TORONTO - Champion Iron Ltd is thinking small with its plans to bring Quebec's giant Bloom Lake iron ore mine back to life. Chief Executive Michael O'Keeffe intends to slash costs while cutting millions of tonnes from a planned production expansion. The strategy runs counter to the traditional economy of scale formula, which bumps up production for proportional cost savings.

It may prove a prescient approach as iron ore prices pull back from 30-month highs in February. The recovery sparked signs of life for a handful of hibernating miners in Canada's metal-rich Labrador Trough, straddling the provinces of Quebec and Newfoundland and Labrador, including Champion, Alderon Iron Ore and Tata Steel Minerals Canada.

Champion is taking a different tack with Bloom Lake than its previous owner and North America's biggest iron ore producer, Cliffs Natural Resources, beginning with the price tag.

Cliffs paid US$4.9 billion for the mine in 2011, near the top of the market. Later it launched a $1.2 billion expansion to make the mine viable by doubling output to 16 million tonnes in a bid to help bring costs down.

But as prices slumped, Cliffs suspended the money-losing operation. It sold the mine to Champion for $10.5 million in 2015, a year when spot prices bottomed at $37 a tonne, from $190 in 2011.

O'Keeffe, a former Glencore executive, believes other miners looking to buy Bloom Lake made calculations using Cliff's high-volume blueprint and were spooked by the costs.

Walking "every inch" of the property, O'Keeffe told Reuters that he and Champion's chief operating officer David Cataford looked for ways to reconfigure operations that would squeeze costs to $50 per tonne of delivered concentrate from over $91.

Rather than trucking ore in 240-ton trucks for processing, for example, the mine will use a 3.8 kilometer (2.36 mile) conveyer belt to move the steelmaking ingredient, Cataford said.

And instead of trucking some 12 million tonnes of tailings waste to on-site storage each year, that material will move through pumps, said Cataford. A new recovery process and more efficient equipment, used to sift through iron particles, will goose recovery rates to 80 per cent from 68 per cent, explained O'Keeffe, and cut production costs by some $12 a tonne.

"We had a view which was quite contrary to everyone else," said O'Keeffe: scrapping the growth project underway and matching costs with the "big guys."

"What was in everyone's head was the only way to do this is expand. But your mining costs would have been more, and you'd have to spend a massive amount of capital," added O'Keeffe, who may be best known for building Riversdale Mining from a A$7 million ($5.23 million) coal explorer in Mozambique into a producer that Rio Tinto paid nearly A$4 billion to buy.

Champion's board has yet to vote on a $326.8 million mine restart plan, but the company said in a feasibility study it intends to be operating by the first quarter of 2018.

The miner forecasts revenue of $15 billion over a 21-year mine life, producing 7.4 million tonnes of concentrate annually. A lower stripping ratio - the amount of dirt removed to expose mineable ore - helps squeeze costs to $44.62 per tonne, while the high-grade concentrate price is seen at $78.40.

At 66.2 per cent iron content, the ore earns a premium above the industry standard 62 per cent.

Market jitters over rising low-cost global production, coupled with an oversupply of Chinese steel, have pushed spot prices down to $63.19 a tonne, from $94.86 in February.

Clarksons Platou analysts said the consensus price among Asian steel industry companies they recently polled was $60 per tonne, though several expect a decline to mid-$50 before a longer-term climb above $60. Signs of cooling Chinese demand is another factor at play, with BMI Research recently cutting its forecasts to $50 from $55 a tonne in 2018.

Even at prices in the mid-$50s, Champion is comfortable that it can repay debt and "keep our heads above water," O'Keeffe said. But he expects demand to skyrocket for Champion's "clean" concentrate, which will allow Chinese steelmakers to reduce emissions and pursue high-grade steel production.

O'Keeffe, who recently announced $40 million in bridge financing to restart the mine and a supply deal with Japanese trading company Sojitz Corp, acknowledges his opportune acquisition.

"Cliffs were on the road to do this, they just ran out of time and money," O'Keeffe said. "So it's easy for us to come along and pick up and build all of this and implement a lot of the changes that Cliffs were already going to do."