As Baffinland goes, so goes Nunavut

Baffinland’s Mary River Mine is a bit like Nunavut’s General Motors — so integral to the territory’s economy that the company’s success goes hand in hand with its fortunes.

General Motors has been so closely linked with the U.S. economy since the 1950s that the phrase “What’s good for GM is good for the country” came to dominate political and business thinking.

There’s a similar relationship between Baffinland and Nunavut.

Iron mining at the Mary River Mine, near Pond Inlet, represents about 25 per cent of all the economic activity in Nunavut. Mining accounts for about half of the territory’s economy.

Baffinland has 1,200 employees, including 300 who are Inuit. Because it operates on Inuit Owned Land, it pays millions of dollars a year in royalties to the Qikiqtani Inuit Association, payroll and fuel taxes to the Government of Nunavut, and federal and territorial income taxes.

It has been two weeks since Baffinland asked an Ontario judge for protection from its creditors. The company is struggling with a $1.1-billion debt it incurred, partly as a result of its unsuccessful Phase 2 expansion proposal to build a railroad from the mine to Milne Inlet.

After a protracted review process, the federal government rejected that proposal over concerns about the effects of the expansion might have on caribou hunting and narwhal populations.

The court-ordered protection temporarily prevents the people and companies Baffinland owes money to from taking steps to get their money back. The move gives the mining company time to restructure its own finances in a bid to carry on. But one of the options is the potential sale of the company, a Baffinland news release said on May 15.

In the meantime, the company said it doesn’t expect any disruptions to its operations.

Its public statement says the company is considering alternatives while stabilizing its current operations. It also said it continues to work on its plan to build a railroad from the mine to Steensby Inlet — another option for moving more iron ore from the mine to the market.

It’s hard to imagine Baffinland’s Mary River Mine would cease operations.

If Baffinland ultimately has to sell, a new owner better able to absorb the billion-dollar debt might be able to take over and continue the operation.

You’d think the mine would be attractive to other potential owners.

Certainly, the world’s demand for iron ore isn’t going down. And Baffinland has tried to position itself as a leader in so-called “green” steel — or low-carbon steel — produced using lower carbon emissions and less environmental impact.

From a financial point of view, at least, what’s good for Baffinland has been good for Nunavut. The coming weeks should reveal what the long-term future of the Mary River Mine looks like.