Tobin vs. Schulich

The war of words between Newfoundland Premier Brian Tobin and Toronto businessman Seymour Schulich over the Voisey’s Bay nickel project in Labrador has served one useful purpose: it has made everyone aware that this project ain’t going anywhere anytime soon.

That’s just fine with the Australians, particularly those lavishing praise on Tobin for helping get their nickel projects financed and into production. “We could never have done it without him,” one said during a presentation at Mining Millennium 2000 in Toronto. Tobin’s tough tactics are also being cheered in New Caledonia, a far-flung island nation that is hoping to become the next big name in nickel with the help of Canada’s two leading nickel producers.

It’s bad news for Canada, though federal politicians don’t seem to care, not with dot-com tulips blooming like crazy in their New Economy garden. It’s bad news for the mining industry, but fewer people care about mining when there are dot-coms trading at 4,000 times revenues with larger market caps than the major banks. Oh for saner, sensible times and a better context in which to understand what went wrong at Voisey’s Bay — something we’re asked to do time and time again, mostly by mad-as-hell investors.

The impasse is tough to explain, but, in a nutshell, there are two positions — or more properly, two solitudes — at work here. The first is that most Newfoundlanders support Tobin’s position that not one drop of ore should leave the province until Inco builds a smelter and refinery, as well as the mine and mill. This resolve, which stems from a series of past government blunders that left the populace suspicious of outsiders, is as hard as a rock. On the other hand, most of the business community shares Inco’s belief that Voisey’s Bay should be developed on its economic merits, just like any other private-sector project. They are defending a cornerstone of the free enterprise system.

All sides agree that the government has a legitimate role to play in overseeing the regulatory and environmental permitting process, and in helping resolve underlying land claims. The core of the dispute is whether or not the government has the right to dictate the economic and technical terms of resource development.

Tobin believes he has this right. He argues that Schulich’s quarrel is “with a fundamental policy of the government I lead, which requires that those who seek to develop our mineral resources must process those resources in Newfoundland and Labrador, wherever feasible.”

Tobin points out that this law was put on the books in late 1995, before Inco bought rights to Voisey’s Bay and after the company made a “promise” to build a smelter and refinery. “Inco knew what it was getting, and got what it bargained for,” he pontificates.

Tobin is a populist promoter who clearly believes the best defence is a strong offense. But the mining business knows promoters better than most, having coined the adage that, “It’s not what they [promoters] tell you, but what they don’t tell you.”

For starters, Tobin is being less than honest when he states that Inco “promised” to build a smelter and refinery. The company only unveiled “plans” to build the downstream processing facilities, and it did so with the caveat that such facilities would only be built if they were “economically feasible.”

Those two words are often overlooked, but they are critical to this debate. The law that existed when the bidding war took place mandated downstream processing only when it was “economically feasible,” and didn’t put the cabinet’s decision on that question out of the reach of the Mineral Rights Adjudication Board and the court.

Inco had no way of knowing that Brian Tobin would alter the law further after it acquired rights to Voisey’s Bay. Nor did anyone else. But that’s exactly what Tobin did in 1998, solely to make Inco do his bidding. His recent missive in The National Post doesn’t mention this point at all. Inco can still apply for a mining lease, which cannot be denied, assuming regulatory obligations are met. However, the 1998 changes to the mining law give the mines minister effectively absolute discretion to order any company to smelt and refine its ores in the province once that lease is granted, whether smelting and refining are economic or not. Should the company refuse, the minister can cancel the lease, which means the project would revert back to the Crown. And there is no longer any recourse to the Adjudication Board or to the courts. If that isn’t bad faith, we don’t know what is.

Tobin doesn’t talk about these changes at all, yet in mining circles they are viewed as being worthy of a banana republic. Tobin has placed his mines minister above the courts. He has given himself unchallenged power to decide what is “economically feasible” and what isn’t. He has given his government the right to expropriate any mineral deposit from any company that does not do its bidding. If that isn’t unfair, we don’t know what is.

Tobin reassures the public that his position is based on studies from the best advisors in the world. “These expert advisors have counseled us that the Voisey’s Bay project can be developed in an economically feasible manner with full processing in Newfoundland and Labrador.”

During a 1999 interview with Ann Petrie of the Canadian Broadcasting Corporation, Tobin promised to make these reports available to the public. But our requests to obtain them were flatly and repeatedly denied. Is it because we know who the nickel experts are?

If Tobin’s statements are to have any credibility, he should make his reports and studies public. Until that happens, Schulich has every right to complain. Sure he has a vested interest, but he’s also voicing the frustration of other investors, as well as the mining companies, whose ability to raise capital has been harmed by Tobin’s heavy-handedness.

That brings up another important point: exploration, and how it could have saved the day had the rules governing resource development been applied fairly. This didn’t happen. While special provisions were made to allow for provincial and aboriginal participation in the permitting process, too many other intervenors used Voisey’s Bay as a means to plead their special interests. They believed Robert Friedland’s hype that the project was the biggest and richest in the world. But the real nickel experts agree: it isn’t any such thing, nor is it a nickel camp yet (the usual prerequisite for smelting and refining complexes).

The high-grade Ovoid was expected to be all things to all people, but, at the end of the day, it was too small to do that big a job on its own. Another discovery in the neighbourhood might have saved the day, but that didn’t happen either. The geology is complex, and if another Ovoid exists, nature is hiding it well.

What Tobin and many Newfoundlanders forget is that Voisey’s Bay didn’t fall from the sky into their laps. Thousands of people invested both their intellectual and financial capital — not to mention their hearts and souls — to find, explore and advance this project for the benefit of all. Their contributions have been totally ignored and belittled. Many have packed up and gone elsewhere because their faith in fair play, and in this nation’s system of mineral tenure, was horribly betrayed.