Northern Iron wants Domtar as railroading partner – by Ian Ross (Northern Ontario Business – October 2012)

Established in 1980, Northern Ontario Business provides Canadians and international investors with relevant, current and insightful editorial content and business news information about Ontario’s vibrant and resource-rich North. Ian Ross is the editor of Northern Ontario Business

Northern Iron Corp. is knocking on Domtar’s door to gain access to a railroad right-of-way to advance a proposed open-pit iron ore operation in northwestern Ontario.

The Vancouver junior miner has a series of iron deposits spread out over 14,600 hectares, east of Ear Falls and south of the Red Lake gold mining district, that includes the former Griffith open pit, once operated by Stelco. The project contains an historic estimate of more than 500,000 million tonnes that the company is trying to prove up.

The company wants to build an on-site processing plant that converts iron ore into premium hot briquetted iron (HBI) for the North American and global steel industry. They’ve secured two advance orders of 960,000 tonnes of HBI from two Chinese state-owned companies if the mine goes ahead with production in 2016 as planned.

But to move product out, the company wants to gain access to a railway right-of-way that runs 120 kilometres south from the Griffith site to Amesdale, a spot on the Canadian National Railway’s (CN) main east-west line.

The rails were lifted years ago, but a significant length of the track bed remains largely in the hands of forestry giant Domtar.

“We would like to negotiate a joint right-of-way with Domtar,” said Michael Hepworth, Northern Iron’s vice-president of corporate affairs. “They don’t want to give it up, so we’d like to reconstruct the railway line and put a road right beside it.”

Northern Iron’s plan is to finance, build and maintain a railway, while CN would run its rolling stock over the line to move either iron ore concentrate or HBI.

Hepworth estimates the cost to re-lay the track at between $70 million and $80 million. As well, some bridges over river crossings would likely have to be replaced.

Northern Iron was told Domtar wants to keep the corridor as a logging road.

Bonny Skene, Domtar’s regional manager of public affairs in Dryden, confirmed that’s, indeed, the case.

“Future plans (for the right-of-way) are similar to its current use – providing access to the network of forestry roads in the area,” she said in an email. “We have been approached by Northern Iron Corp. and we have indicated that we would require more information to assess any related requests.”

But she classified talks as very preliminary in nature.

“CN is very keen to help us, but we’ve got to make things actually work,” said Hepworth, who is working with former Toronto mayor David Miller, a Northern Iron director, to address other infrastructure challenges.

The project requires a natural gas pipeline connection and substantially more power transmission capacity than what’s currently available in the area.

Northern Iron needs 60 megawatts to run its mine and mill development.

Hepworth said simply twinning an existing 115-kilovolt (kV) transmission line doesn’t address their needs.

The company wants a beefed-up 230 kV line of which Northern Iron would use 25 per cent of the power with the rest being available for electricity-starved gold miners in Red Lake to the north.

“It’s very expensive to put in – about $400,000 per kilometre – but obviously very, very critical for us,” said Hepworth.

The company expects to have some in-depth discussions with the Ontario Power Authority, which is drawing up a long-term energy plan for the region.

Northern Iron has made no secret that it’s looking for a deep-pocketed partner to bring the mine into production, but with global iron ore prices hitting a three-year low in September, few financiers are writing cheques.

However, with the baseline environmental work underway and exploration drilling ongoing, Hepworth said the project remains on schedule.

But the company still has some fence-mending to do with a local First Nation.

Two years ago, Northern Iron got off to a rocky start in consulting with the Wabauskang First Nation, a small community 40 km south of the Griffith pit.

Chief Leslie Cameron wasn’t impressed that the company cancelled a mid-August meeting so soon after receiving a provincial dewatering permit. And he’s equally discouraged by the lack of government involvement in consultation.

“They’ve kicked us once. I don’t have any faith in anybody. It’s all about greed and money.”

Cameron wants the Ministry of Environment to revoke the permit, citing the recent Keewatin decision, a legal victory by the Grassy Narrows First Nation near Kenora, which ultimately strengthens the hand of bands in having a say on resource extraction projects north of the English River.

Another meeting with the company was scheduled for late September.

“I hope it’s all a misunderstanding,” said Cameron, who’s angry the project has progressed this far without their territorial consent. “This time they’re not going to walk all over us.”

Hepworth said Northern Iron executive chairman Rick Brown and technical manager Cameron Tymstra are taking the lead to speak with the community.

“We haven’t gotten anything resolved but we’re more than happy to employ any First Nations for jobs that they’re qualifed for. We hope to have good relations with them on an ongoing basis.”