Chrome, Cliffs and Fire: how Ontario’s Ring of Fire started burning for all the wrong reasons – by Razvan Isac (Global Business Reports Roundup – December 18, 2013)

TORONTO, CANADA – The Ring of Fire, named so in honor of Johnny Cash’ famous country ballad, is a mineral rich region situated in Ontario’s deep north, approximately 540 km northeast of Thunder Bay. Containing chromite, nickel, copper, platinum, zinc and gold resources equating over $60 billion in value, it is even said that the Ring of Fire alone could sustain Ontario’s mining industry for a century. However, nothing as good as this comes easy in life, and this particular James Bay Lowlands area is no exception.

While several issues have been on the development agenda since the Ring of Fire’s discovery in 2007, the most controversial and complex ones so far have been the establishment of proper infrastructure and finding the appropriate formula for collaborating with the Matawa First Nations of the region. Given its scale and projected economic benefits, the Ring of Fire has certainly been a topic of high political interest for the last couple of years. However, on November the 20th, this subject became a fiery-hot topic that has since sparked several weeks of intense national media coverage and debate.

Cliffs Natural Resources, probably the largest private player with a stake in the region, announced on the 20th of November that it would be suspending its $3.3 billion Black Thor chromite project indefinitely. The company quoted project timeline uncertainties and the unresolved infrastructure issue as the main reasons for taking the decision. The announcement took the general public by surprise, and subsequently caused immediate and heated political debates, in which the likes of Ontario’s premier, Kathleen Wynne, and Ontario’s Minister of Northern Development and Mines, Michael Gravelle, were put in the spotlight. However, a closer look into the evolution of Cliffs Natural Resources’ Black Thor project developments in 2013 reveals plenty of early signs that this suspension was bound to happen.

In early 2013, the ongoing challenges associated with developing the project in the Ring of Fire had made Cliffs move back the initial production date from 2015 to 2017. Then, in June 2013, Cliffs temporarily suspended its environmental assessment activities for Black Thor, due to delays related to the permitting process, land surface rights, and negotiations with the province of Ontario. Moving on, in September 2013, Cliffs lost an essential infrastructure development battle in court: Ontario’s mining and land commissioner dismissed the company’s application for the construction of a $600 million North-South all-weather road to its Black Thor project. The project was supposed to pass through an area claimed by KWG, a Toronto based junior with interest in the region, which has its own separate plans of building a $1.6 billion railroad to facilitate access in the area; KWG won in court.

To top things off, in October 2013, Bill Boor, vice president of ferroalloys at Cliffs Natural Resources, told The Canadian Press during an interview that “If it can’t build the road, Cliffs will have to consider shutting down operations. We’ve got a fairly high spend rate ($4 million per month), so at some point in time, it’s only rational or, it’s kind of our responsibility to decide whether it’s wise to keep pushing”. Considering all these recent events, the “surprising nature” of Cliffs’ November announcement becomes debatable, to say the least.

Without a doubt, Cliffs is one of the Ring of Fire’s major players, perhaps the biggest even; but it isn’t the only company with plans of development for the region. KWG, with its interest in the Big Daddy and Black Horse chromite projects, is the other player that has received significant attention lately, due to the role it played in the Cliffs Natural Resources story. Nonetheless, it is Noront Resources, a company that has managed to stay away to a certain extent from the recent media storm, which perhaps has the most exciting proposition for the Ring of Fire.

The first aspect that makes Noront Resources stand apart is the fact that its current focus is on its Eagle’s Nest nickel and PGM (platinum group metals) project, and not on its chromite BlackBird project. “Noront Resources’ focus at the moment is on advancing its Eagle’s Nest project, which is fundamentally different from what Cliffs had envisaged for their open-pit, bulk-transportation model Black Thor Project. Noront is focusing on a high-grade nickel-copper-platinum group underground mine: from a logistics point of view, this means small volumes of high-grade concentrate.

We are looking at a mine life of 11 years at roughly 1 million tonnes per year of throughput, which would consequently produce 150,000 tonnes per annum of high grade nickel-platinum concentrate. Consequently, our project economics and infrastructure needs are completely different than those of Cliffs. Eagle’s Nest’s main advantages are its high grade reserve and the fact that it will have by-products. Noront Resources expects this mine to produce within the first quartile of nickel operations around the world and moreover, we will not rely exclusively on the economics of nickel for our success,” said Alan Coutts, president and CEO of Noront Resources.

The second original element about Noront Resources is related to one of the Ring of Fire’s key topics: infrastructure. Both Cliffs Natural Resources and KWG are looking at developing the infrastructure on a North-South corridor. Noront Resources is looking at an East-West alternative: “We continue to believe that an East-West route is more appropriate for Noront’s needs at this time. The North-South corridor is, without a doubt, the quickest way to the markets. However, it does not tie in a lot of the local communities to all season roads. Additionally, it has three major river crosses that are costly and somewhat sensitive from an environmental and First Nations’ point of view.

The East-West corridor, on the other hand, comes off an existing winter road infrastructure, north of Pickle Lake, and ties in more communities. It does not have any river crossing so it is lower-cost and more environmentally friendly. The secret with the infrastructure situation here is to meet the needs of many: whatever the preferred route will be, it will have to provide development opportunities for the First Nations as well; it cannot be an exclusive resource-road that takes simply takes minerals to the market,” noted Coutts.

Without a doubt, Matawa First Nations negotiations and their integration into the various projects planned for the Ring of Fire have been some of the most sensitive points on the development agenda for the region. With nine separate communities in the area, obtaining a unified representative voice was essential for progress. In July 2013, the province of Ontario appointed former Supreme Court of Canada Justice Frank Iacobucci as lead negotiator on behalf of Ontario in discussions with Chiefs of the Matawa Tribal Council on resource developments in the Ring of Fire; meanwhile the First Nations had also chosen a lead representative, in the person of Bob Rae, Ontario’s former premier between 1990 and 1995.

“We have seen progress since this new negotiation framework was implemented, but, as always, we would like to see it happening at a faster rate. We recognize however that with nine communities spread across a wide geographic region and with all their distinct ideas on how things should progress, it is difficult to obtain one single galvanized view. The best solution forward is to have these communities speak with one unified voice,” said Alan Coutts.

Indeed, recent progress has been palpable and in September 2013, the Matawa First Nation chiefs withdrew a legal challenge to the federal environmental assessment of Cliffs’ Black Thor project, citing the existence of this new framework of discussion as the reason for doing so.

Nonetheless, small victories such as these were quickly and vastly overshadowed by the news of Cliffs suspending its work in Ontario. In the short-term, the immediate result was a political debate, and more precisely, a political blame-game. Both premier Wynne and Minister of Northern Development and Mines for Ontario Gravelle claimed that the federal government was not sufficiently involved in the Ring of Fire. The Ontario officials quoted specific previous instances where the federal authorities had intervened financially, as antecedents mandating federal involvement in Ontario’s chromite rich region (e.g. the Northwest Transmission Line in British Columbia and the Lower Churchill hydroelectric project in Labrador).

Meanwhile, on November 22nd, when asked about the Ring of Fire during a visit to Winnipeg, prime-minister Harper answered that “ultimately, as I say, the jurisdiction here is primarily provincial, and ultimately it is private companies themselves that have to make commercial decisions on the viability of projects.” Furthermore, his words were echoed by FedNor Minister and Kenora MP Greg Rickford, the federal representative in charge of the Ring of Fire development.

Fortunately, as the initial shock was slowing fading away, a more constructive approach was adopted by both the parties involved. On November 24th, Minister Gravelle wrote an official letter to Minister Rickford, asking for a face-to-face meeting and a stronger federal support for the Ring of Fire. He went on to quote First Nations wellbeing as a federal responsibility, fact which would further justify Ottawa’s duty to act in this particular case. Meanwhile, prime-minister Harper finally answered a November 8th official letter addressed to him by premier Wynne, in which the federal government was asked to pay for 50% of the costs necessary to develop the Ring of Fire.

On the 5th of December, the two officials met and while the conclusions were brief, they were also seemingly positive. “I’m more optimistic than I was before I went in to the meeting that we’ll be able to work together,” Wynne told The Canadian Press, after the meeting. “He and I agree that this is a very important project. He and I also agree that infrastructure is critical, and infrastructure that will be directly associated with the development of the Ring of Fire but also infrastructure that will serve the needs of First Nations and other communities in the north. Definitely, we have each other’s ear on this.”

At the moment, there is still a lot of uncertainty regarding the future of the Ring of Fire: establishing a reliable infrastructure corridor is still hundreds of millions of dollars away. Furthermore, while recent progress has been achieved in consultations with the First Nations, this relationship is still laying down the bricks of its foundation. Finally, to top things off, we also have Cliffs’ recent Black Thor suspension announcement. Mathematically, these elements combined do not paint a confident picture for the future development of northeast Ontario’s chromite rich region. However, there are some silver linings that should be considered before making any hasty conclusions.

To anyone monitoring the Ring of Fire, Cliffs’ announcement was anything but a surprise, given the series of signs that had been offered by the company throughout the year: moreover, it is hard to believe that a company such as Cliffs would completely and irrevocably abandon a $3.3 billion project, after investing considerable amounts of capital in it. While the Black Thor suspension news did not really startle anyone, it did however draw a lot of public attention to the Ring of Fire: this increased interest and political spotlight might have been exactly the sort of jump-start this region needed. Emerging from underneath the ashes of the recent media fire, the high-level talks and the new initiatives such as the Economic Development Corporation could be the signs that the Ring of Fire’s Phoenix is coming to life again.

This article was written as part of GBR’s research on the mining industry of Ontario, to be published in Engineering and Mining Journal. To participate in this report, please contact Gabrielle Morin at [email protected]

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