ST. JOHN'S, N.L. (CP) -- Iron Ore Co. of Canada [TSX:LIF.UN] announced Tuesday a C$500-million expansion of its operations in western Labrador to boost annual concentrate production from 17 million tonnes to 22 million tonnes in a bid to satisfy surging global demand.
As part of the first phase of a three-year expansion, the company will acquire new drilling, loading and hauling equipment at its mining site near Labrador City, as well as the construction of a new crusher station.
IOC will also build a six-kilometre overland conveyor linking the crusher to the concentrator and install an additional grinding mill to help address bottlenecks in production and improve performance, said company president and CEO Terry Bowles.
"Today marks a significant milestone in our evolution," Bowles told a news conference.
"We can now open what I believe is a new chapter in IOC's history."
The expansion by the company, part of the global Rio Tinto [NYSE:RTP; LSE:RIO] mining group, comes at a time of soaring demand for iron ore pellets used by global steelmakers to produce steel in their blast furnaces.
The announcement also follows in the wake of another recent expansion in Quebec as the industry seeks to raise iron ore output to supply insatiable markets, especially in Asia.
"The big, big increases that have happened in China are obviously putting an enormous strain on producers in Australia and Brazil and of course on ourselves, but obviously has opened up opportunities for us elsewhere in the world," Bowles said.
Last August, IOC announced a C$60-million program to increase total concentrate production to 18.4 million tonnes by the middle of this year. At the time, IOC also said it would conduct a feasibility study to boost concentrate production to 22 million tonnes annually.
IOC is Canada's largest iron ore producer, employing 1,900 people at mining and processing mills near Labrador City and shipping operations in Sept-Iles, Que.
With the expansion, the company expects its workforce to grow by 200 in a region already suffering a shortage of workers.
"It's certainly going to be a challenge," said Conservative member Jim Baker, who represents Labrador City in the provincial legislature.
"There is a zero vacancy rate anywhere now in Labrador City. We're almost a mini-Fort McMurray with the housing prices escalating in our area."
In a statement, Newfoundland Natural Resources Minister Kathy Dunderdale said IOC's expansion is a sign of the province's growing strength in the mining industry.
"The confidence this company is showing in the province, especially Labrador West, proves we have the resources, people and business climate to compete and win in this global industry," she said.
Bowles said with roughly one billion tonnes of reserves in Labrador, he hopes to eventually ramp up annual production to 25 million tonnes.
The company is 59% owned by Rio Tinto, one of the world's biggest miners, and 15% owned by Labrador Iron Ore Fund, a Toronto-based royalty trust.
Last week, Consolidated Thompson Iron Mines Ltd. [TSX:CLM], a Toronto-based miner, got approval from the Quebec government to build the Bloom Lake open-pit iron mine in Quebec, a project expected to operate for 34 years.
China-based Worldlink Resources Ltd. has previously agreed to buy seven million tonnes, representing a full year of production, from Bloom Lake.
The deal with Worldlink comes at a time when the demand for steel has grown by 33% in China over the last three years.
The world's largest iron producer, Vale, recently negotiated a 65% hike in iron prices from some of its major customers - putting upward pressure on the widely used base metal, a primary raw material for steel production.
The Iron Ore expansion and Bloom Lake launch come after Hamilton-based U.S. Steel Canada Inc., formerly known as Stelco and its partner Cleveland Cliffs Inc. withdrew from talks to sell their combined 71% stake in Labrador's Wabush Mines company to third partner ArcelorMittal Dofasco Inc. [NYSE:MT] also of Hamilton.
Earlier the former Dofasco had exercised its right to buy out its two partners in Wabush, scrapping an earlier deal that would have seen their combined 71% stake sold to Consolidated Thompson.
The driver in the steel market has been the Asian market over the past three or four years with demand at 10% and more in China as well as India.
In contrast, North American and European growth on steel consumption has been about two to three%.
In trading Tuesday on the TSX, Labrador Iron Ore fund units rose C$1.50 to trade at C$53, a gain of nearly 3%.
(c) The Canadian Press 2008