Shares of Labrador Trough juniors fall as rail plan halted

Mon Feb 11, 2013 12:13pm EST
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* Firms are developing projects in region rich in iron ore

* New rail line could help control transport costs

Feb 11 (Reuters) - Shares of junior miners with projects in Canada's Labrador Trough fell on Monday, after Canadian National Railway Co hit pause on its plan to build a new rail line in the region.

CN, Canada's biggest railroad, said late on Friday it had halted a study into the feasibility of building an 800-kilometer (500-mile) line to connect the isolated region to port.

The Labrador Trough, a geological formation extending south-southeast through Quebec and Labrador, is home to vast deposits of iron ore, the main component of steel. But a recent slump in the benchmark price for iron ore O62-CNI=SI has jeopardized the viability of projects in the sub-Arctic region.

Two rail lines already exist in the region, but their capacity is insufficient to meet demand from planned new mines.

Stretching from the Port of Sept-Iles on the St. Lawrence River to north of Schefferville, Quebec, the proposed new line could help keep a lid on transport costs.

CN said back in July it might shelve the plan unless more miners committed to using the proposed rail line. In August, five miners agreed to help pay for the study along with CN and its partner, Caisse de depot et placement du Quebec - the Quebec pension fund.

The railroad operator said on Friday it is halting the study, as miners are delaying projects. The news hurt shares of early-stage Canadian iron ore miners.   Continued...