Tories say Cliffs quit Ring of Fire because of planned Ontario tax on chromite

TORONTO – Ontario’s Opposition says a Liberal government plan to tax the mineral chromite prompted Cliffs Natural Resources to pull out of the Ring of Fire mining project in the province’s north.

The U.S.-based Cliffs withdrew earlier this year from the Ring of Fire, a region 540 kilometres northeast of Thunder Bay that is rich in deposits of copper, nickel, platinum and chromite, which is essential for making stainless steel.

The company, which spent $550 million to buy land in the area, was in negotiations with the Ontario government for a $3.3-billion capital investment to develop the Ring of Fire until it pulled out last spring. It also cancelled a planned $1.8-billion chromite processing facility in Capreol, near Sudbury, Ont.

Documents released as part of an investigation into cancelled gas plants in the Toronto-area four years ago revealed the province wanted to impose a royalty on chromite mined by Cliffs of between $6.6 million and $34.4 million a year.

Minister of Northern Development and Mines Michael Gravelle refused to confirm the Liberals tried to impose the chromite royalty, insisting the negotiations with Cliffs were commercially sensitive and must be kept secret.

But Progressive Conservative finance critic Vic Fedeli says the documents prove what Gravelle doesn’t want to admit: that the chromite tax drove Cliffs to abandon the Ring of Fire.

Gravelle insists that’s “completely and absolutely false,” and says Cliffs made their decision to withdraw from Ontario because of “a number of market conditions,” and he refused to even mention a tax or royalty on chromite.

“Those discussions were never in any way finalized,” he said. “There was nothing in that regard that was remotely close to being set up.”

Fedeli said the Conservatives discovered the chromite tax as they sifted through reams of documents they were given as part of the investigation into the Liberals’ decision to cancel gas plants in Oakville and Mississauga prior to the 2011 election, at a cost of up to $1 billion dollars.

“Page 2,156 of the 300,000 documents we received says that they proposed a chromite tax,” Fedeli said.

“They had to turn over every gas plant document that had anything hydro-related, and there also was a hydro deal here, so that’s how we got the documents.”

The three-part agreement that was never concluded between Cliffs and the province called on the government to give the company a reduced rate on electricity for 25 years that would have saved it up to $1.5 billion.

The failed deal also required the province to pay $425 million for an access road to the Ring of Fire while Cliffs would have paid up to $600 million, with any balance of capital costs being made up with road tolls.

Ontario-based Noront Resources paid $20 million for Cliffs’ chromite mining claims in the Ring of Fire last March, giving it a total of 360 claims covering 80,000 hectares or 65 per cent of the region.

The New Democrats said Noront is expected to halt spending on the Ring of Fire by the end of year, and warned Gravelle that the government’s failure to develop the project will mean “enormous” job losses.

“Will your government take action now before Noront’s investors bail and you are responsible for killing a $60-billion project,” asked NDP critic Michael Mantha.

Cliffs did not immediately respond Thursday to requests for comment on the Tory allegations.

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