The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry.
As the daylight hours shorten and winter chill takes hold of the iron ore mines and surrounding communities in the Labrador Trough, it’s as good a symbol as any of the deep freeze that is engulfing the global iron ore market, as spot prices continue to head south.
Back in October, Cliffs Natural Resources said it would permanently close its Wabush iron ore mine on the Labrador side of the Trough, after having laid off some 500 workers in February when it first idled the mine.
And now Cliffs says it has failed in its attempts to find investment partners for the US$1.2-billion expansion of its Bloom Lake iron ore mine on the Quebec side of the Trough — an expansion that the struggling major said was needed to make the Bloom Lake mine financially viable.
While Cliffs had been optimistic about finding such financial partners as recently as a month ago, layoff notices have been sent to some 400 workers at Bloom Lake ahead of the closure of the entire Bloom Lake complex, which will take affect in mid-December. Around 80 workers will be kept for care and maintenance.
Cliffs now states bluntly that it is pursuing its “exit options” for all its Eastern Canadian iron ore assets. Perhaps the biggest surprise in the announcement is the high price tag that Cliffs has put on closing shop and leaving Eastern Canada: up to US$700 million in the next five years.
Cliffs already prepared some of the financial groundwork for its exit in its third-quarter results, having written off US$4.5 billion related to Bloom Lake mine’s long-lived assets, US$28 million related to Wabush’s long-lived assets and US$254 million on the Chromite Ring of Fire assets in Ontario.
One of the realities of living in a remote mining town is the community’s vulnerability to macroeconomic events on the other side of the world, with little to no access to the real decision makers.
In the case of iron ore, the market is oversupplied courtesy of massive production increases by some of the biggest players, including BHP Billiton, Rio Tinto, Vale and Fortescue Metals.
For the rest of this editorial, click here: http://www.northernminer.com/news/editorial-iron-ore-prices-wheres-the-bottom/1003370213/