.

The minister told LIM that she would be making a recommendation for consideration by the government of Newfoundland and Labrador on release of the project from further environmental assessment.

Story provided by Business Financial Newswire