$80B Plan Nord aims to attract more miners to Quebec

Up until about two months ago, management at Western Troy Capital Resources (WRY-V) thought the company might have to come up with as much as $70 million in a public-private cost-sharing partnership to build the Otish Mountain Road, which will pass within 70 km of its MacLeod Lake copper-molybdenum project in northern Quebec. Access to the project area, about 275 km north of Chibougamau, is currently limited to aircraft and snowmobile. 

But now under Premier Jean Charest’s ambitious Plan Nord, the company says, the cost of extending Route 167 all the way to the Otish Mountains will be footed by the government. The only outlay Western Troy would have to make is $14 million to build a 70-km spur from the Otish Mountain Road to MacLeod Lake.

The news has made Rex Loesby, Western Troy’s president and CEO, an even bigger fan of operating in the province – if that is possible – than he was before.

“I’ve worked all over the world – in South America, Mexico, Alaska, the U.S., Australia, Papua New Guinea – and Quebec is by far the best place I’ve ever worked in terms of everything from mine permits to tax rebates to working with the government on making things happen,” he says. 

“Quebec is already a great place to be and Plan Nord makes it even better,” he continues. “The economic benefit projections ($80 billion over 25 years) that form the core reasons for the Plan Nord include the MacLeod Lake project, so the government of Quebec and the regulatory agencies involved will be looking to assure the mine gets developed.”

Extending Route 167 to the Otish Mountains will require an investment of nearly $280 million over the next five years, according to Quebec’s budget, released in March. The area served by the Route 167 extension stretches from the northeast of Mistissini Lake to the Trans-Taiga road leading to the La Grande hydroelectric complex. 

The infrastructure project would add 260 km to Route 167 – an area that currently is accessed only by an ice road in winter and seaplanes in the summer – and will benefit several companies including Stornoway Diamond Corp. (SWY-T), Strateco Resources (RSC-T), Abitex Resources (ABE-V), and Eastmain Resources (ER-T).

Construction will begin this summer and is anticipated to be an engineering feat, involving at least 20 bridges and many culverts necessary to cross 76 waterways. 

Other infrastructure projects outlined under Plan Nord include a $200-million upgrade of Highway 389 between Baie-Comeau and Fermont, an area rich in iron ore mines such as Consolidated Thompson Iron Mines‘ (CLM-T) Mt. Wright mine and ArcelorMittal‘s (MT-N) Lac Bloom and Fire Lake mines. 

In addition, about $57 million over the next five years will be invested in building a 500-km land link between Nunavik and the rest of Quebec, which would provide access to the Labrador Trough. The Trough stretches 60,000 sq. km between Schefferville and Ungava Bay, a region that is also rich in iron ore and home to New Millennium Capital‘s (NML-V) LabMag and KeMag projects. Also in the cards: a $33-million investment in feasibility studies looking into building a deep-water port at Whapmagoostui-Kuujjuarapik and a 250-km road between the new port and Radisson.  

“For us what would be very important is the deep-water port,” says André Gauthier, president of Matamec Explorations (MAT-V), which has two exploration properties in the Plan Nord region. Its Wachibagau-Lesperance property is in the Desmaraisville area, 10 km north of Metanor Resources‘ (MTO-V) Bachelor Lake gold project, and its Sakami gold property is in the James Bay area.

Although Gauthier admits that the two projects are too early-stage to determine whether they will ever proceed into development, a port would certainly help save costs down the road. He also points out that, in terms of major mining companies pondering where they should look for new mining projects, Plan Nord makes the province that much more attractive. “It’s good news for the mining industry,” he says. “If you look at a map, the area covered by Plan Nord makes up about three-quarters of the entire province.”

Plan Nord underscores the importance the Quebec government gives to encouraging mining companies to operate in the province and stepping up investment decisions across all natural resource sectors. 

To be sure, many of the details of the northern development plan have yet to be ironed out and question marks remain. It is unclear, for instance, whether some of the funds for the Nordic plan will come from additional taxes or mining royalty payments, some companies say.

René Branchaud, head of the mining group at Lavery, a law firm in Montreal, does not believe higher taxes or royalty payments are part of the game-plan under Plan Nord. “They have already raised royalties in 2010 and the government has tabled a draft of the new Mining Act in which there are a few more obligations for mining companies but I don’t believe they are significant, except for the funding of the rehabilitation plans,” he says. (Under the bill tabled on May 12, mining companies must offer financial guarantees for 100% of all rehabilitation costs; commit to begin exploration on mining claims within two years; and hold public consultations with communities and municipalities before undertaking mining projects.)

Branchaud clarifies that under Plan Nord, the government has committed to spend about $1.2 billion over five years, $821 million of which will be spent on transportation infrastructure projects and another $370 million on other infrastructure related to housing, health, education, culture and the creation of parks. 

Another $52 million would be spent over five years on setting up a crown corporation to oversee the plan and assist the 16 ministers involved in administering the various investment projects and ensuring that they advance quickly. 

But the lion’s share of the investment money to get these projects off the ground, he says, ultimately will come from the private sector.

“The $80-billion figure is the amount the government hopes will be invested over 25 years not only by the government, but mainly, and by far, by private corporations,” he explains. “And the money that the government will get back from corporations through taxes and so on will be reinvested in the north, either in the communities or for other infrastructure, so it will be used for northern development.”

Branchaud argues that the development plan is a signal that the provincial government is serious about developing the north, that the north is now very much open for business, and that as a result, projects can be developed much faster than before.

That signal is being received across the mining industry in Canada, and beyond. 

“Quebec has a track record of lending support to economic development, particularly in the resource space, and obviously they’re doing it again,” says Peter Cashin, president and CEO of Quest Rare Minerals (QRM-V), which is advancing its Strange Lake rare earths project in the province’s northeast. 

“This is a huge, very long-term commitment to develop economic activity north of the 49th parallel,” he adds. “It’s a reflection that they’ve taken this long-term view and that’s exactly what governments are supposed to do.”

Martin Bergeron, vice-president of operations at Aurizon Mines (ARZ-T, AZK-X), describes the plan as “long overdue” and says that among its many benefits is the fact that it will give mining and other companies in the region a better basis from which to do business with the First Nations and Inuit communities.

“If you want to do business anywhere in Quebec these days, you must establish good relatio
ns with the stakeholders of your projects and this is particularly true with the First Nations and Inuit communities in northern Quebec, and having agreements with them, is of the utmost importance,” he explains, noting that the implementation of Plan Nord will fully involve them in all project discussions. “Most of them already feel included in the Plan Nord so I think it’s very favourable.”

Aurizon is currently earning into two properties on ground covered under the Plan Nord: The Rex South property, 145 km southeast of the community of Puvirnituq in Nunavik, and the Wildcat property in the James Bay region, 350 km north of Matagami.

While mining companies certainly stand to benefit from the provincial government’s investments under Plan Nord, Quebec will benefit too. 

Cashin of Quest Rare Minerals argues that seed capital typically brings back three to four times the original investment and points out that bringing investors into the province and developing downstream industries, particularly in support of the expanding rare earths industry, will bring thousands of jobs, millions to billions of dollars in revenue, and technical expertise to the province.

With rare earths, he explains, the province would ultimately benefit from enhanced R&D capacity and the development of expertise and technologies in the separation and refinement of rare earths, as well as product development and enhanced manufacturing capacity. 

“From our perspective, the Plan Nord will benefit the mineral resource industry in the province as a whole,” Cashin explains. “Quebec is aware of the Strange Lake project and the benefits of the development project for them… I see this as an opportunity to lend support to building an entire new sector of the economy.”