Debates of February 9, 2005 (day 32)

Thank you, Mr. Speaker. I would like to pick up where I left off with my statement. That is to talk about the secondary diamond industry here in the Northwest Territories and the fact that, to date, on the Sirius deal, this government has lost $3 million. That is all I can talk about today with the government, is the fact that we have lost $3 million, but I just want to say that it is going to end up costing the government substantially more than that, Mr. Speaker.

As a preamble, what I understand is that we have a socioeconomic agreement with BHP. Whether the 10 percent allotment of rough diamonds is contained in that socioeconomic agreement, I don’t think it is. What we do have, Mr. Speaker, is a written agreement from BHP to supply 10 percent of rough to northern manufacturers. We also have an understanding from Rio to supply rough to northern manufacturers. What I would like to ask, Mr. Speaker, if the Leviev Group, who went through the receiver, submitted a proposal to purchase the Sirius plant as a going concern and met all of the GNWT’s due diligence work on whether or not they could be deemed a northern manufacturer and, as such, were deemed a northern manufacturer by the Government of the Northwest Territories, why did they subsequently fail in the negotiations with both producers to get a supply of rough diamonds, Mr. Speaker? The concern I have is whether these agreements we have with our producers actually hold any water, and what involvement did the government have in trying to see these negotiations through to completion. Thank you, Mr. Speaker.

Thank you, Mr. Ramsay. The honourable Minister of Finance, Mr. Roland.

Return To Question 349-15(3): Agreements For Supply Of Rough Diamonds

Thank you, Mr. Speaker. Mr. Speaker, the Member is correct that at this point we have booked a loss for the Sirius operations of $3 million, and we entered into a process and had a court-appointed receiver put in place and followed through a process of trying to have the Sirius operation go as what we would call a going concern, meaning that it is a fully operational business, feeling that would be the best value we receive for that. We did enter in that process. The "receiver" entered into the process. It went out for bids to receive those. We looked at those proposals. We, as a government, made a decision to go with what we felt at the time was the best package that we received. We went about doing our work and felt that we were satisfied with our work. We are prepared to offer the Leviev Group a northern manufacturer status, conditional on them getting a supply of rough agreement with the mining operation. The reason that we are not pursuing this avenue any more is that they were not able to come to an agreement. I don’t have any details of how far it went. Just knowing that our concern as a government was to make sure we tried to get a sale in as timely a manner as possible, it is unfortunate that we are not able to do that and had to go to the next option in working with our receiver once again on what options are available to us. Thank you.

Thank you, Mr. Roland. Supplementary, Mr. Ramsay.

Supplementary To Question 349-15(3): Agreements For Supply Of Rough Diamonds

Thank you, Mr. Speaker. Mr. Speaker, I thank the Minister for his response, but I would just like to know, when the negotiations for a sales agreement between the Leviev Group and the producers goes sideways, for a government that has sank millions and millions of dollars, time and effort into a secondary industry here in the Northwest Territories, cannot stand up and do something about it, I don’t understand why we didn’t step in five months ago, six months ago and demand of the producers that they come to an agreement with Leviev. We have lost millions of dollars. I would like to know what the Minister plans to do to mitigate those losses. Thank you.

Thank you, Mr. Ramsay. Mr. Roland.

Further Return To Question 349-15(3): Agreements For Supply Of Rough Diamonds

Thank you, Mr. Speaker. Mr. Speaker, the first thing is for us is to see if there is a possibility of getting another deal through our receiver to take care of the Sirius operation, that facility, and see if we can keep it as a going concern. Secondly, as I stated publicly, as a government, we are going to have to review what options we have to try to strengthen our position with the dealings we have with the mining companies. In some cases, we may have better agreements in place. But for this specific one, unfortunately, from the FMBS side, our involvement through the receiver trying to encourage a deal and trying to find out where things are was very limited, as we entered into a very formal process through the courts. So that limits what we can do. I am aware that the Minister of RWED, through his shop, was also monitoring what was going on. It is something that we, as a government, are going to have to look at if we are going to truly encourage the secondary industry from not only a mining operation, but any development of non-renewable resources in the Northwest Territories.

Thank you, Mr. Roland. Supplementary, Mr. Ramsay.

Supplementary To Question 349-15(3): Agreements For Supply Of Rough Diamonds

Thank you, Mr. Speaker. Mr. Speaker, I would like to again thank the Minister for his response. I would like to know if it’s in the government’s future to support this industry and if it is, why are they saying today maybe we will bring in some stronger measures to deal with the producers after we’ve lost millions of dollars? I would like to know why today it’s a concern, when unfortunately in the ‘90s I know there was a former Finance Minister who stood up in the House in 1997 and said they would bring in a tax to choke a mule before BHP went into production. Maybe the government in the 1990s didn’t go far enough, Mr. Speaker. We’ve already lost millions and millions of dollars and I would like to suggest that the Finance Minister and this government take a firm stance, so that we don’t lose any more money and that we can support the secondary industry that we have spent a tremendous amount of money on in the Northwest Territories, Mr. Speaker.

I would like to ask the Minister of RWED a question, Mr. Speaker. What is currently stopping this government from going back to the producers and saying we have this agreement with BHP for 10 percent and we have an understanding with Rio for 10 percent? I don’t know if it’s quite 10 percent, but to supply rough. We set up a diamond agency, secretariat, or whatever, and we get the 10 percent. Then we set up an exchange here in the Northwest Territories. What’s stopping the government from doing something like that, from going back to the producers and supporting the secondary industry? Thank you, Mr. Speaker.

Thank you, Mr. Ramsay. Mr. Roland.

Further Return To Question 349-15(3): Agreements For Supply Of Rough Diamonds

Thank you, Mr. Speaker. Mr. Speaker, I don’t believe there is anything stopping us from doing that. We can begin the discussions in that area. My understanding in looking at the matter is there were some initial discussions in that area for the Government of the Northwest Territories to receive 10 percent and then look at some sort of operation to go out from there. That wasn’t acceptable at the time to the parties involved. For us now, we have to go back to the drawing board to look at what options are viable to us here in the Northwest Territories and what it would mean for us to support that. It is a difficult thing.

When we look at the situations of having to come forward already for a $3 million loss for that operation and the Member is correct, at some point when we close the deal we will have to look at the numbers at that point and come forward to this House with potential further losses. The important thing now is to sit down and evaluate where we are, where we intend to go and look at the implications of that direction and the avenues we choose. The operation has been going. We have had the agreements. We’ve heard concerns from both sides. It is now time to sit down and re-evaluate where the weaknesses and strengths are and decide from there where we are going to go. Thank you.

Thank you, Mr. Roland. Short supplementary, Mr. Ramsay.

Supplementary To Question 349-15(3): Agreements For Supply Of Rough Diamonds

Thank you, Mr. Speaker. Mr. Speaker, as I see it, this is our territory, it’s our future and it’s our economy. There are many good reasons why we should revisit this, Mr. Speaker. I would like to ask the Finance Minister, does he believe the secondary diamond industry here in the Northwest Territories is indeed our industry or is it the producers’ industry and we are going to continue to let them call the shots? Let’s take the industry back, Mr. Speaker, and let’s revisit that, as the Finance Minister had stated. Thank you.

Thank you, Mr. Ramsay. Mr. Roland.

Further Return To Question 349-15(3): Agreements For Supply Of Rough Diamonds

Thank you, Mr. Speaker. It is what we are going to do now, go back and review our situation, how things have unfolded to this date and look at what we need to do to strengthen our position. It is timely that we do a review of these agreements, but we have to do this in a comprehensive way to make sure the avenue we choose, the road we go down is something that will be supported by this Assembly. We do have to look at what’s left for the future. We know the non-renewable resource industry, at some time an operation will close down because it has used all the material there. So as a government, we are going to have to look to not only this government, but our future generations, our children in the Northwest Territories and see what’s going to be left for them. So we are going to have to take all of that and look at if what was entered into was a success or a failure. We do have three operations continuing in the Northwest Territories, but, yes, it has been an expensive way to go to try to encourage secondary industry in the North and we’ve had a lot of doubters out there. Let’s just say it’s not over yet and we have to re-evaluate where we are going to go with this. Thank you.