The Iron Ore Company of Canada (IOC) plans to suspend construction at the iron ore pellet-making plant in Sept-les, Que., thanks to deteriorating market conditions.
The company was in the midst of a $360-million reconditioning project that would have seen the plant come on stream in mid-2002 at a rate of 4.5 million tonnes per year.
IOC’s CEO Terry Bowles said, “The steel industry is facing very difficult market conditions in North America and Europe, which are IOC’s major markets. This has resulted in a very significant fall-off in demand for IOC’s pellets.”
“We are confident that construction will resume in the future with the return of more favourable market conditions and that IOC will emerge from this market cycle stronger and even better positioned to supply customer requirements,” he added.
The suspension will take place over the next few months. IOC says the project could be quickly reactivated in the future as construction and equipment purchases are well advanced.
The company says its other facilities continue to run at full capacity, resulting in a build up of stocks, which will favourably position the company should customer requirements pick up next year. However, if poor market conditions persist the company will look at a scheduled temporary shutdown of those facilities during the summer of 2002.
IOC operates a mine, concentrator and iron ore pellet-making plant at Labrador City, Labrador, and port facilities at Sept-les, Que. The company runs a 420-km rail link connecting the mine to the port.
IOC is held 56% by British mining giant Rio Tinto (RTP-N), Japan’s Mitsubishi holds 25% and the Labrador Iron Ore Royalty Income Fund (LIF.UN-T) has a 19% stake.
Earlier this year, Rio Tinto walked away from a takeover bid for Labrador Iron Ore Royalty Income Fund after too few unit-holders tendered their shares. Rio had offered $14.25 for units of the Fund, in an attempt to consolidate its position in IOC. Rio closed its offer on April 21 after taking up 1.6 million units tendered under the offer. With 4.3 million units bought on the open market, Rio now holds a 20.3% interest in the Fund.
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