VANCOUVER — Noront Resources (TSXV: NOT; US-OTC: NOSOF) has emerged as a leader across the Ring of Fire region in the James Bay Lowlands of Northern Ontario, and it has a long-term plan in the works that it hopes will establish a world-class nickel sulphide and chromite camp in the region.
The company knows it won’t be quick, but a commitment to social license and First Nation partnerships could lead to success where larger companies have failed.
Noront made headlines in late March when it acquired 103 claims in the Ring of Fire from beleaguered U.S. iron ore and coal miner Cliffs Natural Resources (NYSE: CLF) for US$27.5 million. The deal was financed via a US$25-million loan and US$3.5 million cash-payment agreement that saw Franco-Nevada (TSX: FNV; NYSE: FNV) pick up a 3% royalty on the Black Thor chromite deposit and a 2% royalty on Noront’s other properties in the region, with the exception of its advanced Eagle’s Nest nickel and platinum group metals project.
“We’d always had our eye on consolidating the Ring of Fire, because we view it as an emerging camp … you have a greenstone belt with a big ultramafic complex that seems to be chalk full of discovery potential,” president and CEO Alan Coutts said during an interview.
“But from our point of view the prospectivity is only one attractive aspect of the big picture, because when it comes to dealing with regulatory agencies and First Nations, it becomes a lot easier when you have one industry voice with a singular vision in terms of development and infrastructure,” he continued.
The Ontario government led by Premier Kathleen Wynne has earmarked $1 billion for infrastructure in the northern Ontario mining area, and had hoped a larger company like Cliffs could fast-track a bulk-tonnage chromite project. The Ohio-based company exited Canada, however, after a collapse in iron ore and coal prices and a proxy battle that saw a full turnover in management.
Coutts said the first message he needed to convey to the Ontario government was that Noront was not ready tackle a large-scale, infrastructure-intensive project. The company is focused on the more realistic goal of getting Eagle’s Nest into production, and working on permitting and licensing at its chromite assets to prepare for a rebound in metals markets.
“Most of the world’s chromite smelting — wherein you smelt chromite ore into ferrochrome — takes place in China, but interestingly they don’t have any real domestic supply of note. The current chromite ore is imported predominantly from South Africa, where it’s a by-product of platinum-palladium reef mining. Right now markets appear to be in balance, but what if things go wrong in South Africa?” Coutts mused.
“If that does happen and it curtails those exports, there could be a dramatic impact on the global ferrochrome market. We have the world’s best undeveloped resources, and we really believe there will be a time and a place for these projects,” he continued.
Meanwhile, Eagle’s Nest represents a relatively near-term opportunity that could be developed at a fraction of the cost. The deposit is a sub-vertically dipping body of massive magmatic sulphide (pyrrhotite, pentlandite, chalcopyrite and magnetite) in a pipe-like form that’s 200 metres long, up to several tens of metres thick and at least 1,650 metres deep. It strikes northeast–southwest and occupies the northwest of a vertically inclined, serpentinized peridotite dyke.
Eagle’s Nest hosts proven and probable reserves of 11 million tonnes grading 1.7% nickel, 0.9% copper, 0.89 gram per tonne platinum and 3.09 grams per tonne palladium. In addition, the deposit has inferred resources of 9 million tonnes grading 1.1% nickel, 1.1% copper, 1.16 grams per tonne platinum and 3.49 grams per tonne palladium.
Noront’s first step involves updating a 2012 feasibility study of the project. Metal prices have plummeted over the intervening three years, but Coutts said the high-grade asset is attractive, even in today’s market.
Assuming current metal prices and exchange rates, the project has a 14.9% after-tax internal rate of return and a $165-million net present value at an 8% discount rate.
The study models a $609-million development that would produce 150,000 tonnes of high-grade nickel-copper concentrate annually, with an estimated $97-per-tonne operating cost, including road access fees.
“The feasibility study is a little bit dated at this point, so we’re updating it, but outside of the fact that it’s around three years old, it’s important to note the playing field really changed after acquiring Cliffs’ properties,” Coutts said.
“One of the issues we dealt with was the lack of good, high ground in the James Bay Lowlands, where we could build facilities and infrastructure. The thinking was that we’d build the mill underground, and that was built into our studies. Now that we have access to new ground, we’re looking at moving the facilities to surface and whether we’d be better situated — from a marketing and sales angle — producing separate concentrates,” he continued.
In June the Ontario Ministry of Environment and Climate Change approved Noront’s terms of reference at Eagle’s Nest, which helps the company move forward on an environmental assessment for what could be the first mine in the Ring of Fire. The company also received permits to conduct regional geophysical surveys and drilling to advance property-wide exploration over a consolidated land package that covers 800 sq. km.
In September Noront closed a $1.5-million non-brokered private placement, wherein it issued 2.9 million units priced at 33¢, and 1.5 million flow-through shares priced at 38¢. Each unit consists of a share and half a share purchase warrant exercisable for two years, with one full warrant allowing a holder to buy a share at 47¢.
“I spent a number of years as operations manager up at the Raglan complex in northern Quebec, and there was just deposit after deposit along this favourable contact in the ultramafic rocks. We believe it’s the same thing we’re dealing with. We have 30 km of the favourable contact, and we’ve explored 4 km,” Coutts said.
“We’re literally chomping at the bit to get back to exploration, because we think we have a nickel camp. What our investors are telling us right now, however, is that they want to see progress on permitting and development of a single mine.”
He added that later this year the company would still do exploration work.
Noront’s flow-through funds are earmarked for drilling on nickel-sulphide targets. The company has identified areas of interest and intends to
complete ground-based geophysics. The drill program will consist of step-out holes along the contact corridor, in search of discoveries.
Noront shares have traded within a 52-week range of 25¢ to 67¢, and gained 32% over the past nine months en route to a 36¢-per-share close at the press time. The company has 237 million shares outstanding for an $85-million market capitalization.
“There are a lot people out there that really get this story. When we were out looking for support and financing to complete the Cliffs deal, Franco came to the table quickly. They recognize the regional potential and really liked the multi-metal nature of the camp,” Coutts said. “Franco wanted to get in early and backed us for in-ground royalties up there. What we’ve done is put this land package together, so when the markets do turn, we’ll be positioned to take advantage.”