Raising the bar for iron ore development
A lot can change in a year, particularly for companies exploring resources in geographically rich zones. The last time CBJ spoke with Adriana Resources, a TSXV-listed Canadian company, the team was deeply focused on a Brazilian iron ore project. In 2007, Brazore Ltda., an Adriana Resources subsidiary, had purchased a strategic development site to construct an iron ore port facility. Preliminary environmental studies were completed last year and the technical instruction (IT) leading to the environmental permit was received in September.. The right people were, as they say, in the right places to explore the potential in Brazil. However, when we spoke with Allen J. Palmiere, he explained that it is on Adriana’s home soil that the company intends to focus their efforts in the immediate future.
Previously, Adriana’s resources were directed to the Brazilian properties, which we learned from Palmiere has since changed (Palmiere has been in his role since the summer of 2009, a little after our previous article). “When I joined Adriana, the company was challenged for cash and focused primarily on the Brazilian port project, and there was little emphasis placed on the Quebec property,” he recalls. “When I took on my role, I took the view that the property that has the most potential is our Quebec property—not that Brazil doesn’t have potential but the Quebec project is one of the largest undeveloped iron ore resources in the world,” he explains.
And so, the focus for Adriana changed, as did their home base. The company now operates from Toronto, having moved offices from across the country in Vancouver.
A world-class deposit
Adriana’s Quebec property (where the company is placing all its current efforts), the Lac Otelnuk Iron project is in the Labrador Trough in Nunavik, Quebec. Adriana is working towards developing strategic partnerships in order to move towards production. Research done by Magnus Erickson of Raw Materials Group in Stockholm, reported that the mineral resource identified in the South Zone of Lac Otelnuk ranks it in the top 15 of all known world-class iron deposits.
In a recent statement, the company announced: “Adriana is pleased to say that the South Zone of Lac Otelnuk can now be considered a world-class iron deposit, and the new resource estimate has exceeded our expectations, and is a significant milestone for the company. The significance of this resource estimate will bring global attention to the project and also to Nunavik, Québec, Canada as a major iron ore player.”
The company has now drilled off about a third of the deposit, and according to Palmiere they know that the “deposit is a multiple of what has been drilled so far.”
Not only is the company in a much better position than they were two years ago, they are still considered a junior—but operating on a very major deposit. “It is very seldom that a junior company has the opportunity to work with a world-class resource,” Palmiere comments.
Building up the necessary means and support
Adriana has not seen an entirely easy run, however. Logistically, iron ore can be difficult to attain and process, and Palmiere says that “getting rail infrastructure is going to be very important.” The company now must work with provincial partners and get the infrastructure in place in order to maximize the success of the property. “The bigger you have your production the more economic the infrastructure is going to be,” he says. “We’re projecting that this project will cost in excess of $7 billion. For a junior company to raise $7 billion on the capital markets would be virtually impossible,” hence, bringing on a strategic partner—this is the next step for Adriana.
“Conversations still continue, and we’re very optimistic,” Palmiere says.
Dealing with community relations activities is another aspect to working in the area that Adriana is focusing on. In the Nunavik territory, the James Bay Accord grants rights to Inuit in perpetuity—and although the Inuit don’t ultimately approve the mine they do, according to Palmiere, have an involvement with the environmental permitting process. “They are very supportive,” Palmiere says.
Having a firm infrastructure plan bodes well for Adriana and all provincial and local community partners. The Inuit, according to Palmiere, have a shared goal of infrastructure for rail—Palmiere hopes that eventually there will be rail all the way to Kuujjuaq (Nunavik), joining South and North Quebec.
Through Plan Nord, a development project for Quebec as defined by the provincial government, the province will see increased prosperity in Quebec and stimulated economic growth. The plan will see improved infrastructure to facilitate access to the North, more employment opportunities and the development of the housing market in Nunavik.
Adriana’s focus on the Lac Otelnuk project has not only come at a great time for the company (demand is steadily increasing for iron resources), but also for the Northern Quebec communities who will see that a need and a means has been determined for improved infrastructure. “The Inuit people want rail and roads, and power—but the issue in the past has been that there has to be a commercial rationale for development,” Palmiere reasons. “The entire population in the area is only about 40,000, and it has been hard to see how those people can support the massive cost necessary to develop the infrastructure.”
“Our mine, by virtue of the size and location would provide one of the catalysts for Plan Nord—and both the government and the Inuit are supportive.”
Demand will drive business
As demand from the East increases, the potential for the Lac Otelnuk project grows. Adriana has potential to find billions more tonnes of ore in the region, and the company looks forward to supplying that demand that it will see in 2011 and beyond. “Going forward we will be exporting to China. That really will be our marketplace,” Palmiere says. “It’s no secret that China is trying to reduce their reliance for resources on the ‘big three’ [Vale Inco, BHP Billiton and Rio Tinto] so they’re aggressively pursuing alternative sources of supply,” he concludes.
Adriana has made the right moves since Palmiere got on board. The company is focused on developing home-grown resources, and although the Brazil properties have not gone by the wayside, Adriana’s real promise lies in Quebec’s north.