BUSINESS

House prices dive, food bank use is up as latest mining bust hits Labrador town

02/04/2015 12:47 EST | Updated 04/06/2015 05:59 EDT
ST. JOHN'S, N.L. - Jason Penney knows the highs and lows of a miner's life in Wabush, N.L., a one-industry town where the price of iron ore is discussed like the weather.

But he says the community of 1,900 has reeled since its main employer shut down last year.

"We've never seen it quite this bad," the president of United Steelworkers Local 6285 said from the office he now occupies alone.

An administrative assistant and a safety officer were both let go along with about 500 other workers who lost their jobs when the Wabush iron ore mine closed.

Cleveland-based Cliffs Natural Resources Inc. blamed high production costs and nose-diving commodity prices as demand from prime steel buyers, such as China, waned.

The company also confirmed last month that it had stopped production at its Bloom Lake mine in Quebec, about a half-hour drive from Wabush.

Penney said the move affects another 500 workers who flew in and out. For Wabush and nearby Labrador City, which bills itself as the iron ore capital of Canada, it means a loss of crucial spinoff and service jobs.

It's all adding up to one of the most resounding busts ever for the region, Penney said.

"There's been a lot of people in sad, tough times. It was a rough Christmas on a lot of families.

"We've had some people who lost their houses here in the area. And unfortunately, the worst is yet to come."

Employment insurance runs out for many of the Wabush miners in the next month, Penney said.

Over the last three years, younger workers who landed jobs earning at least $50 an hour also bought houses at the height of the latest boom. They're now saddled with mortgages worth more than collapsing property values, said Tammy Elliott, owner of Big Land Realty.

"They're sort of really stuck and can't sell because the prices are lower than what they paid for their home."

Bungalows that two years ago would have sold for around $370,000 have fallen to about $220,000, Elliott said in an interview.

Listings have soared as demand has dwindled. Contractors that drove up local rents as they paid $4,000 a month or more to lease houses for workers have now left town. Apartments that fetched $1,500 a month are going for $800 or less as vacancies increase.

"There's a lot of gloom and doom over the town right now," Elliott said. Still, residents of the area known as Labrador West pride themselves on finding a bright side as they support each other, she added.

Hopes are still riding high that Alderon Iron Ore Corp. (TSX:ADV) will kick start its plans for a new mine in the area.

The Kami project, owned 75 per cent by Alderon and 25 per cent by Hebei Iron & Steel Group of China, is expected to create more than 800 construction and spinoff jobs, along with about 500 full-time jobs.

Natural Resources Minister Derrick Dalley says Alderon has affirmed it's still committed to the project.

"Construction will proceed once additional financing is secured," he said in a statement released Tuesday.

The province will also work with any company with a viable plan to take over the Wabush mine, but talks between Cliffs Natural Resources and prospective operator MFC Industrial failed, Dalley said.

William Burt, an industrial mechanic at the Iron Ore Company of Canada mine in Labrador City, volunteers as chairman of the regional food bank. The downturn in Wabush has almost doubled the demand for monthly hampers.

About 2,000 people work at the IOC mine and many are worried, Burt said.

"They're being told we need improved production, improved costs," he said. "A lot of them don't know what to expect. It's just this waiting game."

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