IOC Announces $60 Million Expansion Program in Response to Customers Demand

August 2, 2007

TORONTO, Aug. 2 /CNW/ - The Iron Ore Company of Canada (IOC) announced a $60 million program to expand production to 18.4 million tonnes by mid-2008, and a feasibility study to increase production further to 21 million tonnes annually as per the attached press release.

The increased production will enable IOC to increase sales which will result in increased royalty revenue to the Fund. The income of the Fund is entirely dependent upon royalties and dividends received from IOC.

PRESS RELEASE

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Iron Ore Company of Canada

IOC Announces $60 Million Expansion Program in Response to Customers

Demand

(Canada) Montreal, Sept-Iles, Labrador City, August 1st, 2007 - The Iron Ore Company of Canada announced today the approval of C$60M to expand production capacity at its operations. The expansion will increase concentrate production capacity to 18.4 million tonnes by mid-2008, and a feasibility study will assess further expansion to 21 million tonnes annual capacity.

The expansion will address operating bottlenecks and improve winter performance. New equipment will be acquired for the mine and concentrator at Labrador City, including mine loading & haulage equipment, upgrades to the Automatic Train System which delivers ore from the mine to the plants and additional process spirals for the concentrator. It also includes new railway cars to increase haulage capacity on the QNS&L Railway to IOC's portin Sept-Iles, Quebec.

This investment reflects the commitment of shareholders to expanding IOC. Rio Tinto, IOC's majority shareholderhas embarked on a major investment program for its iron ore businesses in recent years, equivalent to the iron ore division's entire profit since 2003. Rio Tinto Iron Ore Chief Executive and IOC Chairman Sam Walsh said that the expansion program would add substantial value and take advantage of the strong on-going market demand.

"These decisions are a vote of confidence in our ability to maintain improved performance following the recent achievement of a five-year collective agreement," Mr. Walsh said. "IOC has added approximately 100 highly skilled jobs since the beginning of the current growth efforts in 2005 and expects to continue to hire as these expansion plans are implemented."

The feasibility study for expanding concentrate production to 21 million tonnes includes an extensive Resource Assessment Program to increase IOC's Ore Reserves by advancing high priority targets and further evaluating IOC's 3 billion tonnes(x) of in-situ Mineral Resources. Pre-feasibility engineering studies were sufficiently encouraging for IOC to order the additional primary grinding mill required for the expansion.

Terence F. Bowles, President and CEO of IOC, said this advance purchase would avoid delays caused by long delivery times in the current market. "We are very pleased to be able to proceed with expansion of our business in this strong market. This growth is being driven by strong market demand, and ordering the mill now allows us to overcome constraints due to the current demand for mining equipment. Following on from the achievement of a five-year labour agreement, these decisions reflect continued confidence in our people and commitment to the provinces of Newfoundland & Labrador and Quebec. IOC's outstanding product quality and commitment to meeting the needs of our customers, helps ensure our ongoing success in a highly competitive market. I am optimistic that the feasibility study results will be positive and that we will be able to commence expanding our capacity to 21 million tonnes by late 2008."

Rio Tinto is the major shareholder and operator of IOC (58.72%), along with Mitsubishi Corporation (26.18%), and LIORIF (15.10%). IOC is the largest manufacturer of iron ore pellets in Canada and has a global customer base. The Company operates a mine, concentrator and a pelletizing plant in Labrador City, Newfoundland and Labrador, as well as port facilities located in Sept-Iles, Quebec. It also operates a 418 kilometer railroad that links the mine to the port, and has 1,900 employees.

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(x) Source: IOC internal report "2006 Report of Ore Reserves and Mineral

Resources". In-situ Mineral Resource tonnes (3,155 billion) are

equivalent to 1,371 million tonnes of saleable product listed in the

2006 Rio Tinto annual report as approved for release by IOC's

Competent Persons: Tim Leriche P.Eng and Mark Blake P.Geo.

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Source:

Michel Filion

Director Communications & External Relations

1000 Sherbrooke Street West, Suite 1920

Montreal (Quebec) H3A 3G4

Info: (514) 217-6253

%SEDAR: 00002722E


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