UPDATE 2-Cliffs chromite project halt dims Canada Ring of Fire hopes
June 12 (Reuters) - Cliffs Natural Resources Inc said on Wednesday it is "temporarily suspending" work on its $3.3 billion chromite-mining project in northwestern Ontario, casting doubt on development hopes for the region's mineral-rich Ring of Fire. Cliffs blamed the delay on stalled talks with the Ontario provincial government and on other political and regulatory problems. But it's far from clear that the company will be able to revive the project, called Black Thor, given the low iron ore prices that have put its operations elsewhere under pressure. "It's hard to see why Cliffs would undertake a project of this magnitude when its core business, the source of all of its cash flow, is withering," said Morningstar analyst Daniel Rohr. He said Cliffs would likely not have had the capital to go ahead with Black Thor even if infrastructure and regulatory issues had been resolved. The Ring of Fire, about 1,500 km (1,000 miles) northwest of Toronto, is a large cluster of mineral deposits that Canadian political leaders say could bring economic development to northern Ontario much as the oil sands have to northern Alberta. There are no rail lines, highways or reliable power sources in the region, and Cliffs' plan for Black Thor includes a $600 million highway that could open the zone to smaller mining companies such as Noront Resources Ltd that are developing projects or have claims there. The Ontario government effectively appointed Cliffs to lead development in the region last year, when it drafted a non-binding agreement to support the highway. But talks were put on hold when Kathleen Wynne took over as provincial premier in January. The government was not immediately able to comment. Cleveland-based Cliffs has been battered by weak prices for iron ore and metallurgical coal, and it has been clear that it would need government support to build the highway. Noront has the highest-profile of a group of junior mining companies that have interests in the Ring of Fire, including Probe Mines Ltd and Fancamp Exploration Ltd. Noront has said in the past that it can pursue other options if the Cliffs' road falls through. Chromite is refined into ferrochrome, used to make stainless steel, and Cliffs has touted the mineral as a natural next step for a company with long experience supplying the steel industry. But relatively high-cost iron ore producers like Cliffs have been hit hard by weak demand in recent quarters. At Tuesday's close, its shares were down 55 percent so far this year. Cliffs said its decision resulted from political and regulatory delays - "unfinished" agreements with the province, legal challenges from some aboriginal communities and a delayed environmental assessment - not the tough market. Cliffs' shares were up 0.5 percent at $17.59 on the New York Stock Exchange.