A decision by Cliffs Natural Resources to halt activities on the environmental assessment (EA) of its massive Black Thor chromite project in the Ring of Fire should send a message to Queen's Park.
“I think they've put the government on notice,” said Garry Clark, executive director of the Ontario Prospectors Association. And it won't do much to enhance Ontario's muchcoveted reputation as a mining- friendly jurisdiction to companies and investors.
“Up until now we've had this record that we could put mines into production fairly quickly,” said Clark. “Now we're stumbling and people are going to notice that for sure.”
The Ohio-based iron and coal miner announced June 12 that it was “temporarily suspending” EA work on its remote chromite project in the James Bay lowlands due to delays in the environmental assessment process, land surface rights, and negotiations – or lack thereof – with the province.
Black Thor is the most advanced play in this mineral exploration camp in Ontario's Far North, about 500 kilometres northeast of Thunder Bay. Cliffs' Black Thor is the only project among 21 mining companies operating there that is undergoing an EA.
Little has been publicly said on the progress of talks between Cliffs and the province ever since the company signed a term sheet in May 2012 that named Sudbury as the future site of a $1.8-billion ferrochrome smelter.
It's part of the Cleveland miner's larger $3.3-billion mine and mill investment in Ontario.
Negotiations slowed and dialogue was eventually suspended last February during the transition of government from Premier Dalton McGuinty to Kathleen Wynne.
The two parties haven't been back to the table since. Clark believes talks are stalled between the company and various levels of the Ministries of Northern Development and Mines, and Environment, and Cliffs has decided to go public for a top-level olitical solution to exert pressure on the bureaucrats.
“If the premier says let's get this done, the ministers are going to put their thumb on the deputy ministers and it'll get done that way.... because going the other way from the bottom (up) is just not happening.”
While mine projects like Detour Gold and Young-Davidson have moved quickly through the environmental assessment process, Clark suspects the environment ministry is being “super cautious” about siting a mine in the sensitive James Bay wetlands.
Cliffs said among their “unresolved issues” remain the environmental approvals front, including delays over the terms of reference for a provincial EA and “uncertainties” on the federal side due to a legal challenge by First Nation communities impacted by the proposed mine.
There's also unfinished business that's critical to Black Thor's and the refinery's economics, including reaching an industryfriendly power rate that's comparable with cheaper North American jurisdictions, and a provincial plan on how to proceed with building a transportation infrastructure to haul chromite ore out by road or rail.
Armed with three years of their baseline environmental work, Bill Boor, Cliffs' president of ferroalloys, said they've simply pushed the project as far as it can go.
The delay throws a wrench into Cliffs' timeline to commence mining by late-2016 or 2017, especially with the feasibility study on Black Thor expected to be completed by summer's end.
That study is the final economic evaluation presented to Cliffs' board of directors to either proceed or not with the project.
“This is less of a decision on Cliffs' part than it is an acknowledgement of where we are and where we aren't,” said Boor.
Things remain unchanged at their McFaulds Lake exploration camp with personnel already at a seasonal low. And there are no current plans to shrink the project team or cut into the $60 million earmarked to finish the feasibility study.
But Boor said that could be revisited if the project's “momentum” is lost. “The vision was always to be constantly building the team and the camp that would transition into construction. If we get delayed too long then that doesn't become practical.”
Any reconsideration of their decision to place the refinery in Sudbury will not be used as a bargaining chip in negotiations with the province, said Boor.
“That's not our mindset right now. We think our project description is the right one.” But the longer the delay, the more the entire project remains in doubt.
“As long as these kinds of issues remain outstanding nothing is set, even the project itself. It's incredibly risky for a project of this magnitude and this complexity to have times when it loses momentum.
“I'm stuck in between saying we're not thinking about going somewhere else and at the same time telling you nothing's certain when you've got open issues like this.
“There'll be no furnace anywhere if you can't build a road and we can't advance an EA.”
Boor denied talks with the province are at an impasse, calling it a “pause in negotiation,” and that discussions with Northern Development and Mines Minister Michael Gravelle's staff about getting back to the negotiating table appear “promising.”
Last February, Boor said the company was prepared to wait until after Wynne and her newly sworn-in cabinet were settled before resuming negotiations, but he concedes “we are several months beyond that now.”
He deflected any suggestion that a political message was being sent when Cliffs issued their stop-work order within hours of the Wynne government passing its first budget through the Ontario legislature, thus avoiding a snap election.
“What we're trying to do is be clear with everyone that we've run out of steam here.” Cliffs' announcement sent a chill into Dick DeStefano, executive director of the Sudbury Area Mining Service and Supply Association, who told Northern Life newspaper that he didn't expect Cliffs will be able to get the chromite project running until at least 2020.
He estimated construction of an access road or a Ring of Fire railway would take five years. Given the depressed prices of chromite, he said it's unlikely Cliffs will move the project quickly.
DeStefano said there are many issues at play with the intrusion of the project into the lifestyles of the remote First Nation communities, stricter government regulations, and the question of where the province will get the money to build the transportation infrastructure to access deposits in the James Bay region.
“If it's in the ground and can't be brought out in a cost-effective method, or there aren't enough rewards for what you're doing, then leave it in the ground.”
Cliffs is also waiting on the outcome of the Ontario Mining and Lands Commissioner hearing from last February.
The company was seeking an easement for road access across the claims of a rival miner, Canada Chrome, which has staked a 300-kilometre long rail corridor to its own chromite deposit in the Ring of Fire.
