Resource World Magazine

38 www.resourceworld.com D E C E M B E R / J A N U A R Y 2 0 1 5 MINING IT'S A GENERALLY ACCEPTED truth in the resource business that bigger is better. Most investors believe that larger mines are simply easier to finance. They tend to favour multi-decade mines that provide the kind of underpinning cash flows that banks and other lenders need in order to feel comfortable. But events of the last few years have challenged those assump- tions. It used to be that projects like the massive iron ore deposits of the Labrador Trough in eastern Canada were prized for their big in-place mineral resources. These projects, with hundreds of millions of tonnes, or even billions, were all the rage for investors. But with funding growing tighter in the mining business of late, a critical eye has now been cast on the capital costs for such mega-projects which can run into the billions of dollars, given the big infrastructure build-outs required to get ore to market. So, if bigger isn't better then – what is? That's a question min- ing investors have been scrambling to answer. But even as the search is on for the next wave of development projects, some emerging events across the industry are providing strong clues as to what it takes to make a mine in the current economic climate. In short, it takes infrastructure. That point was driven home last month by one of the most significant joint venture deals signed in the mining space for some time. A cooperation agreement between iron ore developer Northern Iron Corp. [NFE-TSXV] and major Italian iron con- glomerate Danieli Centro Metallics. The deal is a somewhat surprising one, given its David-and- Goliath scale. Danieli is a $2.3 billion major in the steel-making space. The firm is also one of the world's top three manufacturers and suppliers of iron-making, direct reduction and steel-making equipment. Northern Iron, on the other hand, is a $2 million micro-cap developer. However, the company holds something very appeal- ing to a major like Danieli, a project where much of the building has already been done. The project in question is the Griffith Mine in northwestern Ontario. It may sound presumptive to place the word mine in the name of a development project. But in Griffith's case, the moniker is jus- tified by the rich production history of the deposit. Griffith, in fact, produced iron for the better part of two decades, starting in the 1960s. The facility here was operated by Stelco, and pumped out iron pellets and sponge iron used at steel mills in nearby Hamilton and Nanticoke. This wasn't just a fly-by-night producer either. Griffith's total production through its life was nearly 80 million tonnes of ore, yielding over 20 million tonnes of iron pellets. It was this prolific track record that originally attracted Northern Iron's principals to the project. Not to mention the fact the mine is estimated to still hold more iron than it produced with historical reserves estimates running at 120 million tonnes remaining in the shallow open pit here. As far as global iron ore projects go, that's a decent-sized resource, amounting to an 18-year mine life. Plus the company holds additional upside from four other properties in the area. However, it's not the size here that's attracted the attention of Danieli. It's the legacy of development and the infrastructure that comes with it that's made Griffith a focal point for the major firm. To start with, there are the facilities available at the site itself. This includes a 115 kv power line that passes within 3 km of the property. Also, there is a natural gas line that's been laid directly to the mine, a legacy of past operations. A roadway to the property is also in place that connects to a railhead south of the mine. From here, cargo can be loaded onto Northern Iron's strategic advantages draw big backers by David Forest Basil Botha, President and CEO of Northern Iron, left, and Jason Li, CFO of OMC Investments Ltd., sign the investment agreement to advance the Griffith iron ore project in northwestern Ontario. Photo courtesy Northern Iron Corp.

• Cover