U.S. mining giant Cliffs Natural Resources Inc. (CLF.N 0.00%) is leaving Ontario’s Ring of Fire after it found a buyer for its chromite assets in the area.
Noront Resources Ltd. (NOT.V 0.00%) said on Monday it has a $20-million (U.S.) agreement with Cleveland-based Cliffs to acquire the shares of two indirect wholly owned subsidiaries of Cliffs, which hold mining claims in the Ring of Fire, about 500 kilometres northeast of Thunder Bay.
To finance the transaction, Noront is borrowing $22.5-million from Franco Nevada Corp. (FNV.TO 0.00%) In return, Franco Nevada will receive royalties on several chromite deposits.
Toronto-based Noront’s president and chief executive officer Alan Coutts said the deal “underscores Noront’s long-standing belief and commitment to the region. We have made significant investments in the Ring of Fire and our team has become experts in the region from both a technical and social point of view.”
But the Ring of Fire is years away from development and some observers say it may never be economical to mine the chromite deposits. And plans for infrastructure, road and rail development are moving at snails’ pace. Chromite is a mineral used in making steel.
Earlier this month, the federal government funded a study to determine whether a road to the Ring of Fire is viable.
Noront is one of the most active mining companies in the area and Cliffs owns the largest chromite deposits.
Since chromite was first discovered in 2008, estimates have pegged the mineral potential in the region at $60-billion (Canadian).
Cliffs CEO Lourenco Goncalves has said he has “zero hope” the Ring of Fire will be developed in his lifetime.
Noront said on Monday the agreement with Cliffs – which is subject to bankruptcy court approval as Cliffs Quebec iron mining operations are undergoing restructuring – includes the acquisition of 103 claims currently owned by Cliffs Chromite Ontario Inc. and Cliffs Chromite Far North Inc.
Noront also gets 85 per cent ownership of the McFauld’s Lake copper-zinc resource.
Cliffs, the biggest U.S. iron ore producer, is also exiting from its iron ore mining operations in Bloom Lake, Que.