TORONTO In a remote part of Ontario,
little-known junior mining company Noront Resources Ltd. made
an ultra-high-grade nickel-copper discovery last year that
sparked one of the most frenzied staking rushes in recent
The find in the McFauld's Lake area had junior miners
salivating at the prospect that the next Voisey's Bay was about
to be revealed deep under the swamplands and frozen lakes in
the northern reaches of the province. Volumes on the TSX
Venture Exchange, where most of the juniors are listed, shot up
to record levels. It even caught the attention of metal
analysts, who wondered whether world markets should be bracing
for a major new source of nickel and copper.
More than a year later, the bloom has come off the rose. The
share prices of the more than 40 juniors who swooped in and
claimed much of the prospective land near the initial discovery
are hurting badly, with nearly every company seeing their
trading value off by more than 50 percent. Even Noront's stock
is at a fraction of its 2007 highs.
Undoubtedly, the credit crisis can be blamed for some of the
deflated enthusiasm. Juniors, most with little cash flow of
their own to speak of, were the first to see financing
opportunities in debt and equity markets dry up-and it's hard
to explore when the piggy bank is empty. Noront is one of the
lucky ones, and this fall was still sitting on about Canadian
$40 million ($36.3 million) in cash in the bank.
But drilling results that followed the initial discovery,
known as Eagle One, haven't lived up to some of the initial
hoopla. Eagle One turned out to be a small pipe-like body quite
different from the Voisey's Bay ovoid and Eastern Deeps
deposits in Labrador discovered by South Africa's Diamond
Fields International Ltd. in the 1990s.
The area of mineralization, nicknamed the Ring of Fire for
its half circular shape, is far from being written off as a
potential future mining camp, but it will take a long time for
its potential to be clearly known. The area has never been well
mapped by surface geology, helping to keep any potential
deposits well hidden.
Noront had about a dozen drills working in the region this
fall on its 300,000 acres under claim, which is about 30
percent of the Ring of Fire. There have been continued
discoveries of mineralized sulfide, but no massive ones such as
Eagle One, which had outlined a gross metal value of nearly $2
billion. Given that there is no infrastructure, including power
sources, in the region, a $2-billion find alone won't cut it. A
series of deposits and mines would have to be developed in the
land-locked region to make it all economically feasible.
The focus of the hunt for metals also has changed from
nickel, copper and platinum group metals, to the less sexy-and
to many, unfamiliar-world of ferrochrome.
A few months after its initial discovery, Noront made its
Eagle Two discovery, which was a very different type of ore
body. Much more spread out and not nearly as concentrated, it
did contain something unexpected chromite. Further discoveries
of the metal were made recently by other junior miners in the
region, perhaps most notably by a joint venture between
Freewest Resources Canada Inc., Spider Resources Inc. and KWG
Chromite is used to make ferrochrome, which in turn is used
in stainless steel to protect it from corrosive forces such as
moisture. There are no chromite mines anywhere in the Western
With hopes of the next Voisey's Bay discovery dashed, Noront
and other juniors are now suggesting that McFauld's Lake could
be akin to Outokumpu Oyj's Kemi chromite and ferrochrome mine
in Finland, in production since the 1960s. Kemi is comprised of
11 chromite ore bodies, and as of 2006 ore reserves stood at
41.1 million tonnes grading 24.5-percent chrome.
"From a geological perspective, that's the best example of
what we're dealing with today," Kevin Feeney, chief financial
officer for Noront, said in an interview. Only Noront sees even
greater potential. "We think we're dealing with chromite of 40
percent, which makes it incredibly valuable chromite, probably
among the highest grades found anywhere in the world."
Along with that chromite would likely come associated nickel
and copper discoveries, so the Ring of Fire is unlikely to be
just a single commodity story. "The way I look at it, they will
take turns outshining each other," Feeney said.
Some estimate that the McFauld's Lake region will need at
least $20 billion worth of in-situ base metals to justify the
infrastructure investment. That's going to require a lot of ore
hunting-and a lot of good luck. But while investors are clearly
now worried they could get badly burnt by this Ring of Fire,
there's still reason to speculate that an abundance of minerals
awaits those willing to take the gamble. DARCY