The duel over who will control high-value chromite resources in the remote "Ring of Fire" area of Northwestern Ontario resumed Monday with Cliffs Natural Resources Inc. claiming Toronto's Noront Resources Ltd. overstated the value of its counterbid for Freewest Resources Canada Inc. last week.
Joseph Carrabba, CEO of U.S.-based Cliffs, a large international iron ore and coal producer, also said Noront's own chromite properties in the same region are deeper, thinner and discontinuous, and offer no synergies in a merger with Freewest.
"There is only one mine to be developed, a surface operation on one of Freewest's properties, rather than an underground mine on Noront's deeper deposits," said Carrabba in a statement.
"The scale and quality of Freewest's 2.5 kilometres long chromite deposits render Noront's deeper deposits completely irrelevant at this point," he said. "This is why Cliffs has no intention on acquiring Noront or its chromite deposits."
Last week, Cliffs offered stock for Freewest, valuing its shares at 90 cents each for an overall $211 million. This had been sweetened to surpass Noront's all-stock offer valuing Freewest shares at 86 cents each. It is this stated value that is contested by Cliffs.
Chromite is processed into ferrochrome, a key ingredient in stainless steel manufacture. Cliffs claims a new Freewest chromite mine and processing plant costing about $800 million U.S. could be up and running by 2015.
Later, Noront CEO Wes Hanson said his company's offer remains on the table until expiry Dec. 11 and his lawyers are reviewing the Cliffs statement. It is a final offer, he added.
The calculation of the value of the warrants attached to its Freewest offer worth 86 cents a (Freewest) share was based on Noront's share-price, he said, and "we stand behind it." However the value of the warrants would normally fluctuate with Noront's future share price.
Hanson, a veteran of the Diavik diamond mine north of Yellowknife and other projects, said operating an open pit mine in the waterlogged topography of the Ring of Fire region, about 350 kilometres from the nearest road, presents "enormous challenges" and an underground project makes more sense, "especially when you put the Noront and Freewest chromite properties together."
Freewest shareholders have greater upside potential from accepting the merger with Noront, which plans to have five drills working on its properties from January through June to boost ore reserves.
© Copyright (c) The Montreal Gazette
