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Cliffs should stop pointing fingers, check its corporate ego before resuming work on Ring of Fire

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On Wednesday, U.S. mining company Cliffs Natural Resources announced that it was ceasing work on the environmental assessment process for its high-profile chromite project in the area of northern Ontario dubbed the “Ring of Fire”.

Cliffs’ announcement poutedly pointed the finger at the province for not approving the terms of reference the company drafted for its environmental assessment and for not coming to unspecified agreements “critical to the projects economic viability”, i.e. hydro and infrastructure subsidies. The blame was shared with First Nations who are pursuing a legal challenge to the project’s federal environmental assessment and the provincial Mining Land Commissioner for not issuing a decision over a land rights dispute with fellow would-be Ring of Fire mining company KWG.

While the announcement got a fair bit of press including coverage by the Globe and Mail, Financial Post, Star, CBC and Sudbury Star none of the news reports that I’ve seen pointed to Cliffs' own role in creating these delays.

Back when the project was entering into the environmental review process, Cliffs doggedly refused to support the reasonable and routine call (for a project of this size and complexity) of First Nations and NGOs (MiningWatch included) for a joint review panel assessment process. The failure of the government to designate the project to such a process is the subject of the judicial review. Cliffs failure to accept and co-endorse such a process surely fed into the federal decision to reject the reasonable and collaborative path.

But wait, it gets better: within legal proceedings of the judicial review Cliffs has not been working to see the process through in an expedient manner, but took it on a variety of legal tangents. The judge hearing the case gave both Cliffs and the federal government lawyers a sharp rebuke in March for dragging out the process.

As for their provincial terms of reference, MiningWatch reviewed Cliff’s proposed draft and provided comments (as did others) that it did not meet requirements under the Environmental Assessment Act. Cliffs refused to take our input and now they are grumpy that the province hasn’t approved it. Approving a document that doesn’t meet requirements in legislation is a good way to get yourself into court, so it’s no surprise Ontario hasn’t approved it.

Investing the hundreds of millions, if not billions of dollars that are needed for the infrastructure associated with the project is a huge risk to whoever decides to put money down -- thank goodness Ontario is not rushing to sign a deal.

Caution and careful consideration are needed as the viability of this project is no slam dunk -- something brought to light again in the recent media coverage. The risk associated with the project and the shaky economics under current mineral prices and sector contraction were noted by financial analysts quoted in the Financial Post and the Globe and Mail.

The Globe cited a comment by RBC Dominion Securities analyst Fraser Phillips  that Black Thor’s economics are “questionable at current ferrochrome prices.”

The analysts also pointed to Cliffs' own economic challenges and noted that the pause may be a good thing for the company’s bottom line. Company CEO Bill Bloor denied an economic interest in the pause but the reality is that the company is very short on cash. The financial analysts looked favourably on them spending the resources they do have elsewhere, so it’s hard to believe that wasn’t part of the motivation.

Cliffs has stated they remain committed to the project. If they want to see things go more smoothly, less finger pointing, more sincere collaboration, and a bit of humility would serve them well.

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