Iron will

Iron will

 

Francis MacKenzie hopes to supply steel mills all over the world with made-in-Labrador pig iron

In June of 2006, Francis MacKenzie suffered a stunning rebuke. At the time, MacKenzie was leader of Nova Scotia’s Liberal Party and it had just been trounced in the provincial election. The Liberals went from holding 11 seats in the legislature to nine, and MacKenzie failed to win his riding. On June 20, 2006, just a week after the election, he resigned as the party’s leader.

But as his political career was unravelling, MacKenzie was busy working on a fallback plan. The plan was to run a company looking to build a mine and processing plant near Happy Valley-Goose Bay, Newfoundland and Labrador that would take iron sands and turn it into pig iron for use in steel mills. “After I was humbled by the people of Nova Scotia, I literally got involved in [the iron sands project] 12 hours after not winning the election,” MacKenzie says. “When you turn that page you move on with your life. I believe everything in life happens for a reason. One door closes and another one opens.”

As president of privately-owned Grand River Ironsands Inc., Mackenzie’s current task might be more challenging than trying to win a provincial election. For MacKenzie and the rest of the junior mining company’s management team are seeking to not only mine iron sands, but also process it into pig iron and transport it to customers. Oh, and they also need to find $700 million to get everything built at a time when investors are not exactly rushing to give mining juniors their cash.

MacKenzie is not short on confidence, however, and that confidence comes from knowing he has a product that’s in demand. The pig iron Grand River wants to produce from Labrador is a product used in blast furnaces to help make steel. Most of the pig iron used in North American steel mills is imported from Brazil and Russia. MacKenzie thinks the Labrador iron sands project could be a big hit with steelmakers, particularly in the U.S. market. The pig iron would be closer (and thus potentially cheaper) to source for these steel mills and they wouldn’t have to rely on buying the product from two countries that have a history of being politically unstable.

“In any discussions we’ve had with North American steel mills they are extremely receptive to having someone who can supply them in their own backyard,” MacKenzie says. “And we’ve got an enormous resource here.”

That resource lies on mineral claims covering 450 square kilometres in the Happy Valley- Goose Bay area. Grand River, and its partner in the venture – South African-based Petmin Limited, which owns 30 per cent of the project – want to operate an open pit operation that would supply iron sands to its pig iron making plant. The plant would produce 800,000 tonnes of pig iron per year for 20 to 25 years. The mine and plant would employ approximately 200 workers each.

It’s taken seven years and roughly $25 million for MacKenzie to stickhandle the project to the point where he says the partners will have a preliminary economic assessment out by the first quarter of 2014 (the assessment had not been released as this magazine went to press). Getting the assessment in the public domain is a big deal for Grand River and Petmin, but important progress has already been made.

One of the milestones was completing testing at two furnaces in Easton, Pennsylvania in February of 2013. The smelting tests were necessary to show the technical and economic viability of producing pig iron from the iron sands in Labrador. “We’ve been able to prove we can take the iron sands of Labrador and smelt them to make a very high purity pig iron. We’ve done this repeatedly,” MacKenzie says.

However, successful testing is just one small, albeit significant, step towards getting the project off the ground. It needs regulatory approval (MacKenzie says Grand River would like to start the permitting process for the mine by the first half of 2014). It needs the formal support of the Innu First Nation, as the mineral claims are on Innu land. And if it is going to build a pig iron making plant in Happy Valley-Goose Bay, Grand River needs to find the power that will supply the 130 megawatts of electricity the facility would use daily. The company has looked at several other sites in North America where it could set up pig iron making plants if it can’t build one in Happy Valley-Goose Bay.

The other missing element is capital. Grand River and Petmin don’t have $700 million in their bank accounts to pay for the projects themselves. So they will have to either raise the money through the capital markets, find a strategic partner with deep pockets who can fund the project, or some combination of the two. MacKenzie says the Labrador iron sands venture has a lot going for it. The iron sands are high grade and close to the surface. The mine will be near Happy Valley-Goose Bay, a community of 7,500 people that is already a service centre for the mining industry. Finally, no road, rail or port infrastructure investment will be required.

All those factors aid the economics of Grand River’s project. MacKenzie says the company’s current projections show that it can produce pig iron for under US$360 per tonne, whereas pig iron was fetching approximately US$420 per tonne as this magazine went to press. But even with these advantages, MacKenzie knows investors aren’t lining up to fund junior mining projects – not yet anyway.

“No matter how good your project is, if the markets aren’t ready to participate you’re going to hurry up and wait. These are very difficult times to be in. Capital out there is still challenging, but I do see some of it coming back, even for the juniors,” MacKenzie says. “Our strategy has been let’s be more than a miner. Let’s get into manufacturing and get into the value added. That really separates us from the vast amount of other mining projects throughout the world. That key strategy will hopefully bear fruit when we have to go to the capital markets.”

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