ST. JOHN’S, N.L. – The announcement of a new power line for western Labrador is a leap toward development of the $1.3-billion Kami mine in the region, says the president and CEO of Alderon Iron Ore Corp.
Tayfun Eldem said Premier Tom Marshall’s confirmation Thursday of the $300-million line from Churchill Falls is the certainty the company needs to nail down financing.
“We’re pursuing $1 billion worth of debt,” Eldem said in an interview from Montreal. “And nobody’s going to lend you money unless they know that there will be power when this project is built.”
Eldem said the company will forge ahead as soon as the project is released from federal environmental assessment with construction starting as early as this spring or summer. It was released from the provincial environmental review last month.
The Kami project is expected to create about 800 construction jobs with hundreds more spin-offs, along with about 500 full-time production jobs, Eldem said.
Marshall made the long-awaited announcement in Wabush where he met Thursday with workers affected by news this week that the nearby Scully iron ore mine is shutting down.
Cliffs Natural Resources blamed volatile prices and high costs for its decision to idle the site by the end of March. The move affects about 380 unionized workers and 120 staff members.
There are hopes that another buyer may be found for the mine. But if not, Alderon (TSX:ADV) expects to need many of those skilled workers and more for its Kami project.
Confirmation of the power line was a bit of good news in the one-industry town of Wabush — population 1,900 —which has relied on the Scully mine for one-third of its budget.
Marshall said Alderon will contribute $65 million for the new power line as other users will help cover the rest according to rates set by the provincial utility regulator.
Newfoundland and Labrador Hydro has received a $65-million letter of credit from Alderon and has been directed to start building the extension as soon as possible, said the premier.
“There are tremendous opportunities and demand for the iron ore that the Labrador trough has — another 80 years of supply — but there has got to be power to make that economic growth happen, to make industrial development happen,” he said from Wabush.
Marshall said the decision by Cliffs to idle the Scully mine is a major blow for the region. The company has said it will provide severance packages and other assistance for workers.
“It’s very difficult right now and there’s a transition period,” Marshall said. “But I think the future, given the opportunities that are out there, there’s good reason for hope.”
Alderon said in a statement that it has worked with the province and Crown corporation Nalcor Energy for more than two years to secure access to enough power for the Kami development.
The project over time will generate an estimated $3.9 billion in tax revenues and add $25.4 billion to the province’s gross domestic product, it says.
The Kami project is owned 75 per cent by Alderon and 25 per cent by Hebei Iron and Steel of China.