Chromium’s primary use is in the production of ferrochrome alloy, which in turn is used to make stainless steel. Approximately 2.5 tonnes of chrome ore is consumed in order to produce 1 tonne of ferrochrome, while 1 tonne of ferrochrome is used to produce 4 tonnes of stainless steel. Like nickel, chromium (and hence ferrochrome) prices are largely driven by the growth of the global stainless steel industry, which consumes over 90% of the world’s ferrochrome supply. Unlike nickel, however, there is no substitute for chromium in the stainless steel process.

Ferrochrome prices have surged in the last several years, rising from about US$0.50 per pound in 2003 to over US$3.00 per pound in early 2008, an increase of approximately 43% year over year. Huge demand from the stainless steel industry, particularly from Asia, coupled with supply problems from main producers in South Africa were the driving forces behind these price levels. However, as a result of the current global financial crisis, stainless demand began to weaken substantially in the second half of 2008 and steelmakers around the world have started scaling back production. Ferrochrome prices have consequently declined. As of mid-November, ferrochrome was trading around US$1.40 per pound on the spot market.

The dominant player in the world ferrochrome market is South Africa, which accounted for 41% of global production in 2007. South Africa holds 74% of the world’s chrome ore reserves, followed by Zimbabwe (12%), Kazakhstan (8%), India (1%) and various other countries (5%).

Potential Ferrochrome Production in Ontario

During the second quarter of 2008, Noront Resources Ltd. announced the discovery of a massive chromite deposit at its Double Eagle property in the James Bay Lowlands of Ontario, Canada.

The deposit, named Blackbird One, consists of massive layers of high-grade chromitite, varying in thickness from centimetres to apparent thicknesses exceeding 70 meters and true thicknesses likely exceeding 30 meters. The main mineralized zone remains well above a grade of 40% chromite for over 30 metres and includes a zone over 5 metres wide that averages above 45% chromite. Similar results have been reported in other holes, and further assay results are pending.

Noront’s chromite discovery is relatively high grade compared to other global deposits, has a favourable chrome/iron ratio and has a desirable lumpy consistency (large crystals) suitable for direct shipping. The value of 40% lumpy chromite ore is about US$500 per tonne FOB Thunder Bay, Ontario. Considerable value can be added to the ore by smelting to produce ferrochrome alloy. Based on the third quarter contract price for high-carbon 65% ferrochrome of US$2.05 per pound, the contained metal value in a ton of ore at 40% chromite is US$1,890, a considerable increase over the price of lumpy ore.