Wabush Mines shutdown blamed on production costs

The company that owns Wabush Mines in Labrador saysits decision to close the iron ore mine and put nearly 400 people out of work is based on financial problems at the operation that it could not overcome.

Cliffs Natural Resources announced plans Tuesday to idle the mine, known as Scully, effective immediately.

The company, the key employer in a one-industry town, said production costs were simply too high to continue.

"In a volatile iron ore market, and [with] escalating costs at Scully, we deemed the operation as unsustainable and the decision was made to idle the operation," said Sean Whiteford, a vice-president with Cliffs.

The decision to idle meanslimited electricity will still be available at the mine site for the coming weeks, should Cliffs be able to find a new buyer.

Wabush Mayor Colin Vardy said the closure is a setback, but is certainly no death knell for the town.

"You gotta stay strong. It's trying times. This is no different than the fire that we had this summer," he said, referring to forest fires that prompted a two-day evacuation in late June.

"It was something that could've very easily torn apart our community. We got through that, and we'll get through this," Vardy said.

Meanwhile, the local Steelworkersunion said workers will get 12 weeks of severance pay.

Jason Penney, USW Local 6285 president,saidsome workers, however, will struggle to pay their mortgages.

Penney said due to the housing market, they were forced to purchaseexpensive homes.

"Alot of people got big houses and stuff, or big mortgages. The problem is if you wanted to work in Labrador west in the last couple of years, you had no choice but to purchase. With all the contractors in town for the different local mining companies, the rental market was just out of this world," Penney said.

He said workers who own company homes will get a six-month break on mortgage payments.

Penney added that a general membership meeting is planned for Thursday night in the town. One of the items on the agenda will betrying to get the company to offerearly retirement packages.

Premier heading to town

Newfoundland and Labrador Premier Tom Marshall is heading to Wabushon Wednesday with two cabinet ministers.

"While we believe this was undoubtedly a difficult decision for Cliffs, our thoughts are with employees of the mine and their families during this challenging time," Marshall said in a statement issued on Tuesday.

"It's terrible, I feel for the people in Wabush. Those of us who live in towns and cities, and I'm one of them, that relyon one major industry, when that industry goes down, it hurts ... it hurts badly ... it affects a lot of people. It's stressful," Marshall told reporters on Wednesday.

"I've been told that when you lose a job, [that] next to a death in the family, it's probably one of the most stressful things that you go through.In spite ofthis bad news, Labrador west has seen ups and downs, we're optimistic about what the future can hold for Labrador west and I wanted to talk to the people about that."

The decision comes at a time while Alderon Iron Ore is intensively lobbying the Newfoundland and Labrador government for financial support for a dedicated power line for a mine it wants to build near both Wabush and nearby Labrador City, home of the Iron Ore Company of Canada's much larger mine.

The closure will be a significant problem for the town of Wabush, which receives about a third of its operating budget from the mine.

Whiteford said the decision to idle the mine, while affecting the entire workforce, was not made lightly.

"We understand the impact that this has on the community and we will work with the town and the employees to get them through this transition," he said.

The company's contract with union workers is set to expire this month.

Cliffs Natural Resources Inc. has also indefinitely suspended its planned expansion at the Bloom Lake Mine in Quebec and slowed spending fortailingsand water management there.

The cuts come as Cliffs chops capital spending in 2014 by half, compared to 2013, under pressure from an activist investor. Its 2014, capital expenditure will be between $375 million and $425 million US.