CN Rail halts study into rail line to Quebec iron ore belt

Fri Feb 8, 2013 6:27pm EST

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* CN launched feasibility study in 2012

* CN spokesman says study paused, not abandoned

Feb 8 (Reuters) - Canadian National Railway Co has halted a study into the feasibility of building a C$5 billion ($4.99 billion) rail line to ship iron ore from northern Quebec to port, the railroad said on Friday, as miners delay projects due to low prices.

CN, Canada's biggest railroad, last year started looking into building a 800 kilometer (500 mile) rail line to the isolated region that is so rich in iron ore deposits it could turn Canada into the world's third biggest producer.

A slump in the benchmark price for iron ore , the main component in steel, has jeopardized the viability of projects in the sub-Arctic region. Some projects and planned expansions have been put on hold, lowering potential transport volumes for CN.

The rail line "is paused, it's not abandoned," CN spokesman Louis-Antoine Paquin said, adding that CN wanted time to evaluate "projects from mining companies that seem to be delayed."

Iron ore prices plunged to $86.70 a tonne in September from above $180 a tonne in September 2011. Prices have since recovered to about $155 a tonne.

Even if CN decides to go ahead with the project, which is backed by Quebec's public pension fund, it is seen as several years away from development as it faces complex negotiations with local native groups, governments and miners in the area.

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