Global meltdown promises pain, relief for Nunavut: Mining to suffer, energy prices will easePublished by MAC on 2008-11-10
Source: Arthur Jonnson, Nunatsiaq News
Nunavut is far removed from the world's financial capitals, but brace
yourself: the effects of the global economic crisis will soon be felt in almost every aspect of territorial life.
As stock markets plunge, commodities plummet in value, financial institutions topple and credit tightens, the shock waves will be felt by anyone who drives a car or snowmobile, operates a business, heats their home or goes looking for a job.
Nunavut has a lot riding on its enormous resource potential - especially mining.
"What really changes is the outlook for the territory from about 2010 to 2014," says Grahame Clinton, a Yellowknife economic consultant.
Clinton, who is preparing an update of the Nunavut Economic Forum's overview for 2008, said that mining projects set to come on stream during this period are likely to be delayed by at least a couple of years.
And this, in turn, means that Nunavut residents will remain largely dependent on government for employment.
Not all the fallout will be unpleasant. The good news: weakening demand has caused oil prices to slip from the frightening levels reached earlier this year. That means pretty much everyone will get a break next year when the Government of Nunavut negotiates bulk fuel contracts.
Electricity rates will probably ease too, because the GN will have some room to lift a surcharge imposed earlier this year when diesel prices were much higher.
And as cheaper aviation fuel becomes available, look for better rates from First Air, Canadian North and other carriers.
Weaker commodity prices could also ease the pain of food shopping as wheat, corn and other grains come down from the stratosphere.
But the prospects for most of the main sources of wealth and employment in Nunavut, from mining to fishing to government and beneficiary organizations - is much bleaker.
The outlook for mining is grim indeed, which could drag down the entire territory for years to come.
Mike Vaydik, president of the Nunavut-Northwest Territories Chamber of Mines, says the slowdown is already evident among member companies.
Later this month, the chamber will hold its annual geophysics forum in Yellowknife and Vaydik expects attendance will be down sharply. "A lot of companies that normally send four people have let us know they'll only be sending one," he said.
For many junior mining companies with exploration programs in Nunavut, he said, survival is now the priority. "They'll be focusing on keeping the lights on in their offices in Toronto and Vancouver."
Last week, Newmont Mining Corp. announced that it was postponing plans to begin operations at its Hope Bay gold side, 160 kilometres southwest of Cambridge Bay.
The mine was originally scheduled to open this year, but a company spokesman now says the it will be delayed indefinitely.
On Monday, Tahera Diamond Corp. disclosed that a scheme that might have seen the reopening of its Jericho mine 350 km southwest of Cambridge Bay has collapsed.
The company had been in talks to emerge from creditor protection under new ownership. It lost tens of millions of dollars on the Jericho operation before running out of cash and shutting down in February.
Events in Iceland are likely to have an adverse effect on companies fishing in waters off Nunavut. Jerry Ward, CEO of the Baffin Fisheries Coalition, said that in recent years, Icelandic banks emerged as the main credit source for fisheries around the world.
Iceland's economy has collapsed in the past few weeks and the government has been forced to nationalize its largest financial institutions. "This will have an effect for sure on the operating lines of credit" of all companies involved in the fishery, Ward said.
"We are working with our partners to see where we stand on this," he added.
The stock market crash is already being felt by beneficiary organizations in Nunavut.
Last week, Nunavut Tunngavik Inc. said it would seek to chop 25 delegates from its usual roster of 47 at its annual general meetings.
"Looking at the future, we can't afford to spend any money," said vice-president James Eetoolook.
NTI and other beneficiary organizations are funded by the Nunavut Trust, which invests compensation money Ottawa gave Inuit through the Nunavut land claims agreement. The trust has been hit in the past by stock market declines, and the recent drop in share prices looks to be the worst ever.
And finally, the Government of Nunavut shouldn't count on Ottawa to ramp up the money it turns over for to pay for education, health care, housing and other vital services.
The federal government, which has enjoyed healthy surpluses for years, may actually be running a deficit before long if tax revenues plummet during an expected recession.
So if you've been dreaming of a sunnier, wealthier future for Nunavut, put those dreams on hold. It may yet happen - but not in the next few years.