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CN shelves study of $5-billion Quebec iron ore railway line

A CN train passes by Dorval station in Montreal in this file photo.

Christinne Muschi/The Globe and Mail

Canadian National Railway Co. has shelved a study into a $5-billion project to build a major new railway line in northern Quebec to ship iron ore.

Montreal-based CN said on Tuesday it is suspending a feasibility study for the construction of the proposed 800-kilometre line that would run from Sept Iles on the Lower North Shore to Schefferville and then further on to the iron mines being developed in the Labrador Trough.

CN says the timing is wrong because of uncertainties regarding the completion of the various mining projects.

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The railway had teamed up with pension fund giant Caisse de dépôt et placement du Québec, with the backing of six mining companies, to fund the feasibility study.

CN said last week it is suspending preliminary planning work on the railway to give it time to evaluate the mining companies' timetables on their respective iron ore projects.

The initial deadline of June 2013 for completion of the feasibility study was pushed back. But now, CN says it's putting the study – a key element of the project – on ice as well.

"We have invested considerable effort and resources towards the feasibility study, but in light of the circumstances, CN has concluded that it is not advisable to continue with the feasibility study at this time," CN executive vice-president and chief financial officer Luc Jobin said in a news release.

The railway was to be an important element in the previous Quebec government's ambitious northern economic development plan, dubbed Plan Nord.

Construction of the railway and terminal had been estimated at about $5-billion.

"The study has been progressing steadily over the past several months. However, the current market realities have resulted in anticipated delays with mine development projects in and around the Labrador Trough," CN said.

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"A joint review of the project together with the mining companies indicates that mine construction schedules and diverging needs for each specific individual project will make it difficult to obtain the critical volumes of iron ore necessary to support the building of a new rail and terminal infrastructure by CN."

Another factor in the move to suspend the study is the decision by some miners in the region not to join the group of mining companies that support CN's project, CN said.

Volumes of iron ore expected to be shipped in the foreseeable future are much lower than initially anticipated, said the company.

CN did not mention the new Parti Québécois government's commitment to increasing the amount of royalties mining companies operating in the province must pay.

Caisse president and chief executive officer Michael Sabia said in the news release Tuesday that "we understand that conditions in the global economy prevent undertaking the project at this time. As a long term investor, the Caisse remains open to participating in infrastructure projects that will facilitate the development of Northern Quebec, always in partnership with an experienced partner that can minimize the operational costs."

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About the Author
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

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