The Sudbury Star is the City of Greater Sudbury’s daily newspaper.
Earlier this year, KWG Resources released a commissioned report by engineering consulting company Tetra Tech on the costs of a road versus a railroad in the Ring of Fire.
By way of background, KWG wants to build a railway to ship ore out of the Ring of Fire. It’s rival, Cliffs Natural Resources prefers a road. However, KWG has staked some of the land Cliffs needs for such a road. Cliffs appealed to the Mining and Lands Commissioner of Ontario to get access to the land, but lost — a decision it is now appealing.
The study KWG ordered confirmed the initial capital costs (direct and indirect) to construct a single track railroad were about $1.551 billion versus $1 billion for a road. Media reports keep repeating an older figure of $600 million for the road, which most mining industry experts believe is too low.
If the premier’s office has not done so already, a quick discussion with the engineering experts at the Ministry of Transportation, who have been building roads in Ontario for more than a century, should settle this cost issue.
In an email, Bill Boor, senior vice-president of global ferroalloys for Cliffs Natural Resources, said the company can’t get put a price on the road. “Any contribution by the government is a part of the broader negotiation following the agreement to terms from May 2012.”
Boor wanted to emphasize the road would be used by others and the location of the furnace in Sudbury and the road subsidy “is part of the overall economic negotiation.” Previous statements by government officials during the McGuinty era indicated a preliminary subsidy in the $300-million range.
Boor does not agree with Tetra Tech’s cost estimates for the railway, thinking they are too low and I agree. A more accurate figure would be about $2 billion and change.
He is not against the idea of a railway, in theory.
“To be clear, I have said on numerous occasions that once enough material is being mined in the region, a railroad may become viable and a lower operating cost solution … but not as a first step unless someone comes forward with a business plan (investors and economic freight rates). That has not happened to my knowledge.”
So, which should come first – road or rail? It’s a “chicken or the egg dilemma” that has major repercussions on the long-term viability of the project. It is one of the issues holding up the development of the Ring of Fire. Located 500 kilometres northeast of Thunder Bay, the Ring contains at least $60 billion and counting of chromite – among the best deposits in the world – plus nickel, copper, platinum group elements, gold, zinc and vanadium metals.
Since there was supposed to be some form of taxpayer subsidy for the original road proposal, there is considerable merit in going over the Tetra Tech study that looked at road versus rail. Notwithstanding the estimated enormous capital costs of at least $1 billion for the road and $2 billion for the railroad, we need to pay close attention to the annual operating costs as these are multi-generational projects.
The Tetra Tech study found that the operating costs for rail would be significantly lower, which is very important since the price of high-carbon ferrochrome has ranged from 80 cents to $1.40 a pound over the past seven years. This is not a high-value metal, so transportation costs are a critical component in making this project economically sustainable.
The report estimates – based on public information at the time (February) – that the region has about 220 million tonnes of chromite reserves (measured, indicated and inferred) above the 20% cutoff level. The operating cost figures were calculated on a baseline transportation capacity of three million tonnes per annum, somewhat higher than Cliffs’ current plan, giving an estimated mine life of about 73 years.
Cliffs plans to transport to Capreol an estimated 2.3 million tonnes of concentrate each year from its Black Thor deposit by using 100 70-tonne haul trucks (I mistakenly said 140 trucks in a previous column) that will be scheduled in convoys about 45 minutes apart or so. Obviously, these trucks will be making the trip twice a day, putting enormous wear and stress on the road. And during the spring thaw, road use will need to be curtailed.
The Tetra Tech study found the annual labour, trucks and fuel maintenance budget for the road would be $183 million as opposed to about $31 million for the railway.
While the details of the road proposal have yet to be worked out, a key question is whether the province or the company will be responsible for its maintenance, which is going to be expensive and ongoing, with that volume of traffic. Again, a quick conversation with the highway experts at the Ministry of Transportation would confirm these costs. And there are some parts of the route that are very narrow – less than 100 metres – and might not support both forms of transportation.
The study also found that there is not enough aggregate to build both a road and railroad. Using the existing aggregate deposits to build a road first would significantly increase the costs of railroad construction. Transporting the needed aggregate for the railroad by truck over long distances would be expensive. Conversely, the cheaper solution would be to build the railroad first, then bring in additional aggregate from distant sources, at a significantly cheaper cost for any future road.
M. J. (Moe) Lavigne, vice-president of exploration and development at KWG Resources, said a road could not handle the ore being shipped out of the Ring of Fire, once it’s fully developed.
“Initially, production will be focused on North American demand,” Lavigne said. “However, as global stainless steel production increases, producers in other jurisdictions will want to source at least some of their ferrochrome production from a politically stable country like Canada for security of supply. The road will not be able to handle increased chromite production or the development of many other base metal deposits and with depleted aggregate sources building a railroad later would be much more expensive.”
In terms of greenhouse gas emissions, there is no debate that a railroad would be significantly better for the environment and two train trips a day would have a much less detrimental impact on large animal populations – woodland caribou and moose – than 100 trucks going back and forth every 24 hours.
There is no doubt that operating in the swampy and flat James Bay Lowlands will be a challenge. One of the major hurdles will be the containment of tailings waste material from the chromite operations.
The construction of a circular dyke embankment or wall that will contain these tailings and lined with specific material to prevent leaching into the water table will be costly to build and monitor.
With a railroad, raw chromite ore could conceivably be shipped down to the Exton rail terminus near Aroland First Nation and Nakina for concentration (milling) and the waste material more economically and safely contained in the surrounding Canadian Shield geology, with its natural hills and valleys.
For more than a century, Ontario has dealt with tailings waste at Sudbury, Timmins, Kirkland Lake and many other mining camps located in similar geology to that around Exton. And locating the concentrator near Exton would also save the expense of flying these workers in and out of the isolated mine site and housing them. This definitely needs to be more thoroughly explored.
A railroad would definitely open up many new or innovative options on how to economically and environmentally develop these deposits in a sustainable manner as well as have the capacity to handle future mineral development.
In Part 3, one of Canada’s top geo-scientists will take an educated guess at the enormous economic value of not only the Ring of Fire, but the very geologically rich region to the west of the camp.
Stan Sudol is a Toronto-based communications consultant and mining policy analyst who owns/edits www.republicofmining.com.
For Part 3 of this 4-part series on the Ring of Fire, click here: http://republicofmining.com/2013/11/16/accent-rings-potential-astounding-by-stan-sudol-part-3-of-4-sudbury-star-novmeber-16-2013/
For the original version of this column in the November 15, 2013 issue of the Sudbury Star, click here: http://www.thesudburystar.com/2013/11/14/is-rail-or-road-the-best-choice-for-ring