Baffinland slashes scope of Nunavut’s Mary River project
Company postpones railway, Steensby Inlet port, Foxe Basin shipping
In a bolt from the blue, the Baffinland Iron Mines Corp. told Nunavut regulators Jan. 10 they’ve slashed the scope of the Mary River iron project in response to slumping steel prices and rising borrowing costs.
“In the current global financial environment the large development capital cost for the Mary River Project is difficult to finance,” Erik Madson, Baffinland’s vice president of sustainable development, said in a letter to the Nunavut Impact Review Board. (See document embedded below.)
Madsen said Baffinland’s owners, Arcelor Mittal and Iron Ore Holdings, now want to build the mine under a “phased” approach.
In the first phase, the company will jettison plans for a railway, a Steensby Inlet port and year-round shipping.
Planned iron ore production would be slashed from 18 million tonnes a year to 3.5 million tonnes a year — and would be shipped only from Milne Inlet, in the summer.
Madsen did not provide a date for when a “second phase” of development might occur at Mary River.
A source told Nunatsiaq News that Baffinland officials briefed officials with the Government of Nunavut and Nunavut Tunngavik Inc. about the plan on Jan. 9.
Arcelor Mittal, whose credit rating was downgraded this past December by the Moody’s agency, has been selling off assets and issuing new bond offerings in an attempt to reduce its debt-load.
Also in December, Mittal transferred 20 per cent of its stake in Baffinland to Iron Ore Holdings, giving each company 50 per cent ownership.
Baffinland’s board approved the new Mary River plan late last year, just before Christmas.
At around the same time last December, the NIRB held two days of project certificate workshops in Iqaluit, and then issued a certificate to Baffinland for a much bigger version of the project.
The company now seeks amendments to that project certificate, which now includes 182 terms and conditions — some of which must now have to be altered.
Baffinland’s new plan includes the following:
• production reduced from 18 million tonnes a year to only 3.5 million tonnes a year;
• no railway from the mine site to Steensby Inlet — that’s deferred to a later date;
• no port at Steensby Inlet — that’s deferred to a later date;
• no shipping through Foxe Basin or Hudson Strait, that’s deferred to a later date;
• iron ore will be shipped only through a port at Milne Inlet;
• no year-round shipping — ore will shipped from July 15 to Oct. 15 only, from Milne Inlet to Rotterdam and other European ports;
• a shorter construction period, starting in 2013.
In his letter, Madsen said Baffinland is caught in a squeeze that’s constricting the activities of many other mining companies.
“This same effect is being felt by many major projects around the world. Additionally, the risks associated with large capital developments are magnified during tight financial markets.”
To sweeten the impact of the altered project, Baffinland said the new plan would allow for the earlier introduction of training, employment and business programs.
(More to follow)