Mary River iron ore on Baffin Island, Nunavut.
Plans to scale back the massive Mary River iron ore project in Canada's northern Arctic may have a silver lining.
Baffinland Iron Mines Corp. says the deposit could now be in production as early as 2014, and ship its first iron ore in 2015, or two years sooner than it would have under a mine plan that was recently shelved due to financing concerns.
"The way we described it to the folks in Nunavut, is that we're taking two smaller steps instead of one big step," said Baffinland spokesman Greg Missal, who recently returned from community visits in the region of the mine site on Baffin Island.
Owned by global steel giant ArcelorMittal and Iron Ore Holdings LP, a private equity concern, Baffinland earlier this month radically reduced the size of the mine plan at Mary River, saying the $4-billion development cost was too much to shoulder in an uncertain demand outlook for commodities.
The new plan will cost just $740-million and will be carried out in such a way as to be compatible with the larger plan at some later date.
Mary River was just the latest victim of the economic slowdown that began with the 2008/09 global crisis and has hit the world's miners especially hard over the past year as China's thundering growth slowed, and markets in Europe and the United States failed to gain traction.
Mary River, one of the world's richest and largest undeveloped iron ore deposits, was to start shipping some 18 million tonnes of the key steel component in 2017. The plan was to build a dedicated rail line and port and then transport the ore to European markets year-round on ice-breaking ships.
Under the revised plan announced on Jan. 11, Baffinland Mary River will now produce just 3.5 million tonnes of iron ore per year. Instead of a rail line, Baffinland will use trucks to move the ore to a smaller port on the north of the island, where it will be stockpiled for most of the year and then shipped during the 75-95 days a year when waters are ice-free, from late July to October.
The company expects to start awarding contracts to build the mine in coming months, with heavy equipment and other supplies shipped to the site in the summer. Construction will likely go through 2013 and 2014.
"This is a way of moving forward with the project despite the difficult capital markets out there," said Mr. Missal, adding that a final hearing on Mary River's water licence, which will allow it to move ore and materials by ship, was expected soon.
Mary River will likely target European markets – some 5,000 nautical miles away from Baffin Island - for its iron ore once in production. China's market would be some 15,000 nautical miles away, taking into account the need to travel around the tip of South America.