China Railway ponders Ring of Fire line

The study could lead to construction of a 350-kilometre rail line that would haul chromite from the Black Horse site, located in the James Bay lowlands, south to two processing plants proposed by KWG for the town of Nakina. KWG would reduce the chromite into ferrochrome and ship the alloy on newly laid tracks east to the tiny village of Pagwa, then on existing rails to Hearst and on to Montreal for further refining into stainless steel.

Funding, other infrastructure, environmental approvals, permits, co-operation with First Nations and construction timelines all remain to be sorted out, says Moe Lavigne, vice-president of exploration and development for Toronto-based KWG. But if China Railway gives its go-ahead on building the rail line, the rest of the project is a sure thing, says the veteran mining executive.

"As soon as there is a commitment to build a railroad, everything else starts," he said.

Estimates of the value of the chromite, copper, gold, zinc and nickel deposits located in the Ring of Fire have ranged from $70 billion to Lavigne's more optimistic half a trillion dollars.

"When you have half a trillion dollars sitting in the ground, everyone is trying to get their hands on it. So these things don't go undone," said Lavigne. "And the only way this is going to happen is by cheap bulk transport that a rail provides."

Noront Resources, the only other major player still active in the Ring of Fire, is currently developing a plan for its adjacent Eagle's Nest claim, contemplating an all-weather roadway. Other early players have quit the Ring, citing the costs and logistics of getting the minerals to market.

KWG has spent close to $15 million on pre-engineering studies on its preferred rail corridor, says Lavigne. China Railway took a look at the findings and told KWG in December it was willing to take the next step.

KWG president Frank Smeenk is scheduled to visit China in January to discuss the costs of the feasibility study and further explore what returns China Railway might be seeking. Lavigne says the study could be completed in less than a year. Environmental approvals and permitting might then take three years, he estimates, and building the railroad could take 3.5 to five years.

Lavigne calculates, in rough figures, that the KWG mine will produce 18,000 tonnes a day of chromite, which could sell for $250 or $300 per tonne. If KWG sold 3-million tonnes of straight chromite the first year, before a processing plant was in place, at $200 per tonne, that is $600 million in revenues the first year.

With those rewards, he says, "Nobody is going to leave it; everyone is going to keep kicking at it."