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Cliffs confident in Black Thor viability

Keywords: Tags  Cliffs Natural Resources, Black Thor project, ferrochrome, Bill Boor, Prospectors and Developers Association of Canada, PDAC, Daniel Fitzgerald

TORONTO — Cliffs Natural Resources Inc. believes its delayed Black Thor chromite project should still yield pricing viability in the long term despite recent drops in ferrochrome prices.

"Pricing should be pretty strong over the next decade or so," Bill Boor, Cliffs’ senior vice president for global ferroalloys, told AMM at the Prospectors and Developers Association of Canada (PDAC) convention in Toronto.

"From a demand perspective, the stainless steel markets, which drive ferrochrome, lag the carbon steel markets, so we have a good outlook for growth in stainless demand in all the typical places, like China," he said. "On the supply side, it’s very much a story of the cost curve, and with what’s going on in South Africa and other places with costs going up due to overcapacity, we’re expecting the cost curve to shift up dramatically."

Boor said these fundamentals should underpin strong ferrochrome pricing for the Black Thor project, even though high-carbon ferrochrome prices have declined to about $1.01 to $1.05 per pound currently from as high as $1.32 to $1.41 in April 2011.

"Pricing is always the ultimate bet on a project like this. But our view is that the cost curve is shooting up, and that even with the prices we’ve seen in the last few months or last year, this is a profitable project," he said.

Boor acknowledged that the project is currently experiencing "challenges and some uncertainty." Cliffs president and chief executive officer Joseph Carrabba said during a conference call in mid-February that the company "cannot predict how quickly the definitive agreements will be in place allowing the project to continue" due to "stalled dialogue with the government" (, Feb. 14).

Boor said that the company would meet with Ontario and federal government representatives at the PDAC convention to further the project, but he reiterated the company’s refusal to put a schedule on Black Thor’s completion.

"We’re getting so close to a feasibility study. When it’s in hand, we’ll have a very clear plan for the execution of the project. To speculate before we finish that study doesn’t feel right to us," he said.

Boor also said that calls from Ontario officials to provide funding assistance for the project only on the condition that the mined ferrochrome ores stay in Canada in order to support the local stainless industry were "not practical."

"We’re building, by industry standards, a very large ferrochrome processing facility. It’s as aggressive a move in the market as we can get comfortable with," he said. "This project has a huge infrastructure component that drives capital costs up, and the ferrochrome production alone can’t support all of that infrastructure. So we need the second source of revenue, which is the ability to export concentrate."

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