Due to a shaky price forecast for iron ore and continued regulatory uncertainty relating to its expansion plans, Baffinland Iron Mines is warning that it may shut down production at the Mary River mine in the future.
The company recently served notice that it’s cutting costs and plans to remove equipment this summer associated with its yet unapproved phase two expansion plans.
Although iron ore prices soared to a lofty $180 per tonne in early May, the outlook for the commodity is much more bleak in the coming years due to an projected rise in global supply, according to renowned consulting group AME. Various forecasts show iron ore prices at or below $100 per tonne in 2022, which may result in Baffinland putting Mary River on care and maintenance status should that come to pass, stated Brian Penney, the mining company’s president and CEO.
“These decisions have been made in the context of iron ore price forecasts and, based on the mine’s current production levels and cost structure, the operation will not be viable should prices fall as expected. The phase two expansion, including a shift to lower-cost rail transportation and increased shipping volumes, is necessary to ensure the mine’s ongoing viability in the future,” Penney stated on April 30. “These were not easy decisions and I regret the uncertainty they represent for our employees and the impact they will have on the contractor businesses that depend on the Mary River project.”
Baffinland’s workforce comprises close to 1,200 people.
The latest round of public hearings for the mining company’s proposed expansion to 12 million tonnes of iron ore per year – up from the existing six million tonnes – was suspended on April 14 due to an outbreak of COVID-19 in Iqaluit. There were six days left on the agenda. No date for resumption has been set yet, Karen Costello, executive director of the Nunavut Impact Review Board, stated last week.
The April meetings were an extension of hearings that took place in late January and early February.
Baffinland insisted that it needed regulatory decisions to be resolved before the 2021 shipping season.
“The stability phase two offers the company is the reduced unit cost of rail versus the high unit cost of a trucking operation. Trucking is expensive to operate and maintain, not to mention dustier, so the shift to rail would allow us to reduce those unit costs and maintain viability in a lower price environment,” said Heather Smiles, Baffinland’s manager of stakeholder relations. “Without a clear path forward, decisions must be made that include certain cost saving measures. The business cannot operate long-term at a loss.”
Smiles noted that Baffinland has been incurring “significant costs” to keep phase two expansion equipment on standby due to delays in the regulatory permitting process since late 2019.
‘Didn’t listen to the people’
Tununiq MLA David Qamaniq said Baffinland was advised by some residents in Pond Inlet, 160 km south of the Mary River mine, not to ship up equipment for phase two expansion without first getting regulatory approval.
“They didn’t listen to the people … who were warning them not to rush things,” he said.
Should the mine reach the point of ceasing operations due to falling iron ore prices, Qamaniq said local employees would be affected, as would initiatives that rely on Baffinland’s sponsorship, such as a breakfast program for students.
It would also mean waiting longer for a heavy equipment training centre in Pond Inlet, although Qamaniq is at a loss to explain why that hasn’t come to fruition already.
“It’s been three or four years that they promised to give $10 million to start up that North Baffin heavy equipment training facility. I don’t know why they’ve been dragging their feet to come up with the materials to start the project,” he said.
Conversely, Qamaniq said a mine shutdown could have beneficial effects on local wildlife, a concern that the Mittimatalik Hunters and Trappers Association has raised many times.
“Hopefully the hunters will see some positive changes within the marine mammals, and wildlife near the project will hopefully improve if that does happen,” he said of the potential for temporary closure of the mine. “That will certainly prove that the (ore carrier) ships that go back and forth every summer for the past few years truly affected the marine mammals’ migration routes in our area.”