July 25, 2012 / 9:29 PM / 5 years ago

CN Rail to shelve Quebec rail plan if miners don't sign up soon

* CN says will shelve plan if miners don't sign up soon

* Plan is to build C$5 bln railway to northern Quebec

* Line would ship iron ore to port

* Miners looking at possibility of cheaper alternatives

July 25 (Reuters) - Canadian National Railway Ltd will soon shelve plans to build a C$5 billion ($4.9 billion) rail line to northern Quebec unless more miners sign deals with the rail operator to ship iron ore from the isolated region to port, CN's chief executive said on Wednesday.

CN, Canada's biggest railroad, backed by Quebec's public pension fund, the Caisse de depot et placement du Quebec, wants to build the 800-kilometer (500-mile) rail line from Port of Sept-Iles on the Gulf of St. Lawrence to a mining region north of Schefferville, Quebec, but it wants junior miners to commit to filling rail cars with iron ore shipments before it proceeds.

Iron ore is the main component in producing steel.

The small miners in the region want to keep a lid on transport costs, and some have even floated the idea of building their own rail line rather than signing on to CN's plan.

CN CEO Claude Mongeau said that the railroad has recently put out a deadline of "another week or two" for miners to join up.

"If they do, we would move forward, file an application, do the feasibility study and continue to update you. If they don't, we wish them good luck and move on to other opportunities," Mongeau said on a conference call to discuss CN's results.

Because of the high cost of building the line, CN wants most of the miners in the region to sign up.

"At this point in time, despite the compelling offer that we put in place, it would seem that some think they still have alternatives that would be much cheaper than what we believe the cost of this infrastructure will be," Mongeau said.

"Some may be a little bit -- and I hesitate to say it that way, but that is what it is -- free riding on the side, thinking that maybe CN will get moving even if they don't sign up so that they could share in the small cost of the feasibility study," Mongeau said.

$1=$1.02 Canadian Reporting By Nicole Mordant in Vancouver; Editing by Peter Galloway

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