China makes strategic investment in Quebec iron ore
Thursday, 17 Sep 2009
It is reported that commodity prices were boiling in March 2008, when little known Consolidated Thompson Iron Mines Ltd launched a USD 650 million Lac Bloom iron ore project about 1,000 kilometers northeast of Montreal.
Mr Richard Quesnel CEO of Consolidated Thompson Iron Mines Ltd said it was the first new iron ore mine in the Quebec-Labrador Trough as the region is called in 35 years and the Chinese would buy the annual output of eight million tonnes.
Money was easy to raise and USD 50 million had already gone on a construction camp. But by that summer, the giant US investment bank Lehman Brothers had collapsed sending stock markets into a dive and deepening a global recession. Thompson couldn’t raise more money at reasonable cost and it seemed Lac Bloom might be headed into limbo.
Mr Brian Tobin Chairman, former Newfoundland and Labrador premier and federal industry minister and Mr Quesnel set about finding a long term strategic partner.
Mr Quesnel said this week “We knocked on a dozen steelmakers’ doors, from Japan, Russia, Korea and China. He said that finally we found Wuhan Iron and Steel Corp known as Wisco, China third largest steelmaker who wanted to diversify its sources of iron ore away from giants such as Vale of Brazil and Rio Tinto in Australia.”
He added that “As a big producer of auto sheet, Wisco wanted top grade ore for its blast furnaces and a long term deal Lac Bloom could fill that bill.”
Mr Quesnel 54 a Quebecer, mining engineer from McGill University and veteran manager of mines across North America including the Goldstrike in Nevada, Sigma in Quebec and Gibraltar Mines in British Columbia said “We’re on schedule and on budget because we’ve got a top-rate team with broad international experience working with the outside engineers and cost specialists.”
Lac Bloom’s operating cash cost per tonne is estimated at USD 25 or under the industry average, but Mr Quesnel agreed its real competitor will be Brazil. He said that Thompson has negotiated long term social benefits and employment pacts with the Innu. Water use and tailings have not been big issues with the region’s existing mines.
Mr Quesnel said “The bulk commodity business is always high risk and no-one controls the price of iron ore, so success rests on quality, high iron content, cost control, port efficiency and long-term sales contracts.”
He said that “The landed price in China is paramount. But understand this we wouldn’t be doing Lac Bloom if Quebec-Labrador didn’t have two railways to the North Shore available. Otherwise it would have cost at least USD 2.5 billion unable to compete with Brazil and Australia and soon India.”
Thompson has moved its headquarters from Toronto to Montreal and Tobin is now executive chairman.
The Montreal office has 20 specialists and many more work at Lac Bloom.
