December 3, 1998
(Mines and Energy)

The following statement was issued today by Charles Furey, Minister of Mines and Energy. It was also read in the House of Assembly:

I would like to take this opportunity to brief the members of the House of Assembly today on the findings of a study that was released on November 27, 1998, by Brook Hunt on the world-wide nickel industry and the relative competitiveness of the Voisey's Bay Project.

Brook Hunt are a mining and metals industry consulting company that do an annual comparative review of the world-wide nickel industry. Their analysis is used as an industry benchmark globally by the industry, investment analysts and shareholders to measure the competitiveness of firms and projects around the world.

Brook Hunt has just released its annual nickel report for 1998 which focuses on existing and potential new nickel operations. It gives cost comparisons for 1996 through to 2006, with the latter capturing new projects that have yet to come on stream. There is also a long-term notional table that deals with the period beyond 2006. It is important to note, that the Brook Hunt study includes an assessment of the ovoid only during the 2006 period and the underground only during the long-term period for the Voisey's Bay Project.

But why are we bringing this study to the public's attention today? We do this because Inco has argued that the long-term project with a smelter/refinery is not economic. However, the Brook Hunt analysis supports the province's view that the Voisey's Bay Project is in fact an economic proposition as a fully integrated project that includes a mine, mill, smelter and refinery.

Brook Hunt, using what we consider to be very conservative assumptions, confirms that a fully integrated Voisey's Bay project, based on the ovoid and underground and involving a mine/mill/smelter/refinery has a rate of return ranging from 14-17 per cent. In addition, payback of the original project investment can be achieved after four to five years. The province considers these estimates to be conservative. Furthermore, it should be noted that neither Brook Hunt, the province, nor Inco for that matter, include the $4.3 billion acquisition cost in their analyses.

Indeed, Brook Hunt notes that the Voisey's Bay project is among the lowest cash cost of any nickel project in the world.

The results of the Brook Hunt study yield the same conclusion as our provincial analysis that the ovoid component of the project is highly profitable and the underground component less so, but still positive. Taken together the ovoid and underground can support a solid long-term operation including a mine, mill, smelter and refinery in the province of Newfoundland and Labrador.

Brook Hunt's analysis also lends credence to the province's conclusion that if Inco is allowed to strip the ovoid and ship the concentrates elsewhere for processing, then there will never be a smelter/refinery based solely on the higher cost underground mining operation. In fact once the ovoid is gone and depending on markets and pricing, Inco could decide not to proceed with the underground mining phase.

If you review the comparative cost analysis which Brook Hunt has done, you will see that the position the province has argued before the Voisey's Bay Environmental Assessment Panel, and elsewhere, is the only logical one that the ovoid should be spread over a longer period and blended with underground resources as the latter are proven up. Such a blended operation can support a smelter and refinery. The Brook Hunt analysis corroborates this view.

Our position of a blended operation adheres to principles of sound resource management and long-term sustainable development. It will allow for an attractive rate of return for the developer and fair long-term benefits for the province and its residents.

1998 12 03 2:30 p.m.