Mary River: if financial viability is a factor, then prove it
Regulators should demand that Baffinland produce financial evidence
Nunavut’s system for regulating industrial development, born within the 1993 Nunavut land claims agreement, has likely never faced a greater test than the twisting, turning series of environmental and socio-economic assessments for the Mary River iron mine over the past 10 years.
This was on full public display in Iqaluit earlier this month, when the Nunavut Impact Review Board’s final public hearing on the $900-million railway expansion proposal from Baffinland Iron Mines Corp. imploded amidst a mood of confusion and incoherence.
The final two days of that seven-day hearing, scheduled for Pond Inlet, were cancelled.
At the same time, the fate of Baffinland’s multibillion dollar, multigenerational iron mine is now shrouded in uncertainty. When this editorial was written, the review board had yet to decide on a motion from Nunavut Tunngavik Inc. that, if accepted, would delay proceedings for eight to 12 months.
And Baffinland’s landlord, the Qikiqtani Inuit Association, declared earlier they cannot support or endorse the railway-based expansion. But QIA’s business arm, the Qikiqtaaluk Corp., has declared its enthusiastic support for the idea. So has Arctic Co-operatives Ltd. This is a complex issue.
As for Baffinland, its vice-president of sustainable development, Megan Lord-Hoyle, reacted by claiming that the company is now concerned about the project’s very survival, saying, “we will do everything possible to survive and protect the employment of 3,000 Canadians, 476 of which are Inuit.”
Just this week, Baffinland confirmed to Nunatsiaq News that it has laid off 490 non-Inuit contract workers and 96 Inuit contract workers.
That leads directly to what has emerged as one of the biggest unanswered questions surrounding the project: Mary River’s financial health.
Baffinland claims that the mine’s financial viability cannot be guaranteed unless regulators permit them to build a 110-kilometre railway to Milne Inlet and raise production to 12 million tonnes a year, which would require up to 176 voyages through the environmentally sensitive waters of Eclipse Sound.
The problem is, they’ve put no evidence on the public record to support that claim. And until recently, most of the big players weren’t even asking for it.
But one year ago, that lack of evidence didn’t stop stakeholders from accepting that claim as gospel truth.
For example, through the summer and fall of 2018, the QIA stood shoulder-to-shoulder with Baffinland, defending it against the Nunavut Impact Review Board.
On Aug. 31 of that year, the NIRB recommended the federal government say no to an earlier and smaller annual production increase request—from 4.2 million tonnes of iron ore to six million tonnes.
So Baffinland and its partner, QIA, swung into action. Within weeks, they fired off letters asking that the real decision-maker in such matters, Dominic LeBlanc, then the federal northern affairs minister, reverse the review board’s recommendation.
Why? Because of money. The Inuit organization said they feared for the Mary River mine’s viability, which threatens a long list of cash handouts and other benefits, worth more than $20 million contained in a new Inuit impact and benefit agreement.
Ottawa agreed. Heavily influenced by QIA’s fears for the financial viability of the mine, the federal government approved Baffinland’s request last year.
“We are also concerned about the long-term viability of the Mary River mine and cognizant of QIA’s concern that the economic viability of the project depends on the production increase proposal,” Leblanc wrote on Sept, 30, 2018, in a letter co-signed by Crown-Indigenous Relations Minister Carolyn Bennett.
In other words, the most important regulator of them all—the federal government—accepts financial viability as a relevant and important factor. And they did so without having received a shred of financial evidence on that issue.
That’s a big problem. Because if it’s true that a project can’t make money, the regulator should be required to call the proponent’s bluff and ask them to prove that claim.
In just about all other aspects of the Mary River project, Baffinland staff—as they should be—are required to supply mountains of evidence in support of the claims they make in their environmental impact statement.
But on the project’s financial viability, the NIRB has been reluctant to put any evidence on the public record. For example, the review board ruled a lengthy financial document acquired by Oceans North is “irrelevant” and should not be put on the review board’s public registry. (The document remains on our website.)
NIRB made that ruling even after it had made the document public—and then pulled it away from public view at Baffinland’s behest.
For its part, Baffinland even offered to submit, in confidence, a much shorter financial summary explaining why Mary River is financially viable only at a greater rate of production.
The request for confidentiality may be a problem. But at least Baffinland made some effort to clear the air.
In response, NIRB deferred a decision on the matter, which makes no sense. If the federal government can accept financial viability as a factor, then so should the federally funded advisory board.
Indeed, NIRB and other regulators should do more than just accept such evidence. They should demand it. So should Baffinland’s landlord, QIA.
And since this kind of issue is likely to come up in other assessments, the federal government should amend the federal law that governs the NIRB’s procedures, the Nunavut Planning and Project Assessment Act, to clarify how such financial information can be handled in the future.
Yes, as many intervenors have said, there are multiple unanswered questions surrounding Baffinland’s latest expansion proposal, related to the railway’s impact on caribou, the impact of ships on narwhal, the project’s low Inuit employment numbers, and much more. More questions surround the status of the Steensby Inlet southbound rail-port proposal, which Baffinland has had permission to build since 2013, with a permitted production rate of 18 million tonnes a year. It’s still unclear why Baffinland has chosen not to carry out that plan.
But the biggest question of all may be how this project can even survive. JB
96 Inuit Employees. No longer working….
If each earned $,60,000 a year that would total $5.7 million dollars of income no longer going to Nunavut communities. No longer feeding families, no longer paying for housing.
No more taxes on those incomes. No more spending on extras and nice to haves.
Many of the employees probably made more then $60 thousand a year too.
Great job QIA and NTI. What are you doing to take care of all of these employees that now do not have jobs??? You caused this, so what are you doing? Let me guess. Nothing.
What happens if Baffinland shuts down and over 400 Inuit loose their jobs? That would be over $24 million dollars no longer going to Nunavut communities.
QIA start spending the 40 million dollar warchest you have received from Baffinland. The time is now.
What they fail to underatand is that a company like Baffinland operates on investments and not revenu from the ore. They run a huge defecit every year. They will not operate without Phase 2 signed for more than a a year tops before they shut it all down. Mark my words. I would say less than that. Woild be willing to bed 6 months
Am one of the inuits that is losing my job which I had now for over a year…Thank a hell of alot NTI and QIA and NIRB. ..wIll any of you organizations support me with being unemployed now with the royalties you have received so far? Or should I go on welfare?
An Inuk with mining experience should be able to get a job at any of the other mines in Nunavut.
But yes, the timing is bad.
An Inuk from the North Baffin area should get a job at which mine, specifically?
sorry to hear about your contract ending early (Baffinland said they had planned shutdown of these contracts by December 31 anyway). As mentioned, there are 3 other operating mines in Nunavut, Hope Bay with TMAC, AEM’s Meadowbank and Meliadine, all of them have Inuit hiring policies, and I know there are Inuit from other regions (actually some even from the Baffin!) working at them. why not give it a go? 2 weeks in is still 2 weeks in, whatever region it’s at.
Are the mines outside of my region gonna pay my air fare? Baffin is my home, I’m comfortable with it around my family, where will we get housing elsewhere?
Workers go to where the work is, it doesn’t come to us. This is, for better or worse, the way that the Canadian economy operates, and I daresay that it isn’t going to change in our lifetimes, so better get used to living in many different areas of the country over your career. The Canadian workforce is highly mobile and is only becoming more so.
Determining the financial viability of the project is a concern for the company’s shareholders, not the regulator. You might want to check your bias, Jim, and consider writing on only those topics where you have at least some basic grasp of the subject matter (that is, if there are any).
Prove it? They laid off and/or canceled the contracts or half the people working on site……
The layoffs came a month earlier than they would have, regardless of the bickering.
That is strange.
In August 2018 the company put out a comprehensive project alternative study that is required by NIRB under their guidelines and is available from their public registry.
In this document they outline the economic, technical and community implications of staying with the status quo, going south with a railway, going north with a railway, or shutting down.
Based on this analysis the company went with their best case that was then subject of the NIRB environmental assessment.
There is even discussion of 18MT production in there which, if Oceans North ever read, probably would have saved some drama and newsprint the other week.
Contrary to the editorial, NIRB does seem to require a proponent to explain economics, and in this case they appear to have done so.
At a about a hundred bucks value per ton, it’s little short of miraculous that Baffinland can see its way to making any profit at all when you consider the cost of getting ore onto a ship and then paying for the transportation.
Given economic uncertainty around the world and the plentiful availability of iron ore elsewhere, although of lower grade, this is a high-risk investment that requires big volume to make it work.
Harassment like what ended the de Beers diamond mining operation near Attwapiskat in northern Ontario also puts Baffinland at risk of closing up shop. They have other options.
their CEO Penney stated in his opening remarks they want to make Mary River the most successful iron ore mine in North America, and plan to do so by delivering high quality iron ore at BELOW MARKET PRICE. Now I’m sorry, call me whatever you want, but who tf plans to operate a mine selling product below market price, especially when costs of infastructre and operations here are so high??? Who will be the losers?? Externalities always dump on the easiest…communities/Inuit, and the environment. Obviously. Shame on you Baffinland. Sell ore for less than market and rip off the Inuit who tolerate your presence. Shame.
When the same people own the mine, the shipping company and the steel mill it’s amazing what can be profitable, what can operate at a loss and where the profits can be made to go.
Then there’s licensing fees for use of technology, management fees, consulting fees… the list goes on. Any half-way skilled accountant can always turn a profit into a loss when it suits the company’s needs.
In the case of Mary River, royalties are computed on profit after including the price of shipping. Want to stop paying royalties, just raise the shipping cost so the mine makes no profit and “earn” your profit from the shipping company.
But so true.
This is a shakedown and they are shaking the NIRB.
canada is not a realiable witness. Canada caved on SNC-LAVALIN and never got up again. NIRB is the last man standing.
This article is absolute horse crap. The viability of this project, among other things, is dependant in the market price of iron ore. No one can predict exactly what this price will be next month let along next year? Next decade?
That makes mining a risk. QIA, NTI, the HTOs, and the Hamlets (and lets not forget Oceans North) just made the whole environment even riskier. No worries for them though, exactly ZERO of them rely on this project to feed their families.
QIA is looking for a hand out.
They pay their cleaning employees barely any money.
They cut their wages in half 3 years back and never gave hem any raise, while the owners are putting it all in their pocket.
Talk about looking out for your “locals”. This company treats them terribly and could raise their pay a lot more.
What did Inuit expect when they signed with the devil? Something has to give, but than again, Inuit just want to gain on anything. Royalties or Wildlife. Which is it? You can’t have both, as one of them must suffer. I am glad that all the parties involved are not working together anymore. NTI, QIA, and even NIRB, haven’t a slightest clue what they are doing. So much for the collective, what a farce.