Mining Prospects in Newfoundland

56.jpg

Source: Ron Struthers for Streetwise Reports 09/12/2018

Sector expert Ron Struthers takes a trip to Newfoundland and reports on companies working in the province.

It was a wonderful day and perfect weather for the ferry ride from Sidney, Nova Scotia, to Channel-Port aux Basques, Newfoundland.

One thing I noticed strange on my first several days of travel in Newfoundland were all the high voltage electrical transmission lines. They seemed numerous and going everywhere, although nothing is really there. For the most part Newfoundland is barren land with only around 550,000 people across the whole province. And Newfoundland/Labrador is larger than New Brunswick, Nova Scotia, and Prince Edward Island combined, although you could eliminate half of it (Labrador) as there is little development other than resources. About 95% of the people live on Newfoundland, and the island has about 25% of the population of the other three eastern provinces I’ve mentioned.

As you know I have a keen interest in energy and alternate energy. I could not help but wonder, where is all this power going in a province where growth is stagnant and the population has been stuck in the 500-550,000 range for decades.

56.jpg

The most positive outcome is this new high voltage transmission line, which runs through the northern part of Zonte Metals Inc.’s (ZON:TSX.V)’s Cross Hills project. This picture is not from Zonte’s property but elsewhere, but it is the same transmission line.

Newfoundland’s Electrical Boondoggle

Electricity prices are a hot topic in Ontario, but Ontario folk may take some comfort that Newfoundland will soon join them and probably see rates way higher. Ontario has the third highest rates in Canada, and Newfoundland is about $0.01 per kilowatt hour (kWh) lower.

After several days speaking with locals and seeing local news I learned all the transmission lines were, in part, about a project called Muskrat Falls. About 3,200 transmission towers were built because the project is far away from where any power is required. In fact, all this power is not required in Newfoundland either.

In Newfoundland, Hydro is a provincial crown corporation under the umbrella of a company called Nalcor Energy, and is the primary generator of electricity in Newfoundland and Labrador, with an installed generating capacity of 1,637 megawatts (MW). In 2008, more than 80% of this energy was clean, hydroelectric generation. Hydro’s power-generating assets include nine hydroelectric plants, one oil-fired plant, four gas turbines, 25 diesel plants, and thousands of kilometers of transmission and distribution lines.

The diesel plants are small and for remote areas. Why would a province with no growth need a huge new 3,000 MW hydro-generator, almost twice current capacity? Just considering the first phase, at 824 MW, is about a 50% increase over current capacity. The answer: it is not needed.

Muskrat Falls is probably a bigger boondoggle than the likes we have witnessed in Ontario. Phase one at Muskrat Falls includes construction of an 824 MW hydroelectric-generating facility, over 1,600 km of transmission lines across the province, and the maritime link between Newfoundland and Nova Scotia.

The original Muskrat Falls deal was designed to supply the island with low-cost hydro power to replace power generated at the oil-fired Holyrood power station, and to sell Emera 20% of the output for use by its Nova Scotia Power subsidiary. The balance was going to be sold to “lucrative U.S. power markets.” There is no doubt the original projected cost, between $5 and $6 billion, was low-balled because of either engineering incompetence or political posturing—or some of both. The project got the go-ahead during the 2011 election campaign when Stephen Harper, desperate to win seats in the province, promised federal loan guarantees to get the dam and its lengthy transmission system from Labrador to the island, and on to Nova Scotia, built, despite an unconvincing economic case.

The latest estimate for the project completion is $12.7 billion, more than double the original. There are estimates between $0.22–0.24 per kWh for the cost of generation. This is about double current rates in Newfoundland and no doubt makes this the most expensive large electrical generation in Canada.

Muskrat Falls has actually become cheap power for Nova Scotia at Newfoundland’s expense. What a win for Nova Scotia. Think of it. Newfoundland said, “If you (Nova Scotia) connect to our grid, we will give you one-third of Muskrat Falls power free for 35 years.” Since there is no market for the rest of Muskrat Falls power, Nova Scotia is going to get another third at market prices of $0.03–0.04 per kWh. In essence, Nova Scotia will be getting two-thirds of Muskrat Falls power for a few pennies or less/kWh, while the cost to Newfoundland will be $0.22–0.24 per kWh. What a boondoggle.

This is very sad for a province already saddled with huge taxes. Provincial fuel taxes are more than double almost anywhere else in Canada. Practically everything costs 10% to 25% more because it has to be shipped to Newfoundland by sea, since not much is produced there. However, the beautiful scenery and laid-back way of life is free.

I love Newfoundland, and the people there are second to none. Mining discoveries and new mines would be very well received as the jobs are badly needed and the extra revenues to government coffers from the additional tax base are badly needed also.

That said, let’s get into the mining mania that is gripping the province. The best explanation is the graphic.

56.jpg

The circular structure outlined by the air magnetic in red is the intrusive outlining epithermal vein activity. Practically all the ground is now staked around this, and on the epithermal trend that continues to the northeast indicated by the red arrow, toward Zonte’s Wings project, and the arrow to the southwest, toward Marathon’s Valentine project.

I found most of the projects are early stage and private. There is a good private project that will …read more

From:: The Gold Report

Comments are closed.