Sins of the past

Few mining projects have had to carry as many social expectations as the Voisey’s Bay nickel-copper-cobalt project in Labrador. So heavy is the load that the project remains undeveloped, caught between the political goals of Newfoundland Premier Brian Tobin and the economic objectives of Inco, the deposit’s owner.

Many Newfoundlanders support Tobin’s position that not one spoonful of Voisey’s Bay ore should be processed outside the province. Better to leave it in the ground than have the province’s resources “exploited” by outsiders, as has happened time and time again, they say.

Tobin is holding out for the jobs and spinoff benefits the processing complex would provide, knowing full well that up to 80% of the taxes and royalties from the mine and mill would flow to Ottawa, and not the province. This wouldn’t happen if the project was in Alberta. But Newfoundland is the recipient of generous equalization payments from Ottawa, which means the benefits from Voisey’s Bay would be deducted from those payments.

Most business leaders sympathize with Inco’s position that it can’t build a processing plant to turn concentrates into metal — either by conventional pyrometallurgical processes or by hydrometallurgical processes similar to those now being used on nickel laterite deposits in Australia — if it doesn’t make economic sense to do so. After all, companies get their financing from banks, and banks are not in the business of funding government make-work projects. Nor do they finance projects that don’t provide a reasonable return on investment. And they’re pretty rigid about such things.

Some Newfoundlanders, even some of our readers, say it’s not Newfoundland’s fault that Inco paid too much for Voisey’s Bay. We agree. It isn’t Newfoundland’s fault. Yet, in the next breath, they suggest that Inco should pay too much again, this time for a smelter and refinery or a processing plant it really doesn’t need. It’s tough logic to follow.

Tougher still to follow is the non-logic that brands any criticism of the government’s position as mainland bigotry acted out on Newfoundlanders — a fish story that reached its peak when former mines minister Charles Furey said Toronto-based newspapers were “mouthpieces for Inco and other huge giants that want to come in and pillage little provinces . . . those days are over.” Yes, minister, if those days ever existed, they are over. Nobody in the mining industry with any experience of Newfoundlanders — that would be almost all of us — dares look down on them. We do make an exception for ministers of the Crown that shoot from the lip and for newspaper columnists whose ignorance is surpassed only by their complacency.

The toughest line of all to follow is the notion that because Newfoundland was taken for a bad ride on the Churchill Falls hydro development, outsiders shouldn’t be trusted not to exploit the province again. But Brinco, not Inco, made that deal — at the behest of the Smallwood government. Why should Inco shareholders have to pay the price for someone else’s poor judgment? More to the point, why should Voisey’s Bay be held up over the past sins of Newfoundland politicians who didn’t have the foresight to see the value of Churchill Falls?

It would also be a different matter if Inco had bought Voisey’s Bay while the present law mandating downstream processing was on the books. But the law that existed when the bidding war was taking place mandated it only when “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 courts.

The Newfoundland government changed its mining law in 1998 solely to make Inco do its bidding. Inco can still apply for a mining lease, which cannot be denied assuming regulatory obligations are met. But the minister now has effectively absolute discretion to order any company to smelt and refine its ores in the province once a mining lease is granted, whether smelting and refining are economic or not. Should the company refuse, the minister can cancel the lease, which means the property would revert to the Crown. Inco and its shareholders would end up with nothing, while the province would end up owning a dormant nickel deposit. Perfectly legal expropriation, but expropriation nonetheless; and wasteful along with it.

That camp also argues that Newfoundland shouldn’t have to give up jobs and benefits because some executives in a corner office at Inco fell victim to Robert Friedland’s hype and opened the company’s wallet too wide. But some — chief among them, the premier himself — have clearly fallen for the same hype too; why else would he be parroting Robert Friedland’s 1994-vintage promotional rhetoric about “the biggest and richest nickel deposit in the world” and “the most exciting nickel, cobalt and copper deposit anywhere on the planet Earth”? He might come down and visit some time: the trip could be enlightening.

Contrary to what Tobin is telling anyone that will listen, Voisey’s Bay isn’t the biggest and richest nickel deposit in the world. In tonnage — resources included — it doesn’t even come close to the Noril’sk camp in Russia, or the Sudbury and Thompson nickel camps in Canada. Its reserves are still only 32 million tonnes of 2.8% nickel, 1.7% copper and 0.12% cobalt. Prove some more before using the words “biggest and richest” again.

But Voisey’s Bay is big and rich enough to provide plenty of benefits to Canada, including its native peoples. It’s too bad Brian Tobin can’t see past his own agenda.