Ring of Fire: Miles to Go Before We Dig – by Stan Sudol

This column was published in the January 5 and 7 editions of the Sudbury Star:




It may be a cliché, but over the past six months, how things have changed and how they’ve stayed the same in the Ring of Fire. There may be some ongoing activity or discussions behind the scenes, but without a doubt, the declining state of the global economy, First Nations issues and Ontario politics seem to have halted any progress on a varity of issues.

First let’s look at the fragile nature of the world economy. The U.S. is still struggling, Europe is worse, with skyrocketing unemployment rates in many countries and China’s past double-digit expansion is gone. It is estimated that their economy will “only” grow seven per cent this year.

The price of commodities and the value of resource companies have plummeted. Many mining projects are being put on hold or cancelled while layoff notices are being handed out. Funding for junior exploration companies – the source of future discoveries like the Ring of Fire – has become almost imposible to find putting many on life support.

The stock price of Cliffs Natural Resources has plummeted from US$100.00 per share a year and a half ago to a little under US$30.00 recently. Cliffs has publicly stated that they are looking for a partner to help develop their northern Ontario chromite deposits. Recently the company has put their Bloom Lake iron ore expansion project in Quebec’s Labrador Iron Trough on hold and stopped production at two of their U.S. iron ore mines.

There is also rampant speculation that Cliffs – which only operates in politically stable countries like the U.S., Canada and Australia – is a prime takeover target.

Recently, the Glencore-Xstrata merger has been given the green light by shareholders and European regulators. Xstrata is the world’s largest producer of chromite from their extensive operations in South Africa. That country supplies almost half the global demand of this vital ingredient for stainless steel and many other strategic uses including critical military applications.

Last summer, the labour strife and the violent deaths of many miners in South Africa – the Marikana Massacre is where 34 workers were killed on August 16th – started in the rich platinum-mining region of the bushveld and had spread to many other mines throughout the country. The bushveld is also the source of South African chromite production and many other minerals.

The country has one of the widest gaps between the very rich and poor. While the violence and strikes have subsided, there is still much tension in the mines and many fear that if their standard of living does not significantly improve, the political stability of the entire country may be at risk. And the more militant youth wing of the ruling ANC party continually calls for the nationalization of some parts of the mining sector.

With the strategic value of chromite, South African political uncertainly and the very low value of Cliff’s stock, is Glencore/Xstrata thinking about swallowing the cash-strapped U.S. miner? They are certainly big enough as the merger has made Glencore/Xstrata the fourth largest international miner after BHP-Billiton, Vale and Rio Tinto. Or would one of the other major miners want to takeover Cliffs and establish themselves in the chromite game becoming the new “King of the Ring” as well as acquiring that company’s valuable iron ore and coal deposits. Many people feel that Cliffs will not be the company digging chromite out of the ground in 2016, their revised timeline for mining production to start.

Considering the strength of the financial downturn, First Nations political and social issues, on top of the environmental and transportation challenges , one wonders if Cliffs’ management is dreaming in “techni-color” if they think they will meet that new starting date!

I am betting on 2019 or 2020. And a warning to Sudbury politicians to not count your chromite eggs just yet. If Cliffs is taken over, the new company will surely reassess all previous decisions and that ferrochrome facility might end up elsewhere. Stay tuned as it will be a very interesting 2013.

The Commodity Supercyle is over?

Of course, with all this economic uncertainty, the financial bears are coming out of the woods. Many newspaper headlines are screaming that “the commodity supercycle is over.” Don’t believe it for a minute. From the end of the second world war and the early 1970s, we went through a previous commodity supercyle as we rebuilt Europe, the U.S. and Canada boomed and Japan, South Korea and other smaller Asian tigers industrialized. However, the demand for commodities did not go up in a straight line.

That was painfully evident here in Sudbury, where we experienced the traditional boom and bust cycles of the mining sector. The old Inco would lay off 2,000 workers and a year or two later rehire them.

In addition, China is experiencing the largest rural to urban migration of people in human history. India, Latin America and Africa will be following. Metal consumption is an integral part of the urbanization process as a growing middle class wants indoor plumbing, electricity, cars, subway systems, appliances and other services or products that require vast quantities of metal.

Even Bank of Canada Governor Mark Carney stated in a September speech, “Rapid urbanization underpins this growth. Since 1990, the number of people living in cities in China and India has risen by roughly 500 million, the equivalent of housing the entire population of Canada every 18 months. Despite the current, sharp cyclical slowdowns in China and India, this secular process can be expected to continue for decades.”

Ontario Politics and Far North Act

Now let’s focus on the lack of leadership in Ontario. Premier McGuinty’s unexpected decision to step down has basically frozen all major decisions in the Ring of Fire. Regardless of who becomes the new Liberal leader – a Toronto Sun editorial quipped that this process is like “putting lipstick on a pig” – Ontario will likely hold a spring election.

Considering the current stalemate or lack of progress in the Ring of Fire, especially with First Nations communities, and Ontario’s dismal economy, the new Premier must give this file the attention it deserves. Two quick early “wins” to signal that he or she respects Aboriginal concerns and recognizes the huge economic opportunities from this project would be the creation of a stand-alone Ministry of Aboriginal Affairs inside the provincial cabinet and make significant changes to the much detested Far North Act.

Until Kathleen Wynne announced that she was running to become the new Liberal leader, she was the Minister of Municipal Affairs and Housing as well as Aboriginal Affairs. When I worked at Aboriginal Affairs in the late 1990s – then known as the Ontario Native Affairs Secretariat – the Attorney-General was responsible for this ministry. There are many serious First Nations issues around land claims, resource revenue sharing and social and educational challenges just to name a few. The Ministry of Aboriginal Affairs deserves its own full-time minister.

The Far North Act is detested by both Aboriginal and non-Aboriginal people across northern Ontario. However, there are some good initiatives being done under this Act, especially with community-based land-use planning. So instead of “throwing out the baby with the bathwater” make a few strategic changes. First eliminate the requirement that 50% of the Far North should be turned into parks. First Nations communities are still angry that the powerful southern environmental movements forced this provision on them. Let the Aboriginal communities decide how much of their traditional territories should be off-limits to sustainable resource development.

Furthermore, according to the Act, no new resource development can occur until the communities have completed their land use plans. It will take years if not a decade or longer for some who may not have the financial or human resources to complete these plans. Change that provision so First Nations that have been adequately consulted can allow resource projects to proceed even if the land-use plans are not completed.

Visit Finland Chromite Operations

Another way to build enormous trust and allay environmental concerns among the Ring of Fire communities is to bring the the Chiefs, some of their councillors and a few elders from each First Nation on a trip to the highly efficient Kemi chromite open-pit mine in Finland and a nearby ferrochrome facility in the town of Tornio. As I mentioned in my previous column, Finland has one of the highest standards of living in Europe, has a mining culture similar to Canada and is as environmentally conscious.
On the way back, this group could visit the very successful nickel mining operations in Labrador, Newfoundland and northern Quebec operated by Vale and Xstrata Nickel respectively. Both projects partnered with the local Aboriginal or Inuit communities whose members make up significant percentages of the workforces and have also created many indigenous businesses that supply the mines.

The Ontario government should take the lead with this proposed initiative.

Third-World Ontario

The Ministry of Northern Development and Mines estimates the value of the current known chromite deposits at US$50 billion over it 30-year lifespan. Noront Resources is developing a nickel/copper/PGM mine with a current 11-year life span. The mineral deposit is “open at depth” which means that even though official TSX regulations will not allow you to estimate the potential size of the orebody, most feel that mine will be in production for much longer.

The Ring of Fire mining camp will become bigger than the nickel mines of Voisey’s Bay, Newfoundland and Raglan, Quebec combined. It’s bigger than diamond deposits in the Northwest Territory or the uranium mining district in northern Saskatchewan. We have just begun to explore this geologically rich mining region that will probably equal if not exceed the legendary trillion-dollar Sudbury basin.

These developments and potentially many more to follow will significantly alleviate impoverished living conditions in the adjacent Aboriginal communities as well as provide enormous economic benefits for the entire province.

But how are the First Nations going to build their capacity and take full advantage of these extraordinary job opportunities and most importantly, give their consent to sustainably development their traditional territories, when many if not most of them are living in deplorable conditions?

We need to establish an “infrastructure and social Marshal Plan” with both levels of government working closely in partnership to upgrade to southern Ontario standards the third-world living conditions in these communities. The original “Marshall Plan” was a large-scale American aid program that helped rebuild war-torn European economies at the end of World War Two.

When the earthquake hit Haiti, Canadians were quite proud that our military was able to fly down the famous Disaster Assistance Response Team (DART) who was able to have clean drinking water available within a short period of time.

Yet Marten Falls (population 282), which is under a boil water advisory since 2007, has to fly in clean drinking water at an annual cost of about $300,000. Neskantaga (population 274), has been under a boil water advisory since 1997.

Education and health care facilities are substandard and per capita student expenditures are much lower than the general population. All of the fly-in communities should have the funding to educate their students up to grade 12. Sending children to Thunder Bay or other communities to finish high school has mixed and at times, tragic consequences. Since 2000, seven students from remote reserves have died in Thunder Bay while attending high school. An inquest into these deaths will begin in the spring of 2013.

And the tragic legacy of the Aboriginal residential schools still haunt many people. If both levels of government are serious about “building capacity” in these communities than education must become a top priority. Housing shortages and conditions are deplorablen and must also be addressed.

In addition, the reserves suffer high levels of addiction problems especially the devastation brought on by OxyContin prescription drug abuse. These issues will require significant investments by both levels of government if we want to ensure healthy, job-ready community populations.

Canada is one of the wealthiest countries in the world. Both federal and provincial governments are more than capable of providing functioning infrastructure and education and health care services.

If Premier McGuinty felt he could waste a billion dollars to cancel two gas-fired power plants in southern Ontario in order to get a majority in the last election than Ontario’s $15 billion deficit can not be brought up as a reason for inaction.

Environmental Assessment

This multi-generational chromite project is going to be a huge industrial operation that will be built with the most modern and environmentally sustainable technologies that are available today. So I was very disappointed when Mining Watch highlighted the many environmental and medical issues surrounding the chromite operations in India’s Sukinda region in a previous article in the Sudbury Star.

A bit of background context might be helpful. India’s Sukinda region, the source of about 97% of that country’s chromite, began production in the early 1960s. At that time, India was a very poor country which even had trouble feeding its growing population, let alone worry about environmental issues.

Let’s remember how Sudbury and our moonscape looked like during that time period and Inco’s infamous nickel Sinter plant at Copper Cliff that caused the death of many workers. Even in this country, the environmental movement did not really start developing until the early 1970s.

Comparing Ontario’s 21st century environmental regulations and standards – among the best in the world – with India’s or even Canada’s past is just scaremongering. Asking Mining Watch to comment on the Ring of Fire chromite project is almost akin to “asking the Boston Strangler to massage your neck” – if I may steal an alleged remark made by Hollywood director Billy Wilder many years ago.

However, the current controversy between what type of an enviromental assessment should be conducted on the planned chromite mine is shameful. Both Cliffs and the federal government do not come away from this issue looking very good.

Cliffs is conducting a Comprehensive Study Environmental Assessment (EA) as opposed to eight of the nine members of the Matawa Tribal Council who want a Joint Review Panel Environmental Assessment. The Matawa Tribal Council is made up of the following five fly-in First Nations, Webequie, Marten Falls, Neskantaga, Nibinamik, Eabametoong and four road accessible communities, Aroland, Long Lake #58, Ginoogaming and Constance Lake.

The Comprehensive Study EA allows very limited participation with First Nations while the longer Joint Review Panel EA would involve a more thorough consultation and consider all the impacts of a mine including health and social issues.

Fishing, hunting, and gathering plants for food and medicine are an integral part of First Nations connections with their traditional territories. Memories of the mercury contamination of the Wabigoon-English River systems that affected members of the Grassy Narrows and White Dog reserves with Minamata disease in the early 1970s are still vivid. At the time, the mercury was dumped into the river by Reed Paper Company’s chemical and pulp mill with no government oversight.

That will never be allowed to happen again in this country and there is no mercury being used in the chromite mining process. With that horrific legacy in Northwestern Ontario, one has to question why the Canadian Environmental Assessment Agency selected the less rigorous and shorter environmental assessment process.

Shockingly, Stillwater Canada Inc.’s PGM/Copper open pit mine near Marathon is undergoing a Joint Review Panel EA even though that project is a significantly smaller development that will be in operation for only 12 years as opposed to Cliffs chromite mine that will be in production for at least three decades if not longer.

With the exception of Webequie, the Tribal Council has launched a judicial review of the federal government’s decision to use a Comprehensive Study EA which should be heard by the courts sometime next year.

First Nations Want Ring of Fire to Succeed

Over the past fifteen years, courts in Canada have become very sympathetic towards First Nations grievances about resource developments. Lawyer and author Bill Gallagher has chronicled 171 Aboriginal court victories regarding resource issues and conflicts. His recently published book “Fortune and Folly on Canada’s Road to Resources” highlights the enormous power First Nations continue to hold over these projects despite their impoverished living conditions.

Let’s remember that the vast majority of First Nations in the Ring of Fire want this project to succeed but they need to be sure that it is done in a sustainable manner and that their people get as much economic and social benefits as possible. They rightly want to be partners at the table.

If the Ontario and federal governments wish to develop these enormously rich mineral deposits – $50 billion and counting – they need to better understand, respect and resolve the impoverished social conditions and environmental concerns of the surrounding Aboriginal communities.

If they don’t, to paraphrase poet Robert Frost, “we will have many, many miles to go before we ever dig anything out of the ground in the Ring of Fire.”

Stan Sudol is a Toronto-based mining analyst and communications consultant and owner/editor of the RepublicOfMining.com website. stan.sudol@republicofmining.com