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Noront Resources becomes sole miner in Ring of Fire region

Published: 16:06 24 Mar 2015 EDT

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Shares of Noront Resources (CVE:NOT) have jumped in recent days after announcing the US$20 million purchase of the Ring of Fire chromite deposit north of Thunder Bay, Ontario from former bidding rival Cliffs Natural Resources (NYSE:CLF). 

"We have made significant investments in the Ring of Fire and our team has become experts in the region from both a technical and social point of view. We also believe in the considerable exploration upside which we are eager to develop," said Noront president and chief executive officer Alan Coutts.

In 2009, the junior miner fought a bidding war over the property, losing out to Cliffs, which took the prized chromite asset. Cliffs ended up spending some US$550 million to buy and develop the property, meaning Noront has managed a considerable bargain.

Franco-Nevada Corp. (TSE:FNV) has facilitated Noront’s acquisition by lending the company 100 percent of the funds in exchange for a 3 percent royalty over the Black Thor chromite deposit and a 2 percent royalty over all of Noront’s properties in the region, excluding the Eagle’s Nest high-grade nickel, copper, platinum and palladium project.

Now, Noront will be the only mining company left in the Ring of Fire, a region north of Thunder Bay where there are huge deposits of chromite, copper and nickel, among others.

Despite the loss, Cliffs' investors responded favourably, pushing up its stock price. The American company says it is moving away from mining to focus on supplying iron pellets to the steel industry, while complaining that the development process for the mine was too slow.

Noront wants to start operating its Eagle's Nest deposit in 2017, although it will need to invest on transportation infrastructure to facilitate access into the Ring of Fire. 

Cliffs had planned to launch operations, requiring the employment of hundreds of workers, in 2015, but then postponed to 2016 and finally, to 2017. Cliffs had started to recruit employees, but the project depended on negotiations over power costs and government funding for an access road.

If Noront has an advantage, it is that by being the sole mining company left in the Ring of Fire region, it will receive undivided attention from the government, the native populations and other stakeholders to facilitate the logistics and infrastructure work.

Noront shares are up more than 70 percent year-to-date, trading around 48.5 cents in Toronto, with a market cap of $109 million.

 

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