Decision time for Cliffs [Ring of Fire Ontario refinery location? – Ian Ross (Northern Ontario Business – September, 2011)

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. Ian Ross is the editor of Northern Ontario Business ianross@nob.on.ca.

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Cliffs V-P looks for cheap power, government direction in Ring of Fire

Cliffs Natural Resources isn’t sold yet on Sudbury. Bill Boor, Cliffs’ senior vice-president for global ferroalloys, said while the Nickel City remains a “technically viable site” because of logistics and available power, the project economics may spell otherwise.

When the Ohio miner released its project description of its Black Thor chromite deposit in the James Bay region last February, Sudbury was identified as the front-runner to host the ferrochrome production facilities.

“When we put Sudbury forward, we were pretty specific about the language,” said Boor. “That remains our base case, but at the same time we identified that technically viable is different from economically viable, and a lot has to be worked through.”

Boor said the location of the production facilities is one of the many trade-offs to be considered in how the direction of the entire massive mining, processing and transportation infrastructure will unfold.

Cliffs also identified Thunder Bay, Timmins, and Nakina, a community in the rural municipality of Greenstone, as potential host communities.

As many as 1,300 direct jobs in mining, ore processing and transportation were identified by Cliffs in its base case scenario. Sudbury has identified a former National Steel site on the north side of the city near the community of Capreol.

However, Greenstone is applying a full-court press to sell Nakina as a site for the ferrochrome processing by hiring former Energy Minister George Smitherman as a consultant, while the local community development corporation has added KWG Resources’ vice-president of exploration and development to its board of directors.

KWG is examining the feasibility of building a 350-kilometre long railroad from Exton, near Nakina, to the Ring of Fire chromite deposits.

“Nakina, from a logistics perspective, would be a great place to be,” said Boor. “The issues we’re trying to work through are the availability of power and a robust enough grid to handle a very large furnace operation.”
Both Nakina and Capreol are next to Canadian National Railway’s main cross-Canada line. The leading issue remains the price of power in Ontario compared to neighbouring provinces.

While Boor praised its working relationship with the province, Cliffs isn’t hiding a scenario that it could place the ferrochrome processing outside of Ontario if the province doesn’t come to the table with competitive power rates.

“We’ve been pretty open about the fact that we’ve begun discussions with the adjacent provinces and we’re looking at sites in Manitoba and Quebec.

“We have to do that. It’s part of the due diligence for an investment that’s going to last decades at a minimum.” Cliffs can also apply to the province for a domestic processing exemption to take ore outside of Canada for refining.

The ferrochrome production facility, which refines ore and concentrate into metal used in stainless steel manufacturing, requires 300 megawatts to operate an electric arc furnace.

Boor said power has been the main thrust of discussions between Cliffs and the Ministry of Northern Development, Mines and Forestry. He offered no insight on how those talks are progressing.

“The right issues are being talked about, the relationship is very strong and I’m really impressed by how the ministry has approached this.”

KWG Resources, a junior partner with Cliffs on its Big Daddy chromite deposit, is suggesting an off-grid solution to generate power for the project with a string of First Nation-run hydroelectric developments in the Far North.

Boor didn’t dismiss the idea from the project evaluations, calling the concept “valid,” but a large already-established power grid acts as a giant “shock absorber” to the fluctuating needs of a furnace.

“There’s a real advantage to being connected to a robust grid that having an isolated supply of power would be pretty challenging from a technical perspective.” While many communities are openly lobbying for the ferrochrome processing, Boor said the ripple effect from the Ring of Fire
deposits will spread across the North.

“There tends to be a real focus on the furnace, which I know is important, but we’re pulling studies and information about direct employment, but also indirect employment, and it’s very strong for all aspects of this project. This a win for Ontario in either case in my opinion.”

What the province and federal government’s role will be in helping develop the Ring of Fire, or to set a course of direction has yet to be determined.

Boor, who attended a provincial Ring of Fire infrastructure conference in Thunder Bay last June, said although all the stakeholder interests were well-represented in one forum, it didn’t produce a “specific design” for development in this Far North mining district.

“It was the most tangible discussion we’ve had yet about the trade-offs that have to be considered.”

But he said someone needs to take the reigns to spell out a course. With Cliffs aiming to start mine production by 2015, Boor said they’re being “pretty vocal” about pushing the project forward.

“The question of timing is a real concern for us. I’m hoping this will be an event that starts to get some momentum on getting more specifics, because we really didn’t get to that point.”

Cliffs is edging toward finishing its pre feasibility study on Black Thor in September with the intent of immediately launching into the feasibility stage soon after if the economics prove favourable.

Boor said Cliffs expects to have a draft study done internally by that time and will decide how information will be released from there.

“It’s getting tight for us and we need the government and other stakeholders to start engaging in specific discussions about solutions. This conference got perspectives on the table, but it didn’t get solutions.”

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