Chinese-funded study considers rail link for Ring of Fire

Ontario’s massive Ring of Fire chromite deposit could be back on track thanks to a deal recently brokered between a Chinese company and KWG Resources (CNSX:KWG), one of the main players in the remote region, for a study on a rail link.

The 4,000-square-kilometre Ring of Fire, located 540 kilometres northeast of Thunder Bay, is home to an estimated $60 billion worth of mineral deposits. But the region lacks highways, rail lines or reliable power.

Two years ago Cliffs Natural Resources (NYSE:CLF) had to suspend most work on its then-valued $3.3 billion Black Thor chromite deposit, citing stalled talks with the province and other political and regulatory problems. The miner had also struggled to win over aboriginal communities. The stoppage came despite Cliffs spending some $500 million building its land position in the region. In 2015 Cliffs sold its Ring of Fire assets, including Black Thor, to Noront Resources (TSXV:NOT) for US$27.5 million.

The two juniors, KWG and Noront, are currently the only companies doing any significant exploration in the region. Formerly a TSX Venture-traded stock, KWG is now bought and sold on the much-smaller Canadian Securities Exchange. It lost 70 percent over the past year. Noront has fared much better, gaining 30 percent in a year, and spiking to a 52-week-high 67 cents a share last April following the property acquisitions from Cliffs.

Now KWG is enlisting help from a Chinese company on a proposed rail corridor that would link the Ring of Fire to Greenstone, Ontario – a distance of 350 kilometres.

According to a media report on Sunday, KWG has worked out a deal with China Railway First Survey and Design Institute (FSDI) for a feasibility study into the project.

Bruce Hodgman, a vice-president and communications director for KWG, told Postmedia that “KWG spent between $15- and $20-million on pre-engineering, surveying and soil-testing work on that corridor to make sure it could support a railroad.” The explorer then presented its findings to China Rail, which according to Postmedia, “in the past 60 years has created nearly 48,000 kilometres of rail through some of the world’s most difficult terrain.”

“We’re the company that actually staked those claims, the high ground that leads into the Ring of Fire if you will; that sand ridge that leads right from Greenstone up to the project itself,” Hodgman is quoted saying. “So it is the only feasible corridor because it has high ground and of course we have so much swamp up there it doesn’t make any sense to go anywhere else.”

The study is expected to be financed by China Rail. The company would be paid in metal proceeds, either ferrochrome or stainless steel ingots, or a combination of the two. Hodgman says the study, valued “in the ballpark of $10 million,” would take less than a year and would be followed by an environmental assessment and permitting process.

Responding to a reporter’s question that KWG might be selling out Canadian resources to the Chinese, Hodgman said that isn’t the case. The company plans to set up a plant in Greenstone for processing the chromite, and would use natural gas to convert the chromite into ferrochrome, which is used in the production of stainless steel.