Cliffs Mine Shutdown Threatens Ring of Fire Development – by Gerrit De Vynck (Bloomberg News – November 22, 2013)

Cliffs Natural Resources Inc. (CLF) is postponing a $3.3 billion project in Ontario, threatening development of the mineral-rich Ring of Fire area once described as Canada’s most-promising mining region.

Cliffs’ plan to mine chromite, an ingredient for making stainless steel, was among the most advanced in the Ring of Fire, the horseshoe-shaped deposit about 1,000 kilometers (622 miles) northwest of Toronto and named by a mining executive after the Johnny Cash song. Other companies working in the area include Noront Resources Ltd. (NOT) and KWG Resources Inc. (KWG), both headquartered in Toronto.

At stake is development of Northern Ontario, an area about twice the size of California, and projects to mine chromite, copper and nickel. In 2010, former Ontario Premier Dalton McGuinty called the Ring of Fire “the most promising mining opportunity in Canada in a century,” and Michael Gravelle, the province’s mining minister, values the Ring of Fire’s mineral potential at C$60 billion ($57 billion).

Cliffs’ decision is going to have “a huge impact on the development of the Ring of Fire,” Michael Mantha, an opposition New Democratic Party member from northern Ontario, said in a telephone interview. The provincial government hasn’t established a clear framework for developing the Ring of Fire, he said. “It sends the wrong message to the rest of industry.”

Associated ‘Risks’

Exploration and technical work at Cliffs’ project will stop by the end of the year and company offices in Toronto and Thunder Bay, Ontario, will be shut, the Cleveland-based company said in a Nov. 20 statement. Cliffs blamed “risks associated with the development of necessary infrastructure” as metals prices slumped this year and Goldman Sachs Group Inc. forecast declines next year.

“When the macroeconomic conditions are tough, and you’re facing infrastructure constraints also, it becomes a double whammy,” Mitesh Thakkar, an analyst for FBR Capital Markets in Arlington, Virginia, said yesterday in a telephone interview.

Cliffs, the biggest U.S. iron-ore producer, calls its chromite deposit North America’s largest. The company said in January 2012 the estimated total cost to develop the project was $3.3 billion, including mine development, a processing plant and transportation infrastructure.

Cliffs has had challenges advancing the project. In June, the company suspended an environmental-impact evaluation, citing delays in negotiations with the provincial government and uncertainty over the environmental review process because it was being challenged by native groups in the area.

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