Labrador's Kami iron ore project getting $245M from Japanese investors

Two Japanese companies have struck a deal with Champion Iron Ore that will inject $245 million into a proposed iron ore mining project in western Labrador, bringing the project one step closer to reality, says a company executive.

Japanese trading firm Sojitz Corporation and Nippon Steel, the world's fourth largest steel maker, are buying a 49-per-cent stake in the Kami Project.

"This is a pretty big milestone for Champion Iron, but also for people in Labrador West," said Michael Marcotte, senior vice-president, corporate development and capital markets for Australia-based Champion Iron Ore.

The deal was initially announced in late December.

Marcotte said the high-grade iron ore project near Wabush will release fewer emissions because it won't require coal to manufacture steel, which will help the industry reach its decarbonization goals.

"This transaction that we've announced with two large global partners enables us to continue evaluating the project," he said, adding that work will include additional studies on the project's economic feasibility as well as environmental impacts and community engagement.

He said the project will bring big benefits to the region.

Global interest

The Kami Project hasn't passed its feasibility study yet, and Marcotte estimates they'll need a $4 billion investment to get started.

Marcotte said the company needs "strong" partners to get the mine up and running, and Champion was looking for companies who are interested in decarbonizing the steel industry.

Champion Iron Ore already has business ties to Nippon Steel through its Bloom Lake mine in Quebec.

"The required investments here are very sizeable for a company like us to undertake," he said. 

"We have a very good, proven track record at Bloom Lake but these $4 billion in investments require sizeable partners."

Even with the money from these two Japanese companies, he said Champion will still be in charge of the project.

"What these partners are really after is the product. So they currently buy some of our product, but they do see that product being quite scarce in the economy of tomorrow," said Marcotte.

"And this is why, financially, they're looking to support the project, but we're remaining the operator."

Rare product

Marcotte said there is global interest in securing high-grade iron ore at a time when governments and businesses are trying to decarbonize.

"You've seen many governments around the globe, including here in Canada — but also in Germany, across Europe and Japan, across Asia — subsidizing a lot of these steelmakers to remove coal in their process," he said.

Only about five per cent of iron ore in the world is rated as high-quality, making the resource in the Labrador trough geological belt rare, said Marcotte, adding it can also be found in Brazil, Ukraine and Russia.

He said they're also looking for partners who can help finance the mine and then engage with the community and look at other economic factors to determine whether it's the right time to launch the project.

Watching U.S. carefully

Marcotte said having two partners in Japan is also a bonus during a time of political uncertainty, as U.S. president-elect Donald Trump has repeatedly said he will impose 25 per cent tariffs on Canadian goods coming into the country.

"It's definitely something that we're watching quite carefully. Now, having partners with Japan isolates us, in a way, from what's happening in the U.S," said Marcotte.

He added Champion Iron Ore doesn't currently sell directly to the U.S. market, but it might in the future.

Marcotte did not address outgoing U.S. president Joe Biden blocking Nippon Steel's proposal to acquire U.S. Steel, citing it as a national security risk.

Download our free CBC News app to sign up for push alerts for CBC Newfoundland and Labrador. Sign up for our daily headlines newsletter here. Click here to visit our landing page.