Iron ore miners look to Far North

Canada’s daunting, undeveloped Arctic iron ore deposits got a lot of attention in late September with two significant deals.

• Australian-listed Iron Ore Holdings, which has several iron ore exploration projects in Western Australia’s Pilbara region, unveiled a hostile 80¢-per-share cash offer for Baffinland Iron Mines and its Mary River iron ore project on Baffin Island in Nunavut.

The offer is a 43% premium to recent trading, and values Baffinland at $274 million, though Iron Ore Holdings already owns 20.4 million Baffinland shares, or 6% of the company.

Nestled in a starkly beautiful landscape, the Mary River iron ore deposits are a true geological wonder, in that they have essentially every characteristic of great ore: large tonnage, shallow, extremely high-grade, large grain sizes, and minimal impurities. These deposits have always garnered the appreciative eye of anyone specializing in iron ore deposits, even if they’ve sat undeveloped since their discovery in 1962 by Murray Watts and Ronald Sheardown.

A 2008 feasibility study pegs the reserves for deposit Nos. 1, 2 and 3 at 365 million tonnes grading 64.7% iron. Measured and indicated resources chip in another 52 million tonnes at 64.6% iron, while inferred material stands at 448 million tonnes of 65.5% iron. Pretty mind-blowing stuff, but the drawback, of course, has always been the project’s location, which makes building mines in the Labrador Trough look like a walk in the woods.

Baffinland directors are weighing the offer and say they will provide a recommendation to shareholders by Oct. 7. With such a prized asset now in play at a relatively small dollar sum, it’s guaranteed that large iron ore miners and end users around the world are now looking at Baffinland with fresh eyes and seriously pondering the pros and cons of launching a rival bid. Baffinland stock traders certainly think so: the stock is above $1 at presstime.

• On a more modest financial scale, John Gingerich’s Toronto-based junior Advanced Explorations has brought in Chinese state-owned XinXing Pipes Group to help it develop the Roche Bay iron ore project, situated on Melville Island in Nunavut.

XinXing and an affiliate will buy 19% of Advanced Exploration for 25¢ per share, amounting to $5.3 million, and XinXing has sketched out plans with Advanced to either further invest directly in the company or form a joint venture, all with the goal of completing a definitive feasibility study at Roche Bay. XinXing has also agreed to pull together up to $1 billion in financing towards mine development. (Advanced’s Tuktu project was left out of the deal.)

Roche Bay’s most-promising C zone hosts 357 million tonnes of inferred material composed of magnetite-rich banded iron formation.

Investors clearly like what they see these days, with Advanced Explorations’ shares having doubled since Labour Day.

• In a northern dream that’s turned sour the past year — the remote Voisey’s Bay nickel mine in Labrador — there is new hope that a 13-month-long strike could be settled, with mine owner Vale and United Steelworkers’ negotiators now working with the provincially appointed, independent mediator Bill Wells to hammer out a deal.

The resumed talks have briefly paused at presstime and are set to resume in early October. Vale has maintained significantly reduced mining levels at Voisey’s Bay this year using non-striking workers.

Vale’s not short on cash, having unveiled a new share buy-back program involving up to US$2 billion and an additional dividend of US$500 million, on top of the second tranche of its minimum dividend of US$1.25 billion.

Furthermore, Vale’s executive board has approved a proposal to pay an extraordinary dividend in January 2011 of US$1 billion, to be submitted for the full board of directors’ approval in January. Vale says this special dividend will come from funds generated by a sale of assets due to be completed by the end of 2010.

• At a gala ceremony at the Lincoln Center in New York City, Northern Miner staff writer Ian Bickis picked up an Emmy award in the “Outstanding Investigative Journalism in a News Magazine” category for co-producing the TV documentary Ghana: Digital Dumping Ground, which aired on PBS Frontline.

Produced by students at the University of British Columbia’s Graduate School of Journalism, the documentary beat out entries from 60 Minutes, ABC Nightline and 48 Hours Mystery. It can be viewed on the PBS Frontline website at http://www.pbs.org/frontlineworld/stories/ghana804/

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