Cliffs VP wants Queen’s Park to find Ring of Fire solution – by Ian Ross (Northern Ontario Business – October 23, 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.

Bill Boor hesitates when asked if his company would have dumped a half-billion dollars in Ontario’s Ring of Fire if, back in 2009, it would have known of the myriad of economic, political, cultural, and environmental challenges in trying to develop a mine in the James Bay region.

“That’s a tough question when we’re right in the middle of the story,” said the vice-president of global ferroalloys for Cliffs Natural Resources, who is the overseer of its Black Thor chromite project.

“I do think about that from time to time. We believe in what we’re doing and this is a good project.” Cliffs is heading to the Ontario Superior Court to appeal a ruling that denied Cliffs overland access to Black Thor. Ontario’s Mining and Lands Commissioner ruled on Sept. 10 against the company which was seeking an easement to run a road on the mining claims of KWG Resources.

KWG staked a string of claims atop a sandy ridge to set aside a corridor for a future railroad stretching 328 kilometres from its Big Daddy chromite deposit – of which Cliffs is a 70 per cent owner – to the Canadian National Railway’s main line in northwestern Ontario.

The independent government tribunal said granting Cliffs an easement would interfere with KWG’s ability to work its claims.

The ruling has bitterly disappointed Cliffs. It accuses KWG of blockading all access to the Far North.

“We expected the commissioner to rule the other way so we were quite surprised by it.” said Boor.

Road access is one of a litany of issues that’s thrown Cliffs’ $3.3-billion plans for an open-pit mine, reload centre and ferrochrome smelter in Sudbury into disarray, and has steadily pushed back the project’s original startup date from 2015 to 2017, and likely beyond.

The company is saddled with a high-grade deposit that’s stranded hundreds of kilometres away from the nearest railroad. The Black Thor deposit contains 102 million tons of mineralized material, measured and indicated in 2012, and has open-ended potential at depth.

In September, Boor said an appeal was unlikely given that the length of time to wait for a hearing could take months. That was time the company could ill-afford to waste as it re-evaluated whether to reign in its roughly $4 million a month in spending from its $50-million exploration budget this year.

But in early October, Cliffs changed its tune and decided to exercise that option within the 30-day appeal window.

“We decided to do it but I don’t think it’s the solution,” said Boor. “We think it’s a decision that had errors in it and that’s why we decided to appeal.”

Part of Cliffs’ argument is that mining claims doesn’t entitle KWG to have control over surface rights.

“They staked these claims to control the corridor and…now they’re interested in leveraging that into a mining position. We don’t think that was intent of the mining claims legislation,” said Boor.

But before it ever hits court, Boor is calling on Queen’s Park to fix their problem of either securing road access or give them land to build a road to Black Thor.

“If Ontario wants this project now they’ve put up a heck of a roadblock to it.”

Boor said if the situation is left unresolved, the company will come to a project decision in the next few months, but didn’t get into specifics.

Between 2009 and 2012, Cliffs has spent $485 million on this project, including $350 million to acquire total or majority control in three chromite deposits.

“The (mining commissioner’s) ruling we got has jeopardized it,” said Boor, who said the company isn’t walking out of Ontario but called the decision a “possible showstopper.”

The company is further frustrated with the pace of negotiations with the Ontario government since the leadership changeover last winter from Dalton McGuinty to Kathleen Wynne.

Boor said there have been no meaningful discussions on the issues of power rates, a commitment to mining-related infrastructure, and approval on the terms of reference for the project’s environment assessment.

Last summer, because of the lack of progress in talks with Ontario, Cliffs halted its environmental assessment work.

“This is a large, complex project with a lot of people with an interest in it,” said Boor. “Companies cannot drive it alone.”

Northern Development and Mines Minister Michael Gravelle finds “there is indeed progress” on a number of fronts, particularly on Aboriginal issues.

“We have, what I would describe, as productive and quite focused discussions with Cliffs on a number of aspects related to this project.”

Gravelle understood Boor was expressing “a level of frustration” over the tribunal’s decision and acknowledged “we do need to have the kind of discussion that we have been having in the past.”

Gravelle’s maintained the government’s posture that the Wynne government sees tremendous value in Cliffs’ project and that the entire Ring of Fire remains a high-priority file that will produce wide-spread economic opportunity and value-added benefits for First Nations, Northern municipalities and the province.

Despite the setbacks, Cliffs is staying in Ontario.

“We own the mining claims up there,” said Boor. “Presumably there’s value to that and we’d like to develop that on a reasonable time frame and I would think the First Nation communities would prefer that, and I would think Ontario would prefer that.”

But Boor expressed definite concerns about the lack of public policy direction from Queen’s Park on providing a means of access to this future mining camp.

“If someone found a new mining district and a discovery, you wouldn’t run up there to try to staking mining claims. You’d just cover the territory that could be used to develop infrastructure, you wouldn’t provide your consent and you’d hold the development hostage.”

The situation has also forced Boor to become an observer of provincial politics.

The Ontario Liberal government faces the real possibility of a fall or spring election over its controversial cancellation of two gas plants in 2011 that will cost taxpayers $1.1 billion.

A change in government could delay the company’s negotiations with Queen’s Park even further if last winter’s change in leadership is any indication.

“You tell me whether it’s better or worse to have a change in administration,” said Boor.

Cliffs’ third quarter financial report will be released on Friday. Boor declined comment if the project stalemate will be reflected in next year’s investment in Black Thor.

Boor said what’s been overlooked has been the progress made with First Nations.

In early September, Cliffs received some good news when the Matawa Tribal Council, the governing body of the communities closest to the Ring, withdrew its legal challenge of the federal environmental review of Cliffs’ chromite project and decided instead to deal directly with the company.

“I’m very appreciative of the First Nation communities that have stuck in there and decided working with Cliffs is better than working it out in the courts and I think we’re on a good path and that should be noted,” said Boor.

www.cliffsnaturalresources.com

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