May 11, 1999

RESOURCE ESTIMATES COMMITTEE

The Committee met at 5:15 p.m. in the House of

Assembly.

CHAIR (Reid): Order, please!

Before we start with the Estimates for the

Department of Mines and Energy, we have a copy of the minutes from this

morning's meeting on ITT. If there are no errors or omissions could someone move

that the minutes pass?

On motion, minutes adopted as circulated.

CHAIR: I would like to thank everybody for

changing their

schedule tonight to allow us to start an hour-and-a-half to two

hours to three hours early.

The procedure we follow, Mr. Minister, is that we

give you fifteen minutes to introduce your officials and to say something about

your department. Then we pass it over to the Committee members and the

Vice-Chair or the critic for the department takes fifteen minutes and then we

will call the heads.

If your officials are to answer questions, could

they identify themselves beforehand so they can be recorded in Hansard.

We may as well call the head first.

CLERK: 1.1.01.

CHAIR: 1.1.01., Department of Mines and Energy.

Minister, do you want to say a few words before we

start?

MR. GRIMES: Thank you, Mr. Chairman.

I just might, as we begin, introduce the staff who

are here with me this evening. We look forward to an opportunity to discuss

information relating to the Department of Mines and Energy with the Committee.

With me, on my left, is Brian Maynard, who is the

Deputy Minister of the department. On my far left is Paul Dean, who is Assistant

Deputy Minister with respect to the Mines side of the department. Also joining

us this evening, directly behind me, is Mr. Charlie Lester, who is the Director

of Policy, Planning and Co-ordination for the department, and Mr. Frank

Blackwood, who is the Director of the Geological Survey, which is an integral

part of the Department of Mines and Energy.

Just a few very brief comments, Mr. Chairman,

completely in line with the way I usually try to present information in the

Legislature, straight to the point, very brief and direct, and leaves time for

questions and comments for the Committee members.

Basically in this department our goals and

objectives as outlined, I guess, as gleaned from the piece of legislation that

establishes the Department of Mines and Energy, are fundamentally to try and

stimulate integrated mining and energy industries within the Province, and to

try and stimulate the development of them with policies that are fair to the

developers and also will lead to a continuation of high levels of exploration

and development on an ongoing basis.

In order to do that, the department has basically

been organized into six lines of business which are conducted in the Department

of Mines and Energy. There is the facilitation of resource exploration,

critically important. I mentioned that Mr. Blackwood is here as the Director of

the Geological Survey because the geoscience that people in this sector use is

critically important. Most of the information that they use if provided and

available to them through the geological survey. Both onshore and offshore they

can get information from the department.

We try to facilitate resource development whenever

and wherever we can. We look at monitoring and having responsibility for the

supply of electricity in the Province even though we have, of course, a Crown

agency in Newfoundland and Labrador Hydro; but there is a mandating in the

legislation for the department to make sure that there is an adequate and

appropriate supply of electricity in Newfoundland and Labrador.

Then there is resource management and compliance so

there is always a monitoring function in terms of making sure people are living

within the rules; and a division, of course, a line of business with respect to

policy, legislation and regulation.

Within those six areas, what the department tries

to accomplish in its long-term goals is to, as I indicated before, maximise

mineral and energy production and the associated benefits and to minimize the

cost of electric energy to consumers in the Province. All of the staff in the

department are consumed in their jobs on a day-to-day basis with trying to

achieve these goals and objectives.

Just a couple of things for context, Mr. Chairman.

We were delighted in the Budget this year to receive an increase in funding for

the Department of Mines and Energy, one of the few departments of government

that did receive some funding. One of the highlights, of course, is the mineral

exploration program that you may have some questions and want more detail about

tonight. That has already attracted a lot of interest. There have been several

companies that have taken advantage of the new program already to increase and

expand mineral exploration in the Province. We are very proud of that and hope

that it continues with the same kind of interest and uptake as it has in the

early days.

As well, on the energy side of the department we

were fortunate, through the government process, to be allocated some additional

money so that we could add some staff on the energy side, in the energy branch

of the Department of Mines and Energy, to assist us in finalizing the work of

things like the energy policy review that was announced almost a year ago now

and things of that nature, and to continue to give the department the ability to

formulate generic policies with respect to royalties and revenue related issues,

both for onshore resources and offshore resources.

Those issues I'm sure you might have further

questions about as we go through the examination by the Committee this evening.

Again, in context, Mr. Chairman, it might be

interesting for the Committee members to know that the total value of mines

sector mineral production in Newfoundland and Labrador is forecast to be just

over $800 million in this year of 1999. Some members of the Committee, at least,

might know that that is down about 20 per cent from last year. We got to just

about the $1 billion mark last year so there is about a 20 per cent reduction in

the expected forecasted values this year. The projection is based mainly on a

global downturn in steel markets and depressed prices for a number of the

products that leave the Province, particularly iron ore concentrate and pellets

from the operations in Labrador.

However, the employment in the mining sector is

projected to remain pretty stable around the 3,000 mark in direct jobs, people

who are directly involved, never mind in the indirect or spinoff effects, but

directly involved in mining activity in the Province.

On the energy side, a major milestone was reached a

couple of years ago, as we all know, with Hibernia at the end of 1997 coming

into production offshore at its first full year through 1998. Currently it is

averaging about 135,000 barrels a day, which makes it the major producer in

Canada and all of North America.

The other good news is the Terra Nova project.

Currently the facilities, the floating production storage and off-loading system

that they are going to use, are in various stages of construction: some of it

overseas in Korea, some of it at Bull Arm, some smaller components at Marystown.

They are exceeding their expectations of Newfoundland quantities and percentages

of work on the project compared to what they announced at the beginning. They

are still on schedule, on budget, and targeting to be actually producing oil

late in 2000. In November or December 2000 we should have the second producing

oil well offshore.

There are still some good signs on the West Coast

with respect to onshore drilling. Everybody has their fingers crossed that there

will be successes because, of course, if there are, with the capital cost of

drilling onshore so much lower than offshore, then the return from any

investment would be much greater. Loyalties to the Province would accrue much

earlier because capital cost would be covered much earlier and so on.

So there are a lot of good and promising things

that are happening in this particular area and this particular sector. We have

always had issues where one of the things that the department does in its

regulatory and monitoring role is to try to challenge all of the proponents for

any development - whether they be in the mining sector or the energy sector,

offshore oil and gas and so on - to try and maximize benefits for Newfoundland

and Labrador.

I am sure again that all members of the Committee

would have heard of or participated in some of the debate over individual

projects as to whether or not we are getting maximum benefit for Newfoundlanders

and Labradorians and for the Province from the development of these mining

operations and the energy sector operations, both in electrical developments and

oil and gas developments.

Without saying much more than that by way of

introduction - there is a lot more I could say in terms of the kinds of

initiatives and the kinds of things that are happening - I just might want to

add again that myself and the Deputy Minister were part of a delegation just

last week that visited the offshore technology conference in Houston. It is the

major offshore oil and gas show that exists in the world. Newfoundland firms

have been going there for almost twenty years. Some of the companies that were

there this year have been travelling to Houston - they also travel to Aberdeen

and Stavanger when they visit North Sea sites for similar shows - for as long as

twenty years. This year they were very excited by the interest shown in the

offshore oil and gas prospects in Newfoundland and Labrador. Several of the

companies actually signed deals while we were in Houston. They were excited by

the fact that the turnout and participation by Newfoundland-based firms was the

biggest in history. There were almost fifty Newfoundland-based firms that

decided to participate at their own expense and their own cost in Houston.

Over one hundred individuals representing those

companies from Newfoundland and Labrador travelled to Houston to be part of the

show that lasted for almost a full week. They were all very pleased with respect

to the increasing amount of knowledge that exists in the oil and gas sector

about prospects in Newfoundland and Labrador, particularly offshore. Also, they

were very pleased with the amount of knowledge that there seems to be about

onshore prospects on the West Coast - the Port au Port Peninsula and so on - and

that this whole play, in terms of Atlantic Canada, Newfoundland and Labrador,

seems to be really taking a foothold.

I travelled to Aberdeen some five or six years ago

when I was Minister of Employment and Labour Relations because the Minister of

Energy of the day could not attend. I must say that the recognition factor with

respect to Newfoundland and Labrador as a player, as a real site, not only for

exploration now but with a producing well offshore, makes a big difference. The

recognition factor has quadrupled, if not more, in terms of the major players,

the major companies, and the major participators in the energy sector, the oil

and gas sector, and their recognition of and their seeking out of opportunities

to participate in our Province. It is very encouraging. I think all of those who

attended Houston last week were very encouraged to see the interest in what is

happening here, and they all continue to try and develop business relationships

with companies that have been long established in both onshore operations in

Canada and the United States, as well as offshore operations in the Gulf of

Mexico, the North Sea and other parts of the world.

Any other issues like that I would certainly try to

bring to your attention as we cover off any questions or commentary that might

arise as we investigate the Estimates for the Department of Mines and Energy.

Thank you, Mr. Chairman.

CHAIR: Thank you. Mr. Rideout, do you want to

lead off or do you want to defer to Mr. Shelley?

MR. RIDEOUT: Mr. Chairman, Mr. Shelley, my

colleague and the Member for Baie Verte, will be lead for us.

CHAIR: Mr. Shelley.

MR. SHELLEY: Thank you very much, Mr. Chairman.

Certainly I have a lot of personal interest in the

mining sector. I always have. I am not the mining critic any more, Mr.

Ottenheimer is, but I certainly still follow it very closely, for the simple

reason it could prove to be very important for the Baie Verte Peninsula and the

Green Bay area in the near future, I would say that.

I have a few comments to make and I then I will ask

some specific questions on the Estimates. First of all, I would say about

exploration that I'm a firm believer in it, and growing up around a mining

community I guess I know full well that exploration is the key. We walked over

minerals every day, and like Voisey's Bay and everywhere else, if you have the

right incentives in place of course, and the right laws of the Province in

place, then these are incentives for people to come and spend money to take a

chance. Because that is what exploration is, taking a chance to find out what is

really in the ground, and then spending usually quite significant amounts of

money to get down to see if there is enough there to mine. So that is where it

all comes from. That is the driving engine behind mining anywhere in the world.

Exploration, that is the key, that starts it all off.

The exploration incentive program certainly is the

right step in the right direction. I assume that is under 2.1.03. That is where

that falls under, in that category, is that right? When we see -

MR. GRIMES: Yes it is, the Grants and Subsidies

section.

MR. SHELLEY: Under that Grants and Subsidies

one, that is specifically with this new incentive program. Is that the cost of

it?

MR. GRIMES: Yes it is. Mr. Chairman, as you can

see, the budget revised last year was $100,000. This year it is $2,110,000. The

additional $2 million that we have been talking about, that is where

(inaudible).

MR. SHELLEY: Just for the sake of everybody in

here - and of course I have read it already and had some comments from different

people - do you want to just basically go through what the incentive program

means and how it works, how it is allocated, and so on?

MR. GRIMES: I think what I would like to do,

Mr. Chairman, if I may, and Mr. Vice-Chairman, is to ask Mr. Dean, who basically

crafted the program for us in consultation with the representatives of the

mining sector, to speak. The mining council for Newfoundland and others had a

number of discussions with respect to this. Probably the Assistant Deputy

Minister could best give you the details of the three or four components. I

could ramble on about it but you would get a better answer if Mr. Dean answered

for you.

MR. DEAN: Thank you.

The program has three parts. In previous years we

had a Prospector Assistance Program, which has been going on for nine years now,

funded at $100,000 annually, or on average $100,000 annually. That has been

increased to $250,000 under the new program.

What we would call the Junior Company Incentive

Program ,whereby the department cost shares exploration expenditures, chiefly

drilling, with the junior sector on a 50-50 basis, there is an allocation of

$1.5 million under the new program.

The third program is for the Dimension Stone

Industry, which is an important part of our mining sector that is growing

rapidly. There is $250,000 to, again, cost share infrastructure, trial quarries

and development of Dimension Stone projects with the private sector.

All of these programs, except for the Prospector

Assistance Programs, are 50-50. We cost share these things with the proponent. A

more typical program is more like 30-70.

MR. SHELLEY: Okay. What about exploration

specifically though, an exploration program? How does that work? How do these

incentives work for the exploration part of it?

MR. DEAN: A junior company, someone who does

not have sustained cash flow from mining operations - that is essentially how we

define a junior company - will apply to the department for funding. Each

applicant or each project is eligible for $100,000 per project. That is the

maximum government contribution per project. The company must spend at least

$100,000 to be eligible for that. What we are seeing so far in the program is

that the proponents, the applicants, are normally committing to $300,000.

MR. SHELLEY: Yes. A few years back the cash

flow shares were the way to go. That is what was so interesting around Central

Newfoundland, for sure. Are there any discussions or talks with the federal

government of ever seeing that again?

MR. DEAN: The flow through shares Mr. Shelley

refers to, the flow through mechanism still exists within the federal tax

system, so it is possible to raise money through flow through shares. It is just

that with the tax reform inside the federal system the incentives for the

individual investor are not as great as they were ten years ago. The mechanism

is still there and some people do manage to raise some money from flow through

shares.

MR. SHELLEY: (Inaudible), because that was very

attractive to a lot of people back in the early 1990s and so on.

The (inaudible) there is no doubt about that. I

have to ask this question too, of course. Incentives in exploration, I drive

that home again. I really believe that is the answer. If we increase the

exploration in this Province we are going to find some other big finds on this

Island. I really believe we are going to find something in Green Bay and that

area. I am in touch with the McWatters Group and so on, and I am going to ask

for some updates on some of those mines in a second. There is no doubt about

that.

Minister, I will just ask you this. With the change

to the mineral act which was done - and of course reasons were given in the

House and so on, I understand that part of it - I have also gotten feedback, and

I know you have too, on negative implications of that change to the Mineral Act,

nationally and so on. With this incentive program you are talking about right

here now, there is no doubt that will help, but are there any intentions by the

department and by the Province to increase incentives or do more by way of

incentives for exploration? Do you believe there was negative feedback from the

change that we have had in this Province?

MR. GRIMES: Mr. Chairman, I think the

indication, certainly in the couple of months immediately after the changes to

the minerals act were proclaimed just before the end of 1998, showed that a

number of interests, at all levels, were expressing some concern. Part of the

concern was that the changes in Newfoundland and Labrador seemed to be occurring

at a time when other jurisdictions in Canada as well were taking certain moves

that the mining industry across the country did not approve of. One of the

issues that seemed to go hand in glove with it was that in at least two other

provincial jurisdictions in Canada the provincial governments were in the

process of - I guess the phrase used in the mining sector would be alienating

large blocks of land from the prospect for exploration by declaring provincial

reserves, ecological reserves and so on. Of course, in the mining sector if you

take out whole blocks of land that can no longer even be prospected or explored

in any way, shape or form they always express concern.

Because that environment was in other provinces in

Canada - and then we had a pretty drastic change in the regime that applied in

Newfoundland and Labrador. Whereby it switched completely to being that a

licence or permit was not going to be achieved unless the Cabinet approved of

it. Instead of going through any process that was seen to be impartial or run

bureaucratically or by certain regulations, and then if you did not like the

decision that came out of the process you could go to court, the Newfoundland

legislation did two things. It put it completely in the hands of the politicians

to make the final decision as to whether or not a lease was going to be given to

run a particular operation. Secondly, it denied any opportunity for a proponent

to go to court if they did not like the decision.

It was seen to be a very strong, very stern type of

approach but when we had opportunities, as we did at the Prospectors and

Developers Association of Canada - again, the largest meeting in North America,

in Toronto, where some 7,000 companies and representatives were there, and they

had the biggest meeting they have had in years as well - we did meet with the

executive. We met with representatives of some of the major exploration and

mining companies in the country and on the continent. When we explained to them

exactly what had happened and showed them the experience of what has been

happening in Newfoundland and Labrador, that the government - our recent record

was not at all to be unreasonable. When someone came forward with a reasonable

proposition they were granted a licence.

If they traced the track record of it - as a matter

of fact, in Labrador West, if we remember the controversy, people were

suggesting we should have been more strident and should have somehow cancelled

or altered a licence that has been in place for almost fifty years. We did not

do it because we had an examination done of the issues. The government was

convinced that a proper examination had occurred and that a reasonable position

was to continue on with the current permit and licence for the Iron Ore Company

of Canada without alteration, even though there was considerable pressure to

say: Do something about it and don't let this corporation make a certain

decision.

On balance, once we had a chance to have those

discussions - and we had the discussions as well with the federal minister, who

had indicated that in some travel to foreign countries where they had talked to

consulates and embassies, the issue had also been raised, that some of the

legislation in Canada and in Newfoundland was getting to be kind of prohibitive

with respect to the future development of mineral and mining prospects. Our

discussions with all of them seemed to have mitigated against that kind of

backlash a bit.

The more recent indication that Mr. Dean had -

again, having been at the CIM meeting in Calgary just last week - is that people

seem to understand what was done. They are not nearly as upset now as they were

when they first heard about the legislation. What happens in many of those

instances, Mr. Chairman, is that people hear something, they hear a story about

the change, and after they have had an opportunity, though, to actually read the

legislation and speak to people like Mr. Dean - who basically then is given the

task of making sure that the legislation works in Newfoundland and Labrador on

behalf of the government - they do not seem to be nearly as upset after they

have had the full information as when they heard a story saying: The government

down in Newfoundland has gone half crazy, there is going to be a bunch of wacko

politicians making the decisions, there is no process to go through. If you

don't like it you cannot even go to court.

If you put it in that context and describe it as

such, then if you were in the mining sector at all you would probably be very

upset too. Once they look at the track record of how leases and permitting has

been done in the Province, both before and since the changes were made, they

understand the context, they understand exactly what was happening, and the good

news is that it has not caused any diminution in terms of the interest and

activity in Newfoundland and Labrador.

The amount of interest that we are seeing so far in

1999 with respect to people wanting to go out and prospect and explore in the

mining sector is every bit as high as it was before the changes were made in the

legislation.

MR. SHELLEY: Well, first of all I will say this

to you - and that is why the Estimates, I think, are valuable. I do not think

you (inaudible) back and forth in the House of Assembly during the session, but

this is certainly something I had intended to ask tonight and I asked it in a

constructive way because, simply put, I heard those same things too.

I was the mining critic at the time. I had calls

from Ontario, British Columbia and so on, asking me what I thought. I tried to

explain it, because the bottom line is this: All of us, at the end of the day

when you take the politics out of it on this particular issue, had better hope

that - and I take you at your word here today - that we have calmed that down a

little bit and it is more attractive. That was your job to go up and sell that,

as your ADM and so on did. I hope, for all of our sake, that you have done that

because it is going to mean a lot for this Province.

That is why I ask again. I take you at that but at

the same time I am wondering if there are more incentive programs like you have

just announced, which is $2 million. It is not bad and it is in the right

direction. It certainly helps and it calms down everybody and lets us know, and

lets other people know, that we are mining friendly and you can deal with us,

and we are not going to be the bunch of politicians you talked about and so on.

It is really important because I want to see those

people down exploring and in the woods again, cutting and so on, because then

you get excited and you find out there is something down the road for you. I

think it is important for all of us and I really wanted to ask that question

tonight.

MR. GRIMES: That seems to be the indication,

that the interest -

MR. SHELLEY: The feeling is good -

MR. GRIMES: - (inaudible) this year is every

bit as high as it was prior to the changes in the legislation.

MR. SHELLEY: That is good to hear. I am

relieved to hear it because I really feel that we have some things that happened

in my area - not just my area, I am being local now, but I know throughout the

Province and so on.

I guess I will get one more question. I have a list

of things here but we will go back and forth, will we? I have only a couple of

minutes left, Mr. Chairman?

CHAIR: Yes.

MR. SHELLEY: Archean Resources, as of right

now, I know we cannot talk into the detail of legalities and so on right now; we

are in the court process and so on. Is it June that we will know the final

decision on that? I want to ask you again, from an Estimates Committee point of

view, is there any negative impact that you feel from that particular situation,

Minister? Can you comment on that?

MR. GRIMES: I will probably again ask Mr. Dean

to give the latest information with respect to where they are in the appeal

process.

MR. SHELLEY: I know it is in appeal. I do not

mean to ask the legal ramifications but just overall.

MR. DEAN: I believe Mr. Shelley is referring to

the court case where Archean challenged the Minister of Finance or the

Department of Finance on the taxation of their royalty.

MR. SHELLEY: Yes.

MR. DEAN: I believe that the court ruled in

favour of the Department of Finance and Archean is appealing that decision. I am

not exactly sure where it is in that procedure, or whether a date has been set

for the appeal or not.

MR. SHELLEY: Okay. Well, let me say it like

this: I understand that and I have been following it very closely. They are in

an appeal process and I think by June they will know. Of course, the Finance

Department won. What I am saying is that - and I do not want to get into an

amount of money. Apparently it is a significant amount of money. I have some

numbers. I do not know if they are correct but it is a significant amount of

money to Archean Resources if they lose this case and the Finance Department

wins the appeal.

I am wondering if there have been any discussions

and so on with Archean, the negative impact on that? They are investors in the

Province; they are an exploration company and so on. Will that have a negative

impact on them?

MR. DEAN: Well, they would certainly pay more

tax if the court ruling is upheld than they would if the court ruling were

overturned, but a company such as Archean can reduce its tax payable by

investing in the Province. In other words, if they spend more money in the

Province in mineral exploration or development then those expenditures can be

used to reduce the taxes they would otherwise pay. So the tax, as it is

designed, is in fact an incentive to reinvest income in the Province.

MR. SHELLEY: Okay.

I just wanted to ask that question too because they

are also significant players in the Province and we want everybody interested

and attracted to doing more exploration in the Province. I will just stop at

that for now.

CHAIR: Thank you.

Mr. Collins, would you like to ask some questions?

MR. COLLINS: Thank you.

First of all, I think the minister indicated in his

opening statement about the controversy that was, and still is, in place. I

guess as we go forward in time, that is going to be a hard pill for the people

in Labrador West to swallow. There is no question about that.

I would like to ask the minister: Regarding the

possible expansion in Labrador West of the Iron Ore Company of Canada

facilities, and given the fact that the municipalities and the committee had

their own study commissioned, what if anything has government done with that

report? I understand you are going there later this week. I wonder if you could

enlighten us, because the only response that we have had, really, was from the

Minister of Finance, who within twenty minutes of receiving the report sort of

discounted it as being nothing more than words on paper.

MR. GRIMES: Thank you, Mr. Chairman.

With reference to, I guess, the controversy: I have

never seen it as any kind of controversy. It caused quite a kerfuffle in the

Province for some period of time and may still be causing some kind of a stir in

Labrador West.

The issue, though, is abundantly clear, and the

reason that the Minister of Finance, who I believe was the acting Premier on

that particular day, was prepared to make a comment within minutes after

receiving the report was due to the fact that the engineer, I guess the

consulting engineer from St. John's who had worked with the local committee,

acknowledged that he did not have financial expertise and that the

section on

financing and rate of return was done by a local Chartered Accountant in

Labrador West.

The information in that had been shared, again,

with the Iron Ore Company of Canada who also, minutes after receiving the

report, came out and said that the information on the financial side was

completely and totally flawed, and that it did not, in any way, shape or form,

change or provide any prospect for the corporation to change its decision.

That information also had been shared in an

informal matter with officials of the government, both in our department, policy

planning, and also in finance. So they were aware of what the report was going

to say on that issue before they received it. They had advised the committee, as

well, that a couple of the basic premises that Mr. Taylor, I believe it was, had

used in the report were absolutely false, that he had completely misinterpreted

some federal taxation issues and other issues, and therefore the conclusion that

he drew was of absolutely no merit.

If you read the report yourself, as I am sure you

have, the consulting engineer was careful not to attach his name to that

information. He made it quite clear that: This is not my information, I am an

engineer, I am not a financial expert and so on. I think that information was

conveyed because of the fact that there is no basis, and we will have the

opportunity to discuss it in detail again with the committee for the company.

If I might take a minute, Mr. Chairman: I was not

the minister at the time this issue surfaced, but I did make some comments about

it at the Federation of Municipalities' meeting because I did think then, and I

do think to this day, that it has been the most misrepresented issue that I have

come across in ten years in politics, where people are suggesting, totally

unreasonably, that the government should have done something about it.

There are two things that the Government could do.

The Government could pay the difference because the company has decided, a

company by the way that has been in operation for forty years, a company that

lived up to its lease and its permitting and its licensing every year and has

injected incredible wealth into Labrador West and added to the Province...

AN HON. MEMBER: And Quebec.

MR. GRIMES: And Quebec, because it operates in

both provinces. They have lived up to every commitment that was made and asked

of them by anybody over the years. Their lease was only renewed two or three

their license should change and prohibit concentrate, as a product, from leaving

Labrador West, because concentrate has always been one of the product lines from

Labrador West. Mr. Collins would know that, Mr. Chairman, as well as anybody in

this room, probably better. We would either have to pay the difference, when the

company which is not in violation of its lease at all, as a matter of fact has

lived up to it every year, makes a corporate decision to make an investment in a

certain way -the government can intercede by offering all kinds of financial

incentives, or basically buying the project and paying the difference, which

would have been hundreds of millions of dollars, which I am sure that an NDP

government would never suggest because they always suggest that we don't tax

corporations enough.

Surely goodness, Mr. Chairman, we would never have

an NDP member suggest that one of the major corporations in mining in the world

should be given additional tax breaks or paid cash. We might hear it from the

Liberals, we might hear it from the Progressive Conservatives, we might hear it

from the Reform, but we would never hear it from an NDP, that you should give a

major corporation a tax break or give them cash.

MR. COLLINS: If it meant saving thousands of

jobs, you would.

MR. GRIMES: Oh, you would?

MR. COLLINS: Yes.

MR. GRIMES: So you are very flexible with your

policies. So there is no policy basis for the NDP, it is just whatever is good

for the moment.

MR. COLLINS: You are doing the same thing this

afternoon you have been doing the last few months. Questioning me (inaudible)

different meaning.

MR. GRIMES: No, no. I am clarifying again,

because I am convinced that if you went to one of your policy meetings - and

maybe you have never been to one, a policy of the NDP of Newfoundland and

Labrador would never be that you - because I have been to a few myself, by the

way, and it always says: Tax the big corporations more; what with student loans

and those kinds of things, when I was the education minister. Sure the answer

is: Just tax the banks, tax the big corporations.

They used the example, and the hon. member, Mr.

Chairman, has used it in the House -

MR. COLLINS: If you taxed the Iron Ore Company

more, Mr. Minister, you might have (inaudible).

MR. GRIMES: - has used the whole issue, not to

be argumentative about it, but has used the whole issue, when I was the

education minister, that you could go ahead and solve all the student loan

problems in the Province if you just raised more corporate income tax. They used

the example that we get more from lotteries than we do from corporate taxes.

It is an issue that sort of cheeses me off a bit,

so I will deal with it just for a second. The notion was, either buy it which

this government is not going to do, and the hon. member really is not going to

suggest, even though he suggests he might if it means saving some jobs, or

secondly, change the actual lease itself to prohibit the export of concentrate

from Labrador West. That is one way to do it, but then everybody knows what that

means. It means that one-third to forty per cent of the actual revenues and

operating of IOC itself stops right away and Wabush shuts down. You can't very

well say that the Iron Ore Company of Canada can't ship out concentrate, but in

the same part of the Province, on the other side of the lake, Wabush Mines can

ship out concentrate; because that is all they have ever done, ship out

concentrate to Quebec.

MR. COLLINS: You are comparing apples and

oranges, and you are the laughing stock of Labrador West with the comments you

had in the paper last week.

MR. GRIMES: It doesn't matter. I will be the

laughing stock many times over and I will be the laughing stock when I go in

there and have the meeting, because the fact of the matter is: If there is a

different reality than one of those two, then I would like to know what it is. I

would really like to know what it is. You can pipe dream all you like about

these kinds of issues. As I said, Mr. Chairman, the controversy is (inaudible),

because I think it has been the most misrepresented - maybe the Member for

Labrador West might want to explain to the committee exactly what should have

been done differently in terms of forcing a major corporation to make a

different decision.

MR. COLLINS: I think that is your job, you are

paid to provide explanations. It is not our job.

MR. GRIMES: I have provided the explanation,

that we have two choices, buy the jobs or prohibit the export of concentrate,

and we are not going to do either one. Now, you tell me what the other options

are and maybe we can have a conversation.

MR. COLLINS: You would do it, and then you

would close Wabush Mines at the same time. That is incredible!

MR. GRIMES: Who is closing Wabush Mines?

MR. COLLINS: You said, if you do that Wabush

Mines would have to close as well.

MR. GRIMES: So, you are suggesting that a

government in Newfoundland and Labrador could bring in a rule or a law that says

that the Iron Ore Company of Canada cannot ship out concentrate, but a company

operating right next door, using the same ore body, can ship out concentrate.

MR. COLLINS: All we are saying is that the

resource is in the Province, it is in Labrador West, and in spite of the

misleading things you are saying here now, that has not happened. The

concentrate that was shipped from Labrador West was shipped as a product to be

sold to customers who use concentrate as a product; not to be turned into

pellets down the track.

MR. GRIMES: No, and I guess you wouldn't want

to suggest, by the way, that the product they turn it into, the other customers,

happens to be pellets. When they send it to, for example Europe, as concentrate,

they send it to people who turn it into a pellet.

MR. COLLINS: It is mostly used as (inaudible).

MR. GRIMES: They send it to people who turn it

into a pellet, and they are going to turn it into a pellet in Quebec. So what is

the difference? I am really stupid when it comes to certain things. I am

certainly stupid when it comes to seeing the difference.

MR. COLLINS: Well, why don't we get really

smart and shut the pellet plant down that is in Labrador, so we can send it all

to Quebec?

MR. GRIMES: Why would anybody even consider

that? The company is certainly not considering that. The company is considering

investing in the pellet plant to make it more efficient.

MR. COLLINS: The long-term plan will bring that

reality. We can argue about this all day.

MR. GRIMES: Absolutely! And we will argue about

it for a long time any time anybody brings it up without suggesting what the

other alternatives are. I only see two and I have not heard you suggest that

there are any other alternatives, other than buy it or prohibit the export of

concentrate. So, what is it?

MR. COLLINS: There is an alternative. It is in

the back of the report which I am sure that you have read as well.

MR. GRIMES: Which is what?

MR. COLLINS: Which is to do it in Labrador

West. The cost difference is not what was suggested by Hatch, because don't

forget, the Hatch Report was flawed as well. Everything in that wasn't

(inaudible) either.

MR. GRIMES: By the way - and this is why I say

it is the most misrepresented, Mr. Chairman. I know that the committee usually

doesn't get into these kinds of discussion and arguments. I certainly have not

in eight or nine years as a minister. The whole notion with respect to the

report saying, do it in Labrador West, there is a suggestion that the government

can make them do it. This is the point I am making: If the government is going

to make them do it, we can make them do it one of two ways, because the company

which is living within its lease has said that it is not going to do it.

MR. COLLINS: What about the economic

priorities?

MR. GRIMES: So you are suggesting that we

should force them to do it. So we force them to do it by giving them the

difference in cash, and then they might think about it, or by saying: You cannot

ship the concentrate out. So the government didn't make the decision to spend

$600 or $700 million in Labrador West on improving the mine and the pellet plant

and so on in Labrador West. That is not the government's decision. That is the

whole point, Mr. Chairman, that when you say, what can the government do about

it, I am telling you the government has two choices, give the company a pile of

money, one of the major corporations of the world that you suggest we should tax

more, but now because it is not convenient to tax them more we should give them

several hundred million dollars, because that is the only way the company is

going to agree to do it, if they agree then; or secondly, find some way to

prohibit the export of concentrate. Now, think about it, because it is the

company that has made this decision, not the government.

CHAIR: May I interject here?

MR. GRIMES: Certainly, Mr. Chairman.

CHAIR: We could go on like this for hours

tonight and I don't think the committee wants to pursue this for the next two or

three hours. I think you could have that debate outside or in Question Period at

some other time.

Do you have any more direct questions, Mr. Collins?

MR. COLLINS: Shabogamo Mining, Mr. Minister.

Could you give us an update as to the status of that now? I understand that they

have been given approval on a number of issues. I wonder if that is ready to

take place?

MR. GRIMES: I think - again, Mr. Dean will

correct me if I am wrong - we are in the final stages, actually, of providing a

lease or the appropriate documentation that they will need to start an

operation. Again, it is an issue that I will address when I go to Labrador West,

that Shabogamo, as you would know - and it is being supported, as I understand

it, in Labrador West and by yourself - want to ship a raw product out of

Labrador West? Is that not correct?

MR. COLLINS: Not to my knowledge. There is

still some controversy. I don't think anybody in Labrador West yet has enough

information on exactly what their intentions are. The rumour, and I guess what

they have been saying, is that they want to send it out. I think the number of

jobs they are talking about that would be created was between sixty and seventy.

I don't think anybody in Labrador West, to my knowledge anyway, has any

information on exactly what they would do, what the alternatives are at this

point in time.

MR. GRIMES: I have been visiting Labrador West

for ten years and this issue has been on the go for most of that time. Every

single time that the proponents came forward to suggest what they wanted to do,

they wanted to take the ore out of the ground and ship it out of the Province.

MR. COLLINS: They are going (inaudible) it in a

place over there. Right now, as I said, I have no knowledge, and I don't know if

anybody else does, enough information, to decide whether that is what should or

should not happen.

MR. GRIMES: So, maybe you might just inform me:

The actual project that they want to proceed with, taking ore out of the ground

and shipping it out of the Province, you are not going to support that?

MR. COLLINS: Now, don't put words in my mouth.

MR. GRIMES: I am just asking a question.

MR. COLLINS: I think the legislation of the

Province says if it is economically viable, and if it passes that test, to do it

in Labrador West, then, yes, that is where it should be done. I think the one

with the Iron Ore Company, you don't want to get back to that, but in our

opinion it is economically viable for a company that has been in operation there

for forty-odd years and made hundreds and hundreds of millions of dollars, to do

that in Labrador West as well.

MR. GRIMES: I guess, Mr. Chairman, it is better

not to talk about it because all we will do is agree to disagree.

My understanding is that with Shabogamo it is

silicon, I think, and the whole notion, the only thing I have ever heard of in

the number of times it has been presented, is that the company, at this point in

time, needs to take raw ore outside the Province to have it milled, refined and

so on elsewhere, so that they can find out for sure whether there is a good

market for it.

MR. COLLINS: They have sent some out for

testing.

MR. GRIMES: Right! And if it proves to be

something that is marketable, maybe some time in the future they will have a

plan that suggests that some further processing should be done in Labrador.

Because I am so gun-shy about these issues, and know how we get attacked, I

would hesitate to give somebody a license or a permit or a lease to do

something, to send out raw ore knowing that the member for the area and the

business community in the area, and the unions in the area, are going to condemn

the government for letting somebody start up a mine to ship raw ore out of

Labrador West.

MR. COLLINS: You weren't too hesitant before.

MR. GRIMES: Remember now, currently we are

talking about a forty-year-old lease.

CHAIR: Mr. Collins, I think your ten minutes

are up. We will give you time again later on. We are going to move on to Mr.

French now.

MR. FRENCH: Minister, before we get into

amounts of money and so on, pretty close to my area in Conception Bay South

there used to be talc mining. Some years ago I know that the company was sold to

a company called Armstrong World Industries Limited, and the facilities out

there have shut down. I go back to, I guess, Rex Gibbons' day as minister. I had

a conversation with him one time about the mining and he said that the Armstrong

World Industries Limited were to get in touch with him within a certain period

of time and I never heard anything after. I still have people who ask me about

pensions and so on.

I just wonder, does your department have anything

to do with this Armstrong? I am led to believe that maybe Armstrong World

Industries Limited may have, indeed, sold the facility. I see you nodding your

head, so they have; that rumour is correct. I would like to know who owns it

today. I do not know how the lease works in this instance. Are they going to be

told you have to mine this facility and, if you do not, would we look for

somebody else to go in there? There was a time in my district when this mine

employed a lot of people, and a lot of people for a lot of years. I understand

there is enough ore out there today to probably keep that mine going for another

100 years.

MR. GRIMES: I could certainly ask Mr. Dean to

give you an update as to what he knows of the current status.

MR. DEAN: Yes, Mr. French, the mine, in fact,

has been sold. Armstrong World Industries Limited did sell the mine last summer

to a company called Trinity Resources & Energy Limited. They have a subsidiary

called Newfoundland Pyrophyllite, which they operate under. They have two or

three, I think, employees at the site; at least two of whom were former

management people from Armstrong World Industries Limited.

MR. FRENCH: If you would just excuse me? That

is right, but they are not doing any mining. They have, I think, probably Mac

and maybe one other fellow still there who just make sure that the place does

not fall down around your ears, that somebody does not go in and rob any of the

equipment or anything. I am well aware of that.

MR. DEAN: The focus of the new company, Trinity

Resources & Energy Limited, is, in fact, to produce different products. The

pyrophyllite that was mined at Manuels was shipped to ceramic tile plants in the

United States. Those plants have shut down permanently, I am informed, so that

market no longer exists.

What Trinity Resources & Energy Limited are trying

to do is establish a new market in the paint industry, primarily. They have been

doing a fair amount of research on grinding the pyrophyllite and use as a filler

in paint manufacturing. I am informed that they are making considerable progress

in that regard. They have done some test products, sent them out, and they have

been very well received by customers, including our own paint plant here in St.

John's.

The focus, if you like, the market focus, has

changed with the new ownership. They are attempting to find new markets for the

material and put the operation back in production.

They would also mill the product on site, if you

like. If you remember before, the pyrophyllite went out as a lump product and

they would produce essentially a powdered product which would be produced on

site or near site there.

They are having some success. There is not very

much in the public realm that I can inform you on today but we hope that they

will be successful with this new venture.

MR. FRENCH: Could you send over to my office an

address of this company, because I would really like to have a chat with them

about what exactly is going on. One time, like I said, the stuff was shipped out

about five minutes' walk from where I live, and at one time that facility

employed a helluva lot of people. Of course, now it is down to two people. That,

to me, is very sad. If it is there and the product can be used, I think we

should be doing everything we can to encourage the use and the mining of it.

Thank you.

CHAIR: Mr. Hunter, do you want a go? Okay, go

ahead, Mr. Shelley.

MR. SHELLEY: Okay, I will just stick now with

updates on some sites and so on around. First of all, Minister, as you know,

Nugget Pond on the Baie Verte Peninsula is nationally renowned, I would say now,

from the cost-effectiveness of that particular site. I have visited it a few

times. I do not know if you have already been to the site or not.

MR. GRIMES: No, I am actually planning to, and

have been invited to visit during the mining conference (inaudible).

MR. SHELLEY: Yes, that was my next question. I

always do this in Estimates. I know you have already been officially - I'm

hoping you are going to be at the mining conference in Baie Verte.

MR. GRIMES: Yes.

MR. SHELLEY: It has been a very positive one,

as Mr. Dean will tell you over the years. It continues to be, even when there is

not a lot of excitement going on, but apparently this year it is going to be a

little bit upbeat because of Nugget Pond but also some other things in the area

that I will mention in a second. Of course, Nugget Pond, I cannot say enough

about it. They have even an environmental award recently.

The one I want an update on now is the Ming Mineral

and the old Rambler site. I was wondering if Mr. Dean or yourself can just

update me on that. I'm hearing bits and pieces of things but it would certainly

be nice to know exactly what is happening there.

MR. DEAN: The current project that is being

pursued at the former Rambler site is the tailings. There was an attempt to

recover the gold from the tailings by a company called Raymo Processing. That

attempt failed for technical reasons, essentially. The department has cancelled

that mining lease of sale by Raymo and the minister has now called for proposals

for that resource. I believe the closing date is the end of this month, May 30.

We are confident we are going to get at least one proposal.

MR. SHELLEY: You do not have one yet, do you?

MR. DEAN: The closing date, Mr. Shelley, is May

MR. SHELLEY: Okay.

MR. DEAN: We have been informed by at least one

company that they will give us a proposal to reactivate.

MR. SHELLEY: Yes, I'm hearing the same thing.

It certainly sounds interesting. They keep coming back to it. (Inaudible)

hopefully will make it work there. They know there is an ore body there.

The other one of course in the area again is

McWatters' interest up in King's Point area, and I have been trying to keep in

touch with them as much as possible. I have spoken to them a few times. The time

frame is hard to nail down. I understand the gold prices are going to influence

that, but from what I understand, throughout the summer, maybe even by this

fall, we might see some movement and heading to construction of that type. Is

that possible?

MR. DEAN: The price of gold today I think is at

a twenty-year low. Gold companies, including McWatters Miller, are having a lot

of financial difficulties in their operations and in their corporate financing

because of the price of gold today. The reason that project has not moved ahead

I think is largely due to the corporate difficulties the company is having due

to the price of gold. There is another (inaudible).

MR. SHELLEY: There is no update on when they

expect - because last year at this time they were saying that this fall they

could be into something (inaudible).

MR. DEAN: That is right. The financial health

of the company has changed considerably since they announced they were going to

proceed with that.

MR. SHELLEY: Yes, I realize that.

MR. DEAN: I think that rebounding gold prices

is necessary for McWatters to raise the financing that is necessary to proceed

with the feasibility study and ultimate development. We have had a good look at

the resource itself and we are very confident that the resource is there in the

ground. There are some challenges on mining but the grades are similar to Nugget

Pond, which Mr. Shelley referred to before, so I think ultimately that project

will go forward. In order to get financing we are going to need to see gold

prices going the other way.

MR. SHELLEY: I just have to leave that for a

second and come back to something I missed earlier. Last year I brought this up,

and I think we have had something done with it since, but I would to get an

update. It is about when you are staking claims down here at the building and

the lineups outside. It was supposed to be corrected. Is that process in place

now? Have we made some corrections?

MR. GRIMES: Yes. The new process, Mr. Chairman,

has been in place a month or so now I guess. I've noticed it because even going

into the building every day you find out that the people who used to be waiting

outside the door are absent.

The new staking system has been activated. My

understanding again too is that it is well received within the industry, that

they now quite understand the procedures and are quite pleased to know that from

any other location, you don't have to have somebody paid, or you don't have to

take time yourself, to leave Central Newfoundland as an example, or the West

Coast or Labrador, to come into a physical location in St. John's and stand and

actually stake a claim on the map with the proper coordinates and so on. The

electronic system has been working well, to my knowledge. Either Mr. Dean or Mr.

Blackwood or someone might be able to give you more information.

I have certainly noticed that the lineups have

disappeared from the building. The general feedback from the mining sector

again, now that they fully understand the process, is that they are quite

pleased with the new approach.

MR. SHELLEY: That is good to hear because I

have raised that a few times. I had people down here from my district calling me

at 1:00 a.m. looking for heaters for their cars because they are sitting outside

and that type of thing.

There was one loophole there - I do not know if it

was closed up - dealing basically with the call-in system, or however you do it

now. A fellow might be staking a claim, then his wife, son, daughter and

everybody else could do the same thing and sort of double up or triple up on it.

There was some discussion on that with the previous minister. I do not know if

that is closed off now or exactly how it works. Paul, is it taken care of now,

can you tell me?

MR. DEAN: This is really only an issue when

people are competing for the same piece of ground if you like or the same

mineral rights. The new system will essentially -

MR. SHELLEY: It hasn't run into that yet.

MR. DEAN: We haven't run into it.

MR. SHELLEY: There is potential there for it, I

say to you. Because if you do get a bit of excitement in the area - something

was brought up by the people who were staking it, by the way. They said it to

me: What if that happens?

MR. DEAN: I guess we will have to cross that

when we come to it. The minister is right. The system works fairly well. It is

also a very tight, confidential system. If someone does apply, no one else knows

that a person from Baie Verte or Grand Falls or Labrador City has applied. On

the designated day, if you like, if there are two people who applied for the

same ground, there is just a matter of doing a computer (inaudible).

MR. SHELLEY: No, I think it is great, and I

congratulate you for doing it. All I am saying to you is that down the road if

you have a hot spot again, something like Voisey's Bay or whatever happens

somewhere else, people will use the loopholes. It is a matter of closing them

up, like with any process I guess. That was mentioned to me by a person who was

staking a claim that that could possibly happen if you saw some competition

around the area. It is something to consider and something you might have to

handle down the road. I'm glad that it is fixed, or better than what it was

before, for sure.

There is something else I wanted to mention to you.

It is sort of in your department and it is not in your department. It is old

mine sites and cleanup. Over two years ago I brought it up with the Little Bay

mine, myself and actually a constituent out there. It was two and a half years

ago, probably. Irving owned that site, the Little Bay mine. I had complaints

there were people throwing garbage into the pit that was there, it had caved in,

they were throwing animals in there. Everything. I've had some contact with

Irving and so did this particular constituent.

The Little Bay mine site, Gullbridge and Tilt Cove

were owned by Irving. I understand they are planning to do some cleanup at those

sites. This is unofficial with me, but what I have heard from one phone call is

that it is something like $2 million to clean up some of those sites. I think it

is supposed to happen this summer. I was just trying to get an update on that.

Do I have to go to Environment and Labour, and that is out of your hands? I'm

not sure. I just ask the question.

MR. FRENCH: Excuse me, Minister. Before you

answer that, Mr. Chairman, I wonder if I could be excused. I have to go and meet

with a council in my district. It does not have any mining, but they have a lot

of votes.

MR. GRIMES: You are still trying to get

re-elected.

MR. FRENCH: (Inaudible).

MR. GRIMES: He must be going to run again.

WITNESS: Long-term prospects as well.

MR. FRENCH: It is too exciting now to give it

up, boy, especially if I have to see you sitting over here (inaudible).

MR. GRIMES: Mr. Chairman, Mr. Dean will give

more information. Basically most of the cleanup issue is dealt with in one of

two ways: either in some incidents part of an original lease, a commitment given

to clean up afterwards, and the monitoring of those functions usually fall with

the Department of Environment. Because we are dealing with issues now, for

example, like the Hope Brook gold mine and those kinds of issues as well.

The other thing is this. I understand we are in the

final stages as well though of making another change or a change to the act or

the regulations to indicate that in order to get a lease or licence in the first

instance the whole commitment would have to be the decommissioning.

MR. SHELLEY: That is with the newer mine sites.

MR. GRIMES: Also, a commitment for the new

ones. That is the direction for the future. Because everyone understands that it

has been difficult sometimes in the past to get someone after it has become

uneconomic - they have abandoned the site, to track them down to see where they

are financially and to get them to live up to commitments to restore and reclaim

the sites. As to the ones that you mentioned, Mr. Dean might want to give you a

brief update as to where they are and whether or not the actual reclamation work

is scheduled to happen this summer.

MR. DEAN: The three sites Mr. Shelley referred

to - Little Bay, Gullbridge and Tilt Cove - the surface rights in those areas

where the mining took place are still owned by the Irving group of companies.

They have a couple of different mining companies. The Irving group has

acknowledged that it is their responsibility. If something is needed to be done

on that site, they either do it or sometimes we do it and send them the bill.

The St. John office of Irving sort of - I guess, we

have a working relationship in Mines and Energy, and Environment and Labour,

that if there is an issue there to be dealt with it is brought to the attention

of the St. John office of Irving. They either have someone do it or say: Would

you get a contractor to do it and we will reimburse you for that?

I'm not aware, however, that there is a major

funding initiative for this summer for cleanup of those sites but I stand to be

corrected on that.

MR. SHELLEY: Okay. I'm not officially aware of

it but, like I said, I have done this for a couple of years back. As a matter of

fact, I call your department and call this guy. I will try to get some names and

hopefully get an update on that because it is important.

It started with the Little Bay site because of what

was happening there and complaints by local residents, and the skidoo almost

went into the (inaudible). All these type of things were happening. Basically,

it started from simple complaints like that. I've just heard this from this

constituent so it is all secondhand, I will say that to you, but it would be

nice to know if it is true.

Those are the older mine sites around, Mr.

Minister. That is like the Baie Verte mine site which I am going to get to in a

second. While we are on that note, that is something that is going to have to be

raised with that particular site pretty soon. Maybe we might be saved from that

because I think there may be some good possibilities coming there, and I will

get to them in a second.

Also, while we are on this same track, could I get

an update on a newer mine - about which hopefully there will be some regulations

in place - and that is the Hope Brook? Can I get an update on what is going to

happen there with the cleanup, the reclamation and so on?

MR. GRIMES: Again, the issue largely is being

dealt with by the Department of Environment and Labour. I think all of the

indications are that with the particular company involved every indication has

been that they will honour their commitments at the Hope Brook site even though

they are going through, I think, some financial difficulties that all of us have

followed through the news, and protection proceedings and so on. The indication

given to the government is that we can fully expect that their obligations at

Hope Brook will be met over the next period of time because I think it is,

again, substantial at that gold mine. The Minister of Environment certainly

would be the first to let the people of the Province know if there was any real

suggestion that the commitments will not be lived up to with respect to cleanup

at Hope Brook.

MR. SHELLEY: Okay, thank you. Just a couple of

other small ones. First, about the silica bulk sample last year in La Scie. I

haven't heard anything about it since but the bulk sample seemed to turn out

alright. I understand that that type of silica was for blast furnaces and so on.

The market was for blast furnaces in Iceland and that type of area, but they had

some problem with that market after. Is there any update on if they are going to

come back again? Apparently, the sample worked out alright but we have not heard

since.

MR. DEAN: Yes, I understand the bulk sample was

successful and went to a silicon smelter in Iceland. There may be a requirement

for further bulk shipment before they could look at a commercial venture. At the

moment there isn't any sort of approvals for a commercial mine at the La Scie

silica project. In other words, it has not gone into the environmental

assessment process. We do not have an application before us for a mining lease

or anything like that. It is still one of those that is at the advanced

exploration stage but might eventually make it into a commercial mining

operation.

MR. SHELLEY: Okay. I will bring up one more and

then just make a comment on the last one. The question is for another one. I'm

hearing again about the antimony mine site at Glenwood. Could I get an update on

that? That could be a possible positive spin soon, as I'm hoping. I know the

Japanese market ruined it before, or the Chinese market, I'm not sure which one.

WITNESS: (Inaudible).

MR. SHELLEY: Chinese, was it? Are there any new

developments there?

MR. DEAN: The price of antimony is the major

factor that is affecting that operation, and China is a major producer of

antimony and essentially does have a major influence on the price. The current

price today is about $300 per ton of concentrate below what the company at

northwest Gander, Roycefield Resources Limited, would require in order to

reactivate the mine. The price needs to go up by 20 per cent to 30 per cent from

where it is at the present time before they could have a successful mining

venture in the Glenwood area. Having said that, it is a good deposit, it is a

good mine, it is a good company, and the initial production that they had was

well received in the marketplace. Unfortunately, the market took a dive just as

they were coming into production, but that is the cyclical nature of the mining

industry. The market will come back, undoubtedly.

MR. SHELLEY: I will just make a comment on

these next two things. The Canadian Magnesium Corporation, since its very

beginning, with the magnesium potential there at the Bay Verte mines, with the

tailings - I have taken it on as a research study myself and learned quite a bit

about it. There is so much more to learn about it still. Asbestos tailings are

full of magnesium and silica. As late as yesterday I had the press release from

Magnola in Quebec. I have studied that process also. It is a huge project, $733

million so far invested in Quebec, a magnificent project. The headline - I don't

know if you have seen that

article yet - is: Magnesium magnificent. That is what

it was yesterday, Magnola. It is really interesting. From my limited resources

and the research that I can do, the Internet and getting articles - I just faxed

a group from the United States and so on - I've gotten to find out pretty

quickly that magnesium is one of the most interesting materials on the market

right now.

As a matter of fact, Ford had a statement out a few

weeks ago that last year they used - I think I have this right now - five

kilograms of magnesium per car. By the year 2020 it will be over 200 kilograms

per car. That is where the interest is going. I have been to the magnesium

conference. I would suggest actually, Minister, that that is where we encourage

travel. The one for this year is in Rome. You should take that money - but in

all seriousness, if you go to these you really find out quickly. Unless the

former minister wants to go again. I will say to you that the magnesium - I

don't know in this Province, and the ADM can tell me, he knows more about it,

but I certainly did not, and I don't know how many people in this Province know

about it. Certainly the market is going to expand and explode.

At that last magnesium conference I watched, I

don't know, twenty presentations. Mercedes-Benz, all the car companies, were

talking about the increase of magnesium in the products. Obviously because it is

a lighter material and therefore there is the environmental aspect. If they are

lighter machines there are less emissions and so on. It is certainly getting

very interesting. I can only wish them well. I know the feasibility is ongoing

now with the Canadian Magnesium Corporation and that they are going to be doing

some work in the area very soon now. In fact, in a little while. I think that is

going to be a very exciting project. It has the potential to be, from what I

have seen of it anyway.

Hopefully that will answer two questions as to what

is happening at that site down there as far as the environmental problem anyway.

I think we have the potential for a huge, very good, project. Haven't said

anything about it publicly or anything, and for good reason, because people in

the Baie Verte area have heard so many things in the past, like many parts of

the Province, and not see it come to fruition. So it has been just very quietly

done. I know they are doing their homework. Basically, when people ask me

locally I just say they are doing their homework, they are doing what should be

done and hopefully down the road something will happen with it. I know they are

ongoing.

On that same note, the North Co Forest Group are at

the mine site now - as the ADM and the minister probably knows - and doing very

well. They made all of their equipment and they are ready to start producing

lumber about the first of June. They made all of the equipment at the machine

shop there in Baie Verte. It is a fantastic job. I hope you visit them when you

go down there too.

Of course, we do not know what will happen with

Canadian Magnesium Corporation. We hope they (inaudible) there and they may want

to use that machine shop down the road. I just want to make the comment here

tonight that these people at the sawmill made very good use of it. For one

thing, they stopped it from dilapidating. The roof was leaking, it was a mess.

They have it all cleaned up. It is all lubricated. There are no leaks there, so

they have done us a favour already. I'm not making proposals here, but I'm just

suggesting that these guys did do that and maybe along with Canadian Magnesium

Corporation down the road, there is a potential that these guys can continue to

use the machine shop, maybe continue to operate it, I don't know. They could

work jointly in having a first-class machine shop on site that is up and

running. They had some people to work down there and I think it was good for

everybody.

So I just want to make that comment about the North

Co Forest Group that are there now and commend them for doing that. I am hoping

that in the very near future some of these things we are talking about here

tonight - I hope it is in the near future - can come to fruition and we can see

some real heavy activity going on there. I understand that could be as early as

the fall, if everything goes along well with the study and so on.

That is all I have to say. It is just that every

time I think about mining - I suppose where I grew up around it and so on - I'm

always an optimist about mining, that somebody is going to find something and

have the money to go down and dig it out and find out, so that we can put people

to work. Because when you talk mining you are talking about new money in the

Province, and you are talking about putting people to work. I certainly support

the mining industry.

Anything I can do - I say that in all sincerity,

and I've worked with the last mining minister - I certainly would do in

promotion, in any way assisting for any of these companies, not just in my

district but anywhere, to come into production.

Thank you very much.

CHAIR: Thank you, Mr. Shelley.

Mr. Rideout.

MR. RIDEOUT: Thank you, Mr. Chairman.

I would like to switch focus for a few moments from

mining, as important as that is, to the energy side of the department. I noticed

the minister in his introductory remarks indicated that the Terra Nova project,

I believe he said, was on time and on budget. I'm not responsible for energy

matters for our caucus but it seems to me that it was only just a few weeks ago

that there was some concern expressed that one of the fabrication yards - I

believe it was in Korea - was experiencing some difficulty. There was some

concern as to whether or not some of the units being constructed and fabricated

in Korea would be delayed. Am I safe in gathering from the minister's comments

that that fear is not realistic, is not about to materialize, and that whatever

the difficulty was at that yard has been overcome and the project is not going

to negatively impacted by it?

MR. GRIMES: That, Mr. Chairman, is the

company's expectation right now. They did discuss with us the circumstance in

Korea at the Daewoo yard, where they were actually constructing the hull which

they will bring over here and assemble all the topsides at Bull Arm. Some of the

topsides' components, as I indicated, are being built and constructed at Bull

Arm. As we speak, all of that will occur.

They indicated to us in advance that a Japanese

company had been buying out the shipyard in Korea and that they fully expected

that because of the ongoing normal tensions and relationships between Japan and

Korea that when it happened, when it became official that the take-over by a

Japanese company of a Korean yard was public, the most likely thing that would

occur was that the workers would protest, which they did. They did indicate that

if it went on for any period of time then there was some possibility of course

that it could jeopardize the completion of the hull and so on.

The latest information that I had, again, was that

it was more of a protest to make the point than any long-lasting strike at the

yard that has now delayed work. The protest and the demonstration did occur. The

work did stop for a day and a bit but the workers have resumed, and that short

interruption should not cause any difficulties there.

The other interesting part, Mr. Chairman, with

respect to it as well is that the work that is occurring here offshore - I think

the particular vessel that was supposed to do the glory hole excavation at the

site where they are actually going to put the subsea components was in port in

St. John's Friday past. They got supplies and fuelled and they should be at the

site now. It is a couple of days steam for them. They are in the process now of

doing the excavation and digging out the glory holes, I guess, for those who are

not familiar with the terminology.

They have to actually dig a hole below the actual

seabed so that they can put these things underneath so they will be not impacted

by scouring icebergs. What they do is they actually go down underneath the

seabed and put these things several feet underground so that they are not

disturbed. That work is on-going, and they are assuming that with everything in

place on the seabed a lot of that work will be done this summer.

Newfoundland firms, like New Dock down here at the

yard in St. John's, are participating in some of the plating and so on that is

going to be required for that, actually constructing them in Newfoundland as

well. They will do that kind of installation, if the weather holds and if the

season prevails, this summer after they get the glory holes done, with the full

expectation that they will have that in place so that when they steam across the

actual vessel late this year, or very early next year, then they will have that

time to do the assembly at Bull Arm. They will reach the target date of

somewhere in mid-November or early December at the latest to have the whole rig

out at the site, hook up to the subsea structures that they are doing now, and

actually be producing before the end of the year 2000.

MR. RIDEOUT: I thank the minister for the

information. The minister mentioned that the target date for Terra Nova is late

2000, I believe. Of course, ideally in growing this offshore oil and gas

industry, as one project is coming on stream you like to look to the prospects

of others gearing up. Can the minister tell us what appears to be on the horizon

in terms of White Rose and Ben Nevis in particular, and what the plans are by

the owners of those particular fields now, and where they fit in, without giving

commitments, in terms of possible projects down the road and how far?

MR. GRIMES: Mr. Chairman, I am sure the Deputy

Minister or others will correct me if I start giving the information that is

incorrect, because we would not want to give any incorrect information.

The good news with respect to the offshore

development at this point in time is that there certainly seems to be continuing

great interest in both Hebron-Ben Nevis and White Rose in the sense that there

is further exploration that has occurred this spring and more will occur this

summer. There will probably even be an announcement of results as we go through

this late spring and early summer. All of the preliminary information - and

again, this was the kind of buzz that was evident in Houston, because people

were so well aware of this - has been very encouraging, I guess is the phrase

that I would use, to the point that the major companies again are continuing to

invest in very accelerated drilling and further exploration to delineate exactly

what the resource is.

I guess if I were in this position a year ago, the

indications would have been that at both White Rose and Hebron the partners in

the operating companies - Husky being one of them, and I think Petro-Canada

again is to be the operator for the other on behalf of a consortium of companies

- were both speaking most probably of floating platform systems again for both

of these.

The most recent discussions that we have been

involved in - they are still exploring - is that one if not both of the

companies think again, because of the depth of water or the lack thereof, that

it may even be quite possible that one of these projects may again be a floating

concrete structure like at Hibernia, somewhat similar, which would again be

great news, particularly from the point of view of - these companies ever since

Hibernia now are doing this all on their own ticket. There is no government

money in this, but everyone I think would understand the construction impacts

and so on out of Bull Arm if someone decides to build another gravity-based

structure rather than a floating production system.

They are seriously looking at that. Because the

last sessions that we had indicated clearly that with the depth, I think, which

is in the eighty metres or just a little bit more that they expect to have some

anchoring and mooring difficulties with the shallowness of the water, and with

tides and wave action. Eighty metres sounds pretty deep to me, but I guess in

this industry they are talking about that as being shallow. It is not quite deep

enough for the floating system that is going to be at Terra Nova. It is

questionable right now, but both groups are examining both options.

Because of the exploration that is going on, I

guess it will depend upon the results of the drilling that is occurring now, the

further exploration, and who is in the best capital position. The phrase that

was most used in Houston in the last week is that there is shaping up to be a

foot race as to who is going to be next, whether it is going to be Hebron or

whether it is going to be White Rose. Both of them, though, depending upon the

latest result of what will happen out of this spring and summer, are in a

position to follow very quickly after Terra Nova, in the range of maybe being

out there and producing, again, around 2003. One, for sure, I think - it all

depends on proving the reserve - seems like it would be ready in 2003 and

another one - they may even both be ready about the same time, or one very

shortly thereafter.

In short, Mr. Chairman, it looks very much like a

continuing, growing, developing industry, so that we could look five years out

and see the offshore for Newfoundland and Labrador going from a single producing

operation at Hibernia to four producing operations within that span of six or

seven years.

Again, there is a nomination of land bid that is

out now for consideration, expressions of interest. I think it closes in

November this year. The other good news, again, is that the land that is being

put up - some of it, again, is in the Jeanne d'Arc Basin, the same area - but

some of it as well is moving out into some deeper water, into other areas. There

is a full expectation - because these lands were nominated by the companies. The

process is that the companies say: We would like for you to put these lands up

for bid. Then C-NOPB determines which ones they actually will and will not. They

are going to try a few deeper water parcels in this particular process, fully

expecting that the companies will go out there - they already have done some

seismic work - in the deeper water and do some more drilling.

The expectation for all of the companies involved

is that there will be a continuing development even beyond the next two. They

fully expect that because of the seismic work that has been done. As well, then,

there is the prospect of moving into gas production as well as oil. So far it

has all been concentrated on extracting oil from under the sea but a lot of the

work, again, has indicated that there are significant recoverable gas reserves.

There is at least one company which is actively

pursuing a partnership with Husky Oil, which has come to the government on a

couple of occasions now outlining proposals to build a subsea pipeline as well

that would do two things.

The two components: one would be to carry gas and

hook into the Sable system and go directly to the northeastern United States and

New England market. Secondly, and very importantly for us, there would be a spur

line that would come into the Island to bring natural gas as well to the Island

so that we could look at natural gas for electrical generation. Also, natural

gas being used for a whole bunch of downstream product development, such as they

are doing in Trinidad and so on. A trade mission from NOIA visited Trinidad in

February and were absolutely amazed by the level of industrial development that

is in a tiny little island like Trinidad, because of the fact that they brought

natural gas ashore and developed all kinds of chemical and petro-chemical plants

right on the island by maximizing the use of the gas.

There is at least one company as well that is

actively pursuing a partnership with one of the majors for the beginnings of the

extraction of the gas as well as the oil. There is an awful lot of interest in

the offshore, and it certainly has all the markings now of not being a one or

two project area, but three or four producing oil wells within the next five

years, and then gas production shortly thereafter, as well as more oil

production following on that.

MR. RIDEOUT: Thank you.

CHAIR: Mr. Hunter.

MR. HUNTER: Mr. Chairman, I have a question for

the minister. Minister, are there any small hydroelectric projects being

proposed on the Island? If so, could you tell me a little bit about if there are

any proposed or being planned for the near future?

MR. GRIMES: Not right now. In the context of

this energy policy review that we are conducting, there were a whole series of

them that had gone through a request for proposals with Newfoundland Hydro a

year and a half or two years ago. My understanding is that all of them were

cancelled. Pending the outcome of the energy policy review, at this point in

time there would not be any to be proceeded with. There are no requests on the

books in any active state.

There are some interesting issues. Again, I would

let the Committee know, for example, that Corner Brook Pulp and Paper and Kruger

are very interested still in doing a co-generation plant at the mill in Corner

Brook. Not to dam a river, but burning bark and so on to provide electricity

that partly would service the needs of the mill but also be available to the

grid.

In terms of small river hydro, that whole issue has

been completely set aside for inclusion in the energy policy review as to

whether or not that is an appropriate policy position to be taking in the

Province, or whether or not we would proceed with more thermal, gas or oil

produced things by expanding Holyrood, for example, with Hydro. There were some

propositions before, Mr. Chairman, with respect to wind power. There was a

company that had proposed generating electricity from wind power on the

Bonavista Peninsula.

Some of those may resurface again, but the whole

issue as to whether or not we would dam any small rivers and do any small river

hydro projects has been deferred and delayed until the outcome of the energy

policy review. The main one that Hydro itself has always had on the books that

they would like to do - and apparently the initial information is that it is the

most cost-effective one on the Island - is the Grand Canal one that basically

would be in back of Bay d'Espoir, back in the same water system. At some point,

either by having a preliminary release of the review or bringing some changes

forward in the Electrical Power Control Act to this Legislature, the government

may decide that we would like for one, two or three of these to proceed.

At this point though, in order for them to proceed,

my understanding is that we would have to come to this Legislature and basically

ask for some kind of a change to the Electrical Power Control Act in order for

any small hydro projects to proceed in the Province. If it is deemed that one or

more of those is appropriate and should be done, then we would certainly have an

opportunity to debate it in the Legislature because the government would have to

bring the issue here for discussion and debate.

MR. HUNTER: Minister, could you just update the

Tally Pond proposed site there? What is the status on that site right now?

MR. DEAN: The previous owner of the Tally Pond

site, Noranda Inc., have made an agreement with another Canadian based company

called Thundermin Resources Inc. to go in and do extensive drilling and a

feasibility study to see if the Duck Pond deposit can be put in production. That

has a preliminary cost of about $1.4 million. Last week, Thundermin Resources

Inc. entered into a joint venture with a related company called Queenston Mining

Inc. to provide the financing for that.

The drilling is about to start. Tenders have been

called for the first phase of drilling, which I think is roughly around

$600,000. I suspect before the end of May the initial drill program will begin.

People are on site at the camp south of Millertown getting ready to start that

project. There should be a fairly intensive drill program there this year and

the $1.4 million commitment, I believe, is meant to be spent by June of next

year. That particular area is going to be quite active in the next twelve

months.

MR. HUNTER: Thank you very much. That is good

news.

Thank you, Mr. Chairman.

CHAIR: Mr. Sweeney, do you have a question?

Mr. Parsons.

MR. PARSONS: Just one comment, Mr. Minister. I

had the benefit of seeing Hope Brook recently with the Minister of Environment.

I noticed someone raised the question tonight. Again, I understand there are no

current regulations concerning postings of bonds by mining companies in advance.

I'm not sure which department it falls under, but so it doesn't get lost in the

cracks, I think certainly it would be a worthwhile thing to look at, to make

sure that mining companies do in fact have some bonding procedures.

MR. GRIMES: That, Mr. Chairman, is the issue

that is addressed in the new mining act, a requirement before any new lease is

given of either the bond or a commitment to the reclamation and restoration plan

as part of the lease itself. I think it was identified in the past by me. That

was a gap that was not adequately covered off. Commitments were asked for and

received in a variety of ways but it will be much more specific and much more

transparent in this new legislation that it would be an absolute condition of

getting a lease to operate in the first place. The commitment to the cleanup

will be part of the provision of the lease in the first instance.

MR. PARSONS: Thank you.

CHAIR: Thank you. Mr. Collins.

MR. COLLINS: (Inaudible) I'm sure Paul is

pretty familiar with the

On motion, subheads 1.1.01 through 3.1.05, carried.

On motion, Department of Mines and Energy, total

heads, carried.

CHAIR: Before we adjourn, I would like to thank

the Committee members for their questions, and Minister, I would like to thank

you and your officials for coming tonight. I found it to be very informative,

actually. A lot of questions were asked that enlightened me on a number of

aspects of your department.

Without further ado I would like to have a motion

to adjourn.

MR. RIDEOUT: So moved, Mr. Chairman.

MR. GRIMES: Mr. Chairman, as you adjourn, could

I just again do two things? I thank the Committee for the attention paid to

these estimates and apologize for my uncharacteristic behaviour.

MR. SHELLEY : We thank you for the sandwiches.

MR. GRIMES: Mr. Chairman, I'm surprised and

disappointed, though, that there was not an increase voted to Transportation and

Communications so I could take more of you to Rome.

Thank you very much for everything.

MR. RIDEOUT: You got a substantial increase as

it is.

MR. SHELLEY: You will not see me complaining if

you take it.

The Committee adjourned.