Earlier this week Cleveland-based miner Cliffs Natural Resources NYE:CLF pulled out of the $3.3-billion Ring of Fire chromite project in Ontario.
Cliffs chose to indefinitely suspend the project through its subsidiary Cliffs Chromite Ontario because of the “uncertain timeline and risks associated with the development of necessary infrastructure.”
“We continue to believe in the value of the mineral deposits and the potential of the Ring of Fire region for northern Ontario,” vice-president Bill Boor said in a statement. “As we’ve assessed the current challenges in the region and the costs to continue on the current path, we decided to suspend the chromite project indefinitely.”
The company said it would continue to work with the provincial government, first nation communities and other interested parties to resolve the issues, but did not mention a restart date.
The announcement didn’t come as much of a shock: In June the company suspended environmental assessment activities. In October Boor told Canadian Press that there were talks about shutting down the project because the company was having trouble building an all-weather road to the site.
Although Cliffs’ share price took a mild beating from the announcement, dropping from $27.50 per share on November 20 to $25.50 by November 22, not everyone sees the move as a bad sign.
H. Fraser Phillips at RBC Capital Markets said on November 22 that Cliffs made the right decision.
“It has been our view that the project would take years to develop if it could ultimately be developed at all,” Phillips was quoted in the Financial Post.
With today’s chromite prices, Phillips seriously questioned the project’s economics.
By scrapping the Ring of Fire plans, the company can now allocate resources and capital to its iron ore project in Quebec, Phillips noted.
But the province of Ontario might take a different view. In a piece for the Toronto Sun, Christina Blizzard writes that the Ring of Fire’s “flame-out will impact all of Ontario.”
When Cliffs pulled out of the project the company took jobs with it, closing its offices in Thunder Bay and Toronto, as well as the exploration campsite.
The project was valued at an estimated $60 billion in economic development.
Blaming a “Toronto-centric government” that “doesn’t get mining and doesn’t understand northern Ontario,” Blizzard writes: “That clanging sound is $60 billion being flushed down a stainless steel drain.”
Reprinted by permission of MINING.com