Why Baffinland waited to apply for increased shipping limit

Baffinland Iron Mines Corp. didn’t apply six months ago for an extension of the permit that has allowed it to ship more ore from its Mary River mine because the company did not know then whether it would need that extension, a company spokesperson says.

That decision led Baffinland to request an emergency order from the federal government in May to increase its shipping limit this year or suspend its operations for the balance of 2022, and lay off 1,300 employees and affecting the jobs of 400 contractors.

Since 2018, Baffinland has been operating under a temporary permit to ship six million tonnes of iron ore a year from its mine on northern Baffin Island. That permit expired at the end of December. Baffinland is now relying on its previous permit, which allows it to ship 4.2 million tonnes a year.

When Nunatsiaq News asked why Baffinland waited until May to apply for an extension, company spokesperson Peter Akman pointed to three factors: the pending decision on the company’s expansion plans for Mary River; the price of iron; and concerns the Nunavut Impact Review Board would have rejected the application anyway — on technical grounds known in the mining industry as “project splitting.”

Akman said the company had been expecting a decision on its proposed expansion of Mary River before its temporary permit expired. The expansion has been in the works since 2018, when Baffinland applied to the Nunavut Impact Review Board, the body that advises the federal government on development projects, for permission to do it. The plan includes shipping 12 million tonnes of iron ore per year out of Milne Inlet.

But the board’s review of that expansion saw multiple months-long delays because of COVID-19 and concerns from Inuit groups about the process.

The board recommended on May 13 that the expansion not proceed. Now, the final decision rests with federal Northern Affairs Minister Daniel Vandal. This week, he extended his timeline to make that decision, which was formerly expected in late summer, by 90 days.

If Vandal rejects the proposal, Baffinland has said it would consider shutting down the mine.

The price of iron also factored into the company’s decision not to apply for an extension.

On Dec. 31, when Baffinland’s permit expired, iron ore cost US$115 a tonne, according to tradingeconomics.com, a website that provides commodity prices and other international economic data.

Since then, prices have increased: The price on May 26 — the day Baffinland asked for the emergency order to increase its shipping limit — the price of iron ore was US$124 a tonne.

“With a negative [review board] recommendation report coupled with higher iron prices, in order to do everything we can to avoid the need to issue layoff notices to our employees, Baffinland made the decision to request an extension to the [permit to ship six million tonnes per year] while we await final determination from the minister,” Akman said.

Baffinland also wasn’t sure the review board would have considered a separate application to extend its temporary six-million tonne permit during the review process for its proposed expansion, Akman said.

He said that could have been seen as “project splitting,” which he described as “applying for a decision on a new project that is already under consideration in an existing application” — and not allowed by NIRB.

Baffinland has gotten one extension of its higher six-million-tonne shipping limit during the review process for its proposed expansion — in 2020.

Neither Akman nor Costello said if Baffinland had consulted the board at any point this year about whether applying for an extension would be considered project splitting.

Baffinland sent the review board a letter on May 20 to request its shipping limit be increased to six million tonnes from the currently approved 4.2 million tonnes for 2022.

That application is now being reviewed by the board, and entered the screening phase on June 6, according to a document filed on the board’s registry.

Earlier this week, Vandal wrote to the review board asking it to conduct its hearing into that request “in an efficient and expeditious manner” and for the board to make a recommendation by Aug. 26.