[Ring of Fire] Canada’s “Next Oil Sands Miracle” a Bust – by Rich Duprey (The Motley Fool – March 26, 2015)


Once billed as the economic equivalent of Canada’s oil sands industry, the vast oil deposits in the country’s western provinces of Alberta and Saskatchewan, where 97% of its oil reserves reside, Ontario’s Ring of Fire chromite region held the promise of being an engine of economic growth in its own right worth somewhere north of $120 billion.

Unfortunately it was also mired in parochial biases and competing interests that served to quench any fire for success.

A fraction of its value

Cliffs Natural Resources (NYSE: CLF ) was once thought to hold the key to unlocking its potential, but after suspending work in 2013 on its $3.3 billion Black Thor chromite deposit, it gave up all hope of the region ever being developed and began an orderly exit from Canada. That culminated earlier this week with the sale of all of its chromite projects to one of the Ring of Fire’s other interested parties, Noront Resources (NASDAQOTH: NOSOF ) .

Six years ago the two had engaged in a protracted bidding for the rights to the chromite properties with Cliffs emerging victorious and agreeing to pay about $240 million. The just-announced deal, however, has a purchase price of only $20 million, showing how far down the ladder of probability Cliffs believes the region holds for development.

Once upon a time, Canada’s Treasury Board president Tony Clement said chromite mining had the potential to “transform what was hitherto a very poor, underdeveloped area of Ontario and give people who live there, particularly First Nations people, a chance for a decent life.” Now one of the premier sites is being sold for a song.

Nerves of stainless steel

Chromite is a rare but key ingredient in the manufacture of stainless steel, and nearly three-quarters of the world’s 5.5 billion tonnes of supply is produced in just three countries: South Africa, Kazakhstan, and India. Another 12% comes from Brazil, Finland, Russia, Zimbabwe, and Turkey. It was through Ontario that Canada was looking to break into the field as a major producer.

The Ring of Fire is a vast but remote region in the James Bay lowlands, currently only accessible via a two-hour flight from Thunder Bay, the nearest major city. Current estimates suggest it holds the largest deposit of chromite ever found in North America, as well as significant production quantities of nickel, copper, and platinum.

Yet that lack of infrastructure and infighting among the biggest players about how best to achieve it ground progress to a halt and prevented them from exploiting the resources. Because of its remoteness, bringing in equipment or taking ore out was impossible, and each party had its own idea about how best to resolve the problem.

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