TORONTO (miningweekly.com) – Adriana Resources, planning to build what could be Canada’s biggest mining project yet, will likely conclude negotiations with China’s Wuhan Iron and Steel Company (Wisco) for the Lac Otelnuk project “within the next couple of months”, CEO Allen Palmiere said on Friday.

Earlier this week, TSX V-listed Adriana announced a positive preliminary economic assessment of the project, located in Nunavik Quebec, expected to produce 50-million tons or iron ore pellets yearly.

In March, the company sold a 20% equity stake to Wisco, and the negotiations currently underway relate to the structure of the relationship between Adriana and the Chinese firm in building Lac Otelnuk.

According to a framework agreement the two firms signed in January, Wisco will get a 60% holding in the project.

According to a presentation on Adriana’s website, Lac Otelnuk could cost up to $9-billion to build, and includes an 815 km as well as port facilities at Sept Iles.

Palmiere told Mining Weekly Online that Adriana would only have to raise a small amount of this.

“Wisco will provide project financing as well as their 60% share of the equity,” he noted.

“In aggregate, they will fund and arrange funding for 88% of the capital, leaving 12% for Adriana to fund.”

Once the negations with Wisco have been completed, Adriana will start on a bankable feasibility study on Lac Otelnuk, which Palmiere said would take 12 to 18 months to complete.

The company would then start construction in 2013, with first production arriving three years later.

IRON INTEREST

Canada’s iron ore mining industry has been enjoying its day in the sun over the past few months, with foreign firms investing billions of dollars in companies.

US miner Cliffs Natural Resources agreed to buy Consolidated Thompson for C$4,9-billion at the start of the year, and ArcelorMittal paid hundreds of millions of dollars for control of Baffinland Iron Mines.

Wisco had also invested in Consolidated Thompson before Cliffs bought the company.

Even India’s Tata Steel has been making moves into Canadian iron ore through its partnership with New Millennium Capital.

Palmiere said he saw a bright future for Canada as a supplier of the steel-making ingredient to China.

“Long term, I believe that Quebec will become a major exporter of iron ore to the Chinese market.

Consolidated Thompson has proven that Quebec can compete on the world market, and there is a great deal of interest in other projects in Quebec.”