10/02/2014 08:14 EDT | Updated 12/02/2014 05:59 EST

Financing troubles for construction line puts Kami mine in Labrador on hold

ST. JOHN'S, N.L. - Construction of a third power line in Labrador expected to kick-start the proposed Kami mine is suspended because the company behind the development hasn't secured financing.

The provincial government announced the construction of the $300-million line between Churchill Falls and Labrador West in February.

At the time, Alderon Iron Ore Corp. (TSX:ADV) said approval of the dedicated power line was what it needed to nail down financing for the $1.3-billion Kami project.

But Natural Resources Minister Derrick Dalley says slumping prices in the mining industry have made it difficult for companies like Alderon to raise capital for new projects.

Dalley says Alderon has assured the government that it remains committed to Kami, which is owned by Alderon and Hebei Iron and Steel of China.

Newfoundland and Labrador Hydro has cleared 20 kilometres in preparation for the new line and the government and Alderon say construction will continue once financing is in place.

Alderon says it provided a $21-million security deposit to Newfoundland and Labrador Hydro and all project costs so far are covered by that.

When the line was announced, the government said Alderon was expected to contribute $65 million, with other users helping to cover the rest according to rates set by the provincial utility regulator.