Your rational is right on BJ. However the politicians in Toronto have never been north of the 401 and don't have a clue what Northern Ontario looks like.
After talking to Cliffs I am convinced they want the Smelter in Sudbury for the same reasons you site. However the gov't will try to do the politically correct thing and involve the FN as much as possible without asking themselves the tough questions like......can we rely on them to operate the power generators and railway in a TIMELY manner and without interuption.
I agree with giving the FN people the chance to train and find employment in the RoF but putting them in charge is risky. If Monias were in charge for example, he would shut down the railway and/or power every time he wanted to protest that he does not get his own way. Cliffs is smarter than to allow this to happen.
SN