QUEBEC – Quebec’s new government is living up to its pledge to take a tougher stance with mining companies after offloading some responsibility for the construction of a controversial access road.
Finance Minister Nicolas Marceau announced Thursday that Quebec has renegotiated a deal that will see Stornoway Diamond Corp. (TSX:SWY) assume a bigger share of the costs to build a route to its proposed mine.
Marceau expects the agreement on the 240-kilometre highway extension to the Renard diamond mine site will save Quebec taxpayers at least $124 million.
“We’re not going to build gold-plated roads with huge cost overruns,” Marceau told a new conference.
“The signal we’re sending to mining companies is that we’re ready to make deals with you, but the terms must be reasonable for Quebec taxpayers.”
PQ officials had expressed concern that costs for the Route 167 project had exploded beyond the estimated budget of $260 million in 2009. By August, the price tag had soared to $472 million.
The new deal will drop the maximum cost down to $304 million, the government insists.
The PQ has criticized the previous Liberal government’s northern-development plan — known as the Plan Nord — for being too generous to the mining sector.
Quebec’s natural resources minister indicated that the Stornoway deal is a sign of things to come under this fledgling PQ government.
“What we’re doing here, with the new Stornoway contract, is really the new approach for northern development,” said Martine Ouellet, who joined Marceau at the news conference.
The Renard project, 350 kilometres north of Chibougamau, is expected to create about 450 jobs in the region. It will be Quebec’s first diamond mine.
Under the new deal, a portion of the gravel road will now be a more modest, single-lane route. Its completion will be assumed by Stornoway instead of the Quebec government.
The company said Thursday that the agreement will ensure construction of the mine, the company’s flagship project, will begin in 2013 as previously planned.
Last month, Stornoway issued a statement indicating it had been advised by Quebec’s Finance Department that contracts for work on the road extension would be stopped until the government had reviewed the overall costs of the project.
Stornoway’s president and chief executive expressed relief Thursday.
“Today’s news represents the removal of a major element of uncertainty over the Renard diamond project,” Matt Manson said in a statement.
“With Stornoway now responsible for the completion of the project’s access road, we will be in full control of our overall development schedule for the first time.”
The company said it now anticipates first all-season vehicle access to the Renard site by the fourth quarter of 2013, compared earlier expectations of July 2013.
Under the agreement, the province will provide Stornoway with an unsecured credit facility of up to $77 million to complete the work. The old deal would have seen the company contribute $44 million to the road project and up to $1.2 million annually for its maintenance.
“The financing terms that we have negotiated to complete this work are beneficial to Stornoway, and are expected to have a minimal impact on the project’s overall valuation and financing capacity,” Manson said.
In addition, Quebec will continue with the construction of a winter road this season as previously planned.
Quebec will complete the first 143 kilometres as a two-lane gravel highway, while starting in April 2013 Stornoway will build a single lane mining road over the remaining 97 kilometres. Construction of the extension began in February.
Shares in the company remained steady Thursday on the Toronto Stock Exchange.