Iron Ore Co. of Canada (IOC) is moving ahead with developing the Wabush 3 project, after a $79-million investment approval by its board.
Wabush 3 — envisioned as a conventional open-pit mine — will provide a new source of iron ore to extend the operating life at IOC’s Carol project in Labrador City, Newfoundland and Labrador.
“This value-driven investment will deliver significant benefits for our business, employees and surrounding communities in Labrador West and Sept-Îles for many years to come, by increasing the mine life and allowing us to offer continued employment opportunities,” Clayton Walker, IOC’s CEO and president, said in a media release.
IOC has been operating Carol since the 1960s. It produces concentrated iron ore and pellets from the operation and transports them by train to the port of Sept-Îles, Que., to ship to global customers.
The project has four operating pits (Humphrey Main, Humphrey South, Sherwood Pond and Luce), two dormant pits and two new deposits (Wabush 3 and Wabush 6).
Wabush 3, which is next to the Luce pit, should help IOC ramp up Carol’s annual capacity from 18 million tonnes to 23 million tonnes.
Along with adding tonnes, Wabush 3 could extend the operation’s mine life by 12 years, from 2067 to 2079.
“When the Wabush 3 environmental impact statement was submitted to the Newfoundland and Labrador government, it indicated that the completion of the Wabush 3 pit would extend IOC’s mining activities at Labrador City to 2079,” Marsha Power-Slade, the company’s senior advisor of external relations, said in an email.
The provincial government released Wabush 3 from the environmental assessment process in September 2015. IOC, however, delayed a construction decision due to low iron ore prices.
With the spot price for the steelmaking metal recently picking up, developing the new pit now makes more sense. Spot iron ore exited this January at US$80 per tonne, up 90% from a year ago.
IOC intends to start building Wabush 3 — estimated to cost $79 million — in April. The pit will contain 744 million tonnes of iron ore, with first production expected in the second half of 2018.
Wabush 3 will create “70 total full-time equivalent jobs with contractor and subcontractors during the 18-month construction phase,” Power-Slade adds.
The company — which is a joint venture between Rio Tinto (NYSE: RIO; LON: RIO), at 58.7%; Mitsubishi, at 26.2%; and Labrador Iron Ore Royalty (TSX: LIF), at 15.1% — says it will fully integrate Wabush 3 into its Labrador City operations.
IOC operates the Carol project, a concentrator and a pelletizing plant in Labrador City, as well as port facilities in Sept-Îles, and a 418 km railroad that links the project to the port.
BMO analyst Alexander Pearce, who covers Labrador Iron, notes that development at Wabush 3 is starting earlier than expected.
“The Wabush 3 pit is IOC’s best option to access low-cost, quality ore,” Walker says. “It provides a compelling opportunity to make our business more competitive by lowering operating costs during a period of increasing iron ore price volatility.”