IOC in Labrador City losing money with sub-$40 ore, says VP

Even though it is leaner and more efficient, a cratering of iron ore prices means the Iron Ore Company of Canada operation in Labrador West is no longer breaking even, says northern operations vice-president Mike Wickersham..

However, an emphasis on cost reductions and improved productivity means the operation will be a strong financial performer when markets rebound, he added.

• Another blow for Labrador as IOC delays Wabush 3 project
• IOC exec says Labrador West operations 'at risk'

"People have really stepped up to make this business healthy and resilient," Wickersham said. "There's still more work to do."

Averted a serious financial blow

Wickersham gave a cautious assessment of IOC's outlook during an interview Thursday with the Labrador Morning Show, just two days after the company informed employees it was delaying an important expansion at the site.

He said IOC entered 2015 facing a serious financial blow because of slumping prices.

But a series of measures helped improve ore production by roughly 20 per cent, and reduce costs by an equivalent amount.

Wickersham said overall productivity also swelled by 40 per cent.

He said this has allowed IOC to continue operations as prices fell from a high of $75 per tonne at the beginning of the year to a 10-year low of under $40 as of Wednesday.

But with many analysts forecasting more struggles ahead for the industry, Wickersham would not rule out more pain for IOC.

"Any rational person would have some concerns about the iron ore business in the Labrador trough," he said. 

"When prices get below $40 a tonne for folks who are this far away from the market, which is primarily in China, you need to worry," he said.

Wabush 3 on the backburner

One of the casualties of the market slump is the Wabush 3 open pit mine expansion.

The company had planned to begin development of the pit in 2016, but informed employees on Tuesday that it is now on hold.

Wickersham said the decision will not mean layoffs now, but he wouldn't rule out future job cuts.

"We'll continue to use our folks to run at full production, and we have some alternatives in other ore sources in the mine," he said.

He said there will be a delay in some spending in the community, with much of the impact being felt by contractors who would support the development.

The Wabush 3 project is "absolutely vital" to the future of the IOC operation, said Wickersham, because it contains a very large body of ore. The cost of mining the current pits is progressively rising, he added.

He said a decision on whether to proceed with Wabush 3 is contingent on market conditions.

"We're better off hanging on to some of that cash for a little longer," he said, "and working on the pits we have open."