"We don't have a time frame set in stone but it's a process that we have already started so right now it's just execution time," chairman and CEO Lourenco Goncalves said in an interview Wednesday.
The mine, about 975 kilometres northeast of Quebec City and 30 kilometres southwest of Labrador City, N.L., is in an area known for iron ore deposits.
Shares in Cliffs (NYSE:CLF) closed down $2.04 or just under 20 per cent at $8.17 Wednesday in New York. The stock has had a 52-week range of between $7 and $28.23 per share.
Goncalves said falling iron ore prices made Bloom Lake unprofitable, forcing the need for a capacity expansion.
Even if metal prices unexpectedly rose, it wouldn't be enough to save the mine, he said.
"You cannot have a business that is only viable when iron ore prices are high because the overall business is cyclical. So even if iron ore prices next month go through the roof there's no assurance that they will not go down again."
Closing the mine would cost an estimated US$650 million to US$700 million over five years, mainly from three years of costs required to be paid to the Quebec North Shore and Labrador Railroad owned by Rio Tinto subsidiary Iron Ore Company of Canada.
According to the company's website, the mine had 539 fly-in workers and 40 local staff as of the end of 2013.
In asking the provincial government to intervene, the union representing workers said the closure marks the "death of the Northern Plan" for Fermont, where the mine is located.
"If this miner is not able to invest....we ask that it sell the installation to anyone to complete the second phase," Steelworkers representative Dominic Lemieux told a news conference.
Goncalves conceded that Bloom Lake's closure imperils the government's economic project to develop the resource-rich region of the province.
Cliffs acquired majority ownership of Bloom Lake — a new mine that began production in 2010 — as part of its takeover of Consolidated Thompson Iron Mines Ltd. in a $4.9-billion deal that closed in 2011.
The company announced two years ago, in November 2012, that it would delay Phase 2 and idle some of its U.S. iron ore operations in Minnesota and Michigan.
Two months later, in January 2013, it said the value of its Consolidated Thompson acquisition would be written down by about US$1 billion because of reduced anticipated long-term volumes and higher projected costs but continued to say the Phase 2 construction would be complete by early 2014.
Then, in third-quarter results issued Oct. 27, Cliffs said it had written down its Bloom Lake long-lived assets by a further US$4.5 billion and that it wouldn't provide 2015 guidance for sales tonnage from the mine because the company hadn't made a definitive decision on its future.
Bloom Lake has an annual capacity to produce seven million tonnes of ore. A phase 2 expansion would have raised that to 14 million tonnes, with plans for a further upgrade to push capacity to 21 million tonnes.
The company targeted three more equity partners to each buy a 10 per cent stake by the end of 2014. Among them was Nucor, according to a Wall Street Journal report.
Goncalves said any hope of finding investors evaporated when one of the three said it couldn't meet his deadline to make a decision by year-end.
"It's three or nothing," he said.
Cliffs also disclosed Wednesday that its Quebec subsidiary and Bloom Lake partners recently lost an arbitration claim against a former customer, which had terminated a sales agreement in August 2011. The arbitrator awarded the former customer more than $71 million in compensation and other fees.
Analysts said the closure costs are higher than they had forecast.
Brian Yu of Citi said it was unclear if Cliffs can "ring-fence Canada" as it previously stated — suggesting it hoped to isolate the problem without affecting other global operations. "While today's announcement is specific to Bloom Lake, the company's Australia mines are also at risk of closure," Yu wrote in a report.
He reiterated his sell rating based on a forecast for iron ore prices to average US$65 per tonne in 2015-2016. However, Yu doesn't foresee Cliffs breaching its lending covenants over the next two years, assuming the company ends its dividend.
Low iron ore prices have disrupted operations in the Labrador Trough region of Quebec.
Toronto-based Labrador Iron Mines (TSX:LIM) has suspended all operations at its mines for the year. The company said Tuesday that it needs a financial restructuring and new creditor agreements while it waits out a market downturn that has cut iron ore prices.
LIM is seeking to negotiate support from an existing creditor and offtake partner, RBRG Gerald Metals, but expects that could require a filing under the Companies' Creditors Arrangement Act and more favourable commercial terms on supply and service contracts.
Cliffs previously idled its other two operations in Eastern Canada — Wabush Mine in Newfoundland and Labrador earlier this year affecting 500 employees — and Pointe Noire near Sept-Iles in 2013, affecting 165 workers.
— With files from Julien Arsenault
Follow @RossMarowits on Twitter