Study begins on James Bay railroad

The first tentative steps toward building an ore haul railway to the James Bay Lowlands began this past winter, Northern Ontario Business reports. Helicopters moved drills into place as geologists tested frozen riverbanks north of Nakina, taking core samples to determine where bridges can be built to haul ore from a chromite open pit in the Far North's ‘Ring of Fire' exploration camp.

Building a railroad through
the Canadian Shield and into the vast boggy plain of the lowlands will be a
huge and complex feat of engineering and construction. The railway engineers
have already begun studying the footing and economics of how to move millions
of tons of chromite out of McFaulds Lake in time for mining operations to begin
by 2016. About C$100 million will be spent by KWG Resources and their mining
partners in environmental and other consulting studies before any approval for
mining is ever given.

"It’s an exciting time,"
said Nels Ojard, special projects manager at Krech Ojard & Associates, a
Minnesota engineering firm. "The one thing you can say about this endeavor is
that it’s anything but boring."

Canada Chrome, a subsidiary
of KWG Resources, hired Krech Ojard last year to start the engineering work for
the rail connection. In concert with a scoping study of the Big Daddy chromite
deposit, KWG launched a rail feasibility study for the construction of a
350-kilometer-long (217-mile) railroad from the McFaulds Lake site, south to
Exton in northwestern Ontario.

Ojard said the construction
would require a huge coordinated effort to assemble people, material and large
pieces of equipment in an inaccessible area.

New rail construction of
this size in North America is a rarity. Ojard compares it to the Wabush Lake
Railway constructed 50 years ago, which cuts through the wilderness of
northeastern Quebec and western Labrador.

"This is a very exciting
and interesting project of a size that would be large for anybody."

The Ontario Northland
Transportation Commission (ONTC) could play a major role in the construction of
this rail corridor. KWG Resources and Krech Ojard have been tapping into the
expertise of the North Bay-based rail carrier.

"There’s been ongoing
discussions with a wide range of people in industry, including Ontario
Northland," said Ojard. "We’re working very closely to learn the lessons that
others have taken to heart and have turned into successful business operations."

KWG first approached the
ONTC two years ago, excited about their mineral findings in the Ring, and
knowing a railroad to move ore out of the James Bay region would be an
eventuality. The railway has 100 years of experience operating in the rocky
terrain of the Shield and the swampy muskeg of the Far North. The ONTC
maintains 1,100 kilometers (682 miles) of track from North Bay to Moosonee, and
from Calstock (near Hearst) to Rouyn-Noranda, Que. They’ve built spurs to serve
mines in northeastern Ontario.

The Ring of Fire rail
project is reminiscent of the ONTC’s early decades involving the extension of
rail to the mouth of the Moose River during the 1920s and ’30s.

"They’ll face some of the
same challenges we do," said Steve Carmichael, ONTC president and CEO.

Carmichael said extremely
cold temperatures can expand and contract steel cargoes, while freezing and
thawing ground can warp track beds, and there are constant year-round drainage
problems in low-lying areas.

While it hasn’t been
determined if an established rail carrier will haul out the chromite ore from
the Ring, Ontario Northland is receptive to picking up those future tons. With
the closure of Xstrata Copper’s Kidd Metallurgical site in May, the ONTC will
lose $8 million to C$9 million in metal and sulphuric acid freight, though they
will continue to ship concentrate from Timmins.

The Crown agency has a
mandate for economic development and wouldn’t mind being the exclusive carrier
of James Bay ore. In their year-end 2009 financial statement, KWG Resources
made overtures for the ONTC to take a "leadership role" in creating the rail
corridor. Carmichael said their role with the project has yet to be determined.
They are assisting Krech Ojard and the mining company in an unofficial capacity
but have not been asked to come aboard as a consultant.

He categorized their
discussions so far as "mostly conceptual but good conversations."

The KWG-Canada Chrome
project – centered around the Big Daddy chromite deposit – has the backing of
iron and coal giant Cliffs Natural Resources, a major shareholder. The southern
terminus of the route starts west of Nakina, at Exton, where there is a
6,000-foot railway siding on the Canadian National Railway main line near the
location of a closed-down sawmill. Highway access as well as sand and gravel
reserves are close by.

"Mining claims along the
entire route secured the corridor. The route would ride on the glacial eskers
that start south of the Albany River and make for an ideal track bed.

"It’s really a blessing of
nature that these sand ridges exist," said Ojard.

The route represents "the
shortest path that takes advantage of the best ground." Building the line would
cut through three provincial parks and involve 90 water crossings ranging from
creeks to major rivers like the Albany and Attawapiskat. Ojard said a great
deal of time is being spent studying the river crossing locations, hydrology
and anticipated ice flow conditions.

Besides hauling an initial
one to two million tons of ore annually, other mining players may use the line
and even passengers could be accommodated.

"There’s nothing in the
infrastructure that would preclude it from passenger service," along with
nickel, copper, zinc and forest products, said Ojard. "The corridor would be
there to serve them as well."

The feasibility study will
be finished and presented to KWG this fall.

It’s unclear whether a
concentrator will be built at the mine site or near Nakina and the location of
the furnaces to process ferrochrome has been yet not be determined. Ojard said
it’s too early to speculate on projected railroad costs until the review is
complete. The number being popularly used by the KWG and Canada Chrome for the
entire mine-railroad project is more than C$2 billion.

Carmichael said when ONTC
built a new spur into an Agrium phosphate mine near Kapuskasing, the cost per
kilometer was about C$1 million. Adding a major bridge can cost as much as an
entire section of new track. He said doing structural work on their
quarter-mile-long bridge spanning the Moose River will cost between C$18
million and C$20 million over five years.

Ojard said consulting with
First Nations is not within the scope of the engineering but they are working
with KWG and Canada Chrome to provide supporting information to facilitate
those discussions. He adds this is only "the start of the start" and the
engineers are keeping an open mind on the route as they move through the
process.

"It’s an opportunity for
all the interested groups to really pull themselves together, organize their
thoughts, plan for the future so that if and when this project moves forward
they’re all prepared for it.

Carmichael said there must
be a real effort to somehow joint venture with First Nations to make them part
of the railway through training and employment opportunities.