Look to public-private partnerships to build infrastructure for Ontario’s Ring of Fire

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Appeared in the Thunder Bay Chronicle Journal, March 1, 2017

It has been 10 years since the discovery of a massive chromite deposit in northern Ontario, which could be a game changer for the region’s economy. But despite this potential, the developers are still as far away from bringing a mine into operation today as they were a decade ago.

Known as the “Ring of Fire,” the area is rich with deposits of Chromite—which is used in the production of stainless steel—nickel and copper. The possible upside of the region’s economic potential is tremendous. At one point, then Conservative Treasury Board President Tony Clement called the Ring of Fire an economic equivalent of the Alberta oilsands given the projected investment required. That may be an exaggeration of course, but the deposit nevertheless has the potential for thousands of jobs for several decades of mining.

So why the delay?

The mineral-rich area is located about 400 kilometres north of Thunder Bay in northwestern Ontario, and the project requires hundreds of kilometres of road over muskeg to the mine site, which would open up the isolated area to markets and the wider economy. Noront Resources is the main business proponent of the project after Cliff Resources pulled out in 2013. Both companies dealt with deteriorating relationships with local First Nations, but in the end, the main issue was a lack of infrastructure to get the mineral to market. In April 2016, a Chinese rail company made news when it was announced they were exploring the possibility of building a rail line to the Ring of Fire deposit.

Before yet another year passes, the issue of who will bear the burden of risk associated with the massive infrastructure should be resolved. David Kaplan of Global Public Affairs, a public affairs firm, argued in 2014 that policy makers must strongly consider a public-private partnership (P3) model for the necessary infrastructure. Public infrastructure is a legitimate responsibility for government, as long as it is really necessary and done correctly. In most P3 models, federal and provincial governments, along with private equity partners, pay for the infrastructure, and a private sector partner builds and maintains the infrastructure over time.

All parties concerned should re-consider the ideas of Kaplan, as well as other P3 proponents, including one former Assembly of First Nations (AFN) executive. In the case of the latter, the argument goes further in saying P3s should also be considered in the case of power supply and other assets that would enable mining development in the Ring of Fire. The P3 model has been used in hundreds of projects across Canada, including in schools and hospitals. Mark Romoff, president of the Canadian Council for Public-Private Partnerships, has said the public-private model is relatively new to First Nation communities, but has much potential in dealing with the public infrastructure gap on so many reserves. Developing the Ring of Fire could put stress on surrounding First Nations due to more people coming to those communities. Of course, there will likely be more economic opportunities from the increased people. But the beauty of the P3 model is that it generates resources to help deal with that added stress.

For mineral extraction to occur, modern transportation routes must be built that can handle Ontario’s winters and heavy mining trucks. Kaplan also said politicians are reluctant to put taxpayers alone on the hook for routes that will largely by used by a few mining companies and not the general public.

A P3 has many appealing features as it would place the policy risk on the governmental partner, where it properly belongs, while offloading the financial risk onto the private sector.

A P3 arrangement allows the infrastructure to pay for itself over time. The revenues derived from the mine (and perhaps truck-tolls) are put back into paying for the public infrastructure, which has the added bonus of opening up this depressed region to development, which ideally in time will reduce the need for social investment in those isolated communities. To some, it is really a loan from taxpayers that nets them a profit on payback, much like bonds.

In the end, politicians need to show courage in moving forward on the necessary infrastructure for the Ring of Fire, and the P3 model is perhaps the most attractive option, both for the region and for the taxpayer.

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