Established in 1980, Northern Ontario Business provides Canadians and international investors with relevant, current and insightful editorial content and business news information about Ontario’s vibrant and resource-rich North. This article is from the May, 2010 issue.
For an extensive list of articles on this mineral discovery, please go to: Ontario’s Ring of Fire Mineral Discovery
“The cost to produce electricity in Northern Ontario is really quite cheap.
Northern Ontarians are now paying for the very expensive nuclear plants in
Southern Ontario that they need. And our electricity costs should be based
on what it costs to generate electricity in Northern Ontario.”
(Moe Lavigne, KWG VP Exploration and Development)
Power and First Nation cooperation key to developing Ring of Fire mine.
An abundant supply of cheap power will decide whether northwestern Ontario lands any of the processing of chromite ore when a proposed Mc-Faulds Lake mine opens in 2016.
At an investors’ forum in Thunder Bay in early April, Moe Lavigne, KWG’s vice-president of exploration and development, laid out his company’s timelines and challenges on how the Toronto miner plans to develop its Big Daddy deposit in the James Bay Lowlands.
Behind the backing of Cliffs Natural Resources, a Cleveland, Ohio-based iron ore and coal conglomerate, KWG has set up a subsidiary company, Canada Chrome, to bring to life the massive and ambitious mine and railroad project, estimated at $2 billion.
Many one-industry communities along Lake Superior’s north shore are salivating at the opportunity to replace hundreds of lost forestry mill jobs with mineral processing employment opportunities. The manufacturing capacity to process McFaulds Lake chromite will require a concentrator and an electric arc furnace which produces fer-rochrome, a key ingredient in making stainless steel. The processing must be located close to a source of affordable power and rail connections.
“The issue with an electric arc furnace is that it consumes a huge amount of electricity and one of the issues will be where do we get electricity cheaper?,” said Lavigne in an interview with Northern Ontario Business.
Lavigne said his boss, KWG president and CEO Frank Smeenk, wasn’t posturing to the Ontario government when he publicly floated the possibility last February that ‘Big Daddy’ chromite could be processed more cheaply in Montreal or Prince Rupert, B.C. where the industrial hydro bill is lower.
“It’s a simple financial decision. It makes more sense business-wise for us to save a billion dollars a year by building a plant somewhere else.” The province’s Mining Act allows companies to process Ontario ore anywhere in Canada.
With an abundance of hydroelectric power in Northern Ontario, Lavigne said the rates have to reflect that. “The cost to produce electricity in Northern Ontario is really quite cheap. Northern Ontarians are now paying for the very expensive nuclear plants in Southern Ontario that they need. And our electricity costs should be based on what it costs to generate electricity in Northern Ontario.
For the Big Daddy project, he pegs an acceptable power cost at four cents-per kilowatt hour.
The McGuinty government threw big Northern Ontario power users a bone in the March Throne Speech by offering a three-year electricity rate program to provide companies with a two per cent rebate per kilowatt: a move they say will cut industrial power prices by 25 per cent.
Lavigne said that isn’t substantial or long enough to change his company’s thinking.
Steve Demmirigs, CEO of the Thunder Bay Community Economic Development Commission, expressed no fear about his city possibly being by-passed for mineral processing opportunities.
The city is well on its way to branding itself the ‘Gateway way to the Ring of Fire’ with the launch of an on-line mining services directory. Dem-mings said the city is preparing for an “onslaught of real jobs and investment” related to the Ring of Fire activity. “We have our ducks lined up in helping to support what is a very critical industry for us.”
Resolving the power issue is important, but Demmings said the city intends to “realize the full economic benefits” of the opportunity “There’s a lot of decision making yet to be made around issues of the electric furnaces but the fabrication and steel making opportunities are very significant for this community.”
In early April, Demmings wouldn’t reveal what case the city was making to Canada Chrome to locate the processing in Thunder Bay except to say a major infrastructure initiative would be announced within four to six weeks involving public and corporate partners.
As equally important to the development of a mine is the construction of an ore haul railway into the Far North. Soon after Lavigne joined KWG last August, the company hired Krech Ojard & Associates, a Minnesota engineering firm, to find the best route to haul out millions of tonnes of ore from the proposed open pit.
The 350-kilometre route that’s been claim staked, ties into the Canadian National Railway at Nakina. The track bed would sit up high on sandy glacial eskers that skirt the rugged Canadian Shield on one side and flat muskeg plain on the other. The railroad would span 80 water crossings by culvert and bridge, including major rivers like the Attawapiskat.
The railroad’s preliminary engineering should be done by August as Canada Chrome juggles-and struggles-with ongoing consultation with area First Nations and while preparing a mineral estimate for Big Daddy as the project moves into pre-fea-sibility stage.
Lavigne cautioned with baseline environmental work underway, it’ll be a long time before anyone sees an operating mine. “The investment will be greater than $100 million before we make a go, no-go decision.” With the possibility of connecting dozens of remote Aboriginal communities with year-round rail and road access, Lavigne expects Ottawa will help subsidize the project.
“If we’re going to use this railroad to deliver bulk fuel to a half dozen First Nation (communities) I would expect the federal government would step in.”
While some confusion reigns in mining circles as to what role the Ontario government plans to play to shepherd Aboriginals and miners through this development, Lavigne said First Nation community support for the project is key.
“They truly understand that this project will provide long-term hope for the communities and bring meaningful jobs to their children. I think the Ontario government will fall in line with that.”
KWG-Canada Chrome and all the Ring of Fire exploration companies are trying to say the right things given the sensitive nature of building major developments on First Nation traditional lands.
David Peerla, a former mining advisor with the Thunder Bay-based Nishnawbe Aski Nation, said KWG needs to build trust and partner with First Nations in order to avoid necessary delays in moving the Mc-Faulds Lake project forward.