'Proof is in the pudding' and the iron ore is there, says Tacora on Wabush Mines
First employees getting hired, company will be in Lab West to prep for business by next summer
The company that purchased the Scully Mine in Wabush says it has a five-year deal with the world's largest iron ore trader and hopes to have the operation back up and running by this time next year.
We have a lot of work to do but it's all very exciting and we're ready to do it.- Tacora CEO Matt Lehtinen
Tacora Resources is currently going through the Companies' Creditors Agreement Act (CCAA) purchase process for the site, since the mine has been locked in creditor protection since being shuttered by Cliffs Natural Resources in 2014.
Matt Lehtinen, Tacora CEO and president, says his company has been looking at Wabush Mines since January 2016 and working hard these past eight months to buy and reopen the operation.
"I really thought that we had found a diamond in the rough," he said. "We saw a lot of potential."
Tacora first visited the site in 2016 and did some testing to determine the viability of the iron ore content left in the ground.
Lehtinen said what they found gave them enough hope to make an offer, as well as sign a five-year deal with Cargill, an international metals supply chain.
But Tacora wasn't the only company interested in purchasing Wabush Mines; Alderon had a $1-million offer on the table to buy the mine and use it as a tailings waste site, saying the mine was at the end of its life and there wasn't enough viable iron ore worth mining.
That's something Lehtinen said he disagrees with.
It's going to be a substantial creation of new jobs for Labrador West.- Matt Lehtinen
"I don't know what analysis they have done, so I can't really speak for them, but what I can tell you is based on our internal studies and the diligence that we've done … put it this way, there are reserves there," he told CBC's Labrador Morning.
"We would not have done this deal and put this capital at risk if that was not the case. And the proof is in the pudding, so to speak, with the five-year [deal] that we have from a very sophisticated, successful company that happens to be the largest trader of iron ore globally."
Raising more capital
Before the operation can again start mining for iron ore, Tacora needs to complete a feasibility study that qualifies under national regulations, which he expects will wrap up by the end of 2017.
Then it's on to securing additional funding and financing.
Tacora's partner and co-investor is Proterra Investment, an international commodities and private equities firm with a mining-specific operation, which Lehtinen said has a "shared vision for Wabush."
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"Our plan would be to raise some additional capital once our feasibility study is done in order to restart, but vis-à-vis Proterra and the other stakeholders that we have, we're very confident and excited for that to happen."
Tacora has already signed a collective agreement with the United Steelworkers Union, and Lehtinen said they've hired their first employees for security and environment.
They expect to employ at least 300 people directly at the mine, "with probably many more supporting the operation" through indirect employment both in Labrador West and with the transportation of iron ore.
"It's going to be a substantial creation of new jobs for Labrador West and of course there's always a significant spinoff factor that helps the region in general with supporting industries and jobs," said Lehtinen.
"We'll be spending time in Labrador West with our team on the ground there and working with local suppliers and vendors."
Previous bankruptcy protection
When asked about previous mining venture, an iron ore company called Magnetation which went into bankruptcy protection back in 2015, Lehtinen said he's not worried about the same thing happening at Wabush.
"We were just unfortunate to get caught in the 2014 downdraft of the iron ore prices. And at that time, in 2014, no one predicted that iron ore would ever go below $90, and the capital that we raised and the business that we built at Magnetation was based on those assumptions," he said.
"That's not the case here. We designed this business model around much lower iron ore prices … and between the way the business plan is designed and the positive attributes that I'm sure will get reflected once the feasibility study is done, we're very confident that this project will be very successful."
If the feasibility study goes according to plan, Lehtinen is optimistic that the mine will be producing iron ore by summer 2018.
"We have a lot of work to do but it's all very exciting and we're ready to do it."
With files from Bailey White and Labrador Morning