Since the Ring of Fire was found in 2007, politicians and business leaders have talked about how it could be good for the economy. The Ring of Fire is a remote, mineral-rich area in northern Ontario.
In recent weeks, this has gotten worse. Recently, Ontario Mines Minister George Pirie said, “From what I hear, mining people say this is a trillion-dollar project.”
In a recent documentary by Global News, Pirie said that the $1 trillion figure was “not a formal valuation,” but was instead “based on the increased value of critical minerals that are already in the ground.”
Professionals and researchers in mining and resource governance have called the minister’s comments exaggerated and even harmful because they could make fraud easier.
CBC News sent an email to Pirie’s office asking why he said the Ring of Fire was worth $1 trillion, what information he was using to talk about possible valuations in the area, and if the province has a working valuation of the Ring of Fire.
Dylan Moore, a spokesman for Pirie, gave a short answer: “The economic potential is unlimited.”
When Luca Giacovazzi, the CEO of Wyloo Metals, was asked about Pirie’s claim, he laughed and said to Global, “There are a lot of lies about the Ring of Fire, and that number is way off… Numbers like that don’t make much sense.”
But in a statement to CBC News, Kristan Straub, the CEO of Ring of Fire Metals, said for the first time in public that their most recent estimate of the value of minerals in the area is around $90 billion.
Ring of Fire Metals, which used to be called Noront Resources, has most of the established mining claims in the area. In April 2022, Australian mining company Wyloo Metals paid $600 million to buy the company, making it private.
Straub did not provide a detailed breakdown of how it reached that estimation, leaving one geologist concerned about how they got such a large number.
A geostatistician says, “It’s not endless.
Mohan Srivastava said that it’s frustrating to see the minister say things about the value of minerals in the Ring of Fire and then stand by them.
Since the 1970s, Srivastava has been a geologist who specializes in estimating resources and works as a consultant for Red Dot 3D. Srivastava helped write the widely used college textbook.An Introduction to Geostatistics in Practice, which is a field of study that looks at Earth science data using statistical methods.
“No, it doesn’t have no end. It couldn’t be,” said Srivastava, adding that the claim of $1 trillion is “such a round number that it gives itself away as a wild guess.””
Srivastava said that professional geologists and publicly traded companies in Canada could never make such claims because they are controlled by national rules called the National Instrument 43-101, Standards of Disclosure for Mineral Projects.
I think the harm is giving people a chance to lie or exaggerate in a different way.– Mohan Srivastava, geologist specializing in resource estimation
One goal of Canadian securities laws is to protect investors from wrongdoing or fraud. This is done by making sure that professionals make accurate economic estimates of the value of minerals.
In 2001, after one of the largest financial scams in the world’s mining industry, the regulatory tool went into effect.
In 1996, Bre-X Minerals, a small mining company based in Calgary, claimed to have found a lot of gold in Busang, Indonesia. Its stock price went through the roof, making early investors into millionaires. However, just over a year later, an independent report said that the gold find did not exist.
Srivastava said that part of the problem right now is that National Instrument 43-101 doesn’t apply to politicians or market analysts, so they can’t be stopped from making incredibly optimistic statements under the current rules.
“I think the harm is that it opens the door to another kind of exaggeration or even fraud,” Pirie said. “Small and large investors can get excited about projects if they think that the person making the claim, like Pirie, is a trustworthy source.”
Ring of Fire Metals has its own estimate of how much it’s worth
When the Ring of Fire was first found, there was a lot of talk about how rich it was in chromite, a mineral that is used to make stainless steel.
Politicians, businesses, and news organizations have said for more than a decade that the mineral deposits are worth more than $60 billion. This number is rarely questioned.
But in 2019, the Globe and Mail found that the $60 billion claim came from a 2013 speech by James Franklin, the former head geologist at the Geological Survey of Canada. Franklin told the newspaper that most of his estimate was based on “inferred” resources from public companies that had published resource estimates, which he said he shouldn’t have done.
When geologists or companies make public estimates about the amount and value of their resources, those estimates must fit into one of five categories: inferred/indicated/measured mineral resource, probable/proven mineral reserve, inferred/indicated/measured mineral resource, and probable/proven mineral reserve. These categories are based on how much geological information is known and how the economy is doing.
The Canadian Institute of Mining, Metallurgy, and Petroleum makes the rules for the groups. Based on limited information and sampling, an inferred mineral resource has the lowest level of confidence, while a proven mineral reserve has the highest level of confidence about the type of metals and the economic viability to extract them.
Recently, people have become more interested in the Ring of Fire because it has important minerals like high-grade nickel, chromite, zinc, and copper that are needed for electric vehicle (EV) batteries and energy storage systems.
WATCH: Ontario’s mines minister talks about how important certain minerals are.
Based on the prices of commodities in January and February 2023, Ring of Fire Metals CEO Kristan Straub estimated that the “in-situ, gross metal value of our defined ore bodies in the Ring of Fire to be around $90 billion.”
The company did not explain in detail how it got to the $90 billion number, but it did say that it was based on data from the range of inferred, indicated, and measured mineral resources and probable and proven mineral reserves.
Srivastava said he doesn’t think that number is true.
“Mining companies shouldn’t use the gross metal value as the project’s value, since that doesn’t take into account costs, taxes, and the discount rate,” he said. The discount rate is a calculation based on the idea that the value of the metal produced by a mining project will go down over time.
The National Instrument 43-101 tells companies not to use gross metal values and not to give inferred resources an economic value, Srivastava said.
He pointed to a feasibility study that Noront Resources put out in 2012 about their Eagle’s Nest deposit, which he said was the most promising find and the mining project that was closest to being put into production in the area.
“They did a full economic analysis, taking into account both capital costs and operating costs, as well as taxation, and they came up with a value for the Eagles Nest project of just over half a billion dollars,” Srivastava said. This is a realistic, economic value that can be shared with the public.
The feasibility study from 2012 is still being changed by Ring of Fire Metals and its parent company, Wyloo Metals.
Srivastava looked at other 43-101 reports from companies and mineral deposits in the Ring of Fire that were available to the public. He said he doesn’t know how they could have gotten to the $90 billion range.
“They’ve misused the numbers by using in-situ values and gross metal values, including inferred resources and all that,” Srivastava said.
“Not figuring out how much it will cost to get the resources out is a big mistake. They are acting like cheerleaders instead of builders who are trying to build a mine.”
Indigenous rights and the environment must be taken into account
Franklin, who helped find the first metals in the Ring of Fire, said that it does have a lot of metals and could become a major mining district in Ontario.
In an interview with CBC News, he said, “Once the discovery is made and put into production, the chances of making more discoveries are almost 100%, so this is how the Ontario government is thinking about it and promoting it.”
Franklin said, “But again, it’s just a possibility because no one has figured out how we’re going to get this stuff out of there.” He also said it’s not clear how much it will cost to get the resources out.
There are no roads or power lines leading to the remote area, and the minerals are in a hard-to-reach place. They have to be moved south through the dense boreal forest and the peatlands of the James Bay Lowlands, which Franklin called “the world’s most miserable swamp I’ve ever worked in.”
Plans to build a road to the area are moving forward. The province has approved the terms for the environmental assessments that need to be done before three different road projects can be built. But the federal government is still in the planning stages of a broader regional assessment, and no proposed mining projects have been sent to the Impact Assessment Agency of Canada for regulatory review, a Natural Resources Canada spokesperson said.
WATCH: One First Nation says they will keep people from building on their traditional lands.
Several First Nations have also said they don’t want any new construction in the area.
Neskantaga Chief Wayne Moonias said in a recent video statement, “This is a message to all the investors: If you want to come and do business in our traditional homelands, you have to get our free, prior, informed consent.”
“No government or country can say you can’t go to our traditional homelands. We’ll stand up for it. Before you can cross our river system, you’ll have to kill us.”
With all of these important things to think about, like how mining affects the environment and the rights of First Nations in the area, Teresa Kramarz says she’s worried about the language she’s hearing, especially from politicians and industry leaders at the Prospectors and Developers Association of Canada (PDAC) conference in Toronto earlier this month.
Kramarz is a professor at the University of Toronto and co-director of the Environmental Governance Lab. He is also co-chair of the UNDP’s Advisory Group on Energy Governance.
“PDAC has brought out the excitement about the Ring of Fire, the important minerals, and the huge, once-in-a-lifetime business opportunity,” Kramarz said. “I honestly don’t hear any environmental concerns in that excitement.”
Kramarz said that a big part of the argument for mining important minerals in Canada instead of other places is that it is done better, more responsibly, and with better ways for Indigenous communities to be consulted and take part.
“If that’s the narrative for onshoring [mining in Canada], then it would be good to not forget at least in the messaging … that there are problems with the environment that need to be fully understood and fixed.”
A spokesperson for Natural Resources Canada told CBC News that before any decisions are made about mining, its possible effects must be studied and “meaningful consultation” with First Nations must be done.