Alderon plans to take over Wabush Mines, despite refusal to submit bid
The mine is locked in bankruptcy protection until Jan. 31, 2017
A plan to reuse the Wabush Scully Mine could kick-start a nearby iron ore project, but the interested company has no intention to spend a dollar on it.
Alderon Iron Ore Corp., the group behind the proposed Kami project in Labrador West, announced last week its intention to use the idled mine's pit as a tailings dump for its own mine six kilometres away.
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Wabush Mines, run by Cliffs Natural Resources and its subsidiaries, is locked in bankruptcy protection under the Companies' Creditors Arrangement Act (CCAA).
"We took a good hard look at it and it just doesn't make any sense to purchase it, or even to pick it up for free and run it," said Alderon CEO Mark Morabito. "All you're going to do is lose money."
Instead, Morabito expects the property will revert to the province's ownership when the CCAA protection is lifted, after which he hopes the government will hand over the land to Alderon.
CCAA protection is set to expire Jan. 31, 2017.
Scully's demise could give Kami life
The Kami Project has been waiting in the wings since a preliminary economic assessment (PEA) was released in 2011.
Alderon's new plan would save the company from having to build its own tailings dump, which could trim enough fat to get the project off the ground during the ongoing downturn in the iron ore market.
"We believe it means we can build a mine that would be economic, even in today's depressed environment," Morabito said. "Out of the death of Scully will come the birth of Kami."
Alderon will use its plan for Wabush Mines in its upcoming PEA, due for release in the first quarter of 2017. Depending on several factors, construction could start within 12-18 months of the assessment.
Despite Alderon's expectation the province will hand over the Wabush property, Labrador West MHA Graham Letto said he's had no discussions with the company about its plan.
"That's something we have not even discussed at this point," he said. "I'm not sure if that's even possible."
Complicating the plan is the fact a third party, MFC Bancorp, is the leaseholder on the site and its mineral rights. MFC has sought buyers for the mine, but has come up empty.
Morabito said his company has analyzed Wabush Mines and found zero economically viable reserves in the pit. A statement from the monitor of the CCAA proceedings said it had become "increasingly apparent" no proposal could be expected.
This is not an immediate term solution for the town. It's a long term solution, but it's the best we can offer.- Mark Morabito
Due to the lack of interest, Alderon expects MFC to walk away from the site.
"I don't think they are going to be very happy about our plan because we're going to take our tailings and dump them on top of what ore is left in the ground there," Morabito said. "What MFC is, is a cheque-casher. They simply want someone to come in and keep mining Scully so they can keep cashing cheques, but they don't add any value (to the community)."
CBC's attempts to reach MFC-Bancorp were unsuccessful.
Cautious optimism in Wabush
Mayor Colin Vardy said people in Wabush are unsure what to think of Alderon's plan.
"Ideally, we would like to see Wabush Mines operate as it traditionally has been, but it's not terrible news by any means," he said. "We do need an industry here in our community and we will work with all interested parties and try to get our people back to work as soon as we can."
Vardy said townspeople had a lot of hope in Alderon initially, but in the intervening years hope has been replaced with cautious optimism.
"Alderon is a publicly traded company. I'm willing to bet there's a substantial investment financially from the people here in the community as they believed in the project," Vardy said.
Morabito said he knows it's not the ideal plan for the people of Wabush, but it's better than nothing.
"This is not an immediate term solution for the town. It's a long-term solution, but it's the best we can offer," he said. "It won't happen fast enough for some people. I understand that."