Another blow for Labrador as IOC delays Wabush 3 project

The Iron Ore Company of Canada is blaming a weak outlook in the commodities market for a decision to delay development of the Wabush 3 project in Labrador West.

• Wabush 3 mine a 'critical piece' of IOC's future, says president
• IOC exec says Labrador West operations 'at risk'

The project has been described as "critical" to the ongoing viability of the operation, but company officials said in a memo to employees Tuesday that it must limit capital spending in 2016.

With iron ore prices now at a 10-year low, and no signs of a rebound on the horizon,IOCofficials saidtough decisions have to be made.

The Newfoundland and Labradorgovernment gave its approval for the new openpit mine in September, bringing some much-needed good news toan area hard hit by a prolonged slump in iron ore prices.

Development was expected to begin in 2016, and mining was to commence in 2018. Developments costs were estimated at $250 million.

The memo explained that IOC will continuewith engineering activities andwill submit a revised approval request to Rio Tinto's board of directors in the second quarter of 2016.

"We recognize this news is unsettling for our employees," ThierryMartel, IOC's vice-president of technical services, saidin the memo.

Expansion plan seen as crucial to IOC's future

IOC has been trying to increase production at the operation, and the Wabush 3 pit was seen as crucial to that plan.

Labrador West, which consists of Labrador City and neighbouring Wabush, depends heavily onthe mining industry, and has been hard hit by the market downturn.

The IOC mine, ore concentrator and pellet plantemploys some 2,000 workers, and company officials acknowledged in the memo that the operation's future is uncertain.

"It is important for all employees to understand the seriousness of the current situation, while at the same time supporting each other to ensure we can do our jobs safely, and to the best of our ability," Martel wrote.

"IOC remains at risk, therefore, we must continue to adapt to the challenging conditions every day. Our future depends on it."

Newfoundland and Labrador'sDepartment of Natural Resources took a long view in a statement Wednesday.

"Although it is difficult for communities in Labrador West at this time, the iron ore industry in Labrador over the long term remains attractive due to high quality iron ore resources, stable and dependable regulation and taxation, and low-cost power," the statement said.

Union in the dark, but hopeful

Most of the workersare represented by Local 5795 of the United Steelworkers union.

President Ron Thomas saidhe wasn't entirely surprised by the decision to delay this new pit.

He told CBC News he ishoping the decision will notmean more layoffs, but addedhe's still very much in the dark about what this might mean.

"The company has not discussed anything with us," he said.

"According to thememo, it is postponed as of now until second quarter and for us it'sbusiness as usual. We can't predict the future but are hopeful thatIOC has a long life ahead."