Project Focus: Ring of Fire – by John Chadwick (International Mining – January 2013)

There is a very exciting new mining camp developing in Canada, John Chadwick reports

According to the Ontario Government, “The Ring of Fire is one of the most promising mineral development opportunities in
Ontario in almost a century. Located in Ontario’s Far North, current estimates suggest the multigenerational potential of chromite production,as well as significant production of nickel, copper and platinum.”

The projects will open up economic opportunities in an extremely remote and undeveloped area, an 80 km by 100 km swath of
muskeg, especially for local First Nations communities. Any new infrastructure (community, social, etc.) will further benefitlocal communities. The region will require significant investment in mine and processing infrastructure, the construction and operation of transportation infrastructure and the provision of energy. Rail and all-weather road options are currently being assessed for the transportation corridor.

The exploration and prospecting involves some 16,400 claim units, covering an area of 2,630 km2, with 21 companies currently holding claims in the Ring of Fire belt. The area of most intense exploration is about 20 km long running northeast from Noront’s Eagle 2 prospect to Spider-KWG’s McFauld’s #2. Discoveries include chromite, nickel, copper, zinc, gold and kimberlite.

Some C$208 million had been spent on exploration to the end of 2011 and the total forecast for 2012 was C$84 million. Exploration is expensive in this region, for obvious reasons – Noront Resources has estimated around C$1 million for an average hole.

Probe Mines explains that “the McFauld’s Belt, commonly referred to as The Ring of Fire, is an over 100 km long, arcuate greenstone belt comprised predominantly of a bimodal population of basaltic and rhylotic-dactic volcanic rocks with minor intercalated sediments. At the centre of the midpoint of the arc, situated at the contact of the greenstone belt and granodioritic country rocks, is a 20 km long, thin, sill-like body of variably altered and sheared ultramafic intrusive, which hosts all of the known Ni-Cu, PGM and chromite mineralisation.

“Mineralisation in the Ring of Fire is as varied as it is extensive. To date, potential economic sources of Cu-Zn, Cu-Ni, Cr2O3, PGM, Au and V have been identified in the felsic volcanic and ultramafic intrusive rocks of the belt.

“The most significant VMS deposits occur in two areas of the belt, central and northern, and are distinguished by copper-rich and zinc-rich varieties, respectively. The central VMS deposits are typically associated with highly Mgmetasomatised felsic volcanics, characterised by intense talc alteration. Although some examples contain zones of zinc rich mineralisation, most are notable for their high-grade copper.”

Key companies in the region include Cliffs Natural Resources (chromite) and Noront Resources (nickel); both are advancing through feasibility and environmental assessment (EA). Community engagement and consultation has been initiated.

Cliffs’ investment plans include an open-pit mine, concentrator, all-weather road infrastructure, and valued-added ferrochrome refinery with capital investment estimated at C$3.3 billion. Noront’s plans include an underground mine, underground concentrator, and underground tailings storage, as well as access to all weather road infrastructure. The capital investment is estimated at C$609 million.

KWG Resources has been a pioneer in exploring the James Bay lowlands since 1993 and discovered diamond-bearing kimberlite
pipes near Attawapiskat and five more near the Ring of Fire area in 1994. This led to the accidental discovery of the McFaulds Lake copper-zinc volcanogenic massive sulphide deposits in 2002, the discovery which precipitated a staking rush that defined the Ring of Fire.

The communities of the Matawa Tribal Council are most directly impacted. The Ring of Fire includes five remote communities located in the Far North and four road access communities. The infrastructure corridor and location of processing facilities would transect a broader group of First Nations communities as well as intersect with Metis and municipal interests. The provincial government attaches such importance to this; the newest of Ontario’s mining camps, that it has its two of its own Assistant Deputy Ministers, Dr Christine Kaszycki and Deborah Richardson.

The government has announced a suite of commitments to First Nations, including: regional environmental monitoring, regional infrastructure planning (local access, transmission, community based infrastructure), social supports (health, skills training etc.) and resource revenue sharing with directly impacted communities.

Eagle’s Nest

Noront Resources’ 100% owned Eagle’s Nest deposit is the most advanced project. Last September Noront announced the results of an updated NI 43-101 feasibility study for a standalone nickel, copper, PGM mine and mill complex. The results of the study, completed under the supervision of Micon International,confirm that Eagle’s Nest offers robust economics.

A Discounted Cash Flow (DCF) based on the assumed metal prices indicates:

■ An after tax NPV at an 8% discount rate ofC$543 million

■ An after tax IRR exceeding 28%

■ An estimated initial capital investment of C$609 million

■ Estimated life of mine sustaining capital cost of C$160 million

■ Estimated operating costs (including road access fees) of C$97/t or C$2.34/lb of nickel equivalent or -C$0.31/lb of nickel net byproduct credits

■ An estimated mine life of 11 years

■ A capital payback period of less than three years based on a 100% equity project.

The planned throughput for the mine and concentrator is 1.0 Mt/y, producing about 150,000 t/y of high grade nickel-copper
concentrate. This is based on Proven and Probable mineral reserves of 11.13 Mt at 1.68% Ni, 0.87% Cu, 0.89 g/t Pt and 3.09 g/t Pd. Metallurgical recoveries are estimated to be 83.1% nickel, 89.7% copper, 74.0% platinum, 82.3% palladium and 76.7% gold.

The underground mining method will be the highly productive blasthole sub-level stoping. Initial mine production will be from an internal ramp and production ramps will be developed after year three to access the lower levels of the deposit.

All major mining facilities (including the mill) will be located underground. All tailings will be stored underground as paste fill. All major earthworks will use non-acid generating mine waste rock as aggregate. The surface disturbance will be limited to less than 50 ha. Wes Hanson, CEO of Noront, told delegates at the MassMin 2012 conference in Sudbury last summer that “the James Bay Lowlands is devoid of any topographic relief. There are no construction materials for aggregate, no rock outcrops. Building traditional surface facilities will be extremely challenging, so we’ve decided to construct our [3,000 t/d] mill underground.”

The mine will have one of the smallest footprints of any underground mine in the world. Surface facilities will be limited to a road network, a year round airstrip, a camp, a portal facility for the twin decline system and compressors. There will be no tailings pond, no mill and no warehouses.

The mill and associated production facilities will be housed in a series of underground chambers 18 m wide by 18 m high at a depth of 170 m in very competent rock. The 3 million m3 of aggregate for the runway and surface facilities will be supplied from underground for two or three years while construction is in progress.

Concentrate will be trucked to a rail load-out facility near Nakina along a toll road following the north-south all-season road corridor supported by the Province of Ontario and Cliffs. Power will be generated on-site with the use of diesel generators, with recovered heat used to dry concentrate in a facility positioned on the surface area adjacent to the power plant.

Of the estimated operating cost of C$97/t, approximately 35% was attributed to underground mining, and approximately 34% was attributed to on-site processing (including power costs); 9% was attributed to road toll related costs, and 22% was attributed to general and administrative related costs.

The company made the discovery in 2007 by following up on anomalies from airborne geophysical surveys. “We went up there in 2007 to do a 10-hole drill program and the fifth hole hit what is probably the most significant discovery in Canadian history: 3.5% Ni, 2% Cu and 15 g/t Pt and Pd,” explained Hanson.

“Between the different companies, we’re probably sitting at a total resource of between 150 and 200 Mt of high-grade chromite, and by high-grade, I mean better than 35 or 40%. That’s a highly desirable product equal to anything that’s being mined in South Africa,” he continued. “There may not ever be a city like Sudbury up there, but the Ring of Fire will certainly rival the Sudbury camp as one of the great mineral discoveries in Canadian history.”

Noront’s chromite-bearing Blackbird property,2 km from Eagle’s Nest, lies at the southern extension of the 15-km long chromite belt, and can be developed using common underground infrastructure, “but as a small Canadian junior mining company with a limited market cap, it’s very difficult for us to take on two projects simultaneously, so we decided to focus on Eagle’s Nest first,” explained Hanson.

Noront is currently completing condemnation, geotechnical and hydrological drilling near the proposed portal location and detailed engineering related to portal construction. It is also evaluating potential benefits to producing both a nickel concentrate and a copper concentrate now that the development of Eagle’s Nest no longer considers use of a concentrate slurry pipeline. Additional metallurgical testing is underway.

The company is continuing to progress through the environmental permitting process with the Ontario Ministry of Environment (MOE) and the Canadian Environmental Assessment Agency (CEAA). The permitting process is progressing as planned with no undue delays to date. A comprehensive EA of Eagle’s Nest has been recommended by both agencies and Noront believes the process will be complete by the second half of calendar 2013.

Hanson states: “The decision of the Province of Ontario to financially support the north-south road corridor pending certain approvals is a very positive development in unlocking the mineral wealth of the Ring of Fire. Our discussions with the Province have confirmed that the all-season road will be accessible to all industrial users including Cliffs and that the costs to use the road will be based on proportional usage, a critical consideration for Noront as our concentrate shipments represent less than 7% of the currently identified ore haulage along the corridor.

“We are currently focused on site work in advance of project development as we evaluate opportunities to finance project construction. Analysts are predicting a nickel price rally in 2015 and 2016 as demand outstrips supply. This timing matches the planned start of production at Eagle’s Nest. With nickel production costs in the lowest quartile of existing and planned nickel producers and limited capital costs, Eagle’s Nest remains one of the most exciting opportunities in the nickel sector today.”

In a letter dated August 10, 2012, Ontario’s Ministry of Northern Development and Mines (MNDM) advised Noront that the Province was in early stage discussions with Cliffs regarding a north-south all-season road that would connect the Ring of Fire to existing provincial infrastructure. The letter confirmed the Province’s intent to contribute financially to develop the proposed all-season road subject to various environmental, regulatory and financial approvals.

MNDM advised Noront that “the current expectation is that the all-season road would be made available for use by industrial users otherthan Cliffs, with access fees generally based on proportional road usage, although specific terms are still to be determined.”

Details on the estimated capital costs of the proposed north-south road have not been provided to Noront. However, Cliffs has stated that the cost of its proposed integrated transportation system is budgeted at $600 million. This cost is consistent with previous work completed by Noront on this alternative and was used as the basis to establish road usage costs in the feasibility study.

Black Thor

Cliffs Natural Resources’ Black Thor chromite deposit is the other advanced project. It was acquired from junior miner Freewest Resources in 2009. In May the company began to advance its proposed chromite Black Thor project from prefeasibility to the feasibility study phase. Cliffs stated that its discussions with the Government of Ontario “have resulted in an agreement in principle for key elements of its chromite project, including development of provincial infrastructure.”

The company has chosen Capreol, a few kilometres north of Sudbury, as the future location for its intended ferrochrome processing facility. “This facility will be designed to process the chromite ore mined and concentrated in the region. Sudbury was selected due to various economic and technical factors that would best support the viability and success of the overall project, including transport logistics,labour, long mining tradition, community support and access to electrical power.” Its electricity requirements are estimated at 300 MW annually. Concentrate will be refined in enclosed electric arc furnaces – 1,500 t/d of ferrochrome is expected once mining is in full production.

Bill Boor, Senior VP – Global Ferroalloys for Cliffs has said that its project “has sufficient scale to justify infrastructure investments with the potential to connect remote communities with more populous municipalities, opening up the Ring of Fire to other responsible mining investments.”

Cliffs anticipates a majority of the project’s anticipated capital requirements would be made in 2014 and 2015, with an early works program initiated prior to 2014 to maintain project execution timeline.

The deposit is extremely remote. The “base case” mine site is 350 km north of the town of Nakina in the Municipality of Greenstone and the nearest transport infrastructure. Nakina has the CN transcontinental rail line and the TransCanada Highway (Ontario Highway 11).

Thunder Bay is the closest major city to the Ring of Fire, approximately two hours by air to the southwest. The nearest industrial facilities are the Victor diamond mine 150 km to the east and Musselwhite gold mine 300 km to the west.

The Black Thor project will consist of four interrelated components. The open-pit mine is anticipated to move up to 30 Mt/y of material and deliver up to 4.4 Mt/y of ROM ore to the concentrator. The 4.4 Mt/y ore processing facility is expected to produce up to 2.3 Mt/y of chromite concentrate. As discussed above, an integrated transportation system will link all project components, including the Capreolferrochrome production facility.

It is expected that for the first 10-15 years mining will be from two open pits. A transitionto underground will be considered in future forore at greater depths. An output of 6,000-12,000t/d of ore is expected once mining is in full production. Following crushing, ore with a grade of 40% Cr2O3 or greater is suitable for refining or direct sale.

Processing involves crushing, mechanical processes and gravity separation to produce a concentrate suitable for refining. About 3,600 to 7,200 t/d of chromite concentrate is expected at full production.

Transport alternative and more

Canada Chrome Corp (CCC) is a wholly-owned subsidiary of KWG Resources. CCC has staked mining claims covering a unique linear sand ridge that stands proud of the vast wetlands. This sand ridge is well suited for a railroad embankment which could be created to bring materials into the Ring of Fire area as well as hauling product out. Krech Ojard & Associates is undertaking prefeasibility engineering of theembankment alignment and water crossings in the 330 km study corridor.

KWG has earned a 30% interest in the Big Daddy chromite deposit. At a 15% cutoff, the Measured resource is 29.5 Mt, grading 29% Cr2O3, the Indicated resource is 7.9 Mt grading 26.7% Cr2O3, and the inferred resource is 4.8 Mt grading 25.0% Cr2O3. By comparison, Outokumpu’s Kemi mine in Finland has ore reserves of 41.1 Mt averaging 24.5% Cr2O3. KWG says “the much higher grades of Big Daddy compare favourably with those deposits whose ore is shipped directly to foundries with minimal processing. This potential is being investigated.

On April 12, 2011, KWG announced that a PEA it commissioned recommended the project advance to a feasibility study phase. The project as described in the PEA includes the development of a railway and power line to the site, an open-pit mine and associated crushing plant and infrastructure. It is estimated that the pre-production construction would be completed over a three-year period and the open pit would produce a total of 25.35 Mt of Indicated potentially mineable resource at a grade of 38.02% Cr2O3 and 13.54 Mt of Inferred potentially mineable resource of lump chromite mineralisation (37.03% Cr2O3) over a 16-year operating life. Lump chromite mineralisation produced daily is projected to be 8,000 t/d. Additional options are being studied through marketing, transportation and mineral processing studies.

The open pit would be mined conventionally using shovels and diesel-powered haul trucks. The ultimate open pit would
measure approximately 1.7 km long by 1.3 km wide by 570 m deep. Some 1,000 Mt of waste would be produced over the life
of mine at an overall stripping ratio of 27:1. Product preparation would consist of crushing the lump chromite mineralisation to minus 51 mm size, prior to trans-shipping by rail.

KWG explains that “lump chromite mineralisation is material which has sufficient grade (i.e. greater than 35% Cr2O3) that smelting of the rock can be directly performed. Lower grade material (greater than 3.83% and less than 35% Cr2O3) would be
stockpiled for possible processing in the future.”

The PEA includes a proposed railway which would extend approximately 350 km from the mine and connect to the CN Railway’s main line near the town of Nakina. The construction cost for the rail line is the largest single capital expenditure for the project at an estimated cost of C$900 million.

Probe Mines has assembled a significant land package in the Ring of Fire and has to date identified VMS mineralisation on its Tamarack and Victory properties. An NI 43-101 resource estimate has been completed on its high-grade Black Creek chromite asset. The deposit includes a Measured and Indicated 8.645 Mt averaging 37.41% Cr2O3 and an additional Inferred 1.6 Mt averaging 37.78%.

Great future

The Ring of Fire should open up “a broad range of local and regional business opportunities which will drive growth, increase investment and open up the ‘North’ for future generations,” Dr Kaszycki notes. As the major city nearest the Ring of Fire, Thunder Bay could strengthen its role as the northwest’s health, education, training and social services centre. It could also grow its mining supply and services sector, which currently employs over 1,600 people in some 130 companies.

Timmins and North Bay already have welldeveloped mining supply and services sectors, which combined account for C$1.5 billion and employ about 7,000 people. Both of these communities could generate further economic growth from development of multiple Ring of Fire projects. Similarly, Sudbury could further expand its thriving mining supplies and services sector due to the location of the processing facility.

The Municipality of Greenstone is strategically located at what could be a main junction of rail and road access to and from the Ring of Fire, which could result in the community becoming a major transportation hub. Nearby First Nation communities could benefit from direct employment opportunities, as well as economic partnership opportunities associated with this development. These communities struggle with 90% unemployment, extreme poverty, and severe alcohol and drug dependency. Hanson says “we’re especially focused on educating the youth about mining and the opportunities that will be there for them in the future.” IM