Ring of Fire doubts ‘baseless and false’ – by Carol Mulligan (Sudbury Star – October 30, 2014)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

Cliffs Natural Resources’ new chief executive officer may have shaken the confidence of some this week when he said he had “zero hope” the Ring of Fire would be developed in the next 50 years.

But Lourenco Goncalves didn’t cause three proponents of the chromite deposits 500 kilometres northeast of Thunder Bay to lose faith the Ring will be mined and will add billions to the province’s economy when it is.

Goncalves, 55, told The Financial Post he didn’t expect to see the Ring developed in his lifetime, and that he intends to be around for another 50 years.

The newly named CEO of the Cleveland-based company was, no doubt, expressing the frustration of the company with one of the biggest claims in the Ring of Fire. It has suspended work on its project after investing $500 million in it.

In May 2012, Cliffs and the Government of Ontario announced Cliffs had upgraded its Ring of Fire project to the feasibility stage and reached a number of key agreements with the province. Most important to Sudbury was Cliffs’ decision to locate a $1.8-billion ferrochrome processing plant in Capreol, just north of the city.

This week, Goncalves told the Financial Post he doubts anyone will buy his company’s assets because junior companies interested in them don’t have the money. He also said challenges developing infrastructure should have been resolved long ago.

Cliffs turned out The Sudbury Star’s request for an interview.

Sudbury Star mining columnist Stan Sudol called Goncalves’ remarks “completely baseless and false.”

The $60 billion to $70 billion worth of wealth located in the James Bay Lowlands will entice a new company to “replace” Cliffs, said Sudol.

Both levels of government and First Nations’ leaders must, however, significantly reduce the business risks for this development.

“Those business risks include severely damaged relations between First Nations and Ontario due to limited consultations,” and the provincial and federal governments’ “miserable failure to move forward on much needed social and transportation infrastructure in the communities.”

Sudol is hoping Goncalves’ comments will serve as a “much needed wake-up call to … Queen’s Park and Ottawa to put aside their partisan differences and finally start working together for the benefit of the entire country. Hopefully, political sanity will eventually prevail.”

Moe Lavigne is vice-president of exploration and development for KWG Resources, which has a 30% interest in the Big Daddy chromite deposit and the right to earn 80% of the Black Horse chromite deposit where resources are being defined.

Lavigne said Goncalves’ comment is what you would expect of a company that has made it clear it’s going to divest itself of its assets. “To them, the asset isn’t worth anything and they’re now taking a position it will never be developed. A year ago they thought it would so that’s been a big sea change on their part.”

To say the Ring will never be developed is misleading because several companies are interested in Cliffs’ assets and hope to find the money to purchase them.

Consolidating chromite deposits would take care of some of the hurdles Cliffs had in developing its project, said Lavigne.

KWG has expressed an interest in purchasing Cliffs’ assets and Lavigne has said it was approached by the company to do so.

But any mining company looking for investors is being hamstrung because of the lack of government decision-making on infrastructure, he said.

All companies looking for money to build mines are approaching the same investors and they want a guaranteed date for a return on investment.

“Like any investment , you need to know what your return’s going to be and when your return’s going to happen. Right now, as it stands, we cannot put a date on that.”

A guarantee can only be given after First Nations, mining companies and the Government of Ontario agree to a long-term infrastructure plan that “meets everybody’s needs, and that plan is scheduled and it’s financed and it moves ahead.”

Lavigne said Cliffs’ problems aren’t so much with the Ring of Fire, but with its iron ore mines whose high production costs, and low price per ton of iron ore pellets, are hurting the company financially.

The Ring of Fire is “collateral damage,” he said. The company is more than $3 billion in the red, although it did experience a better than anticipated third quarter, he said.

The “whole Cliffs’ saga is a reality check,” said Lavigne. The mining business is so fragile, it’s at risk of collapsing if the price of a commodity plunges and you’re a high-cost producer.

That’s why it’s important to strive to keep production costs low in the Ring of Fire when developing transportation and other infrastructure, said Lavigne.

Nipissing Progressive Conservative MPP Vic Fedeli, who’s also launched a leadership bid for the party, said while Goncalves’ remarks are a “scathing” commentary on Liberal inaction, his view of the future isn’t as bleak as the Cliffs’ CEO’s.

Fedeli, who has been to the Ring four times, believes in a three-phase development for it.

The first is to encourage private companies, such as Noront Resources, which is developing a nickel mine and east-west road. While not as expansive as the $60-billion chromite plans, “it gets us into the Ring of Fire quickly, efficiently, for a lot less money and starts proving the results,” said Fedeli.

That opens the door for chromite mining and for Ontario Northland to be brought in. The rail company has hauled ore out of the North for more than a century, said Fedeli, “and they’re not even invited to the Ring of Fire table.”

The third phase of development id discussing how to establish a stainless steel industry in Ontario where chromite, nickel and iron ore are all mined.

“So often, Northern Ontario doesn’t do the value-added,” said Fedeli. “We haul the minerals out, ship them out and wave goodbye.”

Michael Mantha, the New Democrats’ Northern Development and Mines critic, is still looking for information about the development corporation announced by NDM Minister Michael Gravelle almost a year ago.

Instead of bringing First Nations and company representatives to the table, it’s solely comprised of civil servants. The “devco” was established to plan and finance infrastructure in the Ring and the province has committed $1 billion toward that. But Mantha and his party are frustrated with what he says is virtually no progress.

When asked to comment on Goncalves’ remarks, Gravelle issued a statement that his government remains committed to working with “any and all interested parties” to develop the Ring of Fire. More than 20 companies have staked claims there so far.

He repeated a list of accomplishments including establishment of the development corporation, a regional framework agreement with chiefs of the Matawa Tribal Council and the $1-billion infrastructure commitment.

He also repeated the province’s mantra — that with a project this size, it needs to “get it right.”

For the original source of this article, click here: http://www.thesudburystar.com/2014/10/30/ring-of-fire-doubts-baseless-and-false