Noront Resources

More than two years after Noront Resources Ltd. discovered the "Ring of Fire," it is taking the next big step: consolidating the region.

Yesterday, the Torontobased company unveiled a hostile, all-stock proposal to buy Freewest Resources Canada Inc. for about $90-million, a move that would greatly boost its resources as it looks to take the discovery to the next stage of development.

"Our mandate is to become Canada's next great mining company. I believe the Ring of Fire offers that springboard to get us there," new chief executive Wes Hanson said in an interview.

The "Ring of Fire" is the popular term for McFauld's Lake, a remote stretch of land in the James Bay Lowlands of Northern Ontario. Investors never thought much about it until Noront made an ultra-high-grade nickel-copper discovery there in 2007. That triggered a market frenzy and a huge staking rush in the region by other junior miners.

Many of those companies were derailed by the credit crunch of 2008, which wiped out their aggressive exploration plans. And when the dust cleared, Noront and Freewest stood out as the companies with the best discoveries and the best capital positions.

By buying Freewest, Noront would become the undisputed king of the region and would greatly increase its chromite resources.

"This appears to be a win-win, as it could mean critical mass for all of the Ring of Fire deposits given the remote location," Genuity Capital Markets analyst Michael Gray wrote in a note to clients. He added that the key deal driver is the chromite, as Freewest's deposits would "roughly double" the size of Noront's current chromite deposits.

However, Freewest does not plan to go quietly. Chief executive Mackenzie Watson issued a terse statement rejecting the offer before hiring a financial advisor to study it.

Additionally, Mr. Watson is owed a startling $4-million payment if control of the company changes hands. Noront refused to pay that much, noting it is almost 27 times his regular compensation and equivalent to nearly 6% of Freewest's market value before the offer was announced.

In an interview, Mr. Watson said that Noront is "the nickel company" and Freewest is "the chromite company," and that this is just not the time to put them together.

"There may be some synergies, but I think it's much better for our shareholders to stick with us, and more exploration on our properties," he said.

pkoven@nationalpost.com---

FREEWEST RESOURCES CANADA INC.

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