“It’s still not clear which part of the chrome intrusion will be developed first. It’s in my interest to make it Big Daddy, but it could be Black Thor,” said Frank Smeenk, president and CEO of KWG Resources. “Big Daddy has the width, the grade and the consistency and seems to be the more concentrated portion of the intrusion…but there’s no data indicating a compelling case in favour of Big Daddy or Black Thor, so I think the source of financing may determine it.
“If KWG is able to put together a project financing package, then that would add to the attractiveness of Big Daddy being first.”
KWG and Spider earned a 53 per cent interest in the Big Daddy deposit as the result of an option agreement with Freewest, leaving Cliffs with a 47 per cent stake in Big Daddy to add to its 19.9 per cent stake, or close to it, in KWG itself. “The attractiveness of a project financing vehicle using tax incentives available in Canada and having a partner like KWG is that Cliffs’ financial metrics aren’t affected by this huge capital cost, so we’re finding a sympathetic hearing in Cleveland,” said Smeenk.
The advantage of having a Canadian partner to navigate through a lengthy environmental assessment process and negotiations with First Nations may also persuade Cliffs Natural Resources to let KWG and Spider take the lead.
A move by Cliffs to acquire the remaining 80 per cent interest in KWG is also possible, “but that would take away some of our motivation to work as hard as we do,” said Smeenk. “Having the motivation of equity upside for a Canadian partner suits their purpose because you can’t develop a sense of urgency better than that.”
If Cliffs decides to go it alone and develop its wholly owned Black Thor deposit, Big Daddy would likely sit idle for decades.
What KWG (and its recently created subsidiary, Canada Chrome Corp.) has and no one else has, which will keep us in the game no matter where the pit is, is a right-of-way for the construction of a railroad,” said Smeenk.
In a gutsy and expensive move to reinforce its position, KWG has staked some 8,000 claims along two proposed routes from the existing Canadian National Railway main line north to the chromite deposit.
The first route up to Ogoki Post ended in string bog north of the Albany River and was “totally unusable,” said Smeenk. The preferred route, further west, from Exton north along the fluvial esker is on higher ground.
A LIDAR optical remote sensing survey was commissioned by KWG to assist in identifying the best possible route and geotechnical samples were taken this winter to determine the bearing capacity of the ground.
A concentrator and electric arc furnace will have to be built to process the chromite into ferrochrome, but the location of these facilities is still to be decided.
It may make more sense to locate the concentrator where the furnace is to bypass the engineering challenges associated with tailings management in the swampy terrain of the James Bay Lowlands, said Smeenk.
Thunder Bay was originally cited as an ideal location for the processing facilities, but the Regional Municipality of Greenstone, which includes the Town of Longlac, is also in the running.
Thunder Bay’s location on Lake Superior is an advantage, but getting there by rail from the CN main line won’t be easy since CN tore up the Kinghorn rail line between Longlac and Thunder Bay.
Longlac, on the other hand, is on the CN main line and offers access to Chinese and European markets.
The need to comply with stringent environmental standards for an electric arc furnace, which would require a setback from populous areas, is another problem for Thunder Bay, said Smeenk.
Adding to the speculation was a December 14 story in the Cleveland Plain Dealer that cited the north shore of Lake Michigan in the United States as a possible location for a processing facility.
Another unknown is the extent to which the chromite mine will spur the development of new communities in the James Bay Lowlands.
There is some thinking that the development of the region will extend the developed frontier of the province from Timmins and Cochrane up to McFauld’s Lake and the Attawapiskat River, said Smeenk.
“With a railroad going to McFauld’s Lake, we could stop this nonsense of building hugely expensive ice roads and bring all of these remote First Nation communities into the First World, which they all desperately want. It’s not the perfect place to have a town – it’s really a bug-infested swamp that’s frozen two-thirds of the year – but there’s no reason not to have a town up there – with some constraints.”
There’s enough chromite in the 12 to 14-kilometre strike length of the deposit to keep the world supplied with ferrochrome for at least a century, but the region, dubbed the Ring of Fire, also hosts high-grade nickel deposits discovered by Noront Resources, several copper-zinc discoveries and possibly even gold.
“There are going to be 50 mines found up there,” said Smeenk.