Getting To The Ring Of Fire

Despite the industry slump, exploration in the McFaulds Lake area of northern Ontario continues apace as Noront Resources (NOT-V, NOSOF-O) and other explorers drill off deposits they hope will add up to a viable mining operation one day.

Noront is spending $8 million before the end of June to further investigate the nickel and chromite potential of its extensive land package in the area, and will spend another $11 million of flow-through funding before the end of the year.

Another positive development for the area is the sale of a 19.9% stake in KWG Resources (KWG-V, KWGBF-O) to Cliffs Natural Resources (CLF-N), one of North

America’s largest suppliers of raw materials to the steelmaking industry. The $3.5-million transaction gives Cliffs a foothold in the Big Daddy chromite discovery in the Ring of Fire, the geological structure that defines the sphere of exploration around McFaulds Lake.

But even though the area continues to gain prominence as a potential new multi-commodity mining camp, there remains one major obstacle to development: lack of infrastructure.

McFaulds Lake is just about as remote as you can get. Situated in the swampy James Bay lowlands, the area has no roads or railways, no supply, and no access to tidewater. The nearest settlement, the tiny First Nations community of Webequie (population 642), is 60 km to the west. The nearest mine, De Beers’ Victor diamond mine, is 250 km east and serviced by winter road only.

If the area’s deposits continue to develop, the companies operating there will eventually need a transport route that will allow them to bring in the supplies needed to build a mining camp and send out concentrates on a continuous basis to smelters farther south.

“We are not dealing with diamonds or gold,” says Joe Hamilton, interim co-chief executive of Noront. “These concentrates need to ship regularly, so we would need year-road access on an all-weather road.”

The area’s deposits would have to contain at least $20 billion in in-electrical situ value to justify the power and transportation infrastructure required, estimates John Kaiser, editor of the Kaiser Bottom-Fish report.

There is some potential for direct shipping higher-grade nickel that has already been outlined in the Eagle One nickel deposit, but Noront hasn’t found enough of the rich ore yet to justify the capital cost of building an all-weather road.

If and when resources grow big enough, the most logical route would run from McFaulds Lake to the First Nations community of Marten Falls, 150 km south. From there, the concentrates would travel south to Nakina, where there is a railhead. Though the Marten Falls- Nakina route is only passable for two to three months in the winter, the Ontario government is currently upgrading the road to make it accessible year-round.

In that case, Noront’s share of the transportation route would be limited to the 150-to 200-km leg between the camp and Marten Falls. Glacial eskers along the route could provide road-building material. Assuming a 7-metre-wide road bed and truck speeds of 60-70 km/h, Noront’s preliminary economic assessment of the Eagle One deposit estimates the cost of road building at roughly $306,000 per km, or $50-60 million.

Nickel and copper ore would be concentrated onsite, then trucked south to Nakina, where it would be loaded onto rail cars for transport to smelters in Thompson, Man., Kidd Creek, Ont., or — the most likely destination assuming there is available capacity — Sudbury, Ont.

The other option would be to build a road to Webequie, about half the distance away from the exploration camp. But the winter road running south from Webequie would have to be upgraded first. In that case, concentrates would head west to Webequie, then southwest to Pickle Lake, and eventually end up in Red Lake, where they would be loaded onto rail cars for shipment to smelters.

Even though James Bay is the closest tidewater for shipment to Asian markets, transporting the concentrates to a port there is out of the question because access is seasonal.

There may be some opportunity to tap into the federal and provincial infrastructure funds for road development to the camp. The federal government has announced $12 billion in new spending, while Ontario recently committed more than $1 billion for infrastructure projects in communities with populations of fewer than 100,000 people, among other spending commitments.

“We haven’t had discussions with government, but some of the communities in the area have been talking to their representatives at the provincial and federal levels about infrastructure development.” Hamilton says. “It’s a depressed are a of Ontario. It could certainly use jobs, but attracting industry requires infrastructure.”

The workforce would be transported by plane on a 14-day-in and 14-day-out rotation from northern communities to the project site.

If the area is developed at all, it will be developed for its nickel or chrome potential or — more likely — for both. Though nickel and chromite concentrates could be produced onsite and the nickel shipped to smelters, the next logical step for the chromite is less certain because there are no facilities in North America that process the metal.

In order to supply stainless steel manufacturers, the chromite concentrates would need to be converted to ferrochrome. Unlike nickel or copper smelters, ferrochrome plants are not difficult or expensive to build using off-the-shelf technology. But they do require a lot of power, something McFaulds Lake lacks.

“We would have to run a 300-to 400-kilometre power line into the site if we wanted put a ferrochrome plant there,” Hamilton says. “So the cost of building the plant would have to offset the increase in transportation costs if we were to just ship the chrome concentrate (to a plant built farther south).”

In the meantime, Noront is considering building a winter road from either Marten Falls or Webequie in order to support ongoing exploration. Currently, all the exploration is serviced by helicopters or float planes at great expense. “If we could get a loop between the two communities that would be even better,” Hamilton says.

He estimates the winter road would cost about $1,000 per km to build and maintain every year, but there is the opportunity to offset these costs by charging a toll to other exploration companies that would benefit from road access to the Ring of Fire.

Noront is currently focusing on the Blackbird chromite deposits partly because they are easier to drill in the winter and partly because Noront wants to get a clearer picture of how chromite will fit into the economic model for McFaulds Lake.

By mid-March, the company will move the drills to the southeastern area of the Ring of Fire to step out on anomalies along strike from the nickel and chromite deposits it has already discovered.

After a lull during breakup in May, exploration will resume, most likely in the northern areas of the belt that have not yet been explored, Hamilton says.