The following is an excerpt from Canaccord Wealth Management’sMorning Coffee report.
Late Friday, it was reported that Canadian National Railway Co. (TSX: T.CNR, Stock Forum) had suspended preliminary work on the building of a $5 billion, 800-kilometre rail line that would connect iron ore mining projects in the Labrador Trough to the deep water port of Sept-Iles, Quebec.
In an interview with Bloomberg News Services, a CNR spokesman said, “The feasibility study is on hold and we haven’t determined whether we will resume it. The pause is linked to several factors, including an evaluation of the time line. We also have to evaluate with the mining companies which projects are on ice.”
In August, 2012, CNR secured the support of La Caisse de depot et placement du Quebec and mining companies including Cliffs Natural Resources Inc. (NYSE: CLF, Stock Forum), New Millennium Iron Corp. (TSX: T.NML, Stock Forum), Cap-Ex Ventures Ltd. (TSX: V.CEV, Stock Forum) and Alderon Iron Ore Corp. (TSX: T.ADV, Stock Forum), to prepare a feasibility study on the proposed rail line. The feasibility study on the railway was anticipated to be carried out over the next ten months.
However, in November 2012, CLF announced it would delay part of its Bloom Lake mine expansion, while also idling some production at two of its U.S. iron ore operations. The company cited volatility in iron ore prices and declining use of the mineral by North American steelmakers.
Alderon fell 3.6% to $1.45 on Tuesday, leaving the company with a market cap of $188.7 million, based on 130.1 million shares outstanding. The 52-week range is $3.83 and $1.10.
Cap-Ex Ventures Ltd. was down 7.3% to 32 cents, leaving the company with a market cap of $24.3 million, based on 75.8 million shares outstanding. The 52-week range is $1.19 and 20 cents.
“I believe the selloff is due to the CN Rail study suspension,’’ said Stockhouse poster jduade in a Cap-Ex Ventures Ltd. post. The only options are either build their own rail road, or build their own pipeline. Both of those are very expensive propositions and would require a heck of a lot of time and money to study.