Baffinland signed contracts for its railway and mine expansion before project approved, documents show

Executives of Baffinland Iron Mines Corporation faced questions on Wednesday about whether the company already started work on phase 2 of its proposed mine expansion.

The project has not yet received a green light to proceed, though contract equipment has already been shipped to the site.

But the vice-presidents of Baffinland repeatedly denied any work has begun prior to its project certificate approval.

"No construction on phase 2 has started," stated Udlu Hanson, vice-president of community and strategic development, during the final Nunavut Impact Review Board (NIRB) hearings into its Phase 2 expansion, underway this week in Iqaluit.

Again, in response to another query about the presence of construction equipment on the Baffinland site, Megan Lord- Hoyle, vice-president of sustainable development, said that's because the company had planned to get approval for its phase 2 expansion in 2019.

If this had gone through, she said, there would have been ground-breaking on construction in 2020. 

But, documents obtained by CBC News show the mining company had signed multi-million dollar contracts with various companies in advance of its phase 2 expansion and brought workers as well as equipment north.

Under phase 2, the Mary River mine's production would increase to 12 million tonnes of iron ore a year. The expansion would also include the construction of a new 110-kilometre railway from the mine to Milne Inlet and the passage of 168 huge iron-ore carriers a year.

The project proposal is being assessed by the Nunavut Impact Review Board, which will make a recommendation to the federal minister of northern affairs, who has the final say.

It's not easy for independent observers to reach the mine site. 

Naman Inuarak, of Pond Inlet, Nunavut, who spoke remotely from his community at the hearing this week, told CBC he has seen the construction "from a distance" and from satellite images. "I have also seen those contracts," he said, about 14 to 16 in all. "A lot of the contracts just stalled."

While workers, with equipment, were in place for phase 2, it's not clear what exactly they did while on standby at the mine site.

Contract with construction company signed in 2017

The court documents show that in September 2017, Tower-EBC signed a contract with Baffinland to perform mine expansion work. That included the construction of the infrastructure to support the rail link between the Milne port and the mine site and all related services, like supervision, labour, materials, supplies, equipment and machinery.

Baffinland agreed to pay Tower-EBC an estimated contract price of nearly $250 million.

From May to October 2017, on the instruction and approval of Baffinland, Tower-EBC mobilized its equipment to the mine site.

But then Baffinland, in breach of the contracts, "prevented the works from progressing, most notably due to its failure to obtain the necessary governmental permits for the works," says a statement of claim filed in the Nunavut Court of Justice by Tower- EBC in 2018.

Baffinland 'neglected or refused' to pay construction company, says claim

In the absence of the required permits, Baffinland acknowledged that it would not be possible to begin until the 2019 season at the earliest, the document says.

In September 2018, Baffinland, in the absence of these permits and without any prior notice, terminated the contracts which resulted in claims by subcontractors of Tower-EBC.

"Despite Tower-EBC's demand for payment, Baffinland has neglected or refused and continues to neglect or refuse to pay the amount currently owing, $71,431,970.67, or any part thereof," reads the statement of claim from 2018.

Items then shipped to Baffinland by sealift in 2019 — and declared to NIRB beforehand — included a ship loader, a conveyor belt system and other materials for use in a railway transportation system, such as railway ties and bundles of rails, along with track spikes and tie plates.

In 2019 Baffinland also entered into a memorandum of agreement with GE Industrial Financing Services to purchase five locomotives from Mining Construction Services Contract and Activities.

Also, in July 2019, the Edmonton-based Aecon Mining Construction Services mobilized its staff to the site for the purpose of proceeding with the work, says the statement of claim filed on behalf of AMCS.

AMCS agreed to perform the construction of bulk material handling, piling and rail bridges for the railway project, for $83, 864, 925.04.

Then, in November 2019, Baffinland verbally notified AMCS that it was suspending the work due to its failure to obtain necessary permits for the project. It made a claim of lien for around $33, 801, 292.18, for work it said was done on or before Nov. 22, 2019, and that was still being done at the time the claim was filed.

Baffinland has not mentioned these expenditures when it talks about its current financial situation and its threat to close the mine if it doesn't get approval of the phase 2 expansion. 

During the NIRB hearing, representatives from the Qikiqtani Inuit Association and Crown-Indigenous Relations and Northern Affairs Canada have said that if they were aware that Baffinland started work on Phase 2 without all the proper permitting they would intervene.

Review of the phase 2 proposal continues until Saturday in Iqaluit, with a remote connection to Pond Inlet.