THUNDER BAY -- Despite their insistence to the contrary, the Ontario Liberals intended for Cliffs Natural Resources to pay a new chromite tax for mining in the Ring of Fire.
While the government’s critics claim the proposed tax is responsible for Cliffs abandoning its claims to the Far North chromite deposit, a leaked document shows the tax was only part of a broader incentive package the province offered the company in 2013.
PC finance critic Vic Fedeli leaked a draft document on Friday illustrating the relationship the Ministry of Northern Development and Mines hoped to have with Cliffs. The Ring of Fire Expenditure Analysis was declassified as part of documents related to cancelled gas-fired power plants in Oakville and Mississauga.
Fedeli read from the document during Question Period on Thursday, revealing the proposed chromite tax would have netted the province between $6.6 million and $34.4 million in revenues annually.
“A major mining discovery is made and the very first thing this Liberal government thought of was, ‘how can we tax them more?’ Well, they taxed them right out of Ontario,” Fedeli said.
Minister of Northern Development and Mines Michael Gravelle maintained Ontario has no chromite tax and the draft agreement with Cliffs was never signed. He stressed the materials Fedeli released were not only confidential but oversimplified Cliffs’ complex decision to pull its business out of Canada.
“(Fedeli) chose to take one particular aspect and use it to make a contention that the company made a decision to leave based on that,” Gravelle said.
“If one looks at the rest of the material – which I’m not going to discuss because it was based on confidentiality that we wouldn’t be engaging in those discussions – others can look at that, if they choose to do so, and see there was much more at play in those discussions.”
The document explains the chromite royalty would have replaced Cliffs’ responsibility to pay the Mining Tax based on “competitiveness considerations.”
While Cliffs would have been allowed to maximize deductions and incentives under the Mining Tax Act, the draft stipulates Cliffs would not incur losses as a result of those applications.
It proposed Ontario would assume risks associated with additional tax liabilities and specified such a royalty would have been relative to chromite market prices and revenue sharing.
The document paints a broader picture of Ontario’s January 2013 proposal to Cliffs. The deal would have approved $425 million in public funds for the mine’s access road, plus a $10-million annual commitment to its upkeep.
The provincial Treasury Board and the Ministry of Natural Resources offered to waive aggregate fees and royalties for the access road, fees for land rights and even to provide partial relief from the chromite royalty.
Money and power
Ontario also promised to provide Cliffs electricity at a reduced cost over a 25-year period. The contract that would have begun in 2015 agreed to allot 260 to 335 megawatts at a fixed price of $55 per megawatt. That cost would have escalated at a rate of at most two per cent each year.
Considering Ontario’s industrial rate in 2013 was $76 per megawatt hour and expected to rise, it estimated the province would have supported Cliffs’ mine to the tune of $1.5 billion in energy savings.
The rationale for the energy subsidy is the high cost of processing chromite concentrate into ferrochrome.
Cliffs’ end of the deal was to spend at least a billion dollars of the expected $1.8-billion cost to build a chromite processing facility in Capreol near Sudbury. There, it would process at least half the chromite from its Black Label and Black Thor projects.
The company would also have been responsible for creating and maintaining a minimum of 800 full-time, direct jobs.
Fedeli wouldn’t comment on those incentives or whether they would have painted a higher or lower tax situation for Cliffs, when added together.
“They can put all the spin they want on this. The fact is, we’ve waited eight years. The government hasn’t done one thing. All they’ve done is get in the way of business,” Fedeli said.
“They’ve introduced a new tax -- unheard of before – very similar to the diamond tax they imposed on DeBeers. These are disincentives that send these companies packing.
"The bottom line is, there are four people working in the Ring of Fire and in 2011, there were 250. That’s the bottom line. No spin can deny that.”
