January 29, 2009
Province Reaches Improved Development
Agreement with Vale Inco
The Provincial Government has negotiated
improvements to the development agreement with Vale Inco for the
construction of a commercial hydromet processing plant at Long Harbour.
The improvements include more certainty that the project will proceed on
this new schedule, enhanced local employment benefits and greater
protection of the province’s resource.
In exchange, government has agreed to a later construction completion
date of February 2013 due to the increased size and complexity of the
project’s construction. The Provincial Government and Vale Inco reached
an agreement-in-principle Thursday on amending the original 2002
“In its draft Implementation Plan, Vale Inco requested an extension of
14 months beyond the original completion date of December 31, 2011,
contained in the 2002 Development Agreement,” said the Honourable Danny
Williams, Premier of Newfoundland and Labrador. “When we entered into
discussions four weeks ago, it was important to us that we reach an
agreement that provides greater assurances around the project, protects
the public interest and gives us enhanced benefits. We are confident we
have achieved that.”
Vale Inco was to have submitted an Implementation Plan for the hydromet
facility on December 31, 2008, that met the terms and conditions of the
original 2002 Development Agreement. The province extended that deadline
to January 22, 2009, to have further discussion with the company when it
became clear the completion date was not going to be met. Discussions
with the company continued after the extension expired under the
understanding that no nickel concentrate would be shipped out of the
province while negotiations were ongoing.
The company cited the larger size and complexity of the project, and the
lengthy process for receiving federal approval for residue disposal at
Sandy Pond for the extended completion date.
“There is no change in the project beyond a new completion date of
February 2013,” said the Honourable Kathy Dunderdale, Minister of
Natural Resources. “It will still be a hydromet facility at Long Harbour
processing nickel concentrate from Voisey’s Bay. The company will not be
able to export any more than the 440,000 tonnes of nickel they were
granted in the 2002 Development Agreement, despite the longer
construction period. They will be required to maintain a maximum annual
export average from Voisey’s Bay over the next four years. The province
has achieved significant increased benefits and controls in this
negotiation and greater certainty that the project will proceed on
Vale Inco will now submit its final Implementation Plan on March 31,
2009. Initial work for this project will start in April of this year
with site clearing and port demolition work.
To improve certainty around the schedule, Vale Inco has also agreed to
change the original development agreement to remove a clause that would
have allowed them to delay the project schedule for such reasons as a
shortage of labour or supplier interruptions.
As part of the new arrangement, Vale Inco commits to a target of 77 per
cent of total project employment – 8.9 million person hours – in
Newfoundland and Labrador. This translates into roughly 4,500
person-years of work between now and February 2013, and includes 460,000
hours of engineering work. Under the previous agreement, the commitment
was to full and fair opportunity and first consideration for local
“The construction of the hydromet facility at Long Harbour is a
tremendous boost for the entire area and the increased certainty that
now accompanies this project is a great relief to businesses and
families who have been waiting for this project to start for some time,”
said Felix Collins, MHA for Placentia & St. Mary’s.
The Provincial Government took this opportunity to solidify certain
aspects of the original Development Agreement. Under the new agreement,
the company is now required to complete its second-stage feasibility
study for underground mining by June 30, 2011.
For the hydromet plant, the company must also meet six project
milestones on specific dates in the first half of 2009, and three more
milestones during the life of the project. This allows government to
measure the company’s progress. If the milestones are not met, the
province can shutdown any further export of nickel or copper
concentrate. In addition to the milestones, they are pledging financial
security in the event of a default.
The company has also agreed that it will pay the island industrial rate
for its power supply, surrendering its option to have a better rate
should other industrial customers obtain a better rate for whatever
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Director of Communications
Office of the Premier
Office of the Premier
Director of Communications
Department of Natural Resources
Amendments to the 2002 Development Agreement
The Provincial Government
and Vale Inco have reached an agreement-in-principle to amend the 2002
Development Agreement to allow for a later construction completion date
as a result of the increased complexity of the commercial hydromet
project and the lengthy process of receiving federal approval for
residue disposal at Sandy Pond.
The hydromet plant will now be completed in February 2013 – 14 months
later than originally expected.
Highlights of the amendments include:
Vale Inco will not
export more than an average of 55,000 tonnes of nickel in
concentrate per year for the next four years to remain within the
existing 440,000- tonne cap of exports from the province.
Vale Inco must meet six
project milestones on specific dates in the first half of 2009 and
three more milestones during the life of the project. If the
milestones are not met, government can shutdown any further export
of nickel and copper concentrate until the milestone is met.
Early start of site work
at Long Harbour in April.
Vale Inco commits to a
target of that 8.9 million person hours of employment, or a minimum
of 77 per cent of total project employment, will be located in
Newfoundland and Labrador.
Total employment hours
in this province include a minimum of 460,000 hours of engineering
The second-stage of the
feasibility process for underground mining at Voisey’s Bay to be
completed by June 30, 2011.
Increased monitoring and
At any time during the
life of the agreement, the Provincial Government can ask an
engineer, selected by both parties, to determine whether the project
is proceeding diligently towards its completion date. If the
engineer determines that progress is not occurring, government can
terminate the development agreement and the company's mining lease.
Previously, the engineer could only perform such a review once a
To improve certainty
around the schedule, Vale Inco will not be permitted to delay the
project schedule for such reasons as a labour shortage or supply
The company will pay the
island industrial rate for its power supply, surrendering its option
to have a better rate if other industrial customers obtain a lower
2009 01 29