Ring of Fire

So what does all this mean for our little area of the world: the Ring of Fire?

Well, three high grade chromite ore zones were discovered in the McFaulds area, during the course of 2008. Freewest (FRW.V) has discovered the 100% owned Black Thor deposit, and the Big Daddy deposit, 4 km along strike to the SW was discovered by the Freewest-Spider-KWG joint venture. 5 Km South West of the latter, Noront (NOT.V) has found 100% owned Blackbird One, during its Eagle One drilling program. Step out drilling at Blackbird One revealed Blackbird Two, due East. The string of deposits is believed to be part of a trend with a total strike length of 14km, running from Blackbird One to Black Thor. In between these properties lies the enigmatic Fancamp (FNC.V), which hasn’t yet let its drills speak. The map below, courtesy of Freewest, depicts the position of the various deposits.

Let’s compare this zone to a deposit of similar size: the Kemi mine in Finland. The Kemi mine is set on a 15km long intrusion, containing 11 chromite orebodies averaging 40m thick, in places 200m deep, and a grade of a lowly 26% Cr2O3. Despite this diminuitive grade, the mine is made economical because of the immediate on-site processing of ore into ferrochrome, and on into stainless steel. Kemi has ore reserves of 41.1 Mt, and inferred resources of 86.1 Mt. In 2005, 1.1 Mt of ore was processed into 235,000t of ferrochrome, at an assumed market value of $2 /lbs this makes for a value of just over $1 billion. In one year. And Kemi is low grade, requiring lots of processing.

Now lets project this onto the Ring of Fire. A very rough averaging of the 8 holes drilled at the Freewest and Spider deposits reveals a chromic oxide of 39% in the high grade sections, averaging 34m (hole-) widths, with a Cr:Fe ratio of 1.74:1. Lower grade sections at Freewest and Spider are markedly lower. At Noront, the same 39% is apparent in the high grade sections. Hole widths are somewhat lower at 23m, the Cr:Fe ration averaging 1.87:1. However, Noront’s lower grade sections are only marginally lower in grade than the high grade sections, increasing hole widths to over 50m. These are serious grade vs widths.

Potential

Freewest believes that the Black Thor deposit by itself should easily be capable of holding 72 Mt of ore, at a value of approximately $ 29 billion. Given that both the Freewest Big Daddy deposit and Noront’s Blackbird One hold similar grades, widths and depths, added to as yet undrilled anomalies on all properties, the increasingly apparent link between the Ni/Cu and the Cr deposits, and Fancamp’s wait and see attitude, all makes the likelihood of a multi-million tonnage in the ore deposits along the 14km strike length a huge probability. Now that is what’s getting us excited.

We could be talking about a $ 100 billion or more asset for a major to pounce on, just counting the chromite. And we all know how the world reacted to Noron’t discovery of the Eagles. We can also safely say, that a major will want all the chromite together with all the Ni/ Cu deposits along the 14 km zone. Thus, any major interested, will have to negotiate with Noront, Spider, Freewest, KWG and possibly Fancamp. And as we have seen in the introduction to this analysis, a number of majors have woken up already. The recent takeover of the Noront board of directors by a hedgefund, is one indication of the majors stirring.

Another is a major’s buying in on the Spider joint venture, as mentioned above. And Freewest has a good working relationship with a third major. History also dictates that a battling of majors will take place long before the whole area has been drilled to bits. Once they have seen enough potential, they often scoop up and get on with mining. Interesting times indeed.

Conclusions

Well, we’ve made quite a journey, just to prove our point;

- Chromite has great metal and political value.
- The Ring of Fire contains a variety of metals that together have a huge strategic importance.
- We expect future supply shortages from current producers.
- We expect increasing demand for metals that are in huge supply in the Ring of Fire.
- Canada is a stable country in a chromite world where political stability is an asset.
- And perhaps most importantly, the Ring of Fire has a huge potential metal value.

The combined market caps of the five players are:

Freewest (FWR.V) $ 51 mln
Spider (SPQ.V) $ 14 mln
Fancamp (FNC.V) $ 10 mln
KWG (KWG.V) $ 9 mln
Noront (NOT.V) $ 171 mln

Although we are not predicting a winner, we believe that all of them have a huge upward potential once the majors battle over the spoils. These discoveries are simply “too big to ignore”.

A combined market cap of $ 255 mil for a set of assets potentially worth multiples of billions of dollars, is about as good an investment opportunity as you are ever likely to get.

Willem Middelkoop, February 7th 2009