UPDATE: Reports released on Labrador mining power needs

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Ashley Fitzpatrick
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Power needs to exceed available supply as soon as 2016

Natural Resources Minister Jerome Kennedy opened the province's main mining conference for the year by offering up reports on the value and power needs of proposed Labrador mines.

There are two new reports. One has been produced by the Department of Natural Resources and the second by economist Wade Locke.

Both are being made available online.

The first, from the department, is titled "Labrador mining and power: how much and where from?"

It states there is the potential for $10 billion to $15 billion dollars in new investment in Labrador mining projects in the next decade, if all goes well and the power is available.

It provides best and worst-case scenarios in terms of power availability.

"Based on projects already in construction or near sanction, existing generating capacity in Labrador may be exhausted by 2015-17."

Labrador iron ore proposals, for new mines and expansions, are a focus and there is discussion of how the Chinese economy will likely affect prices.

The report includes the numbers for power usage and the supply systems for existing mines.

On power: "Government is developing an industrial rate policy for Labrador," the report states.

"The proposed rate policy will provide reliable and competitively-priced electricity for existing and new industrial  customers in Labrador ... Competitive pricing in power is particularly important in the Labrador Trough, where developing projects are competing for investment against those in directly adjacent Quebec."

The report states power demand will likely surpass current supply for Labrador mines in 2016-17, offering Muskrat Falls as the recommended new supply.

At the high end, the report states "over 1,400 MW might be required by 2020."

Iron ore already a major contributor

The iron ore industry in western Labrador already makes a major contribution to the province through employment, taxation revenue and contribution to gross domestic product (GDP).

Locke says the industry is already one of the largest sources of employment and revenues for business in Newfoundland and Labrador.

"In particular, its operations represent one of the few significant sources of employment and earnings outside of the Avalon Peninsula. The development, construction and ultimate operation of the iron ore projects described in this analysis will require substantive investments in supporting human resources and capital infrastructure," Locke says in a report prepared for the province.

Locke and Strategic Concepts, Inc. prepared the paper titled, “Economic Impact Analysis of Iron Ore Mining Industry in Labrador 2011-31.”

Four growth scenarios developed by Locke show that production in Labrador could grow from the current 26 million tonnes per year to 81 million tonnes if all projects proposed were developed. Over a 21-year-period, such growth would result in an additional $80 billion in new capital and operating expenditures, 358,000 person years of employment, and $117 billion in GDP. The provincial treasury would also see an additional $17.5 billion in tax revenue.

Below are some of the report's estimates:

Base case

Using a $100-per-tonne commodity price for concentrate and $130-per-tonne for pellets, current mine developments and anticipated levels of production and capital expenditures in the iron ore mining industry will generate more than 157,000 person years of employment in Newfoundland and Labrador over the next 21 years, including 62,000 person years of direct employment.

On an annual basis, current mining activities should grow to support 7,500 person years of employment on average including 3,000 direct person years of employment.

Current mining operations will also generate more than $20 billion in incomes ($1.0 billion annual average), $53 billion in GDP ($2.5 billion annual average) and $9.0 billion in Taxes ($0.4 billion annual average).

 Scenarios 1 to 3

Total employment could increase from 157,000 person years of employment in the Base Case to 237,000 person years of employment under Scenario 1, 333,000 person years of employment under Scenario 2 and 515,000 person years of employment under Scenario 3.

Investments in Scenario 3 could generate an incremental increase of approximately 358,000 person years of employment. Similarly, total Newfoundland and Labrador incomes could rise from $20 billion under the base case to $30 billion under Scenario 1, to $40 billion under Scenario 2 and $58.0 billion under Scenario 3, for an incremental increase of $38 billion over the next 20 years.

Based on the range of iron ore prices, the Base Case iron ore industry in Labrador is expected to generate an estimated $9.1 +/-1.3 billion ($0.4 +/- $0.1 billion annual average) in total taxes paid to government over the next 20 years.

Operating under Scenario 1 treasury impacts could increase to $13.7 +/- $2.4 billion ($0.7 +/- $0.2 billion annual average).

An increase to $24.6 +/-$5.0 billion ($1.2 +/- $0.3 billion annual average) is estimated under Scenario 2.

And an increase to $25.9 +/-$5.4 billion ($1.2 +/- $0.5 billion annual average) is estimated under Scenario 3.

Locke's full report can be accessed HERE.

For more details, see Friday's Telegram.

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Earlier story

Two reports on Labrador mining released today conclude the mining industry has a significant impact on the economy of Newfoundland and Labrador, and that Muskrat Falls will be an important source of power for potential mining developments, the provincial government states in a news release.

The discussion documents “Labrador mining and power – how much and where from?”, and “Economic Impact Analysis of Iron Ore Mining Industry in Labrador 2011-31”, were released today by the Department of Natural Resources.

“There are over 8,000 people now employed in the mining industry in the province — an all-time high — and mineral shipments are expected to be worth $4.1 billion this year,” Natural Resources Minister Jerome Kennedy said this morning while speaking at the Mineral Resources Review conference in St. John’s.

Kennedy said there is a need to be aware of the importance of powering Labrador mines.

"We know what the power is costing in Quebec and we have to be competitive with Quebec," he said.

In the news release it states that based on projects already in construction or near sanction, existing generating capacity in Labrador may be exhausted by 2015-2017, and Muskrat Falls could be an important source of power for mining developments post 2017.

 “The mining industry holds tremendous growth potential, with upwards of $10 billion to $15 billion of investment in Labrador mining projects possible over the next decade,” Kennedy said.

There are currently a number of mining projects at various states of development in Labrador. Voisey’s Bay, Wabush Mines, Iron Ore Company of Canada’s (IOC) Carol Lake and Labrador Iron Mines Ltd are in operation.

IOC Concrete Expansion Program and Tata Steel Minerals Canada are currently in construction.

The feasibility study for LIM Expansion is complete. Alderon Iron Ore Corporation’s Kami project, Tata Steel Canada Labmag project, Vale Inco’s Voisey’s Bay underground mine and Labec Century Iron Ore’s Joyce Lake are all undergoing feasibility studies.

IOC Labrador West Strategic Development, North Atlantic Iron Corporation, Aurora’s Paladin Michelin project and Julienne Lake are all undergoing pre-feasibility studies.

 

 

Organizations: Department of Natural Resources, Mineral Resources Review, Tata Steel Iron Ore Company of Canada IOC Alderon Iron Ore Labrador West Strategic Development North Atlantic Iron

Geographic location: Newfoundland and Labrador, Quebec, Carol Lake Canada Labec Century Iron Ore

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  • Cold Future
    November 01, 2012 - 13:02

    Quebec is delivering Romaine power to market for 9 cents per Kwh-that means based on the new estimate that Nova scotia can deliver Muskrat power at 12 cents per Kwh and Newfoundland at 21 cents per Kwh. If the Muskrat comes in at 10 billion instead of $7.4 then the corresponding prices would be 17 cents for NS and 30 cents for NL (assuming equal risk associated escalation for both NS and NL). So anyone can see the problem with our cost of electricity with Muskrat. Its just too expensive a project. Now to say that we can compete head on with Quebec for power delivered to Labrador mining interests is a bit (as Archie Bunker would say) NAVE isn't it? Apart from the 170 MW of recall power being sold to Emera, Its hard to see how Quebec could be shaking in boots over the competition for any additional power from Muskrat.

  • Cyril Rogers
    November 01, 2012 - 12:40

    There is a serious disconnect between the government's CALCULATOR exercise and the real reasons for Muskrat Falls, if this report on Labrador mining is any indication. There are projections FOR MINING, at the high end, of power needs in excess of 1400 MW. This amount of power would most certainly NOT be available from the Muskrat Falls project. CONSIDER THIS: the Island will supposedly need 40%(close to the average production would be 200 MW). Nova Scotia would take 20%(100+ MW). That leaves all of 200, or maybe 400 at peak river capability. SO: Will it come from thermal generation in Labrador OR will it come from purchases from Quebec Hydro? Given these numbers, would Gull Island not have made more sense, strictly from the perspective of supplying power to new mines? FURTHER, the mines will be looking for very cheap power, so guess who pays? YOU AND ME! We will heavily subsidize these mining developments just to shut down Holyrood? This whole scenario smells! KEEP THESE NUMBERS IN MIND: 28 years to go until we have virtually free power from the Upper Churchill! With Muskrat, total costs, including debt repayment will run close to $20 billion dollars!

  • Jerome
    November 01, 2012 - 12:24

    Hydro Quebec has plenty of excess power that they can't sell in the US. The problem for potential mining customers in Labrador is that HQ will be probably asking for 6 or 7 cents per kilowatt hour for that power, while at the same time, they can get it for 3 or 4 cents from Muskrat Falls.

  • Too Funny
    November 01, 2012 - 12:18

    "We know what the power is costing in Quebec and we have to be competitive with Quebec,". uh huh. You mean we have to be competitive with the power we are subsidizing to Quebec. Sure, lets build another damn and subsidize that power so that it's competitive with the power that we are already subsidizing to Quebec. That's the logic of swirling down a drain. Why not just use all those tax revenues and royalties to pay for MF and leave us Joe Blows alone.

  • For who's fortune
    November 01, 2012 - 12:04

    This MRF is a microcosm of the fortune and OCI matter. Both governmnet and big business are pushing to access our provinces natural resources at the cost of the taxpayers.And they'll break any rules they need to because they can and the rules don't apply to them. That's why a naysayer is also a taxpayer.At any cost to us in these historic, harsh, tough tory times.

  • Maurice E. Adams
    November 01, 2012 - 11:14

    So is anyone surprised to see that the real reason for Muskrat Falls is so that the mining giants of Labrador will get their power at 2 or 3 cents per KWh, while the real cost of this unneeded power (about 37 cents/KWh to build and transmit to the island) will (must) be paid for --- lock, stock and barrel by captive island ratepayers --- $21 billion AFTER 2041 (even though near-zero cost Upper Churchill power would have otherwise been available)..... In effect, the benefit of near-zero cost Upper Churchill power will no longer be available to island ratepayers in 2041 ---- they will be locked into Muskrat's high cost, 50 year 'take or pay' contract until 2067 ---- What a travesty. Muskrat will not only impose high cost Muskrat power on our children and grandchildren until 2067, but will also deny them the benefit of near-zero cost Upper Churchill power also until 2067.