Analysts leery of Cliffs’ threat – by Mike Whitehouse (Sudbury Star – December 2, 2011)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

“Ontario needs to help build the necessary key transportation
routes to develop the North’s enormous and strategic mineral
potential. …These include a railway to the Ring of Fire mining
camp and all-weather highways to replace winter ice roads to
isolated aboriginal communities. The first priorities should
be regions with high mineral potential. The resulting economic
spinoffs throughout the entire province and increased tax
revenues will more than justify these public investments.”
(Mining Analyst Stan Sudol – RepublicOfMining.com)

The threat of taking its concentrate to Asia for processing will be legally difficult for Cliffs Natural Resources and may, in the end, prove only to be a negotiating ploy, mining analysts say.

Cliffs Natural Resources has announced plans to ship chromite concentrate from the Ring of Fire area in Northern Ontario to international markets, primarily China, to capitalize on the growing smelting capacity and booming demand for strategic metals in Asia.

Although still planning to build a smelter somewhere in Ontario — possibly in Sudbury — company officials have said demand from Chinese smelters will drive volumes for the concentrate, making its export economically viable.

Standing in the way of this plan is the Ontario Mining Act, which requires that ore produced in the region must be processed in the region — though the province and Cliffs appear to differ on how processing is defined.

While the company has taken the position concentrate is a processed, value-added and established commodity in world markets, a ministry of Northern Development and Mines official told The Star last week any company wishing to send concentrate to a refinery outside of Canada would need an exemption from the Act to do so.

Cliffs has not applied for an exemption, Laura Blondeau, a ministry spokesperson, wrote in an email.

“And it would be up to the company to argue they need one.”

There are no precedents for processing concentrate of strategic metals out of the country, a mining analyst says.

Even Xstrata Nickel, which smelts product in Sudbury but refines it in Norway, needed an exemption decades ago to do so, said Stan Sudol, a Sudburian who runs a mining blog in Toronto ( www.republicofmining.ca).

Indeed, historically, Northern Ontario, and Sudbury in particular, have been destinations of choice for such operations, but the province’s business climate appears to be changing that.

Sudol has long advocated for the province to improve infrastructure in strategic northern locations to expedite both mine development and new exploration.

“Ontario needs to help build the necessary key transportation routes to develop the North’s enormous and strategic mineral potential,” he said.

“These include a railway to the Ring of Fire mining camp and all-weather highways to replace winter ice roads to isolated aboriginal communities. The first priorities should be regions with high mineral potential. The resulting economic spinoffs throughout the entire province and increased tax revenues will more than justify these public investments.”

The known Ring of Fire deposit is twice as large as Prince Edward Island and is said to hold one of the world’s largest and richest deposits of chromite, as well as nickel, copper, platinum, gold, zinc and magnesium.

But there is very likely more underground in remote northwestern Ontario than anyone yet knows, he said, and only improved transportation links — such as a railway out of the Ring of Fire deposit — will spur investment there, Sudol said..

Another analyst suggests Cliffs’ threat may be a ploy to secure such a commitment from the province.

William Brehl, president of the union representing maintenance workers at Ontario Northland Railway, which hopes to carry Ring of Fire minerals, says the province must get tough with Cliffs on exporting.

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