[Ring of Fire] A Market For Chrome – by Brian Sylvester (Mining Markets – September, 2009)

Please note this article was originally published in Mining Markets in September 2009. Much has changed in the Ring of Fire since then and this article is posted here for archival reasons. – Stan Sudol 

Noront Resources (NOT-V) president and CEO Wes Hanson says the global ferrochrome market is somewhere around 17 million tonnes, while his predecessor and Noront director, Joe Hamilton, believes it’s closer to 12 million.

German firm Heinz Pariser Research is forecasting an average ferrochrome price of US$0.79 per lb. and US$1,600 per tonne until 2017. Raw chromite fetches US$200 per tonne.

With global demand of 14.5 million tonnes (the average of the earlier estimates), the global ferrochrome market is worth about US$23.2 billion. A 5% share of that market would be worth US$1.16 billion annually.

Some rough estimates put the chromite tonnage in the Ring of Fire well into the billions but it takes 2.5 tonnes of chromite to make 1 tonne of ferrochrome. And if you saturate the market with too much production early on, prices will sink and the financial models used to finance development would be rendered useless.

In 2006, South Africa supplied 38% of the world’s chromite, with Kazakhstan and India each producing 18%, and Finland, Brazil and China among the largest remaining chromite producing nations.

Most customers, mainly steel mills, which use it as a key component in stainless steel production (chromium is alloyed with steel to make it corrosion resistant or harder) have contracts with chrome suppliers.

The rich chromite deposits in Kazakhstan supply steel mills in Europe and Russia, while deposits in India and Brazil largely supply domestic needs. That leaves the vast chromite fields of South Africa’s Bushveld Complex to meet the rest of the world’s ferrochrome demands.

“There is no chromite production in North America. The Americans are importing; they are getting their chromite from South Africa,” says Donald Hoy, Freewest Resources’ (FWR-V) vice-president of exploration.

Cliffs Natural Resources (CLF-N), one of the world’s major iron ore pellet suppliers, owns 10% (fully diluted) of Freewest, and almost 20% of KWG Resources (KWG-V). The US$3.2-billion company clearly sees the North American market as the best chance for success.

“I think Cliffs has aspirations of supplying the European and Chinese markets,” says Frank Smeenk, president and CEO of KWG Resources. “Cliffs also sees a huge opportunity in this small North American market.”

Supply problems have dogged the chromite market in recent years. Hoy says some chromite shipments from South Africa never reach their customers. He believes there is room for another supplier.
“It depends on the quality of your product. There are different qualities of chromite,” Hoy says.

“If you can find a really large tonnage of very good quality (chromite) and very good grade, then you may put some people out of business,” Hoy predicts.

Hanson sees it differently.

“Realistically, what (size of market share) is a new Canadian (chromite) operation going get in an ‘old boys’ club? Two per cent, three per cent, four? You’ll get the domestic market in the U. S. If you have the right connections, you may get inroads into China,” Hanson says. “It looks like it’s going to be a difficult market to break into.”

Noront’s chromite development plan goes something like this: Join the International Chromite Development Association (ICDA); publish a National Instrument 43-101 compliant resource estimate; work out an agreement with the ICDA as to how much chromite Noront could supply the market; establish with chromite buyers that Canadian chromite is excellent quality; develop a chromite brand (similar to the way Canadian diamond miners made Canadian diamonds a luxury brand); and maybe get 10-15% of the market -or 1.2-2 million tonnes per year.
“You have to establish a name brand. You have to be Nike,” Hanson says. “Fully understanding that market is very high on our list of things to do.”

Noront plans to have a National Instrument 41-101-compliant estimate for its Blackbird 1 and 2 chromite deposits by the end of 2009. The junior has drilled 154 holes and more than 52,000 metres over both deposits.

A chromite-to-iron ratio of 2 to 1 is considered the benchmark to process chromite into ferrochromium in a smelter.

In South Africa the ratios are generally 1.7-1.8 to 1, in Kazakhstan the ratio often exceeds 2 to 1, and at the Proterozoic-aged Kemi mine in Finland the ratio drops to 1.5-1.6 to 1.

Most of the chromite deposits discovered so far in the Ring of Fire report chromite-to-iron ratios of 2 to 1 or better.

For the rest of this article, please go to the Mining Markets website: http://www.miningmarkets.ca/news/a-market-for-chrome/1000344014/?type=Print%20Archives