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Honorable Lloyd Matthews
Minister of Mines and Energy
Speaking Notes - Voisey�s Bay
April 11, 2001
Holiday Inn- St. John�s
Introduction
- First of all, I wish to thank the St. John�s
Board of Trade for its kind invitation. The Board of Trade is recognized
as an excellent forum for the sharing of information on issues of
interest and importance to the general public and the news media.
- Today, I want to discuss the potential
development of Voisey�s Bay; to talk about where we go from here; to
identify the challenges we will face; and to set out government�s
overriding objectives in securing the best possible deal for the people
of Newfoundland and Labrador.
- When the new cabinet was formed in
mid-February, the Premier indicated that government would adopt a policy
of openness and transparency.
- On the Voisey�s Bay File, the Premier
has committed to providing the public with regular updates on the status
of this important project. We have to remember that Inco is a publicly
traded company. Owing to the sensitive nature of the investment
community, it will not be possible therefore to conduct our day-to-day
negotiations in the public domain.
- However, Inco does realize that the
resource belongs to the people of Newfoundland and Labrador. You should
be kept informed. The Premier and I will ensure that you are.
General Project
- As you are aware, Voisey�s Bay is a
nickel-copper-cobalt deposit in Labrador.
- Locked in Voisey�s Bay is the potential
for significant benefits to the Province in terms of capital investment,
employment and business opportunities. Hard work will see those benefits
realized.
- This project, as proposed, would consist
of an open pit/ underground mine, milling facilities and associated
infrastructure in Labrador and a processing facility in the province.
- The total capital cost to be expended over
the 30 year life of the project is estimated to be about $3 billion.
Construction costs in Labrador for the initial project including
mine/mill/concentrator and related infrastructure are estimated at $600
to $800 million. Construction costs for a commercial state-of-the-art
hydrometallurgical processing plant are about $1 billion. A further $1.2
billion in capital expenditures will be made over the 30-year life of
the project for expansions and sustaining capital.
- Direct employment during the four year
construction period could reach upwards of 700 plus positions. During
the operating phases, employment will range between 400 and 800 people
at the mine/mill, and 400 people at the processing facility.
- While the project life is estimated to be
30 years, experience in the industry has shown that processing
facilities have a much longer life, as they can be supplied with ores
and concentrates from various new mines as they are discovered and
developed worldwide. Having said that, government firmly believes that
the life of the Voisey�s Bay mine will extend well beyond 30 years.
The possibility of finding more ore will be enhanced as exploration
activity continues during the development and operation of the mine.
Benefits of the Project
- There is, without doubt, considerable
public interest in the development of the Voisey�s Bay project. I
firmly believe the people of the province have an interest in seeing
this project move forward. One has to remember that the ore in Voisey�s
Bay renders no value to anyone as long as it sits in the ground.
- The project has the potential to bring
substantial direct and indirect benefits to the province and its
citizens, and notably to the Inuit and Innu communities of Labrador. As
I mentioned earlier, capital investment, employment and business
opportunities are all benefits that would accrue to the people of
Newfoundland and Labrador.
- The people of New Caledonia are already
experiencing many of these benefits. Inco commenced development of their
Goro project in 1998 after negotiations with the province broke off for
the first time.
- A deal with Inco would also result in
other indirect benefits. Many national and international investors have
expressed concern about the investment climate in Newfoundland and
Labrador. They wonder if this province can be competitive. We must
understand that our view of competitive is not always the same as that
of the investment community. Project delays are often viewed with
negativity. The sooner we reach a deal with Inco, the sooner we send a
positive message to the rest of the world. All economic developments in
this province depend on private sector investment for success. Whether
it is the oil and gas industry, forestry or mining, we must ensure that
investors have confidence, not questions. This will show the investment
community that Newfoundland and Labrador is an attractive place for
business and investment. This, in turn, will create new opportunity and
renewed confidence in our province.
- Development of Voisey�s Bay would also
increase exploration expenditures in the province. A new, large mining
development would renew interest in our mineral sector, leading to
increased investment activity and more active exploration projects. We
would expect numerous mining companies to increase their exploration
expenditures, especially in Labrador, in an attempt to make new mineral
discoveries. Currently, exploration expenditures in the province total
$22 million. With an agreement on Voisey�s Bay, we expect this number
to grow by at least $10 million annually. This, in turn, will create new
opportunities in our mineral sector.
- However, there still remains a huge amount
of work to be done. The challenge on this file is enormous. While the
level of effort to date has been significant, there remains a number of
issues to be resolved.
Negotiations
- Let me first of all clear up two myths.
One. Was there a deal on Voisey�s Bay ready to be signed last year?
The answer is No. Two. Is there a deal on Voisey�s Bay ready to be
signed now? The answer is still No.
- Our position is, that, unless there is a
deal whereby Inco agrees to have full processing in Newfoundland and
Labrador, there cannot be a Voisey�s Bay project. And by full
processing, I mean processing to a point where a finished nickel product
is exported.
- Inco knows our position. It has been
conveyed to Inco by both the Premier and I. I am pleased to say that
Inco - understanding our position on processing - is still interested in
entering into formal discussions with the province to see this project
developed.
- Inco has also indicated that it believes
that the Voisey�s Bay project can be developed concurrently with the
development of their Goro project in New Caledonia.
- So, as it stands today, there is a climate
where the two parties, the Government of Newfoundland and Labrador and
Inco, have a shared interest - both parties are interested in finding a
way to develop the project � sooner rather than later. That is a good
starting point. We have an environment that will allow for a frank and
positive discussion of all relevant issues with a view to finding a way
forward, recognizing the needs of both parties. However, we still
require an agreement that is in the overall best interest of the people
of Newfoundland and Labrador.
- We are entering a period of negotiations.
Both sides will present proposals and various viewpoints . We must move
forward with a clear understanding that negotiations involve give and
take on both sides. This will be necessary if we are serious about
reaching an acceptable deal to both parties.
- Some have said that we are rushing and
appear too eager. That view is simply wrong. We might recall that Voisey�s
Bay was discovered almost eight years ago and talks started six years
ago. Since that time you have seen four Premiers and I am the sixth
Minister of Mines and Energy. I say it�s time to roll up our sleeves,
focus on the task at hand and try to reach a deal that the people of
Newfoundland and Labrador will support.
- All available options must be considered.
One issue is the potential export of ore in the early years of the
project. 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 ore will be
processed in the province.
- That being said, we will not move to do a
quick deal. We will work to do a good deal, one that is in the best
interest of, and one that we believe will have the support of, the
people of Newfoundland and Labrador.
Processing Facility
- I want to turn to the issue of the
processing technology - the hydrometallurgical processing facility. Many
people are unclear whether this type of technology is proven.
- Hydromet is the technology of the future;
and in the eight years since Voisey�s Bay was discovered, four
hydromet facilities have been put into operation, the fourth one, by
Inco itself, in GORO, New Caledonia. The steps which Inco has followed
in developing GORO, we understand, are comparable to the development
process which may be proposed for this province.
- Industry expects say that the hydromet
technology will work. However, prior to the construction of the full
scale commercial plant, it will require research and development,
detailed design and engineering; For more than two years, Inco have been
moving through the research and development phases at their worldwide
centre for Research and Development at Sheridan Park, Mississauga.
- As one moves forward from research and
development into design and engineering, experts in the field have
stated that the best and prudent approach is one which uses two phases.
- We have witnessed other projects that have
and have not used phased approaches. The Murrin Murrin project in
Australia did not use a phased approach. As a result, there were
numerous technical failures. As of December, 2000, the plant was
operating at just 46% capacity. This, in comparison with other projects
in Australia that did use a phased approach. The Cawse facility is one
example of that used a phased approach and is now producing at 90%
capacity. A huge difference.
- Phase One would see Inco construct a
substantial demonstration plant in the province to optimize the design
engineering and "fine-tune" the process using concentrate from
Voisey�s Bay. This phase would cost approximately $180 million, would
involve the construction and operation of a plant of the approximate
size of four football fields and would employ some 200 professionals and
skilled workers.
- To demonstrate the magnitude of this
project, a comparison can be made to other well known projects in the
province. If a hydromet facility were built today, it would resemble the
size of the Come By Chance Oil Refinery or the Corner Brook Pulp and
Paper Mill. Truly an enormous undertaking.
- Phase Two would see Inco construct the
full-scale commercial processing facility. This would cost approximately
$1 billion and will employ upwards of 400 people annually in the plant.
- The demonstration plant will continue to
be available to test concentrates from other locations as potential
feeds for the processing facility. We would then have a state-of-the-art
processing facility that would operate for many years after the
mine/mill project at Voisey�s Bay is finished. That has been the
experience in other jurisdictions worldwide.
- We believe a hydromet facility can create
many opportunities for Newfoundland and Labrador.
- First, this type of technology would make
the province a center of excellence. We would have the technology, the
knowledge, the expertise and the skilled labour force. We would have the
first hydrometallurgical refinery capable of processing sulphide ore.
This would be an attractive benefit worldwide and other companies could
use this facility to process their ore.
- This plant could be used to process ore
from other parts of the world long after our ore resources have been
depleted. The refinery in Harjavalta, Finland is one example of a
facility that currently imports nickel oxide for processing, even though
they no longer mine for nickel at the site.
- Second, this type of refining facility is
more environmentally friendly than a traditional smelter. This would
eliminate the smokestack, airborne pollutants and reduce green house gas
emissions and would therefore have a minimal impact on our tourism
industry and environmental resources.
- Third, this is a lower cost facility.
Engineering studies have stated that capital costs are 30% less for
hydromet technology. Operating costs would also be reduced by 30% due to
lower energy costs and lower material costs. With this type of refinery,
the recovery of nickel and cobalt would also be higher.
- If it turns out that it would be a huge
gamble for us to proceed with hydromet to process sulphide ore ... then,
I assure you, we are not gamblers.
Equalization
- No doubt you have all heard the comments
about the perceived revenue split on Voisey�s Bay between the federal
government and this province. This is not, in our view, an issue that is
directly related to the development of Voisey�s Bay.
- We cannot hold up resource development
until there is a change in the equalization and taxback arrangements.
That applies to Voisey�s Bay; it applies to the development of
offshore resources including Terra Nova and White Rose, to forestry
developments in Labrador and all other resource developments in the
province. It is ludicrous, in my view, to suggest that we, as a
government, should not proceed with resource development until we have a
change in the equalization formula. If we were to adopt that position,
then nothing would happen -- the province would simply be at a stand
still, No, not a stand still, we will slip backwards. The only thing
that would move would be our children and we have seen enough of that.
Aboriginal Issues
- Aboriginal issues are and will continue to
be a key component of our discussions on Voisey�s Bay. I assure you
the province remains committed to a progressive approach in addressing
Aboriginal issues with the Labrador Inuit Association (LIA) and the Innu
Nation. There is a requirement for successful resolution of a series of
outstanding issues between Inco, the province, the federal government,
the LIA and the Innu Nation. Resolution of these Aboriginal interests
will be a top priority.
- We will work toward a fair and equitable
resolution of the outstanding issues. We will do this because this
project, by definition, requires close cooperation between the
provincial government, the federal government, Aboriginal groups and
Inco. The Voisey�s Bay project represents an opportunity to enhance
the economic and social benefits for the province and the Aboriginal
groups.
Conclusion
- Our objective in Voisey�s Bay
negotiations will be to ensure that the project includes the processing
of nickel concentrate to a finished nickel product in this province.
This commitment is the key element in securing long-term sustainable
benefits from this project.
- We would all like to see this project move
ahead. We must work together to ensure a fair and equitable deal for
Newfoundlanders and Labradorians.
- We want a new industry and the jobs and
industrial benefits that it will bring. These jobs will be long-term,
highly skilled, and well paying. There will be many benefits for the
local supply and service community.
- These benefits will come from our having a
fully integrated operation here in this province. From the mining of the
nickel ore to the processing of a finished nickel product.
- That is what I�ll be looking for from
Scott Hand when we sit down at the table to commence formal
negotiations.
- As we start the process of negotiations,
this province is entering from a position of strength, not a position of
weakness. We issue the mining lease, and unless we find a way to have
the ore processed into finished nickel product in this province, there
will be no deal. We must reach an agreement that we feel is acceptable
to the people of Newfoundland and Labrador.
- Our discussions may lead to an agreement
on a project. Hopefully, this will be the result at the end of the day.
It is also possible that the negotiations may lead to absolutely
nothing. Inco is meeting with us with the knowledge that, together, we
want to find a way to have nickel leave Newfoundland and Labrador.
- Our goal is both sound resource management
and sustainable development.
- When we sit down at the table to commence
our formal negotiations with Inco, we will be starting from scratch. The
clock is being reset. I have a strong negotiating team in place headed
by my Deputy Minister Brian Maynard and a strong group of officials.
Currently the negotiating team is reviewing and updating files and
developing our position for negotiations. As we move further into the
formal stages of negotiations, it will be necessary for us to engage
other professionals -- lawyers, consultants and other experts from whom
we may need advice, however, that will be decided at the appropriate
time as we move forward.
- We must be optimistic and look to the
future.
- I thank you for your time.
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