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Plans to build Baffin Island’s massive Mary River iron ore project, a key driver of Canada’s northern development, have been scaled back to a much smaller proposal as its owners fall victim to global financial tumult.
In a letter to Nunavut authorities, operator Baffinland Iron Mines Corp. said it is replacing a mine plan to produce 18 million tonnes a year of iron ore with one that will produce just 3.5 million tonnes. A planned railway for the project will be deferred, and the iron ore will instead be trucked to an existing small port instead of a building a new one.
The original project had a development cost of about $4-billion, but the scaled-down plan would keep spending to an estimated $740-million.
“In the current global financial environment, the large development cost for the Mary River Project is difficult to finance,” said Baffinland, a joint venture between global steel giant ArcelorMittal and Iron Ore Holdings LP, its private equity-backed partner, in a letter to the Nunavut Impact Review Board. “The same effect is being felt by many major projects around the world.”
Mary River is the latest casualty of slowing commodities demand and soaring operating costs in the resources sector that have already caused companies to delay multibillion-dollar mining projects in recent months. Even the largest miners have been hit by slower growth in China, and economic woes in Europe and the United States.
Teck Resources Ltd., Canada’s largest diversified miner, said in November it deferred $1.5-billion in capital spending over the next year amid rising costs and an unpredictable outlook for the economy.
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