Canadian analyst says IOC in danger of closing, while hope fades for Alderon’s Kami Project
here’s more unsettling news for the iron ore industry in Labrador West after a Canadian investment firm suggested IOC is in danger of closing, while hope continues to fade for Alderon’s much-hyped Kami Project.
A report by Raymond James Ltd., suggested that mining giant Rio Tinto, majority owner of the Iron Ore Company of Canada, is losing money at its Labrador City operation, which employs an estimated 2,000 workers.
“Iron ore prices continue to weaken and by our estimates are below the operating cost at the mine,” the firm wrote in an investment overview published in late April.
Analysts at Raymond James estimate IOC will receive an average price of US$62.50 per tonne this year while costs are estimated at $US68.50.
One analyst said the operation is a “drain” on Rio Tinto and “we believe there is a risk IOC may close if its costs and productivity do not improve.”
Still reeling from Wabush closure
A closure at IOC could spell the end for Labrador West, which was built around the iron ore industry and is still reeling from the closure of Wabush Mines in 2014, which claimed nearly 500 direct jobs.
The mining industry worldwide has been hit hard by low commodity prices caused by a combination of decreasing demand in China, and increased production by industry leaders like Rio Tinto, BHP Billiton and Vale.
Companies like Rio Tinto have been cutting costs in order to offset the drop in prices with the priority shifting from price to volume.
During a conference call with investors last week to discuss mid-year results for 2015, top executives with Rio Tinto refused to say whether IOC was in jeopardy of closing.
CEO Sam Walsh said there’s been a strong focus on reducing costs at IOC, which is considered a higher cost operation because of the distance to Asian markets and other factors.
He also emphasized that IOC president Kelly Sanders moved his headquarters from Montreal to Labrador City “so he can physically ensure that we’re taking every step possible to optimize that business.”
A year to turn things around
The Australian newspaper said Walsh and chief financial officer Chris Lynch told industry analysts recently that IOC could be at risk if productivity plans are not successful.
For the rest of this article, click here: http://www.cbc.ca/news/canada/newfoundland-labrador/it-s-a-double-dose-of-uncertainty-for-labrador-s-iron-ore-industry-1.3186707