Which Way to Ring of Fire? As Cliffs stands down, Noront and KWG propose alternate transport routes – by Stockhouse.com (June 14, 2013)

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Which Way to Ring of Fire? As Cliffs stands down, Noront and KWG propose alternate transport routes

It’s a suspension, not a cancellation. Yet the June 12 announcement from Cliffs Natural Resources dumped cold water all over Ontario’s Ring of Fire. By putting the region’s largest project on hold, the company has also shelved plans for an all-weather road to the south, a vital link some other companies were counting on to develop the McFaulds Lake area about 540 kilometres northeast of Thunder Bay. But Noront Resources [V.NOT] quickly responded that its own projects are “still good to go” thanks to a proposed east-west road. Not to be outdone, KWG Resources [V.KWG] pursues the feasibility of north-south rail.

Seemingly a Plan B, Noront’s east-west corridor was actually the company’s first idea. It would link the Eagle’s Nest project to Highway 808, roughly 230 kilometres southwest. But in May 2012, the Ontario government conditionally agreed to help finance the north-south route, part of Cliffs’ $3.3-billion proposal to build the Black Thor mine with road access to a new processing facility near Sudbury. On that basis, Noront used the north-south route in the base case for the September 2012 Eagle’s Nest feasibility study. Noront retained the east-west route as back-up.

Prudently, it now seems. Explaining the suspension of what would have been North America’s first major chromite mine, Cliffs’ senior vice-president of global ferroalloys Bill Boor said, “Certain critical elements of the project’s future are not solely within our control and require the active support and participation by other interested parties such as government agencies and impacted first nation communities.”

Reacting to Cliffs’ suspension, Noront chairman/interim CEO Paul Parisotto said his company’s east-west proposal “balances first nations objectives, the environment and job growth. We’re confident this alternative will be attractive to each level of government, the local communities and the people who will benefit from this sensible approach.”

The route would upgrade an existing winter road to all-weather status. Among its advantages, it “avoids provincial parks, avoids areas of special interest to aboriginal groups and provides the greatest benefit to first nation communities,” the feasibility report stated. The native bands are currently served by air travel and winter road.

With Cliffs temporarily out of action, Noront emerges as the regional bigshot. Its Eagle’s Nest project achieved feasibility last September, using an 8% discount rate to calculate an after-tax net present value of $543 million and a 28% internal rate of return. With initial capital costs of $160 million, payback would come after three years of the 11-year mine life for a project showing:

proven reserves of 5.26 million tonnes averaging 2.02% nickel, 1.04% copper, 1.01 grams per tonne platinum, 3.45 g/t palladium and 0.19 g/t goldprobable reserves of 5.87 million tonnes averaging 1.38% nickel, 0.72% copper, 0.78 g/t platinum, 2.76 g/t palladium and 0.18 g/t gold.

Less than two kilometres away, the company’s Blackbird project has a March 2012 resource showing:

a measured category of 9.29 million tonnes averaging 37.44% chromite with a chromium-to-iron ratio of 2an indicated category of 11.17 million tonnes averaging 34.36% with a Cr:Fe ratio of 1.95an inferred category of 23.48 million tonnes averaging 33.14% with a Cr:Fe ratio of 1.97.

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