Renewed Plan Nord’s betting on diamonds -by Nicolas Van Praet (Montreal Gazette – July 10, 2014)

Declining prices for resources causes an overall re-think

Quebec is turning north again for deal-making and growth. It may find it has to contend with industry contraction first.

Barely a month after sketching out plans to revive the so-called Plan Nord, a multibillion-dollar economic development strategy hatched by former Premier Jean Charest and pinned on natural resource extraction north of the 49th parallel, the reality of world markets has set in. And for many companies active in Quebec’s north, that means shrinking before they expand.

Take Canadian iron ore miner Labrador Iron Mines Holdings. The company, which operates in the Labrador Trough in Quebec, said last week it has stopped operations this year as a flood of new supply cools prices by about 30 per cent so far in 2014. The company is experiencing “considerable strain” on its cash reserves and needs outside investment to continue, its CEO said.

It’s not the only one. U.S.-based Cliffs Natural Resources in February announced a 50 per cent pullback on capital spending this year, putting on hold a planned expansion of its Lac Bloom, Que., facility. It’s also facing a proxy fight from shareholder Casablanca Capital.

Overall, low commodity prices persist after falling significantly last year. Net earnings in the industry remain near a decade low.

“We should be positive about Plan Nord, but also prudent in terms of expectations,” said Nochane Rousseau, mining sector leader for business consultancy PwC Canada. “It’s a difficult time for the mining industry. … The first thing we should do is to make sure we keep the mines that are presently operating in northern Quebec.”

Interest by international investors in Quebec’s north is growing again after falling under the Parti Québécois, Rousseau said. To build on that interest and help existing players, initiatives such as the plan to speed up the supply of natural gas to the Côte-Nord and northern Quebec regions by 2016 are “the most important right now,” he said. Most companies operating in the north are using diesel or other fuels that are more costly.

But not all resource producers are equal in the Plan Nord. Against problem-plagued firms such as Strateco Resources, precious gem hopeful Stornoway Diamond Corp. stands out like a beacon of positivity amid the gloom. It helps that the company mines a rock with high global demand and limited supply.

So it’s not surprising that Premier Philippe Couillard made a point of attending the groundbreaking ceremony of Stornoway’s Renard diamond mine in James Bay region on Thursday. If he wanted to pick a symbol to highlight the prospects of his “enhanced Plan Nord,” as he calls it, it’s hard to choose much better than $1-billion Renard.

Quebec’s first diamond mine, the project is expected to yield 1.6 million carats per year for a total 18 million carats under the case estimate. But there are more diamonds beyond that, enough the company thinks, for a mine lasting 20 years or more.

“This project marks the relaunch of Plan Nord,” Couillard told guests assembled for the event at the mine’s camp Lagopède, just north of the Otish Mountains. “It’s a big day for northern development and for the growth of our mining industry.”

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