In a move clearly aimed at heading off any challenges by Voisey’s Bay developer
The bill, introduced in the house of assembly on Nov. 17, is meant to ensure that the government can oblige the holder of a lease to complete “primary processing” in Newfoundland or face loss of the lease. It also prevents the holder of the lease from disputing the government’s decision before the Mineral Rights Adjudication Board, and from bringing suit against the Crown in the event of damages.
The bill passed the first of three readings in the legislature and will be taken up by committee once it passes second reading. Its principal revisions are to the act’s section 31, which set out the conditions a holder of a mineral property must meet to receive a mining lease. The existing act enables the provincial cabinet to compel the holder of a mining right to “complete primary production” — defined in the act as smelting, processing or refining a metal or mineral ore — in the province unless the lessee could demonstrate that downstream phases of production were not economically feasible, or were otherwise an “unreasonable” requirement.
The new bill removes saving clauses that provided for economic feasibility and obliged the provincial government to set out specific criteria that could be used to determine whether primary processing was economic or not. An amended act would leave the decision to order primary production — or exempt a lessee from the act’s current requirement — to the provincial cabinet.
Under the amendments, the lieutenant-governor in council, when advised by the cabinet that “as a matter of public convenience or general policy it is in the best interests of the province,” would be able to order the holder of a lease to complete primary production in Newfoundland regardless of its economic feasibility.
The issue of primary production has been one of a number of roadblocks in the path of the Voisey’s Bay nickel project near Nain in Labrador. Talks between the government and Inco over the conditions of the lease broke down last July when Inco presented the government with a proposal for a $1.1-billion project that included a mine and mill at the Voisey’s Bay property, but not the smelter and refinery that had been previously planned for Argentia, on the island of Newfoundland about 100 km southwest of St. John’s.
Inco insisted that its most recent feasibility studies had shown that building a smelter-refinery complex was not justified by the ore reserves at Voisey’s Bay and the present state of the nickel market. It offered a compromise solution that would have seen a nickel-oxide plant built in Argentia, at a cost of $900 million, in addition to the Voisey mine and mill. But the company also said that project would only be economic if there were tax concessions and other financial assistance from the national and provincial governments.
The province countered that it had engaged consultants who had determined that the project, including a smelter and refinery, was economic even based on the limited amount of ore that had been brought into the reserve category at Voisey’s Bay. It has not produced those studies, saying that it cannot reveal confidential numbers supplied by Inco.
Bruce Hollett, Deputy Minister of Industry, Trade and Technology, acknowledged to The Northern Miner that there was no single independent opinion from the consulting firms engaged by the government, but rather that the consultants had given advice to the government in reviewing the Inco studies. “What they have done is not come to us with a report. . . . They have sat at the table with us as part of our technical sessions, and they’ve advised us on what to look for, and they’ve provided opinions that were worked into our analysis.”
(The Voisey’s Bay deposit has a reserve of 32 million tonnes grading 2.83% nickel, 1.68% copper and 0.12% cobalt. A second deposit, the Eastern Deeps, has an indicated resource of 50 million tonnes grading 1.36% nickel, 0.67% copper and 0.09% cobalt, and the whole property has an inferred resource of 116 million tonnes, though the grades of that resource have not been specified.)
The bill also adds a provision that the minister of mines and energy may impose discretionary conditions before granting a lease, and a change in wording makes it specific that the basic right granted under a lease, “to develop, extract, remove, deal with, sell . . . the unalienated minerals,” is subject to the conditions of the act.
A licence-holder that found that developing a project under the conditions prescribed by the government would be uneconomic would not necessarily or immediately lose the property; property held under licences must be taken to lease within 20 years of staking and as long as adequate assessment work had been done. Earlier stories that the government was considering imposing a “fallow” tax on licence-holders that held undeveloped mineral resources were dismissed by Paul Dean, assistant deputy minister in the Department of Mines and Energy, as “just not in the cards.”
Still, two new provisions set out in the bill seriously restrict the rights of licence-holders and lessees.
The province’s Mineral Rights Adjudication Board, which is empowered under the current Mineral Act to hear disputes arising out of the act’s application, is stripped of its jurisdiction in any dispute arising out of the new section of the act. As well, another clause of the bill provides that legal action cannot be brought against the Crown over an order to complete primary processing.
Taken together, those two provisions of the bill mean that a licence-holder compelled to process ore as a condition of receiving a lease could not bring a dispute against the order to the Board, and would have no recourse in the courts if the government’s order resulted in damages to the licence-holder.
In a measure clearly aimed at the Voisey’s Bay project, the bill also makes its own provisions retroactive over mineral licences issued since the beginning of 1993. Prospectors Albert Chislett and Christopher Verbiski staked their claims on the Voisey ground in the spring, dealing an option to Diamond Fields Resources in May of that year.
Both Hollett and Brian Tobin, the provincial premier, have pointed to previous decisions the government had made under the existing Mineral Act as proof that there will be no arbitrary or capricious decisions made under the new laws. The government has already agreed with Inco that there will not be enough copper concentrate produced at Voisey’s Bay to justify building a copper smelter, and Hollett also pointed to the recent decision by Iron Ore Co. of Canada to reactivate its pellet plant at Sept-les, Que., to process ore from western Labrador.
In both circumstances, the government hired outside consultants who agreed that processing in Newfoundland was not economic.
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