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So why did Alderon take part in CN’s study? It was “a potentially high-value alternative option,” the company stated. But now CN is “obligated to refund the $1.5 million Alderon contributed to the study last year.”
Cap-Ex Ventures TSXV:CEV, which committed $1.75 million to the study, stated last August that the feasibility should “shorten the scope” of the Block 103 project preliminary economic assessment “as Cap-Ex would not be required to develop such extensive infrastructure on its own.” The PEA was originally scheduled for Q1 2013 completion.
CN’s announcement closely followed Champion Iron Mines’ TSX:CHM February 7 pre-feas for the Consolidated Fire Lake North project, which factored in costs for its own $1.33-billion rail link to Sept-Iles. The corresponding rail debt service would increase costs by $9.47 a tonne for a total of $14.27. “This is a higher cost than the initial rates proposed by the CN multi-user rail transportation solution,” Champion stated. “Nonetheless, it shows that the project economics are strong enough to support the construction of a new 310-kilometre railway on its own.”
According to a March 22 Financial Post article, Champion was one of three companies considering their own jointly-held railway. Century Iron Mines TSX:FER president/CEO Sandy Chim told the FP that his company had been talking with Champion and Adriana Resources TSXV:ADI for two years. “We don’t want to be caught in a situation where, after a multi-billion investment, we cannot ship out goods,” the paper quoted him. “Way before production happens we have to work on the logistics.”
CN’s decision also marks another setback for Plan Nord. An $80-billion public/private infrastructure dream envisioned by Quebec’s last government, the idea has faced uncertainty since the Parti Quebecois gained office last September. Infrastructure improvements continue, however, at Sept-Iles, where newly expanded deep-sea facilities are due to begin operation in March 2014.
And while CN’s feasibility has been put on hold, no one has actually said it’s cancelled. The projected iron ore price slump could be ephemeral. Meanwhile Asian interests, determined to break the power of iron ore’s Big Three of Vale, Rio Tinto and BHP Billiton, continue to show interest in the Labrador Trough.
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