Pedal to the metal

Pedal to the metal

Labrador’s mining sector is driving major infrastructure investments in Quebec

Hurricane Humberto’s fury is still far away, about 1,000 km to the south, as the Star Gwyneth approaches Cabot Strait on this late September day on its way to the Port of Sept-Îles.

Ashore in Sydney, Nova Scotia, the mercury has just hit 16 degrees Celsius. It’s sunny and mild; A beautiful, late summer afternoon. Environment Canada has issued a weather warning, forecasting gales of up to 47 knots, or roughly 87 kilometres per hour, due to hit the area later in the day.

But, for now, the Panamax-class bulk carrier with its black sides and red underbelly is staying the course, sailing smoothly ahead at 11.8 knots through the Strait. Her route will take her past the Magdalen Islands in the southern Gulf of St. Lawrence and then between the Gaspé Peninsula and Anticosti Island before docking two days from now at one of Iron Ore Company of Canada’s two docks in Sept-Îles. Then, the 75,000-tonne capacity Star Gwyneth will take on iron ore and head off again.

Even though this behemoth of the seas is longer than two football fields and wider than a baseball diamond, most Canadians will never see her. Tucked away on the northern shore of the St. Lawrence River in Quebec, the Port of Sept-Îles is out of sight and out of mind for most Canadians.

But not for the mining industry.

In the past four years, the volume of iron ore shipped through this Port has exploded, jumping more than 45 per cent from about 20.3 million tonnes in 2016 to an estimated 29.6 million tonnes this year.

In August, Tacora Resources Inc. became the latest of three new arrivals to the Port of Sept-Îles with a load of iron ore from its Scully Mine in Wabush, Labrador. The other new arrivals include Quebec Iron Ore Inc. and Tata Steel Minerals Canada Limited. Iron Ore Company of Canada has already been using the Port for so long that it has its own terminal with two docks.

Due to this spike in demand from mining companies operating in the Labrador Trough, which runs roughly along the Labrador-Quebec border from north to south, a $180-million infrastructure upgrade program is underway at the Pointe-Noire terminal in Sept-Îles.

In mid-August 2019, federal Transport Minister Marc Garneau announced Ottawa was ready to plunk down $50 million and Quebec Premier François Legault matched that with another $50 million—bringing the total Province of Quebec investment up to $80 million for this infrastructure project. SFP Pointe-Noire (a private and public corporation working to develop and enhance its Pointe-Noire assets) is putting in the remaining $50 million.

“The potential of the Labrador Trough, particularly for the exploitation of metals, is encouraging,” said Legault in French in August, explaining why this is the right time to upgrade the facilities. The docks at the SFP Pointe-Noire terminal, built in the mid-1960s, are still capable of accommodating the smaller ships but the water there is not deep enough for the larger bulk carriers used today throughout the world.

Under the infrastructure upgrade program, two new conveyors are being built to connect its storage yards to the newly-built, higher-capacity multi-user terminal in the Port of Sept-Îles, says Gabriel Striganuk, SFP Pointe-Noire’s manager of corporate affairs and business development. Once built, these will more than double the current ore-handling capacity.

That investment in extra capacity for the future is well worth it, says Striganuk. “Whether we build smaller conveyors or bigger ones, the cost is not all that different… [and]… all the minerals from the Labrador Trough, whose capacity seems almost infinite, have to be shipped through Pointe-Noire,” he said in an interview in French.

When iron ore leaves Labrador, it is transported south on the Quebec North Shore and Labrador Railway. That starts in Labrador City, stretches out for 414 km and ends at Sept-Îles. The ore then has to be freighted another roughly 34 km on a spur line to Pointe-Noire so it can be loaded onto ships. That spur line is also going to be upgraded starting in the spring of 2020.

The Quebec North Shore and Labrador Railway is privately owned by Iron Ore Company of Canada. Other mining companies, though, usually don’t own the rails or run their own trains—and that can lead to disputes.

Under Canada’s Transportation Modernization Act (passed last year), mining companies and the railways can resort to something called Final Offer Arbitration to settle disputes over the cost to transport ore.

Here’s how it works. Both the railway and the mining company have to agree on an arbitrator to settle their dispute. They then put forward their proposals for how much the service should cost. The arbitrator then picks one or the other of those two proposals. In an effort to inform his or her decision-making, the arbitrator can ask for an independent third party to provide a cost assessment outlining how much it should cost to transport the ore. But the arbitrator isn’t bound to do that.

When arbitrators don’t call for a third-party cost assessment, mining companies are left in the dark without expert advice on what the costs should really be, says Brendan Marshall, vice-president of economic and northern affairs for the Mining Association of Canada. “A shipper should have the right to have a costing assessment available to the arbitrator to help him make a decision… Knowing that the finest arbitration is one where data informs the process, we maintain that the data should be available to the arbitrators,” says Marshall.

In Canada, the mining industry is a major customer of both the country’s railways and its ports. “Annually, the industry accounts for approximately 50 per cent of total rail freight revenue generated and is the largest single shipping sector by volume by both rail and marine modes,” states the Mining Association of Canada’s Facts & Figures 2018 report.

The cost of disruptions of rail service while these disputes are worked out is simply too costly for the mining companies, says Marshall. “If you miss a sale because a product is out of the ground and sitting on your lot, then you’ve essentially lost a sale … and you’re contracting losses,” he says. “Rail transportation is the single biggest factor in getting that product to market.” •

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