NLIS 2 June 11, 2002 (Executive Council) (Mines and Energy) (Labrador and Aboriginal Affairs) BACKGROUNDERS - Voisey�s Bay Project BACKGROUNDER Geological Setting The Voisey�s Bay deposit is a nickel-copper-cobalt deposit located approximately 35 kilometres southwest of Nain in northern Labrador. It was formed about 1.3 billion years ago and is contained within igneous rocks typical of those that host major nickel deposits elsewhere in the world. The Deposit The Voisey�s Bay deposit consists of a series of individual nickel-copper-cobalt deposits that are known as the Reid Brook, Discovery Hill, Ovoid and Eastern Deeps. The Ovoid is close to the surface beneath 2.5 to 30 metres of overburden. The other deposits are deeper and plunge to the east-southeast at about 20 degrees. Their depth varies between 100 and 1,000 metres below surface . The only deposit that has had sufficient exploration work done to be regarded as a proven resource is the Ovoid. This is a bowl-shaped deposit that measures 950 by 500 metres across, and is over 100 metres deep at the centre. It contains proven reserves of 31.7 million tonnes of ore, 2.83 per cent of which is nickel, 1.68 per cent copper and 0.12 per cent cobalt. It is the only deposit that can be developed by surface open-pit mining techniques. The other deposits contain a total of 118 million tonnes of indicated and inferred resources, however, further exploration work (including underground work) will be required to determine how much of these resources can be mined. Most will have to be developed using underground mining techniques. All mineralization consists of nickel sulphide (pentlandite), which also contains the cobalt, copper-iron sulphide (chalcopyrite) and iron sulphide (pyrrhotite). The style of mineralization varies from massive (i.e. over 90 per cent sulphide minerals) to disseminated (i.e. the sulphides are mixed with other minerals).
BACKGROUNDER Inco will invest a minimum of $55 million at the Voisey�s Bay, Argentia and St. John�s sites between June 2002 and March 2003. This activity in infrastructure development is expected to employ approximately 250 people over the 10 month period. The following is a synopsis of the activities planned for each of the sites: Voisey�s Bay
Argentia
Innovation Centre
BACKGROUNDER A mine and mill/concentrator processing facility will be constructed at Voisey�s Bay in northern Labrador, approximately 35 kilometres southwest of Nain. The mine will be completed in two phases:
Phase I will begin in 2002 with infrastructure development, including: construction of access roads and a dock, and mill site clearing. Construction of the open pit mine and a 6,000 tonne per day mill/concentrator at Voisey�s Bay will begin in 2003 and take three years to complete at a cost of approximately $710 million. The construction of these facilities is expected to generate 1,700 person years of employment (550 jobs at peak). Annual employment during the operations phase will be approximately 400 people. The mill/concentrator will produce two products: a copper concentrate and a nickel-copper-cobalt concentrate. The copper concentrate will be sold on the open market, while the nickel-copper-cobalt concentrate will initially be processed at Inco�s operations in Ontario and Manitoba, and subsequently at the commercial hydromet processing plant at Argentia. Phase II will include the development of the underground mine and an expansion of the mill/concentrator. This will involve sinking mine and ventilation shafts, as well as developing access roads to the ore body. During the underground mining operations, annual employment will increase to approximately 800 people. Capital costs for the underground mine development and mill/concentrator expansion is approximately $750 million. Infrastructure to support the mine and mill/concentrator processing facility at Voisey�s Bay will include:
BACKGROUNDER Inco will complete an underground exploration and mine development program to confirm mineable reserves and develop a mining plan. The initial phase of this program will be an advanced surface program that will start in 2002 with target completion in 2006. This program will cost $20 million and employ 85 people. Phase II of the underground exploration will include the sinking of exploration shafts and will commence on a �just-in-time� basis that is currently estimated to be 2014. This schedule will ensure sufficient ore is available to sustain full operation of the mill/concentrator processing plant during the transition from the open pit operations to full underground mining operations. This program will cost $75 million and employ 85 people. Upon completion of a successful underground exploration program, Inco will commence underground mine development, currently estimated to take place in 2017. The underground mine development and the expansion of the mill/concentrator processing plant will cost an estimated $750 million. The underground mining operation, in conjunction with mill/concentrator, is expected to result in the employment of approximately 800 people.
BACKGROUNDER - Voisey�s Bay
Project Inco will undertake a $130 million hydrometallurgical (hydromet) research and development (R&D) program in the province. The research and development program will include the evaluation of chemical and mechanical equipment design for the hydromet process. The R&D program will also define the circuit and determine design parameters for the demonstration plant. An integral component of the R&D program is a hydromet demonstration plant to be built at Argentia at a cost of $85 million. The demonstration plant will be used to establish the commercial, technical and economic feasibility of using hydromet technology for Voisey�s Bay nickel concentrate. Site preparation and development for the demonstration plant at Argentia is scheduled to begin in 2002 with design, engineering and construction commencing in 2004 and the plant being operational in 2006. Inco is not permitted to ship nickel concentrate from the Voisey�s Bay mill/concentrator until the demonstration plant is operational and ready for testing. Following the completion of the R&D program for the Voisey�s Bay concentrate, Inco will continue to test concentrate at the demonstration plant facility to fine tune the hydromet process. Inco will also explore future business opportunities utilizing the demonstration plant including the evaluation of other concentrates and intermediate feeds.
BACKGROUNDER - Voisey�s Bay
Project A commercial hydromet processing plant will be constructed at Argentia on the southeast coast of the island portion of Newfoundland and Labrador, 127 kilometres from the capital city of St. John�s. Hydromet processing to recover metals from concentrate is considered the technology of the future for metals such as nickel. It is a cost-effective way of recovering a higher percentage of metal from concentrate, uses less energy and is more environmentally-friendly than traditional smelting methods. The research and development program required to demonstrate whether hydromet is a viable technology for Voisey�s Bay concentrate will take approximately 48 months commencing with design, engineering and construction of a demonstration plant at Argentia. Upon successful development of the technology, Inco will construct a commercial hydromet processing plant at Argentia to extract nickel, cobalt and copper from the Voisey�s Bay concentrate. Hydromet History Hydromet technology has become an important process for extracting metals from ore or concentrates. Over 200 processes world-wide currently utilize some form of hydromet and a significant number are under development. Hydromet now accounts for over 90 per cent of world production of gold and approximately 80 per cent for zinc. Pressure hydromet is used for nickel laterites and is also used in the acid leaching of copper-nickel-cobalt mattes at several refineries around the world. Hydromet Process The hydromet process being proposed by Inco utilizes water, oxygen and acid in a pressurized vessel to separate the metals from the concentrate. The processing technology involves:
Commercial Hydromet Plant The Argentia facility will have an annual production capacity of approximately 110 million pounds of nickel, five million pounds of cobalt, and 15 million pounds of copper. The three-year construction period is expected to generate 3,000 person years of employment (1,000 jobs at peak) and approximately 400 people will be employed annually during operations. The capital cost of the facility will be approximately $800 million.
BACKGROUNDER In the unlikely event that the hydrometallurgical (hydromet) concentrate processing technology is found not to be technically or economically feasible, Inco will construct a state-of-the-art commercial nickel refining plant to produce a finished nickel metal product at Argentia. This processing facility would:
Such a facility would have an annual capacity to produce approximately 110 million pounds of finished nickel product. The capital cost of a commercial hydromet nickel refining plant is estimated to be $670 million. The construction schedule for this facility is the same as the commercial hydromet plant with construction starting in 2009 and nickel production by 2012. Employment during construction will be approximately 2,500 person years. Once operational, the facility will employ approximately 350 people.
BACKGROUNDER An Inco Innovation Centre will be developed and operated in conjunction with Memorial University. The centre will be located at the St. John�s campus and will focus on education and research in mineral exploration, mining and metallurgical processing techniques. It will provide world-class education and research opportunities for 50 - 60 students per year engaged in bachelors, masters and doctorate level programs. The centre will operate in conjunction with the university�s engineering and earth sciences departments. The facility will be located in the former Thomson Student Centre building. Renovations and modifications to the building will cost $10 million with architectural design work, preparation of tenders and engineering work to begin in late fall 2002. The target completion date for the centre is 2004. Inco will provide an annual endowment of $1 million over a 10-year period to cover operational costs.
BACKGROUNDER Why we have land claims The Labrador Inuit Association (LIA) and the Innu Nation have land claims which have been accepted for negotiation by the governments of Canada and Newfoundland and Labrador. These claims overlap with the Voisey's Bay area. In light of the significant nickel-copper-cobalt discovery at Voisey's Bay, the Province maintained during land claims negotiations with both the Innu Nation and the LIA that they could not select Voisey's Bay lands as part of eventual land claims settlements. Instead, both the Innu Nation and the LIA agreed to negotiate Voisey's Bay Chapters for their respective land claims agreements, which would define their rights within the project area, including their shares of provincial revenues arising from the development of the mine and mill/concentrator. Voisey�s Bay Chapters The Voisey's Bay Chapters will be part of land claims treaties that are not yet completed. As such, the chapters on their own have no legal effect. As a result, and in order to secure aboriginal consent for the Voisey's Bay development to proceed while land claims are under negotiation, interim arrangements implementing the provisions of the chapters have been negotiated. Impact and Benefits Agreements Both the Innu Nation and the LIA have negotiated Impacts and Benefits Agreements (IBAs) with Inco/Voisey�s Bay Nickel Company Limited (VBNC) with respect to the Voisey�s Bay project. Land claims agreements include provision for the negotiation of IBAs between developers and aboriginal groups. An IBA is a private contractual agreement, providing for economic opportunities for aboriginal people, and mitigating against any negative impacts of the development. An IBA may address a wide variety of issues, including: preferential employment and contracting, joint venture arrangements, training, revenue sharing, environmental protection and rehabilitation. It is understood through the land claims process that IBAs must not place an excessive burden on the developer so as to jeopardize the viability of the development, and IBAs cannot preclude non-aboriginals from obtaining benefits from a development. IBAs can increase business opportunities for non-aboriginal businesses through joint ventures. Environmental Management Agreement The Province and the federal government have negotiated a Voisey's Bay Environmental Management Agreement (EMA) with the LIA and the Innu Nation, as well. Recommendation 94 of the Voisey's Bay Mine/Mill Environmental Assessment Panel was for Canada, the Province, the LIA and the Innu Nation to negotiate an environmental co-management agreement, to establish an appropriate mechanism for ongoing four-party involvement in associated regulatory processes, the review of future related project developments and the administration of the follow-up program. While the panel recommended this agreement deal with all mineral resource development in northern Labrador, the Province rejected this option and the four parties agreed to negotiate an EMA related solely to Voisey's Bay. The EMA will create an Environmental Management Board comprised of two representatives for each of the four groups, plus an impartial chair. The board will not be a decision-making body; rather, it will be advisory to ministers.
BACKGROUNDER Mine and Mill Project In recognition of the multiple stakeholders in the Voisey�s Bay Project, the governments of Canada and Newfoundland and Labrador, the Labrador Inuit Association and the Innu Nation signed a four-party Memorandum of Understanding (MOU) that established a multi-party approach to the environmental assessment for the Labrador portion of the project. In December 1997, Inco submitted its Environmental Impact Statement for the Voisey�s Bay Mine/Mill Project. Public hearings were held on the Inco proposal. On March 31, 1999, the Environmental Assessment Panel submitted a report to parties to the MOU containing 107 recommendations. On August 5, 1999, the Government of Newfoundland and Labrador issued the Voisey�s Bay Mine and Mill Undertaking Order that released the project from further environmental assessment and permitted the project to proceed subject to terms and conditions. Hydromet Demonstration and Commercial Processing Plants Inco will be required to register both the hydromet demonstration plant and commercial hydromet processing plant for environmental review under both federal and provincial environmental assessment legislation.
BACKGROUNDER Government has agreed to a Statement of Principles with Inco respecting the Voisey�s Bay Project. Included in this Statement of Principles is a commitment by the province to introduce and support legislation to amend the Mining and Mineral Rights Tax Act, as well as undertakings by both parties regarding Corporate Income Tax. Mining and Mineral Rights Tax Act The current act was implemented in 1975, and a number of major amendments were made in 1994. The act is generic, that is, it is intended to affect all mining operations, other than those grandfathered under their own special legislation, such as the iron mines in Labrador West. Taxation is an important element of the project from the perspective of both government and the proponent. For this reason, proposed changes have been discussed with the proponent, and a number of items are included in the Statement of Principles. The fundamental structure of the tax regime will not be altered, but a number of amendments will be introduced to strengthen the law while ensuring the province receives a fair and reasonable share of the economic rent from mining projects. Features of the proposed amendment:
Corporate Income Tax Allocation Agreement The Statement of Principles contains provisions to ensure that the province will receive an appropriate allocation of Corporate Income Tax from the project. Companies which operate in more than one jurisdiction are required to allocate their taxable income to those jurisdictions on the basis of a formula which considers both wages and gross revenue. Inco will enter into an agreement with the province on arrangements which, to the extent permitted by law, will result in an allocation of gross revenue from the sale or disposition of nickel-copper-cobalt products to the province for purposes of the Federal Income Tax Regulations. This would ensure that provincial Corporate Income Tax paid by the proponents, relative to revenue generated by the project, is paid to the province which owns the resource. The province has undertaken to provide the proponent with a provincial Corporate Income Tax rate which is the lower of the general Newfoundland and Labrador rate or the all provinces� average. The general Newfoundland and Labrador rate is currently set at 14%. The all provinces� average tax rate is currently 14.34%. Government will also commit to compensate the proponent in the unlikely event that the allocation agreement results in double taxation. For more information regarding the Voisey�s Bay Project, please visit the Government of Newfoundland and Labrador website at www.gov.nl.ca/voiseys 2002 06 11 10:30 a.m. |
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