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Unread 01-23-2015, 06:47 PM
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NFE in Mining Weekly article from 2 weeks ago:



After a tough 2014, junior mining companies will no doubt hope the economic headwinds start to recede in 2015. But it is already too late for some, their fates sealed by evaporated treasuries. Many of these companies tried to weather the storm by slashing expenditure and praying for a return of supercycle conditions to excite the market once more.

Other juniors, however, saw the writing on the wall long beforehand. The smarter ones realised that advancing their core projects would increasingly depend on securing alternative finance and taking other innovative measures. But this route will take time, a precious commodity many juniors no longer have. It also comes with an important caveat; the project in question must be attractive enough to build interest in the first place.

SCORING SUCCESS
One Canadian junior that recorded successes in the alternative sphere during last year was Northern Iron. It secured two deals: one with Italy-based Danieli Centro Metallics, a leading equipment supplier to the steel industry, and the other with Hong Kong-based OMC Investments. Northern Iron seeks to bring the past-producing Griffith iron-ore mine, in the Red Lake region, in Ontario, back on stream.

The tie-up with OMC was a three-year process, with detailed negotiations taking place over two years, VP for corporate development Michael Hepworth told Mining Weekly Online. “Cultivating a relationship with people and building up the necessary trust takes time.”

OMC secured 19.9% in Northern Iron for a private placement of just over $950 000 that was completed on December 1. OMC could earn additional equity through three more phases, the first requiring it to invest $8.2-million to help fund resource delineation and environmental permitting. This would secure an extra 30%.

Phase 2 required $2-million to help fund a prefeasibility study and would obtain OMC another 5%. Phase 3 comprised $20-million to help fund the project’s bankable feasibility study and would secure a final 20%.

OMC would also assist in opening up sales avenues for Griffith ore to Chinese mills.

Before teaming up with OMC, Northern Iron faced the quandary many Canada-based juniors experience when seeking new private partners, particularly those in China – how does a company find the right pairing and who should it approach? To help resolve this, Northern Iron used conferences as its primary conduit to meet potential investors.

“Conference organisers knew the people Northern Iron needed to know, so that’s where we started our networking,” Hepworth said, noting that the company was eventually introduced to the OMC team and "the chemistry with them was good from the start”.

The deal with Danieli was reached in May. It contemplated the installation of an integrated operation to produce hot briquetted iron (HBI), comprising a concentration plant, a pelletising plant, an Energiron direct reduction plant, a briquetting plant and other relevant systems.

Danieli would provide technical data and support for the project’s feasibility study and also assist in promoting Griffith to possible strategic partners and financiers. “In addition, we’ll have an introduction to the steel mills they deal with. This could prove to be a major advantage as it might lead to potential customers,” Hepworth highlighted.

HOT STUFF
The goal at Griffith was to produce HBI, the mine being one of five Northern Iron-held properties in the area. “We’ll use the others as feeder properties as and when required,” Hepworth explained.

Griffith was on stream from 1968 to 1986 and operated by Stelco, producing pellet and sponge iron for the Hamilton and Nanticoke steel mills, in Ontario. Its pit was designed for 245 m but only mined to 85 m and Northern Iron believed there was between 120-million and 130-million tonnes of ore remaining, possibly more.

The company also had a good idea of the metallurgy involved and aimed to mine six-million tonnes a year to produce 1.5-million tonnes HBI, Hepworth noted.

The HBI would be sold as feed for electric arc furnaces (EAF), which use scrap steel as a primary input. “EAFs dilute deleterious elements [associated with scrap] by using virgin iron units, which is where metallics like pig iron, HBI and DRI come in,” he said.

The company also believed HBI had the advantage of servicing a market once removed from iron-ore, the price of which had tumbled by over 40% from its 2014 peak.

HBI was more closely tied to the scrap price, which was currently off from its peak by about 14%, Hepworth pointed out. “So, if we were in production right now, we would have been less affected by the price decline than a straight-forward iron-ore producer, which we’re not planning to be.”

The outlook for EAFs was positive, he said. It was at present the primary steelmaking method in the US, while China was seeking to increase the level of EAF production, although blast furnace technology currently predominated.

Northern Iron’s more immediate goal was to delineate the resource at Griffith. It secured a dewatering permit in November and would start pumping in spring. “After dewatering we’ll be able to get onto the benches to start drilling. This will allow us to undertake full resource testing to start bulk sampling and prove up the ore’s metallurgy,” Hepworth stated.

The company also aimed to move forward with environmental permitting work and continue to cultivate ties with steel mills in North America and Europe.

In addition, Northern Iron wanted to secure more offtake deals and pre-sell as much of the proposed output as possible. “Project finance becomes more feasible if production is presold and revenue has already been guaranteed,” Hepworth noted.

Steel mills frequently preferred offtake agreements to obtain security of supply, he added.

As with most projects in Canada, the need for community engagement was also an important factor in advancing a project and Northern Iron was consulting with First Nation communities and local municipalities. The Red Lake region already had a superb mining pedigree and local people had voiced support for the potential job opportunities the operation may herald, Hepworth emphasised. icon_article_end.png
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