August 10, 2012 / 12:07 PM / 5 years ago

CN Rail gets miner support for study of Quebec rail plan

2 Min Read

(Reuters) - Canadian National Railway Ltd (CNR.TO) has won backing from a group of mining companies to study the feasibility of a proposed C$5 billion ($4.9 billion) rail link in northern Quebec to ship iron ore from the isolated region.

Canada's biggest railroad, which said last month it would shelve the plan unless more miners signed up, said the study will assess the cost and engineering needs of the rail line and the associated infrastructure.

Five miners will help pay for the study along with CN and partner Caisse de depot et placement du Quebec, the Quebec pension fund, which will own one-third of the project. CN did not disclose the cost of the study.

The mining companies are Cliffs Natural Resources Inc (CLF.N), Labrador Iron Mines Holdings Ltd LIM.TO, New Millennium Iron Corp (NML.TO), Alderon Iron Ore Corp ADV.TO and Cap-Ex Ventures Ltd CEV.V.

The proposed 800-kilometer (500-mile) rail line would link Port of Sept-Iles on the Gulf of St. Lawrence to a mining region north of Schefferville, Quebec.

Montreal-based CN said it will apply within days to the Canadian Environmental Assessment Agency for the permits needed for the project.

"CN will work closely with mining companies in the group and the Caisse to determine the best design and right timing for the development of rail infrastructure to tap the significant iron ore production potential of the Labrador Trough in northern Quebec and Labrador," CN Chief Executive Claude Mongeau said.

The project, which has an ambitious 2017 launch target, could generate more than C$2 billion in annual revenue for CN, RBC Capital Markets analyst Walter Spracklin has said.

Iron ore is too heavy to be transported by truck. Current Canadian output is about 40 million metric tons (44.1 million tons) annually. Top global producers Australia and Brazil have a combined output of more than 850 million tonnes a year.

Reporting by Susan Taylor, with additional reporting by Maneesha Tiwari in Bangalore; Editing by Saumyadeb Chakrabarty

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