Mining News

Cliffs Natural Resources Suspends Ring of Fire Project Indefinitely

Posted by Alana Wilson on 11/22/2013 4:05:29 PM

By Alana Wilson

On November 20th, Cliffs Natural Resources announced that they will indefinitely suspend their Chromite Project in Ontario’s ‘Ring of Fire’ by the end of 2013. The company cites current challenges in the region as well as the cost of continuing along the current path as reasons for this delay.

The Company determined that it will not allocate additional capital for the project given the uncertain timeline and risks associated with the development of necessary infrastructure to bring this project online. In June of this year, Cliffs suspended the environmental assessment activities because of pending issues impeding the progress of the project.

According to the company’s news release, technical project work such as the feasibility study, development, and exploration activities are being halted and no restart date is planned.

A key issue hampering development of mining projects in the Ring of Fire has been transportation infrastructure. Earlier this year, Cliffs Natural Resources were unsuccessful in their request for an “easement” that would have allowed the company to build a road over claims held by another mining company, KWG. KWG is a junior minor that had staked the ground for a potential railroad. At the time of that decision, Peter Koven noted other significant challenges that Cliffs had to overcome to develop its project.

The company needs to clear up uncertainty over its environmental assessment process, negotiate key agreements with the Ontario government and First Nations, and come up with a credible financing plan. Cliffs has a very stretched balance sheet and is keen to find a partner to share the financing burden.

The announcement by Cliffs comes less than two weeks after Ontario announced the creation of a new development corporation that “would provide a business structure for the support of strategic infrastructure development”.

The corporation would develop, construct, finance, operate and maintain infrastructure supporting access to strategic resources in the Ring of Fire. The province will begin immediate work with partners, on the development corporation to determine its scope and a suitable governance model.

Ontario has also asked the Federal government to help finance infrastructure investment. An estimated $1.25 billion is needed to construct an all-season access road to the region located 500 kilometres northeast of Thunder Bay. Capital investment for industrial infrastructure is expected to cost an additional $1 billion.

At stake in all of this is an estimated $60 billion in deposits in the region containing chromite, nickel, zinc, copper and platinum group metals that could provide jobs and economic benefits for decades to come. Ontario estimates that once operational, development in the Ring of Fire will create 1,500 jobs directly as well as 3,000 jobs indirectly. While the activities in the Ring of Fire are still at the development stage, 21 companies already hold claims and spending to date has exceeded $278 million.

However, the future of these projects is now less certain after the suspension of one of the two major projects in the area. Ontario must resolve the significant uncertainty in permitting, infrastructure development, and in First Nations consultation if it hopes to benefit from the significant deposits in the Ring of Fire. If not, the economic growth, jobs, and much needed government revenues associated with its development could also become ‘suspended indefinitely’.

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