Mining News

Northern Promise Series

Posted by Alana Wilson on 8/28/2013 3:33:21 PM

By Ken Green

In case you missed it: the National Post has an interesting six-part series in development on development in Canada’s more remote communities. Part one (by Peter Koven) focuses on the “Ring of Fire,” the region in Northern Ontario where a large chromite mining operation has been held up for 6 years. With an estimated $30-60 million at stake, and with today’s attention to environmental detail and aboriginal land claims, Koven sums up the status of the project:

Development is caught in an enormous bureaucracy. The permitting process cannot even start until a court decides what environmental assessment process will be used. First Nations groups continue to express concerns. And the companies that want to develop the region (Noront and Cliffs Natural Resources Inc.) are in such poor financial condition that the concept of them spending billions of dollars to build mines is questionable.

How poor are those financial conditions? Koven elaborates:

None of these issues even matter if Cliffs can’t get its financial act together. What many stakeholders seem to ignore is that Cliffs is in no position to develop this project. Its balance sheet is loaded down by US$3.1-billion of net debt, a result of its disastrous $4.9-billion takeover of Consolidated Thompson Iron Mines Ltd. in 2011.
Cliffs maintains that the US$3.3-billion capital spend in the Ring of Fire is manageable if it secures a deep-pocketed partner, and Mr. Boor has correctly pointed out that first-rate projects tend to get financed regardless of market conditions. But even he admitted that getting board approval for this project would be an awfully tough sell right now.
Likewise, it is hard to imagine the Cliffs own shareholders supporting development until the company deals with a debt burden that BMO analyst Tony Robson called “unsustainable.” 
It all suggests that development of the Ring of Fire is not imminent, and Cliffs prediction that it can reach production in 2016 is highly dubious.

Part two of the Koven series takes him to Red Lake a set of five small communities, home of the “world’s richest gold mine.”

More than 70 years after the first mine went into production, Red Lake remains, along with Nevada, one of the very best places in the world for gold mining. Goldcorp’s Red Lake complex is still the richest gold mine on the planet, with grades in its legendary High Grade Zone topping two ounces per tonne of ore. The fabulous grades lead to low cash costs of around US$500 an ounce. And the mining-friendly atmosphere is the envy of every company kicking around Tanzania or Kyrgyzstan.

Part three of the series, written by Jeff Lewis (just released on August 26) looks at Canada’s artic oil resources, but sees development some way off:

It could take 20 to 30 years to move from seismic work through exploration and delineation drilling to commercial production on the frigid frontier, said Kevin Williams, operations manager with the exploration unit of Chevron Canada Resources, which is assessing two prospects in the northern region.

The “Northern Promise” series tells some fascinating stories of remote communities involved with mining and natural resource development in Canada. It’s a must read for those interested in Canadian Mining.

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