The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.
MONTREAL — Labrador Iron Mines Holdings Ltd. said it is halting all operations at its mines for the rest of the year, the latest industry player to fall victim to slumping demand.
The benchmark price of iron ore, used to make steel, has plummeted 30 per cent this year on rising global supply and reduced steel output in the critical Chinese market. The spot price is in the $93 (U.S.)-a-tonne range, down from almost $120 in early April, a level at which high-cost producers such as Labrador Iron can barely meet their costs. Some observers see the price falling to below $80.
Labrador Iron is experiencing “considerable strain” on its cash resources and now needs outside investment if it is to continue operations, the company’s chairman and chief executive officer John Kearney said.
Across-the-board cost-cutting measures are in place and Labrador Iron is in talks for potential financing with commodity traders, financial institutions and others, the company said. The focus for 2014 is development of the flagship, long-life Houston Mine in the Labrador Trough, it said.
However, financing in the current climate of uncertainty has dried up for many mining companies, as they buckle down and slash costs to ride out the slump. Iron ore producers Atlas Iron Ltd. of Australia and giant BHP Billiton Ltd. have cut jobs and taken steps to boost productivity. Closer to home, Cliffs Natural Resources Inc. indefinitely mothballed its Wabush Pointe-Noire iron-ore pellet plant on Quebec’s north shore last year, and Baffinland Iron Mines Corp. sharply scaled back its Mary River iron ore project in Canada’s north.
“Right now, the chart for iron ore looks horrible,” said John Kaiser of Kaiser Research Online. “I would not want any exposure to iron plays.”
Labrador Iron said on Wednesday that development of its Houston Mine is subject to completion of financing and the negotiation of major contracts. The company also said it is seeking to cut costs by renegotiating agreements with contractors and suppliers.
For the rest of this article, click here: http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/labrador-iron-mines-suspends-operations-amid-falling-ore-prices-high-costs/article19409363/#dashboard/follows/