According to CEO John Kearney, roughly 30 people have been cut from the company’s workforce as of last week, as a start to aggressive cost saving measures aimed at making the company’s operations in Labrador more attractive to potential investors.
Labrador Iron Mines will also be trying to negotiate revised terms with contractors, affecting everything from the cost of plane service for the fly-in, fly-out operation to mining equipment rates and rail car costs.
As several media outlets have reported, Labrador Iron Mines needs more money to continue its operations in 2014.
What is less commonly reported, is Labrador Iron Mines — producing for the last three years in the Labrador Trough — has similarly needed to raise cash every year at about this time.
“I think the one difference we have this year is we’re coming off a year of very high losses in 2013.
“So while our outlook is still very positive, we have to look at that in the context of our performance and our results in 2013, which were frankly not good,” Kearney said Monday.
Add the poor results with the slip in iron ore prices and the company felt a need to issue a caution of potential problems in future.
In reporting third quarter results to investors on Valentine’s Day, he pointed out some positives from the past year of operations, mainly a higher level of production from the company’s James Mine, about five kilometres from Schefferville, Que.
But while that mine was producing more, prices were slipping and some of what was produced was of low enough quality — at 58 per cent iron instead of 62 per cent — to result in an added cut to what was being paid in return for the product.
While producing more iron ore than ever, the company reported a $31 million net loss in its third quarter of 2013.
“Clearly that situation cannot be allowed to continue,” Kearney said during the investors’ call-in Friday.
There remains the prospect of better returns for the company with the Houston deposit. The find, about 15 kilometres southeast of the James Mine would require about $20 million to get up and running, under current plans.
Another prospect is the Howse deposit, where Labrador Iron Mines is partnered with Tata Steel, the later being the majority partner. According to the latest corporate presentations, a feasibility study for that project is expected in the fall.
“I remain positive about the outlook,” Kearney said.
“With the development of Houston and the iron ore price staying steady at $125 (per tonne), provided we can keep our costs under control, then we have a very positive outlook,” he said.
“But we have to recognize where we are.”
The company is currently looking at financing options and plans for 2014, expected to be finalized in the late March-early April timeframe.
As for association with the shutdown of the Scully mine in Wabush, while market forces affect all iron ore producers, Kearney noted all public companies are into a required reporting period and Labrador Iron Mines was not intentionally trying to tie its belt tightening to the news out of Wabush.