Adriana Resources Inc. has closed its partnership deal with China's third-biggest steel company for joint development and operation of the big Lac Otelnuk project, 170 kilometres north of Schefferville.

The Chinese company, backing the massive Quebec-Labrador project, is Wuhan Iron and Steel Co. (Wisco), which already owns about 20 per cent of Adriana.

Under the deal, a joint-venture, Lac Otelnuk Mining Ltd. (LOM) - held 60 per cent by Wisco and 40 per cent by Adriana - will take over the project. Wisco has put up a further $91.6 million to fulfill an earlier commitment to Adriana and $40 million will go to LOM. Then Adriana transfers its interest in Lac Otelnuk to LOM. Wisco will be responsible for finding up to 70 per cent of the cost of bringing the project to production. The full feasibility study will take some time.

Lac Otelnuk's resource estimate indicates the property has 6.5 billion tonnes of reserves, averaging 30 per cent iron content.

It will have an open-pit mine with concentrator and pelletizing plant nearby. A 2010 pre-feasibility study envisaged final annual output of 50 million tonnes of pellets, capital cost $12.9 billion and startup in 2016.

The partners are considering an 815-kilometre railway to ship the concentrates to the Sept Îles area, where a new port would handle 400,000-tonne ore carriers.

"This agreement is an important milestone and with Wisco's financial support we can accelerate Lac Otelnuk," Adriana CEO Allen Palmiere said in a statement.

Negotiations with aboriginals will go on concurrently with the full feasibility study.

Source:montrealgazette