Shining a little light on the Mary River process

“We are hopeful that the impasse we are currently seeing will be overcome in short order”

A German vessel called the Biglift Barentsz approaches Baffinland’s port at Milne Inlet this past August, carrying big prefabricated buildings for use in the company’s railway-based phase two expansion, which is not yet permitted by regulators. The N.W.T.-Nunavut Chamber of Mines says it is not uncommon to pre-position equipment at or near a project site in advance of receiving required permits. (File photo)

By Ken Armstrong
President of the NWT-Nunavut Chamber of Mines

The current impasse that phase two of the Mary River project finds itself in is of great interest and also concern to investors and industry watchers. We’d like to shine some light on three aspects of this process.

First, there has been recent criticism of Baffinland Iron Mines Corp. for positioning several buildings and construction materials, needed for the phase two railway expansion, before approvals for the railway are in place.

Operating in the North is challenging, with remote projects relying on limited transportation infrastructure and seasonal shipping windows.

For northern resource projects, it is not uncommon to pre-position equipment at or near a project site in advance of receiving required permits.

Pre-positioning equipment is permitted by regulatory authorities and land owners, and this practice should not be considered as presumptive, but rather as an additional project risk, borne by the proponent.

The company is not assuming the permit is a slam dunk. Rather, they are being optimistic in the future of their project, that their stakeholder engagement has been effective and sufficient, and that their resultant submissions to regulatory agencies are reasonably complete.

The proponent is also displaying confidence in the regulatory process and its embedded timelines for holding hearings, making decisions and granting permits.

In effect, the proponent is weighing the risk and cost associated with shipping and storing equipment it is unable to use until permits are in place, versus being granted permits, but being unable to proceed because necessary equipment is not available.

Second, the Nunavut regulatory process has many layers, checks and balances that ensure a proponent cannot say one thing, then do another.

At the recent hearings, Baffinland was characterized as secretly telling investors it wants to build an 18 million tonne per year mine and telling regulators it wants a 12 million tonne per year mine.

It is up to proponents to present their aspirations for a planned project in a transparent and balanced way, to all stakeholders.

But it is not at all unusual for companies to present plans for upcoming drilling programs, or mine developments, prior to permits being in place.

In fact, mining feasibility studies always include timelines for raising money, construction, and commencement of mining operations.

Mining development in the North is a slow process. Investors can accept this, if the potential upside makes up for the risk.

Many of our members operate exploration and development projects in Nunavut. When they are speaking with investors in Canada and elsewhere in the world, not only are they promoting their project, but they are also promoting Nunavut as a jurisdiction in which mines can be successfully and responsibly developed.

Jurisdictions with a reputation for a transparent and rules-based regulatory process, in which profitable mining operations have been constructed, will typically see the inflow of more investment dollars.

Last, some of our chamber members have been hearing of an emerging sentiment that another company will step in to operate Mary River should Baffinland be forced to abandon the project.

This sentiment is misguided. Setting aside questions related to the logistics and timelines involved with a new company positioning itself to take over a project, the fact is that if a mine is not profitable for Company No. 1, the economics likely won’t change and the mine will also be uneconomic for Company No. 2.

Furthermore, the world of mine finance is highly interconnected and the chances are that Company No. 2 would end up approaching the same investors that lost money investing in Company No. 1.

Once a deposit has a reputation as being a money loser, finding new investment can be very difficult.

For everyone’s sake, we are hopeful that the impasse we are currently seeing will be overcome in short order by the landowner and the company, and supported by the regulatory system.

We suggest that the success of this project to both is well worth the effort.

Share This Story

(6) Comments:

  1. Posted by Kyle on

    How much did Baffinland pay you to write this?

  2. Posted by Observer on

    Someone actually making sense. They know that the whole thing will shut down in short order if phase 2 is not approved.
    Hopefully they step in and end this rediculous mess so everyone can get back to work and working on their careers. Otherwise everyone looses

  3. Posted by Jim on

    I think the lack of profits by the mine may be due to a great range of factors unrelated to the 300% acceleration of the project originally begun. I have yet to see actual $$$ spent by the company, monies given as royalties, subsidies to Baffinlands, wages made by beneficiaries versus total wage expenditures or actual profits. The absence of this vital information leads me to question the honesty of arguments. There have been similar examples in the past of companies seeking changes to their operations that would increase profits for the shareholders that were denied by regulators due to the interests of the people living in the region. Those refineries or mines or wells did not necessarily shut-down. And what if they do?? I think OurLand is a place where sila reigns and not necessarily for the monetary profits of a few decades. It makes me
    proud to see Nunavummiut make there industrial expansion decisions so holistically considering the land, the animals and society.

    • Posted by ken on

      i worked on the expansion for 6 months under Hatch, first railline ever attempted in the north, its a really hard place to adapt for anyone not use to that climate, not to mention sleeping in tents partitioned off into rooms inside. Best part of my job was getting to know some locals and learning about how life is in the north

      If the railway dont go ahead the mine wont last, everyone loses and worldwide noone will want to risk losing money again attempting anything like this north of 60. Which will hurt our entire north not just Nunavut. Im sure this is drawing worldwide attention already , what decision they make, which the regulators are well aware of and will play the biggest part in them letting this go ahead regardless of what anyone thinks.

      Just being realistic here, they never should have let them start this expansion, if they were going to try and stop it at this point and they wouldnt have completed all the work they have completed to date or brought everything to site already if they thought phase 2 might never happen. Just a bump in the road until they sort through some issues and everything will eventually be approved otherwise this decision hurts everyone and noone will attempt anything like this in the north ever again

      • Posted by Jim on

        I find your answer confusing. There are lots of other successful(and not so much) projects like this north of 60 in Nunavut, elsewhere in Canada, in the US, Russia etc. A railway to the south was the originally approved mine and Baffinlands themselves sought the change to the current plan. I still see this as a corporation seeking to maximize its profits with the societal/environmental negative affects being only given token consideration.

Join the Conversation

Your email address will not be published. Required fields are marked *

*


Protected with IP Blacklist CloudIP Blacklist Cloud