Feeling the Ring of Fire’s Burn – by Jason Unrau (Unpublished – January 2014)

This unpublished article was originally written for Canadian Business Magazine in January 2014.

Black Thor, Big Daddy and Thunderbird, unearthed between 2007 and 2008, put a place called Ring of Fire on the mining map. Sounding more like comic book gods than incredible mineral discoveries – chromite their dominant feature and crucial for stainless steel manufacture – by the end of 2013 they had roused nearly one billion dollars to the exploration altar.

Frank Smeenk was among the group of six mining execs and geologists who discovered the Ring. Located deep inside Ontario’s north, its riches are vast enough for a century of mining, yet dispersed in a 5000 square km crescent of muskeg so remote, the place might as well be celestial.

“It’s inaccessible for all practical purposes, except by air, and to sell chrome you’ve got to get it to market and its steel mills of the world,” says Smeenk, CEO of KWG Resources, the plucky junior with a 30 per cent stake in Big Daddy, one of the biggest deposits of them all.

It was DeBeers’ quest for new diamond sources after the Second World War that eventually ushered the first mine into this corner of the James Bay Lowlands. But it was Asia’s insatiable economy, emerging fast and furious in the last decade, that turned sights toward the region’s metal potential.

While Ring of Fire is just 90 kilometres west of DeBeers’ Victor Mine, producing diamonds and mining metal are not analogous, says Smeenk, because “… you can put diamonds in your pocket and walk on the plane.”

“Chrome is a little bit like iron. The rock is valuable, but to get that to where it has to be, you need something that can carry a lot of tonnes,” Smeenk explains. “You’ve got to start looking at rail.”

Word of Ontario’s chromite motherlode continued to fuel investment in Ringof Fire and spending peaked there in 2010, a year after US steel giant Cliffs accepted Smeenk’s invitation to buy a 20 per cent stake in KWG.

Around the time Cliffs took its seat on KWG’s board, KWG began mapping a railroad and secured a right-of-way by staking mineral claims through the route. In following years, competition over the Ring’s cache intensified and challenges in the boardroom started to rival those on the ground. First Nations blockaded runways, KWG thwarted a hostile takeover by Cliffs and a bidding war ensued for mineral claims that changed hands like chips at a poker table.

“All hell broke loose,” describes one insider of what occurred shortly after Cliffs’ failed bid to buy out Smeenk and company. When the dust settled, Cliffs was king of chromite holdings, but KWG controlled the transportation corridor.

Late last year, Cliffs cast a pall over the whole endeavour, shelving plans for a $3.3 billion mine, after shelling out nearly $500 million just for the chance. The unceremonious announcement in November featured Cliffs’ newly-minted president Gary Halverson lambasting the province for protracted First Nations negotiations and doing nothing to address infrastructure shortfalls.

The last straw was delivered by Ontario’s land commissioner, who denied an easement over KWG’s railroad right-of-way, to allow Cliffs road access to its Black Thor deposit. In an ironic rub, Cliffs’ cash had largely funded work on the rail route (Cliffs has since appealed the commissioner’s ruling).

Ontario’s opposition parties charged the ruling Liberals of bungling the Ring of Fire file and amidst the political din Kathleen Wynne’s government hastily arranged a meeting with Ottawa, but came away empty. Only days before Wynne’s tête-à-tête with the feds, her government flip-flopped on divesting itself of the Ontario Northland Transportation Commission, altering the nearly defunct railway’s mandate from liquidation to “transformation”.

This about face was not lost on Smeenk, who two years before had approached the province with a plan save the railway, and with private capital no less.

Smeenk’s idea remains to establish a federal or even provincial agency, not unlike Toronto Port Authority or Vancouver Airport Authority, that could allow local interests to own and expand rail infrastructure with little risk. “Because it has no capital costs in the beginning, no mortgage to pay … that is a providential blessing here.” Unfortunately, the Ontario government didn’t see eye-to-eye with Smeenk.

“If taking the Ring of Fire were your objective, that’s not how you would’ve deployed your forces to win the war,” is Smeenk’s assessment of the province’s management of the affair to date.

Whatever the political, business or logistical setbacks and letdowns, the mining crowd is resilient bunch and Smeenk and his junior venture compatriots remain hopeful.

“It will become Ontario’s next mining camp,” insists Probe Mines president Dave Palmer. Probe’s Black Creek chromite interest is stranded between Cliffs’ wholly owned Black Thor and Big Daddy, that Cliffs still shares with KWG.
“It’s just a matter of when market and political forces create the best conditions,” Palmer adds.

No matter who is queried about exploiting Ring of Fire, creating “best conditions” will require something from Ottawa or Queens Park on meeting infrastructure needs, and a deal between First Nations and the province for access and benefits is crucial. Canada also lacks smelting capability for chromite, so constructing such a facility in northern Ontario would also be advantageous.

For Cornelius Wabasse, chief of Webequie First Nation, the closest community to Ring of Fire, mining in the region is but one of his concerns. The hamlet – population 840 – needs 10 new houses, says Wabasse. Its residents also need training to take advantage of opportunities that a mine would offer.

“We haven’t had any jobs for the last 10 or 15 years. There is no employment here,” the chief responds matter-of-factly about what kind of work is currently available around town.

Since former Ontario premier and Liberal MP Bob Rae took the job as lead negotiator for nine Matawa First Nations, of which Webequie is one, Matawa dropped its legal challenge of the environmental assessment for Cliffs’ proposed mine – a moot point by now. Those hoping for additional progress at the negotiating table could not have been buoyed by recent comments Rae made of his new employers.

Asked in December when a deal might be expected, Rae replied that his clients “historically, … see the issue of time from a different perspective (than government or business).” Translation: there is no urgency.

And Wabasse’s attitude falls much in the same vein.

“There is no timeline,” he says of the talks with Ontario. “We’re always in negotiations.”

Back in the field, work will continue in Ring of Fire this year, albeit on a much-reduced scale. KWG has gone into business with Bold Ventures Inc. and plans to spend $2 million on proving resources in yet another Ring ofFire discovery, this one called Blackhorse.

And Noront Resources, whose nickel and copper discovery back in 2006 kicked off the Ring of Fire rush, is banking on its Eagle One nickel resource.

“We don’t need a grand slam home run right away. What we need is a base hit to get things started,” says Noront’s CEO Alan Coutts of Ring of Fire’s mining prospects.

At the end of 2013, Noront filed a preliminary environmental assessment with provincial and federal regulators for a nickel mine and an access road west to Pickle Lake. Addressing comments and submissions on the assessment will continue through 2014.

“The economics (of nickel) are vastly different, and we’ve got to keep pounding that message,” says Coutts. Working in Noront’s favour is existing nickel smelting infrastructure in Sudbury.

“There is no ability to smelt chrome in Canada at this point in time and that would require a massive investment,” Coutts says. “The chrome mining story is a very different one.”