Southbound Steensby Inlet route the best option for Mary River

“Over a decade later it remains the most viable solution in my mind”

Gordon McCreary, the president and CEO of Baffinland when it was still a publicly traded company, pitches the Steensby Inlet road and port proposal for the Mary River mine at the 2010 Nunavut Mining Symposium. After getting federal permission for that plan, Baffinland, under new owners, opted in 2013 for a truck route to Milne Inlet instead. (File photo)

By Alan Gorman

I have followed progress with Baffinland’s Mary River project over the years with great interest.

I was involved in the early days as the corporate operations manager for the Mary River project. Our team extracted the bulk sample, raised capital from the public markets and produced the definitive feasibility study that charted a shipping course to the south via Steensby Inlet.

I have been looking back at the news release that said, “Steensby Inlet was selected as the preferred location for the port, over Milne Inlet, after a comprehensive review of socio-economic, environment and operational considerations.”

Baffinland the publicly traded company, and clearly the successor private company owned by Energy and Mines Group and ArcelorMittal, have dedicated more resources to community consultation than most mining companies I’ve been involved with over 35 years in the industry—unprecedented for a junior mining company.

There really aren’t many of the old faces left, so it becomes more difficult to get an accurate feel of what’s happening beyond the information that becomes available through print and social media.

Integrity and trust eroded?

I get a sense that somehow, and for reasons not entirely clear to me, the integrity and trust that was progressing in the early years appears to have eroded.

I recall discussions with Inuit elders who feared both the impacts that major economic development would bring and the hardships that would exist without it.

That theme persists among Inuit in Nunavik as well, where I subsequently was involved with Jilin Jien and Goldbrook Ventures’ Canadian Royalties, as well as Oceanic’s Hopes Advance project. The latter, much like the Mary River mine, is a world-class iron ore deposit.

Mary River’s carbon footprint is relatively light as far as major industrial projects go in the iron ore sector, because the ore can be shipped directly. As a consequence, its operating energy requirements are relatively low.

So, the question is where did the project run off the rails?

I read Gary Vivian’s recent op-ed and he does a reasonable job summarizing the development of the iron ore market and the project to date.

The economic crash of 2008 saw Baffinland on its hind foot, because it had invested its cash in asset-backed commercial paper, which choked the company’s liquidity.

The project found itself with new ownership facing the same problem as its predecessor and other resource companies in developing these multi-billion dollar megaprojects: raising capital.

The inability to raise substantial sums of development capital resulted in the decision to truck iron ore to Milne Inlet as opposed to the permitted project, which would have shipped 18 million tonnes of ore by rail through Steensby Inlet.

Was the Milne Inlet truck route a mistake?

The cornerstone was laid then for the present discussion and impasse that exists today.

The project, tempered by the realities of the global iron ore market, initiated an incremental approach to producing iron ore and having it shipped through Milne Inlet.

I wrote to Bo McCloskey protesting the decision to truck ore for shipment from Milne Inlet, proposing that the increased material handling costs were apt to place total operating costs loaded onto ships in the order of $80 per tonne and that trucking both in terms of costs and total capacity would quickly become a constraint.

That concern appears to be present and has shaped the project’s proposed phase two expansion.

From an investment and operating context, it would be naive to believe that Baffinland wouldn’t want to increase production via Milne Inlet to 18 million tonnes per year at a future date, given the capacity of the proposed rail infrastructure, while acknowledging that the regulator could cap production at 12 million tonnes.

However, we can be certain that some future event will transpire that becomes the catalyst to justify increasing rail and shipping outputs to some higher capacity down the road.

The current $1 billion capital investment is a sum that presumably could be allocated to development in the direction of Steensby Inlet, assuming the balance of the capital requirement could be secured.

This is a problem that the federal government could play a central role in resolving, either through federal loan guarantees, or equity participation in the project, with clear repayment and equity recovery terms.

Baffinland’s current owners might also consider securing a strategic partner and a partial asset sale to raise capital. Baffinland might also explore interest in listing the company in order to access equity via the public stock exchanges.

From the onset there have been socioeconomic concerns raised about environmental impacts, especially with regards to narwhal, that have been at the forefront of shipping via the northern route.

I imagine that is the predominant concern of the Mittimatalik Hunters and Trappers Organization and Oceans North, and a problem that is not easily satisfied, even with the deployment of monetary compensation.

It should be noted that the approved Steensby project had similar concerns raised regarding walrus, caribou and other animals.

But undeniably, shipping logistics and associated costs are more complex when navigating through Eclipse Sound, and there should be reasonable confidence that the narwhal species will not be irreparably harmed as a prerequisite to expansion.

The relevant question for Nunavummiut should be: has the development of Mary River to date been a generally positive or negative experience for local communities?

There have certainly been quantifiable direct and indirect economic benefits and jobs. The Mary River project is significant in terms of Nunavut’s gross domestic product. Do these outweigh the concerns? Should they?

Before any progress can be made, trust and integrity need to be restored among the parties. The interests and concerns of both the mine owner and Inuit stakeholders need to be heard and understood and taken into consideration in defining mitigating solutions, notwithstanding the perceived capital and operating constraints.

The burden of responsibility lies with the mine owner to satisfy the socioeconomic and environmental concerns of local stakeholders. Nunavummiut cannot be faulted for any resistance that occurs in the absence of measured, reasonable, and informed assurances in response.

Shipping from Steensby Inlet the preferred option?

Aside from capital limitations, it would appear that shipping from Steensby Inlet and a rail corridor aligned in that direction remain both the company’s and the stakeholders’ preference. Over a decade later it remains the most viable solution in my mind.

It yields the most flexibility in terms of difficult shipping logistics and optimizing ongoing operating costs that are competitive when compared with Brazilian and Australian iron sources.

On the other hand, capital limitations in the context of the iron ore market is a real consideration that requires a resolution. Prime Minister Justin Trudeau and his new cabinet should take an active interest in nurturing that resolution.

In the fullness of time I expect a resolution can be found and implemented to the mutual satisfaction of both the mine owners and concerned Nunavummiut, and I extend my best wishes and encouragement that the parties arrive at that outcome.

Editor’s note: In December 2012, the federal government said yes to Baffinland’s first project proposal. That plan, which is fully permitted, is for a 143-kilometre railway heading south to a port at Steensby Inlet, with an annual production cap of 18 million tones of ore. Instead, in January 2013, Baffinland changed course, delayed construction of the Steensby Inlet railway and opted instead for a trucked route northwards to its port at Milne Inlet.

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(11) Comments:

  1. Posted by jen on

    Best option for the investor, not for the hunter. Ground beef in a tube from Northern vs. fresh red meat.
    The trust was ‘eroded’ when people found out that the equipment for the railway was already onsite before the approval. Just shady.
    Overall Baffinland has been a positive experience for the community, but it is apparent that people don’t want it getting any bigger than it is. I think the community has done more than meeting half-way with shipping traffic compared to the jobs it has locally provided.
    Pulling people out of work and stalling, threatening to shutdown, is a sad way to try to corner a people into what a company wants. People survived before and will be just fine after, and that is important to remember, because there will always be opportunities to capitalize on. Northerners are known for their ingenuity and ability to adapt. I think it is important that people stand their ground, even when it shakes a bit. No earth tremor lasts forever. In the future this whole issue will only be a hick-up in time and people will live on.
    Lots of people can do tourism, art, sewing, hunting, from home sales, free university and employment preferences will always give Nunavutmuit the upper hand in long term sustainability.

    • Posted by Soothsayer on

      Here is a comment that reeks of privilege. How easy for you to treat the people losing the ability to feed their families like abstractions and not actual human beings, jen. People who will suffer and lose their hopes for a good future. Is this is a reality you are being forced to confront in all this? I doubt it. And all this is animated by what? Magical thinking about “resilience” as if ‘tourism’ and ‘arts and crafts’ could seriously replace a multibillion dollar mining project in one of the remotest places on earth. In an area mostly barren of wildlife, and as if the animals of the arctic lack any kind of adaptability or resilience themselves and would simply collapse if a could bands of steel ran through the territory. If the mining company can’t make the project profitable it will be forced to close, there’s no conspiracy here and no shady dealings, it’s real world economics, something most people who have commented on this story, and apparently the leadership of some of the Inuit orgs have little understanding of. No problem for them though, or for you, their jobs and lifestyles are secure. How reassuring.

      • Posted by WB on

        Mining companies always claim they’re on the verge of going broke. Its a very common negotiating tactic, used to bully communities into getting what they want. People should always be suspicious of such claims, because they are frequently made without merit.

        Moreover, the way you (and the press) are spinning the recent layoffs is _very_ misleading. The people who were laid off were temporary workers, working on project expansion. If anyone is at fault here, its Baffinland for starting work on a project that hasn’t even been approved (and for NIRB and QIA for allowing this situation to develop). In any case, these jobs were coming to an end anyways.

        At the end of the day, the presentation of the economics of this project has been highly manipulative, and used to bully the communities into submission. The fact that some of them are still holding to their guns is evidence of their bravery and political saavy.

      • Posted by Skeptical on

        Oh dear. This is where listening and learning come in. It might be true that no one knows what is going on. We (none of us) don’t know everything. For example, little is known about narwhal and how they will respond to 900+ ship passages during a short shipping season – or to ice-breaking that Baffinland plans to do. This has never been tried before. This has nothing to do with a global lack of understanding (whatever that might be). And there are lots of things where there is no information. I would like to see Private Pyle come up with a study that makes it clear that dust carrying iron doesn’t react with other things already present in the ocean or lake bottom to produce something that gets into stuff that some living thing takes into its body and that gets eaten by something that is eaten by fish, seal or whales. Sorry, but there are lots of things we don’t know – and sometimes learning things we should have known or thought about a long time ago, can be our undoing. An example. Seems we’ve just discovered that microplastics are ending up in fish, whales and a whole lot of things we eat. How come we didn’t get on to this 20 years ago? Plastics have been around a heck of a long time. It’s not info that existed 5 years ago. Sorry Private Pyle, but what you are saying doesn’t make a lot of sense.

        • Posted by Someone on

          The mining company will use “broke” as a tactic. because they are all about profits. They are not about the protecting wildlife or the land. If they cannot make a billion dollar profit, they call it “going broke”. They are not about hiring Inuit, or Inuit benefitting from mining. It is all about the company.
          They will cut jobs from Inuit first. Because they can up and move somewhere else to do their mining.
          The jobs that the Inuit had probably did not need to be cut. But they were because the mining is not about Inuit, it is about dollar signs.

  2. Posted by Skeptical on

    Jen says a lot that makes sense. It seems like Baffinland is treating the heating process like a contest.

    The hearing feels like a trial with Baffinland claiming it is innocent of everything; in this case, that it can do no harm – that there will be no negative impacts from anything it does. Only good things can come from its Phase 2 Proposal.

    The problem is that Inuit aren’t blind. Already, not everything is perfect. With money comes problems – drugs, alcohol and family problems. Being away from home for two weeks makes problems for kids.

    Dust all over the southern end of Milne Inlet and even Qurluqtuq lake – what happens when this stuff sinks to the bottom and maybe gets changed into different forms and into char, seals and the narwhal? Does anyone know what is going on? Has Baffinland done good research about this? Why should we believe anything coming from a company that according to what was said at the hearing, says what it is doing will have no impact on anything. Or that it has a solution for every problem. Do they really know what caribou will do when they see a wall over 2 meters high with a huge train going down it? Are they going to have signs directing caribou to crossings they plan to make? Will these crossings even work?

    Do they expect us to believe this idea that everything will be okay? Will the effects of everything they are doing really be not significant? That’s why trust and good relations with this company have gone.

    • Posted by Private Pyle on

      Realistically, very little of what jen says makes sense.

      Curiously, I often find that when people ask questions like “Does anyone know what is going on?” they are mistaking their own lack of understanding, knowledge an insight for a more global lack of understanding. That is, “if I don’t know, no one knows” or, “if i haven’t seen the information it doesn’t exist.” Such a sloppy kind of bias.

  3. Posted by Saali Peter on

    Mr. Gorman’s main point is correct that Baffinland abandoned the trust and respect they had earned with Inuit. Unfortunately, jobs and the investment into that big project will vanish if Inuit leaders persist in making unreasonable demands on Baffinland’s latest proposal. It would also give a very negative signal to the business world that doing business with Inuit is a bad idea.

  4. Posted by Dave on

    Interesting read. I own a Contracting business which does some work at this mine and other mines around the country. t’s not uncommon for mining or oil and gas firms to have to prove their project makes sense and that their are always disagreements along the way. I am no environmental engineering consultant and I have never hunted a narwhal, caribou or much else in my life so I can’t provide any opinion on that particular aspect of the project. However, I just wanted to comment that we have employed Inuit for several years now and I can assure you that all of our past employees, and present, appreciate the work provided. Like most of us, they want a good income to provide for their families. I am so immensely proud when I can visit the North and shake the hands of people who have sincerely appreciated the opportunity to mine has given them.

  5. Posted by Ty2si on

    I am from Pond Inlet it does not feel good when South Baffin islanders and “technical advisors” discuss Mary River. Some of you have never been to the Mary River and Milne Inlet area, We have, and we know the impact that the mine have caused. QIA is getting all the royalties and Pond Inlet has received nothing. We cannot eat caribou anymore. We don’t even catch fish anymore. By the way, Brian Penney is (was) the President and CEO of BLMC

    • Posted by Inuk Elder on

      You are right. Caribou and helicopters don’t mix. Caribou run from the sound of helicopters. When they run from helicopters in winter, they die. If you want caribou, you have to ban helicopters.

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