You are perfectly right that the low cost producer always will be profitable while the high cost ones may have to shut down in tough times.

There are generally three things that will determine where you belong on the cost curve: 1) grade, 2) tonnage and 3) location

Existing plants where all the capital costs are paid off usually can survive at low prices. New plants in new areas(green field plants) need generally a high grade initially to pay of the high capital costs etc, and then go more towards the lower grade stuff.

For the Ring of Fire, the grade is high, the tonnage is questionable and location is bad. Mines close to ocean harbour such as Voisey's Bay and to some extend also Ragland have it made in terms of transportation since ocean fright is so cheap compared to train or truck. It is cheaper to ship from China to Quebec City, than from Quebec City to Toronto. Although the location is bad it appears managable(probably less than 1/2 billion) for road or truck based on info provided by RHammer and others, so it will make the project more expensive and it will take longer to develop, but is will not kill it; if the goods are there.

The grades appear very good from both a nickel and chrome point of view. However, do not forget that generally you don't want these ores mixed for further processing. You don't want chromium in a nickel smelter and you don't want sulfur in a chromium or ferro chromium smelter. This usually should not be a problem, but detailed compositions as will as micrographs showing the intergrowh of the individual grains are also required. These issues will affect the grinding and milling circuit to use. Also in either case you will not get paid for iron, it just comes along.

The tonnages have gone two opposite directions. The nickel one has become extremely dissapointing and much much more has to be found to make it economically. Initially(E1) this was very positive but then as most other targets have shown other ores, the prospects for nickel has dropped dramatically. Only deep drilling and extension of the tonnage of E1 can restore some confidence in the nickel story(of course another huge hit will also partly help). The chromium story has realy got a shot in the arm and I think for now will be the main selling point. Although not as Canadian as a Nickel mine, under the right conditions it will fly.

If this becomes a nickel story it for sure will either go to Inco or Falco, simply because the Canadian government will not allow unprocessed ore to be shipped out of the country, meaning processing will have to take place in Canada and most likely in Ontario because of jobs and taxes, etc. To build a new nickel smelter and refinery will run in the 3 to 5 billion and no outsider could compete with Inco and Falco mainly because of this.

In terms of chrome it is a different story, yes it will have to be processed in canada, most likely in Ontario(but could be Manitoba) bcause cheaper energy, but no present facilities in Canada could process chromium ore. The closest in terms plant layout(in Canada) is the facility by QIT (Quebec Iron and Titanium) in Quebec(between Montreal and Quebec City) that smelts ilmenite ore and produces a rich TiO2 slag and a pig iron product. The materials are very different but the processing are reasonable similar so if you look it up you should get a feel of what may take place. For chrome, the bidders could be anywhere from around the world, but in addition to a mine, some sort of concentrator, you also need a smelter with a 150 to 300 MW power requirements. The costs again should be in the 2 billion plus range for the smelter.

Independently of if this becomes a nickel or chromium plant, the costs will run easily in the 2-5 billion range, plus any takeover costs of NOT and others, plus infrastructure and interests etc. This sounds high, but this is generally the norm in the industry(nothing costs less than 2 billion any more so don't be scared of these numbers). However, this also means that these projects only will take place if you have huge tonnages. Examples of companies with problems because of costs include Skye resources, Gallor Creek, Norther Dynasty. Also Inco's and Falco's big nickel projects in New Calledonia now are estimated at more than 3 billion, but will certainly fly.

If E1 had been in Sudbury and even Timmins, it would have been of sufficient size for serious consideration for development. You could go in, develop it in no time, and get the ore out, no problem.

The reason I post this is just to show what the norm is in the industry, what to expect and what costs typically are. You can't run this as a backyard operation(except in underdeveloped countries). In the Western world, the environmental issues you face sometimes add up to 50% of the plant costs. You just don't dig a hole, and then leave.

Cash operating costs will be high because of location and transportation. At Raglan the operating costs are about 25% higher than what they would have been if it had been In Sudbury. A mine in the Ring of Fire will have the disadvantages of fairly high operating costs, although grade and tonnages(for Cr) will help, the capital costs will be high and interest costs will be high. Could it compete on the international market, yes but it likely for a long time will be towards the high cost producer end. If demand for stainless steel(around 18% Cr and 8% Ni) continues and China buidls more "mac" (they are the bigges consumer of stainless steel for pots and pans etc), there should be a long period of sustained high prices.

Canadian miners are generally more conservative than their international parterns. They don't forget the Voisey's Bay deal. Inco paid about 4.5 billion which was more than the total market cap of the whole of Inco a few years later. At that point in time they felt pretty stupid, today they probably are smiling, at least the Brasilians.