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No white knight for idled Wabush Mines

Blood on the tracks

Workers and local businesses hoping for a re-opening of Wabush Mines will be disappointed to learn that a deal to purchase the facility has been scuppered.

The iron ore mine in western Labrador was closed in fall, 2014 by owner Cliffs Natural Resources (NYSE:CLF), a victim of low iron ore prices. Around 500 workers lost their jobs, with a handful left on to handle care and maintenance.

In April, the gloom and doom over the small mining town of Wabush was temporarily lifted, when it was revealed that an American buyer, Virginia-based ERP Compliant Fuels, had submitted a bid to Cliffs. ERP co-owner Tom Clarke went so far as to tell the CBC that due to the upswing in the iron ore market- the price hit a 16-month high of $68.70 a tonne in mid-April – the mine could re-open by early 2017 and bring with it between 300 and 400 jobs.

Observers thought that Wabush Mines could have a similar fate to the Bloom Lake facility, which Cliffs sold to Quebec Iron Ore Inc., a subsidiary of Champion Iron Ltd., (TSX:CIA) for $10.5 million. Bloom Lake is in northeastern Quebec.

Hopes however were dashed last week, when ERP said it wouldn’t take on the iron ore operation.

“We wish to advise you that the potential purchaser has advised that it will not proceed with the transaction,” says a letter to the parties involved, made public Thursday.

The mine closure will now be subject to the Companies’ Creditors Arrangement Act, which is applied where companies that owe more than $5 million. For Wabush, it means the mine’s assets will be liquidated:

“Accordingly, the CCAA Parties, in consultation with the monitor (FTI Consulting Canada Inc.), are in the process of analyzing liquidation offers and will endeavour to negotiate definitive agreements, subject to court approval for the liquidation of the equipment at the Wabush Mine and sundry other assets,” the letter states.

Before it closed, Wabush Mines was Canada’s third largest iron ore operation, with an annual capacity of 6 million tonnes. Mining there began in 1965, at the Scully Mine, with iron concentrate railed to a pelletizing facility in Pointe Noire, Quebec, for shipment to Europe and throughout North America.