Building a Ring of Fire railroad to move millions of bulk tonnes of chromite is a certainty, said a senior official with Cliffs Natural Resources.
Bill Boor, Cliffs' senior vice-president of global ferroalloys, who is overseeing the Ohio miner's project development in the James Bay lowlands, said rail is an inevitability as more mines come onstream in the remote district.
In last winter's base case for its high grade Black Thor chromite deposit, Cliffs proposed a permanent year-round haul road between the mine site and railway connections near Nakina in northwestern Ontario.
But Boor clarified that one mine alone doesn't support the investment of a railroad.
However, establishing a transportation corridor will improve the economics of other nearby deposits. Once that “scale” is built up, Boor said, “the right answer is to put a railroad in place.
“We just see it as a phased development.”
KWG Resources, a junior miner in the Ring of Fire chromite play, is making some bold moves in setting the tone for development in the Far North.
Though KWG is a junior partner to Cliffs Natural Resources on its Big Daddy deposit, where it claims a 28 per cent stake, the small Montreal-based company wants to tap into a federal infrastructure program to help build a $2-billion ore haul railroad.
On high ground staked by KWG through the swamps of the James Bay country, the proposed 300-plus kilometre route would link up with the Canadian National Railway (CN) main line at Exton, west of Nakina.
Through its subsidiary, Canada Chrome Corp., KWG has applied to Ontario regulators for a licence to operate a shortline railway.
The north-south rail corridor is acknowledged by both KWG and Cliffs as the most direct and economically-efficient operation possible.
To conduct the railroad engineering studies, KWG hired Krech Ojard, a Duluth, Minn-based firm that's well-known to Cliffs as a long-term partner on other mining projects.
Although the two companies differ on what deposit should be developed first, Boor said Cliffs favours a route similar to what KWG is advocating, and doesn't see a lot of conflict in their respective plans.
“We're not directly involved with KWG's route,” said Boor, “but we feel very good about involvement of Krech Ojard and we think they're doing good engineering. It's a matter of when can that development can be justified?”
“We really don't disagree with them. I like the vision and I think our two plans have a lot more in common than people might initially think.”
KWG is teaming up with the Greenstone Economic Development Corporation – the municipality where Nakina is located – in filing an application with the P3 Canada Fund to pay for the quarter of the estimated $1.98 billion railroad project.
P3 Canada is a $1.2 billion federal infrastructure fund which provides up to 25 per cent of capital project costs.
But patience appears to be a prerequisite.
Since the fund's launch in September 2009, only three projects have received money.
An emergency radio system in Atlantic Canada received $50 million from P3, $25 million was invested in a Winnipeg expressway extension, and $25 million went toward construction of a commuter train maintenance building in Lachine, Que.
Moe Lavigne, KWG's vice-president of exploration and development, is confident a project of this massive scale will resonate with the funding agency.
“That's because they haven't had the type of project that fits their mandate. And they love this project.”
P3 officials were in Thunder Bay in June attending the Ontario government-hosted Ring of Fire Infrastructure Conference.
KWG and Greenstone jointly submitted their project plans just under the wire of the funding agency's June 30 deadline, its third annual proposal call.
Lisa Mitchell, a spokeswoman for P3, said it's difficult to give a timeframe on how long it takes from the application to the formal announcement stage given the paperwork involved.
All three projects that have received funding so far came from the first round of proposals. “We hope to be making Round 2 announcements in the coming months.”
The federal Department of Finance approves project funding on the basis of recommendations of a P3 board of directors, drawn from politics, government bureaucracy along with past and present corporate types drawn from finance, construction, law and hospitality sectors.
But KWG is not putting all its eggs on one basket.
Lavigne said the biggest chunk of change will come through Revenue Canada where KWG is working to obtain an advance ruling to raise railroad money from flow-through shares.
“We think we can raise three-quarters of a billion dollars.”
Whether CN Rail plans to invest any money remains to be seen, but Lavigne said both CN and the Crown-owned Ontario Northland Railway are “standing in the wings” to be potential operational partners.
Lavigne said the transportation operation must be self-sustaining.
To oversee all of this, KWG plans to create a regional economic development corporation to handle all of the rail and air logistics in and out of the Ring of Fire.
It'll be a joint venture between Canada Chrome, the Municipality of Greenstone and First Nation partners.
The Matawa and Mushkegowuk First Nations were identified by KWG, but Lavigne said it could involve any number of Aboriginal partners.
“We're trying to line up the players,” said Lavigne. “We're trying to organize one of the essential services to developing what's going to be a new mining camp.”
Initially, First Nations would have partially ownership, but eventually the corporation would be theirs to run.
“We're serious about giving the First Nations control over the logistics delivery to the Ring of Fire,” said Lavigne. “But it takes a long time for the First Nations to wrap their minds around it, that there's a big gift sitting there for them.”