Why Wabush is playing the waiting game with the reopening of the Scully mine

Why Wabush is playing the waiting game with the reopening of the Scully mine
Tacora Resource’s Scully Mine remains a quiet place as a planned summer restart of mining operations here has come and gone. Photo courtesy Tacora Resources Inc.

The 2017 purchase of Wabush’s Scully mine by an American company brought renewed hope to the Labrador town. But missed milestones and deadlines are testing its patience

AFTER BEING SHUTTERED for over four years, there are signs of life again at the Scully Mine in Wabush, Labrador. A new American owner, Tacora Resources Inc., has a skeleton crew at the mine site, which, in a mining town reliant on a single industry for its existence, is taken by locals as a hopeful sign of better times ahead.

Ted Feltham, owner of Grenfell Convenience in Wabush, says that despite Tacora having missed its stated restart date for the mine this summer, residents are upbeat about real progress and the return of jobs, even if only a handful of people are working at the mine now. “People are on-site getting ready for start-up,” Feltham says. “As long as there’s progress, people are hopeful about a restart.”

The small town (population: 1,906 according to the 2016 census) has needed hope since the mine closed in 2014 and put approximately 500 people out of work when its previous owner, Cliffs Natural Resources, filed for bankruptcy.

Minnesota-based Tacora emerged as the town’s white knight on June 17, 2017 when it issued a press release trumpeting the acquisition of the mine, sometimes referred to as Wabush Mines (the name of the three-company joint venture that operated the Scully mine in the past), and saying it had started work with the Newfoundland and Labrador government and the United Steelworkers Union towards a restart of Scully. That work included a new collective bargaining agreement with the union.

At the time, Tacora also brought to the table an existing agreement with Cargill―a Minnesota-based multinational company with interests in multiple areas that include agriculture, industrial products and steel―to purchase 100 per cent of the mine’s iron ore concentrate until 2022. The provincial representative for Labrador West, MHA Graham Letto, was quoted in the release saying, “I have worked closely with the Department of Natural Resources, and the Department of Municipal Affairs and Environment in efforts to find a new owner for the Wabush Mines facility. I am very pleased that Tacora has made significant progress in reaching an agreement to purchase the assets of the Scully mine.”

But the news of Scully’s impending restart came with some caveats and significant milestones that needed to be achieved: there was a feasibility study that needed to be completed and further capital that needed to be raised. If the project stayed on the proposed timeline, Scully would have reopened in the summer of 2018.

With the original restart goal having come and gone, details of Tacora’s progress have been hard to come by. Not surprisingly, that’s led to speculation and rumour about the mine’s future in the community. A brief statement from the Government of Newfoundland and Labrador’s Natural Resources Mines branch acknowledges Tacora has passed some of its pre-production milestones for Scully.

“Tacora Resources has completed its feasibility study with respect to Wabush Mines. As well, Tacora has been released from environmental assessment and has approval under the Mining Act, including having financial assurance in place for rehabilitation of the site,” the statement says. “It is understood that Tacora continues its efforts to raise capital funding and the province looks forward to future advancements towards the reopening of Wabush Mines.”

With the proposed date to reopen the mine having been missed, Feltham thinks a clearer update from government for the people of Wabush should be made available. “They should know where [Tacora] stands on the fundraising and where they’re at with that. Do they have half the money raised, or do they have one-third of the money raised? Nobody knows,” Feltham says. “Everybody’s just sitting back and hoping eventually it’s going to open. But when?”

When Natural Resources Magazine spoke to Letto in mid-September, he was also waiting for an update from Tacora on the Scully mine. He is aware of the false starts the company has had the past year in getting the mine back in operation, including an initial public offering Tacora unsuccessfully floated on the Toronto Stock Exchange. “It didn’t pan out,” Letto says. “It’s a jittery market.”

The news isn’t all bad, however. Tacora has completed consultation with the five indigenous groups of Labrador and was pursuing promising funding opportunities with the government of Quebec. Nearby Sept-Iles, Quebec would be the shipping port for Scully iron ore concentrate.

“I remain optimistic,” Letto says, echoing similar sentiments from other leaders in his district. He points out that with the massive Muskrat Falls hydroelectric project in Labrador winding down its construction phase, the rebirth of the Scully mine would help bring back Wabush residents who have been working at the $12.7-billion mega-project.

“It would be monumental,” says Letto of Scully’s reopening, the positives being 250 jobs at the mine and royalties that benefit the entire province.

The Scully Mine has been a monumental part of the Wabush economy since it first opened in 1965. By 1967 it was producing six million tons of long iron pellets annually. And with the mine came workers. Wabush grew, with its population swelling to around 3,000 residents, including 900 mine workers, by the late 1960s.

Communities dependent on mining must often deal with the cyclical nature of the sector, where commodity prices rise and fall on the whims of fickle markets. Wabush is no different. But when the Scully mine closed in 2014, residents, including those who had been through decades of ups and downs due to iron ore price upheavals and changes in ownership, felt this might not be a downturn but the end of the mine itself.

“This place was devastated. I came back in 2013 from working out West. The mine closed shortly after I came back. I was working here at the store and I can remember people coming in here and they were just stunned that they were told to leave and go home,” Feltham says. “There are people who went in for a 4:00 p.m. shift and they were told the place was done. They thought they had a job when they were going to work at 3:00 or 3:30 in the afternoon and when they got into the mine they were told that they didn’t have a job anymore.”

Many residents were forced to calculate whether waiting for the mine to rebound was worth it. Some people lost their homes in the aftermath of the Scully closure. Some of them packed up and left, while others took lesser-paying jobs to make ends meet. During this tough time, rumours of potential new deals to sell the Scully mine abounded, including plans to mine its remaining tailings for manganese.

Then Tacora entered the pictured. The company is led by Matt Lehtinen, the former president of Magnetation LLC. Both Lehtinen and his father Larry Lehtinen have a long history in the mining industry and the iron ore space. Like most veteran miners, some of their ventures have not worked out. Magnetation, a company formed to recover iron ore concentrate from iron ore waste stockpiles and tailings in northern Minnesota’s Iron Range, filed for bankruptcy in 2015.

Tacora declined to give Natural Resources Magazine an update on the Scully project. It did promise it would provide one in October as this magazine went to press.

But Wabush residents will be interested to know that two major pieces in the puzzle to reopen the Scully mine still stand. Cargill said in September 2018 that its agreement with Tacora to buy all the iron ore concentrate produced from Scully is still in place. And Tony Depaulo, assistant to Marty Warren (the United Steelworkers District Six president), confirms the agreements brokered between the union, the provincial government and Tacora are still in good standing.

Even though Tacora has missed its original date to restart production at the Scully mine, Depaulo doesn’t sound worried. He feels Tacora has dealt with all parties in good faith and he has trust in the relationship and Tacora’s ability to operate Scully. “I’m confident,” Depaulo says. “I’m excited to get it up and running.”

Tacora did provide an update on its plans for the mine to the Labrador West Chamber of Commerce in June of 2018. “They’re working very hard,” says chamber president Toby Leon, who attended the update. He says Tacora told him it was aiming for a spring of 2019 restart of the mine. “I asked the hard question: ‘Is this a go? Where do you stand?’ And Mike Twite (Tacora’s manager, environmental, land and government affairs) said, ‘we’ve spent a lot of money and we continue to spend a lot of money and we wouldn’t be doing that if we didn’t feel that we were going to be moving forward.’”

That mining projects can take time to complete is well understood in all quarters. Leon says its members weathered the last shutdown, with some even emerging in a stronger position as out-of-town suppliers packed up to leave, and local companies stepped in to fill the remaining supply needs of the area.

Behind the scenes, Tacora appears to be laying the groundwork for full operation by contacting people for key operational positions needed for Scully. For example, Leon says he knows of a retired mine employee who ran its heating plant and had been approached by Tacora to oversee plans to get it fully operational again.

“As a community, we’re very used to the cyclic nature of the industry,” Leon says. “The reality is, when they start to warm the plant up and when haul trucks start moving around the lot, that’s when we know it’s happening. Things can change dramatically overnight. To some extent, you wait to see things happen before you believe them. But we’re very hopeful.”

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