Astute investors accumulate solid prospects while timing the trough in commodity cycles

Iron ore exploration and development mining companies operate in a highly cyclical industry and their share price is closely correlated with the prices of the product they aim to bring to market. Successfully advancing a deposit to market involves planning and foresight by shareholders and management, with the ability to see logistics and milestones through to the next cycle. Sharp increases and decreases in the pricing for the steelmaking raw materials (the marketable end product of the deposit mined) impacts the volatility of share price. Global iron ore benchmark pricing, one of the main drivers in determining the revenue for iron mines, appears low. As such, the share prices of all miners in this sector have followed the downward movement in iron ore pricing. Importantly, the fundamentals supporting the long-term strategy of most are intact despite the recent cyclical decline in pricing, which is not expected to continue for the longer term.

Below is an overview of a junior miner that has an exceptional deposit with plans to advance toward a low capex (targeting below $1B), low opex (targeting $65/T (loaded)) mining operation scenario. It currently has ~$1 million in the bank, has low overhead (requiring only ~$280,000/year to keep the doors open, including salaries for key professionals and shared office space (shared with other mining venture)), and is currently arranging to close financing that is expected to see it through to meaningful development (see related July 23, 2014 news release entitled "Lamêlée Announces Pricing of Prospectus Offering"). This junior has the hallmarks of a viable mine site, it has enough room to develop a concentrator/process, it is within 5 km of provincial roads, plus it has access to land and wharf at nearby Port-Cartier to deliver its product. The team tasked with advancing this junior miner are the same individuals that started up the Consolidated Thompson's iron ore operation at Bloom Lake, they advance that project to buy-out, and in the process they brought the stock of Consolidated Thompson up to where they sold it for $17.25 per share in 2011 ($4.9 billion) -- the plan is to replicate that success -- accumulating shares of this company now appears wise.

 

Lamelee Iron Ore Ltd. (TSX VENTURE: LIR) (Frankfurt: G11) is a Canadian mining company with a Québec property located at the south end of the Labrador Trough. LIR.V has an experienced team with great track record, they successfully developed and brought to production the Bloom Lake Iron Mine in Québec (2005-2010).   The Lamêlée Iron Ore deposit sits in the heart of Quebec’s and Labrador- Newfoundland’s Fermont-Wabush-Labrador City Iron Ore Camp where iron concentrate production is currently at 35 million tonnes per annum.

Shares Outstanding Major shareholder 1) Fancamp Major shareholder 2) GimusInc. (base shares) H/D Financing: F/T Financing: O/S Warrants O/S Options F/D Shares Cash Position Debt

77,221,971 45,000,000 13,104,000 15,575,000 3,542,971 7,993,214 5,900,000 91,115,185 $1.0M DEBT FREE

Figure 1. (above) Location map (upper left inset), Lac Lamelee Ridge, containing the deposit at Lamalee, Exploration camp at Lamalee (lower right inset) --  The Project sits 10 km west/southwest of Champion’s Consolidated Fire Lake North project.
  

The Objective
• To build the next iron mine at the southern end of the Labrador Trough close to the Fermont Iron Ore camp.
• Pre-production is expected for Q4-2017.
 

The Plan
• To develop a 5-8M tonnes/year mining operation.
• To produce a low cost, high-grade iron concentrate.
• CapEX Below $ 1B
• Opex TARGET $65/T (loaded)
• Innovating mine to port solution.
• Efficient ship loading

The Lamelee South deposit is interesting from an economic point of view as it has a lot of iron formation squeezed into a relatively small area, a study indicates 100% of the Inferred Resources are in the pit shell (the area where the mining is expected to take place).

 

Resource The Lamêlée Iron Ore deposit contains, as of today, Inferred Mineral Resources 520 million tonnes grading 39.5% Fe2O3 (or 27.6% FeT) - work to be completed in 2014 should increase the size and the quality of the iron resources towards 750 million tonnes at the same grade.   The following table outlines incremental tonnages and Iron grades at various cut-off grades:     The Whittle Open-Pit Shells Study resulted in outlining two shells: the first a smaller open-pit shell of 315 million tonnes at a grade of 41.2% Fe2O3 (28.8% FeT); the second a larger open-pit shell of 520 million tonnes at a grade of 39.5% Fe2O3 (27.6% FeT). A comparison of results demonstrates the amenability of the Inferred MRE to potential open pit mining with 100% of Inferred MRE reporting within a conceptual open-pit shell.   Expectations of a highly economic mining operation Lamêlée Iron Ore expects a viable project producing 5-8 million tonnes of concentrate. Using existing rail and new port infrastructure, between $750 million to $1 billion in capital costs and total operating costs between $60 and $70 per tonne at a sustainable iron ore price of $120-$130 CFR per tonne.

  
Plans

LIR.V plans to conduct metallurgical test work and produce a Preliminary Economic Assessment (PEA) Study (using economic parameters with a +- 30%) for delivery in Q4-2014.

Financing requirements:

•$3M to complete STEP I including additional drilling and to initiate environmental assessment.
•$7M to initiate and complete STEP II in 2015.

 
Experienced team

Lamêlée Iron Iron Ore will be managed and operated by members of the team that brought the Bloom Lake iron deposit to production within 4 years of the feasibility study. The company was acquired for $4.9B at $17.25 per share. Click here for CVs of Board of Directors.
 
No issues

Permitting (environmental, socio-political, First Nations) will not be an issue, since the processing technology follows current industry standards (ie., water is used as the main driver of concentration and there are no deleterious elements in the iron ore); there is only one First Nations group present in the Fermont area which has dealt favorably with the Bloom Lake operation; and Quebec’s and Labrador- Newfoundland’s Fermont-Wabush-Labrador City Iron Ore Camp has a history of iron mining since the 1960’s.

Deposit insight

Work performed:

     • Resource Modeling (57 DDH’s / 18,220m)
     • 3-D mineralization
     • Iron grade estimate
     • Samples for future metallurgical test work
     • Higher grade BIF’s -43% Fe2O3, hematite and magnetite ore
     • Geophysics program / Gravimetryand Mag Survey

Course hematite and magnetite -- the course grain lends to the expectation to having a cost efficient process. Preliminary specs show very good material with low impurity.

Infrastructure advantages

Port-Cartier layout - note proposed laydown area for LIR.V's material

Transshipment potential via Port-Cartier

Market Equities Research Group has identified the following related research links on Lamelee Iron Ore Ltd.:
 
- Lamelee Iron Ore Ltd. Corporate Website: http://www.lameleeiron.com 
 
- SEDAR Filings for Lamelee Iron Ore Ltd.: http://sedar.com/DisplayProfile.do?lang=EN&issuerType=03&issuerNo=00032549

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