Iron ore mining not for the faint of heart—it’s a tough business

“The Mary River iron ore mine appears to be at an unfortunate and dangerous impasse at the moment”

A haul truck carries iron ore extracted from the Mary River mine on north Baffin Island. Under the phase-two expansion plan put forward by Baffinland Iron Mines Corp., the company would use a railway instead of haul trucks to carry ore to its port at Milne Inlet. (File photo)

By Gary Vivian
President, N.W.T. and Nunavut Chamber of Mines

The N.W.T. and Nunavut Chamber of Mines was created over 50 years ago, and our vision is to work for “a strong minerals industry that benefits the peoples of the North.”

From that perspective, we would like to offer the following thoughts and observations on the Mary River mining project.

The Mary River project is a game-changing opportunity for Nunavut and Nunavummiut. It provides an opportunity for longer term training, employment and sustained revenues for Inuit, Inuit associations and governments.

In 1962, two flying prospectors discovered the high quality but remote Mary River iron ore deposits on northern Baffin Island. Despite being found to be of better quality than most deposits being mined around the world, their remote location and the low iron ore prices in a very competitive marketplace dashed any hopes of ever mining them economically.

Thus, the iron ore deposits would remain as interesting oddities for another 50 years.

A quick Google of 30-year iron ore prices, for example, indexmundi.com, shows why Mary River had no chance of becoming a mine at historically flat and low prices.

However, with an almost 500 per cent jump in prices, briefly in 2008, and then again, from 2010 to 2013, market optimism suggested mining at Mary River might be possible.

With rising iron ore prices and a positive outlook, Baffinland Iron Mines made the decision in 2008 to unlock the Mary River iron ore opportunity.

They were joined by partner ArcelorMittal who, besides being the world’s biggest steel maker, operates an iron ore mine in remote northeastern Quebec, from which it ships ore on its own privately funded 420-kilometre railway to Port-Cartier, Canada’s largest private port. Their experience was a good fit to make Mary River mining work.

Unfortunately, by the end of 2015, iron ore prices had fallen to abysmal levels, similar to the previous 30 years. While prices have turned around, it’s been less than dramatic.

While Mary River is arguably the best iron ore deposit in the world, it is also in the worst location to be mined profitably, and all on its own without infrastructure support.

It needs a much better iron ore price, or much larger production levels, in order to achieve the economies of scale required to be sustainable in a highly competitive market and ultimately be profitable.

To be profitable, bigger is better in the iron ore business as bigger production reduces the costs per tonne of mining.

The Mont-Wright iron ore mine in Quebec produces around 25 million tonnes annually, and the Mount Tom Price mine in Australia produces about 28 million tonnes annually. The really big mines like Hamersley in Australia and Carajas in Brazil produce over 100 million tonnes per year.

Mary River, even as proposed, is not a big iron ore mine. A good comparison might be that, even with expanded production, the Mary River mine in the iron ore business is like an Arctic hare compared to a muskox.

Thus, it is no surprise that Mary River must be mined at higher production levels to be economic, certainly at these market prices.

It’s important that people understand that governments around the world—both public and Indigenous—invite mining companies to come and invest in order to do what those governments themselves cannot do: that is to convert rock into training, into jobs, into business opportunities and to generate revenues that can help benefit governments’ constituencies and beneficiaries.

When they invite companies in to invest, governments also expect those companies to take on even more responsibilities by bringing their required expertise, bringing in huge investment dollars, and also having the courage and capacity to take on what can be significant and unpredictable market risk.

Governments, in turn, can provide companies with regulatory process certainty, an able labour force, and in many cases, they assist by helping with supporting transportation and power infrastructure.

For example, in Alaska, government funding provided the port and road for the Red Dog mine, which is owned by the Inupiat and operated by Teck. The company pays off that road and port over time with annual payments.

The Mary River iron ore mine appears to be at an unfortunate and dangerous impasse at the moment. All parties—company, Inuit, and government—have much to lose.

Our members watching the process are expressing concern over potential effects of this impasse on future projects.

We would respectfully provide the regulators and all the parties, including the company, with the following recommendations, which are the usual recipes for mining success:

• Move with speed. Don’t let the impasse drag on. Markets (and iron ore markets especially) are very competitive and prices are fickle. Too many projects have failed due to process slowness while the markets changed. A good case in point is the Mackenzie Gas Project, which became uneconomic when new gas supply decimated the market. Unfortunately, the Aboriginal Pipeline Group, which was going to have equity participation in the project, was also the loser because of the snail-paced environmental assessment process.

• Work together quickly to resolve concerns. Mary River has been described as a multi-generational mining opportunity. The deposit currently being mined is just one of many that can sustain operations and benefits for many future generations. Build the landowner-company foundation with strength and trust, so that it lasts.

• Of course, be diligent to ensure the work being proposed is done with due care for the environment. The Nunavut Impact Review Board process is a good one to provide those assurances. Know too that companies and their investors understand and support environmental diligence.

• Continue to work to maximize socio-economic opportunities. Public and Inuit governments must continue to help the mine maximize economic opportunities by providing education and training of the workforce, building business capacity, and perhaps even looking if there is infrastructure support they might provide.

The outcomes of the phase-two assessment process are being closely watched by many current and potential Nunavut investors, who are looking for a successful resolution to bolster their confidence in the territory.

We urge the parties to sit down quickly and find creative solutions to address and resolve the current impasse and support responsible advancement of the mine. We very much believe that a solution exists.

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(15) Comments:

  1. Posted by miner 49er on

    This analysis by the mining industry tells us that the biggest steel maker in the world is the active partner in Mary River iron mine.
    =
    Guess what steel is made of. Hint, it starts with “iro”. And last week we heard that the business plan for Mary River calls for selling its iron at below market price.
    =
    Anyone care to guess why they are in a hurry to get that iron out of the ground and who they plan to sell it to “at less than market rates”?

    • Posted by James on

      They sell it below market price but they get a $20 a ton premium for very high quality which takes out the process of a ball plant.
      You comment this on every article. Do your research first.
      Also wouldn’t it be a good idea to sell below market price to get new customers to “ try out “ the product?

      • Posted by Try Out The Product on

        “Try out the product”

        Wasn’t that what the “bulk sample” was for, about 6 or 8 years ago?

    • Posted by Error on

      Actually ArcelorMittal is selling off its shares in Baffinland entirely

      • Posted by Sell off on

        That’s because know a quagmire when they see one.

    • Posted by NU Chamber of Mines on

      Thank you for the comments miner49er. Baffinland is majority owned by Nunavut Iron Ore, ArcelorMittal is a minority owner. Therefore, it would not stand to reason that Baffinland would be selling its products at any discount to anyone. What our editorial points out is that for a company to operate in such a remote region, with no infrastructure it requires robust commodity prices (in this care iron ore prices). Iron Ore mining is a competitive global business and Baffinland is but a small player, even if its expansion is approved. I hope this is helpful to you.

  2. Posted by Long term? on

    “longer term training, employment and sustained revenues for Inuit, Inuit associations and governments.”
    What kind of “long term” are we talking about? 20 years?
    By definition, mining industry is not a long term sustainable industry.
    Higher production level will just reduce the life of the mine without bringing true long term benefit to the local economy. It will make few non Canadian shareholders richer while destroying the local ecosystem. Then what do we leave the next generations?

    • Posted by Generational on

      They estimate right now.over 100 years of mining

      Don’t fool yourself. Baffinland WILL close doors if Phase 2 is not approved soon. Along with any future investement groups willing to take that risk.

      Do or die moment for hundreds of jobs.

      • Posted by 100 years? on

        100 years at what production rate?
        1 billion tonne of iron ore at 36 Mtpa is only about 28 years…

    • Posted by NU Chamber of Mines on

      Thank you for the comment Long term?.
      Yes, mining can sometimes be short term however, the Mary River property contains many high quality deposits that can be developed well into the future. Higher production rates at Mary River will allow the company to build a stable financial base to operate from. This will allow the Company to invest in new training and employment programs for those interested in long term careers at Mary River.
      I encourage you to read the Mary River Inuit Impact and Benefit Agreement which outlines many of the training initiatives that Baffinland is already engaged in. I will note this includes a commitment of $10 million toward the construction of a regional mine training centre in Pond Inlet. This is certainly a commitment that will have lasting long term benefits for Nunavummiut.
      Thanks again for your comment.

  3. Posted by Ted Pretty on

    This is a vital commodity in a very competitive marketplace. Investors/shareholders are watching their shares losing value while other mining companies are gaining market share. Let’s hope that a resolution is implemented before it’s too late. The economic impact for our country is very important.

  4. Posted by Gregory A Macdonald on

    Canada needs an all season port somewhere along the North West Passage and I suggest Port Elmsby on south coast Baffin Island as the most logical site. It is open to the sea all year round, has deep water which could accept the deepest draft ships and is on the shipping lanes!

  5. Posted by Mike gallant on

    Ive been aplying for 2 months now .im am super excited to be able to be given the chance to experience working up there.i have 20 years construction experience. Anyone able to help me get in would be much appreciated. Thanks

  6. Posted by Madhadder on

    I have been employed at the Mary River project since 2014. It is a very challenging environment to mine. Having said that we have made huge strides in progressing to phase 2. If phase 2 is not approved it would be devastating to Baffin Island and Nunavut as a whole. It has provided hundreds of Inuit people with training, jobs and good wages. I have had the pleasure to work with these northern people and I see how hard they work to achieve goals and advance in their fields.
    I see a lot of these comments And know that most are just going from hear-say. With the crisis in Alberta and a falling economy, we need to understand the importance of this project.
    Here are some facts about this project. There are 3 high quality deposits in the immediate area of deposit 1 (where they are mining now). Each of the deposits have a mining life of 30 years at 12 -15 million tons of ore per year. That’s 90 years at that production rate in those 3 deposits alone. Then there are 7 potential deposits being explored and considered.
    This deposit is the highest grade in the world to date, as for environmental impact, we don’t run a concentrator or pellet plant, we have the least impact on the environment then any other iron mine in the world. Not having to run such processing plants means as production increases the cost per ton drastically decreases. I believe that this is a very promising mine with the right support and working with the local communities, and employing the people will give a better way of life in the north.

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