What’s more, the 68% iron concentrate grade the company says it could yield in processing makes Lac Otelnuk a candidate supplier of high-purity iron. It’s touted for its low emission steelmaking potential, pushing Ottawa to name it a critical mineral in 2024, and attracting interest from overseas.
“If you were a Japanese investor, would you like to buy a mine that had a 105-year mine life?” MetalQuest CEO Harry Barr told The Northern Miner, citing historical studies on the project’s broader district-scale potential. “It can produce high-purity ore and you get a premium for it.”
Lac Otelnuk represents one of the world’s largest metal projects in Canada’s vast backyard that could be leveraged towards a clean and green energy transition, and MetalQuest is now seeking a deep-pocketed partner to advance the project.
Sleeping giant
Despite its enormous size and promise revealed in the feasibility, little has happened on the ground for the past decade at Lac Otelnuk, located about 165 km northwest of Schefferville and 1,200 km northeast of Montreal. The project sits in the centre of the iron-rich Labrador Trough, which hosts most of Canada’s major iron ore operations.
When the feasibility was released in 2015, Lac Otelnuk was held in a joint venture between China’s Wuhan Iron and Steel Group and Adriana Resources. It was shelved shortly after and Sprott Resource Holdings (TSX: SRHI) took over Adriana. MetalQuest acquired the project in 2022.
“The reason it sat there is very few junior companies ever have the guts to step into a big project,” Barr said. “We took about two years, and we scraped all the data, and now we have the best database in the world, some $120 million of exploration work, 5,000 documents, and we’re coming up with a gap study that is going to tell us everything that should have happened between 2015 and now, and what needs to be done going forward.”
The gap analysis was completed by AtkinsRéalis on Feb. 18, but MetalQuest couldn’t specify when it would be publicly released.
Project of superlatives
The feasibility boasts numbers as big as the deposit. Its proposed open pit is 11.6-km long and 2.8-km wide, dimensions that would put it among the biggest mines in the world. However, its depth – at 130 metres – would make it shallow in relation to many of the largest open pit mines.
The post-tax net present value (at an 8% discount) is pegged at $5.24 billion, with an internal rate of return of 13% and a 30-year mine life, according to the feasibility study. Capital costs for Lac Otelnuk – including a second-stage expansion – are estimated at about $14.2 billion, making it one of the priciest mining projects in the world.
One factor behind the price tag is the proposed size of the mine site needed to develop such a huge deposit over at least three decades. Another is infrastructure, since Lac Otelnuk is hundreds of kilometres from the nearest road and rail links and power connections.
The feasibility proposed an unusual solution to the infrastructure challenges: slurry pipelines to pump iron ore concentrate mixed with water from the mine 755 km to the Port of Sept-Îles, Que. on the Gulf of St. Lawrence.
Though the study modelled the pipeline as a high-volume transport method, Barr said that idea “seems crazy” and he prefers instead road and rail methods.
Seeking major partner
“We’ve got a few million bucks in the bank, but we’re not quite ready to finance a multi-billion-dollar project,” he said. “Our main objective is to look for a worldwide, very large partner.”
Barr was recently in Japan speaking with “six or seven of the biggest companies in the world” about Lac Otelnuk and some have asked him to return to Japan for more talks. He declined to give names or details on the discussions.
“We’ve got at least six or eight companies that have signed confidentiality agreements, and they’re waiting for the gap study,” he said.
Japanese companies have recently made inroads into Canada’s high-purity iron sector. Nippon Steel and conglomerate Sojitz formed a joint venture in 2025 with Champion Iron (TSX, ASX: CIA) for its Kamistitusset (Kami) project in western Labrador. The prefeasibility stage Kami is being advanced as a mine that would produce iron pellets on site for use in direction-reduction – or low-emissions – steelmaking.
The green steel chain
High-purity iron ore comes down to the quality of the processed concentrate, not the ore in the ground. After mining and processing, projects generally aim to produce an iron concentrate grade of at least 67%, with very low grades of phosphorous and silica. Those impurities produce more slag and can raise energy use and costs in steelmaking.
Lac Otelnuk’s feasibility states that it could produce a concentrate grade of 68.5% iron, with 0.02% phosphorous and 2.95% silica, which supports a high-purity profile.
The next step in the chain is turning the high-purity iron into pellets and feeding it into a direct reduced iron (DRI) furnace, which uses natural gas and can lower emissions by up to 50% compared to conventional blast furnaces. If the DRI furnace uses hydrogen, emissions can be cut as much as 95%, though full-hydrogen furnaces are in the early development stages in Canada.
Champion’s Bloom Lake mine in Labrador is Canada’s main commercially-producing high-purity iron mine. But with its 15 million tonnes-per-year capacity, it produces far less than Lac Otelnuk potentially could.
The final piece in the green steel chain for Canada is Quebec’s low-emissions hydroelectricity that powers its industrial metals plants.
Next steps
Looking beyond the gap analysis, Barr foresees more studies coming out in the next few years, including a new feasibility study in 2030. Permitting and agreements with First Nations could happen in 2034 and production potentially in 2035, but that would be accelerated if MetalQuest partners with a major.
Despite Ottawa’s designation of high-purity iron as a critical mineral, direct support from the government has yet to land for MetalQuest.
“It’s partly our fault,” Barr said. “We work hard towards it [but] we’ve been so busy, and we’re working on two or three different multiple angles to get that money.”
Meanwhile, big players, including some royalty companies, are patiently waiting for the gap analysis, he said.
“It’s big, and so big, it’s ridiculous. And our little market cap is so tiny. People don’t think it’s real, but it is.”
