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Yesterday, Labrador Iron Mines Holdings Ltd. (LIM) announced it signed a “life of mine” rail transportation agreement with the Quebec North Shore and Labrador Railway Co. Inc. (QNS&L), which is owned by Iron Ore Co. of Canada.

The contract calls for QNS&L to transport LIM’s iron ore from Emeril Junction, Newfoundland and Labrador, to Sept-Iles Junction, Quebec, where the Port of Sept-Iles handles Canada’s largest volume of export iron ore, according to LIM. The short line already moves iron ore for Iron Ore Co. of Canada, Wabush Mines and Consolidated Thompson. Iron ore will moved from LIM’s plant near Schefferville to Emeril Junction by Tshiuetin Rail Transportation Inc.

LIM will provide rail cars and QNS&L will supply locomotives. To meet its infrastructure capacity needs and secure locomotives, LIM agreed to make advance payments to QNS&L, including $5 million now, another $5 million in October and $15 million in June 2012. The payments will be repaid by the railroad via a “special credit” of $3.50 per ton against all tonnage hauled, beginning in July, according to LIM.

“The signing of this rail transportation agreement is a significant milestone in the development of our Schefferville-area iron ore projects in western Labrador and northeastern Quebec,” said LIM Chairman and Chief Executive Officer John Kearney in a prepared statement. “We look forward to a long-term business relationship with QNS&L, the major rail transport operator of most of the iron ore in the Labrador Trough.”