A market for chromite

The Ring of Fire chromite play is gaining momentum, with a couple

of juniors racing toward publishing National...

September 2, 2009
by Mining Markets staf

Commodities

Industrial/Specialty Minerals

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Canada

United States

The Ring of Fire chromite play is gaining momentum, with a couple of juniors racing toward publishing
National Instrument 43-101-compliant resource estimates on their deposits. But what is the market for
chromite?
Noront Resources (NOT-V) president and CEO Wes Hanson says the global ferrochrome market is
somewhere around 17 million tonnes annually, while his predecessor and Noront director, Joe
Hamilton, claims its closer to 12 million.
German firm Heinz Pariser Research is forecasting average ferrochrome price of US$0.79 per lb. and
US$1,600 per tonne until 2017. Raw chromite fetches about US$200 per tonne.
At a global demand 14.5 million tonnes (the average of the earlier estimates), the global ferrochrome
market worth about US$23.2 billion per year. A 5% share of that market would be worth US$1.16
billion annually.
Some rough estimates put the chromite tonnage in the Ring of Fire well into the billions but it takes
2.5 tonnes of chromite to make 1 tonne of ferrochrome.
But if you saturate the market with too much production early on, prices will sink and the financial
models used to finance development are rendered useless.

In 2006, South Africa supplied 38% of the worlds chromite, with Kazakhstan and India each
producing 18%, and Finland, Brazil and China among the largest remaining chromite producing
nations.
Most customers, mainly steel mills, which use it as a key component in stainless steel production
(chromium is alloyed with steel to make it corrosion resistant or harder) have contracts with chrome
suppliers.
The rich chromite deposits in Kazakhstan supply steel mills in Europe and Russia, while deposits in
India and Brazil largely supply domestic needs. That leaves the vast chromite fields of South Africas
Bushveld Complex to meet the rest of the worlds ferrochrome demands.
There is no chromite production in North America. The Americans are importing; they are getting
their chromite from South Africa, says Donald Hoy, Freewest Resources (FWR-V) vice-president of
exploration.
Clifs Natural Resources, one of the worlds major iron ore pellet suppliers, owns 10% (fully diluted) of
Freewest, and almost 20% of KWG Resources (KWG-V). The US$3.2-billion company clearly sees
the North American market as the best chance for success
I think Clifs has aspirations of supplying the European and Chinese markets, says Smeenk. Clifs
also sees a huge opportunity in this small North American market.
Supply problems have dogged the chromite market in recent years. Hoy says some chromite
shipments from South Africa never reached their customers. He believes there is room for another
supplier.
It depends on the quality of your product. There are diferent qualities of chromite,
If you can find a really large tonnage of very good quality (chromite) and very good grade, then you
may put some people out of business, says Hoy says
Hanson sees it diferently.
Realistically, what is a new Canadian (chromite) operation going get in an old boys club? Two per
cent, three per cent, four? Youll get the domestic market in the U.S. If you have the right connections,
you may get inroads into China, Hanson says. It looks like its going to be a difficult market to break
into.
Noronts chromite development plan goes something like this: Become a member of the International
Chromite Development Association (ICDA); publish a National Instrument 43-101 compliant resource
estimate; work out an agreement with the ICDA as to how much chromite Noront could supply the
market; establish with chromite buyers that Canadian chromite is excellent quality; develop a chromite
brand (similar to the way Canadian diamond miners made Canadian diamonds a luxury brand); and
maybe get 10-15% of the market or 1.2-2 million tonnes per year.
You have to establish a name brand. You have to be Nike, says Hanson. Fully understanding that
market is very high on our list of things to do.
Noront plans to have a National Instrument 41 101-compliant estimate for its Blackbird 1 and 2
chromite deposits by the end of 2009. The junior has drilled 154 holes and more than 52,000 metres
over both deposits.

A chromite-to-iron ratio of 2 to 1 is considered the benchmark to process chromite into ferrochromium

in a smelter.
In South Africa the ratios are generally 1.7-1.8 to 1, in Kazakhstan the ratio often exceeds 2 to 1, and
at the Proterozoic-aged Kemi mine in Finland the ratio drops to 1.5-1.6 to 1.
Most of the chromite deposits discovered so far in the Ring of Fire report chromite-to-iron ratios of 2 to
1 or better.
Ferrochrome refining requires an electric arc furnace, a massive facility comes an equally massive
price tag and chews up lots of electricity. Coking coal is also needed to process chromite into various
ferrochrome products.
The front-runner location for such a furnace seems to be Thunder Bay, Ont., which has not only
surplus electricity due to the shuttering of a handful of local pulp and paper mills, but a deep-water
port on Lake Superior.
Another option is building something on James Bay, where there is direct access to the Atlantic
Ocean.
Clifs estimates such a facility would cost US$600 million.
The supply and demand fundamentals for ferrochrome look good, with a shortage being projected for
the next 10 years. Heinz Pariser Research says stainless steel demand is projected to grow by about
6% per year to 2020 with ferrochrome demand growth slightly lower, at 5.2% per year, because of the
influence of more recycling.
Look for an indepth roundup of chromite exploration in far northern Ontario in the September issue
of Mining Markets, due to be published in a couple of weeks.