Baffinland Sees Interest in Mary River Iron Ore from European Customers


Aerial view of Baffinland Iron Mines’ Mary River project camp in Nunavut, Canada.
The company expects to develop the property into an 18-million-mt/y iron ore mine.
Baffinland Iron Mines Corp. on December 14, 2007, announced the signing of a letter of intent for future sale of up to 3 million mt/y of iron ore to ThyssenKrupp Steel AG, representing 15%–20% of the potential initial output of its Mary River project currently under early development on Baffin Island, Nunavut Territory, Canada. Two weeks later, on December 27, the company also announced signing of another letter of intent for sale of up to 1.2 million mt/y to voestalpine Rohstoffbeschaffungs GmbH. The company noted that the letters of intent are an expression of interest only, and any binding contract of purchase and sale will be subject to a production decision by Baffinland and future negotiations with prospective buyers.

The Toronto, Ontario-based company said it is initially targeting a production rate of 18 million mt/y in connection with a Definitive Feasibility Study expected to be delivered in February 2008 by Aker Kvaerner E&C, a division of Aker Kvaerner Canada Inc. In late November 2007, Baffinland revised plans for the study, raising the projected annual production rate from an initial 12.6 million mt/y due to exploration success and strength in the global iron ore market. At that time, the planned increase in the targeted production rate, as well as a decision to make Steensby Inlet on the south coast of Baffin Island the preferred port site, along with the general increase in costs since the original May 2006 scoping study, prompted the company to predict that a revised estimate of initial capital costs for the project would be “significantly higher.”

Baffinland said it has focused on the European market for the sales of its Mary River project lump and fine iron ore, and is targeting 16 million mt of product to be placed within the European market on an annual basis with plans to sell the remaining 2 million mt into other markets. In connection with its C$5.5-million investment in Baffinland in 2005, Mitsubishi Corp. was granted marketing rights for up to one 1 million mt/y of iron ore into the Asian market for the first ten years of commercial production.

Under the letters of intent announced, ThyssenKrupp would purchase on a longterm basis up to 2 million mt/y of lump and 1 million mt/y of fine ore per year commencing in 2014. Voestalpine would purchase up to 1 million mt/y of lump and 200,000 mt/y of fine iron ore per year over a 15-year period, to start in 2014.

The two companies are among several steel companies that Baffinland said it is currently negotiating sales contracts with for its planned bulk sample program. Approximately 250,000 mt is proposed to be mined over the current winter and trucked to Milne Inlet before being transported to Europe as feed for productionscale trials in various blast furnaces beginning in the third quarter of 2008. The results of this program, according to the company, will form an important final geological and metallurgical test prior to the establishment of contractual sales and purchase agreements with steel producers.

Baffinland executives said analytical and metallurgical testwork on the Mary River iron ore deposits is being completed by SGS Lakefield in Canada and Studien Gesellschaft fur Eisenerz-Aufbereitung in Germany.

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