Speaking Notes for Lloyd
Matthews
Minister of Mines and Energy (Check against delivery)
Update on the Voisey�s Bay
negotiations
to St. John�s Board of Trade
October 11, 2001
- Good afternoon ladies and gentlemen.
It is a pleasure to be here. When negotiations resumed with Inco, I
committed to providing timely updates to the people of the province
on any progress that government is able to make during negotiations.
My intention today is to provide an update on our discussions to
date.
- As most of you are aware, the
responsible development of the Voisey�s Bay Project represents one
of the greatest economic challenges facing this government today.
The challenge, simply put, is to achieve maximum benefits for the
people of the province. Unless we can achieve this fundamental
objective, the project simply will not proceed.
- In April, I had the opportunity to
speak to you about the project. At that time, I discussed various
aspects of the Voisey�s Bay development. This included the
challenges that we face in our efforts to reach a commercial
agreement, the possible configuration of a project, the necessary
components of a deal, the need for resolution of outstanding
aboriginal issues, and the overall benefits to the people of our
province.
- Indirect benefits for employment and
business opportunities as a result of the development of Voisey�s
Bay are also important. During my April speech, I spoke:
TAbout
companies increasing exploration expenditures throughout the
province,
TAbout
the province becoming a centre of excellence for the hydromet
technology, and
TAbout
the development of an experienced and skilled labour force for this
sector.
These benefits will be part of any
deal that may be reached.
- On Monday, June 18th,
government resumed talks with Inco. Both parties returned to the
negotiating table because we had a shared interest in finding a way
to develop the project � sooner rather than later. I can report to
you today this remains the current position of both government and
Inco.
- Ladies and gentlemen, I am pleased to
report that overall the negotiations have been going very well. The
working environment - which has included the necessary suspension of
public comments by either party - has allowed for a frank and
positive discussion of all relevant issues.
- Our negotiating teams continue to move
forward with a view to finding common ground on all issues. We must
balance the need of the province to realize maximum benefits for our
shareholders, the people of the province, with the need of Inco to
earn a fair return for its shareholders.
- Also, as part of the process of
directing and assisting our respective negotiating teams and to
ensure that we are moving forward appropriately on all of the
relevant issues under discussion, Scott Hand, Deputy Chariman and
CEO of Inco, and I have met regularly to further discuss issues that
have arisen at the negotiating table and to provide leadership and
direction to our respective teams.
- Over the past four months, our
negotiating teams have met essentially on a weekly basis. The
process has been intense as we moved from outlining the key issues
required for an agreement to negotiating specific components. I am
pleased to report that we have been able to resolve many points at
issue. In fact, in reviewing the number of issues on the table at
the outset, I can tell you that the vast majority have been
resolved.
- That said, the few remaining issues
are of fundamental importance to this province. The successful
resolution, therefore, of these remaining points are key if we are
to arrive at a commercial agreement. Until an agreement is reached
on all issues, we do not have final agreement on any issue. As you
know, we must arrive at one final agreement that is acceptable to
both sides in order for this project to proceed.
- So, I am sure the real question
foremost in all of your minds right now is: How long will it take
government and Inco to conclude a negotiated deal? Well, as I said
in April - and it still holds true - the most honest answer that I
can give you is: It will take as long as it takes.
- The negotiations underway are complex
and multi-faceted. By way of example, some of the items we have been
discussing include:
TConcentrate
movement; - that is to say if some concentrate needs to
be exported while the mine/mill and processing facility is being
developed, we would seek to ensure that over the life of the
project an equivalent amount of concentrate will be processed in
the province
TThe
fiscal regime including mining and other applicable taxes;
TCertainty
of processing in the province;
TIndustrial
and employment benefits;
TResearch
and development; and
TProject
timelines.
- While this is by no means a conclusive
list, it does provide you with an appreciation for the type of items
at issue. As you can appreciate, each and every issue is singularly
very important and complex.
- Those of you here today who are
involved in the business community frequently participate in
negotiations. As such, I know you understand when I say that I am
not at liberty to publicly discuss the specifics of the ongoing
negotiations because of the sensitive nature of the investment
community given also that Inco is a publicly traded company.
- I can say to you, however, that:
TThe
initial project will include an integrated mine and
mill/concentrator processing plant at Voisey�s Bay along with
supporting infrastructure such as roads, accommodations and port
facilities at an estimated cost of $600 million;
TSubsequent
developments will include underground exploration leading to the
development of an underground mine and expansion of the
concentrator. The estimated cost of these developments is an
additional $750 million; and
TIt
will also include a $200 million research and development program,
part of which includes a demonstration hydromet facility at Argentia.
Subsequent developments will see the construction of a $750 million
commercial hydromet facility that will process Voisey�s Bay
concentrate to a finished nickel product.
- Let�s put into context these basic
but fundamental principals. Over our mining history the province has
never achieved more than mining, milling and concentrating of our
base metals. This project will set a new standard because for the
first time we will see ore mined, milled, concentrated and processed
into a finished product in this province.
- This government is prepared to
negotiate a deal. However, we will take as long as is necessary, and
so in terms of a timeframe, that could mean weeks, months or even
longer. While we are all interested in getting it done as soon as
possible, what really matters is that we do the right deal for the
people of the province. We cannot negotiate an early deal unless it
is the right deal.
- It is also important to put the
ongoing negotiations between the Government of Newfoundland and
Labrador and Inco into perspective.
- Aside from negotiating a commercial
agreement, there must be agreement on three other project components.
These are as equally critical to the overall success of the project,
in terms of it moving forward, as is the commercial agreement. They
include:
Impact and Benefits Agreements -
These agreements will establish benefits regimes for aboriginal
groups. They will address issues such as business opportunities,
employment, training and financial compensation. These agreements
are being negotiated separately by the Innu and Inuit with Inco.
Environmental Management Agreement -
This agreement will establish an environmental management regime for
the Project and address the role the aboriginal groups will play in
that regime. This agreement involves negotiations between the
provincial and federal governments and the Inuit and Innu.
The Voisey�s Bay Chapters in the
Inuit and Innu Land Claims Agreements deal specifically with
aboriginal rights in the project area. These two agreements involve
separate negotiations by the provincial and federal governments with
the Inuit and Innu.
- I am pleased to report that the
respective parties have made substantial progress on these
agreements. Good work has been done on the agreements that require
aboriginal participation on both the Land Claims and the Impact and
Benefits Agreements.
- In recent weeks, the issue of the
federal government�s possible participation by providing research
and development funding has been publicly discussed. Inco has made
an application for funding
under a federal program called the
Technology Partnerships Canada or TPC.
- Research and development funding by
its very nature is designed to help prove up new technology - as
opposed to existing processes. In fact, the goal of the federal TPC
program is to increase economic growth in Canada by investing
strategically in research, development and innovation. Therefore,
those whose suggest that Research and Development assistance should
not be provided for work on unproven technology simply do not
understand the fundamental basis of the program.
- As the Minister responsible for the
Voisey�s Bay file, I have no problem with Inco�s application. In
fact, I encourage all businesses that meet the requirements of this
federal program to apply for funding. Consider this stark statistic
for a moment. As of August 31, 2000, Newfoundland and Labrador
businesses received only $1.1 million from this program which
created approximately 40 jobs. In contrast, the federal government
has awarded a total of $1.1 billion since the program�s inception
creating approximately 23,000 jobs across Canada. We�ve received
the lowest of any province in Canada.
- It is, of course, up to the private
sector to make application for research and development funding.
While the provincial government doesn�t decide on who applies - I
can assure you that we fully encourage and support all potential
applications.
- If Inco can move forward with its plan
to process Voisey�s Bay concentrate using hydromet, then it would
make Canada, and specifically Newfoundland and Labrador, a Centre of
Excellence for this type of technology. Newfoundland and Labrador
would have the only hydromet demonstration plant for nickel sulphide
ore in the world.
- We are continuing to move towards a
knowledge-based economy, therefore we must train our people to work
and prosper under the new rules if we are to compete with the rest
of the world. The proposed demonstration plant alone, if built,
would train approximately 200 people in chemical and process
engineering and metallurgy. That is a significant contribution to
our labour force.
- Government acknowledges that there are
external factors that will have varying impacts on the negotiations
aside from the commercial components required for a project.
Government and Inco are not working towards a commercial agreement
in a vacuum.
- There is in fact much happening in the
mining industry today. Canada has traditionally been viewed as a
world leader in the mining industry, especially as it pertains to
advances in technology. In recent years, however, the industry has
been in decline and we must acknowledge these realities.
- On September 10th, I
participated in a Mines Ministers� Conference where the
provincial, federal and territorial Mines Ministers� had an
opportunity to listen to concerns from industry. Ministers were
reminded through formal presentations by industry that the mining
sector is facing several issues and challenges to its continued
growth. These issues and challenges are of a national perspective
and include onerous tax burdens, decline in exploration resulting in
less opportunities for the development of new mining activities in
Canada, and increased global competition. In this broader
perspective, government believes the development of the Voisey�s
Bay Project is of national importance. As a country we must show the
mining community and the world that Canada is a good place to
invest.
- Governments and industry are now faced
with additional challenges. As the provincial, federal and
territorial Ministers of Energy gathered on the morning of September
11th, the unthinkable occurred. The terrorist attack on
the United States affected millions of people around the world in a
matter of hours. Here in Newfoundland and Labrador, thousands of
bewildered travelers were stranded as the skies over North America
were closed to commercial traffic.
- We are only now beginning to become
more fully aware of the impact that September 11th is
having on the global business and investment community. Low metal
prices were already hurting Canadian and international base metal
companies prior to the terrorist attack. Since September 11th,
it is reported that various mining companies are cutting exploration
spending and deferring capital projects. The attack has also had an
impact on the willingness of all businesses to take on additional
risk. These are obviously issues that are being considered by major
corporations in the context of probable large capital commitments.
- Last week, I met with Scott Hand to
review our progress to date and to discuss the project in light of
September 11th. We discussed at length regarding our
respective positions. During that meeting, Mr. Hand reconfirmed his
company�s commitment to developing Voisey�s Bay. We determined,
therefore, that the work should continue by all parties if Voisey�s
Bay is to proceed. I was very encouraged to hear Mr. Hand reconfirm
Inco�s commitment to the timely development of the Voisey�s Bay
Project.
- So, you may be asking then where do we
go from here?
TGovernment
and Inco will continue to work towards resolving the few outstanding
issues that need resolution for a commercial agreement;
TInco
will work towards completing negotiations for Impact and Benefits
Agreements with the Innu and Inuit; and
TThe
Province will also work towards final agreements for the Voisey�s
Bay Chapters of the aboriginal land claims.
TFinal
aspects of the environmental management agreement will be
negotiated.
- Before I conclude, it is important to
remember that all of our potential resource development projects
must be able to attract large sums of capital, if they are to
proceed. Otherwise, our resources - no matter how valuable - will
remain undeveloped. It is therefore essential to meet our interests
and the interests of the proponents to ensure that our resources are
developed. It goes without saying that our natural resources benefit
no one if they remain undeveloped.
- The development of the Voisey�s Bay
Project will provide many benefits to the people of Newfoundland and
Labrador. Therefore, I intend to give these negotiations every
opportunity for success. I realize the people of the province cannot
be left hanging for an unlimited period of time in the hopes of a
development, but we cannot rush the process to arrive at the wrong
deal.
- For those of you in the business
community and in the province in general, I can tell you that we are
cautiously optimistic that we can reach a deal. If government is
able to reach a satisfactory deal prior to the end of this year,
then significant project related activity can occur as early as next
year 2002.
- I hope this update has been helpful. I
ask everybody to continue to be patient and allow these important
negotiations to continue.
- I thank you for your time.
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