| FACTBOX-Canada's Ring of Fire mining development |
| 05/24/12 - 11:55 AM ET - Reuters |
May 24 (Reuters) - Cliffs Natural Resources Inc's $3.3 billion plan to build North America's first major chromite mine could be the catalyst that will transform a remote swath of northern Ontario wilderness into Canada's next major mining district.
The Black Thor project is located in "the Ring of Fire", a crescent shaped region of mineral deposits whimsically named after the Johnny Cash song. Its mineral wealth was discovered by an exploration team looking for diamonds, but which instead found chromite, nickel, copper, zinc and platinum group metals.
Chromite is the ore that chromium metal comes from. Chromite is refined into an alloy called ferrochrome, which is an ingredient of stainless steel. It has no substitute.
Stainless and heat-resisting steel producers are the leading chromium consumers. Nickel is also a key component in stainless steel production.
TOP GLOBAL CHROMITE PRODUCERS:
South Africa
Kazakhstan
India
If developed, Cliffs' Black Thor project in the Ring of Fire would be the world's fourth-largest producer.
KEY PROJECTS IN THE RING OF FIRE:
Cliffs Natural Resources - Black Thor chromite project, feasibility stage
Noront Resources - Eagle's Nest nickel-copper project, feasibility stage
KWG Resources - Big Daddy chromite project (Cliffs is a partner in this project)
METALS IN THE REGION:
Chromite - 5 projects
Nickel-copper - 1 project
Copper-zinc - 8 projects
Vanadium - 1 project
Precious group metals (platinum and palladium), kimberlites (diamonds) and gold have also been found.
DEVELOPMENT:
The Ring of Fire is located about 1,500 kilometers (1,000 miles) northwest of Toronto. Developing Cliffs' Black Thor mine will require major infrastructure, including a $600 million all-season road to connect it to existing rail lines.
Under current plans, diesel generators will power the mine, but if future development merits it, the Ontario government may connect the mining district - and nearby communities - to the province's power grid.
Cliffs plans to build a smelter to produce ferrochrome, an energy intensive process, near Sudbury, Ontario. Sudbury, about 900 km as the crow flies southeast of Black Thor, is northern Ontario's biggest city and known for its nickel mines and mills.
(SOURCE: Report of the Ministry of Northern Development, Mines and Forestry, company websites) (Compiled by Bhaswati Mukhopadhyay in Bangalore and Julie Gordon in Toronto; Editing by Peter Galloway)
| FEATURE-Risk and reward beckon in Canada's Ring of Fire |
| 05/24/12 - 11:53 AM ET - Reuters |
* Cliffs plans massive chromite mine in northern Ontario
* Region has no roads, rail lines or power infrastructure
* Project faces intensive reviews, needs aboriginal support
* Chromite essential in making stainless steel
* Mine will make Canada world's 4th largest producer
By Julie Gordon and Bhaswati Mukhopadhyay
May 24 (Reuters) - A $3.3 billion plan to build North America's first major chromite mine deep in the Canadian wilderness promises to usher in an era of prosperity for the region's aboriginals and generate millions of tax dollars over its lifetime.
Tucked deep into northern Ontario, the Ring of Fire contains rich mineral deposits that could transform the region much as the oil sands have transformed Alberta. Much like the oil sands, it has raised deep environmental and social concerns.
But the Ring of Fire stands apart from other resource mega-developments around the world in one important respect. Rather than oil, gold or iron ore, its main attraction is a relatively minor ore - chromite - which is refined into ferrochrome to make stainless steel.
The region contains North America's only known large-scale chromite deposit. If Cleveland-based Cliffs Natural Resources Inc develops the Black Thor project, it will likely revolutionize the stainless steel industry on the continent, which now relies on imports from South Africa and Kazakhstan. It would make Canada the world's fourth-largest chromite producer.
Black Thor is the first of many projects that could keep the Ring of Fire bustling with drills, crushers and dump trucks well into the next century - until the deposits run dry.
"We've got a whole bunch of projects and you could have an enormous boom that ends in an enormous bust," said Bob Gibson, an expert on environmental policy at the University of Waterloo in Waterloo, Ontario.
Rapid urbanization in China, India and other developing nations has driven up demand for base metals such as copper, nickel, iron ore and chromite, used to build everything from skyscrapers to household appliances.
At the same time, centuries of exploitation have made it harder to find viable projects in politically stable regions, forcing miners to develop ever-more remote resources.
The Ring of Fire is a case in point. Named whimsically for a Johnny Cash song, the crescent-shaped arc of deposits about 1,500 km (1,000 miles) northwest of Toronto is rich in chromite, nickel, copper and platinum group metals.
RHODE ISLAND SIZED
Turning that 4,000 square kilometer (1,540 square mile) swath of boreal forest - about the size of Rhode Island - into Canada's newest mining district will be no easy task. There are no roads, rail lines or reliable sources of power.
In fact, the price of the Cliffs project has already ballooned to $3.3 billion from an earlier estimate closer to $1 billion. Costs include a smelter hundreds of miles south in Sudbury, Ontario, and some $600 million for an all-season road.
With first production at least three years away, after a prolonged environmental and political permitting process, that price could rise, raising concern whether the chromite project alone is enough to merit the capital investment.
"The costs have nearly tripled from their original estimate," said JP Morgan mining analyst Michael Gambardella. "There must be some additional volumes, whether it's in chromite, ferrochrome or other minerals that are up there, to offset the additional capital costs."
Refined ferrochrome prices have risen 9 percent so far this year to $1.20 a pound. Prices for the alloy have been volatile since early last year as economic worries in Europe weighed against concerns over production shortfalls in South Africa.
Cliffs sees Black Thor as an opportunity to command about 10 percent of the global chromite market, while building on its existing relationships with steelmakers.
The massive, open-pit mine is expected to pump at least 600,000 tons of ferrochrome into North American and European steel markets each year, and some 1 million tons of chromite concentrate into Asia.
"There's still a lot demand growth for stainless steel - and therefore ferrochrome - in the world because you still have a lot of development left in places like China," Gambardella said.
Along with Cliffs, juniors such as KWG Resources Inc , Noront Resources Ltd and Probe Mines Ltd are all exploring chromite projects in the Ring of Fire.
A stable chromite source in Canada will reduce supply risks for steelmakers and cut transportation costs - a game-changer for the North American industry, according to analysts.
"From a strategic standpoint, I think it's an important deposit," said FBR Capital Markets mining analyst Mitesh Thakkar. "It plays right into Cliffs' strength of catering to the steel mills."
NEW MINING DISTRICT
But chromite is not the Ring of Fire's only resource.
Some 35 companies hold 25,000 claims units in the region, according to Ontario government data. Noront is developing a nickel-copper project and the region also has precious metals such as gold, platinum and palladium.
"When you get the infrastructure there, it will open up the opportunity for other companies as well," said Chris Hodgson, president of the Ontario Mining Association.
Development could also bring much-needed tax revenues for the debt-laden province of Ontario, which has committed to helping fund infrastructure.
But the deposits are located on treaty lands of aboriginal peoples, known as First Nations. Companies will need to reach complicated "impact benefit" deals with these groups before any development can proceed.
With First Nations throughout Canada waging very public battles against projects from mines to pipelines, miners could face an emboldened opposition, especially if local communities feel the risks outweigh the benefits.
"We expect to have a say in what happens on our lands, because that is our home," said Grand Chief Stan Beardy of the Nishnawbe Aski Nation, an organization of 49 First Nation communities. "We are not against resource development, but we expect a benefit."
Development advocates say the benefits are clear. Mining will bring skills, jobs and business opportunities to a depressed region that has made headlines in Canada over condemned housing and a lack of safe drinking water.
But while demand for chromite is steady now, the survival of the region will depend on North American and European steel mills, which tend to struggle during times of economic uncertainty.
The biggest challenge is to ensure the region is built out in a sustainable way, so that once Black Thor is exhausted, other mines can take its place.
The alternative would be a mess of disconnected road and rail lines that do little to support local communities or future economic activities in the region.
"This is a one-time opportunity. These are non-renewable ore bodies," said Gibson, the University of Waterloo environmental policy expert. "Unless those things are thought about now, you will almost certainly get regrettable results."
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