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(Reuters) - The cost of developing what may be the largest chromite deposit in North America has tripled from the original $1 billion estimate, a major participant, Cliffs Natural Resources, said on Thursday.
"Initially we did go out with a billion-dollar price tag for this project," said Chief Executive Officer and Chairman Joseph Carrabba.
"(Now) We're in about the $3.3 billion range," he told Wall Street analysts during a conference call, when asked about the status of the Black Thor chromite deposit Cliffs is developing in northern Canada.
Carrabba said the estimate had risen mainly because road construction in the remote Ontario location had not been included in the original estimate.
He said there had been a "sharpening of the estimate" as the project moves through the pre-feasibility stage.
"The transportation and the road has gotten more expensive in this segment than we expected and everything else is falling in line with that."
Cleveland-based Cliffs controls three large chromite deposits in the "Ring of Fire" region of northern Ontario with production at its wholly-owned project, Black Thor, slated to begin in late 2015 or early 2016.
Cliffs originally projected it would produce 600,000 tons of ferrochrome annually. The company now expects to produce 1 million tons of export chromite ore concentrate which is used to make stainless steel and other alloys, in addition to the original 600,000 tons of ferrochrome.
In January, Cliffs said it was budgeting $150 million for mine development, $800 million for a concentrating plant and $1.8 billion for a ferrochrome processing facility. An integrated transportation system, including an all-weather surface road, will cost an additional $600 million, although part of that cost would be borne by the Ontario provincial government and other industry participants.
Carrabba said Cliffs is engaged in positive conversations with the provincial government over an environmental panel review at the project believed to be largest chromite deposit in North America.
Asked if Cliffs still believed Black Thor to be a viable project, Chief Financial Officer Laurie Brlas (cq) said: "It is absolutely still a viable project with a return that exceeds our cost of capital."
Cliffs' shares slipped 3 cents to $68.65 in afternoon trading on the New York Stock Exchange, a day after it reported fourth-quarter earnings that missed Wall Street expectations.
Reporting By Steve James