Nunavut’s Hope Bay: who killed the golden goose?
Newmont pull-out from Nunavut's Hope Bay gold project raises questions, fears
CAMBRIDGE BAY — Two weeks after Newmont Mining Corp. announced it will walk away from its Hope Bay gold mine project near Nunavut’s Cambridge Bay and put it into mothballs, local leaders, workers at the project and business people are grappling with a grim fact: Newmont won’t change its mind any time soon.
But many Kitikmeot residents still don’t understand why, as one observer said, “the golden goose was killed before it even laid an egg.”
For the Kitikmeot Corp. — the business arm of the Kitikmeot Inuit Association— and its affiliated businesses, Newmont’s Jan. 31 announcement that the project was being put into “care and maintenance” means big financial losses for western Nunavut.
They’ll lose at least $60 million a year — the amount they’ve earned annually over the past four years from work on the project.
Other locally-owned businesses will miss out on at least $6 million a year in contracts.
And more than 140 workers at the mine — roughly 50 from Kugluktuk, 30 from Cambridge Bay and about 10 each from Gjoa Haven, Kugaaruk and Taloyoak — who took home a total of $5 million in salaries a year, will be looking for new jobs and new ways to pay their bills.
The millions of dollars worth of contracts and jobs from Hope Bay were expected to grow, since Newmont planned to bring the mine project into production by 2014-15.
But anyone who still believed Newmont is ready to rethink its decision on Hope Bay saw the bubble burst during this past week’s Kitikmeot Trade Show in Cambridge Bay.
At the show’s Feb. 14 banquet, Chris Hanks, vice-president of Newmont’s Hope Bay Mining subsidiary, told delegates from governments, businesses and local organizations that there is “no solid business case” for the gold mine project right now.
Here’s why: after spending $2.1 billion on building an airstrip, fuel tanks, a road system, mine site, tailings facility and accommodations at the site, the mine couldn’t square off on deals with the Kitikmeot Inuit Association.
Just how much gold — thought to be at least 10 million ounces — the 80-kilometre greenstone belt holds and how much more money it would cost to bring the Hope Bay mine into production were impossible to pin down.
But Newmont couldn’t reach an expected agreement with the KIA on Inuit land use tenure and an Inuit impact and benefits agreement for the second phase of its expansion.
KIA president Charlie Evalik says money was not a sticking point, but, according to a person who was not authorized to speak publicly and who spoke on condition of anonymity, the KIA may have asked for too much before the mine had even reached production.
“KIA played a role in a complex decision,” is all Hanks had to say about that issue.
Hanks said delays in making deals cost money, and the longer negotiations drag out, the less money the company stands to make.
“Cost is everything,” he said.
So, Newmont was not be able to develop “a postive pre-feasibility study or business case” for moving ahead. The company plans to write off the $1.6 billion of the money it spent developing Hope Bay.
Until December, when a fire at the Doris North site sent all but essential workers home early for the holidays, the company was steamrolling ahead at Hope Bay — but in January, underground miners and the advanced exploration team members never returned to the site, as Newmont looked closely at its next move. Its decision came Jan. 31.
Now Newmont is just “trying to figure out what to do” with Hope Bay.
“We’re either going to close up the place or properly take care of it,” Hanks said.
A major mining company is unlikely to step in, because, as Hanks said, if one of the top-10 gold mining companies in the world can’t get a project to move, another firm is unlikely to take it on.
A smaller mining company that specializes in mining veins of gold — such as those found at Hope Bay — could come forward and buy the property — which has changed hands four times in the past.
But any sale is unlikely to take place tomorrow.
Jerry Clyne, Hope Bay’s business manager, also gave delegates at the trade show a reality check during his Feb. 15 presentation.
Newmont now plans to use the annual sealift, not for resupply, but to ship equipment out of Nunavut, Clyne said.
In contrast, the company shipped 5,500 tonnes of cargo and equipment and 7,010 tonnes of fuel to the site in 2011.
So, for the next year, there will still be some business opportunities for companies that worked for Hope Bay — like NunaLogistics, Braden-Bury Expediting. NTCL, Canadian North, Kit Caterers, and KitNuna.
But, after that, nothing will move in or out of Hope Bay, as the project goes into “care and maintenance” under a handful of overseers.
At the trade show, two of the Government of Nunavut’s top ministers from the Kitikmeot region confided their worries.
Economic Development Minister Peter Taptuna, who represents the community of Kugluktuk, said a future without a Hope Bay gold mine is “a step backward.”
Taptuna, also responsible for the GN’s anti-poverty strategy, said he’s concerned about what the collapse of the Hope Bay project might mean for his community: more people who are unemployed, more poverty, more social problems, additional stresses on language and culture, and less educational success stories.
Finance Minister Keith Peterson, who represents Cambridge Bay, says the GN will have to juggle budget forecasts as the territorial government faces paying out more cash on benefits like welfare while its revenues drop.
Both ministers say they’re willing to sit down with the parties to discuss what happened.
So could anything change Newmont’s mind?
“The end of the story is not told,” said Hanks, who helped mothball the mine under BHP Billiton after it sold the project in 1999. “We constantly re-evaluate our decisions. Lots of sites come on and off care and maintenance.”
Newmont could consider picking up Hope Bay again, Hanks said, if the price of gold soared and the costs of oil and other commodities used in gold mining dropped.
But he can’t say what dollar value for an ounce of gold “would cause us to rethink restarting exploration.”
So, for now, the gold processing plant once earmarked for Hope Bay will remain in Durban, South Africa, the accommodation barges now frozen in Roberts Bay may be towed away this summer for use at the Baffinland iron mine project, business will take stock, and 140 people in the Kitikmeot will start looking for new jobs.