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Quebec Railway on hold

February 10, 2013

CN has halted its feasibility study on building a $5 B rail line to iron-ore producers in north central Quebec and Labrador.

It was just last August that CN announced that it had partnered with La Caisse de dépôt et placement du Québec and a group of mining companies – Cliffs Natural Resources Inc., Labrador Iron Mines Holdings Ltd., New Millennium Iron Corp., Cap-Ex Ventures Ltd., and Alderon Iron Ore Corp.  on a feasibility study into the construction of a proposed rail line and terminal handling facility to serve the Quebec/Labrador iron ore range. The 800 km. rail line would go from tidewater at Sept Iles through to several advanced mining projects in the Labrador trough. It was thought the rail link could generate $1-2 B in annual revenues for CN.

The CN spokesperson cited the main reason for the decision being that some of the mining projects are on hold right now. The spokesperson declined to comment on the Quebec government’s recently announced higher royalties for the mining industry.

The announcement from CN comes on the heels of an announcement last month that ArcelorMittal has canceling its plans to build a $1.2 B railway on Baffin Island to haul ore to tidewater. The Baffinland Mary River project has been drastically scaled back from a $6 B mega-project to an $800 M bar-bones one. The difficulty in ArcelorMittal in financing was a key reason for not pursuing the rail link.

Commentary

Since CN’s announcement 6 months ago iron ore prices have risen significantly, yet evidently the producers have changed their minds. Iron ore markets are not the reason for this study being put on ice.

The new PQ Quebec government has signaled its intention to curtail direct infrastructure investments as envisioned by the previous Liberal government in its Plan Nord. This new stance by the government is likely a major factor in the mining companies wanting to put a hold on the study.

 

Sources

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Source: US Funds.com