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Iron ore explorer moves toward processor decision

To Mayor Lee Kennard, Ignace will always be a forestry town in his heart. Logging has been the historic economic staple of this northwestern Ontario community of 1,400 since the late 1800s.
Lee Kennard2
Ignace Mayor Lee Kennard hopes his town receives the economic benefits of a potential iron ore and merchant pig iron operation on the outskirts of the community.

To Mayor Lee Kennard, Ignace will always be a forestry town in his heart.

Logging has been the historic economic staple of this northwestern Ontario community of 1,400 since the late 1800s. It's what lured Kennard here in 1978 as a mechanical supervisor at one of Great Lakes Paper's woodland camps.

However the community has taken its share of hard knocks from the downturn in forestry, highlighted by AbitibiBowater's decision to shut down the local sawmill in 2006, affecting 49 positions.

Kennard, who later started Elk Construction, saw the writing on the wall in the mid-90s and wisely switched from working in forestry to hauling gravel.

Now retired and teaching a high school shop class, Kennard is a survivor and he hopes his community can survive too.

There's been some good news lately with Wagner Forest Products planning to set up a wood pellet plant in 2013 with 20 new jobs. Raleigh Falls Timber also signed an agreement with AbitibiBowater creating work for 23 harvesters and truck drivers.

But with a shrinking tax base and a skilled workforce that left for Western Canada, Ignace needs something to kick-start its economy.

The municipality is promoting its location at the crossroads of the Trans-Canada Highway and Highway 599 as a potential staging base for the Ring of Fire, the massive chromite deposit in Ontario's Far North.

The municipality is even considering becoming a nuclear waste storage site.

But if there's one project on the horizon that could dramatically change Ignace's fortunes, it's the iron ore deposit held by Bending Lake Iron Group.

The privately-owned Thunder Bay company headed by Henry Wetelainen is inching toward making a decision this year on whether to choose Ignace or Atikokan as the location of a processing plant.

The company wants to mine iron ore near Ignace and process into merchant pig iron. Wetelainen's first choice is the abandoned Steep Rock open pit near Atikokan, 80 kilometres to the south. But endless government study has him considering a location closer to the deposit, southwest of Ignace.

“I think we've got him fairly interested,” said Kennard. “It's a humongous project and he deserves a pat on the back if he puts it all together.”

The company has proven reserves of 250 million tons grading 30 per cent iron with potential reserves for an additional 200 million tons.

The entire project, valued at more than $900 million, could create several hundred construction jobs and more than 300 permanent jobs, using a special iron-making nugget technology imported from Japan.

The town of Ignace had prepared for iron ore mining back in the 1970s, constructing an entire residential subdivision that has since sat vacant.

Though Wetelainen's company signed a memorandum of agreement with the Ministry of Natural Resources (MNR) to work toward developing an industrial and environmental plan at Steep Rock, he's keeping his options open.

“We're looking at all kinds of avenues,” said Wetelainen, ranging from a slurry pipeline, to a haul road, to using high-speed conveyors from the deposit to the processor. “It's straight dollars and cents.”

Wetelaine favours the Steep Rock site for its rail, road, power and natural gas pipeine connections, but the site has many environmental and water quality issues. The MNR, the site's caretakers, has imposed to several conditions to rehabiltiate the mine which closed in 1979.

Frustrated with almost five years of bureaucracy, Wetelainen, who has local Aboriginal roots in the Ignace area, is running a two-track site search process.

He's hired Krech Ojard, a Duluth, Minn.-based engineering firm, best known for working with KWG Resources in studying a proposed Ring of Fire mining railroad to the James Bay lowlands.

They're scouting locations near Ignace in the vicinity of Bending's deposit 25 kilometres south of the Trans-Canada Highway. Wetelainen's company is staking land there to secure the site.

The choice comes down to the project economics and the speed of permitting. At Steep Rock, a full environmental assessment at Steep Rock could take as long as four years.

Choosing Ignace could shave a year off of the environmental assessment.

“We think it's the quickest way to permit Bending Lake and get it done.”

That's a deciding factor since the company is fielding multiple international investment offers. Wetelainen entertained a Chinese group that came through Ignace earlier this year and a major Japanese automaker is now knocking on his door.

His board is also preparing to receive a United Kingdom delegation offering $750 million in project debt financing and Caterpillar is ready to jump aboard with $100 million.

With the current price of merchant pig iron at $550 per tonne and Bending Lake's production costs projected at $220 per tonne, “we're in the right business at the right time.”

If the company chooses Ignace, Wetelainen said Atikokan and Steep Rock will remain in the picture since his exploration team is identifying vast iron ore reserves to the west at Otter Lake that could turn out to be as big as Bending Lake.

“I'm building up an inventory because I'm pretty sure I'll hammer out a deal with a Chinese partner. I've got a lot of property and will be doing a lot of work.”

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