The new owners of the Bloom Lake iron ore mining project in northeastern Quebec got a bargain, but a mining analyst says don't expect production any time soon.

"We think it's a great deal,"  said Garrett Nelson Tuesday in an interview with CBC Radio's Labrador Morning.

"We think this asset will have significant value, longer term."

Quebec Iron Ore Inc., a subsidiary of Champion Iron Ltd., said Friday it had agreed to pay $10.5 million for the mine, railway and mineral claims just across the border from Labrador.

It will also assume responsibility for nearly $42 million in environmental liabilities.

The previous owner, Cliffs Natural Resources, acquired the Bloom Lake mine in 2011 as part of a $4.3-billion US takeover of Consolidated Thompson.

'We do think Bloom Lake will have some value, eventually.'                     - Garrett Nelson, mining analyst

Iron Ore prices then were $190 a metric ton, compared with $40 and below today.

"Iron Ore prices won't be at these depressed levels forever," said Nelson, a metals and mining analyst with BB&T Capital Markets in Richmond, Virginia.

"Given the quality of the ore at that mine, we think that asset will have value."

But it won't be any time soon.

Nelson said analysts expect ore prices to remain depressed for years, and the new owners will keep the Bloom Lake mine "on care and maintenance for some time."

In hindsight, Nelson said it was a mistake for Cliffs to come to the region.

"Without a doubt, and they're saddled with an enormous amount of debt, an interest expense that is rising. They're doing everything they can to stay afloat, but the headwinds are just so challenging at the moment, with steel demand deteriorating by the day."

Flooded markets

Cliffs also owns Wabush Mines, and Nelson said anyone interested in that facility would also be looking for a bargain..

"I think there's buyers, even in this environment, at the right price. The problem is that transaction values are a fraction of what they were four or five years ago," he said.

As for when prices might rebound, Nelson predicted the end of this decade, or the beginning of the next.

He just said there's so much supply coming from three big Australian producers, and Vale in Brazil.

"So it's really a battle for market share among those four largest producers and they're pushing the higher cost iron ore miners right off the cost curve, and out of business in a lot of cases."

Champion's approach, he said, is to buy assets like Bloom Lake "on the cheap, which we think is a good strategy,"  and wait for markets to rebound.

"The big advantage they have is geography. It's not competitive for the Brazilian or Australian iron ore to make it into the North American market, into the Great Lakes region where a lot of the steel blast furnaces are," said Nelson.

"So we do think that Bloom Lake will have some value, eventually."