An abundant supply of cheap power will decide whether northwestern Ontario lands any of the facilities to process chromite ore when a proposed McFaulds Lake mine opens in 2016.
An abundant supply of cheap power will decide whether northwestern Ontario lands any of the facilities to process chromite ore when a proposed McFaulds Lake mine opens in 2016.
At an investors forum in Thunder Bay in early April, Moe Lavigne,
KWG's vice-president of exploration and development, laid out his company's timelines and challenges on how the Toronto miner plans to develop their Big Daddy deposit in the James Bay Lowlands.
Behind the backing of Cliffs Natural Resources, a Cleveland, Ohio-based iron ore and coal conglomerate. KWG has set up a subsidiary company, Canada Chrome, to bring to life the massive mine and rail project, estimated at $2 billion.
Many one-industry communities along Lake Superior's north shore are salivating at the opportunity to replace hundreds of lost forestry mill jobs with mineral processing employment opportunities.
That means running McFaulds Lake chromite through a concentrator and an electric arc furnace which produces ferrochrome, a key ingredient in making stainless steel.
"The issue with an electric arc furnace is that it consumes a huge amount of electricity and one of the issues will be where do we get electricity cheaper?" said Lavigne.
Lavigne said his boss KWG, president Frank Smeenk, wasn't posturing to the Ontario government when he publicly floated the possibility last February that Big Daddy chromite could processed more cheaply in Montreal or Prince Rupert, B.C. where the industrial hydro bill is lower.
"It's a simple financial decision. It makes more sense business-wise for us to save a billion dollars a year by building a plant somewhere else."
The province's Mining Act allows companies to process Ontario ore anywhere in Canada.
With an abundance of hydroelectric power in the Northern Ontario, Lavigne said the rates have to reflect that.
"The cost to produce electricity in Northern Ontario is really quite cheap. Northern Ontarians are now paying for the very expensive nuclear plants in Southern Ontario that they need. And our electricity costs should be based on what it costs to generate electricity in Northern Ontario.
For the Big Daddy project, he pegs an acceptable power cost at four cents per kilowatt hour.
The McGuinty government threw big Northern Ontario power users a bone in the March Throne Speech by offering a three-year electricity rate program to provide companies with a two per cent rebate per kilowatt, a move they say will cut industrial power prices by 25 per cent.
Lavigne said that isn't substantial or long enough to change his company's thinking.
Steve Demmings, CEO of the Thunder Bay Community Economic Development Commission, expressed no fear about his city possibly being by-passed for mineral processing opportunities.
The city is well on its way to branding itself the “Gateway to the Ring of Fire” with the launch of an on-line mining services directory. Demmings said the city is preparing for an "onslaught of real jobs and investment" related to the Ring of Fire activity.”
"We have our ducks lined up in helping to support what is a very critical industry for us."
Resolving the power issue is important, but Demmings said the city intends to "realize the full economic benefits" of the opportunity. "There's a lot of decision making yet to be made around issues of the electric furnaces but the fabrication and steel making opportunities are very significant for this community."
In early April, Demmings wouldn't reveal what case the city was making to Canada Chrome to locate the processing in Thunder Bay except to say a major infrastructure initiative would be announced within four to six weeks involving public and corporate partners.
As equally important to the development of a mine is the construction of an ore haul railway into the Far North.
Soon after Lavigne joined KWG last August, the company hired Krech Ojard & Associates, a Minnesota engineering firm, to find the best route to haul out millions of tonnes of ore from the proposed open pit.
The 350-kilometre route that's been claim staked ties into the Canadian National Railway at Nakina. The track bed would sit up high on sandy glacial eskers that skirt the rugged Canadian Shield on one side and flat muskeg plain on the other.
The railway would span 80 water crossings by culvert and bridge, including major rivers like the Attawapiskat.
The rail's preliminary engineering should be done by August as the Canada Chrome juggles and struggles with consultation with area First Nations and while preparing a mineral estimate for Big Daddy as the project moves into pre-feasibility stage.
Lavigne cautioned that with baseline environmental work underway, it'll be a long time for anyone sees an operating mine.
"The investment will be greater than $100 million before we make a go, no-go decision."
With the possibility of connecting dozens of remote Aboriginal communities with year-round rail and road access, Lavigne expects Ottawa will help subsidize the project.
"If we're going to use this railroad to deliver bulk fuel to a half dozen First Nations (communities), I would expect the federal government would step in."
While some confusion reigns in mining circles of what role the Ontario government plans to play to shepherd Aboriginals and miners through this development, Lavigne said First Nation community support for the project is key.
"They truly understand that this project will provide long-term hope for the communities and bring meaningful jobs to their children. I think the Ontario government will fall in line with that. "
KWG-Canada Chrome and all the Ring of Fire exploration companies are trying to say the right things given the sensitive nature of building major developments on First Nation traditional lands.
David Peerla, a former mining advisor with the Thunder Bay-based Nishnawbe Aski Nation, said KWG needs to build trust and partner with First Nations in order to avoid necessary delays in moving the McFaulds Lake project forward.
He said if there's any lesson to be learned from the 2006 dispute between junior miner Platinex and the community of Kitchenenuhmaykoosib Inninuwug (K.I.) First Nation "is that blockades work."
A half-dozen affected First Nations did just that this past winter when they blockaded ice landing strips in the Ring of Fire to disrupt what they viewed as the fast pace of exploration activity.
"Projects will not go forward without the co-operation and support of the affected First Nation communities," said Peerla, who teaches about Aboriginal protests and the law at Lakehead University.
In April, a contractor of KWG disrupted an Aboriginal burial ground in the area while conducting soil sampling, which provoked an angry response from the Marten Falls First Nation. Peerla said conducting the geotechnical work, archaeological screening could have easily been integrated into the process.
He favours the formation of regional oversight agency to monitor the entire project and bind the companies and the government to respect and protect the environment, the cultural heritage and the land-based way of life of the affected communities.
"We need an honest broker of information in this process and the only way is to have an independent agency."
Though the provincial government promises to work with all parties to "fully realize" the Ring of Fire's potential, they also pledge to follow through with the heavily-criticized Far North Act to preserve and protect 50 per cent of the boreal forest.
"It's all very cloudy right now," said Lavigne. "There's a lot of discussion about the Far North Act and it doesn't have a lot of support within First Nation communities because it doesn't provide them with anything. I suspect this legislation really won't carry much weight. We'll see."
