By Susan Taylor
TORONTO, Feb 23 (Reuters) - The Iron Ore Company of Canada said on Thursday it will invest about C$79 million ($60.27 million) in its Wabush 3 project to help extend mine life, reduce costs and boost output.
The new pit will be built alongside current mine operations in Labrador City, in the eastern Canadian province of Newfoundland and Labrador. The increased output will help IOC ramp up annual production to some 23 million tonnes from 18 million tonnes.
Existing infrastructure will be used for processing, maintenance and tailings, said the company, majority owned by Rio Tinto Alcan Inc RIO.AX RIO.L .
Construction is expected to start in the second quarter of 2017, with production of the steelmaking raw material in the second half of 2018.
Global miner Rio has a stake of about 59 percent in IOC, followed by Mitsubishi Corp 8058.T , with 26 percent, and the Labrador Iron Ore Royalty Company at approximately 15 percent.
"The Wabush 3 pit is IOC's best option to access low-cost, quality ore and provides a compelling opportunity to make our business more competitive by reducing operating costs during a period of increasing iron ore price volatility," Chief Executive Clayton Walker said in a statement.
Iron ore prices have been surging so far this year, with spot prices setting a near three-year record on Tuesday of $94.86 a tonne. iron ore futures in China fell more than 2 percent on Thursday, moving further from a record high reached on Tuesday, on doubts about the strength of the rally given plentiful stocks at Chinese ports.
Iron ore has tracked a rally in Chinese steel prices as traders built inventories, hoping Beijing's plans to boost infrastructure spending this year would boost steel demand.
The spot benchmark price for iron ore dropped 0.6 percent to $94.30 a tonne on Wednesday. ($1 = 1.3107 Canadian dollars)