Consolidated Thompson hits key milestone at Bloom Lake

In late July Consolidated Thompson Iron Mines or CLM (CLM-T) shipped the first iron ore concentrate to its Chinese partner WISCO from the company’s Bloom Lake mine on the south end of the Labrador Trough, an area spanning northeastern Quebec and western Labrador.

The shipment of 165,000 tonnes of iron ore concentrate from the port of Sept-Îles in eastern Quebec to China’s third-largest steel producer, WISCO, marked one of several milestones for the company this year. Others include the commissioning of the Lake Bloom mine and a decision by the board of directors to try to double production at the mine from 8 million tonnes of concentrate a year by the end of 2010 to 16 million tonnes by the end of 2012, at a cost of US$525 million.

A feasibility study, released in May, indicated that Bloom Lake could produce an additional 8 million tonnes of 66.5% concentrate a year starting in the third quarter of 2012. The study also outlined a payback of 1.9 years, total life-of-mine operating costs of US$31.08 per tonne of concentrate, a pretax internal rate of return of 50.7% (using US$1.2 per iron unit equivalent to revenue of US$80 per tonne of concentrate), and a pretax net present value at a 10% discount rate of US$1.94 billion.

CLM has ordered a second autogenous mill and believes funding over the two-year building period will not be a concern given that WISCO has “already indicated its interest in acquiring additional offtake from the expansion project.” WISCO holds 19.9% of CLM’s outstanding shares and has a 25% stake in the Bloom Lake project specifically.

Bloom Lake is an open-pit mine about 400 km north of Sept-Îles and 10 km north of the Mount- Wright iron ore operation of ArcelorMittal Mines Canada, a wholly owned subsidiary of steel giant ArcelorMittal (MT-N).

The first shipment to WISCO “marks the final milestone in a short three-year period,” management stated in a July 27 press release, “during which CLM put in place the key building blocks — mine site preparation and infrastructure, rail car and heavy equipment leasing, equity and debt financing, offtake agreements with Asian customers, construction and servicing of a 31-km railway link and a modern lay-down area for iron ore handling in the port of Sept-Îles.”

The start-up of mining operations at Lake Bloom in the three months ended June 30, coincided with a second quarter net loss of $28.25 million or 12¢ per share. At the end of the quarter, the company had $60.1 million in cash.

In Toronto, CLM was recently trading at $7.96. Over the last year, the company has a trading range of $4.14-$10.32, and about 232.1 million shares outstanding.