http://issuu.com/wawatay/docs/ono_winter_2014_layout/
‘Boondoggle’: any unnecessary and wasteful project
‘Billion’: a thousand million (Webster’s Dictionary)
A billion dollars is an attention-getting number. That’s no doubt why the Wynne Liberals touted that number as a campaign pledge in the run-up to their recent election win. This $1-billion dollar carrot arose after the party politically ‘rediscovered’ the Ring of Fire as a slumbering engine of economic growth for the province.
Buried in the election budget was the glossed-over detail that the Queen’s Park $1-billion was contingent on Ottawa making a matching billion. The feds quickly set this sleight-of-hand straight; whereupon the Wynne Liberals confirmed on the hustings that they were good for their $1-billion dollar pledge no matter what.
On the industry side of the ledger, as Cliffs Natural Resources slowly realized that it was taking a fiscal cold shower on its rushed expansion into Canada; it took its own billion dollar write down on its Bloom Lake iron project in Quebec. (‘Write-down’ is an accounting term used to describe a reduction of the book value of an asset due to economic or fundamental changes in an asset.) Cliffs will likely take another major write down on account of its botched Ring of Fire investment.
In order to avoid a billion dollar boondoggle, here’s a totally different idea for consideration as to how to commit the budget’s politically-pledged billion:
Step 1: The Ontario government buys-back Cliffs Ring of Fire properties based upon sunk costs (for the sake of argument) making the purchase price half a billion dollars and calling it square. Presumably, Cliffs goes away happy upon getting its investment back.
Step 2: Queen’s Park then transfers Cliffs’ Ring of Fire properties – for the sum of $1 dollar – to a separate corporate entity controlled by Matawa Tribal Council. While it looks like a freebee, it’s anything but since nothing to date has remotely worked.
Step 3: The remaining half billion dollars is put into the new Infrastructure Development Corporation (resource access) budget; but with the future Matawa representative on the board having a singular veto to ensure that it has to be earmarked for mining infrastructure.
Step 4: It would then be up to Matawa Tribal Council to seek and align with a private sector miner on such terms and conditions necessary to make it a successful mining theater. Matawa and the miner would jointly drive the Ring of Fire forward.
Nothing has worked thus far. Litigation is still the prevailing dynamic. The premier says she isn’t worried about the departure of Cliffs. But $1-billion dollars is at risk. And as I’ve laid-out in past columns, it’s already become a serious Voisey’s Bay replay.
So, this novel idea puts Cliffs’ Ring of Fire assets in the hands of the group who will actually do the most to bringing the mining camp to reality. That’s because at the moment, there isn’t a chromite project or a chromite proponent to warrant the expenditure of $1-billion dollars. And to now spend the budgeted billion without a project or a proponent would most certainly qualify as a billion dollar boondoggle!
Bill Gallagher is a lawyer, strategist and author of ‘Resource Rulers: Fortune and Folly on Canada’s Road to Resources’. The book, available on amazon.com, tracks the rise of native empowerment and the coinciding, remarkable legal winning streak in the Canadian resources sector. It offers a way forward, with new rules of engagement for resource development and for winning outcomes.