December 27, 2012

Harper's cabinet mulls massive Chinese resource project in Arctic

Another massive Chinese-owned resource project is before Prime Minister Stephen Harper's cabinet.

Some time in the new year, four federal ministers are to decide how to conduct an environmental review for the Izok Corridor proposal. It could bring many billions of dollars into the Arctic but would also see development of open-pit mines, roads, ports and other facilities in the centre of calving grounds for the fragile Bathurst caribou herd.

"This is going to be the biggest issue," said Sally Fox, a spokeswoman for proponent MMG Minerals, a subsidiary of the Chinese state-owned Minmetals Resources Ltd.

It would be hard to exaggerate the proposal's scope. Centred at Izok Lake, about 260 kilometres southeast of Kugluktuk, the project would stretch throughout a vast swath of western Nunavut.

Izok Lake would have five separate underground and open-pit mines producing lead, zinc and copper. Another site at High Lake, 300 kilometres to the northeast, would have another three mines.

MMG also wants a processing plant that could handle 6,000 tonnes of ore a day, tank farms for 35 million litres of diesel, two permanent camps totalling 1,000 beds, airstrips and a 350-kilometre all-weather road with 70 bridges that would stretch from Izok Lake to Grays Bay on the central Arctic coast.

MMG plans a port there that could accommodate ships of up to 50,000 tonnes that would make 16 round trips a year _ both east and west - through the Northwest Passage.

Izok Lake would be drained, the water dammed and diverted to a nearby lake. Three smaller lakes at High Lake would also be drained. Grays Bay would be substantially filled in.

The result would be a project producing 180,000 tonnes of zinc and another 50,000 tonnes of copper a year.

"That's not insignificant," Fox deadpanned.

The deposits are an old story. Izok was discovered in the late 1970s and High Lake dates back to the 1950s. They'd been owned by a half-dozen different companies before they were acquired by Minmetals in 2009.

Their time has come, said Fox.

"They're very much about our future confidence in zinc," she said from Melbourne, Australia, where MMG is headquartered. "We see in the next few years a number of major zinc mines will be coming off-line."

One of those is MMG's own Century mine, which produces 500,000 tonnes of zinc annually.

"Between the Izok Corridor project in Canada and our other project in Australia, we would be hoping that they would replace the zinc production of our Century mine," Fox said.

MMG estimates the Izok project would create about 1,100 jobs during construction and 710 permanent jobs. The mine life is estimated at 12 years, but Fox said exploration is likely to expand that.

But more than 400 individuals, organizations, aboriginal groups and governments registered concerns about the project with the Nunavut Impact Review Board.

"Both the Izok Lake mine site and the High Lake mine site, as well as the route of the Izok corridor all-weather road, occur either near to or on the Bathurst calving ground," wrote the government of the Northwest Territories.

"The proposed project may cause significant adverse effects on the ecosystem and wildlife habitat," wrote Environment Canada.

"We are concerned that our hunting and harvesting rights will be in jeopardy if the project is allowed to proceed as is," added the Lutsel K'e Dene.

Many pointed out that the Bathurst herd has only recently stabilized after a 90 per cent drop in the 1980s to today's 32,000 animals. That drop was steep and sustained enough for aboriginal groups to stop hunting the herd and many are leery of anything that could impede its recovery.

"The project may also cause some adverse socio-economic effects such as possible reductions and disruptions in harvesting opportunities," wrote the Kitikmeot Inuit Association, despite acknowledging its members are most likely to benefit from mining jobs.

The board also expressed concern about the growing industrial footprint in western Nunavut. There are now nine mines either operating or under review in the Kitikmeot region.

On Dec. 14, the board recommended Northern Development Minister John Duncan call full public hearings on the project.

Duncan and the three other ministries involved _ Transport, Natural Resources and Fisheries and Oceans - have three choices. They can send the project back to MMG and ask for changes, they can choose to let the board run hearings itself or they can decide the project's effects would be broad enough to require the involvement of other governments in hearings.

There's no difference in length, who is able to appear or in intervener funding between the two types of hearings, said board chairman Ryan Barry.

Fox said MMG is aware of the centrality of caribou to residents in the area.

"They're absolutely essential to the local Inuit."

MMG has designed the road to make it as easy as possible for caribou to cross, she said, and the company is conducting field studies on how to further reduce the project's potential impact.

Fox said MMG is also aware of other potential stumbling blocks, such as Canadian sensitivity to major resource projects being owned by foreign governments. She said Minmet has left its Australian subsidiary alone to operate as it sees fit, despite the fact half of MMG's board is from Minmet.

"We're a bit of a different model for Chinese investment," said Fox. "We really run day-to-day quite separately."

MMG doesn't expect the Harper government's recent policy changes on investment by state-owned enterprises to affect Izok. The prime minister announced those changes at the same time Ottawa approved the takeovers of Nexen (TSX:NXY) by China National Offshore Oil Co. and Progress Energy Resources Corp. (TSX:PRQ) by Malaysia's Petronas.

"We're not acquiring and operating assets that are producing," she said. "We're in there as a long-term investor in a project that has been seen as quite marginal by others.

"The Harper government has noted the importance of mineral investment in this region and the importance of that to unlock benefits for the local communities. We certainly see that we're very aligned in our strategy with that."

However Ottawa decides to tackle the questions over Izok, mine production is a long way off.

MMG plans to ask for permission to start preliminary work on-site before the regulatory process is over, but even that wouldn't be until late 2014. The earliest the mines could be producing would be 2018.

Duncan has no deadline to respond to the board's request for a review. But, as the board notes in its letter to him, the ball is now in his court.

"The (board) looks forward to receiving your decision and will respond in a timely and efficient manner to your direction once received."

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