EDITORIAL — Get Voisey’s Bay talks back on track — Dj vu

Soon after being elected premier in 1972, Dave Barrett haughtily told mining companies that he wanted a copper smelter built in British Columbia to process resources so that greater benefits could flow (through the government, of course) to the real owners, “the people.” Miners were threatened with super-royalties and various penalties if they exported raw minerals, and were told that, henceforth, development of new mines would be “contingent” upon ministerial evaluation and approval of plans of operations.

“We’ll leave it [the ore] in the ground,” Barrett threatened. “If the market isn’t any good for us now, then we’ll wait until the market’s better.”

In short order, majors without fixed assets in the province went elsewhere, while hundreds of juniors fled north, south or east. Brokers fell asleep from the lack of activity on the Vancouver Stock Exchange. Barrett and his New Democratic Party government never got his copper smelter — only mass protests, a mass exodus, and a royal heave-ho in the next election.

Just when we thought those bad old days had gone forever, along comes Newfoundland Premier Brian Tobin and his mines minister, Charles Furey. Both men are adamant that they — not Inco or the marketplace — will be the ones to decide how, when, and if the Voisey’s Bay nickel-copper-cobalt deposit in Labrador will be developed.

Tobin’s bottom line is simple. If Inco does not build a smelter and refinery at Argentia, there will be no mine and mill at Voisey’s Bay. Inco’s position is that the smelter and refinery portion of the project, without any forms of government assistance (and not taking into account acquisition costs), would offer a return of less than 10%, or below its cost of capital. The company wants to develop the mine and mill and ship concentrates to Sudbury for further processing while exploration continues. Tobin’s response has been to cut off talks until Inco sees things his way.

No one can fault Tobin for wanting to get the best deal possible. But that doesn’t mean he should hold Voisey’s Bay ransom to unrealistic demands, or saddle the deposit with a heavy load of bitterness because bad deals were negotiated in the past by his predecessors.

We, too, want a smelter and refinery in Newfoundland. But we understand Inco’s position and the poor outlook for nickel. And we know banks do not lend money for make-work projects, nor do they rely on politicians to decide when a project is economic. If the Newfoundland government is so convinced that the complete smelter/refinery project is economic, it should be prepared to find creative ways to make it happen. At the very least, Tobin should release summaries of the studies he says prove his case.

Meanwhile, the government should stop trying to out-hype Robert Friedland about the wonders of Voisey’s Bay. It is a significant deposit, but hardly the biggest and richest on the face of the earth. So far, there is only one main deposit, whereas Sudbury is a mining camp with more than 50 past and present producers.

Tobin and Furey also should stop throwing stones at Inco for “changing the ground rules.” Before Voisey’s Bay was discovered, Newfoundland was promoting various incentives for companies to explore there; the big one being a 10-year tax holiday. Back then, there was no law on the books requiring companies to process ores in the province.

By the time late 1995 rolled around, and the significance of Voisey’s Bay was understood, the tune changed fast. An amendment to the mining act was passed requiring companies to process ore in the province if it is economically feasible to do so. And the government began hinting that the 10-year tax break might be repealed, mostly because it was put in place “before Voisey’s Bay was discovered.” Instead, there was talk of a super-royalty — one of the most onerous in mining history; one that would do Dave Barrett proud.

As an argument of last resort, Furey says the government’s stance is justified because Voisey’s Bay is “owned” by the province . . . which means Inco paid $4.3 billion for paper exploration licences. Technically this may be so, but mineral tenure in this country is based on the principle that those who raise risk capital, stake claims and find a deposit shall have a reasonable right to mine what they find, assuming all technical, regulatory, environmental and other requirements are met. For a mines minister to mock the concept of mineral tenure for political advantage is a betrayal of the industry he is supposed to champion. It is a slap in the face for all the companies still working in Labrador, hoping to find the next Voisey’s Bay.

While Tobin and Furey pout and posture, three new nickel mines came on-stream in Australia. New Caledonia is welcoming both Inco and Falconbridge to develop huge operations that might dwarf and, possibly even sideline, Voisey’s Bay.

Mining is a globally competitive business, which is why we urge Tobin to resume talks with Inco and get Voisey’s Bay moving forward. No one expects the province to “sign away” its rights in the process. Let exploration continue, and let’s re-visit the smelter-refinery issue a year from now, when exploration has brought about an increase in reserves or, possibly, led to a new discovery which would make the smelter and refinery a certainty.