Development Plans for Flagship Houston Project Well Advanced
TORONTO, July 2, 2014 /CNW/ - Labrador Iron Mines Holdings Limited ("LIM" or the "Company") (TSX: LIM) today reports its operating and audited financial results for
the fiscal year ended March 31, 2014 and provides an update on plans
for its 2014 season.
LIM completed its third operating season in December 2013 and achieved
its sales target of approximately 1.7 million wet tonnes (~1.6 million
dry tonnes) of iron ore in ten cape-size ocean shipments. LIM
recognized net revenue from mining operations of $85.9 million for
LIM's sales volumes during the 2013 operating season were achieved at
the expense of product quality, which impacted revenues and resulted in
a large net loss reported for fiscal 2014.
For the fiscal year ended March 31, 2014, LIM reported a net loss of
$105.2 million or $0.83 per share, which included a depletion and
depreciation charge of $33.6 million or $0.27 per share.
LIM entered into a joint venture with Tata Steel Minerals Canada
("TSMC") for the exploration and development of LIM's Howse Deposit.
LIM sold a 51% interest in Howse to TSMC for $30 million and completed
approximately 2,760 metres ("m") of drilling on Howse in 2013.
A Feasibility Study and an Environmental Impact Study for the Howse
Project are on schedule for completion by the end of 2014.
LIM successfully completed its 2013 exploration program achieving over
12,000 m of diamond and reverse circulation drilling.
The focus of LIM's 2014 activities will be the development of the
Houston Mine and, subject to completion of financing, LIM plans to be
in a position to begin production from Houston in 2015.
UPDATE ON THE 2014 OPERATING SEASON
"While LIM achieved its sales target of a total of approximately 1.7
million wet metric tonnes of iron ore for the 2013 operating season,
this was achieved at the expense of product quality as mining went
deeper in the James mine open pit and both the grade and consistency of
the ore began to fall" commented John Kearney, Chairman & CEO.
"These ore quality problems in 2013, together with significant capital
invested during that year, put considerable strain on LIM's cash
resources and LIM now needs new external investment to enable the
Company to continue operations, to bring the bigger and long-life
Houston Project into production and to meet its corporate and
Rod Cooper, President & COO, added "LIM is currently not planning for any mining or processing
activity in 2014, which is planned instead to be a development year for
the Company. For the balance of 2014, we are focusing on developing our
flagship Houston Mine and, subject to completion of financing and
negotiation of major contracts, we are working to be in a position to
begin mining production from Houston in April 2015."
LIM has not restarted mine operating activities for the 2014 operating
season, due to a combination of the prevailing low price of iron ore in
2014 to date, which would almost certainly have resulted in operating
losses, an assessment of the economics of the remaining resources of
the James Mine and other Stage 1 deposits at current iron ore prices
and a strategic shift in corporate focus towards establishing a lower
cost operating framework and completing development of LIM's flagship
Stage 2 Houston Mine, while concurrently negotiating the commercial
terms of major contracts and seeking additional capital investment and
As part of its plan to establish a lower cost operating framework and
substantially reduce operating costs, LIM is seeking to negotiate
revised commercial terms with its major contractors and suppliers.
Operating cost saving initiatives have been achieved with respect to
mining equipment rates, fuel procurement, aviation services,
hydro-electric power, exploration costs, winter cost management, rail
car leasing rates, human resources and man power and corporate and
administration costs. LIM has implemented major reductions in staff
levels and compensation across the organisation and directors' fees
have been waived. All non-essential capital expenditure has been
deferred and no significant exploration activity is planned for 2014
outside of exploration at the Howse joint venture that is already
funded by TSMC.
LIM's Stage 1 deposits and related infrastructure, including the wet
processing plant, are being maintained in standby condition for the
time being, which will allow for a potential restart of Stage 1
production when economic conditions improve. It is expected that the
Silver Yards dry plant will be used for all processing activity of
Houston ore in 2015, with the wet plant re-commissioned to process
plant feed from Houston in future years.
LIM believes that the required financing can be raised and, in
conjunction with major stakeholders, is currently considering various
financing opportunities and is engaged in discussions and negotiations
of draft term sheets with certain commodity traders, financial
institutions and others regarding proposals for financing. Subject to
completing these financings, the Company believes it will have
sufficient working capital to continue to operate over the next year.
In the meantime, and pending completion of financing, LIM will endeavor
to prudently manage its cash resources in order to ensure the integrity
of its properties and to meet all regulatory requirements.
However, there are no assurances that LIM will be successful in
obtaining any required financing, or in obtaining financing on a timely
basis or on reasonable or acceptable terms and, as part of this
process, LIM is continually evaluating the current situation with
respect to the current price of iron ore and the timing and risk
associated with potential financing proposals. If LIM is unable to
obtain adequate additional financing on a timely basis, the Company
would be required to curtail all operations and development activities.
FISCAL 2014 OPERATIONS SUMMARY
Mining, Processing and Rail
LIM completed its third operating year in December 2013. Ore was
extracted primarily from the James Mine (~1.6 million tonnes), with a
smaller portion extracted from the Redmond Mine (~205,000 tonnes) and
the Ferriman stockpiles (~176,000 tonnes) for an aggregate of 1.9
million tonnes of ore mined and 2.0 million tonnes of waste removed
during the year.
The iron grade of ore mined during the 2013 operating season was lower
than in previous years. Mining activity at James was from deep in the
pit and exhibited a lower in situ iron grade and contained a greater
fines component than previously experienced. High clay content in the
Redmond material caused clogging in the wet processing plant during the
late summer months, resulting in poor recovery levels. Plant feed from
the Ferriman stockpiles was known to be lower grade, but responded well
to wet processing.
Processing activities continued until mid-November. A total of 2.5
million tonnes of plant feed was processed and screened during the 2013
operating season, producing an aggregate of 1.5 million tonnes of lump
and sinter iron ore. The product recovery rate of 63% was below the
combined design plant recovery rate for the wet and dry plants of
approximately 75%, which was attributable to a higher than anticipated
amount of fines in the James plant feed extracted from deep in the pit,
the high clay content of the Redmond plant feed and underperformance of
the new WHIMS (wet high intensity magnetic separator).
LIM achieved a record annual volume of rail haulage in 2013, railing
approximately 1.5 million tonnes of iron ore to the Port of Sept-Îles
until the end of November. Rotary dumper compatible ore gondolas were
utilized during 2013, which allowed for longer train sets and enabled
efficient unloading at the Port.
Iron Ore Sales
LIM achieved its 2013 sales target of 1.7 million wet tonnes (~1.6
million dry tonnes) of iron ore in 10 cape-size ocean shipments, the
same number of shipments sold during the previous operating season. The
tenth and final shipment of the operating season departed the Port of
Sept-Îles in early December. During fiscal 2014, LIM's shipments were
sold to the Iron Ore Company of Canada ("IOC") at a provisional
weighted average actual realized price (i.e. CFR China spot price less
marketing discounts and value-in-use adjustments) of approximately
US$100 per tonne on a CFR China basis. LIM recognized net revenue of
$85.9 million during the fiscal year after netting shipping costs and
IOC's participation from the CFR China actual realized price for these
LIM's product sales during the 2013 season experienced value-in-use
deductions related to silica content, iron content and sizing
specifications, which deviated from benchmark standards.
Of the ten shipments, three shipments were sold as a standard grade
(~62% Fe) sinter product, three shipments were sold as a lower grade
(~58% Fe) sinter product, one shipment was sold as a standard grade
(~62% Fe) lump product and three shipments were sold as split cargos of
lower grade sinter product, standard grade sinter product and standard
grade lump product. The discount between the Platts 62% Fe iron ore
price and the Platts 58% Fe iron ore price widened during the fiscal
year to a differential of about US$18 per tonne from about US$10 per
tonne at the beginning of the fiscal year, reportedly as a result of
large volumes of lower grade iron ore arriving in China from Australia
Iron ore prices have dropped sharply in 2014 year-to-date, with a
decline of over 30% to below US$90 per tonne CFR China in mid-June, the
lowest level since the third quarter of 2012.
The Company's operating results for the fiscal years ended March 31,
2014 and 2013 are summarized in the table below.
Fiscal Year Ended March 31
(all tonnes are dry metric tonnes)
Total Ore Mined
Ore Processed and Screened
Lump Ore Produced
Sinter Fines Produced
Total Product Railed
Total Product Sold
Port Product Inventory
Cumulative Inventory Adjustment (1)
Site Product Inventory
Site Run-of-Mine Ore inventory
(1) Cumulative inventory adjustment represents product lost in the normal
course during train unloading, port handling and ship loading since
MARCH 2014 YEAR-END FINANCIAL RESULTS
For the fiscal year ended March 31, 2014, LIM recognized net revenue
from mining operations of $85.9 million on sales of 1.6 million dry
tonnes of iron ore in ten shipments completed during the year.
The decrease in net revenue (2013 - $95.7 million) is attributable to
higher value-in-use penalties resulting from the lower grades mined and
sold, higher marketing discounts and higher ocean freight costs,
notwithstanding a marginally higher volume of sales and a modestly
higher average CFR China spot price of iron ore. LIM's net revenue is
recognized net of deduction of value-in-use adjustments, marketing
discounts, ocean freight and IOC's participation.
For the fiscal year ended March 31, 2014, LIM reported a net loss of
$105.2 million, or $0.83 per share, which included a depletion and
depreciation charge of $33.6 million, or $0.27 per share. The increase
in the depletion and depreciation charge in fiscal 2014 (2013 - $29.7
million or $0.36 per share) was due to higher mining volumes and an
acceleration in the depletion rate for the James Mine.
Operating costs per tonne during the 2013 operating season were
unsustainably high, due partly to production volumes, but largely to
the commercial terms of certain major contracts.
Processing costs in fiscal 2014 increased to $36.5 million (2013 - $16.5
million) primarily a function of the 2.5 times increase in ore
processed and screened, from approximately 955,000 tonnes to nearly 2.5
million tonnes in the respective fiscal years.
Rail and transportation costs of $57.1 million in fiscal 2014 were
reasonably consistent (2013 - $60.9 million) reflecting slightly higher
rail volumes during the current fiscal year, offset by lower rail car
During fiscal 2014, LIM invested approximately $16.4 million in
property, plant and equipment (2013 - $32.0 million), related mainly to
the completion of Phase 3 of the Silver Yards wet processing plant,
completion of grid power connection at Silver Yards and completion of
Phase 1 enhancement work on the rail siding at Silver Yards. The
reduction year-over-year represents a concerted effort to limit capital
expenditures to only essential capital projects.
As at March 31, 2014, LIM had current assets of $16.5 million, including
inventories with a carrying value of $2.1 million and accounts
receivable and prepaid expenses of $4.1 million. At March 31, 2014, LIM
had $7.5 million in unrestricted cash and cash equivalents, an
additional $2.8 million in current restricted cash and $4.2 million in
non-current restricted cash.
Current liabilities, consisting of accounts payable and accrued
liabilities, finance lease obligations and rehabilitation provisions,
were in aggregate $25.2 million at March 31, 2014.
At March 31, 2014, the Company had an ending working capital deficit of
$8.7 million. LIM had no current or long-term bank debt at March 31,
2014; however, the Company had a long-term deferred revenue liability
of $22.1 million.
DEVELOPMENT OF THE HOUSTON MINE
The Houston Project is planned to form the core of LIM's operations for
at least the next ten years. Subject to completion of financing, the
focus of LIM's 2014 activities will be the development of the Houston
Mine. LIM plans to be in a position to begin production from Houston in
The Houston deposits have an average in-situ grade of ~57% iron ("Fe")
that is expected to be upgradable to a 60% to 62% Fe iron product. In
addition, the Houston ore is harder than James and will result in the
production of a larger proportion of lump product. The Houston-Malcolm
deposits are expected to produce consistent saleable product of about 2
to 3 million tonnes per year for a 10 to 15 year mine-life.
In response to lower iron ore prices and in order to reduce up-front
capital, LIM has revised its initial development plan for Houston and
now plans, at least for the initial year of Houston production, to haul
Houston ore to the Silver Yards processing and rail loading facilities,
with processing by on-site dry screening only for several years. This
revised plan will reduce the initial capital cost of Houston by
deferring the originally proposed new plant. Subject to successful
completion of financing, the major development work planned for 2014
will be the construction of a new haulage road, approximately 8
kilometres ("km") long, to connect Houston to the current road to
Silver Yards close to the Redmond Mine. The overall one-way haulage
distance from Houston to Silver Yards is approximately 20 km.
LIM also plans to construct a new rail siding near the Houston Mine.
When the rail siding is completed, high grade Houston ore would be
processed by on-site dry crushing and screening and loaded directly
onto railcars at the planned new rail siding near the Houston site.
Construction of the rail siding is currently planned to be completed in
the second half of the 2015 operating season.
Development of the Houston Project is subject to the availability of
financing. LIM is negotiating additional off-take related financing
arrangements and other potential financing structures to fund the
planned first phase Houston development and related transportation
JOINT VENTURE WITH TATA STEEL MINERALS CANADA AND EXPLORATION PROGRAM
During the 2013 operating season, 2,760 m were drilled in 21 holes and
geotechnical and geohydrology field studies were initiated at the Howse
Project. The drilling program was suspended during the winter and is
resuming in the summer in order to maximize the collection of technical
data under the current budget. A further 3,500 m of exploration
drilling is planned for summer 2014. The objective of the Howse drill
program is to convert the historical resources to NI 43-101 compliant
mineral resources and to collect metallurgical, geotechnical,
hydrogeological and hydrology information to complete a Feasibility
Study in 2014. TSMC advises that the NI 43-101 resource estimate,
Feasibility Study and Environmental Impact Study, all designed to
support a production decision, are on schedule for completion by the
end of 2014. Project Registration Notices for the Howse Project were
submitted to the provincial and federal governments. The federal
government has referred the Project for Environmental Assessment and
Environmental Impact Statement (EIS) Guidelines were issued in June
Originally as part of LIM's planned Stage 3, the Howse Deposit was
expected to be developed by about 2020. The Joint Venture with TSMC is
expected to expedite the start of production to 2016 and should also
result in significant cost savings and synergies due to the proximity
of the Howse Deposit to TSMC's year round Timmins processing plant.
Along with drilling at Howse, LIM successfully completed its 2013
exploration program, achieving just over 12,000 m of diamond and
reverse circulation drilling.
The diamond drilling programs focused on the Houston 1, 2 and 3
deposits, the Howse Project, the Gill Mine, Redmond 5, and the Bean
Lake deposits. A reverse circulation rig was used to carry out some
detailed test work on the Ferriman stockpiles.
SUMMARY OF NI 43-101 MINERAL RESOURCE ESTIMATES1
As at March 31, 2014
Tonnes (x 1000)
Total Measured & Indicated
As at June 15, 2013
Tonnes (x 1000)
(1) See Technical Reports filed on SEDAR.
As at March 31, 2014, LIM had NI 43-101 compliant measured and indicated
mineral resources of approximately 54.8 million tonnes at an average
grade of 56.8% Fe and an inferred resource of 4.8 million tonnes at an
average grade of 55.7% Fe on the Schefferville Projects. In addition,
LIM holds previously-mined stockpiles with a NI 43-101 compliant,
indicated mineral resource of approximately 3.5 million tonnes at an
average grade of 49.1% Fe and an inferred resource of approximately 2.9
million tonnes at an average grade of 48.8% Fe. These stockpiles are
located within 15 km of Silver Yards and form part of LIM's Stage 1
LIM's Schefferville Projects comprise 20 different iron ore deposits,
which were part of the original IOC direct shipping operations
conducted from 1954 to 1982 and formed part of the 250 million tonnes
of historical reserves and resources previously identified by IOC. The
Company holds approximately 108 million tonnes in historical resources
previously identified by IOC.
LIM also holds a NI 43-101 compliant inferred mineral resource estimate
for the Elizabeth Taconite Project (as at June 15, 2013) of 620 million
tonnes at an average grade of 31.8% Fe. Taconites require upgrading
through a concentrator involving a major capital investment to produce
a saleable iron ore product.
A Feasibility Study has not been conducted on any of the Schefferville
Projects and the Company's decision to undertake commercial production
has not been based upon a Feasibility Study of mineral reserves
demonstrating economic and technical viability. Resources, unlike
reserves, do not have demonstrated economic viability.
Iron Ore Market Conditions
The spot price of iron ore (CFR China 62% Fe basis, prior to any
value-in-use adjustments) averaged approximately US$131 per tonne
during the 2013 operating season, an improvement over an average of
US$125 per tonne during the 2012 operating season. However, since
January 2014, the price of iron ore has fallen steadily in the Chinese
market and the benchmark prices for 62% Fe iron ore declined to below
US$90 per tonne in June 2014. Iron ore exports from Australia to China
increased significantly in 2014, helping to push benchmark prices to
the lowest levels since 2012 and contributed to a growing global
The immediate market outlook for iron ore is somewhat uncertain. Chinese
steel mills and traders are being pressed to sell inventories as banks
demand loan repayments by June 30 during the half-year loan settlement
period. Increased supply and lower prices will force the closure of
higher cost domestic Chinese producers. However, Chinese iron steel
production continues to increase and China will need to import more
iron ore to replace the shutdown domestic production, which should help
iron ore price stability. For budgeting purposes, LIM has assumed an
average price of US$100 per tonne during 2014 (during which no sales
are anticipated) and 2015. LIM is anticipating a foreign exchange rate
of US$0.90 per Canadian dollar for budget purposes.
* * * * * *
This press release should be read in conjunction with LIM's Management's
Discussion and Analysis (MD&A) and audited financial statements for the
year ended March 31, 2014, available on the company's website at www.labradorironmines.ca, under the "Financials" section, or on SEDAR (www.sedar.com).
LIM will not be holding a conference call for the quarter and year ended
March 31, 2014. LIM is currently negotiating certain financing
opportunities and revised terms with its major contractors. Discussions
and negotiations with various parties are ongoing. Subject to
completion of these negotiations, the Company will provide further
updates at that time.
LIM has also filed its Annual Information Form (AIF) and NI 43-101
Technical Report, which include the resource estimates disclosed in
this press release, all of which are available on SEDAR (www.sedar.com).
Unless otherwise noted, all references to 'years' in this press release
are 'calendar years', all dollar amounts are stated in Canadian dollars
and all tonnes are stated in dry metric tonnes.
The current resource estimates for LIM's Schefferville Projects,
including stockpiles, disclosed in this press release, were prepared by
Maxime Dupéré, P. Geo of SGS Canada Inc. who is a Qualified Person and
independent of the Company within the meaning of NI 43-101.
The current resource estimate for LIM's Elizabeth Taconite Project,
disclosed in this press release, has been prepared by George H. Wahl,
P.Geo., GH Wahl & Associates Consulting who is a Qualified Person and
independent of the Company within the meaning of NI 43-101.
* * * * * *
About Labrador Iron Mines Holdings Limited (LIM)
Labrador Iron Mines (LIM) is a leader in the reactivation of the iron
ore industry in the Schefferville/Menihek region, engaged in the
mining, exploration and development of its portfolio of 20 direct
shipping (DSO) deposits located in the prolific Labrador Trough.
Initial production commenced at the James Mine and Silver Yards plant
in June 2011 and through to the end of its third operating year, the
Company has sold approximately 3.6 million dry tonnes (3.8 million wet
tonnes) in 23 shipments of iron ore into the Chinese spot market.
LIM's Silver Yards facility is connected by a direct rail link to the
Port of Sept-Îles, Québec. The operation also benefits from established
infrastructure including hydro power, the town, airport, and railway
service. The Company's current focus is to develop the long-life
Houston flagship Project and is planning for initial production
commencing in 2015.
Mineral resources that are not mineral reserves do not have demonstrated
economic viability. Inferred mineral resources are considered too
speculative geologically to have economic considerations applied to
them that would enable them to be categorized as mineral reserves.
There is no certainty that mineral resources will be converted into
The terms "iron ore" and "ore" in this document are used in a
descriptive sense and should not be considered as representing current
The historical resources estimates referred to in this Press Release are
based on work completed and estimates prepared by IOC prior to 1983 and
were not prepared in accordance with NI 43-101. The IOC classification
reported all resources (measured, indicated and inferred) within the
total mineral resource. A Qualified Person has not completed sufficient
work to classify the historical estimates as current mineral reserves.
These historical results provide an indication of the potential of the
properties and are relevant to ongoing exploration but should not be
Forward Looking Statement:
Some of the statements contained in this Press Release may be
forward-looking statements which involve known and unknown risks and
uncertainties relating to, but not limited to, LIM's expectations,
intentions, plans and beliefs. Forward-looking information can often be
identified by forward-looking words such as "anticipate", "believe",
"expect", "goal", "plan", "intend", "estimate", "may" and "will" or
similar words suggesting future outcomes, or other expectations,
beliefs, plans, objectives, assumptions, intentions or statements about
future events or performance. Forward-looking information may include
reserve and resource estimates, estimates of future production, unit
costs, costs of capital projects and timing of commencement of
operations, and is based on current expectations that involve a number
of business risks and uncertainties and assumptions regarding
financing. Factors that could cause actual results to differ materially
from any forward-looking statement include, but are not limited to,
failure to establish estimated resources and reserves, the grade and
recovery of ore which is mined varying from estimates, delays in
obtaining or failures to obtain required financing, capital and
operating costs varying significantly from estimates, delays in
obtaining or failures to obtain required governmental, environmental or
other project approvals, delays in the development of projects, changes
in exchange rates, fluctuations in commodity prices, inflation and
other factors. Forward-looking statements are subject to risks,
uncertainties and other factors that could cause actual results to
differ materially from expected results. There can be no assurance that
LIM will be successful in maintaining any agreement with any First
Nations groups who may assert aboriginal rights or may have a claim
which affects LIM's properties or may be impacted by the Schefferville
Projects. Shareholders and prospective investors should be aware that
these statements are subject to known and unknown risks, uncertainties
and other factors that could cause actual results to differ materially
from those suggested by the forward-looking statements. Shareholders
and prospective investors are cautioned not to place undue reliance on
forward-looking information. By its nature, forward-looking information
involves numerous assumptions, inherent risks and uncertainties, both
general and specific, that contribute to the possibility that the
predictions, forecasts, projections and various future events will not
occur. LIM undertakes no obligation to update publicly or otherwise
revise any forward-looking information whether as a result of new
information, future events or other such factors which affect this
information, except as required by law.
SOURCE: Labrador Iron Mines Holdings Limited
For further information:
please visit LIM's website at www.labradorironmines.ca or contact:
John F. Kearney
Chairman and Chief Executive Officer
Tel: (647) 728-4105
President and Chief Operating Officer
Tel: (647) 729-1287
Vice President, Investor Relations and Communications
Tel: (647) 725-0795