UPDATE 2-Cliffs Canada unit rail contract will be renegotiated - CEO

Tue Feb 3, 2015 3:45pm EST
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(Recasts with CEO interview)

By Nicole Mordant

Feb 3 (Reuters) - An onerous transportation contract entered by Cliffs Natural Resources' Bloom Lake iron ore operation in Canada will be renegotiated under Bloom's creditor protection filing, Cliffs' chief executive said on Tuesday.

Lourenco Goncalves said the contract with the Quebec North Shore and Labrador Railway (QNSL) that has Bloom Lake on the hook for $450 million has been stayed by a Quebec judge as part of Bloom Lake's filing last week in Canada.

"It will be negotiated. When a contract is stayed it means it is no longer valid," Goncalves said in an interview.

Asked if a renegotiation could help to make Bloom Lake's assets more attractive to sell under the restructuring proceedings, he said: "This is the correct conclusion."

The rail contract makes up more than half of Bloom Lake's estimated closure costs of $650 million to $700 million. The QNSL line is a unit of Iron Ore Co of Canada (IOC), which in turn is controlled by global miner Rio Tinto.

IOC was not immediately available for comment.