IOC calls off expansion

Nadya Bell
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Capital spending cutbacks curtail $800-M expansion

Two short months ago the Iron Ore Co. of Canada (IOC) announced plans to spend a total of $800 million towards ramping up the mine's production by 50 per cent in the next three years.

"The decision highlights not only the value of Rio Tinto's global platform of iron ore production, but also the level of confidence in market conditions over the longer term," IOC chairman Sam Walsh said in a release Oct. 4.

Two short months ago the Iron Ore Co. of Canada (IOC) announced plans to spend a total of $800 million towards ramping up the mine's production by 50 per cent in the next three years.

"The decision highlights not only the value of Rio Tinto's global platform of iron ore production, but also the level of confidence in market conditions over the longer term," IOC chairman Sam Walsh said in a release Oct. 4.

Wednesday, after an announcement of substantial job and capital investment cutbacks at Rio Tinto, the mine's parent company, IOC announced it would capitulate to global markets and put all expansion projects on hold.

Michel Filion, director of communications for IOC, confirmed the announcement.

"Last fall we made two announcements of the expansion, Phase 1 and Phase 2, for a total of $800 million, but this expansion program has been for now suspended," he says.

Some aspects of the expansion have already begun, but none of them have been completed, Filion says.

"They were all on their way but we have to suspend them for now," he says. "The decision has been made today and even the ore delivery system has been suspended as well."

The decision may be revisited, but it would depend on a significant improvement in the global market conditions that caused the sharp fall in commodity prices, Filion says.

Global cuts

Rio Tinto, one of the world's largest miners, announced Wednesday it is eliminating 14,000 jobs worldwide, cutting capital investment and selling assets.

"Rio Tinto made a global announcement this morning and IOC is, as well, adjusting to the market conditions," Filion says. "We have to adjust our production to the demand as much as we can."

Filion says the company will extend the shutdown of operations in July 2009 to include the mine, concentrate and power plant operations. The partial production suspension at the mine was announced two weeks ago.

Shock to community

The sharp reversal in fortunes over the past two months has been a shock to Labrador City, says Mayor Graham Letto.

"Just up to two months ago we were doing very well. The expansion projects were going ahead quite smoothly, and it changed overnight. I guess the world changed overnight and we're part of that big world, and unfortunately we cannot expect to come out of this unscathed," he says.

"We're part of the big world markets and everybody is going to feel the impact of this."

No permanent IOC employees are expected to lose their jobs as a result of the recent announcement, but Letto says the loss of expansion projects will have a significant impact on the town and the companies that are depending on that business.

"With the expansion projects all suspended, which is terrible news because of a lot of people are employed with that, there's going to be a lot of people loosing their jobs," he says.

The expanded mine shutdown in July means most employees will take their vacation at that time, Letto says.

"I think people have it on their mind now that it's going to get worse before it gets better, this may not be the end of the bad news, but nevertheless we hope it is," he says.

The IOC board of directors is set to meet today.

nbell@thetelegram.com

Organizations: IOC, Rio Tinto, Iron Ore Co. of Canada

Geographic location: Labrador

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Recent comments

  • Great
    July 02, 2010 - 13:30

    This was great news. Now the employment that was to begin the first of the year for some has been crushed yet again. Better get them make work projects going Danny, not much else left here anymore and EI is running thin.

  • Tim
    July 02, 2010 - 13:28

    Johnny, sorry to not share your outlook but I too have lost out due to the shutdown and expansion halt in the province. Not too sure if you would mind splitting your income with those less fortunate, but looks like a lot more of us are falling into the have not status.

    Our elected officials were to look out for our best interests, now they need to use what we have provided them with to ease the transition to the ranks of the un-employed. Either that or we are about to see a surplus gone very fast to provide the basics for an entire province that will be well below the poverty line.

  • Johnny
    July 02, 2010 - 13:16

    Comments like Great bit of news from SJ whether directed at Danny or any other politician are just stupid. They must be posted just to get a rise ot of others. I guess it worked as you got a rise out of me. I wonder what you expect the givernment to do. Send people or businesses cheques in the mail? Employment rises and falls with local, national and world economies. We have an EI system however inadequate it may be to help lessen the financial blow. I continuously read posts of people whining in the good times and whining in the bad. We are ulitmately responsible for our own lives and I am thankful every day that I don't live in another part of the world where people are starving and being shot at.

  • Fernando
    July 02, 2010 - 13:08

    Newfoundland & Labrador could not stay insulated from the Global Economic Crisis forever ... especially one of this magnatude and one which is reported by much higher-ups than Danny Williams, to get MUCH worse ...
    Sad really ... after 500 years of a near-Third World economy, we were on the verge of an breakthrough ...
    Don't be surprized if the D-word replaces the R-word in reference to the world economy within the next 12 months. Have Not Was No More ... for a very brief time.

  • Great
    July 01, 2010 - 20:17

    This was great news. Now the employment that was to begin the first of the year for some has been crushed yet again. Better get them make work projects going Danny, not much else left here anymore and EI is running thin.

  • Tim
    July 01, 2010 - 20:16

    Johnny, sorry to not share your outlook but I too have lost out due to the shutdown and expansion halt in the province. Not too sure if you would mind splitting your income with those less fortunate, but looks like a lot more of us are falling into the have not status.

    Our elected officials were to look out for our best interests, now they need to use what we have provided them with to ease the transition to the ranks of the un-employed. Either that or we are about to see a surplus gone very fast to provide the basics for an entire province that will be well below the poverty line.

  • Johnny
    July 01, 2010 - 19:57

    Comments like Great bit of news from SJ whether directed at Danny or any other politician are just stupid. They must be posted just to get a rise ot of others. I guess it worked as you got a rise out of me. I wonder what you expect the givernment to do. Send people or businesses cheques in the mail? Employment rises and falls with local, national and world economies. We have an EI system however inadequate it may be to help lessen the financial blow. I continuously read posts of people whining in the good times and whining in the bad. We are ulitmately responsible for our own lives and I am thankful every day that I don't live in another part of the world where people are starving and being shot at.

  • Fernando
    July 01, 2010 - 19:43

    Newfoundland & Labrador could not stay insulated from the Global Economic Crisis forever ... especially one of this magnatude and one which is reported by much higher-ups than Danny Williams, to get MUCH worse ...
    Sad really ... after 500 years of a near-Third World economy, we were on the verge of an breakthrough ...
    Don't be surprized if the D-word replaces the R-word in reference to the world economy within the next 12 months. Have Not Was No More ... for a very brief time.