coal in 2005. After leaving Glencore, he founded coal group Riversdale Mining, which paid 91m Rand (about $14m at the time) for BHP Billiton's Zululand anthracite colliery, funded by credit from BHP. Riversdale sold off the stockpiles and paid off BHP in under a year. It then sold the production back to BHP's Richards Bay smelter, which had failed to land a competing supply agreement with Vietnam. After expanding into Mozambique, Riversdale was bought by Rio Tinto for $3.9bn at the very top of the coal market in 2011.
We land in pinewood country and the map becomes real. Mines that looked like distant dots are piled-up on top of each other. Wabush, which was recently shuttered, is on one side of the bungalow airport. A railway running to Bloom Lake cuts across the airport gate. On the other
side of the cutting, Rio's Carol Lake mine sits behind 1950s buildings, goods wagons lined-up outside.
Bloom Lake is a string of hanger-like buildings in cream and mauve. The plant, which ought to be deafening, was switched off last January and the vast buildings are silent. Endless metal walkways wind around the machinery, high above empty floorspace, covered in red dust. In the mine office, clocks have stopped ticking and a microwave is sitting unplugged. A “Cliffs” logo has been scratched off an aerial photo, showing ArcelorMittal's tailings, encroaching on the edge of the site.
New and abandoned, Bloom Lake is unsightly and overbuilt. A double set of electricity pylons run up the road from the mine gate, in case one line fails. Every water pump has an identical backup. “It's an incredible piece of engineering,” O'Keeffe says, “but if I was building this, I wouldn't do it like that.”
As iron ore tumbled from $190 per tonne in 2011 to a low of $38 last year, Cliffs was dragged into a race of trying to lower costs by continually upping production. The company couldn't stop building. Bloom Lake's pump station alone cost $70m, whilst a “megadome” at the mine gate is stuffed with $45m of spare parts.
Bloom Lake's second plant, which was due to more than double output to 14m tonnes per annum, is immaculate but incomplete, the machinery unused, painted in yellow, grey and blue. Huge steel hooks hang from metal cables. The roller doors are propped open, letting cold wind blow in from outside, but occasionally the doors fail and slam to the floor.
We drive around the open-pit on a 30m wide road, passing lines of diggers and 240-tonne trucks. French-speaking reporters, flown in from Sept-Ils, jam their dictaphones under O'Keeffe's nose. “To see the money that's been sunk and how it's been depreciated,” he says, landing back in Montreal. “It's still a little bit surreal.”
The next day and O'Keeffe is sitting in an oyster bar made of concrete and glass. “Things are really coming together,” he says, before negotiating over a bottle of Chablis. “If you could bring down the price on that I'd be very happy.”
His chief engineer delivers the news: Arcelor-
Mittal has just suspended a mine-life extension at its Mont-Wright operation, whilst Rio Tinto has kicked off a dispute with local unions, blaming them for “skipped shifts” and low productivity in letters leaked to the press. Union bosses have hit back, accusing Rio of “destroying our town.” The double dose of bad news was brought up that morning in parliament, but ministers responded by pointing to Champion, as a piece of good news for the region.
Increasingly, O'Keeffe looks like the last man in the Labrador Trough. He had “three cracks” at Bloom Lake, he says, using stalking horse bids, before Cliffs finally had to “put its white flag up and find that reverse gear.” Rival bidders were close to acquiring the asset, but all wanted to continue Cliffs' strategy of upping production. “The plans were never going to work. You may as well turn the shredder on and just start putting million dollar notes in it, because that's what was going to happen, just shred the fricking stuff. It would have been a total failure.”
Rather than promising to restart the mine immediately, Champion has maintained that the government will realise billions of dollars more in tax receipts, if it properly tidies up the infrastructure. “I love infrastructure,” O'Keeffe says, “and if it's not a government that does it, nothing ever happens.”
“It's all well and good having these resources in the ground, but unless you've got the infrastructure, no-one cares.”
Pressing the Button
There are several cost levers at Bloom Lake that Champion intends to pull. O'Keeffe's team has mapped out “a more aggressive mine plan”, focusing on 7m tonnes per annum of the highest grade material, lowering strip ratios and bringing in the mine life from 36 to 18 years. By using an in-pit crusher, coupled with a 4km conveyer that Cliffs put-up to tart-up Bloom Lake in its bid to attract investors, Champion believes it can drastically lower mining costs from around $30 per tonne.
On the processing side, Cliffs was battling recoveries of 68 per cent, due to problems it had with its spirals, used to sift through iron particles. By ripping out and replacing the spirals, O'Keeffe expects to push recoveries up to 80 per cent, saving another $12 per tonne. “It's not rocket...