Ring of Fire junior wins strategic victory – by Ian Ross (Northern Ontario Business – October 8, 2013)

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.

Frank Smeenk didn’t want to use the opportunity to gloat. “It’s important not to do that publicly,” chuckled the CEO of KWG Resources. The Toronto junior miner’s bitter rival in the Ring of Fire exploration camp, Cliffs Natural Resources, was dealt a blow last month in gaining road access to its Ring of Fire chromite projects.

Ontario’s Mining and Lands Commissioner ruled against the Ohio-based mining giant, which had been seeking an easement to cross the mining claims of KWG in order to build an ore haul road out of its deposits in the James Bay region.

In a ruling released Sept. 10, the tribunal ruled that granting an easement to Cliffs would interfere with KWG’s ability to work its claims since “numerous heavy trucks (passing) every day” would cover up future drilling and sampling sites.

“It’s extremely material,” said Smeenk of the commissioner’s office ruling. “There couldn’t be any more material information for the owners of KWG.” KWG has a 30 per cent ownership stake in the Big Daddy chromite deposit with Cliffs, but the junior miner holds a strategic piece of ground.

In 2009, KWG began staking a ribbon of mining claims for a future railroad from its isolated Big Daddy chromite deposit heading south for 328 kilometres to a point on the Canadian National Railway’s (CN) main line, just west of the village of Nakina in northwestern Ontario.

A good portion of that route was atop a sandy ridge or glacial esker, easily the best spot in the muskeg country of the James Bay lowlands. KWG formed a subsidiary, Canada Chrome, to oversee this railroad venture.

“It was my idea to stake the right of way because the (McGuinty government’s) Far North Act was going to make securing access in that way impossible,” said Smeenk.

At one time, KWG and Cliffs were true development partners, but after a falling out over which deposit to develop first Cliffs went about seeking to secure its own transportation corridor. The best route out of the Ring of Fire belonged to KWG and when Cliffs approached the junior miner for access, it was refused and the matter ended up in the Mining Commissioner’s lap last year.

The tribunal ruled there is little room on the sand ridge for the two mining companies to use the same route. Cliffs’ proposed road “touches each of the claims (of KWG-Canada Chrome) in some part,” said the decision, and there was little indication the ridge could support two transportation systems.

Bill Boor, Cliffs’ senior vice-president of global ferroalloys, who had testified before the tribunal, was not made available for comment. A spokeswoman for Cliffs called the commissioner’s decision “disappointing.”

In an emailed statement, Jennifer Mihalcin said maintaining a north-south permanent road is “essential” to the development of its chromite project. The company did not respond whether it is appealing the commissioner’s decision to a higher court.

“We are still considering all of our options,” said Mihalcin.

Plan B for Cliffs might be to approach Noront Resources, another Ring of Fire junior, which favours an east-west road to reach its Eagle’s Nest base metals deposit.

“We will continue to work with the province, First Nations, and other companies in the hope that we can overcome this roadblock and develop what will ultimately be important infrastructure to the Ring of Fire,” said Mihalcin.

Cliffs’ Black Thor and its satellite Black Label chromite projects are in development limbo since the company announced in June it was stopping all environmental assessment work until issues with area First Nations and the Ontario government were resolved.

Cliffs did receive some good news when a judicial review requested by the Matawa Tribal Council for a widened environmental assessment of the miner’s chromite project was ended.

The chiefs of the communities closest to the Ring of Fire withdrew their legal challenge that was set to go to a federal court this fall. The communities decided to forgo the expense and just deal with Cliffs directly.

Smeenk said if Cliffs were to approach him and ask about negotiating a deal to use KWG-Canada Chrome’s right of way, he would “certainly” consider it.

When asked what’s needed to re-establish a true partnership again, Smeenk paused. “I’ve not had much time to think about it. They’ve (Cliffs) got a big investment in chromite that can’t get to market. I’ve made progress in developing relationships to create a market. I think the conversation may be around what can a buyer of chrome or chrome product do for Cliffs and vice versa.”

Smeenk said there’s plenty of Ontario precedence in using mining claims for transportation corridors such as the DeBeers Victor diamond project in Attawapiskat, the North American Palladium mine near Thunder Bay, and Agrium’s phosphate deposit at Kapuskasing. Garry Clark, executive director of the Ontario Prospectors Association, expressed surprised at the ruling since there are plenty of examples of mining claims that have outside roads, hydro and gas pipelines crossing them.

The lack of a road represents a setback in moving the entire camp forward, he said.

“Access is access. A railroad would be good obviously but a railroad doesn’t help the First Nations because they would have to haul goods in the railroad and have a road from railroad into their community.

A (main) road would have spur roads off of it going into their communities.” Clark was unsure what the future holds for this string of stranded deposits over the next few years.

“Does this mean someone’s going to get onside with (Noront’s) East-West corridor instead? If you’re Cliffs and you’re looking for Plan B do you make a deal with Noront on the east-west corridor instead?”

Clark said the ruling does little to boost investor confidence in the Ring of Fire deposits.

“I think it’s stifles it for a while for sure. You never know what’s going to happen next or who’s going to step up. Right now I’d say everything’s totally up in the air. I don’t know who can put the push on it.”

www.kwgresources.com

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