(Reuters) - U.S.-based Cliffs Natural Resources may seek creditor protection in Canada to insulate itself from closure costs and liabilities at its Canadian operations, its chief executive said on Wednesday.
Lourenco Goncalves, who took the helm at Cliffs in August, told Reuters a filing in Canada to protect it from liabilities related to its Canadian operations is “absolutely” on the table.
The move would mirror the route taken by U.S. Steel, which sought creditor protection for its money-losing Canadian operations two months ago.
Earlier on Wednesday, Cliffs said it might have to close its Bloom Lake iron ore mine in Quebec at a cost of up to $700 million as it struggles to find funds to expand the project as a way to make it more financially viable.
Goncalves said that a closure was already in the works, but he was not in a hurry to seek creditor protection.
“I just don’t need to be in a hurry, because I‘m not out of there today and I‘m initiating an orderly process to cease our operations there,” he said. “It is still an ongoing concern.”
Cliffs shares closed 20 percent lower at $8.17 on Wednesday.
Nearly two-thirds of the closure costs are tied to a rail contract with QNS&L, a unit of Iron Ore Co of Canada, which in turn is controlled by global miner Rio Tinto.
Goncalves said Cliffs is not in talks with IOC at this time, but remained open to discussions about minimizing penalties it faces for not giving the required three years notice.
He said the company was also open to selling the Bloom Lake mine, which currently employs over 580 people, but that he would only do so if a buyer was willing to take on the liabilities.
Cliffs said last month that it was in talks with three big steelmakers about funding a $1.2 billion expansion of the mine that would have made operating costs at the site more viable in light of the major slump in iron ore prices.
Goncalves said the stake sale process failed as the parties could not agree on structuring a quick deal.
Chinese steelmaker Wuhan Iron & Steel Co, known as Wisco, already owns a minority stake in Bloom Lake.
Additional reporting by Allison Lampert, Allison Martell and Nicole Mordant; editing by Simon Jennings, Lisa Von Ahn