Vital Metals, reputation battered, hires former NWT deputy minister

Former NWT deputy finance minister Mike Aumond is being tasked with helping Vital Metals mend northern relations after its controversial deal with Chinese firm Shenghe.

Shenghe, part-owned by the Chinese government, has taken a 9.9-percent stake in Australian company Vital, which owns and operates the Nechalacho rare earths mine east of Yellowknife.

The same deal saw Vital sell all of the material mined at Nechalacho so far to Shenghe.

Critics have called that arrangement a betrayal of northerners who supported the mine when Vital said it would be a Canada-based challenger to China’s market dominance. Instead, Nechalacho will now be used at least in part to supply a Chinese company.

Conservative MPs have called for the federal government to intervene, while the GNWT has taken no position.

Newly elected MLAs are understood to have discussed Vital’s Shenghe deal behind closed doors this week.

Aumond, meanwhile, confirmed to Cabin Radio he has been contracted by Vital to improve relations with Indigenous governments that have an interest in Nechalacho.

“We hope to re-establish a longer, constructive, positive long-term relationship with Indigenous government partners and stakeholders,” said Aumond, asked what his role would be. He is believed to have agreed to the role shortly before Shenghe finalized its investment in Vital.

Aumond said Vital, which is under a new management team after a series of leadership changes in the past 18 months, will now take “a more measured approach to developing the project.”

What that means isn’t yet clear. One person familiar with the company’s plans said Vital now intends to treat Nechalacho in a “more traditional” manner than the small-scale “demonstration project” operated under its former leadership.

Asked what he thought about Shenghe’s investment, Aumond – who was the Department of Finance’s top bureaucrat and then secretary to cabinet when Bob McLeod was premier – told Cabin Radio: “I think I’ll let the management team answer that question.”

Vital’s management team has not answered any questions since Shenghe’s interest became public in October.

A representative of the company said Vital would issue an announcement to the Australian Securities Exchange this week setting out its priorities for 2024, including how it intends to develop the large Tardiff deposit of rare earths that lies untouched at Nechalacho.

However, the working week came and went with no such announcement being made.

‘This should be teaching us lessons’

NWT cabinet members are now heading to AME Roundup, an annual mining conference hosted in Vancouver that lasts for most of next week.

In a video message, Premier RJ Simpson said he and three ministers were heading to Roundup because “mining is a huge industry here in the Northwest Territories, so we want to go down there as a new government to meet with industry, make those connections, learn from industry and bring those lessons back here.”

Hopes for Nechalacho to be a beacon of NWT mining were high for years.

Vital Metals expressed pride at the number of Indigenous workers at the mine when small-scale mining of rare earths, which are important for various kinds of green technology, began in 2021. At the time, the company said its hiring of Det’on Cho Nahanni Construction to manage Nechalacho marked “the first time in Canada an Indigenous group is responsible for extracting minerals on its own territory.”

But critics say the most recent developments involved little to no consultation with Indigenous governments, and the company has lost face.

Yellowknife North MLA Shauna Morgan sees things slightly differently.

To her, the territory has been naive.

“This should be teaching us lessons about how the global mining industry operates,” Morgan told Cabin Radio this week.

“Something like this can always happen. This isn’t an anomaly or something that’s particularly shocking or surprising, or someone going outside the normal rules of how things go. This is a normal occurrence in the sphere of how the global mining industry does business.

“We need to keep our eyes wide open about what are the nice things that we’re hoping for – or taking people at their word – and what things we have the power to bind them to, legally or contractually.”

Morgan wants to see the NWT develop “minimum standards” for what the territory actually asks of its mining companies, so they can be held to account in future, rather than simply stirring up a wave or two of condemnation.

“Whether those are social benefits, whether those are national security guarantees, levels of local ownership, Indigenous equity ownership – what is the floor or the standard that makes it worth it to essentially relinquish a resource that currently the people of Northwest Territories own?” Morgan asked.

“And we haven’t had public discussions yet about: should our resources stay in Canada? Should they be owned by Canadian investors?

“Right now, a lot of the discussion is, ‘Well, we should own these things. They should be Canadian investors, that should go to Canada.’ But if we’re not prepared to make that happen, or we don’t have the tools, then we shouldn’t pretend this is a principle we hold.”

The NWT’s chamber of mines has already said much the same thing: if Canadian companies aren’t investing here, then who’s to stop a Chinese company doing it and what’s the alternative?

Royalties agreement

The Shenghe deal also leaves the territorial government’s approach to royalties facing continued scrutiny.

Multiple people familiar with the GNWT’s approach to Nechalacho have said royalties were not being charged on the product mined there.

Normally, the NWT government takes a cut of the money earned at a working mine as a way of ensuring the territory economically benefits.

But Nechalacho, when it was seen as a plucky demonstration project paving the way for a bright Canadian future in critical minerals, got a pass. The GNWT argued it wasn’t a fully fledged project yet and, until it was, there would be no need to pay any royalties.

Now that all of the ore mined to date is being sold to Shenghe, former Frame Lake MLA Kevin O’Reilly says answers are needed.

O’Reilly’s signature is found on a letter to industry minister Caitlin Cleveland from northern environmental advocacy group Alternatives North last week.

Alternatives North says the current rules governing royalties give unelected GNWT staff “an enormous amount of discretion” to decide who pays what, “with no duty to disclose anything.”

“It’s totally secret, because nothing about royalties essentially can be made public, even 10 years after devolution, which is quite ridiculous,” O’Reilly told Cabin Radio.

“Why is it not public?”

O’Reilly also wants another question to be answered.

“What is the position of the territorial government on this file, with a foreign government basically having a share in this project?”

Image problem

The NWT government has not yet taken a public position.

Behind the scenes, though, internal documents suggest the territory is racing through a range of political considerations.

The GNWT is understood to be anxious that ore from the mine, on land that’s part of five different land claims, was sold to a Chinese company without any apparent consultation – and what role the territory needs to play in raising that issue.

The territory is also examining whether it should leave Canada to decide what the national security issues are or have a view of its own, and whether the deal undermines the image the NWT is trying to portray to the world.

MLAs sit again on February 6, which is likely to be when a minister has to publicly articulate the NWT’s position.

O’Reilly said royalties questions, at least, are set to be asked when the legislature reconvenes for its first proper sitting since November’s election.

“We’ve already had discussions with a couple of MLAs,” said O’Reilly, who would have been guaranteed to lead that charge had this issue arisen during his eight years in office.

“I expect this will be something that will be raised.”