It lacks the obvious allure of gold, but chromite is vying to become the next hot metal in Canada.
A major U.S. mining company is jumping in to the action in Northern Ontario with plans to build the first chromite mine in North America after striking a friendly deal to acquire Freewest Resources Canada Inc. Chromite ore - dark brown to deep black in colour, with a greasy lustre - has never been mined on a major scale in North America, but Cliffs Natural Resources Inc. believes the Freewest deposits are among the most promising on the planet.
Cleveland-based Cliffs said Monday it will cost more than $800-million (U.S.) to build an open-pit mine and facilities to process the chromite into ferrochrome, a key ingredient used to make stainless steel.
Cliffs' $150-million (Canadian) all-stock bid represents a vote of confidence for the remote mining area in the James Bay lowlands known as the Ring of Fire.
Until the financial crisis cooled interest last year, the region had been among the hottest prospecting areas in the world.
Boasting an unusually high concentration of metals including nickel, copper and zinc, the Ring of Fire attracted a slew of junior mining companies jostling for land positions in search of the next big score.
Yet it is the relatively unusual metal chromite that captured the attention of Cliffs, one of North America's largest producers of iron ore and coal.
"This is a world-class deposit and a project that has a number of important synergies with Cliffs' current mining and mineral processing techniques. It also presents outstanding financial growth opportunities and provides further business diversity," Cliffs chairman and chief executive officer Joseph Carrabba said on a conference call on Monday.
Four countries - South Africa, Kazakhstan, Finland and Turkey - currently control 80 per cent of the world's chromite ore production, forcing North American stainless-steel producers to import ferrochrome from overseas. Annual global ferrochrome demand is about seven million tonnes and Cliffs hopes to supply as much as 12 per cent of the market with the Freewest project.
If the project is successful, the Ontario chromite mine could become a major revenue stream for Cliffs, which boasts a market value of about $5.6-billion (U.S.).
The company said it is considering building a mine and smelter that could produce as much as 800,000 tonnes of ferrochrome per year once completed in 2015. At current prices of about 80 cents a pound, the Canadian project could add more than $1.4-billion to Cliffs' annual revenue.
"It's a very big project that we've embarked on. We're very excited about the opportunity to get this thing from a greenfield [stage]" Mr. Carrabba said.
The Cliffs deal trumps a hostile offer for Freewest by fellow Canadian junior Noront Resources Ltd., and is sure to give a significant boost to the host of other development projects in the Ring of Fire region (which takes its name from the Johnny Cash song). Cliffs will have to build roads, rail lines and other infrastructure to support the proposed mine, which is located about 190 kilometres north of the Albany River and 240 kilometres west of James Bay.
"It is going to help the whole Ring of Fire. There are a number of other deposits up there and once you get some infrastructure up there, people won't mind going up and doing more work," Mac Watson, Freewest's president and CEO, said in an interview.
Mr. Watson likened the chromite found in the James Bay lowlands to the discovery of the Labrador iron-ore corridor more than half a century ago.
"It's a whole new industry for Canada," said Mr. Watson, who will lead a new company comprised of Freewest's other mineral projects that will be spun off as part of the deal.
Noront, which said on Monday it will review the Cliffs offer for Freewest before responding, has been among the most high-profile companies in the region.
Shares of Noront were fetching close to $7 (Canadian) a piece in 2008 as it promoted its McFauld's Lake project and the discoveries of significant amounts of nickel, copper, platinum, palladium, chromite and vanadium. However, the stock was stuck below $1 for much of 2009 amid the market crash. It recently spiked above $2 on renewed interest in the region and McFauld's Lake.
Wendell Zerb, an analyst at Canaccord Adams who specializes in the junior mining sector, said the Cliffs bid for Freewest will improve the prospects for chromite mining in Canada and the entire Ring of Fire region.
"It's a bit of a credibility bump to the play," he said.
|CLF-N Cliffs Natural Resources||15.55||
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