TORONTO (miningweekly.com) – Despite the expectation that a glut of iron-ore supplies will persist for several years, junior miner Adriana Resources on Monday consolidated its belief in the Lac Otelnuk project, located in Eastern Canada’s so-called Labrador Trough, by making an investment that would fund the Lac Otelnuk Mining (LOM) joint venture (JV) beyond 2020.

Adriana held 40% of LOM, which was a JV company with Chinese-held WISCO International Resources Development & Investment which, in turn, held the Lac Otelnuk property in Nunavik, Quebec.

Adriana announced that it had made an additional investment of $3.05-million following a cash call, while WISCO funded its portion of the cash call with $4.58-million. The JV was expected to maintain a cash burn rate of about $660 000/y to keep the claims in good standing while the JV worked toward the feasibility stage.

TSX-V-listed Adriana stated that it remained optimistic for the future of the Lac Otelnuk project and, while the results of the April 2015 feasibility study demonstrated that the project had attractive economic returns at higher iron-ore prices, the board of LOM had taken actions to cut costs until the iron-ore market favoured the development of the Lac Otelnuk project.

"Ring-fencing the LOM expenditures for at least the next five years allows Adriana to determine the cash balance to deploy into new opportunities, while protecting our investment in LOM. The current depressed financing market continues to create interesting opportunities for Adriana's shareholders," president and CEO Michael Harrison stated.

Adriana noted that it currently had $29.5-million in cash, a strategic partnership with WISCO and a world-class asset. It had also taken steps to conserve cash and reduce all discretionary expenditures and was reviewing opportunities to create shareholder value.

In 2015, the iron-ore price declined by about 70% from its peak in February 2013 as the majors – BHP Billiton, Rio Tinto and Vale – expanded their operations. They were happy to see the price slip as they operated on the lowest-cost tier, as this deterred new developments elsewhere and forced production shutdowns at the most expensive producers.

Other operators currently focused on the Labrador Trough, such as Labrador Iron Mines, were forced to shutter operations owing to the crumbling iron-ore price, while project developers in the area had gone into financial hibernation, waiting for the market to rebound.