Sustainability in Nickel Projects: 50 Years of Experience at Vale Inco
Looking at the industry’s past and present with a view to projecting into the future can be a valuable exercise for executing and maintaining sustainable development
By S.W. Marcuson, J. Hooper, R.C. Osborne, K. Chow and J. Burchell

Vale Inco’s Goro nickel project on the island of New Caledonia, shown here in an aerial view, cost roughly $4 billion
and was approved for development by the company in 2008—following five decades of discussions and negotiations
among various parties. Inco’s Thompson greenfield nickel project in Manitoba was discovered in 1955 and
first production came on-stream 4-1/2 years later—a schedule the authors deem “incredible” when measured
against today’s typical project timetables.
The first eight years of this century saw rapid growth in the consumption and production of nickel and related commodities. In response to growth in the BRIC countries, especially China, new projects, many in underdeveloped countries, were initiated. Nickel pig iron, produced in aging Chinese blast furnaces, unexpectedly emerged. Simultaneously, scientists concluded that global warming is “unequivocal” and human activity is the main driver, “very likely” (>90%) causing most of the rise in temperatures since 1950.1 These factors point to a future in which sustainable development becomes of paramount interest to the mining and metallurgy industry.

To the practicing metallurgist and operator, “sustainability” may appear as keeping employees safe, meeting prevailing environmental regulations and contributing to social programs contractually agreed to, while maintaining a low-cost operation that meets production and financial targets. But this is a highly simplified view that ignores many of the sustainability concepts.

Sustainability attempts to capture the entire value of ecosystems and divides this value into three segments: direct, the value that can be generated by the animals, plants and other resources; indirect, the value generated by items such as erosion control, water purification and pollination; and intangible, the value to humans derived from beauty and religious/ spiritual significance. While a traditional economic evaluation frequently concentrates on the direct benefits, often the indirect benefits have significant economic value that are difficult to quantify and are only realized after the fact. Examples are fertile soils and coastal and inland wetlands.2

The mining and mineral processing business often feels unfairly targeted by environmentalists and proponents of sustainable development. After all, it creates wealth in developing countries and provides the developed world with the resources it needs to grow. Algie3 and Twigg-Molecey4 highlighted six fundamental features of mining that make it a crucible for the sustainability forces:
• Metal and mineral resources are non-renewable.
• Economic mineralization often occurs in remote areas that are rich in biodiversity with many sites of cultural importance to indigenous inhabitants. The mining company develops essential infrastructure. Its activities irreversibly alter both the natural and social environments.
• The mining sector is diverse in size, scope and responsibility. It comprises government and private organizations, major corporations and junior miners and exploration companies.
• The mining industry has a poor legacy.
• The risks and hazards in production, use and disposal are not well understood by the public and are often poorly communicated.
• In contrast to manufacturing, which involves primarily physical change, the processing of metals involves chemical change, which inherently is more polluting.

To engineers, social sustainability may be the most difficult concept to fathom. Negotiations with native peoples whose mores and values may differ from those of typical mining enterprises, may be a frustrating, non-productive exercise. But in a mining endeavor, a large proportion of the benefits accrue globally while the major environmental effects are felt locally. Frequently, indigenous people are closely tied to the local environment and somewhat remote from the global market. Martin5 defined social sustainability as processes, systems, structures and relationships that actively support the capacity of current and future generations to create healthy and livable communities and identified five components that are necessary for a successful social sustainability project:
• Diversity—modern mining is not labor intensive; only a small proportion of the aboriginal population will be employed at the operation. Additionally, many people may choose a lifestyle that does not fit the manufacturing mode. They have to feel welcome in the community. The sustainability program has to take this into account, for example support for pastoral communities.
• Equity—the community provides equitable, but not equal, opportunities and outcomes for all of its members, particularly the poorest and most vulnerable.
• Interconnectedness—aboriginal groups have to be connected both internally and externally.
• Quality of Life—commitments to improve the quality of life must include (a) employment and training, (b) small business development, (c) individual capacity development and (d) support for diversity in lifestyles and aspirations
• Democracy and Governance—the quality of self-governance directly affects the outcome of the process. Agreements must be aimed at achieving a high quality of self-governance and independence from the state.

Successful completion of these activities requires a continuing commitment of time and resources on the part of the mining company and success typically costs almost two times the original estimate.

Tailings, residues and wastewater generated from milling and processing facilities present visible threats to local water supplies and to the health of the natural environment, the local economies and ways of life. In people’s minds, social sustainability and water quality become inextricably linked.

Moving forward, the industry will be pressured in the areas of energy consumption and greenhouse gas emissions, water usage, residue disposal and effluent quality, and the sustainability of the communities in which it operates. Many of the issues will be confounded; successful resolution will require strategies and visions of the final outcomes. Looking at our past and present with a view to projecting into the future provides a valuable exercise for the sustainable development of the mining industry.

Beginning the winter of 1956-1957, “Snowball Express” tractor trains ran 24 hours a day,
seven days a week to move 30,000 tons of material and supplies over snow-covered muskeg
and frozen lakes to the new town site at Thompson, Manitoba.
Vale Inco Greenfield Projects
The Thompson Project6
Nickel mineralization in the northern part of Manitoba was first identified in the 1920s. Lynn Lake was staked in 1945 and the Inco aeromagnetic exploration efforts began in 1947. With the onset of the Korean War, nickel demand was growing at a 10% per year rate. In 1955, Inco constructed a test shaft at Moak Lake, just south of present-day Thompson, where geologists had intersected disseminated material assaying 0.7% Ni. The big discovery was made in January 1956 when intersections containing massive pentlandite were discovered. Intense drilling and staking followed. By summer the results were confirmed and the company had acquired enough property for mine development, news of the discovery had begun to appear in the press and negotiations had started with the U.S. government to secure a market. Conversations were ongoing with the Manitoba government to secure operating permits.

Production was projected at 34,000 metric tons per year (mt/y) Ni—23,000 mt from the Thompson deposit and 11,000 mt from Moak. Six major requirements for the project had been identified, each requiring provincial approval and/or assistance: a hydro-electric plant; railway spur; adequate land for a mine and plant site; smelter smoke easement; a town site agreement; and access to timber.

Inco’s goal was to move material to site during freeze-up in January 1957. Formal negotiations started in August 1956. Specific sticking points and their resolution included:
1.There were no public funds for the hydro-electric plant. Inco agreed to provide $20 million in advance funding and be repaid over 20 years at 4% interest, considerably below market rate. In exchange, Inco received a guarantee of 102 MW until 2000.
2. Construction of a Canadian National Railway (CNR) spur to the mine site needed to start in early winter 1957. However, approval required a Federal Act of Parliament and a land appropriation, processes that would take one year. To expedite, Inco negotiated a verbal agreement with CNR that allowed Inco to start construction, paying the bills in advance. Upon approval, CNR would reimburse the nickel giant.
3. The Manitoba mining law provided for a 21-year mineral lease with the proviso that the leases “may be renewed for another 21 years.” This language was unacceptable and was a deal breaker; however, an agreement was reached and the regulation was amended to allow 63-year leases on claims that were contiguous to a producing mine.

The final deal was signed in December 1956. Provisions included: a 100-mile easement exonerating the company from smoke damage in this corridor; surface rights for the requisite land would be granted at $1/acre; timber rights; the right to divert, de-water and drain Mystery Lake and Thompson Lake for mining purposes; the right to take water for both the operation and town site at no charge; and regional telephone service.

In exchange, Inco agreed to construct a town site including, roads, town offices, schools, sewer and water, hospital and electric light and power distribution for 8,000 people. In lieu of property taxes, Inco would initially pay 85% of the cost of local schools and town government, with a sliding scale to 55%.

July 28, 1968: Indonesia’s Minister of Mines and Inco Chairman Henry S. Wingate sign the Contract of Work for PT
Inco’s Sorowako project.
At this time, the project comprised a hydro-electric facility, a mine, a smelter and a town site. The four-year capital outlay was estimated at $175 million. In 1959, under pressure from Manitoba, the company agreed to build an electrolytic refinery at Thompson based on technology from the Port Colborne operation.

The first tractor trains reached Thompson on January 6, 1957. The first furnace matte was tapped on August 23, 1960, and the first Bessemer matte poured on September 9. In 1961, the operation produced 41,000 mt nickel, 20% greater than the designed 34,000 mt.

In 2009, successful completion of a project the size of Thompson in 4-1/2 years seems incredible. Success factors that led to this achievement include:
• The deposit was rich and the nickel market was in true growth mode—time was money. Inco had the financial and human resources to lift the barriers and fund the project fully.
• The Thompson location was remote from population centers. Development promised to open the area creating additional jobs and wealth.
• Only two parties were at the negotiating table, the province and the company. Both were business oriented and fundamentally in favor of the project.
• There were minimal environmental regulations and minimal technology step-outs.

Today, the Thompson operations annually produce 50,000–55,000 mt of nickel cathode, highly prized for its applications in electroplating. Thompson has a population of some 13,000 people; 40% are aboriginals. It serves as the regional trade and service center. Federal and provincial government agencies have offices in Thompson and the city boasts a relatively large retail sector. There are 1,700 employees in the Vale Inco operations; 15% describe themselves as aboriginal. The Thompson and nearby Birchtree mines have been major ore sources. Disseminated deposits, while plentiful, have played a small role. The hydro-electric plant remains a constant source of greenhouse gas-free power. Over the years, environmental regulations have been progressively tightened. To date, sulphur dioxide (SO2) emission rates and ground level concentrations have been met by adjusting concentrate composition and throughput, and by short-term shutdowns based on weather conditions. In 2015, Federal regulations mandating maximum SO2 emissions of 22,800 mt/y are scheduled to come into effect. Sustaining the smelting operation will necessitate major capital expenditure for gas capture and fixation.

The PT Inco Indonesia (Sorowako) Project
Inco started research on laterite processing in the 1940s. In the 1960–70s, experimental work was intense; many projects were planned, and a number were developed. The 1973 energy crisis undermined the economics of some operating plants and dampened enthusiasm for new projects. The reader is referred to the 1979 TMS volume for further reference.7

The original contract of work (CoW) for the Soroako
project was signed in July 1968 for 30 years, from the
start of commercial production on April 1, 1978, to
March 31, 2008. The 1968 CoW was modified and
extended in January 1996 for an additional 30 years
through 2025, subject to further extensions. Shown
here is its approximate location on the Indonesian
island of Sulawesi.
Prior to the oil price shock, Inco developed two deposits, one in Guatemala and the other on Sulawesi in Indonesia, each based on reduction/ sulphidization in rotary kilns, electric furnace smelting and pneumatic converting to Bessemer matte for subsequent refining.8 Construction on the Guatemala project started in July 1974 and the first matte was tapped in June, 1977.9 However, it was mothballed in 1981—a technical success, but a victim of high oil costs.

To cope with the ever-increasing energy prices, the scope of the Indonesian project was enlarged part way through construction to triple its original size and to include a hydroelectric power plant.10
Today, PT Inco’s Sorowako project is the largest integrated producer of nickel from laterites in the world but is fully dependent on low-cost hydroelectric power for sustaining the operation.

Dutch traders first visited Indonesia in the late 16th century and in 1799 the islands were overtaken as a colony of the Netherlands government. Iron-nickel laterite deposits at Sorowako on the Island of Sulawesi were identified in 1901. In 1937, Inco was invited to study the deposits further. From 1942–65, the deposits were episodically investigated with some being developed as the country went through a succession of changes—Japanese military occupation from 1942-45, proclamation of independence in 1946, recognition of independence in 1949 and “rebel” occupation of Sulawesi from 1949-65.

In 1967, the government of Indonesia formulated its first Foreign Investment Law and issued invitations to 12 mining companies to bid for exploration and development rights. Inco Ltd. was the successful bidder. In 1968, P.T. International Nickel Indonesia (PT Inco), a foreign investment joint venture company, and the Republic of Indonesia agreed on a concise 29 page Contract of Work (CoW) that allowed PT Inco to explore and develop minerals on 66,000 km2 of land for 30 years. The relevant provisions provide a view of the sustainability issues of the time:11
• The company was appointed sole contractor for the area. Rights and responsibilities included exploration, evaluation, development, processing and marketing of all minerals, excluding radioactive materials and hydrocarbons.
• The company agreed to progressively decrease the contracted area to no more than 25% of its original size during the first five years.
• A five-year development was envisaged; 12 months for general surveys, 36 months for exploration and 12 months for evaluation. Land rent was nominal at first but increased to $1/hectare/year after the start of production. Royalties were based on price of nickel FOB Port Colborne, Ontario. The company was exempted from local taxes.
• The ultimate objective was construction of a commercial plant in Indonesia for the metallurgical transformation of ore into a nickel product(s) for sale. The facilities would comprise the mining and metallurgical plant and other required facilities, have a capacity of 11,500 to 23,500 mty/y nickel per year and cost not less than $75 million.
• The company agreed to use Indonesian goods, services and products to the extent that they were available on a competitive time, cost, quality and quantity basis.
• The company agreed to issue regular reports and to endeavor to coordinate its infrastructure requirement with those of the government. Inco would reserve at least one seat on the board of directors for Indonesian nationals, train Indonesian nationals to occupy “responsible positions in the company,” implement a comprehensive training program, annually donate $50,000 to Indonesian educational institutions and employ Indonesian nationals in all employment classifications. After five years of operation 75% of positions in all classifications were to be filled by Indonesians. Employees in the same job classification would be treated equally regardless of nationality.
• Financing of the project was the responsibility of the company. To ensure Indonesian participation, 20% of the shares would be made available for sale in rupiahs and one fifth of the directors would be appointed by Indonesian owners.
• All domestic costs were to be met through conversion of foreign currency into rupiahs. It was contemplated that there would be little or no need to transfer rupiahs into foreign currency.
• The company would be domiciled in Jakarta and subject to the laws of Indonesia.
• The CoW would expire after 30 years of commercial production and sympathetic consideration would be granted to a request to extend the term based on continuing or expanding operation.
• The company was required to submit plans for development of all facilities in the contracted area. The government would impose no rents or royalties other than those specified in the CoW and agreed to arrange for resettlement of indigenous inhabitants, with the company paying reasonable compensation.
• Under royalty provisions the company was granted the rights to water and construction materials in the contracted area as necessary or convenient for the project.

The first year of exploration concentrated on coastal areas and immediate land relinquishment obligations. In 1969, drilling commenced in the Sorowako area. In 1972, a feasibility study recommended construction of a facility to produce 14,000 mt of nickel in a 75% nickel matte at a capital cost of $135 million.11 Sufficient ore had been identified to provide a smelter life of at least 20 years, the upgradeability of the ore had been demonstrated, the feasibility of smelting ore to matte had been shown in tests using two 50-mt bulk ore samples and a financing plan involving six Japanese partners coupled with loans from banks and export development corporations had been concluded.

The feasibility study implicitly dealt with environmental issues through the provision of engineering standards. Two stacks were proposed, one for the dryer and reduction kiln and one for the converter and power plant. Ontario air pollution standards were to provide the basis for stack height and dust capture.12

In 1973, Dravo Corp. was contracted to provide engineering and construction of the first line. In 1974, Bechtel Corp. was engaged to assume responsibility for overall project management, including design and construction of the town site and hydroelectric facilities. At the end of 1974, the projected capital cost of Stage 1 was $247 million, and the project was behind schedule. These difficulties were attributed to lower than expected labor productivity, unexpected delays in recruiting expatriates, delays in delivery of construction equipment and structural steel and “unprecedented worldwide escalation experienced and forecast on equipment, oil products and oil cost sensitive materials, ocean freight, and salaries and wages.”13

In early 1974, as a response to the oil crisis, PT Inco began talks with the Indonesian government concerning the development of a 165 MW hydroelectric facility on the Larona River. To justify the added cost, to lower the unit cost of production and to match the power plant output, a total of three reduction kilnelectric furnace lines would be built trebling capacity. The original CoW had established the legal basis for the expansion but did not include terms by which PT Inco could utilize the river. Negotiations started in early 1974 and were concluded by year end. The Indonesian Minister of Public Works and Energy approved the project in February 1975. The company agreed to pay a royalty based on installed capacity and nickel price, to implement a design that did not jeopardize the overall hydroelectric development of the Larona River, to keep the minister informed about the design, construction and operation of the facility, to provide 5 MW of power and to provide buy-back provisions for the government. The company further agreed to “have regard to the well-being of people and the preservation of the environment.”13

By the end of 1976, mineral rights in more than 95% of the land in the original contract area (more than 6 million hectares) had been explored, evaluated and then all but about 3% of the original area was relinquished to the government.

The enlarged project had a capital cost of $900 million and financing was obtained from commercial banks and government supported export agencies. The plant was dedicated by President Soeharto on March 31, 1977, and the first export shipment followed in April 1978.14

The plant went through a slow start-up and production ramp-up. A number of production issues were addressed.15, 16 The most important was the determination that the planned SiO2/MgO ratio of 2.4 in the high-grade (2.4% Ni) West Block ore was causing rapid slag attack on the furnace refractory, and successful smelting required a blending of low-grade (1.9% Ni), low SiO2/MgO (1.45) East Block ore. This resulted in a significant decrease in ore grade from 2.4% Ni to 2% Ni and a restating of plant capacity from 45,000 mt/y to 35,000 mt/y. Reaching the original stated production rate was not achieved until 1990 and required an $83-million expansion comprising a fourth kiln line, new mobile equipment, equipment and process improvements in all areas and replacement of existing 46-MVA transformers with 60/65-MVA transformers.

By 2000, the laterite ores were becoming more complex and daily ore blending demanded more detailed resource information. Over a two-year period, PT Inco conducted a massive program of core drilling until the complete geological database was re-constructed to allow sustainable mine planning and ore blending to the process plant.

The impact on the local and regional population has been significant. In 1971, the village of Sorowako had a population of several hundred people which rapidly expanded to 5,000 as construction commenced. At the peak of construction, fall 1973 to summer 1978, approximately 7,000 people were employed of which 6,200 were Indonesian nationals. To support the project PT Inco constructed housing for both expatriate and national staff. The formation of two new satellite towns, Wawondula and Wasuponda was supported through loans and rental purchase agreements. By 1978, both towns had populations of 4,500. Supporting infrastructure comprised an airport, schools, a 36-bed hospital, markets, sewage treatment and recreational facilities. In 2008, the 11 local communities had grown to 219,000 and the company and contractor employees numbered some 7,000.

PT Inco has negotiated an extension to its CoW to 2025. The terms reflect the desire of Indonesia to (1) have extractive industries conduct their operations with a minimum of waste and maximum of safety; (2) provide government a voice in project changes when there is a probability of negative environmental impact; (3) have the company cooperate with central and regional governments in infrastructure plans and activities and future regional projects; (4) have the mining company prepare an annual local Business and Community Development Program; and (5) have the mining company pay additional regional levies in support of development.

Indonesia has evolved over the past 40 years and nationalist and regional powers have brought new stakeholders to the table. The future of the mining industry is passing to a great extent from central to regional government control. In response to the devolution of powers, a new mining law was passed in January 2009. PT Inco will need to comply with new regulations within five years.

The New Caledonia Project
The slow dance between New Caledonia and Inco to develop properties actually began in the first decade of the 20th century when Inco subsidiaries gained control of properties in southern New Caledonia— properties which were sold or abandoned in the 1920–30s. During World War II, Inco refined matte from New Caledonia at the Sudbury operations on a not-for-profit basis. Discussions aimed at creating a new project started in the 1950s and 60s and resulted in a joint proposal made by Inco and Pechiney in 1966 that was rejected by the government of France. In 1969, Inco and the French Bureau de Recherches Géologiques et Minières (BRGM) joined in a consortium to develop a fully integrated nickel project in southeastern New Caledonia, the Cofimpac project. In July 1970, Inco presented a proposal for a 45,000 mt plant at a capital cost of some $500 million utilizing an Inco developed carbonyl extraction and refining process named the Inco Carbonyl Process for Laterites. Production was to start in early 1974. The proposal was rejected by the French consortium. Another proposal (1973), envisaged a reduction and acid leaching process to produce 18,000 mt Ni and 1,300 mt Co at an expected capital cost of $275 million. This proposition, based on the Goro orebody that was held in trust by BRGM, failed when the government decided to split the rights to Goro in two, with the better part optioned to Pétrole d’Aquitaine. By this time, Inco had drilled 85,000 m of holes, had sampled 11,000 mt of ore for pilot testing and had spent $21 million on the effort.17, 18

Environmental considerations and assessments played an important role in the design and engineering of the New
Caledonia (Goro) operations. The iterative process employed by the company for embedding environmental concerns
in the project is illustrated in this diagram.
Subsequently, various attempts were made by BRGM to work with competitor companies to bring the South Province laterites to production but all failed.

In 1989, Inco initiated discussions with BRGM about acquiring all of the mineral rights in the south of New Caledonia. Agreements were signed in 1991 and governmental approvals received in August 1992. This saw the creation of Goro Nickel S.A., the operating company of the project, 85% owned by Inco and 15% by BRGM. Inco also obtained rights to and patents for the pressure leach technology developed by AMAX and BRGM during the 1970s and 80s and tested at a 15-mt/d pilot plant.18

Development proceeded rapidly. In 1998, Hatch and Associates conducted a bankable feasibility study, and in Q2 2001 a consortium of companies was assembled to build and design the project. Due to increasing costs, the project was suspended in December 2002. Projected capital costs had increased from $1.45 billion to $2.1 billion. The suspension negatively impacted numerous local businesses and public relations in general. Renewed efforts were required to regain public support. Construction recommenced in 2004, and in 2006, CVRD (now Vale) purchased Inco for $17 billion cash. In 2008, after further project reviews and negotiation of a sustainable development agreement with the Kanak people (Le Pacte Pour le Développement Durable du Grand Sud), the Vale board confirmed that the project would be completed. Total capital cost was identified as $4 billion.

From the start, environmental considerations and assessments have been crucial. Two intensive environmental baseline data campaigns were conducted. Site specific studies were undertaken for each environmental component, atmosphere, geology and hydrogeology, hydrology, marine biophysical environment and terrestrial biophysical environment. Social impact and socio economic studies were also completed. Once a sufficient environmental data base was collected, the environmental effects of the process were estimated and elements of the project were modified or redesigned to mitigate deleterious impacts. Examples of the redesign include:

Discharge of treated waste water to the ocean—during the pilot plant operation, effluent was discharged into a local pond. Environmental data and modeling predicted that river discharge would cause significant adverse effects on the estuary and bay because of elevated alkalinity and gypsum concentrations. A suitable discharge location, 4 km offshore, where the bottom substrate is barren and tidal and current activity high, was subsequently identified.

Air modeling and the siting of major process plant circuits—air dispersion modeling was used to locate the required stacks, assess potential effects of stack emissions and develop design criteria. A primary objective was to protect Forêt Nord, a forest reserve less that 2 km from the plant.

Protection of the Planchonella tree— during a forest inventory a previously unrecorded variant of the Planchonella species was identified. The original design of the tailings dam was modified to move the southern section 50 m west at an estimated cost of $10 million. Subsequently, another stand of this tree was located in an adjacent watershed.

Reduction of manganese in the treated effluent—in the initial design a 100 mg/l Mn concentration in the treated effluent was proposed. Modeling indicated that the effluent would be rapidly diluted and at 20 m from the discharge point, Mn levels would be near background. On the basis of French standards, the public raised concern that a 1 mg/l Mn level would be required. However, reducing Mn to this level by conventional lime treatment would require large quantities of lime, increase tailings volume and increase CO2 emissions by 250,000 mt/y. A proprietary process to reduce Mn to 1 mg/l was developed in a joint effort by Vale Inco technical staff in Mississauga and New Caledonia and added at a cost of $60 million.

Overall, Vale Inco spent $600 million on environmental compliance and responsibility.

On behalf of UNESCO, the International Union for Conservation of Nature and Natural Resources assessed the lagoons, islands and the areas around the project. It found no incompatibility between the project and creation of a Heritage site. In June 2008, UNESCO declared natural areas neighboring the project a World Heritage Site.

Water quality and the impact of the project on the ocean environment has been a flash-point for community relations. In February 2008, construction of the effluent pipe was put on hold after Rheebu Nuu, a committee representing environmental interests of segments of the Kanak population, asserted that the effluent pipe would contaminate the lagoon. Rheebu Nuu had organized two four day blockades against the project in 2005. Rheebu Nuu’s main claims concerned environmental protection, aboriginal rights and lack of compensation to indigenous peoples for exploitation of the land.

In April 2008, representatives from Vale Inco and leaders from indigenous groups, together with community leaders
and representatives from the Customary Senate, opened a new round of discussions concerning the Goro project.
On September 27, an agreement was signed to assure sustainable development in the areas of environment,
education, training and socio-cultural activities. Participants in the signing of “Le Pacte Pour le Developpement
Durable du Grand Sud” between Vale Inco and the Kanak tribe are shown in this photo.
In April 2008, Vale Inco representatives, leaders from indigenous groups, community leaders and representatives from the Customary Senate opened a new round of discussions. On September 27, an agreement was signed to assure sustainable development in the areas of environment, education, training and socio-cultural activities. A key provision is establishment of a multi-party environmental consulting committee, the Customary Council for the Environment (CCE) which includes minority representation by Vale Inco. Members from local tribes will be trained as environmental technicians and will help with environmental monitoring. Results will be reported to the CCE. Additionally, nurseries are being created in the local communities to contribute to reforestation efforts.

The September 27, 2008, agreement represented the culmination of activities that included development of 200 community development projects and participation in various multi-party committees designed to enhance participation of local contractors and businesses, inform local communities about training and employment opportunities, involve small companies and owner-operators in the work and discuss and define elements of the workplace operation, including conflict resolution mechanisms. As a result, the project is moving forward in a consensual environment.

The UN High Commission on Human Rights has lauded the agreement as an example of a best practice and benchmark in the relationship between resource companies and aboriginal communities.19

The Voisey’s Bay Project20
The Voisey’s Bay project was conceived and planned during the same period as the New Caledonia project. Similar techniques of process development and environmental planning were involved. However, in terms of discovery, mineralogy and grade, and acquisition of mineral rights, the two projects could not be more dissimilar.

The value of the Ni-Cu-Co containing gossan outcrop was identified in 1993 by two prospectors, Chislett and Verbisky, who were grub-staked by Diamond Fields Exploration, a junior mining company whose major activity was a diamond-exploration play in Africa. When drilling in January 1995 yielded 104 m of core containing nearly 4% Ni as massive sulphide, a feeding frenzy for Diamond Fields’ stock and the property ensued. Robert Friedland, a promoter of junior mining companies and a principal of Diamond Fields, orchestrated a flawless bidding competition among Teck, Falconbridge and Inco. There was considerable uncertainty about the size of the deposit. Falconbridge geologists estimated that it contained 87.8 million mt of resource. The number at Inco was 131.7 million mt. When concluded in August 1996 Inco had acquired the property in a $4.3 billion deal, the largest single mining property acquisition up to that point in time.

The exchange of funds and the fortunes created by the discovery and subsequent trading are staggering. When the deal closed, Friedland’s individual share in Diamond Fields was worth $600 million; Verbisky and Chislett together were to receive $300 million in royalties; Falconbridge received $100 million for losing the deposit, and a small Texas firm that had previous dealings with Diamond Fields received $25 million in exchange for dropping a lawsuit that might scuttle the proceedings. Diamond Fields, which flirted with insolvency in 1994, had a share price of $43.50.

Inco was anxious to proceed with development. A management team was quickly assembled and mine startup was projected for 1999. Production rates of up to 122,000 mt/y nickel were envisioned. However, sustainability issues remained. Land claims by the Innu Nation and the Labrador Inuit Association (LIA) had to be resolved. Inco and these First Nations had to negotiate conditions for the project to continue. Environmental impact statements and approvals had to be obtained. Inco and the Newfoundland government had to agree on terms by which the deposit would be exploited. Additionally, the impact of the development on Federal transfer payments to the province had to be determined.

From the start, relations between Diamond Fields and the First Nations had been strained. Protests of the exploration were staged in February 1995 and a nasty standoff with the Royal Canadian Mounted Police ensued. Protests and blockades would follow. Finding a common understanding required lengthy and contentious negotiations. Impact and Benefit Agreements, covering issues such as environmental protection, protection of social and cultural values, education, training and employment and business opportunities for native people, were ratified by the Innu and LIA memberships in June 2002.21, 22

The environmental impact statement for the mine/mill operation was issued in 1997 23 but not approved until 2002 after ratification by the native groups. Among its many provisions are measures to protect the habitats of caribou, an important source of meat, and bear, a creature of spiritual and cultural significance; implementation of a rotating schedule to allow workers extended periods of absence in their home communities where they can participate in traditional activities such as hunting and fishing; creation of a compensation plan for the loss of fish and fish habitat; and an operating schedule that sees suspension of shipping during freeze-up and early spring.

Reaching an agreement with the province was especially vexing. The province insisted that a commercial smelting and refining facility be built and operated within Newfoundland and Labrador. In 1998, buffeted by low demand and poor nickel prices, Inco determined that the smelter and refinery as previously proposed were not feasible. Talks broke down and the project was indefinitely delayed. Some three years later, negotiations resumed, and in the summer of 2002 the parties signed a Development Agreement that allowed early construction and operation of the Voisey’s Bay mine/mill to be followed by construction of a refinery at Argentia. Inco agreed to develop a new hydrometallurgical process for treating Voisey’s Bay concentrate, construct and operate a demonstration plant in the province and build and operate this refinery in the province if “technically and economically feasible.” The agreement stipulated that before the end of mine life, Inco must begin processing as much contained nickel in concentrate or intermediate form as was shipped out of the province.

Construction of the mine/mill began in 2003; first production was achieved in the fall of 2006, in time to take advantage of metal prices that were at historic highs. In 2009, ground was broken for a new hydrometallurgical plant at Long Harbor. One of the last barriers was obtaining regulatory approval to use Sandy Pond, a fish habitat near the process plant, as a disposal area for the hydrometallurgy tailings. Scheduled for operation in 2013, completion of the 50,000-mt/y Ni refinery will bring a set of complicated, multi-party negotiations to fruition and see implementation of a new technology specifically developed for the Voisey’s Bay concentrate.

During development of the Voisey’s Bay project in eastern Canada, a negotiated shipping agreement established
rules and procedures to allow the native Inuit to use the Anaktalak Bay area for hunting, recreation and transportation
while also meeting the company’s need for year-round shipping to sustain operations.
Lessons Learned and the Future of Sustainable Nickel Projects
In terms of mineral development projects, a sustainability initiative may be thought of as any action or expense that subtracts from the direct value of exploiting the resource in order to enhance human safety, improve or stabilize the human and natural environments or contribute to the well-being of the community at large. All the projects reviewed encompassed sustainability issues of the time. In 1956-57 construction of a live-in community, removal of noxious SO2 from the local environment, and local refining were linchpin issues for the Manitoba government. Some 10 years later Indonesia was anxious to establish ownership of the resource, procure hard currency and insure equity for its nationals in the workplace and in management of the enterprise. Again, home refining to a semi-finished product figured into the discussion. In both cases, two parties were at the bargaining table, the government and the company. Bargaining was relatively quick, and the company was granted significant latitude in its stewardship of both the project and the resource.

By the mid-1990s there had been a sea change in sustainability requirements. Non-governmental organizations (NGOs) advocated for environmental legislation and served as watch-dogs over the process. Environmental regulation had found its way into every aspect of a project, and elaborate environmental impact statements, requiring significant pre-engineering, were mandated. The Precautionary Principle, formulated in 1992, placed the onus of uncertainty on the developers of the project. The principles of social sustainability gave native people a voice at the bargaining table, a voice presented effectively through both conventional negotiations and acts of civil disobedience. Native groups gained economic participation in projects, protections for their traditional ways of life and guarantees to insure the quality of water and sanctity for wildlife and land. The presence of multiple stakeholders at the bargaining table and the multiplicity of regulations slowed the project development process, making it more susceptible to delays from shifts in economic conditions and changes of project champions. In 2009, receiving just the environmental approvals and a license to operate for the Thompson project could easily consume the 4-1/2 year elapsed time from conception to completion required a half-century ago.

Looking forward, sustainability requirements will not diminish but will continue to grow. Obtaining a social license to operate has become a fundamental requirement for a project to move forward. Sustainability must become core business for project proponents, especially in underdeveloped countries. In April 2000, nine of the world’s largest mining companies initiated a project to examine the role of the minerals sector in contributing to sustainable development, and how that contribution could be increased. The Mining and Minerals and Sustainable Development Project (MMSD) was launched and progressed over a two year period to establish a framework of sustainable development principles for the sector. In its report “Breaking New Ground” the MMSD project identified governance as a fourth sphere of critical importance for sustainable development.24

Continuing emphasis will be placed on water quality and safe disposal of tailings and residues. Regulations limiting greenhouse gas emissions will be promulgated and enforced. Only in small, potentially unstable, segments of the globe can developers possibly be exempt from international standards of environmental protection and social sustainability criteria. International scrutiny and transparency on projects in developing countries demand high levels of environmental and social protection, even in regions where local governments may not. Under these conditions the nickel industry will be stressed as it attempts to find and develop new deposits. Hydrometallurgical processing of plentiful lateritic ores will be constrained by disposal of residues and waste water. In turn, smelting will be limited by energy availability, cost and greenhouse gas emissions. Additionally all projects will need to critically analyze how the risks and benefits are shared in ways that are widely regarded as equitable.

Today, scientists, engineers and social scientists are engaged in a “rational interpretation” of both the natural and human needs connected with the exploitation of natural resources. The ways of the past are obsolete; the future beckons. For those who take on the challenge of new projects, their endeavors will be replete with surprise, frustration and joy. These adventurers will continue to refine the mission, intensify programs that protect the environment and the common good, while at the same time shed practices and beliefs that do little to advance sustainability. By doing so, companies will create projects of which they can be proud, pay back to Mother Earth what is owed and give to future generations a place that is economically, environmentally and socially sound and sustainable.

The principal author, Dr. Sam Marcuson (Sam.Marcuson@ is vice president, business improvement for Vale Inco Limited, Mississauga, ON, Canada. This article was adapted from a plenary speech made at the CIM Conference of Metallurgists held August 2009 in Sudbury, Ontario. The full paper is available from the author or the conference proceedings.25


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