Cliffs Natural Resources is not throwing in the towel in the Ring of Fire, but the clock is ticking.
After a recent Ontario Mining and Lands Commissioner's decision that denied Cliffs road access to its Ring of Fire chromite property, the Ohio miner is evaluating whether to keep spending millions each month on a remote deposit that doesn't have overland access.
“We're not hanging it up right now, but this (decision) is a possible showstopper,” said Bill Boor, Cliffs' senior vice-president of global ferroalloys.
Cliffs was seeking an easement to cross the mining claims of KWG Resources, a rival company in the Ring, in order to build a road into its Black Thor deposit in the James Bay lowlands.
KWG staked a string of claims to set aside a corridor for a future railroad stretching 328 kilometres from its Big Daddy chromite deposit – of which Cliffs is a 70-per-cent owner – to the Canadian National Railway's main line in northwestern Ontario.
In a ruling released Sept. 10, the independent government tribunal said granting Cliffs an easement would interfere with KWG's ability to work its claims.
The ruling has bitterly disappointed Cliffs.
Having road access is one of a bundle of hurdles that the company said has stymied the advancement of Black Thor and pushed back the mining start date back from 2015 to 2017, and possibly even beyond.
“You can't mine in the Ring of Fire if you can't get materials in and product out,” said Boor.
Access and other unresolved issues with the provincial government prompted Cliffs to halt environmental asssessment work at Black Thor last June and is causing the company to reassess the roughly $4 million it spends monthly for a project at standstill.
Since Cliffs announced in 2009 that it was a player in the Ring, the company has spent $485 million through to the end of 2012. This year's project budget is pegged at $50 million.
Frustrated by the delays, Boor is challenging Queen's Park to come up with a solution.
“It's hard for us to continue spending a pretty significant amount of money, month in and mouth out, on a project that the government has said we don't have land for.”
Boor wouldn't get into specifics on a timeframe to resolve these issues, but he expects the company to make some kind of determination this fall.
“Right now we don't have a Plan B from the government or anyone else on this. I think we need to understand what the possibilities are to resolve this issue. I don't have a firm date on it but it's not very long. I think it's a couple of months.
“I think we're kind of going to be in the position of not being able to move forward if we don't have land.”
Boor refused to comment on whether Black Thor or their other satellite deposits are available to be acquired, but he said Cliffs is receptive to taking on a joint venture development partner.
“If we can't get this resolved, I don't think we'll be going to find a lot of people who are going to step in right now.”
But Boor said there are other sticking points with Queen's Park on power rates, a commitment to invest in mining-related infrastructure in the Far North, and approval on the terms of reference for the provincial environmental assessment, “which we feel is overdue.”
Cliffs and the government reached an agreement in principle on these issues last year when the company announced it would place a ferrochrome refinery in Sudbury, the home riding of then-minister of Northern Development and Mines Rick Bartolucci.
But since last winter's provincial leadership change from Dalton McGuinty to Kathleen Wynne, Boor said talks with Queen's Park have stalled.
While the lines of communication with the ministry remain open, “we're really not in any meaningful negotiations and haven't been since the McGuinty government stepped aside.”
Conversely, Bartolucci's cabinet successor, Michael Gravelle, finds “there is indeed progress” on a number of fronts, particularly on Aboriginal issues.
“We are having, what I would describe, as productive and quite focused discussions with Cliffs on a number of aspects related to this project.”
Gravelle understood Boor was expressing “a level of frustration” over the tribunal's decision, an independent government body, and acknowledged “we do need to have the kind of discussion that we have been having in the past.”
Gravelle maintained the government's posture that the Wynne government sees tremendous value in Cliffs' $3.3-million project and that the entire Ring of Fire remains a high-priority file that will produce economic opportunity and value-added benefits for First Nations, Northern municipalities and the province.
“I continue to be encouraged by the fact that despite this decision, Cliffs has very actively expressed their interest in maintaining their commitment to the Ring of Fire.”
He was awaiting word from Cliffs on whether they planned to appeal the Mining Commissioner's decision. That challenge must go to the Ontario Superior Court of Justice within 30 days of the decision.
Boor said Cliffs is in no mood to appeal and wait months for a hearing.
“We don't have that kind of time to keep spending to try to hold the project together ... to find out that we might get another adverse ruling. I really don't think it's a practical solution to the problem at this point.”
Boor said the possibility of working out an arrangement with KWG Resources, a one-time development partner, to use their access corridor seems unlikely.
He wants the Ontario government to take charge.
“This decision by the Ontario Mining and Lands Commissioner basically says that anyone who has mining claims over the corridor can block the development.
“I'm not sure even resolving this with KWG is the answer. I think we need government to step forward and decide how committed they are to allowing the project to go forward.”
With Black Thor in limbo, it casts serious doubt on the future of a refinery in the Sudbury suburb of Capreol and the promise of hundreds of jobs.
“If I was in Sudbury or Capreol, I'd be thinking, well if they don't have a project, we don't have a furnace,” said Boor.
Cliffs did receive some good news this month when the Matawa Tribal Council withdrew its legal challenge of the federal environmental review of Cliffs' chromite project and decided instead to deal directly with the company.