Here's to the crazy ones, the misfits, the rebels, the troublemakers, the
round pegs in the square holes... the ones who see things differently -- they're
not fond of rules... You can quote them, disagree with them, glorify or vilify
them, but the only thing you can't do is ignore them because they change
things... they push the human race forward, and while some may see them as the
crazy ones, we see genius, because the ones who are crazy enough to think that
they can change the world, are the ones who do.

Steve Jobs
US computer engineer & industrialist (1955 - 2011)

Saturday, January 28, 2012

The Real Muskrat Falls - Part 3

One phrase: Mines for a Dam. Two words: Twin Falls. Twin Falls are waterfalls located on the Unknown River, Labrador. During the 1950's British Newfoundland Development Corporation (Brinco) had the power development rights on  the river. In partnership with Wabush Mines Limited and the Iron Ore Company of Canada, the two mining corporations operating in Western Labrador, Brinco created the Twin Falls Power Corporation to deliver power 115 miles (185 km) west to the two mining operations being developed near the Labrador-Quebec border.

When the dam was finished in 1963, the station had a total capacity of 225 MW with two 115-mile (185 km) long transmission lines at 230,000 volts (or 230 kV), with remote switching at the far end from the station. Twin Falls power was essential to the later power development at Churchill Falls. It helped open up the area and supplied the power required during the construction phase of the project. So a 225 MW dam was built to essentially run two iron ore mines, and infrastructure. Curiously, Brinco was also the corporation that signed the much lamented 1969 Power Contract with Hydro Quebec for the Upper Churchill.

Fast forward almost 50 years, and here we are again - building a dam for mining. Today there are 17 some mines being developed in the Labrador Trough. A few American. A few European. One Brazilian. Two Indian. The remaining six or so Chinese. Its a virtual microcosm of the developing world's strangle hold on the New World financial order of things. The problem for the developers, read juniors and their merchant backers, is the lack of necessary infrastructure to convert promising mining deposits to full scale operations in their own right.

Traditionally, in Newfoundland and Labrador, private businesses have to arrange their own power for such activities as mining. The Twin Falls dam is one example, but there are many others. The problem with that approach for the developers is it adds a massive cost onto the bottom line of each tonne of ore mined, and makes the mining of these deposits unprofitable. That was Credit Suisse's analysis as well when they did a direct comparison to Consolidated Thompson's mine and the developing Kami project which is owned by Alderon http://tinyurl.com/79ey28b . Yes, the same Alderon that has Danny Williams as its "special advisor" to the Chairman of the Board. Credit Suisse essentially says that Alderon- and you could put all the mines developing in Labrador on the same page- is an attractive deposit but lacks the necessary infrastructure to make it profitable. Therefore, they rate it as "speculative".

Alderon is a good example of what is happening with the mines in Labrador, and their connection to the Muskrat Falls development. For starters, here is a look at the insiders who have an ownership interest in Alderon Iron Corp from SEDI, System for Electronic Disclosure by Insiders, Listed Below. Now have a look at the insider report on ownership for Altius, which sold its rights to the Kami project to Alderon for a roughly 40% stake in Alderon Iron Corp, Listed below .

The first thing you are likely to notice is that Altius' directors have their own interest in Alderon - apart from Altius' corporate share of Alderon's ownership. You will also recognize names there from both the Progressive Conservative Party and Liberal Party of Newfoundland. You will notice the recent purchase by Liberty of Alderon shares for $40 million, which will allow the Kami project to be further developed. You will notice the shares held by Mark Morabito -  a large number of shares. Mr Morabito is the Chairman and Chief Executive Officer of The Exploration Group, a privately held company headquartered in Vancouver. If you check the Exploration Group's web site you will notice it lists Alderon as one of its companies. Mr. Morabito also sits on the Board of Alderon as its Executive Chairman.

You will also find a gentleman by the name of Stan Bharti as Vice Chairman of Alderon. In reality, Stan Bharti runs the privately owned Forbes and Manhattan Group. A Toronto-based merchant bank specializing in identifying resource projects around the world, providing them with seed capital, taking them public, often arranging foreign capital acquisition of them, and then getting out. Mr. Bharti is a world class player, and his Advisory Board backs that up : General John Abizaid (ret) US Army; General Jay Garner (ret) US Army; General Ron Hite (ret) US Army; General Lewis MacKenzie (ret) Canadian Army; General Sir Michael Rose (ret) British Army (SAS); Larry King (ret) US entertainment legend; Hon Pierre Pettigrew (ret) Canadian Federal Liberal politician; Bernard Wilson; and Peter Boot.

In reality, Forbes and Manhattan appear to run The Exploration Group, which in turn runs Alderon. As an example, the press release announcing Danny Williams appointment to Alderon's Board listed a Toronto office that in reality is the office of Black Iron Inc, a subsidiary of Forbes and Manhattan. Its Vancouver office is in fact the corporate office of The Exploration Group. You get the idea. These companies are one and the same. The bottom line to these gents is "increasing shareholder value". In this case, as there are no shareholders in The Exploration Group and Forbes and Manhattan, they mean "increase the share value so we can make an astronomical return when it gets off the ground." Fair enough. That is what business is about, and the gents at Forbes and Manhattan are doing it all over the world.

What is interesting on the Newfoundland and Labrador level is the politicization of Alderon's management team. I was present at the October PC convention when Danny Williams took the stage to give an emotional presentation on the service of one Garry Norris. He let it be known that Norris was the go to guy for any research or any problem, and that he had served the Party well over the years. Williams let it be known then that Norris was leaving public service and gave him a present from the Party for his service. Norris' retirement was officially announced on November 30, 2010 and took effect on December 3, 2010 - the same day as Danny Williams last day in office. Norris was Deputy Clerk of Executive Council under Brian Tobin and Clerk under Beaton Tulk. Roger Grimes removed him from that position when he became Premier. Norris took on the position of Executive VP of Government and Community Affairs at Alderon effective July 4, 2011 - barely 6 months after retiring from the government. Three days later he is registered as holding 250,000 options/shares in Alderon at a value today of over $800,000.00.

The same announcement from Alderon appointed Todd Burlingame as Executive VP for Environment and Aboriginal Affairs. He also received the 250,000 share handshake two days after he signed on. His duties are described in the release: "Mr. Burlingame will be responsible for all environmental permitting aspects to develop the Kamistiatusset (”Kami”) Project through to production, including acquiring all required environmental approvals. He will also have a lead role in Aboriginal Relations." Just so happens that Burlingame's previous position, that he left to take this one, was Manager of Environment and Aboriginal Affairs with Nalcor.

The Board at Alderon is really reflective of what is at work in Labrador. We've already covered the real power behind the group - Stan Bharti. We have covered his head of The Exploration Group - Mark Morabito. You have Matt Simpson who also doubles as Forbes and Manhattans man in Toronto heading Black Iron Inc, and who is working with the famous Larry King on a mine in the Ukraine (Maybe that's how Danny Williams got that spot on the Larry King show). There is Bruce Humphrey who is a Forbes/Exploration Group man and sits on several of its subsidiaries boards - including Cross Hair Exploration and Minerals which is currently developing an uranium project in Labrador (the
Nunatsiavut Assembly just lifted a ban on uranium exploration there). There is Brad Boland who was Brian Tobin's right hand man at Consolidated Thompson. Then of course there is Brian Dalton and John Baker from Altius. That is the same Dalton and Baker that headed the failed Newfoundland and Labrador Refining Corporation. The same two that were involved in Aurora Energy that is also developing a uranium property in Labrador. The same John Baker that owns Ottenheimer and Baker that has the Newfoundland and Labrador Department of Natural Resources as its key client.

That brings us to the Board's latest addition - Danny Williams. The Danny Williams that went to the Middle East with Kathy Dunderdale to try and get investors to bail out Dalton and Baker's Refining Corp. The same Williams that placed MacDonald as Chair of Nalcor. The same Williams that while in office refused to do a deal with Hydro Quebec on the Lower Churchill, but endorsed Altius' bid to fund it as one of three. The boss of Kathy Dunderdale, who as the new Premier took a trade mission to China to promote junior mining companies. Three of those should sound familiar: Alderon; Altius; and Century. Knowing the players one big question remains: Why do they need Danny Williams as a "Special Advisor" to the Chair? The Forbes and Manhattan/Exploration Group really needs special advice from Danny Williams? Is Danny part of the deal? Hard to say with a public company that sells shares to anyone on the exchange. Surely it's not a political necessity to have the former Premier on the Board. There is his connection to the Muskrat Falls deal. They do need the power. He does have business connections in St. John's, but do they really need him?

The truth is Forbes and Manhattan has done something similar to this before - except it was with former Liberal Premier Brian Tobin. In 2005 Stan Bharti and a group of investors raised a private placement of $1 million to get then Thompson Consolidated - Lundmark Gold Mines off the ground. Mr. Bharti then took over briefly as President. Despite Brian Tobin's recent comments that his old political contacts in China saved the mines bacon http://tinyurl.com/6n5h77n it was a determined effort by Bharti's Forbes and Manhattan Group that kept the struggling company alive. They outline this as one of their accomplishments:

Recent Successes

Forbes & Manhattan Builds Assets


Consolidated Thompson Iron Mines
(Created)
  • Incubated Consolidated Thompson in 2005 as a grassroots exploration stage iron ore company with assets in Northern Quebec
  • Completed scoping study, 3 feasibility studies, and secured financing and off-take with China
  • Raised approximately $1 billion in development capital over 5 years
  • Consolidated Thompson was acquired by Cleveland Cliffs in May 2011 for $4.9 billion or $17.25 per share representing a return of over 7700% to shareholders


In 2006 Tobin was appointed as the Chair of Thompson Consolidated. He had previously served on a number of boards including Dean MacDonald's Persona Communications, and Canadian Imperial Ventures - a Danny Williams interest. Bernard Wilson was appointed to Thompson Consolidated's Board at the same time. When WISCO (China) invested over $200 million in the corporation Bharti and Bruce Humphrey stepped down from its Board and Chief Financial Officer Brad Boland resigned his position as well. If you check the team at Alderon you will see these three gentlemen now play key roles in this corporation.

The three big problems holding back mining development in Labrador have been power, rail, and ports. In 2010 the rail question was answered to some extent by the completion of the Bloom Lake Railway. A creation of Thompson Consolidated the $100 million railway was described by Tobin: "We have developed our infrastructure, in this case the railway, and we said from the get-go, 'this railway will be available to other users if and when other mining projects are brought to reality.'" Of course the railway is now owned by US based Cliff Resources, and operated by long term agreement with US based Genesee and Wyoming. There remains considerable debate regarding the ability of Quebec's ports to handle projected iron ore originating in Labrador and shipping to Asia and/or Europe.

The power part of the equation is still in question.


 ALDERON INSIDERS
Insider Information by Issuer - View Results
Issuer name : alderon ( Starts with )
Date range : January 1, 1995 - January 27, 2012
2012-01-27 22:40 ET
Issuer Name: Alderon Iron Ore Corp.
Legend: Insider's Relationship to Issuer: 1 - Issuer, 2 - Subsidiary of Issuer, 3 - 10% Security Holder of Issuer, 4 - Director of Issuer, 5 - Senior Officer of Issuer, 6 - Director
or Senior Officer of 10% Security Holder, 7 - Director or Senior Officer of Insider or Subsidiary of Issuer (other than in 4,5,6), 8 - Deemed Insider - 6 Months before
becoming Insider.
Date of Last Reported
Transaction(YYYY-MM-DD)
Security
Designation
Registered
Holder
Closing Balance Insider's calculated balance Closing balance of equivalent number
or value of underlying securities
Insider Name:
Ceased to be Insider: 2009-12-08
Algie, Anita Young
Insider Relationship: 4 - Director of Issuer
2006-12-30 Common Shares 88,000
2006-01-25 Options (Common Shares) 50,000 50,000

Insider Name:
Ceased to be Insider: Not Applicable
Altius Minerals Corporation
Insider Relationship: 3 - 10% Security Holder of Issuer
2010-12-15 Common Shares 2260761 Ontario Inc. 584,000
2011-02-11 Common Shares Altius Resources Inc. 0
2010-12-15 Warrants (Warrants) 2260761 Ontario Inc. 150,000 150,000
Insider Name:
Ceased to be Insider: Not Applicable
Altius Resources Inc.
Insider Relationship: 3 - 10% Security Holder of Issuer
-1-
Date of Last Reported
Transaction(YYYY-MM-DD)
Security
Designation
Registered
Holder
Closing Balance Insider's calculated balance Closing balance of equivalent number
or value of underlying securities
2011-02-11 Common Shares Altius Investments
Limited
32,285,006
Insider Name:
Ceased to be Insider: Not Applicable
Amisano, Terry Michael
Insider Relationship: 3 - 10% Security Holder of Issuer
2003-11-14 Common Shares 0 0
Insider Name:
Ceased to be Insider: 2011-11-28
Atwal, Sonya
Insider Relationship: 5 - Senior Officer of Issuer
2011-09-16 Common Shares 25,000
2010-12-29 Options (Common Shares) 120,000 120,000
2011-05-24 OTC Calls (including Private
Options to Purchase) (Common
Shares)
0 0
Insider Name:
Ceased to be Insider: 2005-04-29
Bachman, Richard Lynn
Insider Relationship: 5 - Senior Officer of Issuer
2004-02-05 Common Shares 840,000
Insider Name:
Ceased to be Insider: Not Applicable
Baker, John
Insider Relationship: 4 - Director of Issuer, 6 - Director or Senior Officer of 10% Security Holder
2011-02-09 Options (Common Shares) 400,000 400,000
-2-
Date of Last Reported
Transaction(YYYY-MM-DD)
Security
Designation
Registered
Holder
Closing Balance Insider's calculated balance Closing balance of equivalent number
or value of underlying securities
Insider Name:
Ceased to be Insider: Not Applicable
Bharti, Stan
Insider Relationship: 4 - Director of Issuer
2011-12-20 Common Shares FORBES &
MANHATTAN
2,100,000
2011-02-09 Options (Common Shares) 900,000 900,000
Insider Name:
Ceased to be Insider: Not Applicable
Boland, Brad James
Insider Relationship: 5 - Senior Officer of Issuer
2010-03-03 Common Shares 250,000
2011-02-09 Options (Common Shares) 300,000 300,000
Insider Name:
Ceased to be Insider: Not Applicable
Burlingame, Todd
Insider Relationship: 5 - Senior Officer of Issuer
2011-06-13 Common Shares 0
2011-06-13 Options (Common Shares) 250,000 250,000
Insider Name:
Ceased to be Insider: Not Applicable
Dalton, Brian
Insider Relationship: 4 - Director of Issuer, 6 - Director or Senior Officer of 10% Security Holder
2011-02-09 Options (Common Shares) 400,000 400,000
-3-
Date of Last Reported
Transaction(YYYY-MM-DD)
Security
Designation
Registered
Holder
Closing Balance Insider's calculated balance Closing balance of equivalent number
or value of underlying securities
Insider Name:
Ceased to be Insider: 2009-09-22
Doctors Investment Group Ltd.
Insider Relationship: 3 - 10% Security Holder of Issuer
2009-12-04 Common Shares 0 0
Insider Name:
Ceased to be Insider: Not Applicable
Dunn, Christopher Noel
Insider Relationship: 4 - Director of Issuer
2012-01-13 Common Shares 0
2012-01-13 Options (Common Shares) 0 0
Insider Name:
Ceased to be Insider: 2010-03-03
Durno, Jeff
Insider Relationship: 4 - Director of Issuer, 5 - Senior Officer of Issuer
2010-02-16 Subscription Rights (Common
Shares)
Natgar Capital Corp. 20,500 20,500
Insider Name:
Ceased to be Insider: Not Applicable
Eldem, Tayfun
Insider Relationship: 5 - Senior Officer of Issuer
2011-09-07 Common Shares 0
2011-09-07 Options (Common Shares) 1,000,000 1,000,000
Insider Name:
Ceased to be Insider: 2010-03-03
Emprise Capital Corporation
Insider Relationship: 3 - 10% Security Holder of Issuer
2009-11-25 Common Shares 3,500,000
-4-
Date of Last Reported
Transaction(YYYY-MM-DD)
Security
Designation
Registered
Holder
Closing Balance Insider's calculated balance Closing balance of equivalent number
or value of underlying securities
Insider Name:
Ceased to be Insider: 2010-12-13
Gleeson, Patrick James
Insider Relationship: 5 - Senior Officer of Issuer
2010-03-03 Common Shares 250,000
2010-11-08 Options (Common Shares) 200,000 200,000
Insider Name:
Ceased to be Insider: 2004-02-09
Hanson, Kevin R.
Insider Relationship: 3 - 10% Security Holder of Issuer
2004-02-09 Common Shares 0 0
Insider Name:
Ceased to be Insider: Not Applicable
Humphrey, Raymond Bruce
Insider Relationship: 4 - Director of Issuer
2010-03-03 Common Shares 500,000
2011-02-09 Options (Common Shares) 500,000 500,000
Insider Name:
Ceased to be Insider: Not Applicable
Jardine, Gerald Levelle
Insider Relationship: 3 - 10% Security Holder of Issuer, 4 - Director of Issuer, 5 - Senior Officer of Issuer
2004-02-09 Common Shares 6,730
-5-
Date of Last Reported
Transaction(YYYY-MM-DD)
Security
Designation
Registered
Holder
Closing Balance Insider's calculated balance Closing balance of equivalent number
or value of underlying securities
Insider Name:
Ceased to be Insider: 2008-01-01
Kowalchuk, John
Insider Relationship: 4 - Director of Issuer
2006-01-25 Options (Common Shares) 50,000 50,000
Insider Name:
Ceased to be Insider: Not Applicable
Lawson, Edward Martin
Insider Relationship: 4 - Director of Issuer, 5 - Senior Officer of Issuer
2006-09-05 Common Shares 359,312
2006-04-28 Common Shares Minera Sucunduri 0
Insider Name:
Ceased to be Insider: Not Applicable
Lewis, Benjamin Gerard
Insider Relationship: 6 - Director or Senior Officer of 10% Security Holder
2011-02-04 Common Shares 0
Insider Name:
Ceased to be Insider: Not Applicable
Liberty Metals & Mining Holdings, LLC
Insider Relationship: 3 - 10% Security Holder of Issuer
2012-01-13 Common Shares 14,981,273

Insider Name:
Ceased to be Insider: Not Applicable
Marcotte, Simon
Insider Relationship: 5 - Senior Officer of Issuer
2010-12-13 Common Shares 101,000
2010-12-29 Options (Common Shares) 325,000 201,000
-6-
Date of Last Reported
Transaction(YYYY-MM-DD)
Security
Designation
Registered
Holder
Closing Balance Insider's calculated balance Closing balance of equivalent number
or value of underlying securities

Insider Name:
Ceased to be Insider: 2009-12-08
Mohammed, Reza Ahmed
Insider Relationship: 5 - Senior Officer of Issuer
2008-01-10 Common Shares 610,000
2005-11-09 Common Shares Tellford Management
Ltd.
267,500
2006-01-25 Options (Common Shares) 420,000 420,000 420,000
Insider Name:
Ceased to be Insider: Not Applicable
Morabito, Mark Joseph
Insider Relationship: 4 - Director of Issuer
2012-01-26 Common Shares 3,095,000
2010-11-01 Common Shares Morabito Family Trust 0
2011-02-09 Options (Common Shares) 900,000 900,000
2012-01-26 OTC Puts (including Private
Options to Sell) Common Shares
(Common Shares)
-425,000 -425,000
Insider Name:
Ceased to be Insider: Not Applicable
Norris, Gary
Insider Relationship: 5 - Senior Officer of Issuer
2011-07-04 Common Shares 0
2011-07-04 Options (Common Shares) 250,000 250,000
-7-
Date of Last Reported
Transaction(YYYY-MM-DD)
Security
Designation
Registered
Holder
Closing Balance Insider's calculated balance Closing balance of equivalent number
or value of underlying securities
Insider Name:
Ceased to be Insider: Not Applicable
Paine, Sheila Margaret
Insider Relationship: 5 - Senior Officer of Issuer
2012-01-27 Common Shares 0
2012-01-26 Options (Common Shares) 100,000 100,000
Insider Name:
Ceased to be Insider: 2011-12-01
Penney, Brian
Insider Relationship: 5 - Senior Officer of Issuer
2011-05-07 Common Shares 0
2011-10-03 Options (Common Shares) 500,000 500,000
Insider Name:
Ceased to be Insider: 2010-12-13
PONTIUS, Jeffrey A.
Insider Relationship: 4 - Director of Issuer
2010-03-03 Common Shares 200,000
2010-11-08 Options (Common Shares) 200,000 200,000
Insider Name:
Ceased to be Insider: Not Applicable
Porter, David James
Insider Relationship: 4 - Director of Issuer
2011-02-09 Options (Common Shares) 300,000 300,000
-8-
Date of Last Reported
Transaction(YYYY-MM-DD)
Security
Designation
Registered
Holder
Closing Balance Insider's calculated balance Closing balance of equivalent number
or value of underlying securities
Insider Name:
Ceased to be Insider: Not Applicable
Potvin, Bernard
Insider Relationship: 5 - Senior Officer of Issuer
2011-11-14 Common Shares 0
2011-11-14 Options (Common Shares) 250,000 250,000
Insider Name:
Ceased to be Insider: Not Applicable
Santorelli, Keith
Insider Relationship: 5 - Senior Officer of Issuer
2011-11-28 Common Shares 0
2011-11-28 Options (Common Shares) 300,000 300,000
Insider Name:
Ceased to be Insider: 2005-03-04
Schellenberg, Gary David Albert
Insider Relationship: 4 - Director of Issuer
Insider Name:
Ceased to be Insider: Not Applicable
Sherk, Susan Bradley
Insider Relationship: 6 - Director or Senior Officer of 10% Security Holder
2010-12-09 Common Shares 460
Insider Name:
Ceased to be Insider: Not Applicable
Simpson, Matthew James
Insider Relationship: 4 - Director of Issuer
2010-09-20 Common Shares 0
-9-
Date of Last Reported
Transaction(YYYY-MM-DD)
Security
Designation
Registered
Holder
Closing Balance Insider's calculated balance Closing balance of equivalent number
or value of underlying securities
2010-12-29 Options (Common Shares) 550,000 550,000
Insider Name:
Ceased to be Insider: Not Applicable
Strauss, James Digby Ronald
Insider Relationship: 6 - Director or Senior Officer of 10% Security Holder
2011-02-10 Common Shares 20,000
Insider Name:
Ceased to be Insider: 2005-03-01
Torresan, Raymond
Insider Relationship: 5 - Senior Officer of Issuer
2004-02-16 Common Shares Threefold Ventures
Inc.
10,000
Insider Name:
Ceased to be Insider: Not Applicable
Tough, Thomas Robert
Insider Relationship: 4 - Director of Issuer
Insider Name:
Ceased to be Insider: Not Applicable
Warr, Donald James
Insider Relationship: 6 - Director or Senior Officer of 10% Security Holder
2011-12-16 Common Shares 39,000
2011-09-22 Common Shares Spousal RRSP 15,000
-10-
Date of Last Reported
Transaction(YYYY-MM-DD)
Security
Designation
Registered
Holder
Closing Balance Insider's calculated balance Closing balance of equivalent number
or value of underlying securities
Insider Name:
Ceased to be Insider: Not Applicable
Wells, Chad
Insider Relationship: 6 - Director or Senior Officer of 10% Security Holder
2011-04-07 Common Shares 35,000
2010-12-08 Common Shares RESP 3,500
Insider Name:
Ceased to be Insider: Not Applicable
Winter, Stephen Lawrence
Insider Relationship: 8 - Deemed Insider - 6 Months before becoming Insider
2011-10-05 Common Shares 42,000
2011-10-05 Common Shares Spousal 2,800


ALTIUS INSIDERS
Insider Information by Issuer - View Results
Issuer name : altius ( Starts with )
Date range : January 1, 1995 - January 27, 2012
2012-01-27 22:58 ET
Issuer Name: Altius Minerals Corporation
Legend: Insider's Relationship to Issuer: 1 - Issuer, 2 - Subsidiary of Issuer, 3 - 10% Security Holder of Issuer, 4 - Director of Issuer, 5 - Senior Officer of Issuer, 6 - Director
or Senior Officer of 10% Security Holder, 7 - Director or Senior Officer of Insider or Subsidiary of Issuer (other than in 4,5,6), 8 - Deemed Insider - 6 Months before
becoming Insider.
Date of Last Reported
Transaction(YYYY-MM-DD)
Security
Designation
Registered
Holder
Closing Balance Insider's calculated balance Closing balance of equivalent number
or value of underlying securities
Insider Name:
Ceased to be Insider: Not Applicable
Altius Investments Limited
Insider Relationship: 2 - Subsidiary of Issuer
Insider Name:
Ceased to be Insider: Not Applicable
Altius Minerals Corporation
Insider Relationship: 1 - Issuer
2012-01-24 Common Shares 0
Insider Name:
Ceased to be Insider: Not Applicable
Baker, John
Insider Relationship: 4 - Director of Issuer
2011-08-24 Common Shares 515,300
2011-08-24 Common Shares Brightsun Holdings
Inc.
50,000
2011-08-24 Options (Common Shares) 62,500 62,500
2011-10-13 Rights DSUs (Rights) 9,069 9,069
-1-
Date of Last Reported
Transaction(YYYY-MM-DD)
Security
Designation
Registered
Holder
Closing Balance Insider's calculated balance Closing balance of equivalent number
or value of underlying securities
Insider Name:
Ceased to be Insider: 2010-03-18
Butler, Roland Wayne
Insider Relationship: 4 - Director of Issuer, 5 - Senior Officer of Issuer
2010-01-15 Common Shares 735,450
2003-06-03 Common Shares Lauren Exploration
Ltd.
250,000
2009-12-08 Options (Common Shares) 250,000 250,000
Insider Name:
Ceased to be Insider: Not Applicable
Dalton, Brian
Insider Relationship: 4 - Director of Issuer, 5 - Senior Officer of Issuer
2011-09-14 Common Shares 968,073
2003-01-02 Common Shares 10587 Newfoundland.
Ltd.
250,000
2005-04-07 Common Shares RRSP Account 177,702
2011-09-14 Options (Common Shares) 125,000 125,000
2010-09-21 SARs (cash) 250,000 250,000
2005-06-28 Warrants (Common Shares) 0 0
Insider Name:
Ceased to be Insider: 2004-08-31
David W. Tice & Associates, LLC
Insider Relationship: 3 - 10% Security Holder of Issuer
2004-08-31 Common Shares Prudent Bear Fund 1,894,700
2003-07-14 Warrants (Common Shares) Prudent Bear Fund 578,500 578,500
-2-
Date of Last Reported
Transaction(YYYY-MM-DD)
Security
Designation
Registered
Holder
Closing Balance Insider's calculated balance Closing balance of equivalent number
or value of underlying securities
Insider Name:
Ceased to be Insider: Not Applicable
Lewis, Benjamin Gerard
Insider Relationship: 5 - Senior Officer of Issuer
2011-09-07 Common Shares 10,000
2009-10-09 Common Shares RRSP 3,050
2011-09-07 Common Shares Spousal Account 18,000
2011-09-07 Options (Common Shares) 75,000 75,000
2010-09-21 Rights SARs (Rights) 150,000 150,000
Insider Name:
Ceased to be Insider: Not Applicable
Mifflin, Frederick James
Insider Relationship: 4 - Director of Issuer
2011-11-28 Common Shares 15,716
2011-11-28 Options (Common Shares) 62,500 62,500
2011-10-13 Rights DSUs (Rights) 9,069 9,069
Insider Name:
Ceased to be Insider: Not Applicable
Sherk, Susan Bradley
Insider Relationship: 4 - Director of Issuer
2011-11-28 Common Shares 9,029
2011-11-28 Options (Common Shares) 47,500 47,500
2011-10-13 Rights DSUs (Rights) 9,069 9,069
-3-
Date of Last Reported
Transaction(YYYY-MM-DD)
Security
Designation
Registered
Holder
Closing Balance Insider's calculated balance Closing balance of equivalent number
or value of underlying securities
Insider Name:
Ceased to be Insider: Not Applicable
Strauss, James Digby Ronald
Insider Relationship: 4 - Director of Issuer
2010-10-27 Common Shares 24,340
2011-10-13 Rights DSUs (Rights) 6,776 6,776
Insider Name:
Ceased to be Insider: 2010-10-27
Thurlow, John Geoffrey
Insider Relationship: 4 - Director of Issuer
2010-10-12 Common Shares 15,640
2010-09-17 Common Shares Bacchus Holdings Inc. 1,163,512
2010-09-20 Options (Common Shares) 87,500 87,500
2004-10-07 Warrants (Common Shares) 0 0
Insider Name:
Ceased to be Insider: 2004-01-01
Tognetti, John
Insider Relationship: 3 - 10% Security Holder of Issuer
2003-07-15 Common Shares -9,400
2003-06-27 Common Shares noelle tognetti 1,465,000
-4-
Date of Last Reported
Transaction(YYYY-MM-DD)
Security
Designation
Registered
Holder
Closing Balance Insider's calculated balance Closing balance of equivalent number
or value of underlying securities
Insider Name:
Ceased to be Insider: Not Applicable
Warr, Donald James
Insider Relationship: 4 - Director of Issuer
2011-11-28 Common Shares 84,816
2008-10-29 Common Shares RSP 8,900
2011-11-28 Options (Common Shares) 62,500 62,500
2011-10-13 Rights DSUs (Rights) 9,069 9,069
Insider Name:
Ceased to be Insider: Not Applicable
Wells, Chad
Insider Relationship: 5 - Senior Officer of Issuer
2011-11-28 Common Shares 43,500
2010-02-26 Common Shares RRSP 34,900
2011-11-28 Options (Common Shares) 75,000 75,000
2010-09-21 Rights SARs (Rights) 150,000 150,000
2005-07-10 Warrants (Common Shares) 0 0
Insider Name:
Ceased to be Insider: Not Applicable
Winter, Stephen Lawrence
Insider Relationship: 5 - Senior Officer of Issuer
2011-08-09 Common Shares 30,000
2011-08-09 Common Shares RRSP Account 2,100
2011-08-08 Options (Common Shares) 75,000 75,000
-5-
Date of Last Reported
Transaction(YYYY-MM-DD)
Security
Designation
Registered
Holder
Closing Balance Insider's calculated balance Closing balance of equivalent number
or value of underlying securities
2010-09-21 Rights SARs (Rights) 150,000 150,000
-6-

Monday, January 23, 2012

The Real Muskrat Falls - Part 2

In this, a record winning year for Canadian Olympians, I think the motto of the Olympic movement says it best, “Citius, Altius, Fortius” – “Faster, Higher, Stronger”. Premier Danny Williams, St. John's Board of Trade, Wednesday, September 8, 2010.

The ending of Williams speech says it best - Altius.


Altius is an exploration corporation based in St. John's, Newfoundland. It has for years staked claims in various areas throughout the province. Its primary business plan is to identify potential mineral deposits, stake claims to them, build small exploration companies to represent the individual claims and then sell them for shares in any company interested in taking over these claims. It generally takes those newly acquired shares and essentially builds its net worth as a corporation on their value. Often it will then liquidate these shares for cash. One practice it always maintains is keeping an ongoing royalty in the projects it sells. It may be a gross sales fee, a net smelter return, or both - as was the case with its Aurora project.

Altius was co-founded by Brian Dalton and Roland Butler, Jr and in October 1997 it went public. Roland Butler, Jr has since left the company to serve as a director of Millrock Resources Inc which hopes to emulate Altius' success as a company  focused on generating metallic mineral projects for joint venture exploration and development. Its Board of Directors is an interesting group covering both the Liberal and Conservative political spectrum. Of particular interest is the involvement of John A. Baker, QC. Mr Baker looks to be the sole surviving founder of the law firm Ottenhiemer and Baker in St. John's. It calls itself : "the largest independent law firm in Newfoundland and Labrador."

Ottenhiemer and Baker was run by both the late Senator Gerry Ottenhiemer (PC), who passed away in the late 1990's  and John Baker - from the Liberal Baker family. Other prominent members of the Ottenhiemer family include John Ottenhiemer who received his QC while he was a sitting Minister in Danny Williams government in 2004 (and would go on to become Chair of Nalcor in 2007), and Ed Byrne who would be named Danny Williams first Minister of Natural Resources (and held it until charged with influence peddling in 2006).

Ottenhiemer and Baker was in fact covered by the publication Canadian Lawyer http://tinyurl.com/7wq7ob9 . Canadian Lawyer actually brought out some interesting points on the firm during their coverage. Most notably: "Key Clients: Bank of Montreal; Government of Newfoundland and Labrador (Department of Natural Resources); Altius Minerals..."
Ordinarily this would not raise many eyebrows. However, consider that Altius directors Fred Mifflin (Liberal) and Jamie Strauss both had affiliations with the Bank of Montreal. Then there is Brian Dalton and the presidency of Altius.

The big one though has to be Mr. Baker himself. Consider for a moment that Mr. Baker's law firm of Ottenhiemer and Baker represents the Department of  Natural Resources, Newfoundland and Labrador and he is also a director of Altius. Consider that Altius has been directly involved with the Department of Natural Resources, over many years, on projects ranging from Alderon's Kami project to the Royalty Trust proposal for the financing of the Lower Churchill.

Take the Newfoundland and Labrador Refining Corporation for starters. It was a project started by Altius to create a refinery near the existing Come-By-Chance refinery in Eastern Newfoundland. Altius held a 39.6% controlling interest in it and Brian Dalton was the managing director. On February 8, 2006 the NL Refining Corporation announced it was starting a feasibility study on the project. That same day somebody else had this to say:

"We know there is tremendous potential to expand and develop many areas of our resource industries, including the oil and gas sector. Worldwide, oil refining capacity needs expansion, and Newfoundland and Labrador is a prime location for a new refinery. With our province's oil and gas expertise and growing industry, expanding our oil refining capabilities will further enhance and strengthen the sector."
- Premier Danny Williams, Feb. 8, 2006

The refinery project received the environmental green light from then Environment Minister Clyde Jackman on October 5, 2007 http://www.releases.gov.nl.ca/releases/2007/env/1005n02.htm  - during the 2007 provincial election period. On November 27, 2007 Altius issued a press release announcing  participation in the project by SNC Lavelin and Japan's IJK consortium. http://nlrefining.com/files/pr_1196877398.pdf  SNC Lavelin had been working on the project with Altius since 2006.

One year later, on October 6, 2008 SNC Lavelin announced it was suing the Newfoundland and Labrador Refining Corporation (NLRC), and Altius Minerals (including its directors) for $20.6 million dollars it claimed was owed to it for work completed on the project thus far.  The SNC Lavelin suit claims that by October 2007, three European investors — including Scottish billionaire Harry Dobson — "had decided to no longer fund their proportionate share" of the refinery's expenses, unknown to the engineering firm. In fact, SNC Lavelin had applied to place the refining corporation in bankruptcy in June, 2008. SNC claimed in court that Altius had "deceived" them. SNC failed to have NLRC placed into bankruptcy with the Supreme Court granting a stay of proceedings, which gave NLRC time to find a buyer/new investors or liquidate assets to pay their creditors. That stay ended in November, 2011. In March, 2010 Dalton and company sued to be excused from personal responsibility in the $20.6 million lawsuit. On March 24, 2011 Nalcor announced that SNC Lavelin was awarded the engineering, construction and procurement management for components of the Lower Churchill development.

During the same period of time Altius, at the open request of the provincial government, submitted a proposal for a Royalty Trust to fund the construction of the Lower Churchill. Although the details of that agreement have been kept relatively confidential, some aspects of it have been admitted to. For instance, as is part of their way of doing business, Altius intends on charging an ongoing royalty on gross power sales from the dam for as long as it operates. Judging from previous projects Altius has been involved in that royalty could range from 2 - 3 %.

In a 2005 interview Danny Williams gave some interesting statements:
"As well, from the original 25 submissions, we have also chosen an additional three proposals as potential financing options," Williams said.

"These three financing options will also move into the next phase of assessment as we continue to explore the best option for developing this resource," Williams said in noting "all six proponents have accepted our invitation to move into phase two."

Of the three financing options, two are potential equity investors.

Once the development concept is further defined, the province will be considering equity participation including: Cheung Kong Infrastructure Holdings Limited and Borealis Infrastructure Management Inc.

Finally, an innovative financing option in the form of a royalty trust has been proposed by Altius Minerals Corporation, which will be explored later in the process, Williams said.

The one financing option without an equity participation was Altius'. Their proposal amounts to an ongoing royalty for arranging financing of the project. Of course Altius could not arrange that kind of financing itself, but that story comes later.

Brian Dalton had this to say about the proposal in 2007:
"We're pretty happy to be there," said Brian Dalton, president of Altius. "I think we can provide a really competitive source of financing here and also a financing source that's based here. We think we've got a reasonable shot." Dalton said royalties are a common method of financing mineral projects. "We've proposed to create a royalty trust that would acquire a royalty interest in the project in exchange for financing. So, we wouldn't look for an actual ownership interest in the project, nor would the province or whomever have to take on additional debt. It's just a third option in the financing world."

In a Special Situations Report, Hayward Securities Inc had the following to say about Altius' plan to fund the Lower Churchill: "In August, 2005, the government announced that three firms had made the shortlist for financing alternatives from the twenty-five expressions of interest entered for the development and financing options. Among the three was a proposal by Altius to buy a $200 million plus gross royalty stake and to create a trust entity that would be structured to offer high benefits to Newfoundland and Labrador based investors, including Altius.

In May, 2006, Premier Danny Williams announced that Newfoundland and Labrador would lead development of the site. He stated that having an external partner join the province would result in "less-than-acceptable" benefits to the province. Given Altius' position as a Newfoundland-based firm with deep local roots and an intriguing financing proposal, we believe this decision is positive for the company. We believe this royalty would provide significant upside to the company's long-term performance. There is no better stream than that from hydro, as cash flows may be generated until the next ice age!"

Now you have an idea where the money will be going locally, and who is involved at that level. Next will be the Labrador/Toronto/China tie in.








Saturday, January 21, 2012

The Real Muskrat Falls I

"If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; and may posterity forget that ye were our countrymen."
Samuel Adams

The real story of Muskrat Falls is not the romantic, nationalistic ballad that the government of Newfoundland and Labrador portays it as. It is not a noble effort to enhance the environment. It is not an attempt to join Newfoundland and Labrador to the North American electrical grid. It is not a project to replace the foul airs of Holyrood. It most definately is not a project to rid us of the territorial stranglehold Quebec imposes. Indeed, it is not even a project to make us "masters of our own house".

It is a project to facilitate the creation of wealth in Labrador, and to profit those ambitious enough to be in the right place for the opportunity. It is a story of far flung claims stretched around Labrador, and in some cases the island of Newfoundland. It is a story of boardrooms large and small. It is a story of corporate battles, and international markets. It is a story of wealthy families and favoured friends. It is all of these things, yet it is sold as none of them.

Although ambitions for the Lower Churchill date back decades it started taking a decidedly interesting turn in 2002 when then Premier Grimes proposed to develop the Gull Island and Muskrat Falls hydro dams in partnership with Hydro Quebec. Then President of Newfoundland and Labrador Hydro Dean MacDonald, a Liberal, resigned in protest days before the agreement was announced. MacDonald, a former bagman for Brian Tobin, believed the deal was not in the province's interest - or so he said. MacDonald's history to that point in time included responsibilities at Roger's Communications, and a business partnership with Danny Williams in Cable Atlantic with an ownership of 4.5%. With Danny Williams, then leader of the PC Party and Leader of the Official Opposition in the House of Assembly, cheering on the sidelines Dean MacDonald effictively killed the Hydro Quebec deal - despite the fact that it had the backing of the majority of the Board of Directors.

During this time a small exploration company named Altius was busy securing a 3% net smelter return royalty, as part of a limited partnership, over the Voisey's Bay nickel-copper-cobalt project in Labrador that is owned and operated by Vale INCO NL. Altius was also involved in the Central Mineral Belt project in 2003 which later would result in Aurora Energy. More on that later.

Significantly, 2003 saw the election of Danny Williams as Premier of the province. A monumental event in more ways than one. It was also in that year that Dean MacDonald was approached by institutional investors to join them in the purchase of Persona Communications. In September, 2004 Danny Williams announced the birth of the Nalcor concept and appointed Dean MacDonald as Chair of  Newfoundland and Labrador Hydro. Significantly, he also replaced two other directors with Ken Marshall and Craig Tucker. Significant because Ken Marshall worked with Williams at Atlantic Cable, and had a minority interest in that company. Also, Craig Tucker who was a vice-president at M5 Marketing Communications and its group of companies - the parent company of the polling firm that conducted weekly unsolicited polling during the 2011 provincial election. Interestingly, both Dean MacDonald and Ken Marshall were listed as directors of companies held in blind trust created when Williams took office as Premier.

2003 also saw several other key appointments. First up was Ed Byrne. Byrne, the son-in-law of the late Senator Gerry Ottenhiemer, stepped aside as PC Party leader in 2001 to allow Danny Williams to assume the leadership. He was appointed as Williams first Minister of Natural Resources and placed in charge of overseeing the development of Muskrat Falls. Another member of the Ottenhiemer family, Senator Gerry Ottenhiemer's half brother John Ottenhiemer, was appointed as Minister of Education. His role as Chair of Nalcor doesn't evolve until 2007 - although he does become Minister of Natural resources for a period in between.

In the same press release of 2004 http://tinyurl.com/7cmdbjw , in which Williams announced his appointments to NL Hydro's Board of Directors, he let his intentions on the Lower Churchill project be known:

"Premier Williams stated his government’s priority for the immediate future is to advance the development of the Lower Churchill and he has full confidence in Mr. MacDonald’s ability to assist government in reaching its objectives on this major development."

Shortly afterward Newfoundland and Labrador Hydro issued a public call for Expressions of Interest (EOI) in developing the Lower Churchill.

“We are open to considering all proposal concepts, including the use of power in Labrador, on the Island, for export or some combination of these options in terms of achieving maximum economic and employment benefits for this province,” Williams said.

The subsequent submissions were narrowed to three, with only one being a Newfoundland based plan - that of Altius http://tinyurl.com/3xs9cf

 

Wednesday, January 18, 2012

A Time for Courage

There has been so much said about Muskrat Falls. Various experts have tossed out numbers, proposed alternatives, and vetted the costs associated with this project. Political hacks from each Party have tried to destroy their opponents. The media has dutifully reported on each twisting and turning curve like a soap opera. Instead of factual contemplation many have centered their focus on marginalizing each other. Yet in all the chaos that has made up the Muskrat Falls debate one thing has been clearly missing - the bottom line. Who will make the money. Which corporations are driving it. Who are the players quietly maneuvering the project from behind the scenes. What is the payoff, and who will be getting it.

The nasty, dark side of what is being spun as some sort of nationalistic mission to revenge the Upper Churchill. and as one player would say, "be masters of our own destiny". Rock Solid Politics will be releasing a series of blogs this week on the corporate history, and the players. Enriching oneself has never been reserved for any particular political party, and the Muskrat Falls story is no different.

This week in the Telegram Editor Russell Wangersky scribed what I believe is one of the most courageous and overdue editorials I have seen describing politics in Newfoundland and Labrador today. I call it courageous, because to shine a light on the banana republic - feudal politics of Newfoundland and Labrador is to immediately invite scorn and marginalization. I call it overdue, because it is so truthful that it amazes me other press outlets have not done the same. The real story of Muskrat Falls starts Monday, but please take a moment and read a very special column by Russell Wangersky reproduced below:


Williams proves the point

Somewhere, the gods of irony are having themselves a great big chuckle, or maybe even a belly laugh. Late last week, former St. John’s city manager Ron Penney and former Public Utilities Board head David Vardy wrote a letter to The Telegram talking about Muskrat Falls.

It was a letter that was relatively moderate in tone. The guts of it? “What we need is the most robust and thorough review possible, and the consumer advocate should be given all the tools he needs to ensure this is the case and that the public interest is protected.”

Seems reasonable.

Vardy and Penney also chided those who have private concerns about the massive project, but prefer to keep those thoughts to a gentle backroom murmur: “We know there are many knowledgeable people who have strong reservations about this project but, who, for personal reasons, are reluctant to make their concerns public. It is now vitally important that they make their concerns public while there is still time to influence this decision.”

Once again, seems reasonable. If you’ve got something to say, say it publicly, while it still has some kind of chance to have an effect.

But apparently that’s not reasonable at all, according to former premier Danny Williams, the original architect of the Muskrat Falls project. The CBC tracked him down

to get a comment or two, and Williams was obligingly offensive.

“I’m very disappointed in Dave Vardy's comments, and the kind of nonsense that he’s getting on with,” Williams blustered.

“Basically (they are) saying that it’s a small community and people are afraid to speak out. What kind of garbage is that?” Williams said. “To try and sort of taint it with some insinuation that people don’t want to speak out on this is absolutely absurd and it’s irresponsible.”

Oh, and, by the way, it’s true.

Because if you do speak out, you’re speaking, um, irresponsible garbage and absurd nonsense.

I’ve spoken to a series of business people in this city who are unsure about the project as a whole, decidely concerned about the current process that seems to trundling along with all the decisions effectively already made, and yet are absolutely determined not to say one single public word.

They’ll phone and tell you issues they’d like to see addressed, they’ll ask questions and explain their concerns, but they start every conversation setting the ground rules — not one single thing they say is to be attributed to them in any way.

Their fears?

That they’ll be singled out and publicly lambasted — something we all know happens, and which Williams himself, even in premierial retirement, is once again living proof of — and more sinisterly, that their businesses will be affected.

Will their businesses be affected? The fact is, the provincial government has a long arm in this economy and no business person worth their salt will harm their own opportunities if there is even the appearance that speaking publicly will bring corporate repercussions.

Does that appearance exist? Well, it must: otherwise, companies doing consulting work for the provincial government would not feel it necessary to buy whole tables of seats at party fundraisers. The same business people who aren’t talking publicly about Muskrat Falls also aren’t talking publicly about being telephoned by party representatives — telephone calls where the business people are told how many seats they are expected to buy for specific events.

Clearly, there must be some concern that there’s a direct line between your actions and corporate repercussions.

It may not be a legitimate fear that if you speak out against Muskrat Falls, your business will be affected.

But one thing is for certain: if you do speak out on Muskrat Falls, there’s a good chance you’ll be publicly roasted.

It’s ironic that Williams not only decided that the Vardy/Penney letter was more strident than it actually was, but that he also had to then go out and prove that what they hadn’t really said was actually true.

You could not make this stuff up.



Russell Wangersky is The Telegram’s editorial page editor. He can be reached by email at rwanger@thetelegram.com.

Sunday, January 8, 2012

Battlefield Labrador - the Ore Race.

The big announcement last week of Danny Williams appointment as "Special Advisor to the Chairman" of Alderon Iron Ore Corp certainly turned heads in the Province. Until that point the exploration business in Labrador was essentially cruising along under the radar for most of the Province, and perhaps it will return there again. Just for now though a big spot light has been placed on Newfoundland and Labrador's version of the "Gold Rush".

On the face of things Labrador, and to some extent Newfoundland, are being swarmed by what have been commonly referred to as "penny stocks" or "juniors". They've been scouring the Labrador trough, staking claims as they go. Selling their stocks on the OTC (Over the Counter), and TSE venture exchanges. Predicting massive deposits of iron ore, or other such minerals. Their stocks rise and fall on every new announcement. Like Generals they search for an advantage over their adversaries.

That is on the face of it. Dig a little deeper and something else appears. Take for instance New Millennium Iron Corp. established as a junior exploration company, a one man outfit, to pursue an iron ore deposit in Labrador. The company was named LabMag Mining Corp. (LMC). The corporation was first incorporated as New Millennium Capital Corp. on August 8th, 2003. On June 8th, 2011, with the approval of shareholders, the company's name was officially changed to New Millennium Iron Corp. In October 2008, NML signed a strategic partnership contract with Tata Steel who as part of the transaction purchased 19.9% percent of NML's shares for about C$23.0 million. That is Tata Steel of India.

Tata Steel has "captured" mines in India for its operations there, but found itself without captured mines for its European operations. In an effort to change this strategically, Tata decided to get involved in the Labrador Trough. Geographically, Labrador is far closer to Europe than Brazil - an export leader in raw iron ore. Tata took an ownership position in tiny New Millenium, and directorships on its Board. Tata has taken over control of New Millenium's Taconite and DSO projects with exclusivity agreements involving sliding exploration investments and percentages of control http://tinyurl.com/7jg9pny .

In a similar play, there is Century Iron Mines Corp (CIMC) - read China. Whether they are partnering with Quebec juniors like Augyva Mining Resources Inc, or "Newfoundland" based juniors like Altius, the pattern remains the same - finance the exploration for a controlling interest and then gently push those pesky juniors out of the way for an ongoing royalty of between half a percent and three percent of gross production.

The result is a wild wild West atmosphere. The kind of atmosphere that surrounded the great rush to riches of the Gold Rush days. This time though its about the big boys. This time it is country vs country. Corporation vs corporation. Sure their are some wanna bes sprinkled in for good measure, and surely they will get a little sprinkle. Even Danny Williams and his inside people have managed somehow to work their way into the action, but make no mistake, they are tiny little fish in a very large bowl swimming with giants. The real action here is control of Labrador's resources from uranium to iron ore, and everywhere in between. Will the North Americans come out on top? Will China and/or India rule the day? Will they co-exist? Right now it's hard to say. In the end they are like Generals on the battlefield - battlefield Labrador.


Monday, January 2, 2012

Muskrat Falls Green Little Secret

You've heard it before: "the greenest project in North America." You've heard this too: " replacing the dirty power from Holyrood." Yet, you haven't heard this: "Our strategy is to get the US federal government to subsidize Muskrat Falls."

Muskrat Falls has our former Premier Danny Williams written all over it. A project that on its face makes no economic sense. Yet dig a little deeper, and you will see a man playing the angles. A man attempting to build a purse from a sows ear. Mr. Creativity - that is Danny William's strong suit. A great imagination combined with an ability to play the angles. Add in a strong sprinkling of Newfoundland nationalism, and you have the complete picture. We saw it with the offshore royalty war with Ottawa. We saw it with the nationalization of Abitibi assets. We even saw it with the Ice Caps. An ability to take a so so or worse situation, dust it off, repackage it, and most importantly have others pay for it. Don't get me wrong - Danny is a genius at what he does. I didn't call him the "Father of Modern Newfoundland and Labrador" without reason.

Unfortunately, all the wheeling and dealing sometimes leaves big, bad holes. In the case of Abitibi he was able to pass off the initial cost of expropriation to Ottawa ($150 million), because he understood that Abitibi's only legal recourse was through the NAFTA trade agreement and that was a federal responsibility. So Harper grumbled, but paid the bill. Not exactly a patriotic strategy, but Danny's PCs were always about Newfoundland first and "to hell with the rest of the country". Fair enough in the war of fiscal federalism that seems to be our lot. Unfortunately, the environmental clean up bill to clean the Abitibi site up is estimated at $250 million. It is currently in court with the government of Newfoundland and Labrador trying to argue they aren't responsible for the environmental mess. Indeed they argue the company they took the property from is. Long story short - Newfoundland is going to lose this one and hold the tab. A creative , but somewhat reactive strategy maturing to bare its not so nice fruit.

That brings us to the much discussed Muskrat Falls deal. Many analysts have questioned its economic viability. The biggest question of all - how can you make enough money on the 40% of the power generated for export to the maritimes and US to pay for this deal? There would seem to be a common sense cap to the amount you could charge for the first 40% generated that is to be consumed in Newfoundland and Labrador. That certainly can not come anywhere near to paying for the fixed costs of the project. The next 20% is being given to Emera to subsidize its investment in the Maritime Link portion of the project. That leaves only 40% left. Here is the answer: have the US government subsidize the 40% sold in the US.

This is where you say "okay we have a conspiracy theorist on our hands here." In fact, I would not  have discovered this myself if I hadn't been given it a year ago by  - lets just say a highly placed unnamed source. Nalcor's big plan for the 40% going to the US is to sell it on the energy exchanges into the US. That isn't a secret. They've openly admitted that many times. That in itself would not come close to paying for it as US market rates for power are 60% or more below the cost of producing and transmitting the power.

No, the secret to making it all work is something borrowed from Nalcor's arch rival Hydro Quebec. The secret is RECs. Never heard of them? Stands for Renewable Energy Credits. Here's a good link to understand what they are all about  http://tinyurl.com/7qtvj35 . In the nutshell: they provide credits to the seller of energy, not the buyer , which can be sold on exchanges to organizations looking to meet government or self - imposed green targets. The only kicker is this - it has to be from an eligible renewable energy. That is where Hydro Quebec and the ever sharp mind of Danny Williams comes in.

Hydro Quebec has been aggressively pursuing "green renewable" status for its power in the US. It also wants those credits to subsidize its operations and offset its massive debt. It has used the state of Vermont as its proverbial beach head. Having just signed a massive supply agreement to the two largest power suppliers in Vermont (one which the Quebec government owned through the Caisse - Green Mountain Power, and the other which the Caisse just outbid Fortis Group for - Central Vermont Public Service) Quebec effectively controls the power business in that state. It was even instrumental in having the Yankee Nuclear Plant in Vermont closed which just happened to open up a massive new supply contract for them on top of the one just signed. In any case, Hydro Quebec succeeded in being given the coveted "Renewable Energy" label by the state of Vermont.  http://tinyurl.com/6u9u472

The problem being that is just a first step. To succeed they must convince the United States government that they should receive that status. Then it will be up to the US if they want to subsidize a foreign national to monopolize their electrical system. This is the piggy back strategy that Nalcor is trying to execute and that has the imagination of Danny Williams written all over it. The question is will it work? The other question is why has it been kept so secret?

Some possible answers are political in nature. It may not be good for the image of a former Premier, who built a career on battling Hydro Quebec publicly, to admit his primary strategy is to follow Quebec. It may not be good for Newfoundland nationalism to admit the same. So there are those angles. Another, and likely more to the point reason is the chance of major hydro dams receiving the "Renewable Energy" label to qualify for the Renewable Energy Credits is almost non-existent.

Listening to Danny Williams on the CBC show On Point this week I heard him use an old familiar phrase: "roll the dice." Nalcor is rolling the dice by banking on Hydro Quebec to succeed in getting renewable status for large hydro. If the gamble fails the people of Newfoundland and Labrador will be losing $900 million a year on the operations of Muskrat Falls. This roll of the dice is the little secret of Muskrat Falls that the PC government don't want you to know, and don't want to talk about. Take heed.