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.
A management shakeup at Cliffs Natural Resources has some mining analysts believing the possible departure of the Cleveland-based mining giant from the Ring of Fire camp could open the door for other international producers to make a move.
But that’s not the opinion of Bill Gallagher, a leading mining strategist. With competing and divergent stakeholder agendas at play, combined with a muddled development picture, the overall uncertainty in the remote James Bay mineral exploration camp may drive off any new investment or mining entrants.
“You could not get a more polarized set of opinions around a non-existent project,” said Gallagher. “How many (news) reports have to come out that show that everybody’s on a different page? There’s nobody singing a unifying theme.”
Gallagher is a former federal negotiator, a strategist specializing in mining and First Nations negotiations, and a published expert on Native empowerment in the Canadian resource industry.
Cliffs won a major court ruling in July to gain overland access to its Black Thor chromite deposit. But the timing of the decision may be too late for the Ohio iron and coal miner to see its proposed $3.3-billion Black Thor chromite mine and Sudbury refinery project come to fruition.
Casablanca Capital’s takeover of Cliffs’ corner office and boardroom paints a more convoluted picture of how development in the Far North will unfold.
“I think it’s another major fundamental complication in what’s already a very complicated resource play.”
Gallagher believes the New York hedge fund will skim off, what it deems are, costly and money-losing international assets.
But Ontario’s shaky reputation as a business-friendly mining jurisdiction may make it difficult for Cliffs to unload their chromite properties.
And if Cliffs manages to do so, it’ll sell for significantly less than the $500 million it spent on acquisition and exploration, said Gallagher.
“These financial wizards on Wall Street may be running a company with the world’s biggest mining poison pill.”
Speaking from his experience as a negotiator who forged key Native agreements on Inco’s Voisey’s Bay project in Labrador, Gallagher said the bad brew of First Nation grievances, “eco-activists,” and a largely hands-off provincial government doesn’t bode well for devising a coherent regional development strategy that’s inviting to business.
He suspects the Ring of Fire could be a decade away from seeing any mining activity.
Gallagher blames Queen’s Park for being AWOL from a provincial dispute tribunal last year between Cliffs and KWG Resources, a Toronto junior miner with which Cliffs had a venomous partnership on another Ring of Fire deposit.
KWG used mining claims to stake a 330-kilometre-long corridor atop an elevated sandy esker to reach its exploration camp. Cliffs was denied access to those claims to build a road and their application for an easement was denied by the Ontario Lands and Mining Commissioner.
The decision created a critical policy question on how much power and control a mining claims holder has over surface rights.
Cliffs’ appeal to the Ontario Divisional Court produced a decision that the mining commissioner made an “erroneous interpretation” of the provincial mining act and set aside the tribunal’s decision.
The court saw no evidence that Cliffs’ road would interfere with KWG’s exploration and threw water on the junior’s ability to finance and build its $1.6-billion railroad, calling it a “speculative” venture and referring to its plan as “unrealistic.”
“Just because you own a mining licence doesn’t mean you become the minister of transportation,” said Gallagher, who called the decision a “refresher course” on how the Mining Act was intended to work.
It’ll be up to the minister of natural resources to draft a process to grant Cliffs an easement.
But the original ruling messed with Cliffs’ timelines for its advanced Black Thor project. That and other unresolved issues with Queen’s Park over infrastructure and other project-related uncertainties caused Cliffs to indefinitely suspend technical work last fall.
“I await to see serious (government) leadership on the Ring of Fire,” said Gallagher.
The Wynne government announced its Ring of Fire development corporation in late August, backed up with a $1-billion infrastructure pledge.
But if Cliffs exits Ontario, the Ring will be without a major miner player with committed dollars while the federal government remains unresponsive to Ontario calling for matching dollars.
Granting the road easement is not a slam dunk, said Gallagher, not with regional First Nation chiefs drawing a line in the sand on unwanted encroachment by government and industry on their traditional lands.
To achieve harmony, Gallagher suggests some outside-the-box thinking to empower affected First Nations, who’ve emerged as real power brokers.
He suggests the Wynne government designate half of its $1-billion infrastructure fund to buy Cliffs’ chromite properties and then deed it to the Nishnawbe Aski Nation chiefs for a nominal fee.
Set aside the remaining funds for any regulatory and environmental requirements, and allow the First Nations to partner with a mining company of their choice.
“Whoever aligns with the First Nations will direct the outcome of this (easement) application.”
www.billgallagher.ca