Nfld. & Labrador

Another blow for Labrador as IOC delays Wabush 3 project

The Iron Ore Company of Canada is blaming a weak outlook in the commodities market for a decision to delay development of the Wabush 3 project.

Company has described project as 'critical piece' of operation's future

This is an aerial perspective of the Iron Ore Company of Canada operations in Labrador West, including the proposed Wabush 3 open pit mine. (Iron Ore Company of Canada)

The Iron Ore Company of Canada is blaming a weak outlook in the commodities market for a decision to delay development of the Wabush 3 project in Labrador West.

The project has been described as "critical" to the ongoing viability of the operation, but company officials said in a memo to employees Tuesday that it must limit capital spending in 2016.

With iron ore prices now at a 10-year low, and no signs of a rebound on the horizon, IOC officials said tough decisions have to be made.

The Newfoundland and Labrador government gave its approval for the new open pit mine in September, bringing some much-needed good news to an area hard hit by a prolonged slump in iron ore prices.

Development was expected to begin in 2016, and mining was to commence in 2018. Developments costs were estimated at $250 million.

The memo explained that IOC will continue with engineering activities and will submit a revised approval request to Rio Tinto's board of directors in the second quarter of 2016.

"We recognize this news is unsettling for our employees," Thierry Martel, IOC's vice-president of technical services, said in the memo.

Expansion plan seen as crucial to IOC's future

IOC has been trying to increase production at the operation, and the Wabush 3 pit was seen as crucial to that plan.

Labrador West, which consists of Labrador City and neighbouring Wabush, depends heavily on the mining industry, and has been hard hit by the market downturn.

The IOC mine, ore concentrator and pellet plant employs some 2,000 workers, and company officials acknowledged in the memo that the operation's future is uncertain. 

"It is important for all employees to understand the seriousness of the current situation, while at the same time supporting each other to ensure we can do our jobs safely, and to the best of our ability," Martel wrote.

"IOC remains at risk, therefore, we must continue to adapt to the challenging conditions every day. Our future depends on it."

Newfoundland and Labrador's Department of Natural Resources took a long view in a statement Wednesday. 

"Although it is difficult for communities in Labrador West at this time, the iron ore industry in Labrador over the long term remains attractive due to high quality iron ore resources, stable and dependable regulation and taxation, and low-cost power," the statement said. 

Union in the dark, but hopeful

Most of the workers are represented by Local 5795 of the United Steelworkers union.

President Ron Thomas said he wasn't entirely surprised by the decision to delay this new pit.

He told CBC News he is hoping the decision will not mean more layoffs, but added he's still very much in the dark about what this might mean.

"The company has not discussed anything with us," he said. 

"According to the memo, it is postponed as of now until second quarter and for us it's business as usual. We can't predict the future but are hopeful that IOC has a long life ahead."

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