In the mining industry, takeover battles between small junior companies are usually over as soon as a senior steps in. After all, the seniors have the financial firepower and do not expect to get challenged.

But with an exciting exploration portfolio and the support of many shareholders, junior miner Noront Resources Ltd. is about to take on a major, and it is confident it can win.

Today, the company is announcing an increase to its hostile takeover bid for rival Freewest Resources Canada Inc., previously valued at about $112-million in stock. Putting Noront and Freewest together would create a dominant exploration company in the so-called "Ring of Fire," a remote corner of the James Bay Lowlands in Northern Ontario that has become one of the world's hottest exploration areas.

The obstacle in Noront's path is U.S. iron ore and coal giant Cliffs Natural Resources Inc. Last week, Cliffs struck a friendly deal to buy Freewest for $150-million in stock (which includes the spin-off of a new Freewest exploration vehicle).

Noront will never be able to outbid Cliffs, which has a market value of more than US$5-billion. So it has to demonstrate to shareholders that the best exposure to the Ring of Fire comes through a pure-play junior development company, rather than as a unit of a much larger miner. Over the next couple of weeks, Noront is planning a flurry of press releases and investor meetings to do just that.

As Noront chief executive Wes Hanson sees it, the friendly bid from Cliffs does not even top Noront's original offer. "The big thing to me is the limited exposure Freewest shareholders have to a very exciting, dynamic mining camp [in the Cliffs bid]," he said in an interview. "You buy shares of companies such as Freewest and Noront for the upside exposure to the discoveries that the Ring of Fire may potentially host."

He said he has spoken with a number of Freewest shareholders who are unhappy with the Cliffs transaction and would prefer a deal with Noront.

The Cliffs offer requires support from investors owning more than two-thirds of the shares, so if Noront can take up just one-third of Freewest's shares in its tender offer, it could block that merger.

Noront was the company that put the Ring of Fire on the map in the summer of 2007 when it made a spectacular high-grade nickel-copper discovery that set off a staking frenzy in the region.

At the time, the Ring of Fire was supposed to be a nickel play. But subsequent discoveries by Freewest and Noront have established that the Ring is also rich in chromite, a metal not currently mined on a large scale anywhere in North America.

Cliffs' offer for Freewest is an endorsement of the chromite potential of the region.

In the next couple of weeks, Noront will try to poke holes in the development plans that Cliffs has laid out. Noront claims that Cliffs has made no promise to build its ferrochrome production facilities in Canada, that its production outlook is questionable and that its plans to build a rail line and other infrastructure around the project are fraught with uncertainty.

"I'd question the perception that Cliffs is a proven mine developer, because I believe a lot of their mines have come to them through acquisition, or have been operational for the last 20 years," Mr. Hanson said.

Noront also thinks it has an edge on Cliffs because it has established stronger relationships with First Nations groups around the Ring of Fire.

http://www.financialpost.com/story.html?id=2284254