Ring of Fire mine needs railway infrastructure

Without a transportation corridor, you couldn’t think of building a mine.

It’s probably safe to say that the Ring of Fire region of northern Ontario isn’t everyone’s favourite place to look for minerals. In summer, when the area air is thick with black flies, exploration teams must wade through muskeg and deep swamp.

But if conditions are less than ideal, this boggy wilderness in the heart of the James Bay Lowlands is fast becoming a hot area for mining exploration, raising speculation that it could soon be a key source of nickel, chromite and other strategic minerals.

In the last three years, discoveries by Noront Resources Ltd. (TSX: V.NOT, Stock Forum), KWG Resources Inc. (TSX: V.KWG, Stock Forum), Spider Resources Inc. (TSX: V.SPQ, Stock Forum), Probe Mines Ltd. (TSX: V.PRB, Stock Forum), and others, has triggered staking activity and attracted the attention of major players such as U.S. iron ore giant Cliffs Natural Resources Inc. (NYSE: CLF, Stock Forum)

But mining officials familiar with the Ring of Fire believe it’s unlikely that any recent discoveries will be mined unless they are sufficiently rich to justify the cost of the railway infrastructure that they say will be needed to transport any mineral production to North American markets.

“Without a transportation corridor you couldn’t think of building a mine,’’ said Chris Meraw, a spokesman for KWG, one of roughly a dozen companies which are active in the Ring of Fire region.

Due to the lack of infrastructure Meraw said a railway line could be a life-giving artery for any future mining operations by connecting the Ring of Fire region to an existing CN Rail line near Nakina, about 280 kilometres north-east of Thunder Bay.

A subsidiary of KWG has retained U.S. consultant Krech Ojard to recommend a route and produce a feasibility study for the railway.

Talk of railway construction comes just days after KWG and partner Spider Resources became a takeover target of Cliffs Natural Resources, which has signaled its intent to gain full ownership of the Ring of Fire chromite deposit known as the Big Daddy.

Cliffs already owns a 47% stake in Big Daddy and 100% of two adjacent chromite deposits – known as Black Thor and Black Label, after acquiring Freewest Resources Inc. for $240 million in January.

But it can grab full ownership of the find by taking control KWG and Spider, each of which own a 26.5% stake in the Big Daddy, and retain the option to increase their respective interest to 30%.

Last week, Cliffs said it intends to acquire all of the outstanding shares of KWG and Spider (not already owned by Cliffs), by offering 13 cents a share for each company, or a 62% premium on the closing price of the shares on May 21. The offer values KWG and Spider at $186 million.

Spider and KWG have reacted by agreeing to merge into a single entity that would retain a majority stake in the Big Daddy deposit and facilitate its development.

In keeping with its plan to become a leading North American supplier of primary chromite and ferrochrome, Cliffs formally launched its bid to acquire Spider on Monday, (May 31st).

Based on its current estimates, the planned mine would be expected to produce up to two million tonnes of high-grade chromite, a key ingredient in the manufacturing of stainless steel.

Meanwhile, another exploration official said railway infrastructure is key to facilitating the development of mineral discoveries in the area. “There has to be a way of getting ore out of the area because there is nothing in terms of infrastructure right now,’’ said Karen Willoughby, a spokeswoman for Probe Mines.

Willoughby said an agreement with local First Nations is also important to companies like Probe, which has hired a consultant to prepare a 43-101 compliant resource estimate for its Black Creek chromite find, which is located in the Ring of Fire’s McFaulds Lake area.

Other active companies include Metalex Ventures Ltd. (TSX: V.MTX, Stock Forum) and Arctic Star Diamond Corp. (TSX: V.ADD, Stock Forum) which are exploring for diamonds in the James Bay lowlands.

MacDonald Mines Exploration Ltd. (TSX: V.BMK, Stock Forum), said it will soon be drilling for chromite on its Hornby and Big Mac properties after recently signed an exploration deal with the Webequie First Nation. Hornby is owned jointly by MacDonald and Temex Resources Corp. (TSX: V.TME, Stock