TORONTO (Reuters) - Cliffs Natural Resources Inc said on Wednesday that its board approved plans to conduct a feasibility study for its proposed $3.3 billion chromite project in the Ring of Fire region of Northern Ontario.
The Cleveland-based miner also announced plans to build a ferrochrome processing facility in Sudbury, a nickel mining hub that is home to major Xstrata Plc and Vale Sa operations.
Morningstar analyst Daniel Rohr said the project would make Cliffs one of the largest chromite producers in the world. The company estimates it will produce of some 600,000 tons of ferrochrome a year and 1 million tons of chromite concentrate for export.
South Africa, Kazakhstan and India are top global producers of the metal, a key ingredient in stainless steel.
Cliffs did not say when it expects to complete the feasibility study, but said it expects the majority of capital spending for the project to occur in 2014 and 2015. Its stock was slightly higher at $56.96 on the New York Stock Exchange.
The company will not make a final decision until it has both environmental approvals and agreements with aboriginal groups.
The mine has the potential to open up the Ring of Fire, a remote swath of mineral-rich land some 1,500 kilometers (900 miles) northwest of Toronto, to development. Numerous small mining companies are exploring metal deposits in the region.
"Ontario is very committed to ensuring this development and recognizes it will be opening up that part of Ontario to future development and opportunities," the province's Ring of Fire coordinator Christine Kaszycki told Reuters.
But a serious lack of infrastructure in the region will be major hurdle. Developers must likely build hundreds of miles of all-season road south to a highway to Sudbury, along with power and other basic infrastructure.
Cliffs said it is working with the province to address the infrastructure issues.
Some analysts worried that overall development costs, which have already more than tripled to $3.3 billion from an earlier estimate of $1 billion, could rise further.
"I don't expect this to be a $6 billion project, but I think you could certainly see further cost pressures of probably 10 to 20 percent above current levels, just based on what we're seeing with other projects," said Dahlman Rose analyst Anthony Young.
Ontario has backed the development, which it expects to create some 750 mining, milling and transportation jobs, plus up to 450 jobs at the ferrochrome processing facility.
Additional reporting By Euan Rocha and Claire Sibonney; Editing by Janet Guttsman