Cliffs Natural Resources Inc. (CLF) has entered into an Exploration Memorandum of Understanding (MOU) with Tl'azt'en Nation and First Point Minerals Corp. for exploring the Decar nickel-iron alloy project in British Columbia, Canada. The MOU establishes a set of rules that will govern the working relationship between the parties for carrying out exploration activities related to the Decar project.
In addition, the MOU has provisions for negotiating a possible Impact and Benefits Agreement in future if the project progresses into the mine development phase. The project is presently in the preliminary economic assessment phase and there are a number of important benchmarks to be met if it is to be developed into a mine.
The Decar area is around 239 square kilometers in size, including a portion of the Mount Sidney Williams ultramafic/ophiolite complex. Moreover, the property’s location has infrastructure such as rail, road and power available nearby.
Nickel-iron alloy mineralization has been discovered in the area through diamond drilling and assaying. However, if the project is to evolve into the mine development phase, key criteria such as pre-feasibility, feasibility and environment assessment approvals are required to be attained. Cliffs holds the option to the Decar property, under an option agreement with First Point Minerals Corp. which was penned between the parties in late 2009.
Cliffs is pushing its expansion projects to increase its reserves. It intends to spend approximately $1 billion in 2012 to increase its mining and transportation capacity globally. Hence, the signing of the MOU is a step taken in accordance with the growth objectives being pursued by the company.
We currently have a long-term (more than 6 months) Neutral recommendation on Cliffs. The company, which competes with CONSOL Energy Inc. (CNX) and Alpha Natural Resources, Inc. (ANR), currently retains a Zacks #3 Rank, reflecting a short-term (1 to 3 months) Hold rating.
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