Century Iron Mines Corporation (CVE:FER) (‘Century Iron’) is a Toronto based mineral exploration and development company with prominent iron ore assets in the provinces of Quebec and Newfoundland & Labrador, Canada. A Qualifying was completed on May 18, 2011 concurrently with financings totaling $115.5 million. The financings included a $60.9 million investment by Wuhan Iron & Steel (SHA:600005)(WISCO) for a 24.99% interest in Century Iron and a $12.2 million investment by MinMetals for a 5% interest. Both WISCO and MinMetals (HKG:1208) are ranked amongst the Forbes Global 500 and are among China’s largest mining companies.
Century Iron has secured strong strategic partnerships in perhaps the world’s most import iron ore market through WISCO and MinMetals. WISCO is committed to assist in 70% of future project Capex debt financing with about 60% of the remainder to be financed by either company. In addition, 70% of the mined product is be pre-sold: 60% goes to WISCO and MinMetals takes 10%.
Century Iron aims to become one of Canada’s largest iron ore producers- China is crucial to those plans. The Middle Kingdom accounted for 627 Mt of crude steel production in 2009, 44.3% of global steel production. Its insatiable appetite for steel drove 2010 iron ore spot prices to record levels. Continued economic growth and need for housing and infrastructure will further drive demand. Growing income and urbanization will help maintain a positive outlook in foreseeable future. Selling to China therefore, is a must for any business seeking international growth.
On Century Iron’s side is a management team with experience in mining and the capital markets. This is particular true of Director and Chief Executive Officer Sandy Chin, who has deep mining and trading experience. Needless to say, his strong China connections are an invaluable asset to this China-focused company.
Primary land holdings consist of the Duncan Lake property, Attikamagan, and Sunny Lake; all located in Quebec. Together, resources including measured, indicated, and inferred are estimated to be over 852 million tons.
The Duncan Lake Project is an advanced exploration stage property consisting of 125 mining claims over an area of about 5,500 hectares in the James Bay region of Quebec. Century Iron has a 51% interest in the resource with an option to increase the stake to 65% from Augyva by expending an additional $14 million within five years. The companies will operate the project together under a joint venture. All resource estimates so far have been for Duncan Lake, leaving considerable room for upside as the earlier stage projects begin to progress.
Duncan Lake had been previously explored in 1973, though current resource estimates are from 10,461 meter drilling program in 2008 to 2009 totaling 52 boreholes. An internal logistics study is ongoing as well as a new 8000 meter drilling program. The site will produce iron concentrate and pellets as the final product. Studies show final iron concentrate to have an excellent grade of 65% to 69% purity.
Located in the Labrador Trough region is the Attikamagen property, an early-stage project comprised of approximately 946 mining claims covering about 31,000 hectares in an area of major iron formation. The property has thin overburden with visible outcrops with preliminary drilling showing the thickness of iron formation to be greater than 100 meters. There are five deposits on a 60 km strike length. A 1,182 meter drilling program was completed in the Fall of 2010.
The company currently has the option to earn a 51% interest in the Champion property by making a $7.5 million in exploration expenditures by March 26, 2012. This can be increased to 56% with an additional $2.5 million spent by March 26, 2013 and further increased to a 60% interest by spending another $3.0 million by March 26, 2014. As with the Duncan Lake project, Century Iron and Champion Minerals will operate the Attikamagen project under a JV agreement.
Sunny Lake is comprised of two groups of claims, together covering approximately 25,850 hectares. It was acquired in 2009 by staking for potential iron mineralization; the property is in an area of major iron formation along strike with other major project. Century Iron is the 100% holder of this property. The area is in the boreal forest, rising 600 to 700 meters above sea level.
Century Iron is moving quickly to take advantage of its iron resources. Financial backing and technical know-how from its large Chinese strategic partners will enable the company to accomplish this with minimal contribution of its own funds. Only 13% of requirements for capex into production will come from Century Iron. Yet it maintains control of all its projects.
Because both WISCO and MinMetals will become buyers of any Century Iron products, they have a vested interest in the Company in addition to their equity investments. This is especially true of WISCO, which has a significant 25% stake as well as a JV partnership with Century Iron. WISCO has contributed $120 million to the joint venture in exchange for a 40% interest in Century Iron’s share of Duncan Lake, Attkkamagen, and Sunny Lake.
The success of Century Iron is tethered to the Chinese economy. If growth rates continue as predicted, the Company’s future looks bright. Of course, things can change quickly in tightly controlled economies, where production is dictated by government fiat. It is a risk for sure, but the reward is too great to pass up. China’s economy may face some hiccups, but the long-term trend looks to point up.Iron Ore