November 21, 2014 / 12:01 PM / 5 years ago

RPT-Quebec's ambitious Plan Nord mineral project goes south

(Repeats without change)

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 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 owns a minority stake in Bloom Lake.

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 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.”


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, 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 to halt operations for the rest of the year.

Earlier in the year, mining giant Rio Tinto 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

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