Real Help for the North – by Peter Foster (National Post)

The National Post is Canada’s second largest national paper. This column was originally published in the Financial Post on January 4, 2011.

Whoever wins the contest for control of BIM, the people of Baffin Island are
far more likely to thrive being “exploited” by filthy capitalists than being
“helped” by governments. National Post, Peter Foster (January 4, 2011)

The Baffinland Iron mine Would Bring Desperately Needed Jobs

From a financial point of view, the takeover contest for control of Baffinland Iron Mines Corp., BIM, hardly registers. The latest round of bidding for the company puts a value on it of $570-million, a piddling amount when compared with, say, the $44-billion market capitalization of Potash Corp. In other respects, however, BIM may be more genuinely “strategic” than the Saskatchewan mining giant, a proposed takeover of which was deep sixed earlier this year because of the “S” word.

In fact, the rejection of BHP Billiton’s bid for Potash was all about electoral politics. However, the location of Bafflinland’s prime asset is genuinely strategic in terms of the Conservative government’s Arctic aspirations. Also, the project would bring desperately needed jobs and revenue to the region of Nunavut, where it costs Canadian taxpayers $1-billion a year to service some 33,000 people living in an area the size of Western Europe.

U.S.-controlled Nunavut Iron Ore Acquisition Inc. made a hostile bid for BIM in September. Since then, Luxembourg-based steelmaking giant ArcelorMittal has arrived on the scene as a white knight. Last week Arcelor upped its bid to $1.40 per share for all the Baffinland shares. Nunavut Iron Ore, which was set up solely to acquire Baffinland, immediately upped its own bid to $1.45, but for only 60% of the equity.

Wrangling continues before the OSC over a BIM poison pill. There are also reverberations from the fact that one of Nunavut’s employees had consulted for Baffinland shortly before the bid. Still, the broader significance of this deal surely lies in its meaning for Northern development.

BIM controls a huge iron ore deposit at Mary River in the middle of northern Baffin Island. The company reckons that it is the highest-grade undeveloped iron ore project in the world “that remains independently owned in a low-risk jurisdiction.” The problem is that it is way closer to the North Pole than to Toronto, where BIM is headquartered. It is also 1,000 kilometres from Nunavut’s capital, Iqaluit.

Desolate hardly describes the Mary River landscape, where the average annual temperature is -15C and activity is all but impossible in the permanent night of the winter months. The deposit was first discovered in the early 1960s, but was abandoned for almost 40 years. What made it potentially viable is the impact on markets of China and India, plus ever improving mining and transportation technology, which tends to be taken entirely for granted.

The development was projected in 2008 to take four years and cost around $4-billion. It will involve building a 140-km railroad south to a new all-season, deep-water port at Steensby Inlet, plus a fleet of icebreaker ore carriers. At the height of construction it will employ over 2,600 people. It will permanently employ around 450 at the mine and port to produce 18 million tonnes of iron ore a year for 21 years, with the prospect of further development beyond that.

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