Labrador Iron says needs new funding to continue mining

Fri Feb 14, 2014 9:12am EST
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TORONTO Feb 14 (Reuters) - Canada's Labrador Iron Mines Holdings (LIM) warned on Friday it needs new investment to continue mining operations in 2014, and reported a fiscal third-quarter loss.

The warning came days after a Reuters poll indicated that iron ore prices were set to test five-year lows this year after hitting a six-month trough in January on rising global supply and slower growth in Chinese steel output.

LIM, which is mining its James open pit mine in the prolific Labrador trough in Eastern Canada, said the grade and the consistency of its ore began to fall as it went deeper into the mine. This resulted in a shortfall in iron ore quality and negative cash generation during its 2013 operating season.

"These ore quality problems, together with significant capital invested during the year, put considerable strain on LIM's cash resources and LIM now needs new external investment to enable the company to continue mining operations in the 2014 season," Chairman John Kearney said in a statement.

The company's operations run from April through November, with a planned winter closure from December to March. LIM is assessing a variety of operating scenarios for the coming 2014 operating season, and focusing on cost reduction and product quality.

In the third quarter ended Dec. 31, LIM reported a net loss of C$31.3 million, or 25 Canadian cents per share. Net revenues in the quarter were C$28.4 million. LIM did not provide year-ago results.

The price of iron ore, the steelmaking raw material, dropped more than 7 percent in January, rivaling losses for all of last year. A further price fall poses a threat to the profit margins of top miners like Vale, Rio Tinto and BHP Billiton and could edge out high-cost producers, including those in China.