UPDATE 1-Labrador Iron says needs new funding to continue mining
(Adds background on markets, CEO comment, share price move)
By Euan Rocha
TORONTO Feb 14 (Reuters) - Canada's Labrador Iron Mines Holdings (LIM) warned on Friday it needs new investment to continue mining operations in 2014, underscoring the challenges facing some of the small and established iron ore miners in Canada and overseas.
The warning, which sent LIM shares sharply lower, 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 Labrador trough in Eastern Canada, said the grade and consistency of its ore began to fall as it went deeper into the mine, resulting in a shortfall in iron ore quality and negative cash generation in its 2013 operating season and a fiscal third-quarter net loss.
"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.
LIM's struggles highlight the challenges that face early-stage iron ore miners working in the Labrador trough, even though many of these companies have strategic partnerships with established steelmakers.
Shares of juniors like New Millennium Iron, Alderon Iron Ore, Adriana Resources and Century Iron Mines Corp have all fallen sharply in the last 24 months.
Even established players like Iron Ore Co (IOC), jointly owned by Rio Tinto , Mitsubishi Corp and Labrador Iron Ore Royalty ; and Cliffs Natural Resources Inc with major iron ore operations in Canada are all re-thinking their commitment to these operations. Continued...