Thursday 27th October 2016

Resource Clips

Posts tagged ‘Canadian National Railway Co (CNR)’

Update: Ring of Fire road study stalls as KWG rail study proceeds

August 22nd, 2016

by Greg Klein | August 22, 2016

Hours after KWG Resources CSE:KWG updated its Ring of Fire rail proposal, CBC reported that a highly anticipated government-funded road study simply called for more study. Specifically excluded from its scope, the network added, was a route to the potential mining sites.

CBC obtained a copy of the document entitled All Season Community Road Study, Final Report June 30, 2016 and quoted this excerpt:

KWG’s Ring of Fire rail study proceeds, government road announcement anticipated

KWG looks to China to support its proposed railway.

“This study has always been considered to be focused on an all-season community service road rather than an industrial road to connect to the Ring of Fire mineralized zone. Its intention was always to (1) link the four communities together and (2) link the communities to the existing highway system.”

Release of the federally and provincially funded report had been expected since its scheduled completion in June. Ontario has pledged $1 billion to Ring of Fire infrastructure and asked Ottawa for matching funds.

“This study was going to be the one that was going to give us the road map forward, literally,” the network quoted NDP MP Charlie Angus. “Now it’s just going to be kicked down the road for more delay, more study and more excuses.”

CBC stated that Ontario mines minister Michael Gravelle “said those discussions are ongoing and there is no timeline for coming to definitive answers. The study was led by the First Nations and it’s up to them to release it to the public, he added.”

Besides the report’s disappointing lack of a call to action, news that the study excluded the Ring’s mineral deposits will take many observers by surprise. Noront Resources TSXV:NOT favoured an all-season east-west road that would connect its deposits and four native communities with Highway 599 at Pickle Lake, which leads south to a Canadian National Railway TSX:CNR line at Savant Lake.

KWG maintained that rail would be necessary to develop the region’s chromite assets. Noront countered that its nickel-copper-platinum-palladium deposits should be developed first, pending better market conditions for chromite. A road would be the faster, cheaper option, the company argued. KWG has said Chinese investors have shown interest in a railway.

Hours before CBC posted its exclusive, KWG announced that a “conditional bankable feasibility study” for its proposed railway should be complete by year-end. The company stated it has “agreed on the deliverables and timetable” with China Railway First Survey and Design Institute Group to examine a 340-kilometre north-south route linking its properties with CN at Exton.

Noront’s flagship Eagle’s Nest nickel-copper-PGE project reached feasibility in 2012. In an optimistic news release earlier this month, the company stated it “anticipates that mine construction will begin in 2018 when road construction starts, resulting in first concentrate production in 2021.”

Noront’s other Ring of Fire assets include the Blackbird chromite deposit and the Black Thor and Black Label chromite deposits. Noront and KWG hold 70%/30% respectively of the Big Daddy chromite deposit and 85%/15% of the McFaulds copper-zinc deposits. Noront is KWG’s largest shareholder.

Noront recently signed a definitive agreement to buy a 75% stake in MacDonald Mines Exploration’s (TSXV:BMK) regional properties, increasing Noront’s portfolio to around 75% of the Ring’s staked claims.

KWG also holds an 80% option on the Koper Lake project with its Black Horse chromite deposit.

Both companies have faced recent public criticism. Last week CBC reported the Neskantaga First Nation issued a “cease and desist” order to Noront, after the company announced a drill program. An online video posted by KWG drew widespread censure for its display of bikini-clad women.

Not-so radical electrified rail

May 12th, 2016

What Elon Musk and the Leap Manifesto could do for Canada

by Greg Klein

Sure, detractors denounce the Leap Manifesto as “naïve,” an “eco-communist” polemic from a “latte-swilling Toronto power couple” who would throw taxpayers’ money at job-killing causes. But in this era of the electrification of everything, why should it seem radical to propose linking Canadian communities with rail powered by renewable energy? The suggestion has been made before and proven elsewhere.

What Elon Musk and the Leap Manifesto could do for Canada

The scene looks idyllic but that diesel-guzzling train
spews toxins as it winds through Banff National Park.

A subject of controversy within the New Democratic Party, Leap combines native rights and climate change into a rationale for sharing and caring collectivism. Electric rail comprises one item in a document big on exhortation and short on details. But the idea has long been taken for granted in other parts of the world, including arctic Scandinavia. Leap’s hardly the first to propose something similar for Canada.

Former Canadian Pacific executive Glen Fisher, described as an expert in railway capacity and electrification, pitched the idea at a 2008 Transport Canada EcoFreight Conference. Writing in the Montreal Gazette at the time, he extolled the environmental and financial advantages of electric rail.

“The CN and CP mainlines coast to coast, along with branches to Detroit and Sarnia, carry about 80% of the revenue tonnage and correspondingly consume 80% of the fuel,” Fisher stated. “On this basis, a realizable reduction in CO2 equivalent of 5.2 million tonnes could be achieved by electrifying 24,800 kilometres of freight mainline track. But that’s not all.”

Electric fuel would also cut air pollution from nitrogen oxide, carbon monoxide, hydrocarbons, sulphur oxides and particulate matter, he added. And electric trains would be an awful lot quieter, shushing locomotives by as much as 30 decibels, and eliminating idling noise and cooling fan noise. Gone too would be the risk of spills from fuel or lubricating oil.

“There would also be impressive cost savings,” Fisher continued. “At 2008 rates, electricity costs just 15% of what diesel costs for a typical electrified section of railway as outlined in many previous studies. Additionally, industrial electricity rates have risen over the last 20 years between 10% and 20% depending on the consumption amounts, while diesel fuel has increased 270% in the same period and is still rising even more.”

Canada has done it before, and not just with passenger traffic in the more populous southern climes. Between 1984 and 2000, B.C. Rail (since taken over by CN) hauled coal over a 130-kilometre electric rail line from Tumbler Ridge. At 55 degrees latitude, the Peace River town was one of Canada’s most northerly rail destinations.

The electrified route resulted from “12 years of worldwide searching, learning, testing, prototype installation and then 20 years’ experience of operating state-of-the-art electrification designed for the harsh Canadian environment,” Fisher stated.

What Elon Musk and the Leap Manifesto could do for Canada

Elon Musk presented Tesla’s Model 3 to a rapturous crowd.

Consider too an expanded grid bringing hydro-generated and other clean electricity to remote, diesel-dependent communities and resource projects (assuming Leap allows the latter). Consider the clean energy projects some of those communities could develop for the grid. Consider a huge green infrastructure project that shrinks Canada’s carbon footprint.

Of course there are costs to consider too.

In 2008 Fisher estimated about $7.5 billion to electrify 24,800 kilometres of single track. But he said railways “would save more than $1.4 billion annually in energy costs.”

The Leap Manifesto doesn’t say who should pay for electric rail. Conceivably Leapsters might believe government should fund inter-city passenger traffic until a proper socialization of private freight carriers can take place. “But the money we need to pay for this great transformation is available—we just need the right policies to release it,” according to the document.

By “policies,” the manifesto mostly means taxes. Leap calls for “an end to fossil fuel subsidies. Financial transaction taxes. Increased resource royalties. Higher income taxes on corporations and wealthy people. A progressive carbon tax. Cuts to military spending.”

All fine and dandy, but what’s the likelihood of such a scenario? For starters, many NDPers oppose Leap. Additionally, the party’s most recent election performance placed the NDP as far from federal power as ever.

Successive Conservative and Liberal governments, however, have their own ideas about redistributing other people’s money. Train manufacturer Bombardier remains one of their favourite beneficiaries of corporate welfare (a term popularized by David Lewis, grandfather of Leap co-author Avis Lewis). So why can’t Ottawa support an immense, nationwide green infrastructure program that benefits the environment and local economies as well as a politically-connected Quebec corporation?

Maybe NDP ideologues just aren’t the right pitchmen. If only the cause could be taken up by someone charismatic, someone of genius, someone who makes visionary ideas at least seem viable. And especially someone who can get crowds swooning over green technology.

Unfortunately he’s probably busy enough with electric cars, energy storage, the Gigafactory and rocket ships.


Related reading: What might airships do for Ontario’s Ring of Fire?

B.C. buys coal licences to resolve aboriginal dispute

May 5th, 2015

by Greg Klein | May 5, 2015

In an effort to placate a native band, Fortune Minerals TSX:FT and POSCO Canada have sold their British Columbia coal licences to BC Rail, a provincially owned railway company without a railway. Announced May 5, the $18.3-million sale of 61 claims totalling 16,411 hectares in northwestern B.C. contains a 10-year buy-back option should the Tahltan First Nation agree to development of the Arctos anthracite project.

B.C. buys coal licences to resolve aboriginal dispute

A 2013 company photo shows environmental field work underway.
As project operator, Fortune continues with land reclamation at Arctos.

Calling the deal a good outcome in the current market, Fortune president/CEO Robin Goad said the joint venture “invested significant funds” to try to resolve the band’s concerns. “Mining is a cyclical industry and, considering the weak metallurgical coal prices at the present time, it was considered prudent to step back from Arctos and focus our efforts on our near-term production assets.”

A PwC report on B.C. mining, also released May 5, noted that steelmaking coal now trades around $100 per tonne, “a considerable drop from its record price around $330 in 2011.” The report quotes Don Lindsay of Teck Resources TSX:TCK.A and TCK.B saying prices can’t recover without further production cuts around the world.

Fortune and the South Korean steel producer subsidiary will divide the proceeds evenly, with Fortune allocating its share to working capital and debt repayment. The company operates the Revenue silver mine in Colorado and holds the proposed NICO gold-cobalt-bismuth-copper mine in the Northwest Territories, along with exploration projects in the NWT.

CN TSX:CNR took over BC Rail’s railway system in 2004 in a highly controversial $1-billion deal that the province insisted was a lease, not a sale. Once the deal was complete, the BC Liberal government acknowledged the lease would run for 990 years. Corruption allegations and a police raid on B.C.’s legislature followed. In 2010 the province paid $6 million in legal bills for two government aides who pleaded guilty to corruption-related charges.

Although BC Rail no longer has a railway to run, the government kept the Crown corporation intact with management, board of directors and staff responsible for maintenance of a 40-kilometre spur line and property sales.

Plan Nord progresses as companies team up with Quebec on rail feasibility

October 21st, 2014

by Greg Klein | October 21, 2014

A feasibility study into a third Quebec railway to the Labrador Trough is back on track, according to October 21 announcements from Champion Iron TSX:CIA and Adriana Resources TSXV:ADI. The companies have joined the Quebec government in a new entity called la Société ferroviaire du Nord québécois, société en commandite (SFNQ) to oversee the technical and economic report.

Champion Iron, Adriana Resources team up with Quebec on railway feasibility

The news follows a bill tabled by the provincial Liberals on September 30 to revive Plan Nord, the massive infrastructure program that had been sidelined by the former Parti Quebecois government. The province now intends to create la Société du Plan Nord to co-ordinate development beyond the 49th Parallel, with $63 million budgeted for this year and up to $2 billion by 2035. The bill allocates a $50-million investment in Gaz Métro LNG to expand production and storage of liquefied natural gas, which would be trucked to Stornoway Diamond’s (TSX:SWY) Renard mine, scheduled to open in 2016. LNG transport to other projects would follow.

Quebec will provide up to $20 million for the feasibility. But the companies’ contributions are less clear. Adriana’s late afternoon announcement didn’t specify a contribution. The company takes part through its Lac Otelnuk joint venture, held 40% by Adriana and 60% by Hong Kong-based WISCO International Resources Development & Investment. Champion listed its share as sunk costs valued up to $6 million. That company takes part through its now wholly owned subsidiary, Champion Iron Mines Ltd.

As a separate company in 2013, Champion Iron Mines failed to find private and public backers for a 310-kilometre rail connection between the southern Trough and the deep sea port of Sept-Iles that was expected to cost $1.33 billion. Earlier that year CN TSX:CNR suspended its feasibility study on an estimated $5-billion, 800-kilometre link to the same port.

Currently two railways connect Sept-Iles with the resource-rich region straddling the Labrador border. The Quebec North Shore and Labrador Railway runs a 415-kilometre route to Labrador City. A private line operated by an ArcelorMittal subsidiary serves its Mont-Wright operation.

Other companies have been invited to take part in the feasibility study, which would envision a common carrier.

Among noteworthy aspects of Plan Nord is the government’s confidence that future commodity markets will justify large-scale investment—and that Quebec sometimes prefers to invest in, rather than subsidize, industry. Apart from Gaz Métro, the government’s Investissement Québec unit sees opportunities in a number of ventures including Stornoway, in which the province is acquiring an approximately 29% stake.

New way to the Ring of Fire?

June 17th, 2014

A think tank suggests Ontario’s development corporation is on the wrong track

by Greg Klein

Is there a better way to plan, fund and build Ring of Fire infrastructure? A “think piece” released by the Northern Policy Institute on June 17 suggests the Ontario government has taken the wrong approach. A better model would be that of Canada’s transportation authorities which relieve taxpayers of most costs, speed up the process and allow greater stakeholder input, according to a 14-page report.

The study was written for the NPI by Nick Mulder, who says the new Ring of Fire development corporation being created for Ontario would follow a Crown corporation model unsuited to challenges posed by the region 500 kilometres northeast of Thunder Bay. He recommends Ontario create an agency based on Canada’s port and airport authorities and “tailored to fit the unique challenges of RoF development.”

A think tank suggests Ontario’s development corporation is on the wrong track

“An effective model would place the onus and risks on all the stakeholders and not just the provincial government and taxpayers, while maintaining elements of independence, inclusiveness, risk sharing, market-driven, political independence and legislated legally binding powers.”

The recommended model began with a 1990s Transport Canada overhaul, the report states. New, local transportation authorities took over from the federal government in a process that opened up wider consultation, streamlined decision-making and raised the bulk of money from stakeholders, while allowing other financing possibilities including public-private partnerships and capital markets.

“Issues such as uncertain mineral markets and prices, a growing provincial deficit and debt, as well as unresolved aboriginal demands and environmental assessments, suggest that there is good reason to transfer more of the responsibilities off the shoulders of the provincial government,” Mulder states.

He notes that Canadian airport authorities spent $14 billion on their facilities between 1995 and 2012. Had they remained in government hands, “such achievements would never have been realized, given the lack of financial resources from the Consolidated Revenue Fund and its slow, complex, cumbersome decision-making.” In place of federal funding is federal revenue—Ottawa got some $300 million out of the airports in 2013, Mulder writes.

Federal and provincial governments put up a total of $60 million for a $175-million container terminal at British Columbia’s Port of Prince Rupert. But the port put up $25 million of its own money while CN Rail TSX:CNR and the port operator provided $85 million.

In Vancouver, “the port, terminal operators, shippers, railways and government have worked together and shared the costs and risks to expand and improve the access to the port by jointly investing over $2 billion from 2000 until 2013.”

Similarly, “Fort McMurray and Nunavut airports are good case studies. In these local communities, partnerships were formed and decisions were made collectively to expand airports to meet increased demand. They were creative and sought out other funding models; in the case of Nunavut, financing was secured through a public-private partnership.”

But, Mulder emphasizes, “More important than simply a cost-saving exercise, the commercialization of hundreds of airports and ports across the country now allowed communities and users—rather than the federal government—to decide the use, the potential and the viability of these important assets.

Issues such as uncertain mineral markets and prices, a growing provincial deficit and debt, as well as unresolved aboriginal demands and environmental assessments, suggest that there is good reason to transfer more of the responsibilities off the shoulders of the provincial government.—Nick Mulder, for the
Northern Policy Institute

On the other hand, the authorities can become federal cash cows, Mulder concedes. He also challenges the cliché “if you build it they will come.” They didn’t come to Montreal’s Mirabel Airport or BC Rail’s Dease Lake line in the 1970s.

The NPI describes itself as an independent think tank that researches policies “to support the growth of sustainable northern Ontario communities.” The report was funded by Lakehead University, Laurentian University and the Northern Ontario Heritage Fund Corp, but reflects the author’s views.

The NPI has further studies pending on the region.

Mulder tells he’s not aware of other reports on a Ring of Fire governance model. “The province is hiring Deloitte to do a report but I haven’t seen anything from them,” he says. Ontario contracted the consulting firm to help create a northern development agency last February.

With a lengthy career in the federal civil service, Mulder says, “I got promoted to deputy minister but they put me back in Transport in ’94 because I knew where all the skeletons were.” He remained at the post until 1997.

“A large part of my career has been dealing with Crown corporations and looking at other models. I was involved in the privatization of Canadian National, the commercialization of Nav Canada, setting up the airport authorities, setting up the port authorities, etc.” He intends his report “to generate debate,” he says.

But do the transportation authorities represent a range of stakeholders similar to those of the Ring of Fire? Mulder insists they do. “If you look at the airport authorities, they have representatives from various entities, not only from municipalities but from business communities, social groups, etc. If you look at the Port of Prince Rupert, they’ve got quite a few different types of people with different backgrounds.” Pointing out the container facility’s financing success, he adds, “You don’t have to get the taxpayer to fund everything.”

His report describes the Ring of Fire as difficult terrain covering about 5,000 kilometres, but with most mining-related activity taking place “on a 20-kilometre strip of land.” The vast wetland contains peat, marshes and many rivers. It’s home to about 24,000 natives from nine Matawa bands.

“Transportation is by water, over ice, via three small airstrips or by float planes.” The nearest roads are 300 kilometres southwest and 340 kilometres south. Railways begin about 400 kilometres distant. “Major power lines are also hundreds of kilometres away.”

Mulder’s report follows the June 12 election victory of the Ontario Liberals, who promised $1 billion to help develop the region, which has had three rival transportation proposals promoted by different companies.

Download the 14-page report.

Read about the Ring of Fire as an Ontario election issue.

Read about Ring of Fire transportation proposals here and here.

Read an April 1 Ring of Fire commentary.

Quebec Liberals revive Plan Nord infrastructure and development program

June 6th, 2014

by Greg Klein | June 6, 2014

Downplayed if not dismissed by the previous Parti Quebecois government, Quebec’s Plan Nord is back “in an enhanced version,” the province’s new Liberal government says. Its 2014-2015 budget includes a number of funded initiatives to encourage infrastructure and resource development north of the 49th parallel, making natural resources “the centrepiece of Quebec’s economic development.”

Quebec Liberals revive Plan Nord infrastructure and development program

Some spending highlights released June 4 include major road work, a feasibility study on a Labrador Trough rail line, government investment in mining and oil and gas companies, and training for northern residents.

A Northern Plan Fund commits $63 million during 2014-2015 for projects like “major work on road infrastructure in the Plan Nord territory, including the extension of Highway 138 and the repair of Highway 389 in the Côte-Nord region and the James Bay Highway.”

The government also plans to study the feasibility of a new rail line to the Labrador Trough. Media accounts put the price tag at a maximum of $20 million.

Finance Minister Carlos Leitao confirmed his government’s “intention to acquire equity interests in companies in the mining and oil and gas sectors, so that Quebec society can obtain, as a shareholder, a direct share in the profits.”

Plan Nord will encourage smaller, local hydroelectric projects while spending $1.1 billion on a fourth transmission line from the north to serve the northern Montreal “agglomeration.”

Education and training for northern residents will get a $100-million boost, the Liberals stated.

But the previous government’s controversial tax regimen stays put—for the sake of stability, Leitao claimed. Acknowledging that the taxes contributed to declining investment, he stated, “We will restore industry and investor confidence by ensuring the application rules are favourable, stable and foreseeable. We are maintaining the existing mining tax regime in order to preserve that stability.”

The government will support small mining companies and Quebec ownership, Leitao added.

To co-ordinate development in consultation with stakeholders, the government will create a new agency, la Société du Plan Nord.

Champion Iron TSX:CIA welcomed the railway feasibility study, even calling it “a defining point in the history of the mining industry in Quebec.” The company’s June 6 news release stated the global steel industry recognizes the Labrador Trough’s potential “to supply high-quality iron ore product, with a range of listed and private iron ore groups active in the region including Champion Iron.”

The company credits the Trough with “one of the world’s largest iron ore accumulations, with annual production of some 50 million tonnes.”

In February 2013 CN TSX:CNR suspended its feasibility study, undertaken in partnership with pension/insurance fund manager la Caisse de dépôt et placement du Québec and a group of mining companies.

Two railways now connect the region with the St. Lawrence River deep-sea port of Sept-Iles. The 420-kilometre Cartier Railway, a subsidiary of ArcelorMittal NYE:MT, serves the company’s Mont-Wright operation. The 418-kilometre Quebec North Shore and Labrador Railway links operations of the Iron Ore Company of Canada (held 59% by Rio Tinto NYE:RIO) in Labrador City, on the Trough’s Newfoundland side. The QNS&L is obligated to carry other cargo, making it the region’s only rail accessible to third parties.

Propping up the oil patch

February 8th, 2014

Juniors seek near-term cash flow as the fracking demand for sand expands

by Greg Klein

Next Page 1 | 2

It’s the stuff that opened up—or more literally, holds open—the unconventional oil and gas deposits that have revolutionized the energy industry. As frac sand demand continues to increase, explorers have taken on the task of finding and developing new projects. In many cases they’re Canadian companies finding Canadian sources for Canadian customers.

Hydraulic fracturing, or fracking as it’s best known, involves pumping a high-pressure mix, often about 90% water and 9.5% sand or other proppants, to create cracks or fissures in otherwise impermeable rock. Proppants prop open the fissures, allowing gas and oil recovery. The process has undergone major advancements since its 1947 introduction and, more recently, has become vital to extraction of shale oil and gas, and coal bed methane. In 2012 Industrial Minerals credited the process for 90% of U.S. wells supplying 30% of American oil and natural gas production. By March of that year, Texas-based Cadre Proppants had sold a billion pounds of sand in just six months.

Explorers hope for near-term cash flow as the fracking demand for sand expands

An aerial view of Rainmaker’s neighbour shows
the near-surface deposit of Canadian Silica Industries.

Numbers released by PacWest Consulting Partners in December foresee 8% annual growth in American land proppant demand, “from 63 billion pounds in 2013 to 75 billion pounds in 2015.” These aren’t uniform commodities but, PacWest stated, the competitors—resin-coated sand and synthetic ceramic proppants—are losing market share to lower-cost natural silica sand.

The boom affects transportation too, especially railways. In December CN TSX:CNR president/CEO Claude Mongeau stated, “Over the past five years, CN’s frac sand market has grown by nearly 300%, rising to more than 50,000 carloads in 2013.”

How much sand is that? According to U.S. Silica Holdings NYE:SLCA president/CEO Bryan Shinn, quoted by the Wall Street Journal in December, “It takes 25 railcars of sand, on average, to frack one well.”

2012 prices cited by Industrial Minerals range between $60 and $200 a tonne, depending on size and quality.

Wisconsin is widely credited with producing about 75% of American supply and a big chunk of Canada’s too. One vertically integrated Wisconsin miner, Calgary-headquartered Source Energy Services, has Q1 plans to open Canada’s largest frac sand storage and distribution facility near Grande Prairie, Alberta. Capable of unloading 100 railcars of sand in less than a day, the Wembley terminal will be one of four new facilities the company intends to open this year. That will bring its total up to 15 along a 4,800-kilometre network from northern British Columbia to southern Texas.

Canadian sources mostly consist of “private producers scattered around the Prairies,” according to Chris Healey, VP of operations for Rainmaker Mining TSXV:RMG. In January his company signed a letter of intent for the 1,471-hectare Jayjay Lake project in northern Saskatchewan and a purchase and sale agreement for two other northern Saskatchewan properties totalling 10,275 hectares. On February 5 another LOI came through for the 24,363-hectare Peace River project in northern Alberta.

“We’re not stopping there,” Healey says. He hopes to see Rainmaker “move to the next level by becoming a producer, either by developing one of our properties to production as quickly as possible or potentially buying a producer. We’re developing our company as a pure frac sand play.”

Among the attractions of the frac sand space are “the potential for market growth, which is substantial, and the ability to acquire assets near customers at reasonable costs.”

Rainmaker’s access to road and rail also has Healey encouraged. “Transportation is one of the key factors in a location, offering proximity to end users,” he says.

The cost of exploration is reasonable too, compared to other commodities. “It’s simple technology to drill into the sand,” Healey points out. “The Jayjay Lake property is an old beach from the glacial lake that covered the Prairies up to 10,000 years ago. You can dig into it with a shovel, a backhoe or a post hole auger. The Peace River property will probably be a bit harder but not particularly hard. We can still use an auger to drill test.”

Patrick Kluczny agrees. A project geologist/manager with Dahrouge Geological Consulting, he was instrumental in evaluating the Peace River project for the vendors, Zimtu Capital TSXV:ZC and its partner.

Unlike other mineral deposits, frac sand is loosely consolidated so there’s no need for core drilling. “We can use an auger drill, which means that the costs of exploration will be a lot lower,” Kluczny says. “Auger programs are on an order of magnitude cheaper than core programs. Also these deposits pretty much have to be close to surface.”

Next Page 1 | 2

Frontier prudence

July 2nd, 2013

Champion Iron Mines steps back from its Labrador Trough rail proposal

by Greg Klein

Next Page 1 | 2

Another transportation setback has highlighted the challenges of reaching Canada’s resource-rich hinterlands. Champion Iron Mines TSX:CHM announced July 2 it had terminated an agreement to use facilities at the deep-sea port of Sept-Iles, Quebec. The decision saved the company a $25.6-million payment due to the port by July 1. But it places further uncertainty on transportation proposals to the Labrador Trough straddling northern Quebec and Labrador. The news followed a June 12 announcement that Cliffs Natural Resources was suspending its Ontario chromite project and, along with it, a province-backed road proposal for the Ring of Fire. In February CN TSX:CNR stated it had suspended its feasibility study on an estimated $5-billion, 800-kilometre Quebec rail line to the Trough.

Champion attributed its decision to a failure to gain private and public backing for a new railway. Estimated at $1.33 billion in the company’s February pre-feasibility report for the Consolidated Fire Lake North iron ore project, the 310-kilometre line would connect the southern Trough with Sept-Isles, on the St. Lawrence River’s north shore. The company studied the project despite the fact that Champion had already signed a collaboration framework agreement backing CN’s proposal.

Champion Iron Mines steps back from its Labrador Trough rail proposal

One of two existing railways in the Trough, the Quebec North Shore
and Labrador line runs a 418-kilometre route between
Labrador City and Sept-Isles.

Champion reverted to Plan A following CN’s February decision. Discussions resumed with private and public interests to finance, build and operate a multi-user railway. But they failed to make progress by the July 1 payment deadline.

Of course market conditions played their role. Iron ore prices have been falling since a February high of about $154 per dry metric tonne. The following month the Melbourne Herald Sun reported that Rio Tinto chief economist Vivek Tulpule expected prices to fall to nearly $100 by September 2014. On June 24, however, Platts quoted Macquarie bank analysts who spoke of a potential recovery later this year. A July 2 report from China’s Xinhua news service stated, “Although there might be fluctuations, prices of iron ore imports will see a falling trend in the longer term.”

“The past year has been a very challenging period for iron ore developers,” conceded Champion president/CEO Tom Larsen in his July 2 statement. But he emphasized the company remains committed to its flagship and to “securing transportation and port-handling services that will permit the company to place among the lowest-cost iron producers in the Labrador Trough.”

Even without Champion’s proposed railway, the region benefits from mines, plants, power and two existing rail lines. The Iron Ore Company of Canada owns and operates the Quebec North Shore and Labrador route, which connects its Labrador City facility in the southern Trough to Sept-Isles, 418 kilometres away. As a common carrier, the QNSL is required to ship other companies’ goods as well.

An ArcelorMittal subsidiary runs a private carrier called the Cartier Railway from the company’s Mont-Wright operation, 40 kilometres southwest of Labrador City, to Sept-Isles.

Iron ore prices notwithstanding, Asian investment in the Trough has continued. Chinese companies are said to be looking at Rio’s 58.7% interest in the Iron Ore Company of Canada, of which Mitsubishi holds another 26.2%. The Anglo-Australian giant reportedly wants to sell its stake for up to $4 billion.

Next Page 1 | 2

Facing Ontario’s challenges

June 14th, 2013

More must be done for the Ring of Fire, says MacDonald Mines’ Kirk McKinnon

by Greg Klein

“The Ring of Fire truly has an array of mineralization unlike any other in the world, says Kirk McKinnon, president/CEO of MacDonald Mines Exploration TSXV:BMK. “Our scientists tell me the Bushveld in South Africa has many of these attributes but the James Bay lowlands has all of them.”

More must be done for the Ring of Fire, says MacDonald Mines’ Kirk McKinnon

There’s even talk of rock worth some $30 billion to $50 billion. But despite the region’s potential for a “suite of minerals” including chromite, vanadium, nickel, copper, zinc and titanium, exploration and development are stymied by a lack of infrastructure. McKinnon discussed these challenges with ResourceClips following news that Cliffs Natural Resources had suspended work on Black Thor, by far the area’s largest project. That June 12 announcement re-kindled debate on how best to build access to the Ring of Fire—from the south or southwest, by road or rail—and whether governments effectively address the region’s challenges.

About 35 kilometres west of Black Thor, MacDonald drills its Butler property, focusing on the Butler 3 volcanogenic massive sulphide target. McKinnon also heads Energizer Resources TSXV:EGZ, whose wholly owned and joint venture claims in Madagascar undergo feasibility for one of the world’s largest known flake graphite deposits. The property also hosts the world’s third-largest known vanadium resource. Yet he can’t speak highly enough about the Ring of Fire’s potential. Another discovery comparable to Cliffs’ could be the catalyst for stronger government commitment to develop infrastructure, he says. But lack of infrastructure makes those discoveries more difficult.

Ontario’s Ministry of Northern Development and Mines struck a Ring of Fire Secretariat specifically to work “with all levels of government, industry and aboriginal peoples to encourage responsible and sustainable economic development in the region.” Last February the federal government appointed Treasury Board president Tony Clement as the go-to guy who would untangle the web of various bureaucracies and stakeholders. But McKinnon says, “For all the conversations we’ve had with the federal and provincial governments focusing on the Ring of Fire, I haven’t seen [commitment] manifested in a vigorous way.”

Not that they’ve lost interest. “I don’t think the zeal for development is gone,” he points out. “The manufacturing sector, which used to drive the province, has significantly shrunk. Because of that they’re looking for secondary activity that will replace that historic engine. The only place it can come from is the development of resources.”

If you’re going to get government funding, a transportation corridor coming out of Pickle Lake would benefit communities like Webequie and something like five to seven different communities overall.—Kirk McKinnon, president/CEO of MacDonald Mines Exploration

Backing the region’s biggest player, the Ontario government supported Cliffs’ proposed road south to the CN TSX:CNR rail line at Nakina. McKinnon thinks a comparable discovery by another company might make the province consider other approaches. Certainly, the transportation debate continues. KWG Resources TSXV:KWG studies the feasibility of a southbound railway while Noront Resources TSXV:NOT promotes an east-west road. McKinnon also favours the east-west route, although he’d prefer rail.

“If you’re going to get government funding, a transportation corridor coming out of Pickle Lake [roughly 260 kilometres southwest of Butler] would benefit communities like Webequie and something like five to seven different communities overall,” he says. “The route that Cliffs is talking about interacts with one community called Marten Falls. Now Marten Falls has about 250 people living there. There are over 600 at Webequie alone.”

The native communities currently rely on light plane service and, during winter, ice roads.

Exploration would benefit too, he maintains. The east-west corridor “would spread along the breadth of a much bigger mineralization opportunity.”

As for electricity, he believes the province could do more to connect the region with the grid. But failing that “there has to be a deal with Manitoba or Quebec.”

“We’ve been up there 10 years and I think we know the people very well,” he adds. Governments could work harder to find “common ground with the natives for development so that after a discovery they can come in and get the appropriate partnership arrangements that they’re looking for. But to do that the government has to stimulate exploration through infrastructure and taking a much more pro-active approach to opening up the country to development.”

As it stands now, “it’s damn expensive to operate up there,” he says. “But there are very big prizes to be had.”

Read more about Ontario’s Ring of Fire.

Read about Kirk McKinnon’s remarks on the state of the juniors.

Which way to the Ring of Fire?

June 13th, 2013

As Cliffs stands down, Noront and KWG propose alternate transport routes

by Greg Klein

Next Page 1 | 2

As Cliffs stands down, Noront and KWG propose alternate transport routes

Left: KWG Resources’ rail proposal. Right: A north-south route from the
Eagle’s Nest vicinity shows Cliffs’ road proposal, while Noront’s plan veers southwest.


It’s a suspension, not a cancellation. Yet the June 12 announcement from Cliffs Natural Resources dumped cold water all over Ontario’s Ring of Fire. By putting the region’s largest project on hold, the company has also shelved plans for an all-weather road to the south, a vital link some other companies were counting on to develop the McFaulds Lake area about 540 kilometres northeast of Thunder Bay. But Noront Resources TSXV:NOT quickly responded that its own projects are “still good to go” thanks to a proposed east-west road. Not to be outdone, KWG Resources TSXV:KWG pursues the feasibility of north-south rail.

Seemingly a Plan B, Noront’s east-west corridor was actually the company’s first idea. It would link the Eagle’s Nest project to Highway 808, roughly 230 kilometres southwest. But in May 2012, the Ontario government conditionally agreed to help finance the north-south route, part of Cliffs’ $3.3-billion proposal to build the Black Thor mine with road access to a new processing facility near Sudbury. On that basis, Noront used the north-south route in the base case for the September 2012 Eagle’s Nest feasibility study. Noront retained the east-west route as back-up.

A mining and exploration retrospect

Northern Ontario’s muskeg poses development challenges, as this photo from Noront Resources shows.

Prudently, it now seems. Explaining the suspension of what would have been North America’s first major chromite mine, Cliffs’ senior vice-president of global ferroalloys Bill Boor said, “Certain critical elements of the project’s future are not solely within our control and require the active support and participation by other interested parties such as government agencies and impacted first nation communities.”

Reacting to Cliffs’ suspension, Noront chairman/interim CEO Paul Parisotto said his company’s east-west proposal “balances first nations objectives, the environment and job growth. We’re confident this alternative will be attractive to each level of government, the local communities and the people who will benefit from this sensible approach.”

The route would upgrade an existing winter road to all-weather status. Among its advantages, it “avoids provincial parks, avoids areas of special interest to aboriginal groups and provides the greatest benefit to first nation communities,” the feasibility report stated. The native bands are currently served by air travel and winter road.

With Cliffs temporarily out of action, Noront emerges as the regional bigshot. Its Eagle’s Nest project achieved feasibility last September, using an 8% discount rate to calculate an after-tax net present value of $543 million and a 28% internal rate of return. With initial capital costs of $160 million, payback would come after three years of the 11-year mine life for a project showing:

  • proven reserves of 5.26 million tonnes averaging 2.02% nickel, 1.04% copper, 1.01 grams per tonne platinum, 3.45 g/t palladium and 0.19 g/t gold
  • probable reserves of 5.87 million tonnes averaging 1.38% nickel, 0.72% copper, 0.78 g/t platinum, 2.76 g/t palladium and 0.18 g/t gold.

Less than two kilometres away, the company’s Blackbird project has a March 2012 resource showing:

  • a measured category of 9.29 million tonnes averaging 37.44% chromite with a chromium-to-iron ratio of 2
  • an indicated category of 11.17 million tonnes averaging 34.36% with a Cr:Fe ratio of 1.95
  • an inferred category of 23.48 million tonnes averaging 33.14% with a Cr:Fe ratio of 1.97.

Noront PR rep Janice Mandel tells ResourceClips two levels of government know about the company’s east-west proposal. “Noront’s been talking to the provincial government and the federal government, and the environmental assessment has been underway for a while, so there have been lots of discussions. But [Ontario’s] formal proposal had been made with Cliffs.”

She added that Goldcorp TSX:G has shown interest in Noront’s proposal as a route for transmission infrastructure. The major’s fly-in/fly-out Musselwhite mine lies roughly 130 kilometres southwest of Eagle’s Nest and Blackbird.

Next Page 1 | 2