Crummy chromite investment – by Kip Keen ( – March 24, 2015)

Cliffs exits the Ring of Fire.

So ends Cliffs Natural Resources’ adventure in Northern Ontario with the miner announcing that it has a buyer for its Canadian chromite projects. It was an expensive one.

A half-decade ago Cliffs paid some C$350 million in cash and shares to buy majority control of a series of then newly discovered chromite deposits. They were heralded as world-class with potential to supply the North American steel markets especially.

In 2009 and 2010 Cliffs struck deals to buy the juniors involved in the discoveries. It bought Freewest Resources for about C$240 million (in shares at the time). Then it bought up Spider Resources in 2010 for C$125 million (cash).

These were the juniors that put the region on the map – the so-called Ring of Fire. The potential was often billed as huge – a nebulous ~$60 billion or so in deposit value.

The region garnered promises from the Ontario government especially for major spending on infrastructure. For it was remote and would require new road access hundreds of kilometres long through bush and First Nations territory.

Undaunted, Cliffs proceeded to spend another C$200 million or so advancing the projects closer to the point of construction, which was to be a multi-billion dollar enterprise. Cliffs planned to mine around 4 million tonnes of ore a year and then upgrade it to ferrochrome at a Sudbury-based facility.

But Cliffs quickly lost patience with the endeavour. Just three years after shelling out hundreds of millions of dollars in cash and share value for the projects, it put a stop to development.

It highlighted issues with infrastructure and negotiations with First Nations. But also problematic were the realities of stagnant chromite prices and poor project economics in remote Northern Ontario. And meantime with iron ore prices falling, so too were Cliffs’ earnings.

For the rest of this article, click here: