Energy costs biggest hurdle for former minister Smitherman's Ring of Fire bid

By: Romina Maurino, The Canadian Press

TORONTO - The biggest hurdle former Ontario energy minister George Smitherman will face trying to secure a Ring of Fire ore processor for the northern town of Greenstone are his own energy policies, critics say.

The Municipality of Greenstone has hired Smitherman to try to convince Cliffs Natural Resources to build a chromite processor on the outskirts of Nakina and Aroland First Nation.

But while the town believes Smitherman is the right go-to guy because of his contacts in government and the electricity business, New Democrat Howard Hampton said that very legacy will work against him.

"One of the big issues with the location of that smelter refinery will be the electricity cost," said Hampton. "The minister who is probably most responsible for driving Ontario's electricity rates through the ceiling is now being contracted to try to talk a company into ignoring those sky-high electricity rates."

It would cost Cliffs Resources a billion more dollars over their projected 30-year period to set up shop in Ontario instead of in neighbouring Manitoba or Quebec, said Hampton.

Other foreign miners such as Xstrata PLC have already shut down Ontario smelters and moved their operations to Quebec — another lower-cost province. The Swiss company closed down its copper and zinc operations in Timmins because of lower demand and higher costs, a move that resulted in the loss of 700 direct jobs.

Xstrata was paying $70 million a year for electricity when it operated its refinery in Timmins, Hampton said, but now that they ship it to Quebec it's smelted for about $32 million a year in electricity.

Smitherman, who left the legislature in 2009 for a failed mayoralty bid in Toronto, dismissed those concerns in an email.

"Bottom line is that Greenstone and area First Nations insist on the principle that the resource must have the value-added action of refining take place nearest the source of extraction," he said. "Opposition to a decision to ship the resource out of jurisdiction will be intense."

Greenstone's proposal, Smitherman added, will save transportation costs and be better for the environment because it reduces the shipping of the chromite, a mineral used to make stainless steel.

The governing Liberals have touted the Ring of Fire as a key plank in their plan to open the province to business, but the project has encountered some opposition from First Nations, who want to ensure they also reap some of the economic benefits and are properly consulted.

There is also concern over whether the region can generate the electricity needed to run the operation.

Energy Minister Brad Duguid said the province has brought in several measures to ensure there is reliable and affordable electricity for companies, including an industrial conservation plan focusing on off-peak hours and a northern industrial electricity program.

"Since we brought in the industrial conservation initiative industry in this province has seen a great benefit," Duguid said. "It's working for them, they've increased productivity in the province and they've created more jobs."

Cliffs said in February that finding a source of cost-effective, reliable electricity would be a challenge because there's nowhere in Ontario where it can economically operate at the current rates.

But the mining company is still looking at Sudbury, Timmins and Thunder Bay as possible locations. It is also believed to be looking at Manitoba and Quebec.