New hope for Kami iron ore project, with Labrador MHA cautiously optimistic
Jordan Brown says he's worried new owner will want to process raw ore across the border in Quebec
An agreement that will see the Kami proposed mining site in Labrador sold to a company with an operational mine across the border could see raw ore head to Quebec for processing, says MHA Jordan Brown.
Brown, a New Democrat who represents Labrador West in the House of Assembly, said he is cautiously optimistic but worried that economic benefits from what mining experts call a world-class iron ore project may not stay in the region.
"This close proximity does bring some concern that some benefits will not come back to the people of Labrador, and may potentially benefit Quebec workers over Labrador workers," Brown said.
Brown was reacting to news that a bid by Australia-based Champion Iron Limited to purchase the high-grade iron ore project near Wabush was approved this week by the Supreme Court of Newfoundland and Labrador.
This followed a competitive bidding process overseen by Deloitte Restructuring Inc., the receiver overseeing the disposal of assets formerly held by Alderon Iron Ore Corp.
Industry, Energy and Technology Minister Andrew Parsons, who was not available for comment Tuesday, must now approve the transaction.
Under the terms of the acquisition, Champion will pay $15 million for the assets, and cover nearly $20 million in Alderon's secured debt.
The deal also includes a "finite production payment" on a fixed amount of future iron ore concentrate production from the Kami project.
The deal, which is expected to close before the end of the year, also includes an additional eight million tonnes per year of loading capacity at the port of Sept-Îles, on Quebec's southeastern coast, which is being used by Champion, though its subsidiary Quebec Iron Ore Inc., to export iron ore concentrate from its Bloom Lake mining complex.
The extra capacity will be used by Champion to export the additional ore concentrate from Bloom Lake once a recently announced expansion is completed.
"When we saw the opportunity of the Kami project, which is a project that could potentially operate for over 20 years, and produce one of the highest grade materials in the world, we saw this as a fantastic opportunity," said Champion CEO David Cataford.
The Kami project has been generating excitement in Labrador's mining sector for years, with Alderon proposing a $1-billion project that would create between 300 to 400 long-term jobs in the region.
The company had received approvals for the project, had advanced plans to deliver electricity to the site, and had come close to commencing construction on a few occasions.
Alderon had also attracted some prominent names to its board, including Andrew Furey, who has since entered provincial politics and is now premier of Newfoundland and Labrador.
Plan fell apart
However, the company was unable to raise the necessary capital, and the entire plan fell apart this year because of the COVID-19 pandemic. Alderon imploded last spring after it failed to repay a $14-million loan to Sprott Resource Lending.
Months later, Champion has emerged as the prospective new owner, and this is being greeted with cautious optimism in Labrador West.
Champion owns and operates the Bloom Lake, which straddles the Quebec-Labrador border and is less than 20 kilometres from the Kami site, according to Brown.
In a unique arrangement, Bloom Lake ore is mined and processed in Quebec, and is shipped into Labrador via a conveyor belt, where it is then loaded onto trains and transported by rail to the ship-loading port of Sept-Îles, on Quebec's southeastern shore.
Brown is concerned that Champion's strategy for the Kami project may include shipping the raw ore into Quebec for processing.
He said such a scenario would bring much less economic benefit than those envisioned by Alderon in its proposal for the project.
"We need to make sure that any project that would mine that ore would benefit Labradorians, Newfoundlanders and Indigenous people prior before it benefits any other province," said Brown.
"I hope the company do operate in good faith on our side of the border, and do a full project that will actually see local people benefit first."
Too early to tell
Cataford, meanwhile, said it's too early to say how, when or if the Kami project will proceed.
He said a team has already been assembled to begin a feasibility study on the economic viability of the Kami site, though a timeline on when that study will be complete has not yet been firmed up.
Nonetheless, Cataford is bullish on his company's newest asset.
"We've been getting more and more demand from our clients to secure longer-term contracts for the exact type of material that Kami could produce. If the market is right, we know the Kami can become a world-class asset in the future," he said.
As for Brown's concerns about shipping unprocessed ore from Labrador to Quebec, Cataford said processing facilities at Bloom Lake are already at maximum capacity.
If the Kami mine were to be developed, he said, additional processing capacity would be required.
Meanwhile, Brown said he will call on Parsons to ensure a benefits agreement is negotiated that delivers maximum returns to the province in which the rich ore resource is located.