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Champion climbs after Quebec commits $20 mln for new Labrador Trough rail line

Champion climbs after Quebec commits $20 mln for new Labrador Trough rail line

Champion Iron Ltd. (TSE:CIA), an iron ore exploration and development company, climbed to the highest in a month after the Québec government committed up to $20 million to fund a feasibility study to determine the optimum rail option of a new rail link for iron ore miners in the Labrador Trough to access global markets.

Shares spiked to 40 Canadian cents, the highest intraday price since May 9, before trading at 39 Canadian cents, up 10 percent, at 9:48 a.m. in Toronto.

Champion, which has offices in Toronto, Montreal and Australia, welcomed the decision by the Ministère des Finances Québec in a statement today. 

Champion said the Québec government's feasibility study on a new rail line to reach ports to service global demand will serve to facilitate and enhance Québec based miners' ability to deliver to world markets.

Champion's Chairman Michael O'Keeffe said this is a significant decision that will lead to the creation of jobs and investment. "It will stimulate further investment into the region and help to establish Québec as a region of international significance for the mining industry."

In tabling the Budget 2014-2015 this week, the Québec Finance Minister Carlos Leitão announced a series of actions and measures to support mining development in Québec. Among these measures, the government has announced that it will evaluate the need for a new rail link to the Labrador Trough to determine the optimum features of the new infrastructure.

The government has set aside a maximum of $20 million from its Northern Plan Fund to contribute to a study to determine the optimum rail option for iron ore miners in the Labrador Trough region to reach ports to service international markets competitively.

It is intended that these funds be allocated towards evaluating the anticipated transportation needs between the Labrador Trough and the port of Sept-Îles. The study will consider the concerns of all potential users and in doing so ensure a multi-user system favoring the conclusion of joint investment, Champion said.

"At a time of uncertainty in investment markets regarding the outlook for iron ore, this decision will be seen as a defining point in the history of the mining industry in Québec," O'Keeffe said. "The government should be congratulated on its commitment to promote an initiative conducive to increased employment and new investment."

There is a high level of interest in the Labrador Trough as the world's major steel industry groups already see the potential of the region to supply high quality iron ore product, with a range of listed and private iron ore groups active in the region, including Champion Iron.

The Labrador Trough hosts one of the world's largest iron ore accumulations, with annual production of some 50 million tonnes. Global majors including Arcelor Mittal (NYSE:MT) and Rio Tinto (NYSE:RIO) have assets in the region, while WISCO, Mitsubishi, Posco, Tata Steel, Cliffs Natural Resources (NYSE:CLF), Century Iron Mines (TSE:FERAlderon Iron Ore (TSE:ADV), China Steel and Hebei Iron & Steel are also involved in joint venture partnerships in the wider region.

Shares of Alderon Iron rose 2.8% to C$1.45 in Toronto on Friday. Century Iron's shares were unchanged at 53 cents. 

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