More iron ore competition as Canada's Labrador is unleashed by:...

More iron ore competition as Canada's Labrador is unleashed

by: Robin Bromby
From:The Australian
January 21, 201312:00AM


FIRST it was West Africa. Now the Labrador Trough is looming as a big iron ore competitor for Australia.

But this huge geological formation, with 78 billion tonnes of defined resources, has something Australian juniors lack: access to infrastructure. While most of the Pilbara transport infrastructure is owned by the three big players, common carrier railways either exist in this part of Canada or are to be built as part of a $US80 billion ($76bn) government investment. Port expansions are under way on a multi-user basis.

And there is cheap hydro-electricity from the Churchill Falls plant, which now supplies Quebec and Labrador. It has total generating capacity of a massive 5428 megawatts.

And big money. Already Wuhan Iron & Steel, Mitsubishi, South Korea's Posco, India's Tata Steel, China Steel and Hebei Iron & Steel are partnering projects.

Apart from the sheer flood of money available, what is significant is that it is mostly from Asia despite the obvious transport cost from the northern Atlantic seaboard of Canada.

Adam Lucas at London's Ocean Equities says in a report that the Labrador Trough -- which extends through northeastern Quebec into Labrador -- is flying under the radar with less than 4 per cent of the world's seaborne iron ore trade.

But all this is about to change and the trough will become a major force in the world iron ore sector.

Lucas points out the transport constraints which face the junior iron ore players in the Pilbara. In West Africa, many iron ore companies also face massive investments in rail and ports before they can begin exporting iron ore.

Existing iron ore production in the Labrador Trough goes out through two ports on the St Laurence Seaway.

A common carrier rail line runs from one of those ports, Sept-Iles, to Labrador City. Several other lines are being planned.

There's one Australian player there. Mamba Minerals (MAB) has one of the more early-stage projects with Snelgrove Lake, an iron formation with a strike length of 33km and about 200m wide. Lucas says the company will begin drilling on February 7 and will spend $C6.5 million ($6.25m) this year.

"The initial drill program will provide the market with an indication of the potential size of the deposit, which we believe is likely to be significant," he adds.

Mamba recently placed $1.35m in new shares with European investors, with another $787,500 worth sold to Michael O'Keeffe . You may remember him as the driver behind Riversdale Mining, which was sold to Rio Tinto (RIO) for $4bn at $16.50 a share, the very same Mozambique coal acquisition which came back last week to haunt Tom Albanese.

We note Mamba had a 19.7 per cent jump on Wednesday on no news. It closed on Friday at 37.5c.

In other news from Canada during the week, Atrum Coal (ATU) announced a 113 per cent increase in resource from its Groundhog anthracite coal project in British Columbia. It also has transport options; an upgrade to a rail corridor running off a main line will provide direct access to the Port of Prince Rupert.

The news gave the stock a healthy 50 per cent kick on Wednesday, followed by further gains to close the week at 32.5c.

http://www.theaustralian.com.au/business/opinion/more-iron-ore-competition-as-canadas-labrador-is-unleashed/story-fnciihm9-1226557740354