Nunatsiaq Online
NEWS: Nunavut April 18, 2017 - 4:00 pm

Arbitration hearing on QIA-Baffinland royalties dispute starts April 18

Inuit org alleges mining company in breach of Mary River IIBA obligations

The port at Milne Inlet through which Baffinland Iron Mines Corp. is now shipping ore to market during the ice-free months of summer. Does that constitute
The port at Milne Inlet through which Baffinland Iron Mines Corp. is now shipping ore to market during the ice-free months of summer. Does that constitute "commercial production" under the Inuit Impact and Benefit Agreement between Baffinland and QIA? A three-person arbitration panel that started hearing evidence on the issue in Vancouver on April 18 is expected to rule on the issue. (FILE PHOTO)

A long awaited arbitration hearing aimed at resolving a complex dispute between Baffinland Iron Mines Corp. and the Qikiqtani Inuit Association over advance royalty payments for the Mary River project got started April 18 in Vancouver before a three-person panel, the QIA has announced in a release.

In a statement of claim filed Aug. 26, 2016, the QIA alleged that Baffinland, under their Inuit Impact and Benefit Agreement for Mary River, owed them, at that time, at least $6.25 million in advance payments.

Under the Mary River IIBA, Baffinland has already made advance payments to QIA—against future royalties— worth a total of $20 million: $5 million on the date the IIBA was signed, $5 million after the water licence was received, and $10 million after making their final construction decision.

After that, Baffinland was to have paid QIA advance payments of $1.25 million each quarter-year until the start of “commercial production.”

And at the commercial production stage, those advance payments were to be replaced by quarterly royalty payments, calculated at 1.9 per cent of Baffinland’s net sales revenue, minus permitted deductions.

At the same time, Baffinland would claw back the advance payments from the royalty payments through deductions of up to 25 per cent for the first 36 quarters and up to 50 per cent thereafter.

But the QIA’s big problem right now is that—in their opinion—Baffinland stopped making those advance payments too early, and is paying royalties instead.

That’s because the two sides disagree over the meaning of “intended commercial production.”

The QIA’s position is that “commercial production” is intended to mean a level of production equal to 60 per cent of 18 million tonnes a year—the level allowed in Baffinland’s original 2012 project certificate, which included a railway to a port at Steensby Inlet.

But Baffinland’s position is that “commercial production” is intended to mean 60 per cent of 4.2 million tonnes a year, the amount allowed in the amended project certificate that covers shipping over a tote road to Milne Inlet

In dispute right now are advance payments for part of 2015 and all of 2016.

The QIA and Baffinland tried and failed to resolve the spat through negotiations, so QIA last year asked the arbitration panel, set up under the dispute resolution section of their IIBA, for two things:

• a ruling on whether Baffinland has breached its obligation to make advance payments; and,

• a ruling that will define the meaning of “intended capacity” for the purpose of carrying out Article 5 of the Mary River IIBA, which sets out Baffinland’s financial obligations.

“The answers will determine whether QIA will continue to receive advance payments of $1.25 million per quarter until production levels of the Mary River project increase to a certain point, or whether QIA will be receiving royalty payments based on current production levels,” QIA said in its release.

The three-person panel is made up of the QIA appointee Thomas Berger, Baffinland appointee Jim McCartney and chaiperson Murray Smith.

The panel’s decision will be binding on both parties and will likely come when the hearing wraps up April 20. The panel will likely start its work each day at 10 a.m. Pacific time.

You can view a live webstream of the hearing at this URL:

  Statement of Claim by QIA Filed Aug.26, 2016 by NunatsiaqNews on Scribd


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(5) Comments:

#1. Posted by ross on April 18, 2017

Baffin land has every right to refuse royalty payments in my opinion. Was it not just to long ago that QIA refused Baffin land when they asked for longer shipping season? When before it opened for production that it was the original plan to increase shipping of the ore anyways in the future?
QIA has been the one negotiating in bad faith. And why arbitration? Did we not elect QIA’s board so they can negotiate for us, or they have no idea how to?
$20 million and counting….were did it go QIA? We should set up a Trust committee to oversee the royalty payments.

#2. Posted by Pond Inlet resident on April 18, 2017

to Ross comment number 1.

Your comment is uninformed, and you are making an uneducated comment. if you knew the last 14 years and all thats been negotiated, you would not have made that comment.  if BIM stuck to their original plan oh so many years ago, and not have to change it every time they get regulatory approval to make it go back to another review, it would have been running years ago…so yeah… you appear to be an armchair commentor with no knowledge of the Nunavut Lands Claims and everything done to date.

#3. Posted by Putuguk on April 19, 2017

So that is what this is all about?

QIA wants more now so they will get less later? Seems like an odd point to go to all this trouble to make.

This seems to be the same sort of thinking that went into NTI obtaining a loan against the Nunavut Trust.

All fun and happiness for a while until you think about what it really did to Inuit cash flow long term.

#4. Posted by Observer on April 19, 2017

“if BIM stuck to their original plan oh so many years ago”

Perhaps people might realize that plans can change due to things outside anyone’s control.

#5. Posted by Original Six on April 19, 2017

And everytime they make changes to their original plan - Poster Observer - they have to go through NIRB process all over again to ensure our land, waters and wildlife will not be harmed!!

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