For those who are interested in reviewing the Voisey's Bay Development Agreement, Sue's Blog has begun a series on it. The Intro, #1, and #2 have been completed please take the time to go over the first three installments.
Sue Kelland-Dyer
Intro
#1
#2
Today we will discuss the Processing Plant commitments.
Once again I encourage you to download, print, and review the Voisey's Bay Development Agreement. for yourself.
Article 4
Section 4.6 Processing Plant
4.6.1 In order to maximise long-term benefits for the Province and the people of the Province, the Proponent shall use its best efforts through the R & D Program to develop a technically and economically feasible hydrometallurgical process technology for processing the Nickel Concentrate in the Province. If such technology is successfully developed, the Proponent shall cause the design, engineering and construction of and operate and maintain a hydrometallurgical processing plant with a design capacity to produce annually approximately 50,000 tonnes of Finished Nickel Product, together with associated cobalt and copper products (the "Hydromet Plant"). The Proponent estimates that the Hydromet Plant will have a capital cost of approximately $800 million and during the three-year construction period will generate approximately 3,000 person-years of employment. The Proponent estimates that the Hydromet Plant will employ approximately 400 people during operations.
(emphasis added)
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Let's talk about this with respect to questions relative to the ore - currently being shipped out - being replaced in the future. Before we get to that actual section of the Agreement - please consider the following.
Let's assume we don't trust INCO and we question their contractural commitment to return the equivalent amount of ore to the province as it will ship out before the processing plant is built. Fortunately - there are shareholders who are unlikely to keep an 800 million dollar plant idle - in fact the return they will want on that investment will take more years than there is currently associated nickel from Voisey's Bay.
It is quite common for INCO and other mining giants to ship ore from one location to another in order to keep their investments operational.
For instance let's say they have an ore body in Africa which contains nickel and copper. They may commit to building a copper smelter there while shipping the nickel component of the find to another jurisdiction (such as Newfoundland and Labrador) for processing at an existing facility. Every body of ore does not constitute a processing facility so resources are routinely moved around using economically sound practices. This in turn boosts the value of the entire development to our province as taxes - in part - are based on net income.
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Outside of this basic shareholder reason to keep the plant occupied for decades to come - the contract language on this is stronger again.
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Article 4
4.13 Return of Concentrate.
4.13.1 In consideration of the Government granting the Exemption Orders, the Proponent guarantees that it shall, prior to Cessation of Mining Operations, commence shipping into the Province Replacement Concentrate for processing into finished Nickel Product at the Processing Plant. Such Replacement Concentrate shall be shipped to and processed by the Processing Plant in sufficient quantities to permit the Processing Plant to operate continuously at a rate that will produce not less than 25,000 tonnes of Finished Nickel Product annually and such shipments shall continue at least until such time as the contained nickel and cobalt in the Replacement Concentrate shall have equalled the total quantity of contained nickel and cobalt in the Nickel Concentrate shipped out of the Province under the provisions of an Exemption Order.
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That's the first commitment but what about if they don't do this?
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4.13.3 The Proponent acknowledges that if it does not perform its contractural obligations under Section 4.13.1: (a) the Province and the economy of the Province will suffer substantial loss; (b) the Government would not be properly compensated for its loss by monetary damages, which therefore will not be considered an an adequate remedy for such breach; and (c) the Government may at any time subsequent to such breach commence an action against the Proponent for any one or more of the following remedies, whether claimed as primary or secondary alternative relief:
4.13.3.1 an order for specific performance;
4.13.3.2 appropriate injunctive relief, whether mandatory or prohibitory; and
4.13.3.3 monetary damages including for consequential and economic loss, reflecting the substantial losses suffered by the Government and the economy of the Province as a result of such breach.
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If they don't bring the ore back they pay for the ore, the primary jobs, secondary jobs, municipal tax losses - the whole works. And as an additional kicker - and a good one at that:
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The Proponent expressly waives any right to claim or argue that the Government cannot claim the relief set out in Sections 4.13.3.1, 4.13.3.2 and 4.13.3.3 in any suit commenced by the Government against the Proponent for the Proponent's failure to perform its obligations under Section 4.13.1.
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The only way a truck is going through this is if your a shareholder in INCO - not if you are a Newfoundlander and Labradorian.
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What if hydromet does not work? We will deal with that in the next installment.
Sue Kelland-Dyer
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