Part 3 of 4 ACCENT: Rings potential astounding Sunday, November 17, 2013 In Sudbury, when people hear about the Ring of Fire, they think of Cliffs Natural Resources and its plan to ship chromite from a mine in northwestern Ontario to a plant in Capreol for processing that would create between 300 and 400 local jobs. But we should remember that this proposal is only a “benchmark” scenario and that many issues still need to be resolved. As a result, the location of this facility could change. In 2007, an interesting mix of six geologists and junior mining executives - Richard Nemis, Mac Watson, Frank Smeenk, Neil Novak, John Harvey and Don Hoy - collectively discovered the geologically rich Ring of Fire. It is the most significant mineral discover in Canada since the Sudbury Basin in 1883 and the Timmins gold camp in 1909. And Cliffs and its Black Thor mine represent only one of the Ring’s many promising mineral resources and future discoveries. Located 500 kilometres northeast of Thunder Bay, the Ring of Fire contains billions worth of chromite — among the best deposits in the world — plus nickel, copper, platinum group elements, gold, zinc and vanadium metals. In engaging presentation about the Ring of Fire at the Prospectors & Developers Association of Canada convention in March, geologist James Franklin outlined the staggering economic value of the Ring of Fire. Franklin was the chief geoscientist at the Geological Survey of Canada from 1993 to 1997. He is one of the country’s top experts on the Canadian Shield geology underlying northwestern Ontario, including the Ring of Fire. By comparing the similar geologies between the Ring of Fire and surrounding regions and that of the enormously rich Abitibi-Greenstone belt between northeastern Ontario and northwestern Quebec, Franklin has come up with some educated guesses of the financial values for the deposit types found in the Ring. For slightly over a century, the legendary Abitibi-Greenstone belt has produced hundreds of billions of dollars’ worth of mostly gold, silver, copper and zinc. “The Ring of Fire is a truly extraordinary mineral discovery due to the various types of deposits. Similar deposits, elsewhere in Canada and around the world have yielded billions of dollars of metallic metals,” Franklin said. “Due to roughly eight smaller VMS-type deposits that hold copper, zinc and silver, which have not been thoroughly drilled-off, the Ring of Fire could ultimately produce between $30 billion to $50 billion worth of these metals and perhaps another Kidd Creek ore body, which has been in operation since the mid-1960s in Timmins.” He very conservatively estimates an additional $7.5 billion to $12.5 billion worth of nickel, copper, PGE values in the Ring alone and while no one is currently looking for gold, feels that due to the favourable geology, at least $10 billion worth of the precious metal is yet to be found. In the adjacent greenstone belts — prime gold bearing geology — to the west of the Ring of Fire, Franklin is exceptionally optimistic and feels an additional $140 billion to $190 billion worth of the precious metal will eventually be discovered. These financial projections are on top of the currently accepted Ministry of Northern Development and Mines valuations of $50 billion for chromite and $10 billion for Noront Resources’ nickel, copper, PGE mine! “These are only conservative estimates,” Franklin said, “and the provincial government should spend at least $50 million over the next few years on more aerial high-resolution geophysical surveys, mapping where outcrops permit and extensive on-ground geochemical and till sampling on a regional basis. Every dollar spent on geoscience results in five dollars of industry activity.” And while he does not want to venture a guess at the value of future chromite discoveries, he believes the current chromite reserves of roughly 220 million tonnes could easily be doubled. He also indicated the chromite discoveries in the Ring of Fire are “very, very well behaved” so that initial (inferred) reserves estimates routinely move over to the (indicated and measured) categories with more infill drilling due to the enormous size and predictability of this massive deposit. KWG Resources recently announced that it has discovered an additional 46.5 million tonnes (inferred) of chromite at the Black Horse deposit, of which the company has 80% control, while Bold Resources has the remainder. This is the second largest chromite deposit in the mining camp after Cliffs’ Black Thor project, which has 102 million tonnes (measured and indicated) and 33 million metric tonnes (inferred). However, the Black Horse deposit has a much higher grade, which could justify it being mined from underground, without the environmental impact of other proposals. “We are tremendously pleased with these initial results,” said M. J. (Moe) Lavigne, vice-president of exploration and development at KWG. “Our next step is to continue to expand this resource, as well as conducting infill drilling. This deposit will allow KWG to put together its own chromite mining development plan.” The massive chromite deposit in the Ring of Fire follows a 12 km strike-length. Each mining company seems to have a portion of this deposit, which remains to be fully explored. In the world of chromite mining, the Ring of Fire, if developed in an economically sustainable manner, will be a game changer. In a global context, only South Africa with 6.86 billion tonnes, Zimbabwe with 930 million tonnes and Kazakhstan with 387 million tonnes, have larger reserves. (Heinz H. Pariser Alloy Metals & Steel Market Research) At the recent Noront Resources’ annual general meeting, Alan Coutts, the company’s new president and CEO, was also very enthusiastic about the future resource potential of the Ring of Fire camp. A professional geoscientist, Coutts has more than 25 years] of executive management experience — mostly with the Falconbridge/Xstrata organization — in a variety of roles, across multiple commodities, including nickel and zinc, and in many remote locations in Canada and abroad. The Ring of Fire represents a wonderful exploration opportunity for a host of mineral deposits,” Coutts said. “Im excited about the prospects for new nickel sulphide — PGM discoveries in the region. In my experience, these deposits tend to occur in clusters, whether its Canada, Russia or Australia. To think that Noronts Eagles Nest deposit is the only one is like saying that there will only be one nickel mine in the Sudbury basin. Noronts plan over the next three years is to develop Eagles Nest and our exploration activities will be focused on the discovery of additional Ni-Cu-PGM deposits. Noront has the largest land holdings in the Ring of Fire. While the Eagle’s Nest nickel mine is its first priority, Coutts intends to also work on the Blackbird chromite deposit that contains 44 million tonnes. We are confident that the Blackbird chromite resource can be significantly increased. We may develop the chromite potential alone or look to do something in partnership with other industry players in the region.” Historically, the federal and provincial governments have funded vital infrastructure projects — both rail and road — which enabled private sector investments in resources, creating jobs, wealth and tax revenue, as well as the sustainable development of remote northern regions. The construction of the Temiskaming and Northern Ontario Railway in 1903 (known today as Ontario Northland Railway, or the ONR, a provincial crown agency) led to the discovery of silver at Cobalt that same year, gold at Timmins in 1909 and at Kirkland Lake in 1911. By opening up this isolated region, many other discoveries occurred, including the Rouyn/Noranda and other gold mining camps in northwestern Quebec. Today, a spur line that extends into Rouyn-Noranda is a critical link for the shipment of mineral concentrates and sulphuric acid to global markets. Except for Cobalt, all these mining camps are still in production. Due to the continuing gold boom in Red Lake, the Ontario government built a 172-km highway from 1945 to 1947, connecting the isolated community to Highway 17. During the late 1950s, Prime Minister John Diefenbaker started the Roads to Resources initiative to help mineral development in Canada’s north. In the 1960s, the Ontario Northland built spurs to three new mines — the Sherman, Adams and Kidd Creek — to ensure economic development and jobs. Interestingly, the line to Kidd Creek was built on mining claims staked for the purpose, just as KWG has now done, to extend the ONR to the Ring of Fire. In 2009, at the height of the economic crisis, the federal and Ontario governments spent $14 billion to bail out General Motors and Chrysler — a worthy cause considering the enormous economic impact from the auto sector on the provincial gross domestic product — but most of that money will not be paid back. These manufacturing jobs can be easily transferred to the U.S. and Mexico, and Ontario is not getting its fair share of the current auto-sector expansion plans. At a fraction of that bailout cost, through an innovative proposal that depends on federal government-backed loans and perhaps some equity participation, a railroad would open an isolated mineral-rich region to sustainable development for at least 75 to 100 years. Mining jobs cannot be transferred to other jurisdictions and the Wynne government may be able to strategically leverage a value-added stainless steel industry for Ontario if it implements the right policies. In part 4, we will take a look at an innovation solution on who should build, and how to pay for a railroad into the Ring of Fire. Throughout this four-part series, transportation infrastructure has been highlighted as one of the key issues — a host of aboriginal concerns is the other — that must be resolved in order for the Ring of Fire’s world-class mineral projects, conservatively worth about $60 billion and counting, to move forward. Since Cliffs Natural Resources is a billion-dollar multi-national, it seems to have taken up all the attention or oxygen in the room when discussing transportation issues. I have often heard from a variety of mining and government colleagues that Cliffs has the money and size, so their proposal must be the right one. Last summer, mining and metals analyst John Tumazos found “the total of metal write-downs from 2008 to 2013 will breach the $200 billion mark this year.” And let’s not forget that Cliffs took a $1-billion write-down in January for its $4.2-billion purchase of Consolidated Thompson Iron Mines Ltd. in 2011, as well as another roughly $900 million in other impairments, according to a Globe and Mail report. As we have seen over and over again during the past few years, big mining companies can make enormous mistakes, so every plan they propose is not sacred or untouchable. “It’s the transportation costs that will make this project sustainable for the next century,” says KWG Resources CEO Frank Smeenk. “Ontario chromite will have to compete with market leaders in South Africa and Kazakhstan, while the deposits in northern Finland are conveniently located less than 50 kilometres from an ocean port. We need to ensure that the minerals can be transported to the market in the most efficient manner, at the lowest possible unit costs.” Smeenk is supporting an innovative business plan that was developed by the General Chairperson’s Association, the leadership organization of the unions representing Ontario Northland Railroad (ONR) employees — the New Deal — that would establish a James Bay & Lowlands Ports Authority. The agency would have a railroad connection between Moosonee and Koper Lake, which is a main float-plane airport in the Ring of Fire, northern infrastructure connecting First Nations to a new local enterprise. A port authority is a special purpose agency formed by the federal government to operate ports and, surprisingly, airports and railways, as well. These are stand-alone agencies that are managed by the cities or regions they serve, like the Toronto Ports Authority and the Greater Toronto Airport Authority. With federal backing, these agencies can borrow money at lower government interest rates that can be paid back over a much longer period of time than standard corporate loans that are usually structured over a 30-year lifespan or less. “(The Ministry of Northern Development and Mines) would lodge its shares in the ONR with the James Bay & Lowlands Ports Authority,” Smeenk says. “The Canada Marine Act provides that the governance of such transportation assets include representatives of the local communities and industry. I think this is a most unique opportunity to have the Matawa, Mushkegowuk and Nishnabie Aski bodies politic provide such leadership. “In addition, taxpayers would avoid the very costly termination and closure liabilities that the province would occur if they liquidated the railway. And KWG would make its railroad engineering and right-of-way claims available for the extension of the ONR network into the Ring of Fire,” he said. This new agency would finance the construction of the railroad and continuing operations of the ONR on a cost-recovery basis and amortize the loan over a 50- to 75-year period. In addition, vital infrastructure stays in public hands for the continued economic development of the far north. There would be feeder roads into the adjacent First Nations. Smeenk says he feels the onus is on Premier Kathleen Wynne to talk to the Prime Minister about establishing the port authority and transferring the assets of the ONR into this new federal agency. On Nov. 8, the Ontario government announced the creation of a Ring of Fire development corporation that would bring together all the private and public stakeholders, including the federal government and First Nations. The goal of this corporation would be to sort out the competing infrastructure proposals and help build, finance and operate the strategic transportation route(s) into the Ring. So, I assume the port authority concept with the involvement of the ONR would definitely be one of the proposals on the table. However, Premier Wynne also sent an open letter to Prime Minister Steven Harper explaining the establishment of this development corporation and asking the federal government for roughly a billion and change to help the province defray the infrastructure costs. While I think the development corporation is a great idea — grabbing the proverbial bull by the chromite horns, so to speak – I am very concerned that federal financial participation is being conducted through the media instead of behind the scenes negotiations. And I am sincerely hoping that partisan politics – Liberal Premier Wynne and Conservative Prime Minister Harper – is not going to hold back this multi-generational project that will generate tens of billions of dollars, if not considerably more, worth of economic activity that will benefit all levels of government. Up until now, the federal government has been doing a considerable amount of “talking” but not much financial “walking.” It’s time the Harper government put some significant dollars on the table and financial backing to help struggling Ontario deal with the Ring of Fire’s billion-dollar infrastructure costs Considering that for most of the last half-century, Ontario has contributed quit literally hundreds of billions of dollars in equalization payments that helped essential infrastructure projects in many other provinces, it is time we got a tiny fraction of that generosity back from the federal government. Liberal Premier Sir George William Ross ruled Ontario for only a short period of time – Oct. 21, 1899 to Feb. 8, 1905 – yet his impact on Northern Ontario and the history of mining in Canada was extraordinary. He is nicknamed the “Father of New Ontario” for having the vision to establish the Temiskaming and Northern Ontario Railway – the forerunner of today’s Ontario Northland – to help develop and settle the Great Clay Belt and for promoting the enormous mineral resources of the then province’s near-northern frontier. This development is not just about Cliffs Natural Resources and their shareholders. It’s about a modern 21st century mining frontier in the province’s far northwest — a geological treasure chest that will challenge a new generation of Ontarians. It’s about the sustainable, long-term development and the economic transformation of impoverished First Nations communities. And it’s about the enormous potential to create many jobs in the region, as well as throughout the entire province and provide much needed tax revenue for all levels of government. The most economically competitive solution to transport millions of tons of chromite concentrate — or perhaps raw chromite ore — is a railroad. To build an inadequate road instead, due to inconsequential cost factors and, in the context of a century of mining and hundreds of billions worth of minerals found and yet to be discovered, would be astonishingly penny wise and pound foolish! We are at a turning point in the history of this province, at a time when the urbanizing and industrializing Asian economies will continue to need the minerals found in the northwest for decades to come. Does Premier Kathleen Wynne and her predominantly southern cabinet have the same vision that Premier Ross had over a century ago? And will Prime Minister Harper be willing to put in the federal government’s fair share and financial backing to ensure the ultimate success of this project? About the Ring of Fire Located 500 kilometres northeast of Thunder Bay, the Ring of Fire contains billions worth of chromite — among the best deposits in the world — plus nickel, copper, platinum group elements, gold, zinc and vanadium metals. In 2007, an interesting mix of six geologists and junior mining executives – Richard Nemis, Mac Watson, Frank Smeenk, Neil Novak, John Harvey and Don Hoy – collectively discovered the geologically rich Ring of Fire. It is the most significant mineral discovery in Canada since the Sudbury Basin in 1883 and the Timmins gold camp in 1909. Cliffs Natural Resources of Cleveland wants to ship chromite ore from its Black Thor deposit in northwestern Ontario to a plant in Capreol for processing. However, its plans are on hold until it sorts out a host of environmental, infrastructure and First Nations issues. Chromite is used to harden steel.
Posted on: Wed, 20 Nov 2013 01:58:55 +0000
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