Champion Iron Limited (ASX: CIA, TSX: CIA) - An emerging Iron Ore company.

Champion Iron Limited (ASX: CIA, TSX: CIA) -  An emerging Iron Ore company.

Champion Iron Limited (ASX: CIA, TSX: CIA) is an iron ore exploration and development company with significant projects in the southern Labrador Trough, Canada’s largest iron ore-producing region.

Champion Iron, through its wholly-owned subsidiary Champion Iron Mines Limited, is developing eight iron-rich projects in a 707 km2 area. The projects are all strategically located close to the electrical grid, all-season roads and railway lines. This infrastructure connects the projects to a terminal located in water that does not freeze, on the north shore of the Gulf of St. Lawrence.

 

 

The loading of the MV Magnus Oldendorff (pictured) at the Pointe-Noire terminal completes a historic milestone for the Company and the Port of Sept-Îles as it represents the first vessel loading at the brand new terminal and also marks the inauguration of the new conveyor linking the stockyard to the new terminal. (source: Champion Iron)

 

The fascinating story with Champion iron is their vast resource.  As you can see in the diagram below, it has several billion tonnes but with what Australians would consider low grade.  However, they appear to be able to beneficiate the grades to over the 60% mark and are producing very impressive tonnages for sale.  I have very little knowledge of the iron ore industry in this part of the world, but I am impressed.  If they can beneficiate all these tonnes, this could be a significant play for investors.

An associate had suggested I write about Champion Iron and on first look, I will admit that I was not so keen.  Upon more detail reading, I was curious about the size of their resource and the share price journey.  The share price has had a great ride and as you will agree after reading this article, technically,  I have a feeling, this journey may have only started.

 

Projects

Champion Iron project overview plan. (source: Champion Iron)

As I mentioned the resources shown in the diagram above is super impressive.  With the recent iron ore pricing taking a run this has got to be a company to look out for in any portfolio.  The Australian magnetite projects differ significantly from the metasomatic varieties in the tropical areas where magnetite “pods” can grade up to 60% plus.  However, these Canadian varieties are lower in grade, but I believe they occur as weathered varieties which I assume will help in the economic department during the beneficiating process.  I think the structure of the magnetite must allow a more natural beneficiation process.

 

Capital Structure

(Data as of November 7, 2018)

Market Capitalisation: 682M

Top 20 Shareholders: 51.9% as of 2018

Share Outstanding * | 419 319 747

Company stock options | 11 050 000

Compensation options | 21 000 000

 

Champion is on the ASX and the TSX.  It has been an exciting share price journey.  The company was a merger of Champion Iron (TSX) and Mamba Minerals Limited (ASX).  The merger was initiated in the last quarter of 2012 and completed in the first quarter of 2013.

Merger Details

• Announced in December Quarter 2012
• The merger of Mamba Minerals Limited and Champion Iron Mines (TSX: CIA)
• Champion shareholders to receive 11 Mamba shares for every 15 shares of Champion shares.
• Raised AUD$10 million with the merger.

 

Champion Iron Limited 10 year chart as of 25th February 2019. (Commsec)

The recent upsurge in pricing appears to have taken hold after the acquisition of the Bloom Lake project in 2016.  The addition included related rail assets and a capital raising of C$30 million at C$0.16.  The transaction brought in two private equity firms invested in the placement,

• WC Strategic Opportunity( a Wynnchurch Capital LLC portfolio company)
• Resource Capital Fund

These two funds are big players, and this would have been a great sign of support from the “smart money” and the “big money sector”.  It would be a boast of confidence to the general market.  The old saying” safety in numbers” or rather ” Don’t get me angry, my big brother behind me will fight you” :-).

Labrador Trough – What is the deal?

(source: Canada Natural Resource)

The Labrador Trough is something like the Pilbara Region of Western Australia. A mass of super-rich mineralisation with a lot of iron ore.  It has been mined since 1954 and currently, production is at a rate of over 30 Mt per year. The region has several billion tonnes of ore outlined in fine-grained, cherty magnetite iron formation.

 

A world-class region. (source Canada Natural Resource)

The iron deposits occur within an extensive Proterozoic geosyncline.  Several facies of iron formation within the Sokoman Formation reflect variations in chemical composition and depositional conditions. This band extends for about 1100 km southeast of Ungava Bay through both Quebec and Labrador. Further south, it turns southwest past the Wabush and Mont-Wright areas to within 300 km of the St. Lawrence River.

The iron formation is essentially folded and faulted along most of its length. The degree of metamorphism is variable, ranging from intense in the northern and southern portions to greenschist facies in the central part.

 

Labrador Trough is located in a modern, politically stable, mining-friendly jurisdiction.  It covers the  Canadian provinces of
NEWFOUNDLAND AND LABRADOR and QUEBEC. (source: Canada Natural Resource)

 

Sokoman Formation

(source: Newfoundland and Labrador Natural Resources)

The Sokoman Formation consists of a 30–170-m-thick sequence of cherty iron-rich sediments and is continuous for 250 km from Labrador City to Schefferville.  It also continues into Québec in both directions and is one of the most extensive iron formations known on Earth.

The lower part of the Sokoman Formation consists mainly of oxide-rich beds which are the most important economically, with iron-rich layers and lenses commonly containing more than 50% hematite and magnetite.

 

Iron Ore Types

(source: Newfoundland and Labrador Natural Resources)

Generally,  the majority of iron ore production, including that of the Labrador Trough, comes from iron-rich cherty sedimentary rocks and their metamorphic or supergene derivates.

All iron-ore deposits in the Labrador Trough formed as these sediments and are eventually altered and metamorphosed in some form and affect grade, mineralogy and grain size, which impacts the economic viability of iron-ore deposits. In addition, faulting and folding led to a repetition of sequences in many areas, which significantly increases the surface extent and mineable thicknesses of the iron-ore deposits.

What the above paragraph means is that all the geological “cooking” creates a variety of ore types with differing grades.

Three main types of iron-ore deposits are as follows

Taconites are found throughout the Labrador Trough. These are weakly metamorphosed sedimentary iron formations (15 to 30% Fe), with magnetite as the dominant iron-ore mineral. None are presently mined in the Labrador Trough.

Metataconites are present in the southern part of the Labrador Trough, especially in the Labrador City– Wabush area. They have been moderate to strongly metamorphosed, and the grade of these iron- ore deposits is generally higher than unmetamorphosed taconites (up to 41% Fe). They are easily beneficiated into iron concentrates (approximately 65% Fe), which are ideal for pellet production.

 

Map showing the distribution of metataconite deposits in the Labrador City–Wabush area (adapted from McVeigh et al., 1980). IOC=Iron Ore Company of Canada

 

Direct Shipping Ores (DSO) are secondary iron ores containing >50% Fe that formed from the enrichment of primary taconites. Such ores require minimal beneficiation and have very low mining costs. Two main types of DSO deposits occur in the Labrador Trough.

Soft, friable, fine-grained, variably porous deposits occur mostly in the Schefferville District and may be related to deep groundwater circulation and supergene enrichment associated with Mesozoic (Cretaceous) tropical climates. Specifically, silica and carbonate were leached from the ores, leaving a high residual iron content.

Hard DSO deposits occur in several locations, including Sawyer Lake and Astray Lake, southeast of Schefferville. These are dominated by blue hematite and martite, and, typically, are denser than the soft, friable ores, with no evidence of an increase in porosity.

The origin of these deposits is unknown, but they may be related to early hydrothermal processes. In addition, some DSO deposits have characteristics of both the soft and hard DSO deposits (e.g., the Houston deposits close to Schefferville).

 

Map showing the distribution of DSO and taconite deposits in the Schefferville area (adapted from McVeigh et al., 1980). LIM=Labrador Iron Mines.

 

 

What could this mean for The Future?

According to my research and the information from Champion Iron,  the iron in the UIF, MIF and LIF is for the most part in its oxide form, mainly as specular hematite and specularite in its coarse-grained form and to a lesser extent, like magnetite, with some of the iron in iron silicates.

Recent research on iron formations in Australia and Brazil has emphasised the importance of structurally controlled hypogene alteration and upgrading of iron formations before supergene alteration. Such models imply that not all high-grade iron ores are linked to surface weathering and leaching processes, which in turn suggests that some ore bodies of this type may lack surface expression. In Australia, there are notable examples of high-grade zones that sit beneath unaltered low-grade primary iron formations. (source: Newfoundland and Labrador Natural Resources)

The Koolyanobbing iron ore mine (Southern Cross, Western Australia) has a distinctive ore.  It is not your typical BIF types.  When you consider that, understanding the ores at the Labrador Trough could be the way to unravel deposits that have been ignored.  The mineral exploration industry has a bad habit of following historical methods, and the lack of funding means new techniques and new thoughts are expensive and dangerous.

 

Conclusion

Recently, I learned that several Chinese companies are searching for lower grade ore for beneficiation.  Chinese steel mills prefer magnetite to hematite, and they can bring grades over 10%.  Now that is very impressive. In steel mill language, magnetite is the preferred mineral.  One report mentioned that up to 15 billion dollars were spent in the Labrador Trough as investments.  This kind of investments is long term looking people and the Chinese are very good with this kind of thinking.

Helping these miners in the Labrador Trough is the Quebec government.  The Quebec government had set aside the C$20 million from its Northern Plan Fund to contribute to a study to determine the optimum rail option for iron ore miners in the Labrador Trough region to reach ports to service international markets competitively.

What the Quebec government have done is very smart with the allocation of funding to help build infrastructure and encourage studies to improve the delivery of products from the Labrador Trough. In the 1960s the Western Australian government did the same for the Pilbara region.  This government spending allowed all this wealth created the iron-ore industry as we know it. Otherwise, it will still be in the ground.  The booming iron ore industry in Western Australia is all in part due to the foresight of previous government spending and policies.

Like all commodities, ports are an essential part of the equation.  Currently, as I am lead to believe the ports handle Cape-Size and Chinamax vessels.  These port all the mineral wealth to be realised by allowing labrador miners a great passage to markets.

 

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Samso is primarily a consulting company that delivers digital information to the market in terms of creating organic content.
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Samso has nearly 30 years of experience in developing business ideas and concepts in the Australasian region. Samso has worked primarily in the mineral resources industry, capital markets and corporate finance. Noel Ong is the founder of SAMSO.

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