Why Franco-Nevada is playing in the Ring of Fire.
The Ring of Fire, an Achaean greenstone belt in Northern Ontario, has become synonymous with – and infamous for – chromite. Cliffs Natural Resources was until couple years ago to put the region on the map as a new global mining centre of the stuff. It has, as many will recall, scuttled those plans and agreed to sell its assets – chiefly a series of chromite deposits, but also a lot of interesting exploration claims – in the Ring of Fire to Noront Resources, the leading junior still operating in the remote region. Among other chromite assets it is chiefly developing a modest-sized nickel-copper-palladium deposit.
At the heart of the deal is Franco-Nevada, the leading gold royalty company. It’s lending Noront $22.5 million to cover the $20 million acquisition cost of the assets. Along with the five-year loan at 7% interest, payable in an accumulated lump sum at the end, it’s also paying Noront $3.5 million to secure Franco-Nevada a couple NSR (net smelter return) royalties. Most directly, Franco-Nevada is to get a 3% NSR in Cliffs’ large chromite deposit, Black Thor.
Franco-Nevada: Chromite? Of course in the grand scheme of things Franco-Nevada is not that floored about chromite. This should come as no surprise. For, if getting the NSR on Cliffs’ old stomping ground is kind of nice –
a maybe on the market-remote Canadian chromite – the greater possibilities for a precious metals royalty company lie in what hasn’t been found in a region that really only emerged as minerally well-endowed in the past decade.
To capture the potential, beyond the 3% chromite NSR, Franco-Nevada is leveraging its junior-loan giving ability and a little cash to also get a 2% NSR on all of Noront’s 80,000+ hectares (post deal) in claims covering most of the Ring of Fire. It only excludes Noront’s Eagle’s Nest nickel-copper-palladium deposit, which the junior hopes to develop as an underground mine, with little surface disturbance as the surface is mostly mucky swamp.
The chief exploration question in the Ring of Fire is whether there are more nickel-copper-PGM deposits to be found. It’s one of Franco-Nevada’s chief risks in the deal (albeit miniscule for a royalty company of its size).
Indeed the question may not be if, but how many and how big the discoveries are going to be.
Geologists think it’s inevitable more deposits will be found. Don Hoy, one of several geologists credited with discovering the Ring of Fire, put it this way to me in a recent telephone call:
For the rest of this article, click here: http://www.mineweb.com/regions/canada/underneath-the-chrome/