Meadowbank a reality check for Nunavut mining: AEM executive
“There is no common vision of what is a benefit”
You think it’s easy to build and run a mine in Nunavut?
Denis Gourde, Agnico-Eagle’s Nunavut general manager, told delegates at the Nunavut Mining Symposium in Iqaluit April 19 that it’s harder than his company ever planned for, and that the Meadowbank mine near Baker Lake taught his company a long list of tough lessons.
The biggest continuing problem? The quality of Nunavut’s labour force, one of several big problems that have led some people to question whether the territory is even ready for mining.
“There were all kinds of production problems, fires and other situations, but I would say the most dramatic situation we have at Meadowbank is absenteeism and the turnover we have within our Inuit workforce,” Gourde said.
He backed that up with figures that show a stunning 80 per cent turnover in Inuit labour at the Meadowbank mine.
Of 276 Inuit workers hired in 2011, 229 departed, Gourde said.
At the same time, contrary to the company’s expectations, absenteeism among Inuit employees increased over the life of project. Since 2009, the absenteeism rate has swelled from about 2 per cent to 5.6 per cent, Gourde said.
That may not sound like much. But it means that in 2011, an average of 22 workers went AWOL every day at the Meadowbank workplace.
“We have an average of 22 missing, not for the first half hour, but for the full day, 22 missing people,” Gourde said. “You can imagine the financial burden on the operation when you have that much absenteeism.”
That, coupled with the high turnover rate, plays havoc with the company’s Inuit training plans, Gourde said.
“Because of the turnover, we are always starting back at Square One in training.”
And all this means the proportion of Inuit labour at Meadowbank has fallen from 40 per cent to about 36 per cent.
“There is a huge culture gap. We have to put more emphasis on cross-cultural training. Absenteeism is a huge situation,” he said.
“We are missing key Inuit leaders within our company to figure it out and to work and make sure that we close this cultural gap,” he said.
“We have a good core but we have a portion of our labour that is moving quite a bit,” Gourde said.
To make sure future workers know what they are getting into when they accept a job at the mine, Agnico-Eagle plans to invite family members to join into job interviews.
And to stave off absenteeism among workers, Agnico-Eagle plans to hire human resources officers in every Kivalliq community, who will, among other tasks, pick up workers to drive them to the airports for their flights to the mine site.
As of March 2012, 152 Inuit workers from Baker Lake, 55 per cent of the mine’s total Inuit workforce, were employed at Meadowbank.
Arviat supplies 50 workers, while 39 come from Rankin Inlet, with much smaller numbers from Chesterfield Inlet, Whale Cove, Coral Harbour and Repulse Bay.
Another big lesson, Gourde said, is that Nunavut leaders don’t understand the real issues that mining companies must cope with in Nunavut — especially the enormous risks.
“There are way too many expectations from the RIAs [regional Inuit associations] and the hamlets. We cannot replace the government.”
One reason for that, Gourde suggested, is that few people understand or know about the royalties that mining companies pay to the Inuit associations who own the land most mines are located on.
“We issue a cheque for royalties and nobody knows about that. There’s nobody who can see the impact of that money coming back,” Gourde said.
His company’s frustration also applies to the glacial pace of land-lease talks with Nunavut Tunngavik Inc., which controls sub-surface rights to adjacent lands with potential resources that could extend the life of the Meadowbank mine.
“It’s extremely difficult to access land to drill. For three years we have been negotiating with NTI to get new claims attached to Meadowbank north and south of our mining claims,” he said.
This issue is becoming “urgent,” Gourde said, because the mine now has only five years left in its projected lifespan.
But “good news” that the company received recently suggests they may be able to strike a deal soon with NTI, he said.
Beyond that, Gourde said, there is enormous confusion over what is meant by the word “benefit.”
“What is a fair share of the wealth? That is a huge philosophical discussion that we need to have. There is no common vision of what is a benefit. Is it dollars? Is it jobs? Is it contracts? Is a benefit program funding for regional associations? Is it education?”
As for Agnico-Eagle’s Meliadine project, just north of Rankin Inlet, cost control will be crucial to the success of the project and all players must understand that.
Meadowbank will close three years earlier than first expected, in 2017. Gourde said that projection could change if cost control measures work and the global price of gold remains high
That’s because Meadowbank’s production costs swelled beyond $1,000 per ounce, due to a variety of factors.
This forced the company to write off more than $681 million from the mine’s book value. With total estimated capital and operating costs of $4.2 billion at that time and total expected revenues of only $3.5 billion, Agnico-Eagle had no choice, Gourde said.
And the company cannot afford to let that happen at Meliadine, he said.
“We have to make this one economical. We can’t do a second write-off of six or seven hundred million. We have to apply the lessons we learned at Meadowbank.”
That includes a realistic Inuit impact and benefits agreement with the Kivalliq Inuit Association and a suggestion that the Inuit association should moderate its demands.
“We have a very good partnership process with KIA. It is not the same story that it was a couple months ago,” he said.
Meliadine, now at least a year behind schedule, could start production by 2017, but only if there are no more regulatory delays and other unexpected events, Gourde said.
This past March 25, the company began building an all-weather road from Rankin Inlet to the Meliadine camp and hopes to begin mine construction there by mid-2014.