Tuesday, September 02, 2014
Text Size

Is An Agreement Between Ontario Government And First Nations Good News For Cliffs Natural?

by Trefis Team

trefis.com

The Ontario government and Matawa First Nations have reached a negotiation framework agreement to discuss how to develop the world-class Ring of Fire mineral belt in Northern Ontario where Cliffs Natural Resources (NYSE:CLF) owns huge deposits of chromite.

The company has been unable to develop its assets here owing to lack of agreement among stakeholders on key issues related to environment, revenue sharing, community infrastructure, etc. Also, the region is totally isolated from the rest of the country and needs massive investment to develop connecting transportation infrastructure. This itself has been the subject of an acrimonious court battle between Cliffs and KWG Resources, which controls the land where the key transportation route lies. [1]

Therefore, while an agreement on a common framework is definitely a good first step, it is still going to take a lot of time to negotiate and agree to specific terms and conditions. This means that Cliffs’ investors will do good not to get their hopes up for now. The Black Thor project, right now in the suspended state, is unlikely to be revived any time soon.

Potential Of The Chromite Mines

The Ring of Fire region is thought to hold up to $50 billion worth of minerals and is going to be North America’s first major source of chromite. Black Thor alone is expected to produce 600,000 tonnes of ferrochrome, if and when production begins. Cliffs has a capital expenditure budget of close to $3.3 billion for this project and had already spent around $500 million by the end of 2012. Ferrochrome is used mostly in the production of stainless steel and there are very few mines in the world with large deposits of chromite from which it is made. Canada is the only potential large scale supplier which is politically stable, doesn’t need chromite for its own consumption and can produce it at low costs. [2]

The Story So Far

The Ring of Fire project has been very unpopular with the First Nation communities in Ontario. These are autonomous aboriginal communities who live in the adjoining areas and are concerned about jobs, business opportunities and improved infrastructure. Due to the diverse nature of these communities and their wide-ranging concerns, progress had been slow and negotiations complicated. Another area where progress had been tardy is the signing of definitive agreements between Cliffs and the Ontario government. These agreements pertain to the lack of infrastructure in the Ring of Fire area and were deemed critical to the project’s economic viability. In view of these problems, Cliffs had put the project on hold temporarily in June. [3]

In September, Ontario’s land and mining commissioner had dismissed Cliffs’ application for permission to build a road to its deposits at Black Thor. This road was proposed to pass through a region claimed by rival miner KWG, which wants to build a railroad instead. The region is too fragile to support two heavy ore transportation systems. While Cliffs proposed a $600 million road, KWG proposed a $1.6 billion railroad. However, the province of Ontario was expected to share half the cost of building Cliffs’ proposed road. The tribunal objected to the province paying for a private road that would bring no benefits to the general public. [4]

The company claimed that building an all-weather surface road was the only way to make its $3.3 billion project viable. In view of the adverse ruling, it declared that the project had been put in jeopardy. Although Cliffs appealed against the ruling in Ontario’s Superior Court of Justice, it knew that any appeal takes years to make its way through the court. The company continued to believe that a real solution can only be found by the Ontario government.

The Ontario government has finally managed to get its act together. Prior to successfully negotiating this agreement with First Nations communities, the government announced last month that it had appointed Deloitte as a neutral, third-party resource for stakeholders such as First Nations, the provincial and federal governments and industry. The firm will help in establishing the development corporation that would be responsible for coordinating infrastructure in the Ring of Fire region.

There Is Another Battlefront For Cliffs

On January 28, the hedge fund Casablanca Capital filed a Schedule 13D document with the Securities and Exchange Commission where it disclosed its 5.2% shareholding in Cliffs Natural and included a letter sent by the fund to the company’s board. The fund said that Cliffs should bundle its Bloom Lake project and Asia Pacific operations into an independent entity. According to the fund, Cliffs’ international business is exposed to the seaborne iron ore market and has a different risk/reward profile than its U.S. business where barriers of entry for other players are high. The letter included other proposals about increasing dividends and corporate structuring of the U.S. business. The fund’s thrust was on unlocking value for shareholders and boosting the stock price. [5]

Casablanca also wants Cliffs to divest its chromite and nickel projects to concentrate fully on its core U.S. iron ore business. If Casablanca mounts a proxy battle and gains control of Cliffs’ board, one can be sure that the company’s chromite assets will be sold off.

We will have to wait and watch how the situation on the two fronts unfolds simultaneously going forward. We will keep you updated with any further significant developments.

Our price estimate for Cliffs Natural Resources is $25 after the latest results.

Whatever Trevor

Dis is Trevor.

Blast from the past: FP archive

When is Consultation, Consultation?

Ovide Mercredi

National Chief – AFN

During a Treaty Roundtable meeting of the Alberta Chiefs, I took note of a federal government document outlining their strategy to define and ultimately impose their own form of self-government. Read more...

Letting go of residential schools

by Gilbert Oskaboose, Nov 1993 First Perspective

There is a lot of "unfinished business" in Indian Country. Garbage that we as a people have never really dealt with. Chief among them is the whole issue of those infamous residential schools and their impact on people. Read more...

OBIDIAH

obidiah picture

ANALYSIS - Bill Gallagher

gallagher picture

Under the Northern Sky by Xavier Kataquapit

Under the Northern Sky by Xavier Kataquapit

JOBS

First Nations Cultural Interpreter PM – 02 Riding Mountain National Park Seasonal Indeterminate

(May to October) From $54,543 to $58,764

Closing Sept. 19, 2014

Read More

Regional Media Officer– Temp (Until Nov 2015) –F/T Position

Office of the Leader of the Official Opposition / NDP Research Office

Location:131 Queen Street, Suite 10-02, Ottawa, ON

Responsibilities

Communicate regularly with regional media outlets (community newspapers, radio stations, student media, ethnic media, etc.) to propose ideas for interviews and opinion content Read more...

Canadian Chamber of Commerce Aboriginal Workforce Report

The Canadian Chamber of Commerce released a report that highlights initiatives to improve the workforce participation of Aboriginal peoples. 

Opportunity Found: Improving the Participation of Aboriginal Peoples in Canada’s Workforce (December 2013)  

click image to download report

Tue Sep 23 @ 3:00PM - 04:15PM
FNHMA National Conference 2014

EVENTS

September 2014
S M T W T F S
31 1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 1 2 3 4
imageimageimageimageimage
cartoonscartoonscartoonscartoonscartoons

Current Video

RIP Percy Tuesday

 

Thanks to Althea Guiboche for allowing The First Perspective to share her video taken at the Manitowapow book launch at McNally Robinson. 

Percey sings Freddy Fender's "Wasted Days and Wasted Nights" and people join in to harmonize. 

Last Week Tonight with John Oliver (HBO): The Washington Redskins