by Greg Klein | October 21, 2014
A feasibility study into a third Quebec railway to the Labrador Trough is back on track, according to October 21 announcements from Champion Iron TSX:CIA and Adriana Resources TSXV:ADI. The companies have joined the Quebec government in a new entity called la Société ferroviaire du Nord québécois, société en commandite (SFNQ) to oversee the technical and economic report.
The news follows a bill tabled by the provincial Liberals on September 30 to revive Plan Nord, the massive infrastructure program that had been sidelined by the former Parti Quebecois government. The province now intends to create la Société du Plan Nord to co-ordinate development beyond the 49th Parallel, with $63 million budgeted for this year and up to $2 billion by 2035. The bill allocates a $50-million investment in Gaz Métro LNG to expand production and storage of liquefied natural gas, which would be trucked to Stornoway Diamond’s (TSX:SWY) Renard mine, scheduled to open in 2016. LNG transport to other projects would follow.
Quebec will provide up to $20 million for the feasibility. But the companies’ contributions are less clear. Adriana’s late afternoon announcement didn’t specify a contribution. The company takes part through its Lac Otelnuk joint venture, held 40% by Adriana and 60% by Hong Kong-based WISCO International Resources Development & Investment. Champion listed its share as sunk costs valued up to $6 million. That company takes part through its now wholly owned subsidiary, Champion Iron Mines Ltd.
As a separate company in 2013, Champion Iron Mines failed to find private and public backers for a 310-kilometre rail connection between the southern Trough and the deep sea port of Sept-Iles that was expected to cost $1.33 billion. Earlier that year CN TSX:CNR suspended its feasibility study on an estimated $5-billion, 800-kilometre link to the same port.
Currently two railways connect Sept-Iles with the resource-rich region straddling the Labrador border. The Quebec North Shore and Labrador Railway runs a 415-kilometre route to Labrador City. A private line operated by an ArcelorMittal subsidiary serves its Mont-Wright operation.
Other companies have been invited to take part in the feasibility study, which would envision a common carrier.
Among noteworthy aspects of Plan Nord is the government’s confidence that future commodity markets will justify large-scale investment—and that Quebec sometimes prefers to invest in, rather than subsidize, industry. Apart from Gaz Métro, the government’s Investissement Québec unit sees opportunities in a number of ventures including Stornoway, in which the province is acquiring an approximately 29% stake.