Camp Esker, in the Ring of Fire, is pictured in this file photo.

UPDATED: Ring of Fire deal 'game-changer'

The Sudbury Star
By Mary Katherine Keown,
Monday, March 23, 2015

Noront Resources Ltd. announced Monday it plans to buy Cleveland-based Cliffs Natural Resources' chromite assets in the Ring of Fire for $20 million.

International companies have touted the region's mining potential for years, but have yet to take any projects to construction, largely due to transportation and access issues.

"We're all in with respect to the Ring of Fire. This is where we want to be committed to," Alan Coutts, Noront's president and CEO, told The Star on Monday. "We think the region is very prospective, from a geological and exploration point of view."

Coutts likened the Ring of Fire "to another Sudbury," predicting "there'll be multiple mines discovered over time, like in Timmins or Red Lake. We think it's another one of these emerging mining camps."

Coutts said the Toronto-based company has been involved in the Ring of Fire since 2007 with the Eagle's Nest nickel-copper-platinum group deposit.

The chromite deposits are part of Coutts' longer-term vision. While not an immediate priority, he said he would like to begin extracting nickel within three years and chromite within five years.

Stan Sudol, a Toronto-based communications consultant and mining columnist, described the acquisition as a "game-changer" on Monday.

"A well-respected and admired Canadian company is putting cold hard cash on the table – during one of the most severe mining busts in decades – in the long-term financial belief of the economic potential of the Ring of Fire," Sudol wrote in a submission to The Star. "This also sends a resounding message to both levels of government to stop their inept dithering and partisan fighting, and to start making the vital strategic infrastructure and social investments in order to move this stalled project forward."

Coutts said his is the only company whose environmental assessments have been completed (they are still waiting for provincial approval), adding Noront has worked closely with the First Nation communities in the region to develop plans and train locals to fill jobs.

Sudol said those relationships represent a "textbook case study of how to do corporate social responsibility correctly."

On March 2, the Prospectors and Developers Association of Canada honoured Noront with an environmental and social responsibility award for its work engaging communities in the remote corner of the province.

"We've spent a lot of time with the First Nations communities, getting to know them and understanding their concerns, and building those concerns into our project designs. We want to put all our efforts into one region," Coutts said.

Franco-Nevada Corp. has agreed to loan Noront $22.5 million for seven years at an interest rate of seven per cent. The loan will cover the cost of the Cliffs assets, as well as $2.5 million for general working capital.

The royalty and streaming company will also pay Noront $3.5 million in cash, receiving royalties of three per cent on the Black Thor project and two per cent on all of Noront's property in the region, excluding its Eagle's Nest nickel deposit.

Cliffs paid $118 million for its Ring of Fire assets in 2009. It was the biggest company invested in the region, but in 2013 it suspended work. Hit hard by a weakened steel market and problems at its mine in Quebec, Cliffs' Canadian subsidiary sought creditor protection in January.

While the deal with Noront will need court approval as part of Cliffs' restructuring process, Coutts admitted his company got a good deal.

"Cliffs has decided to exit the region, so they're a motivated seller," he said. "Markets are low right now. Some of the shine might have come off the Ring of Fire recently, because things have been delayed, but we're still committed."

The sale means Noront has a 100% interest in the Black Thor chromite deposit, a 100% interest in the Black Label chromite deposit and a 70% interest in the Big Daddy chromite deposit. It also gives the company 85% ownership of the McFauld’s Lake copper-zinc resource.

Monday’s deal should get other players in the Ring of Fire talking. KWG Resources Inc. said yesterday Noront has invited it to discuss developing the project. The company owns 30% of the Big Daddy deposit.

“We are delighted with this evolution of the Ring of Fire’s opportunities and are hopeful that our relationship with our Big Daddy joint venture partner will become more constructive and collaborative," Frank Smeenk, KWG's CEO, indicated in a release. "We think the transportation and processing options we have developed can now be pursued in concert with our two governments and the First Nations constituencies to see the mineral assets of both Noront and KWG go into production.”

Among other issues, Cliffs and KWG had clashed over how to transport materials from the Ring of Fire. KWG preferred rail, while Cliffs wanted a road.

Coutts said an east-west all-season road running from Pickle Lake to the Ring of Fire makes the most sense for Noront.

"It avoids a lot of the river crossings that going down to Nakina would encounter and it also builds off an existing disturbed corridor," he said. "We think this is the right choice to access the Ring of Fire and it can bring all-season infrastructure to some of the communities, as well."

Coutts noted on Monday the company hopes to ship nickel ore to Sudbury for smelting, but remained non-committal about the electric arc furnace Cliffs had proposed for Capreol, which would be used to smelt chromite ore.

"The first deposit we're looking at developing is a nickel-copper-platinum group element deposit and it's very similar to some of the deposits currently mined in Sudbury," Coutts explained. "We would expect that this high-grade concentrate would come from the Ring of Fire to Sudbury, so that's a definite opportunity for Sudbury smelters."

-- With files from Reuters
maryk.keown@sunmedia.ca
Twitter: @marykkeown