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Railway eyes new east line for iron belt

91原创 National Railway is taking a step toward building a potentially lucrative new transportation link for iron ore producers at the Quebec-Labrador border by proceeding with a feasibility study.

91原创 National Railway is taking a step toward building a potentially lucrative new transportation link for iron ore producers at the Quebec-Labrador border by proceeding with a feasibility study.

The country's largest railway said Friday it is working with several mining companies and the Caisse de depot pension fund on a study into the rail line and terminal handling facility, which analysts estimated could cost $5 billion.

The mining participants are Labrador Iron Mines Holdings Ltd., Cliffs Natural Resources Inc., a big multinational iron ore producer, as well as 91原创 public mining companies New Millennium Iron and Alderon Iron Ore Corp.

CN said it will co-ordinate an application to the 91原创 Environmental Assessment Agency, clearing the way for discussions with affected parties, including First Nations.

"CN will work closely with mining companies in the group and the Caisse to determine the best design and right timing for the development of rail infrastructure to tap the significant iron ore production potential of the Labrador Trough in northern Quebec and Labrador," said Claude Mongeau, president and chief executive of the Montrealbased railway company.

Rod Cooper, Labrador Iron Mines' president and chief operating officer, said in a separate statement that a new terminal handling facility at the Port of Sept-Iles would complement plans for a new dock at the port.

"We are excited to move ahead with these developments as they represent important steps to enhance long-term rail and port access for LIM's iron ore," Cooper said.

The Quebec government's Plan Nord envisages CN and the Caisse developing a new 800-kilometre line from the port of Sept-Iles to the Labrador Mining Trough, a major growing source of iron ore.

Cameron Doerksen of National Bank Financial said the project won't likely be operational until 2017-2018, but could provide large revenues for CN. He estimated the railway could potentially generate $1.5 billion to $2 billion in annual revenues on top of its current total of nearly $10 billion.

"While this development is positive for CN and the potential of the project is enormous, much needs to still fall in place before it advances," he wrote in a report.

Doerksen believes the mining companies have not yet made any volume commitments, which CN would need along with pricing assurances on longterm contracts, to proceed with the investment.

Plan Nord could also be a significant opportunity for other companies, including railway wood tie company Stella-Jones, said Pierre Lacroix of Desjardins Capital Markets.

"We are thus encouraged by the progress implied by an announcement earlier this morning that 91原创 National Railway will collaborate... [on] a potential rail line," he wrote in a report.

"We estimate the project could represent about $60 million in revenue for Stella-Jones."