CNI Puts Off Project Study

Uncertainty surrounding the mining sector compelled Canadian National Railway Company (CNI - Analyst Report) to shelve the feasibility study for the construction work of a rail line in northern Quebec. The proposed rail line along with a terminal handling plant was to be set up to serve the iron ore range in Labrador.

Canadian National Railway partnered with La Caisse de depot et placement du Quebec (Caisse) and a consortium of 6 mining firms to initiate the feasibility study in Aug, 2012. The study included the assessment of expenses and other engineering factors for the rail network plus related infrastructure. The rail line – almost 497.1 miles long – was supposed to extend from the Port of Sept-Iles on the Gulf of St. Lawrence to a mining field, north of Schefferville, Quebec.

Although the evaluation process was making a steady headway, the ongoing market volatility led to delays in mine development projects across the Labrador Trough. An analysis of the current scenario revealed that there is a shortage of iron ore in the region due to mine construction schedules and other projects. Hence, Canadian National Railway will face difficulties in getting hold of the necessary amount of iron ore for the construction of the new rail and terminal unit.

Further, a few miners in the territory opted not to join the other mining groups supporting Canadian National Railway in the project. This resulted in lower-than-expected volumes of iron ore available for the rail line project that is estimated to cost approximately C$5 billion.

A top-level executive of Canadian National Railway commented that management was highly upbeat regarding this project. But, keeping in view the current economic circumstances, they decided to drop the assignment until the picture turns favorable.

Montreal, Canada-based Canadian National Railway remains committed to enhance transportation services in North America. Recently, the company announced a C$1.9 billion capital investment plan targeted toward building infrastructure, equipment and technology that will drive safety and quality service for the rail.

Canadian National Railway – which operates along with other players such as Union Pacific Corporation (UNP - Analyst Report) – currently retains a Zacks Rank #3, implying a Hold rating.

Other Railroad Stocks

Other stocks worth considering within the sector are Genesee & Wyoming Inc (GWR - Snapshot Report) –that holds a Zacks Rank #1 (Strong Buy) and Canadian Pacific Railway Limited (CP - Analyst Report) – that carries a Zacks Rank #2 (Buy).