Shuttered Bloom Lake mine may have new owner

The shuttered iron ore mine at Bloom Lake in northeastern Quebec may soon have new buyer, with Quebec Iron Ore Inc., close to inking a deal for the mine and rail assets.

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The company, which is a subsidiary of Champion Iron Ltd., issued a news release Friday saying it has reached a purchase agreement with affiliates of U.S. based Cliffs Natural Resources Inc. for the mine and railway, and mineral claims owned by the Quinto Mining Corp., for $10.5 million.

Champion will also assume responsibility for environmental liabilities assessed at nearly $42 million by the Quebec government.

Close proximity to Labrador

The site is located near the border with western Labrador, and was a source of significant economic spinoffs when the mine was in operation.

Cliffs closed the mine last January amid a downturn in iron ore prices and sought creditor protection after pouring vast amounts of money into the operation.

It employed some 600 people.

Cliffs also closed the long-running Wabush Mines in western Labrador, displacing another 400 workers and delivering a devastating blow to the region's economy.

Cliffs has been restructuring its Canadian operations under the Companies' Creditors Arrangement Act.

There have been whispers of a potential buyer for Wabush Mines as well, but so far no deal has been reached with MFC Industrial, a potential suitor.

'Exceptional opportunity'

Meanwhile, the executive chairman and CEO of Champion, Michael O'Keefe, said in a statement that Bloom Lake is an "exceptional opportunity" for the company.

"Champion has reviewed the Bloom Lake assets and has gained significant insight and confidence in the project from both a technical and financial perspective," O'Keefe said.

"The tough market conditions have meant that we have been able to negotiate a competitive and successful bid. This in turn allows us to deliver the prospect of economic growth and employment for the region, and strong upside potential for our shareholders and other stakeholders."

The company also has confidence that any production at Bloom Lake will have a market.

"Additionally, discussions with strategic partners, funds, government agencies and private investors are at an advanced stage for the company to obtain additional financing in order to secure up to 24 months of care and maintenance should low iron ore prices prevail during this period."

'Hibernation' an option until markets pick up

The company believes Bloom Lake can become one of the lowest capital cost mines in the world.

The plan includes boosting yearly production of high quality ore from six to seven million tonnes, and achieving "significant cost reductions."

But with ore prices at a 10-year low, is it really possible to turn a profit at Bloom Lake?

O'Keefe said an extensive amount of work has been done to prepare the site for closure, making Bloom Lake a good candidate for "hibernation" until markets recover.

Any deal for the purchase of Bloom Lake must be approved by the Québec Superior Court, and could be finalized by the first quarter of 2016.