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Mayor of one-industry Wabush, N.L., says town will tough out mine shutdown

ST. JOHN'S, N.L. - The mayor of a small Labrador town that relies on one of Canada's largest iron ore mines as its prime employer says he's thrown but not defeated by news of a shutdown.

"We're going to get through this," Wabush Mayor Colin Vardy, who took the helm at town hall last September, said Wednesday as word of the Scully mine's fate spread.

"This is definitely going to be a tough time. But it's not going to be anything that's going to knock us down completely."

Cliffs Natural Resources blamed dropping prices and high costs for its decision to idle the site by the end of March. The move affects about 380 unionized workers and 120 staff members at the mine and the Pointe Noire rail and port operation in Quebec.

Vardy said the town of 1,900 residents relies on the mine for one-third of its budget. But he stressed that the company assured him just days ago that a grant in lieu of taxes worth $2.4 million has already been processed for this year.

"Nothing has changed from an operational standpoint," he said from Wabush. "There's enough stress, enough discomfort in our town right now.

"I'm wholeheartedly telling residents I have no reason to believe that our budget will change for 2014."

The same can't be said for workers, many of them carrying hefty mortgages after the latest mining boom inflated local real estate and rent prices.

Sean Whiteford, Cliffs vice-president for Eastern Canada iron ore operations, said it was a tough decision but the mine has become too expensive to run. Fourth-quarter cash costs last year were $143 per ton compared to volatile prices ranging from $120 to $130 per ton, he said.

"And we have to add freight in on top of that. We're obviously losing money."

The company expects to spend about $100 million this year to idle the mine before the end of March. Idling, as compared to closure, means power will flow to the site in coming weeks in case another buyer is found.

Whiteford said the mine does not produce much iron ore anymore but rather a concentrate that is only sold to certain customers in Asia.

"And we compete against much lower-cost producers."

Company and town officials met Wednesday to discuss how Cliffs can help workers adjust.

"This is an unfortunate event," Whiteford said. "We'll work with the town, we'll work with the families to get them through this transition."

Cliffs president Gary Halverson said in a statement that severance packages and other support services will be offered.

The Scully mine and concentrator have been in operation since 1965.

Premier Tom Marshall is heading to Wabush for meetings and a news conference Thursday along with Natural Resources Minister Derrick Dalley and Transportation Minister Nick McGrath, responsible for Labrador issues.

"Without question, when we see something like this it's devastating," Dalley said in an interview. "Government will be fully supportive of the community and we remain optimistic that there will be new opportunities on the horizon for them."

Those may include a new buyer for the Scully mine, Dalley said.

"There has been interest particularly from China in new developments in iron ore."

On that note, Dalley said a long-awaited decision on whether the province will pay to build a dedicated power line from Churchill Falls to Labrador West is coming Thursday or Friday.

Alderon Iron Ore has said approval of the line, estimated to cost about $300 million, is key to developing its $1-billion Kami mine project in the region. The Kami project, owned 75 per cent by Alderon and 25 per cent by Hebei Iron and Steel of China, has the potential to create more than 2,000 construction jobs and 650 full-time jobs, Dalley said.

"The importance of that is highlighted by what we've seen in Wabush."

The Canadian Press

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