Operations & financial report

Iron Ore Company of Canada

(Rio Tinto: 58.7 per cent)

RTIO operates Iron Ore Company of Canada (IOC) on behalf of shareholders Mitsubishi (26.2 per cent) and the Labrador Iron Ore Royalty Income Fund (15.1 per cent).

IOC is Canada's largest iron ore pellet producer. It operates an open pit mine, concentrator and pellet plant at Labrador City, Newfoundland and Labrador, together with a 418 kilometre railway to its port facilities in Sept-Îles, Quebec. IOC has large quantities of ore reserves with low levels of contaminants.

Products are transported on IOC's railway to Sept-Îles on the St Lawrence Seaway. The port is ice free all year and handles both ocean going ore carriers and Lakers, providing competitive access to all seaborne pellet markets and to the North American Great Lakes region. IOC exports its concentrate and pellet products to major North American, European and Asian steel makers.

IOC employs approximately 2,000 people and recruited 170 people during the year to offset an increase in retirements and to meet greater production needs.

2007 operating performance

The demand for IOC's products strengthened further in 2007 with concentrate prices increasing by ten per cent and pellet prices by five per cent over last year's benchmark prices.

Total saleable production was 13.2 million tonnes, down from 16.1 million tonnes in 2006. The variation was primarily due to a seven week labour strike. Pellet production was 11.3 million tonnes (12.7 million tonnes in 2006) with saleable concentrate being 1.9 million tonnes (3.4 million tonnes in 2006). Lower production levels coupled with higher oil prices put pressure on 2007 unit costs.

A labour strike in March/April occurred when negotiations broke down over the new collective agreement to replace the one that expired in February 2007. The strike ended following agreement of a new five year collective agreement.

In August, IOC announced the approval of US$57 million to expand annual concentrate production capacity to 18.4 Mt/a by mid-2008 and to conduct a feasibility study to further expand to 21 Mt/a. This is part of a programme to increase annual concentrate production by some 40 per cent, or seven Mt/a, to 25 Mt/a and annual pellet production by ten per cent, or 1.5 Mt/a, to 14.5 Mt/a over the next five years. The feasibility study is nearing completion and will be considered in early 2008.

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