IOC suspends plant construction

In response to a deteriorating steel market, Iron Ore Co. of Canada (IOC) is suspending construction of its iron-ore pellet plant in Sept-les, Que.

The company has been in the midst of a $360-million reconditioning project that would have seen the plant come on-stream in mid-2002 at the annual rate of 4.5 million tonnes of pellets.

“The steel industry is facing very difficult market conditions in North America and Europe, which are IOC’s major markets,” says Chief Executive Officer Terry Bowles. “This has resulted in a significant fall-off in demand for IOC’s pellets.”

He adds, however, that construction will resume once market conditions improve. Reactivation should not be difficult, given that construction and equipment purchases are well-advanced.

The suspension will take effect over the next few months.

The company’s other facilities will continue to run at full capacity. However, if poor market conditions persist, the company will consider suspending these as well, beginning next summer.

IOC operates a mine, a concentrator and a second iron-ore pellet-making plant at Labrador City in Labrador, as well as port facilities at Sept-les. The company operates a 420-km rail link connecting the mine to a port.

IOC is held by British mining giant Rio Tinto (RTP-N), with 56%, Japan’s Mitsubishi, with 25%, and the Labrador Iron Ore Royalty Income Fund (LIF.UN-T), with 19%. Rio Tinto became IOC’s majority owner in the late 1990s.

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 in April 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.