Iron industry: Quebec against the world

producteurs-fer-quebecois-doivent-trimer(Sept-Iles) At a time when the price of iron debacle abuses the greatest, mining players in the province move heaven and earth to weather the storm. But is it that Quebec has what it takes to compete with the giants of the planet in the darkest time? Looking to the Quebec industry iron.

Times are tough for Quebec iron producers who juggle a price per ton which tumbled US $ 189 in 2011 to US $ 37 in December. The beginning of the year nevertheless brought a timid upturn, with a ton which is trading now around US $ 50.

“The question everyone asks is: Is it really that 2015 represents the trough of the cycle?” Says John Gravelle, partner and leader of the mining sector for Quebec at PricewaterhouseCoopers. Although no one has the confident answer, “2016-2017 years will be full of challenges for the iron industry,” he predicts.

And the key to success for players of Quebec will reduce costs. A necessary exercise which is already doing all producers. For example, Rio Tinto IOC managed to cut spending by $ 70 million in 2015, but plans to cut an additional $ 90 million during the year.

“The challenge will be to keep the cost reduction programs sustainable, permanent,” says Rousseau, who points out that general, mining were easier in recent years to cut their costs through the weakness of the Canadian dollar and falling oil prices.

In the bear market that exists, companies that have done the most generous nest in the Labrador Trough, must work hard to get their game on a global scale. It is estimated that producing one ton of iron ore costs twice more expensive in Quebec than in Australia, one of the largest producers in the world.

The size of the deposits, their content and volume are also not strangers to this large gap, according to Rousseau. Ore from the North Shore and Labrador achieved excellent quality, but after a costly process of concentration, “one more step that comes increased costs of production.”

For cons, the industry paid a premium on the quality of the sales price. “There’s demand for the ore in Quebec because of its quality, but also the significant absence of impurities, which ensures that steelmakers want to often combine it with other” argues an expert in mining.

The remoteness of the province of large markets do not benefit Quebec mining that must deliver their production to China in particular. Even if his appetite is less in recent years, the Chinese still consuming countries in 2015 70% of all iron product on the planet. “We are far,” says Mr. Rousseau.

If Quebec is far from Asia, Northern Québec is also far from shipping ports. One railroad, owned by Rio Tinto IOC connects Labrador to Sept-Iles. Producers, to the exception of ArcelorMittal with its own plot of the Mont-Wright mine in Port-Cartier, should enter into commercial arrangements with IOC.

The results of the feasibility study for the construction of a new railway line, multi-user type connecting Sept-Îles in the Labrador Trough, must be known in September. Québec and its partners, including Champion, looking to identify an optimal solution for the transport of the ore.

The northern climatic conditions also reduce the opportunities for companies with a shorter work window. “It may involve cost overruns, delays. […] The climate also ensures that the equipment will require more maintenance, more maintenance, “John Gravelle raises.

And benefits?

Quebec still holds the 8th place of the most attractive mining jurisdictions in the world, according to the latest ranking by the Fraser Institute. The province was also leading the 2007 standings with 2010. A skilled workforce, a large and sparsely populated territory a diversified mining potential are, among others, in terms of benefits.

Quebec also has a large pool of institutional investors that provide “significant support” to the industry. The state including recently acquired mining assets Cliffs Natural Resources for $ 66,750,000 to allow the opening up of Pointe-Noire in Sept-Îles, a vital sector for northern development.

Quebec has also invested $ 20 million in the Bloom Lake mine in Fermont, for Champion Iron Limited can put hand after stopping Cliffs operations.

“Positive” investments that are part of the “long view” Plan Nord says Rousseau.

The Quebec mining industry also benefits from hydropower, “clean energy” that will position the province well “with everything that comes to carbon taxes.”

Reduce the “red tape”

In the context where mining tighten their belts to reduce costs, the Quebec Mining Association board with the state on ways to reduce “red tape” and accelerate time to obtain permits.

“We are not saying we want to rewrite laws, certain amendments which we work do not require legislative changes, but there are ways to work with current laws and be more effective,” said the CEO Josee Methot.

The QMA cites the example of the simplification of certain elements of the tax system in Quebec “because it is heavy work.” In its 2016 survey, the Fraser Institute also threw into relief the long lead times for delivery of permits, including environmental ones. Sources consulted in the industry also raised.

“If we want when prices are going to be good, investors come to us, although we have to be better and put conditions in place for them to come here rather than elsewhere,” says Ms. Methot. The QMA emphasized that “working tables” are in place with Quebec and “there is a will on both sides” to improve things.

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