Canadian Railroads > Quebec to study new iron ore line

http://www.progressiverailroading.com/prdailynews/news.asp?id=40715

The province of Quebec plans to allocate up to $20 million in its 2014-15 budget to fund a feasibility study on a new iron-ore rail line in the Labrador Trough.

The provincial government aims to set aside the dollars in its Northern Plan Fund to determine if a new rail line should be built or capacity should be expanded on an existing rail line between iron-ore mines and the Port of Sept-Îles to help miners serve international markets more competitively. The Labrador Trough hosts one of the world’s largest iron-ore accumulations, with annual production totaling about 50 million tons.

The study will consider the concerns of all potential users to ensure the creation of a multi-user rail system favoring joint investment, according to the province.

Iron-ore exploration and development firm Champion Iron Ltd. welcomed the province's decision to fund the study. The rail line would stimulate further investment in the Labrador Trough and help establish Quebec as "a region of international significance for the mining industry," said Champion Iron Chairman Michael O’Keeffe in a press release.

Sounds like a public version of the new ore line CN decided to shelve a couple years ago.

Isn't this about 20 years too late ? According to Forbes today, "Vale's average realized iron ore price has declined from $143.46 in 2011 to $107.43 per ton in 2013. It further declined to $90.52 per ton in Q1 2014." There is a lot of rail capacity-increasing projects started around the world that are on hold or greatly decelerated that could come on line quicker than anything from scratch [ or a quantum improvement to the QNSL ] I should think.

My opinion: A waste of money.

SZ

How does this add value that the QNS&L doesn't currently provide? Other than providing some political fodder...

Without knowing all the details of the Quebec study, I would submit that the Labrador Trough iron ore district has issues ... several producers are seriously cutting back on production/development (such as Cliff's Nat'l Resources) ... the deposits are world class, but they're a long ways from many of the "users" and have a difficult time competing with Brazil and Australia for the Asian markets given the current iron ore prices ... I'm not a Canadian, but I do appreciate Canada's mineral resource potential and admire the rail history in Canada.

Odyssey
Evergreen, CO

Governments, at least here in Canada, have often used "feasibility studies" as a way to make it look like they are doing something really great, for a relatively small amount of money. These studies can also be used as stalling tactics when the government starts getting pressure. "We have to wait for the results of the study" is the usual answer and usually works as a means to divert the pressure. After a few years, the whole thing can be quietly dropped ... or, in very rare cases, something can proceed.

Will MacKenzie
Dundas, ON

This is a classic case where you have to look at the issues long term. Thus, examining this proposal in light of two years worth of iron ore prices is silly.

The iron ore business is a global business. The lab trough is one of the biggest sources of iron ore on the planet, and it is reasonably well connected to tidewater ports. Once the ore is on a boat, distance doesn't count for much. Especially once the new edition of the Panama Canal opens in a few years.

That said, I don't see the value in building an entirely new RR, unless Cartier and QNSL have no common carrier obligations at all, and can just refuse traffic from new producers. Anybody know if that's the case? If it isn't, neither one of those lines is anywhere near operating at full capacity (railfan them, even during times when the market is hopping, and you spend a LOT of idle time between trains). Additional sidings, new bridges, etc have to be a more efficient use of money than a new build.

And if the common carrier problem really is a limitation, I would imagine the Quebec government would have no problem passing legislation to force the issue.

50 million tons a year is somewhere south of 25% for what BHP and Rio Tinto are each doing out of Australia's Pilbara on an annual basis. [The figures for Vale in Brazil is similar.] These guys have spent BIG to get to that production level and are experiencing the highs and lows of the price of Iron Ore with that infrastructure already in place. Quebec is merely throwing out political fodder.

A few years ago there was discussion of a Iron Ore mine and railway coming down the centre of Baffin Island to feed Danish mills. That drifted into nowhere as far as I can see. Does anyone know of any advancement on that prospect?

Rick

rschonfelder Wrote:
-------------------------------------------------------
> 50 million tons a year is somewhere south of 25%
> for what BHP and Rio Tinto are each doing out of
> Australia's Pilbara on an annual basis. These
> guys have spent BIG to get to that production
> level and are experiencing the highs and lows of
> the price of Iron Ore with that infrastructure
> already in place. Quebec is merely throwing out
> political fodder.



Well south, actually. Rio's capacity is already 292 mmtpa en route to 360 in 2016, BHP's a bit less, Vale a bit more.

OTOH, North American iron ore doesn't necessarily have to serve the same markets as Aussie or Brazilian mines. We need the stuff here, too.



>
> A few years ago there was discussion of a Iron Ore
> mine and railway coming down the centre of Baffin
> Island to feed Danish mills. That drifted into
> nowhere as far as I can see. Does anyone know of
> any advancement on that prospect?


Dead, at least as far as railway is concerned.

http://en.wikipedia.org/wiki/Baffinland_Iron_Mine

"In 2012, in a move that surprised many observers, Baffinland seemed to abandon its original development strategy, where a railway would have transported ore to a new port on the south coast of Baffin Island in favour of a having ultra-large dump trucks convey the ore directly from the mine-site via a "tote road" over 100 kilometers to a new port on Baffin Island's north coast.[12] The move surprised observers because the original plan had spent several years undergoing an environmental assessment, and was abandoned not long after the plan had been approved."


Though the wikipedia page suggests the mine will start operations this year, I wonder if that is still the plan.

BobE

1. I looked up some information on the Sept Isles port authority: In 2013, the port handled 27.2 million tons in and out over the rail, of which 25.2 Mt was iron ore going out. The biggest customer was China, with 12.3 Mt; then came Rotterdam with 3.9, Japan with 1.7, Brazil with about a million tons of alumina, and then everybody else. Of the top 15 ports, only one was a US port, Toledo, with 0.67 Mt -- and that may or may not be all iron ore.

2. There is an interesting report in the online edition of Creamers' Mining Weekly dated 6/13/2014: At a mining convention in Africa a consultant, S. Capoferri* of the consulting firm CRU estimated that only about 40% of the iron ore projects currently under development will be needed to meet future demand.

3. I see the Chinese through African Minerals have rehabbed and extended a 42"ga railway in Sierra Leone to initially handle 3 6000 ton [ net, I'm pretty sure ] trains a day; one I didn't know about.

I reiterate: The study is a waste of money.

SZ

*No, I didn't make that very appropriate name up.