Iron prices falling, construction plans await financing

By JANE GEORGE

The construction of a huge iron mine northeast of Greenland’s capital, Nuuk, looks more uncertain than before.

London Mining planned to put an access road, airstrip and port infrastructure for the mine in place by September 2012, followed by construction of the plant and mine by May 2013, with a with a production start-up in early 2015.

Now, its website only says the company hopes to get the permitting process complete by 2013 and that plans for construction are on hold.

London Mining’s chief executive officer, Graeme Hossie, visited Greenland last week to meet new premier Aleqa Hammond and other officials in the recently-elected government.

In an interview with Greenland’s Sermitsiaq AG newspaper, Hossie said he could no longer predict when the construction of Isua would go ahead.

After meetings with Hammond and other government officials, Hossie said he left convinced that the new government is keen about proceeding with the Isua project.

“When we hopefully soon have a permit, we can start to raise the necessary capital. Only when it is in place, we can begin to build,” Hossie said.

London Mining needs $2.35 billion for the project.

Unlike Baffinland Iron Mines Corp., which has decided to build its Mary River iron mine project in stages, London Mining wants to build the entire mine, right from the start.

Hossie said “you can not start small and expand gradually as you begin to make money, but you will build the vast facility immediately before you make money.”

But Isua should be able to attract foreign investors, Hossie said.

That’s because the deposit contains high-grade iron ore, the economics of the project are good, and there is political stability in Greenland.

The disadvantage is that iron prices are falling, it’s very expensive to bring Isua into production, and the project is in competition with other iron mine projects in the world, he said.

Hossie said China, which imports more than half of world’s iron production and ranks as the largest global consumer of iron concentrate, is interested in the Isua project.

Hossie said he expects money from several places, banks and other financial institutions.

The mine project’s workforce would come from all over the world, depending on the expertise that is needed, he said.

The majority of London Mining’s shares is owned by U.K. investors.

No minority shareholder owns more than 10 per cent of the company, and none is Chinese, Hossie told Sermitsiaq.

Hossie said London Mining would work to ensure as many jobs for Greenland as possible during the mine’s construction and operation.

The company is also prepared to offer training programs for local workers and commit to Greenlandic subcontractors carrying out a lot of the work.

“For us, it is important that both the community and investors will benefit from the project and that there is a win-win situation,” he said.

Meanwhile, Hammond’s new coalition government wants to see mining companies funnelling more money into Greenland through royalties.

Hossie said the success of Isua depends on its economics — “the more expensive it is, the harder it is to raise the necessary investors.”

Plans call for the Isua mine to ship out 15 million tonnes of iron ore concentrate a year over 15 years — three million tonnes a year less than Baffinland initially planned to ship out every year from Mary River over the project’s former 21-year lifespan.

Throughout the year, giant 250,000-tonne tankers would bring Isua’s iron pellets to buyers around the world.

The Inuit Circumpolar Council in Greenland said last year that Greenland needed more time before a project like that moved ahead.

ICC also criticized the lack the debate over mining development and called for more consultation on the various large-scale projects, like Isua, in Greenland.