Toll road to the Ring of Fire? – 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

A provincial toll road may be in the offing for mining companies hauling ore out of the Ring of Fire. Noront Resources said in its discussions with the Ministry of Northern Development and Mines, among the options on the table with Queen’s Park are a toll charge being assessed based on each company’s “proportional usage.”

That’s just fine with Noront since its concentrate shipments will be less than seven per cent of the road’s entire haul. The province has committed to financing a north-south haul ore road out of the James Bay lowlands’ mining camp, and has further assured Noront that the road will be open to all mining companies, not just Cliffs Natural Resources.

The other option under government consideration involves the companies ponying up money for the road corridor. The cash-strapped Ontario government has also appealed to Ottawa for infrastructure capital.

Noront president and CEO Wes Hanson said a final decision on how the road will be built and financed has yet to be decided.

“I know the feds are one of the parties they’re talking to, they’re talking to us and obviously Cliffs, and other potential investors on the road, I’m just able to talk about what they’ve discussed with us.”

Comment from the Ministry of Northern Development and Mines on the status of the road infrastructure was not available at Northern Ontario Business’ deadline.

Noront reported in a Sept. 4 release that the feasibility study for its Eagle’s Nest high grade nickel-copper deposit in the James Bay region offers “robust economics.”

The report conducted by Micon International said the $609-million mine project offers a life of 11 years.

Eagle’s Nest contains a proven and probable mineral reserve of more than 11 million tonnes of nickel, copper, platinum, palladium and gold.

Hanson is encouraged by analysts’ prediction of a nickel price rally in 2015 and 2016, “perhaps in the $10 to $12 (per pound) dollar range,” which coincides with the start of production at Eagle’s Nest in 2016-2017.

“The return on investment would be quite significant.”

Besides a decade’s worth of reserve life, Hanson said there’s probably another 10 years further below that can’t be included in their financial statements.

Hanson said the project could last “hundreds of years like the Sudbury camp.”

Noront is doing site work and collecting environmental baseline data at Eagle’s Nest while evaluating financing options for the development’s construction, which may include finding a deep-pocketed partner.

Earlier, Noront was wedded to an alternative route to build a $400-million east-west all-season road towards Pickle Lake and the Ontario highway system. It was mostly for socio-economic reasons with local First Nations.

Hanson said if there are unanticipated delays in constructing a north-south road, the east-west corridor remains their fall-back plan.

Cliffs and Ontario supported the north-south route on the basis of successful completion of an environmental assessment, and Cliffs giving their Black Thor project a green light to proceed.

Hanson anticipates that decision being made by mid-2013.

“That’s a better pill for us to swallow because essentially…we’re a year and a half ahead of Cliffs in the process.”

Hanson said if they revert to their east-west route, there’s the possibility they could mine and produce concentrate to ship on a winter road basis, and save considerable capital.

With nickel prices at US $8 per pound, Noront aims to develop its Eagle’s Nest nickel sulphide project first and keep its Black Bird chromite deposit in the pipeline for later.

Hanson said Noront has always seen greater value with developing and selling the nickel first, with plans to re-invest that cash into exploration, and later developing the chromite and establishing a ferrochrome processing plant.

The company has plans for an environmentally friendly underground operation, including a below-ground processing mill and tailings storage area.

The surface infrastructure will be minimal and limited to less than 50 hectares, including a year-round airstrip.

With little aggregate to be found on surface, mine waste rock will be recycled.

Hanson said the granite host rock is not acid generating and is ideally suited to be used as aggregate.