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Century Iron Mines Continues To Develop Iron Ore Projects With $44 Mln In Working Capital

Jul. 02, 2013 3:36 PM ET
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Century Iron Mines (TSE:FER) finished up its latest fiscal year with net working capital of $43.78 million, as the company continues to advance its iron ore projects in Quebec, with a feasibility study for its Joyce Lake project planned.

The company, which is aiming to become a major iron ore producer, is one of the largest iron ore companies in Canada, in terms of number of claims by area. It has 6,493 claims and titles, covering some 198,779 hectares in the provinces of Québec and Newfoundland & Labrador. It has interests in four iron ore projects, none of which yet generate revenue.

One of China's leading steelmakers, Wuhan Iron and Steel, has about a 25 per cent stake in the company. China Minmetals' interest is roughly five per cent. Century Iron and Wuhan have a joint venture to develop three projects, with Century and the JV having cash and equivalents of $37.3 million as at March 31, according to annual financial figures released Friday afternoon.

Earlier this year, Century announced a preliminary economic assessment report for its Joyce Lake direct shipping ore (DSO) project, just days after announcing a similar report for its Duncan Lake property.

The Joyce Lake NI 43-101 compliant report, based on 100 percent ownership, showed a pre-tax net present value of $94.5 million at an 8 percent discount rate for the property, which is located in the province of Newfoundland and Labrador, near Schefferville, Quebec. The internal rate of return was pegged at 35 percent pre-tax, with initial project capex estimated at $96.6 million including contingency, and a projected payback period of just less than three years from production start-up.

The Joyce Lake DSO deposit is part of the Attikamagen project, in which Century has joint ventures with Wuhan and Champion Iron Mines (TSE:CHM). A feasibility study on the project is planned for the upcoming year, with an exploration program also anticipated to include infill and resource definition drilling. The aim is to expand the property beyond its current resource boundaries, with the goal of growing the operation.

The study is expected to be fully covered by the joint venture, the company said, as well as by the additional capital contribution from Wuhan.

"This iron ore operation is our low hanging fruit - it has low capex, and is easier to take out and put into production. It also has good tonnage in terms of one single deposit, with 16 million tonnes," said Century's CEO Sandy Chim in an interview with Proactive Investors back in April. Century's plan is to focus on the "low-hanging fruit", as the CEO called it, first, with plans to put the mine into production by 2015, generating cash flow so the company can eventually deliver on its multi-billion dollar taconite projects in Quebec - which require higher capex and financing.

Direct shipping ore refers to iron ore that can be shipped directly to a steel furnace, with these mines typically rarer than magnetite-bearing banded iron formations, but considerably cheaper to mine and process as they require less beneficiation due to the higher iron content.

The company is also working on developing its Full Moon taconite iron deposit in Quebec, where a preliminary economic assessment is underway, and is expected to be wrapped up this fall. This report is also to be funded by Wuhan under the joint venture agreement.

Additional exploration is also planned this year with the aim of adding resources to future operations, said Century, which reported a loss of $9.0 million in the quarter that ended March 31.

It had exploration and evaluation assets of $39.6 million at the end of the period, and investment in the joint venture of about $59 million.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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