Quebec's ambitious Plan Nord mineral project goes south
20/11/2014 22:54
By Allison Lampert and Nicole Mordant
MONTREAL/VANCOUVER, Nov 20 (Reuters) - A plan by the
Canadian province of Quebec to spend billions to develop the
mineral riches of its northern region has been dealt a crippling
blow by the pending closure of a major mine as iron ore prices
sink and China's interest wanes.
The Plan Nord project hopes to attract C$80 billion ($71
billion) of investment to the vast northern region, of which the
iron ore-rich Labrador Trough is a major component. The
French-speaking province is trying to sell the plan globally and
is hoping miners will flock to northern Quebec after the
government invests in the infrastructure necessary to open it
up.
But Plan Nord took a big hit on Wednesday, when Cliffs
Natural Resources CLF.N said it is closing its Bloom Lake iron
ore mine after struggling to secure funds to expand the mine and
make it viable. Chinese steelmaker Wuhan Iron & Steel
600005.SS owns a minority stake in Bloom Lake. ID:nL3N0T93XA
Bloom Lake, one of three producing iron ore mines in Quebec,
would have become a major customer for a railway line being
considered under Plan Nord.
"Without Bloom Lake there's no Plan Nord," Cliffs Chief
Executive Lourenco Goncalves told Reuters. "Without the mine,
there's pretty much nothing for Plan Nord to transport from
point A to point B."
But even before Cliffs' move, Plan Nord was an idea
struggling to get off the ground.
Launched by the Liberal provincial government in 2011, Plan
Nord was shelved by the Liberals' defeat in the 2012 election,
but revived when they returned to power in April. The effort to
reactivate it though came as iron prices were going into a
downward spiral, and drumming up investment has been a tough ask
as private funding for the mining sector has retreated with
commodity prices.
Last year, Canadian National Railway CNR.TO and its
partner, pension fund manager Caisse de depot et placement du
Quebec, halted their study of an 800-kilometer (500-mile) rail
line because miners were delaying projects. The line, estimated
to cost C$5 billion, was set to run from north of the mining
town of Shefferville to Sept-Îles on the Gulf of St. Lawrence.
"Plan Nord's a good idea but I think it is something that
can't be done in one cycle," said Sandy Chim CEO of Century Iron
Mines, an exploration company with projects in the region.
Quebec says Plan Nord, which covers an area twice the size
of France, would create jobs and revenue via billions worth of
public and private investments over 25 years. In its latest
budget, the province set aside C$63 million in the current
fiscal year and up to C$2 billion by 2035 for the project.
"We do not agree with comments suggesting that the Plan Nord
is dead," Quebec Energy and Natural Resources Minister Pierre
Arcand said in an email on Thursday. "The price of metals are
cyclical and we are now putting the right conditions in place
for when they rise back up."
BIG PLANS
The province has set aside C$20 million to study the
viability of another rail line to connect the Labrador Trough to
Sept-Îles. Two mining companies are part of the study.
There are already two privately run rail lines in the region
but the government hopes a multi-user line will reduce transport
costs for companies that must compete against low-cost iron
ore-producing behemoths in Australia and Brazil.
Quebec has also outlined a C$1 billion natural resource fund
to buy equity stakes in mining, oil and gas assets. Half of that
fund is earmarked for Plan Nord projects.
A further C$50 million has been set aside for an investment
in Gaz Métro LNG to expand output of liquefied natural gas as a
cheaper fuel for mining and other projects.
"The government would need to put up billions of dollars to
generate something there," said Andrew Bowering, chairman of
Cap-Ex Iron Ore CEV.V , an exploration company with a Labrador
Trough project. "Just putting a bigger rail line in, and maybe a
road, isn't really going to change all that much."
Meanwhile, companies in the region continue to struggle as
iron ore prices hover at five-year lows. In July, low prices
forced Labrador Iron Mines LIM.TO to halt operations for the
rest of the year.
Earlier in the year, mining giant Rio Tinto RIO.L took its
Iron Ore Co of Canada, the biggest producer in the region, off
the market after failing to find a buyer. Abroad the slump has
forced the closure of many high-cost ore mines in China, the
world's top iron ore importer.
($1=$1.13 Canadian)
(Additional reporting by Susan Taylor and Euan Rocha in Toronto
and Silvia Antonioli in London; Editing by Peter Galloway)
((nicole.mordant@thomsonreuters.com; +1-604-664-7315; Reuters
Messaging: nicole.mordant.thomsonreuters.com@reuters.net))
Keywords: CANADA QUEBEC/PLANNORD