* Cliffs plans massive chromite mine in northern Ontario
* Region has no roads, rail lines or power infrastructure
* Project faces intensive reviews, needs aboriginal support
* Chromite essential in making stainless steel
* Mine will make Canada world's 4th largest producer
By Julie Gordon and Bhaswati Mukhopadhyay
May 24 A $3.3 billion plan to build North
America's first major chromite mine deep in the Canadian
wilderness promises to usher in an era of prosperity for the
region's aboriginals and generate millions of tax dollars over
Tucked deep into northern Ontario, the Ring of Fire contains
rich mineral deposits that could transform the region much as
the oil sands have transformed Alberta. Much like the oil sands,
it has raised deep environmental and social concerns.
But the Ring of Fire stands apart from other resource
mega-developments around the world in one important respect.
Rather than oil, gold or iron ore, its main attraction is a
relatively minor ore - chromite - which is refined into
ferrochrome to make stainless steel.
The region contains North America's only known large-scale
chromite deposit. If Cleveland-based Cliffs Natural Resources
Inc develops the Black Thor project, it will likely
revolutionize the stainless steel industry on the continent,
which now relies on imports from South Africa and Kazakhstan. It
would make Canada the world's fourth-largest chromite producer.
Black Thor is the first of many projects that could keep
the Ring of Fire bustling with drills, crushers and dump trucks
well into the next century - until the deposits run dry.
"We've got a whole bunch of projects and you could have an
enormous boom that ends in an enormous bust," said Bob Gibson,
an expert on environmental policy at the University of Waterloo
in Waterloo, Ontario.
Rapid urbanization in China, India and other developing
nations has driven up demand for base metals such as copper,
nickel, iron ore and chromite, used to build everything from
skyscrapers to household appliances.
At the same time, centuries of exploitation have made it
harder to find viable projects in politically stable regions,
forcing miners to develop ever-more remote resources.
The Ring of Fire is a case in point. Named whimsically for a
Johnny Cash song, the crescent-shaped arc of deposits about
1,500 km (1,000 miles) northwest of Toronto is rich in chromite,
nickel, copper and platinum group metals.
RHODE ISLAND SIZED
Turning that 4,000 square kilometer (1,540 square mile)
swath of boreal forest - about the size of Rhode Island - into
Canada's newest mining district will be no easy task. There are
no roads, rail lines or reliable sources of power.
In fact, the price of the Cliffs project has already
ballooned to $3.3 billion from an earlier estimate closer to $1
billion. Costs include a smelter hundreds of miles south in
Sudbury, Ontario, and some $600 million for an all-season road.
With first production at least three years away, after a
prolonged environmental and political permitting process, that
price could rise, raising concern whether the chromite project
alone is enough to merit the capital investment.
"The costs have nearly tripled from their original
estimate," said JP Morgan mining analyst Michael Gambardella.
"There must be some additional volumes, whether it's in
chromite, ferrochrome or other minerals that are up there, to
offset the additional capital costs."
Refined ferrochrome prices have risen 9 percent so far this
year to $1.20 a pound. Prices for the alloy have been volatile
since early last year as economic worries in Europe weighed
against concerns over production shortfalls in South Africa.
Cliffs sees Black Thor as an opportunity to command about 10
percent of the global chromite market, while building on its
existing relationships with steelmakers.
The massive, open-pit mine is expected to pump at least
600,000 tons of ferrochrome into North American and European
steel markets each year, and some 1 million tons of chromite
concentrate into Asia.
"There's still a lot demand growth for stainless steel - and
therefore ferrochrome - in the world because you still have a
lot of development left in places like China," Gambardella said.
Along with Cliffs, juniors such as KWG Resources Inc
, Noront Resources Ltd and Probe Mines Ltd
are all exploring chromite projects in the Ring of Fire.
A stable chromite source in Canada will reduce supply risks
for steelmakers and cut transportation costs - a game-changer
for the North American industry, according to analysts.
"From a strategic standpoint, I think it's an important
deposit," said FBR Capital Markets mining analyst Mitesh
Thakkar. "It plays right into Cliffs' strength of catering to
the steel mills."
NEW MINING DISTRICT
But chromite is not the Ring of Fire's only resource.
Some 35 companies hold 25,000 claims units in the region,
according to Ontario government data. Noront is developing a
nickel-copper project and the region also has precious metals
such as gold, platinum and palladium.
"When you get the infrastructure there, it will open up the
opportunity for other companies as well," said Chris Hodgson,
president of the Ontario Mining Association.
Development could also bring much-needed tax revenues for
the debt-laden province of Ontario, which has committed to
helping fund infrastructure.
But the deposits are located on treaty lands of aboriginal
peoples, known as First Nations. Companies will need to reach
complicated "impact benefit" deals with these groups before any
development can proceed.
With First Nations throughout Canada waging very public
battles against projects from mines to pipelines, miners could
face an emboldened opposition, especially if local communities
feel the risks outweigh the benefits.
"We expect to have a say in what happens on our lands,
because that is our home," said Grand Chief Stan Beardy of the
Nishnawbe Aski Nation, an organization of 49 First Nation
communities. "We are not against resource development, but we
expect a benefit."
Development advocates say the benefits are clear. Mining
will bring skills, jobs and business opportunities to a
depressed region that has made headlines in Canada over
condemned housing and a lack of safe drinking water.
But while demand for chromite is steady now, the survival of
the region will depend on North American and European steel
mills, which tend to struggle during times of economic
The biggest challenge is to ensure the region is built out
in a sustainable way, so that once Black Thor is exhausted,
other mines can take its place.
The alternative would be a mess of disconnected road and
rail lines that do little to support local communities or future
economic activities in the region.
"This is a one-time opportunity. These are non-renewable ore
bodies," said Gibson, the University of Waterloo environmental
policy expert. "Unless those things are thought about now, you
will almost certainly get regrettable results."