Pact opens path to iron mines

A pact signed with aboriginal groups is expected to clear the way for the revival of iron ore mining in the remote Schefferville region of northern Quebec.

The Innu Matimekush-Lake John First Nation and two other groups agreed yesterday to remove their barricades blocking access to Labrador Iron Mines Holdings Ltd.'s open-pit mine site near Schefferville. Millenium Capital Corp., a future mine developer, also signed.

The companies agreed to support local education, training, health and youth programs, and to participate with government to improve the Schefferville area, near the Labrador border.

An impact benefits agreement is to follow.

"It means our initial mining project, covering two separate deposits on the Labrador side of the border, can be fast-tracked toward commercial production next spring at an annual rate of 2 million tonnes," said John Kearney, Labrador Iron Mines' CEO, in Toronto.

Officials from the federal government, Quebec, and Newfoundland and Labrador helped to broker the pact, he said, "and each government made commitments to the Innu ... so the mining projects in the Schefferville region can move forward."

The aboriginal groups put up the barricades this summer to protest against what they say were the lack of consultation by mining developers and disregard of ancestral rights.

It will be a historic occasion when Labrador Iron moves its crews to the mine site for ground clearing, civil engineering work and erection of an ore beneficiation plant, which will clean and separate the ore. The campsite will be four kilometres southeast. The plant is already at Schefferville, ready to go to the mine site. Local contractors are to handle initial open-pit waste removal and mine extraction.

The company's environmental impact statement has been approved, Kearney said. It has construction permits in hand, and operating permits are expected soon for the mine and a 4.5-kilometre rail spur to the main line from

Labrador City to the shipping port of Sept Iles.

Revival of Schefferville's iron ore industry is possible because of soaring international prices -they have risen by more than quadruple in five years, with burgeoning demand from steelmakers in Asia, especially China. Before that, Quebec-Labrador producers were running below capacity and struggling to make a margin.

Spot market prices now are $120-$140 U.S. a tonne, analysts said. Contract prices that used to be set annually with Asian steelmakers now vary every quarter, ranging from $100 to $125 U.S. a tonne.

Schefferville was a prosperous mining centre when the IronOreCo. of Canada operated there from 1954 to 1982. Before he became prime minister, Brian Mulroney was the head of IOC when it decided to shut the mine because of low prices and high operating costs. Schefferville soon became a ghost town.

IOC, now controlled by Rio Tinto Group, moved on to develop larger and more economic deposits in the Labrador City area, adapting to world demand for concentrates and pellets. It now is expanding capacity to well over 20 million tonnes, at a cost of $800 million.

Together with Wabush Mines, Arcelor Mittal, newcomer Consolidated Thompson Iron Mines Ltd. and soon Labrador Iron, Quebec-Labrador will have annual capacity of 65 million tonnes or more in five years - still modest, compared with Brazil and Australia.

"We're optimistic demand from Asia, especially China, will remain strong over the foreseeable future," Kearney said.

Schefferville, prospering again, sits astride a 100-kilometre belt of iron ore deposits, some of higher grade than others.

Labrador Iron is starting off with a twin-mine (James and Redmond) project on the Labrador side costing $50 million to $60 million to get into production. More must be invested to lift capacity to 3 million tonnes, and ultimately 4 million tonnes.

Labrador Iron will produce direct shipping ore, beneficiated to 65 per cent iron content, for sale on the spot market. The product goes directly into blast furnaces without further processing, Kearney explained.

The operation will be seasonal and won't operate in winter's toughest months.

The ore will travel the same railway to the port of Sept Iles as most other Quebec- Labrador producers use to ship their ore to world markets. Arcelor Mittal ships from Port Cartier, however.