Should we play hardball with the Ring of Fire?

The NDP are proposing that the mining industry contribute to the economy of Ontario by utilizing the chromite ore in the Ring of Fire in the production of stainless steel, while the Liberals are content to get ferrochrome produced here.  Ferrochrome is made from chromite, iron and nickel, all of which are available in Ontario, but not from mines owned by the same company.  

The Liberals feel if they are able to get the private sector to produce ferrochrome in Ontario, that would be enough to justify access to our natural resources.  There are a large number of factors and stakeholders that need to be considered if this area is to be developed and economic benefits produced.

The Liberal progress in the overall negotiations thusfar has been to commit to building a road into the region and collect tolls at an unknown rate from mine operators who want to use it to get their product to market.  This solution was predicated on a smelter that would be located in Sudbury and an unknown hydro rate. 

The exclusion of First Nations from using the road, and the unsuitability of that road to handle heavy ore traffic seems to explain why the Liberal government wanted to negotiate this deal in private and without stakeholder input.  

When one looks at the Voisey Bay deal in Newfoundland, which saw that government press for, and receive, a commitment to build a processing plant in their province, it appears that more stakeholder input may be required to formulate the optimum deal in Ontario.  

Cliffs is not the only player in the development of the region and all those with significant stakes should be brought to the table.  The First Nation communities participation is vital to both local labour availability and most importantly, as environmental stewards of their region.  The ONTC can, and should, play a significant role in the transportation area, and notwithstanding their exclusion from the Northern Growth Plan, the recognition of their expertise, both management and union, is critical to the successful operation of a railroad in northern Ontario.

The table will be rounded out by the federal government, since they have an obligation to provide access to remote regions, they will participate in tax revenue and since the export of chromite to China is probable, at least in the short term, they will be responsible for any export tax that may be applied to that product.  It should be a significant tax and dedicated to the creation of a stainless steel industry in Ontario.

The formation of an advisory committee on ONTC by the Liberals is a good indication of changing attitudes with the change in leadership. The following charts show there is lots of room between Newfoundland and Ontario in what they demand from mining companies.  The tax rate of 5% in remote areas of Ontario seems a little low for a deal that would see the government provide a road into the area, and a subsidy on their hydro use also.   Newfoundland was still able to get a processing facility built in their province for the nickel extracted from Voisey's Bay, in spite of higher royalties.

Cliffs has not yet recognized the importance of working with all concerned, but with their falling share price, economics may dictate a more co-operative approach.  It will take time, but lets hope the current government expands the concept of bringing stakeholders together and negotiates a deal that will benefit all.    We will be watching closely to judge their performance.