Vale has committed to going underground at its Voisey’s Bay site in Labrador, a move that will create hundreds of new jobs and extend the mine’s lifespan to 2035.
In return, the Newfoundland and Labrador government agreed to let Vale continue shipping ore out of the province for another three years.
The agreement is a "win-win event," Jeff McLaughlin, vice-president of Vale’s Newfoundland and Labrador operations, told reporters at Confederation Building Thursday.
"That’s win-win for the province, for the communities that we’re part of, for our employees, and for Vale."
Premier Kathy Dunderdale called the announcement "another example of this government’s continued commitment to ensuring that Newfoundlanders and Labradorians benefit from the development of our natural resources."
Existing royalty arrangements unchanged
The deal has a number of components.
The deadline to finish Vale’s Long Harbour processing facility has been extended, to the end of July. That work was supposed to be completed last month.
There is no public money involved in the deal, and existing royalty arrangements won't be touched.
Vale will also pay the province $100 million for the right to ship out the extra ore. The same amount of ore will have to be shipped back in later.
Going underground at Voisey's Bay is expected to extend the life of the mine by a dozen years or more.
Construction work on the underground mine is expected to begin in late 2015.
According to Vale’s McLaughlin, roughly 800 new jobs will be created at peak during the construction phase.
That number will stabilize at about 400 additional workers when the underground mine starts producing in 2019.
The Voisey’s Bay site currently employs 475.
Vale confident in plan
McLaughlin says Vale is confident the underground mining plan will proceed, even with a current "trough" in nickel prices.
"Newfoundland and Labrador is an important part of Vale’s long-term strategy," McLaughlin said.
"The finalization of this agreement speaks to the way we value our work and our partnerships here in the province."
'Newfoundland and Labrador is an important part of Vale’s long-term strategy. The finalization of this agreement speaks to the way we value our work and our partnerships here in the province.'—Jeff McLaughlin, vice-president of Vale’s Newfoundland and Labrador operations
Processing work will begin at the Long Harbour facility later this year.
Vale will start with ore imported from Indonesia.
Indonesian ore is much more pure than Labrador product, according to McLaughlin — 78 per cent nickel, compared to 20 per cent. Vale will use the imported ore to get Long Harbour up and running.
"What we want to do is get into production as early as possible, to test out the equipment, and to train our new operators," McLaughlin said.
Tories criticized original Voisey's Bay deal
The governing Tories sharply criticized the Voisey’s Bay deal signed by the then-Liberal government in 2002, calling it a "giveaway."
Fast forward a decade, and the Progressive Conservatives are taking credit for making it a success.
Dunderdale says the Tory administration made amendments to the agreement in 2009 that "strengthened" the language around employment, guaranteeing 8.9 million person hours in the province.
'One of the big holes that you could drive a Mack truck through was closed up in 2009.'—Premier Kathy Dunderdale
"One of the big holes that you could drive a Mack truck through was closed up in 2009," the premier said.
According to Dunderdale, the most recent amendment improves industrial and employment benefits.
It also permits Vale to export 84,000 net tonnes more nickel-in-concentrate outside the province over the next three years, in exchange for the underground mining commitment.
That’s on top of 440,000 tonnes already approved over the life of the deal for shipment elsewhere.
Dunderdale says there are "significant" penalties if the company abandons the underground expansion plan, but would not get into specifics.
"If timelines aren’t met, damages will accrue to the province."
Voisey's Bay produces 30% of nation's nickel
The Labrador mine is a major player in nickel production.
According to Patricia Mohr, vice-president and commodity market specialist with Scotibank, Voisey's Bay produced 30 per cent of Canada's nickel last year.
About 60 per cent of nickel is used in stainless steel. Nickel is also found in high alloy steel, such as the kind used in aircraft manufacturing.
Canada currently produces 2.7 per cent of the world's nickel total. Mohr says that may seem small, but it's actually a significant amount for one country.