HALIFAX, TUESDAY, JANUARY 21, 2003
STANDING COMMITTEE ON ECONOMIC DEVELOPMENT
1:00 P.M.
CHAIRMAN
Mr. Brooke Taylor
MR. CHAIRMAN: Members, I would like to bring the Standing Committee on Economic Development's meeting to order. We're very delighted this afternoon to have with us, as witnesses, Titanium Corporation Inc. At the centre of the head table is Mr. George Elliott, Chairman of Titanium Corporation. Good afternoon, George. To George's right is Mr. Elwood Dillman. Elwood is a consultant. To Mr. Dillman's left would be Mr. Allan Lines, geologist. Welcome, gentlemen.
I understand that our witnesses will be putting on a PowerPoint presentation, complete with a short video, and subsequently we will begin a Q&A session. Hopefully before the two hours are up, we can conclude. Before we begin I would ask the committee members, perhaps, to identify themselves, and we will start with the NDP caucus.
[The committee members introduced themselves.]
MR. CHAIRMAN: Welcome. You gentlemen are free to take us on a presentation.
MR. GEORGE ELLIOTT: Mr. Chairman, first off, on behalf of Titanium Corporation, we very much appreciate the opportunity to meet with your committee. I want to compliment your committee clerk. I was very impressed with all the material that has been put together, Darlene. You've done an excellent job, your members are well briefed, and you should be congratulated on that. It's the first time we've appeared before a committee like this, and it's gratifying to see the amount of trouble that people went to to get information on our industry. Again, many thanks to you for preparing that for us.
1
What we're going to do today is - this is a debut of a very short digital video we have put together, the purpose of which is to go on our Web site which will visually be used to inform investors worldwide about what's going on with the company and where its property is located. Primarily what the video shows, which we're not capable of viewing, is for people to see, in fact, how huge this resource possibly is - it's a very large resource - and how accessible it is at low tide on the river.
One of the things that I do want to say with regard to the video is we've used the Town of Truro as an example for location purposes. I don't want anyone to read into that, that we've made any decisions with regard to where our company, hopefully in the future, may be situate. The reference to Truro is strictly so that somebody in California might look it up on a map and find out exactly where Truro is. I want to make that clear.
We will have a short two-minute look at this, our debut of our little video, and then we will go through our PowerPoint presentation with members of the committee. Allan, if you will do the technology here for us, please.
[A video presentation was made.]
MR. ELLIOTT: Now while Allan is changing over to our PowerPoint demonstration, one of the facts I would like to put before the committee that I'm particularly pleased with in regard to Titanium Corporation and its activities down here is we very much feel this is one of the best stories of conversion of a natural resource into commercial benefit, both to the province and to the consumer markets that consume titanium. Any other mining operation or forestry operation, cutting down trees, open-pit mining, hard-rock mining, comes with smelters and pollution.
The entire processing of titanium, whether it's done in Nova Scotia, Africa or Australia, is all done by gravity separation combined with electromagnetic and electrostatic separation in what's known as a dry mill. We tend to think that this is one of the best stories to convert a natural resource into commercial products with about the least intrusion on the natural resource as you can get. We're very excited about that.
Part of running this demonstration, particularly the video, is that we do travel worldwide. I was in Australia last June, talking about our company. I'm going to a major presentation in Miami the first week in February, where our company is featured together with some of the world's largest companies, Rio Tinto, BHP, Iluka, DuPont, Millennium Chemicals and basically little old Titanium Corporation. All the time we're talking on this about our property, we are talking about Nova Scotia, and we're very pleased to be situate in Nova Scotia. It's an excellent opportunity for us to get a message out that in fact Nova Scotia is a province where, as a commercial businessman, I'm very pleased to, hopefully, do business down here in Nova Scotia.
What we would like to do now is go through a very quick PowerPoint presentation with you. I will apologize, some of you may well have read a number of the materials that are in the material that Darlene prepared for you and some of you are already aware of the Titanium Corporation, but if you will bear with me, we will quickly go through this and, in reality, get to the Q&A period so that we can get you updated on what we're doing.
Most people think that titanium is contained in golf clubs, golf balls - I have an artificial hip made out of titanium - but, in effect, that market is about 4 per cent of the world's market. About 1 per cent goes into the cosmetic industry, things like sun block, the white content in candy or Chicklets. When you buy Chicklets, the reason it's white is titanium. Titanium is the seventh most common element in the world. It's found throughout the world. Unfortunately it's not found in great deposits.
Titanium is generally found on beach sands. South Africa and Australia are the main producers of titanium feedstock, where the beach sands down there, over hundreds of millions of years, the oceans have receded and left those deposits inland, which they mine by removing overburden. We have a unique situation here that we will talk about a little later.
The prime use for titanium is in the pigment industry. You cannot make paint, plastics or paper without titanium. Without titanium paper would be a dull colour, it wouldn't be the bright white that you see, the same with plastic and the same with paint. It is an industry that's closing in on $10 billion U.S. a year. To put that into proportion, the worldwide nickel industry, titanium is about one and a half to two times the size of the nickel industry in the world.
We're a little company that has backed into a huge industry. The reason a lot of people don't know about titanium from the industrial point of view is there basically are about five major companies in the world that make the feedstock for titanium, companies like Rio Tinto, BHP, Iluka. Then they sell that feedstock to about five large manufacturers of pigments, DuPont, Millennium Inorganic Chemicals, and it's not an industry that's known like the gold industry or the copper or nickel industries.
It's a fairly closed-shop industry but as I have indicated, it's a huge industry. It constantly grows every year, consumer demand for titanium increases every year as we said, at about 4 per cent a year. That demand will increase more in the future, as they start to lower the cost of making the metallic form of titanium. As you know, the metallic form is very expensive and you're now seeing consumer products like eyeglass frames, computer frames, other metallic uses for titanium. British scientists are working on a new methodology to make the titanium metallic form much more cheaply. For about every 10 per cent they reduce the cost of that, the consumer market grows by about 50 per cent. So being in the feedstock supply business is an excellent opportunity because there's a constant demand for the
feedstock product to serve the market. The same feedstock that goes into making metal goes into making pigment, so we think this is an excellent industry to be associated with.
You can see basically from this graph there has been a constant growth. This projected up to 2000 that there would be slightly over 4 million tons of titanium consumed a year, that figure actually is coming in at about 4.9 million tons right now and it's scheduled to increase in the future. There has been a constant demand growth for the feedstock to make the titanium for the pigment and metal industries.
What is very exciting from our company's point of view and from hopefully future commercial operations in Nova Scotia is that there is a forecasted shortfall of feedstock to make in the titanium industry. Based on this graph and going off 4.2 million tons in 1999, which as I say by 2003 is up to 4.9 million tons consumed, in effect if no new feedstock supplies come on-line in the next eight years, 50 per cent of the world's requirements for titanium will not exist. So, new feedstock, new sources of titanium are in desperate need throughout the world.
There are new sources coming on in addition to our operation in Nova Scotia. There are large deposits in Africa, there are large deposits on the east coast of India, and there are some mid-sized deposits in Australia. The difference with those deposits, particularly if we look at the African ones, there are major large deposits in Mozambique, however, they are all low-grade ilmenite, which needs to have a commercial smelter made to upgrade it to titanium slag. They are all located in an area where there is no water, no electricity, no roads, no towns and no deep-water port to ship it to.
All of that material, whether it comes from India, Africa or Australia, primarily has to be shipped to the east coast of the United States where the pigment manufacturers are located. So we think that a new feedstock supply to come on-line in Nova Scotia is exactly what the industry has been looking for. They have been looking for a new feedstock supply for North America and we certainly hope that we have found that in Nova Scotia.
Our deposit in Nova Scotia is unique, it's different. As I indicated before, all the other world deposits are located primarily inland. DuPont has a huge deposit in north-central Florida. As I said, 300 million years ago the oceans were much higher. They have receded and left the mineral sands generally under anywhere from 30 to 150 feet of overburden on top of where the mineral sands are. For those operators around the world, whether it's Australia, Africa, or DuPont's operation in Florida, they have to remove all that overburden, flood an artificial lake, remove the heavy minerals by gravity separation, then revegetate the lake that they've already mined, we'll call it, and move on to the next pond. That is a very, very expensive way of extracting the heavy minerals.
[1:15 p.m.]
The deposit in the Shubenacadie River and Cobequid Bay is the only one in the world that is located in a water-based resource and as I say, the way you do the primary separation of the heavy minerals from the sand is by gravity. You basically suction dredge, you mix water and sand together to form a slurry, you pump it up about 30 feet in the air to a spiral - and we saw some pictures of the spirals there, they are straightforward, about three-feet-in- diameter spirals - and by gravity separation the heavy black materials run to the centre and the light brown silicates are immediately put back into the river.
This is a unique opportunity which will be the world's lowest cost extractor of heavy minerals, if we are able to come into production. We do have our own unique challenges with regard to locating dredging operations. We are talking with dredge operators now around the world about what kind of dredge they would recommend to work in an active river system and that will require a considerable amount of engineering investigation on our part but preliminarily it was indicated from the engineers that by no means is it an insurmountable problem. So this deposit is unique, there's nothing else like it in the world.
In addition, as I said before, it is extremely close to the consumer markets on the east coast of the United States. Those markets consume the product by hundreds and hundreds of tons at a time, they usually take a container ship full, is how you ship it. The other suppliers in the world have to ship from Australia and Africa, as I have indicated. There's a deep-water port in Halifax it can be shipped from, we have both rail and roads available to the site and we figure this is also an excellent economic advantage to locating a feedstock supply operation in Nova Scotia. You've got a stable government, you've got infrastructure in place, you're close to markets, it's an excellent location if everything drops into place for a commercial operation.
So as I said, the one thing is we have a world-class deposit, we certainly anticipate it will by far be one of the lowest cost recovery. The dry mill cost, once you put it into the dry mill which is electrostatic and electromagnetic separation, as I've said before, it's fundamentally the same whether you have a plant in Florida, Africa or Australia. It is the extraction costs that will be so much lower, we hope, in our operation here that will certainly make it economically viable for an operator to come in and run this project.
Just a quick flow through with regard to a pilot plant - and if anyone is ever interested, at times you can contact Allan Lines - we have set up a joint venture with Dalhousie University, the Mineral Engineering Centre, to operate our pilot plant. Members of the committee should know that we have the finest independent mineral processing plant anywhere in the world, set up at Dalhousie. What it is, although it is a laboratory bench-scale processing plant, all the equipment being used is really the same as large-scale commercial equipment but just smaller versions of it.
What we found during the last six months of operating that plant is that each deposit of sand in the world has its own unique challenges that come with it, which primarily are how do you get rid of certain elements in the sand that you don't want so that your titanium and zircon elements are all that you're producing. Because of the nature of the Shubenacadie sands we've found that we've had to add more equipment to that plant, which we have done, and our geologists and metallurgists are working in the plant now to produce concentrates, which in fact then can be shipped to a DuPont or a Millennium and put into their pigment processing operations to see in fact if they do work in a commercial operation. So the goal of that pilot plant is to produce concentrates that are acceptable to the pigment industry.
Someone asked me earlier where we thought we were with regard to our timing on producing those concentrates. We are probably six months behind where I thought we might be a year ago at this time and most of that is occasioned by the fact that our experts indicated to us that when they got their own pilot plant, they felt that they would be able to produce a much higher rate of return with regard to the total heavy minerals that are being extracted from the sands. The initial indication two years ago from laboratory testing in Australia, which is the basis of the Stratford report, is that we are pulling off approximately 2 per cent heavy minerals and 98 per cent goes right back into the river.
By using our own primary separation equipment - its been strictly dedicated to us and our professionals can work at it full-time, in effect - what we have found is we are getting a much larger heavy mineral recovery. We are getting well in excess of 2 per cent, which is very important from a commercial point of view. So, in effect, our professionals were right on when they said that we would get better heavy mineral recovery rates if they had their own plant. What we have found now, though, is that we still need a lot more work to do on our metallurgy, in fact, to extract out of the material through the dry mill, the electrostatic and the electromagnetic separation, the elements that you don't want, primarily some silica in there that we want to get rid of.
One of the new pieces of equipment that we had designed and it is being delivered at the end of the month is called an XRF machine which is basically a radioactive assay machine. What's happened in the past is, when we did a pass through our pilot plant and we put the raw material in at the start of the spiral, we would assay what that contained, rutile, ilmenite, leucoxene, garnets, zircon, and we would have percentages of those on an assay. Then we would take a cut-off at the end of the first primary separation but we would have to send that off, air freight it to Australia, to be assayed and returned to us. The problem was, that was causing great delays in our timing in getting the pilot plant to work. So we went for the costs, and it was probably about $100,000 to get a new XRF machine designed for us, and as Allan Lines will tell you, when we were working off a test machine, we can get an assay now done in seconds on it.
So what we are able to do, as that pilot plant works out, at every individual stage in the pilot plant, we can pull off now and do an assay right then if we find that partway through our metallurgy that if we had, for example, 20 per cent rutile going in at the next stage that dropped to 15 per cent, well somewhere we lost 5 per cent but now we'll know where it's being lost in the flow processing and we can go back and change the machines to try to recover that because obviously what you want to get is maximum recovery of the valuable titanium and zircon heavy minerals. Starting in February, hopefully, with the new XRF machine in place, we can speed up our metallurgy and get ourselves back on schedule with regard to timing.
What we've taken on, ladies and gentlemen, since our last talk is we are continuing drilling on the property. Allan supervised a summer drill program which did two things. We drilled new sandbars further upriver, we will call it, which we found contained a much higher percentage of heavy minerals. Allan did more in-fill drilling to be able to justify that in fact the percentages of heavy minerals that we had were confirmed and we are increasing our operations by looking to acquire more claims on our property and we anticipate sometime by this Spring we will have that in place and then Allan can start a Spring drilling program, particularly out in Cobequid Bay. I think we have pretty well completed our drilling program for the Shubenacadie River. Cobequid Bay, though, is turning out to be very interesting in the first assay work that we have done in regard to the zircon content that is out in the bay.
I think it is very important just to reflect on this for a second. We started out, we backed into this industry, into titanium. However, zircon is an extremely valuable heavy mineral. As Allan said, the screen lights up there because that's zircon on that screen that lights it up. All the highway signs you see illuminated are zircon. Primarily used in the manufacture of computer chips, lining industrial furnaces, zircon sells for the same price as the most expensive titanium, $400 to $500 a ton. It's not an industry that's as large as the titanium industry. It consumes about 1 million tons a year, worldwide, of zircon. However, it does sell at the highest price.
So one of the things we have to look into here, producing the zircon is much simpler than producing titanium. The zircon comes off on almost the first cut of the production facility so, in fact, you may find that we end up having an extremely valuable zircon deposit out in Cobequid Bay which may cost a lot less to produce than titanium so we are in a very interesting position that we have two really valuable minerals out in the river and the bay, titanium and zircon. We haven't really concentrated much on the zircon but it's looking to be a very excellent by-product of what may be available for commercial development. We have a lot more work to do, drilling and assay work on the bay this summer and Allan is looking forward to getting out on the bay and doing that work.
As you know from reading the Stratford report, the initial evaluation of this property came in in excess of $0.25 billion. That was based on the 330 million tons of probable reserves that were calculated. We estimate by the time we finish the drilling program, add
new claims on, we think that we will be able to get the total size up for commercial operation somewhere in excess of 600 million to 700 million tons, which obviously, if we can prove that out, adds far more to the commercial viability of the project. So that is why we are continuing more exploration work and accumulating more claims to go with the exploration claims we already have.
Not quite in conclusion, but one of the interesting things, when I first got involved with this company in the fall of 1999, I didn't know anything about the titanium industry but when I was told you can't make paint without titanium, I quickly figured out you can't recycle paint. You may be able to recycle paper or recycle plastic. As I subsequently learned, the titanium dioxide content in paper, plastic or paint, that element is not recyclable. It's a consumer product that once it's consumed cannot be reused and new sources of titanium are always going to be in demand in order to fill that shortfall gap. There is no effective substitute for it. It's really quite a wonderful product. As I say, I have a hip full of it. It's totally benign. You can have it in toothpaste, candy. It really is a very exciting mineral to be involved with and, as I say, from a commercial point of view, demand is going to exceed supply and as a businessman, everyone likes to be in that kind of position if you have the product that's in demand and we certainly hope that that's where we are going to be.
As I say when we are talking with prospective investors as part of this PowerPoint, we think it's an excellent opportunity. We have been very happy. This company has been very well financed. We have had tremendous investor support for this company and that support will continue.
I would just like to focus primarily on an update of what we have been doing in Nova Scotia. One of the things that we thought was very important from the time that I got involved with the company is that we have direct communication with the stakeholders who could be involved in this operation and we are committed to a transparency in talking and communicating at all times with all interested parties.
With the assistance of Karen Kittilsen and Jo Ann Fewer, we have set up two separate community committees that represent interests of local business people, agricultural community, fishermen, anyone who has expressed an interest in knowing more about what our company is doing. We have had these two committees set up. The purpose of the committees is so that we can have two-way communication. It's an opportunity for our company to disseminate information about what we are doing and it's also an opportunity for people in the community to express their questions back to the company and I particularly want to thank both of those ladies for the help they have done in establishing those committees.
We had, I believe, since January 2000, approximately eight meetings with local committee people and we've been able to get feedback from them and, in turn, they have been able to communicate to us what their concerns or interests may be. Some of the
meetings are very interesting. Elwood and I had a very fascinating meeting with about 30 fishermen on the river. I was very appreciative of getting an opportunity to talk to those gentlemen and one of the things that came out of that is that when we moved from doing just drilling into what we call bulk sampling, we had to assemble 16 tons to 20 tons of sand to take to the laboratory to process.
A number of the fishermen were engaged and were very helpful to us in being bulk handlers of that material to get to our pilot plant. It's been a good opportunity to work together with the people involved in the fishing community.
[1:30 p.m.]
As I stated before, we're always open to two-way communication with the community. In addition, we have had, I believe, three or four separate meetings with Chief Maloney, representing one of the Aboriginal bands. They have been very appreciative that we approached them first to tell them that we would keep them informed. They wanted to be treated somewhat separately from local interests. They felt their interests were sufficiently diverse, that they didn't want to be represented through the committees, and we respected that. We said that we would communicate with them in the same way that we have with the two other committees that have been set up, and we have done that. We have kept them apprised of what we're doing.
In addition, in the last year, we've been very actively involved, as you know, with the pilot plant and members of the academic community of Dalhousie University. We've also funded a research study undertaken by Drs. Stanley and Daborn of Acadia University, who, last Fall, did all their research work with regard to how the sandbars shift out in the river. We expect their report to be tabled this Spring. That will be very helpful as one of the ingredients to go in our future environmental assessment application, when that comes up.
In addition, Acadia University - we will be working together with them this Spring in doing a fish count survey on the river, something that's never been done before. We're applying to the Department of Agriculture and Fisheries for permits for this Spring, and we will work together with members of Acadia University in doing that survey. We will also take advantage of the fishermen who have been on the river to assist in preparing that survey. So that will be available in due course, when we go forward with regard to the full environmental assessment.
At the request of the Department of Natural Resources, we undertook to finance a graduate student at Dalhousie's Geology Department, who is doing a paper on the origins of titanium in Nova Scotia. We've been supporting her in doing that paper. In return, she has access to Dalhousie's electron microscope, which has become invaluable to us, in fact, in getting inside each grain of sand to find out what its constituent parts are. So if there are
impurities in that grain of sand that we have to remove, by having access to that microscope, that's been extremely helpful.
In conclusion, I would like to say that we've been delighted with the way we've been received by the community and by the Government of Nova Scotia. As you know, we're a public company. We've raised well over $12 million for this project. We have not come to Nova Scotia looking for money. We're determined to finance this all by ourselves. We do not have any debt in the company, it's all straight equity, money that's been raised by shareholders of the company. We intend to continue in that manner.
What we are looking for, obviously, from Nova Scotia is a good working environment to bring forward business that is commercially viable and environmentally sustainable, and so far those two courses are proceeding as they should. I think it's very important that any new resource development is done with permission from government, that's basically how it works. You work within the regulatory framework. We've had very good co-operation with the bureaucrats with regard to the regulatory framework and we, of course, are committed to following everything in that regard, as we will with regard to full environmental assessment, impact, et cetera, before you apply for a mining licence.
We are absolutely delighted to be here in Nova Scotia. We think this is an excellent opportunity. As I say, we're a small company that's backed into a huge industry. I think it's very good for our company, and we really think it will be very good for Nova Scotia, if we are able to put this into production at some time in the future. I thank the committee for an opportunity to tell you about our company, and I would be delighted to answer any questions that the committee members might have, Mr. Chairman.
MR. CHAIRMAN: Thank you very much, Mr. Elliott, for that very comprehensive presentation. Mr. Chipman would like to begin with a question.
MR. FRANK CHIPMAN: Your company is a sole entity and not part of another one.
I just had a couple of questions here. To what depth would your recovery of these minerals take place? You're not just taking the surface off, I assume you're going down.
MR. ELLIOTT: Allan, correct me if I'm wrong, I'm not the technician. The first cut and dredging would be down probably eight to 10 feet. And one of the things that we don't know about this property, which is very potentially exciting, is if you go out there and you do trenching on the property, you dig down four to five feet, you dig a trench and you take bulk samples off, you come back 48 hours later and you can't find where you dredged. In some cases, one of our geologists did some testing and found that within a week heavy minerals had been replenished on the site where, as best he could figure, he had already taken some. That's something we don't know about and that will take a lot more investigation. This may well be a continuing replenishing resource.
MR. CHIPMAN: You don't know what depth - do you go down there 50 feet, 75 feet, 100 feet . . .
MR. ELLIOTT: No, the maximum depth to the river in places, to bedrock, would run 30 feet to 45 feet, 48 feet, maybe 52 feet at the bridge. It's a shallow river, and the basic mineralization is on the top part of the river. You're probably looking at a first commercial pass, as I say, of no more than eight feet to 10 feet.
MR. CHIPMAN: Where do you think the source is, is the source inland?
MR. ALLAN LINES: That's what Karla Pelrine at Dalhousie is studying for us, has the material migrated with the tidal bore and come into the river from offshore, or has it come from the Meguma geological area and downriver. The U.S. Geological Survey identified a resource of approximately 450 million tons of titanium in the Bay of Fundy and the Gulf of Maine. That's potentially the source area. But the rock surrounding the river and the Minas Basin, several of them have good concentrations of titanium within the bedrock itself.
MR. CHIPMAN: What about gold? When you do your recovery, do you separate the gold too?
MR. LINES: We haven't identified much gold, a few flakes here and there. It's something that wouldn't necessarily be a commercial by-product, with what we've found so far, but then again, we haven't done enough assaying to look for gold. We've been testing for titanium and zircon. Unfortunately not many gold assays, so far.
MR. CHAIRMAN: Mr. Epstein.
MR. HOWARD EPSTEIN: You mentioned regulatory approvals, and I wonder if you could just help me out in understanding what it is that you're looking at. Are you looking at both federal and provincial approvals as being necessary?
MR. ELLIOTT: Yes.
MR. EPSTEIN: Particularly with respect to environmental assessment, I wonder what category of environmental assessment you're contemplating at the moment. That is, have you had discussions with either the federal or provincial government authorities about this?
MR. ELLIOTT: No, we would be getting ahead of ourselves at that point, Mr. Epstein. What we've done, of course, in order to get our exploration permits, we had to have a full baseline environmental study done, which was done by Martec Engineering back in 1998, I believe. What we are working to determine is still the commercial viability of the project. As we get closer to determining commercial viability, we will have to sit down with
both the regulators. I feel we will be required and we're anticipating going through a full environmental impact assessment.
MR. EPSTEIN: Some of the newspaper articles spoke about a projected startup date in 2004. Is that still the timetable you have in mind?
MR. ELLIOTT: I get very nervous when I start to get dates involved, because I've found, like right now, we're probably six months behind where we thought we would be. Certainly, we think from the time we apply for full environmental assessment hearings and mining licences, that will be another 18 months minimum in order to get that. In a perfect world 2004 possibly, but it will probably be later than that.
MR. EPSTEIN: I'm interested to hear you speak about what you're calling a full environmental assessment. I just heard you mention the word hearings. I don't know if, under
our provincial laws, it's actually mandatory that there be, what's called here, a Class 2 environmental assessment, which would involve an independent panel, for your kind of undertaking. On the other hand, of course, it's always within the discretion of the minister to order such a thing, a Class 2 environmental assessment, for this kind of undertaking. I suppose it would be best to be completely frank with you and tell you that that's certainly what we would favour. The feeling is that no significant mine should open without a panel hearing. That's something you're building into your contemplation of timetable, is it?
MR. ELLIOTT: We haven't anticipated, in specific detail, what we would do, but we certainly are more than prepared to go through whatever impact study the province wants. We are satisfied that we would be quite comfortable with that. Now we're doing preparatory work to that, with regard to the two studies that I've told you about. But right now, we're still concentrating our current activities on proving out the economic viability of the project.
MR. EPSTEIN: You're at the bulk sampling stage.
MR. ELLIOTT: Yes, and we have a lot more metallurgy work to do. Actually, so you understand, if you do a drill hole for gold, you will find gold. Then you have to figure out if you have enough of it, but you know it's gold. We have black sand that we know contains heavy minerals. What we don't know is can they be extracted out of that sand. What we've brought along here that I would like to invite everyone to take a look at following the presentation is some raw sand from the river, dried, together with our first cut of concentrate. You can see that the heavy minerals are much heavier. What we're finding, though, is there is a lot more work to be done to make sure that we can, commercially and economically, separate out the titanium minerals and the zircon from what we will call the impurities, silica and other impurities that are in the grain, which are not compatible with pigment manufacture.
We know we have heavy minerals, we know how much we've got, but we don't know if they're going to be commercially viable yet. That's the metallurgy that has to be done. As I say, it's much simpler, in fact, if you're looking for a gold mine. Once you strike gold, you know you have gold. We know what we have in terms of size, but we don't know if it's going to be commercially viable yet.
MR. EPSTEIN: You're still not sure whether this is actually a go-ahead project or not.
MR. ELLIOTT: Not at this point. It's very encouraging. What you have to understand is every bit of metallurgy is a constant trial and error basis. You try your settings one day at x, and you see what results you get. Now with our new assay machine, we will be able to know those results instantaneously. If it's not what you want, you have to figure out where your impurity is and how you get rid of it. That's what the metallurgy is doing.
MR. EPSTEIN: Maybe I should ask about what timetable you contemplate before you decide whether it is commercially viable.
MR. ELLIOTT: If I had to make an outside estimate on that, I would say it could take us as much as a year from now to determine that. As I say, we're about six months behind in our metallurgy. Now, we think we can speed that up somewhat with our new assay machine, obviously, that's been one of the holdups on timing, but if you were being realistic, it may well take us until the end of this year to determine it. We certainly think it is. It's richer than we thought. Now you just have to be able to say, can we get rid of the impurities that we don't want, primarily silica, that are in there.
MR. EPSTEIN: Mr. Chairman, I should say that my colleague, John MacDonell is, unfortunately, not able to be here today. You will probably know that at least part of the territory you're looking at is in his constituency, and he's very interested in knowing the details.
MR. ELLIOTT: I have had discussions with Mr. MacDonell in the past. Again, it's just part of trying to keep everybody who I would say is a stakeholder in the area advised of what we've been doing, and we will continue to do so in the future.
MR. EPSTEIN: I have some other questions, maybe I can get back on the list for the second go-around, Mr. Chairman.
MR. CHAIRMAN: Mr. Epstein, a very appropriate comment about Mr. MacDonell. I know he is keenly interested. In fact, we've scheduled to go out on a raft to measure just where the centre of that river is, because it divides our two constituencies. (Laughter) Mr. MacKinnon.
MR. RUSSELL MACKINNON: I want to ask two sets of questions, one on environment and one on economic development. With regard to economic development, how many jobs do you anticipate will be created, local jobs?
MR. ELLIOTT: As we've discussed in the past with the groups and off the Stratford report, which members of the committee have a copy of, which was our first independent report, the first estimates for full-time jobs were approximately 50 full-time jobs. Now, that was based on the original size of the deposit. If the deposit is, as we think, larger, and in fact if you want to process that deposit faster, there may well be, certainly, in excess of 50 full-time jobs in the area.
[1:45 p.m.]
One thing I should point out is we've been working this area since 1998, but really from 2000 on, got into what I would call full bore on it. During that time we've been employing drilling companies from the Maritimes, geologists from Nova Scotia, bulk-sales handlers from Nova Scotia, and I wouldn't have the exact figure but to date we have already spent several million dollars in employment in Nova Scotia, even though we're on an exploration program right now. We've been very pleased with the Nova Scotia workforce. The only thing that we don't have in Nova Scotia are mineral sands experts, and those gentlemen come from Australia.
Someone once asked me how much of value added is going to be left in Nova Scotia if you do come into an operation, and I think that's one thing to stress. The highest value added will be left in Nova Scotia. The minerals will be extracted by Nova Scotians and will be processed by Nova Scotians, and the finished product, the concentrate that goes to a pigment plant will be shipped from Nova Scotia and the shipping handled by Nova Scotians. The only other value added you could do would be to build a pigment plant in Nova Scotia to process that and, frankly, the pigment plants around the world, there are too many of them right now, and there's consolidation in the industry and they're, in fact, closing down pigment plants. From an economic point of view, very strongly, the highest amount of value added that can be in Nova Scotia will be done by Nova Scotians.
I should also point out that I've told other people at times that primarily you're into a bulk products-handling operation, getting sand off the river, transporting it to your processing plant and handling it through the processing plant. Yes, there will be a number of technicians who would be your white collar worker, but the majority of the economic jobs will be in product handling. We've always looked to the local labour pool to help us with that, and we anticipate continuing doing that.
MR. MACKINNON: You indicated that titanium is benign. What about zircon?
MR. ELLIOTT: The same thing.
MR. MACKINNON: For every ton of sand that you would extract from the riverbed or thereabouts, what percentage of that ton, according to your guesstimates or estimates, would be zircon or titanium?
MR. ELLIOTT: I can't give you the breakdown between zircon and titanium, but the total heavy minerals - the THM, as we call it, was initially estimated at 1.96 per cent. We think that will come in over 2 per cent. In effect, you have an economic deposit only removing 2 per cent of that ton, and 98 per cent goes back into the river.
MR. MACKINNON: I was very pleased to hear you say that you had consulted with a considerable number of the stakeholders at the community level and so on, but the more you expanded on that the more it made me wonder whether the government advised you to do that or whether you took it upon yourself to do that, at this stage.
MR. ELLIOTT: No, I can say quite clearly that this company took it on itself to do that. In the Fall of 2000, we became very aware that it was - the background, so you understand, is that during 2000 we had applied to amalgamate NAR Resources, a public company, with Titanium Corporation of Canada, a private company. For the securities regulators to allow us to do that amalgamation, they required that Stratford report to be prepared because they needed to find an economic value to the property that would support the share exchange with regard to that. At that time we were not only cautioned, but I guess you could say basically warned by the securities regulators that until that valuation report was completed, we were to make no dissemination of our property, of its value, whatever we anticipated it could be worth to the public.
So, unfortunately, the local people in Nova Scotia were not able to be kept apprised of what we were doing until that report had been completed and accepted by the regulators.
That acceptance and completion was done in about August 2000, and then from that point forward the company started to have - I believe, our first meeting was out in Urbania - more meetings. Then in discussions, particularly with the assistance of Jo Ann Fewer and Karen Kittilsen, we agreed that the best thing to do would be to form two committees so that we could keep everybody apprised. Since I took over running the company in the Spring of 2000, it's certainly been a commitment on our company's part to communicate with all the interested stakeholders, and we will continue to do so.
MR. MACKINNON: I believe that's the sign of a good corporate citizen . . .
MR. ELLIOTT: We think it's very important because we all have an interest in this.
MR. MACKINNON: It's just that I was a little surprised that the government hadn't taken that initiative.
MR. ELLIOTT: Well, in due respect to the government, they had other things on their mind at the time, I guess. That was an initiative from our company, and we will continue to do so.
MR. MACKINNON: You may want to reserve comment on the word stable. (Laughter) The reason why I'm asking that is because there is an environmental review panel that had been established last year, and they brought in 46 recommendations for the Environment Act, which the minister of the day indicated that the draft legislation would be available for review, public consultation, before the end of 2002. I'm just wondering if any of the officials within your company have had a chance to review that and the possibility of how that may change the approval process, should those changes take place before you get another year down the road. It's probably unfair and somewhat hypothetical, but it seems like the wheels are moving quite quickly.
MR. ELLIOTT: Well, to answer your question, no, we have not reviewed it, but having been made aware of it, we will certainly undertake to review the draft legislation and respond accordingly.
MR. CHAIRMAN: Mr. Elliott, just a couple of quick questions. I noticed in some of your brochures and handouts regarding the Titanium Corporation, they represented the fact that a number of processing plants are close, as far as North America goes, one of Nova Scotia's competitive advantages is its closeness to processing plants. I would like you to perhaps explain, or Mr. Dillman could explain, the distinction between a processing plant and a pigment plant, because I'm a little bit more than concerned, as are the locals, that the Titanium Corporation may set up shop and ship out the concentrate to other points. I'm just wondering, obviously we can't receive a guarantee, but does this company have plans to build a processing plant, if everything continues to be favourable?
MR. ELLIOTT: Yes, just so we understand and we don't get the terms confused, we are in the mineral processing industry. We hope to be in the business of making concentrates for the pigment industry. The pigment industry is what is located on the east coast of the United States, primarily Baltimore, Georgia, Louisiana and Ohio. Those are where DuPont, Millennium Chemicals and Huntsman have their big pigment manufacturing facilities. As a mineral processing company, we take the titanium-bearing heavy minerals and process them into concentrates to be consumed by the pigment industry.
The processing plant that you're talking about, in effect it's a twofold plant. It's primary separation, which takes place on the river or on the bay, then that concentrate gets shipped to what's called a dry mill, which is where the electrostatic and electromagnetic separation takes place to produce a titanium concentrate that you then ship, generally by cargo ship, to a port where it's consumed by a pigment manufacturing company.
MR. CHAIRMAN: Just on the dry mill then, looking at a previously handed out brochure, you indicated - or at least the Titanium Corporation indicated - that the competitiveness of Nova Scotia's deposit is enhanced by several factors, and you may want to change the language in this, its proximity to major North American processing plants. Is the company at the stage of having done a cost-benefit analysis of processing through this dry mill? Right from the river you go to the dry mill. Is there anything that forbids or prohibits the company from taking that, if it's more economical, to another location?
MR. ELLIOTT: The answer to that, very straight up, is absolutely the company would not remove the heavy minerals, as separated on the river, and ship that to a processing plant somewhere. We're just getting confused on the . . .
MR. CHAIRMAN: I just want to be clear on that.
MR. ELLIOTT: A very good point, Mr. Chairman. We could change that. This is two years old, this material. It was really first put together because nobody in Canada knew what the mineral sand industry was. Most people couldn't spell it two years ago. Now there's quite a few people who are very well educated about it. So you're very right, that comment on shipping to a processing plant, in fact, is inaccurate, it's shipping to a pigment manufacturing plant.
MR. CHAIRMAN: Just on that point, my last question for now, at the dry mill, the processing plant - as I like to refer to it - wherever that may be built, based on information that the company has now, how many jobs would be directly, not counting trucking and things of that nature, potentially, arrived at through the dry mill plant?
MR. ELLIOTT: As I said, a combination of the dredging operation and the dry mill in the Stratford report was indicated at 50 full-time jobs. Whether in fact that is more or less remains to be determined on the eventual final size of the operation and how many tons per hour you're going to put through the operation, but it's certainly in the area of 50-plus full-time jobs, with, of course, the attendant spinoff jobs in the area. Most of those jobs, as I indicated before, are in the area of what you would call bulk product handling. I think they would target the employment market in the area.
As you know, Mr. Chairman, we haven't determined exactly where in the area would be the appropriate location of that facility, but that will be a part of the full economic, bankable feasibility study that would have to be done. That's what you do, then with that and with all your permitting in place, it allows you to raise, in Canadian dollars, approximately $125 million to $150 million that will have to be invested to build the dredging and dry mill operations here.
MR. CHAIRMAN: Probably when you get to the point, looking for the location, there will be lots of friendly advice from different corners.
MR. ELLIOTT: I would imagine so.
MR. CHAIRMAN: Mr. Carey.
MR. JON CAREY: Just to help me get a picture in my mind, I understand this starts out with the dredging done from a barge.
MR. ELLIOTT: Yes.
MR. CAREY: What size barge are we talking about here?
MR. ELLIOTT: A typical barge situation on any other processing operation in the world, the barge itself would probably be no more than a 60-foot-long barge, probably 30- feet wide with a dredger on it, in fact, then towing the spiral concentrators. Where you're sitting in a stagnant pond, in effect, an artificial lake that's been created, we're looking at a number of different scenarios where you may end up having to design a barge that was larger, that contained the spiral concentrators on it, so that there was no motion between the two with the tides. There's a number of companies that are getting involved, in effect, in some stationary platforms that can be used for dredging operations as opposed to a barge, a platform that can be moved.
The actual size of the whole operation, though, if I had to guesstimate, would probably be 110 feet, 120 feet by 35 feet. It's not a particularly huge operation. In fact, there would be two, there would be one barge working on the river and another barge working out on the bay, and you have to blend the two products together to get your highest recovery. Preliminary indications, obviously, are that the river is much richer than the bay, but the bay is three times the size of the river. So you end up having to blend your product together, which would be done at the time that both of those barges would be offloaded at a shore location for probably truck transportation to the dry mill.
[2:00 p.m. Mr. Russell MacKinnon took the Chair.]
MR. CAREY: I guess just again to try to get this in perspective for me, when you do dredging you can bring up a fair amount of material quite rapidly but then the separation is the magnetic which you talked about.
MR. ELLIOTT: No, no. The primary separation on the river is strictly gravity.
MR. CAREY: Okay, so as roughly 2 per cent will stay in the slurry that you are bringing up through pipes or whatever, however it works, and then the 98 per cent that goes immediately back . . .
MR. ELLIOTT: It goes immediately back into the river.
MR. CAREY: So there is not a stockpiling of the material coming up or anything. It's an ongoing process.
MR. ELLIOTT: It's an ongoing process and then from your dredge on the river, you would have to barge it to shore and load it onto trucks or probably have a typical, like you see on a railway container truck.
MR. CAREY: I get a picture now of it being returned. I was wondering how you were developing it fast enough to have it returned.
MR. ELLIOTT: Well, they go through the spirals really quite fast in returns. One of the problems is obviously going to be locating the dredge so that you are not just redredging tomorrow what you dredged up today. Again, that's an engineering challenge that we are told by the engineers shouldn't be difficult.
MR. CAREY: And I believe you did say that there are possibilities this could be a renewable resource through the tide.
MR. ELLIOTT: We think so. Again, you don't like to talk about that too much because that gets to be pretty heady stuff. Can you imagine a natural resource that is actually replenishing itself. Certainly, if you watch, depending on what day the tides come in, you could go out there and the sandbars could be a light brown. You could come back the next day and they are all twinkling with zircon and dark black and when you do a stratification - we are going to hand these out after for you - that's just a photograph of one of the sandbars at low tide with the black, heavy minerals contained in it. You could go back the next day and it's all brown again. If you trench down four feet, you can just see the layers. Whether it's a renewing resource or not, we don't know, but there is something unique about it, there's no doubt about that.
MR. CAREY: Thank you, Mr. Chairman.
MR. CHAIRMAN: Mr. Chipman.
MR. CHIPMAN: I just have a couple of quick questions. Are there any military uses to titanium, can it be combined with any other chemical or mineral for another use?
MR. ELLIOTT: A major use of titanium is in the aerospace industry.
MR. CHIPMAN: Right. What would that be for?
MR. ELLIOTT: Aircraft parts. It's the strongest weight-to-strength ratio of any metal in the world. So, yes, there is a constant military application or in the aerospace industry itself. Eventually, theoretically, you could have a car frame made out of titanium, if you
could make it cheaply enough. Right now it's expensive to make the metallic form. It's getting cheaper all the time or you wouldn't have a compact computer with a frame made out of titanium but as a military application, there's a high percentage, obviously, consumed by the military with regard to anti-technology with weight-to-strength ratio in their metal.
MR. EPSTEIN: They're used in tanks, Frank.
MR. ELLIOTT: Lightweight tanks.
MR. CHIPMAN: Nothing for anti-radar to . . .
MR. ELLIOTT: Nothing that I'm aware of. I'll be honest with you, gentlemen, we haven't really concentrated on the metallic form. That's a different part of the industry. We are really interested in making feedstock for the pigment industry.
MR. CHIPMAN: But it's more valuable for the aerospace industry?
MR. ELLIOTT: No, it's just that it's a much smaller market. The large market is the pigment manufacturing and the pigment manufacturers are desperate to find new sources of supply. The years 2001 and 2002, actually, were recessionary periods where a lot of the companies cut back on their manufacture because they weren't building as many cars. You would be surprised how much of the cost of a car is in the paint. It's a tremendously high percentage in the paint. So companies like General Motors, when they buy paint, they want to know from their paint supplier, who are they getting their pigment from and where did the titanium originally source with because on quality control, you just have to be off a touch and that paint isn't acceptable to General Motors.
So there is a huge industry growing there, a huge consumption coming on in China's industry, they are starting to build more cars in China. They all require paint. So we are concentrating on the pigment industry as a consumer of our feedstock material.
MR. CHIPMAN: There is no way it can be recovered or recycled, in other words, from used product?
MR. ELLIOTT: No.
MR. CHIPMAN: That's interesting. I just have another two questions. Is there going to be any effect on the shoreline of the Shubenacadie River from this project?
MR. ELLIOTT: Not that we anticipate. This is part of Dr. Stanley and Dr. Daborn's study that they completed their field work last September and they are going to give us a report. If you go out on the river in June and then you go back in November, you will find the active part of the river has moved from one side of the river to the other. Those sandbars
are in constant motion. So as part of anticipating what would happen if you dredged so many tons per day or per month or per year, will it really change where the sandbars are and we anticipate, the actual comeback is it doesn't really matter. Those sandbars are going to move anyway.
MR. CHIPMAN: Has your company any consultation with First Nations and, if so, how does . . .
MR. ELLIOTT: Yes, as I indicated before, I've probably had four meetings with Chief Maloney and again, apropos of the member's comment, we approached Chief Maloney without him having to come to us and I must say we were very well received by the First Nations' people for having made that effort. They will obviously become involved as you go forward and negotiate operations with regard to a commercial venture, the same as the government will be involved. Eventually, you know, if we go into commercial production, we are going to have some very tough negotiations with the bureaucrats and the government about how much of a royalty Nova Scotia is going to get for doing this. We are anticipating that Nova Scotia just isn't going to give this away. There is going to be economic benefit to Nova Scotia, not only on the jobs but in direct royalty payments to them and that's part of commercial negotiations which we hope if we have a project that is commercially viable and environmentally sustainable that we will be in a position to be negotiating with the government in the relatively near future about just how much of a royalty will be paid on that.
MR. CHIPMAN: Thank you, Mr. Chairman.
MR. CHAIRMAN: Mr. Epstein.
MR. EPSTEIN: Well, I'm glad you mentioned royalties, Mr. Elliott. That was next on my list because I want to ask some questions about benefits. I take it the case right now is that we have no royalty regime that applies to titanium or zircon. Is that right?
MR. ELLIOTT: That's correct.
MR. EPSTEIN: Okay, so that's yet to come. So that's an unknown in terms of benefits at the moment.
MR. ELLIOTT: That's right, but we are fully anticipating that there will be some very tough negotiations with the government about how much of a royalty will be paid but definitely a royalty will be paid.
MR. EPSTEIN: It's not going to be zero, like the salt.
MR. ELLIOTT: Well, I'm just saying that I think it's going to be very tough negotiations with the government.
MR. EPSTEIN: Okay, then lets look at the different categories of benefits. Jobs, and I've seen the number of 40 jobs and you mentioned 50 to 55 as possibilities, so . . .
MR. ELLIOTT: As I say, the first economic report that prepared an independent valuation on the property suggested 50 full-time jobs. As I have indicated, we have a number of people who are working for us full-time now in Nova Scotia and have been for the last two years and we just hired another gentleman in September. So we have been employing Nova Scotians and drilling companies and others down here and we will continue to do so.
MR. EPSTEIN: When we are talking about this number of jobs, do I take it that you are talking about jobs that would last the projected life of the project, the 15 years that's been mentioned as a possible lifetime for the project, it would be anticipated those jobs would last during all of that time? Is that the idea?
MR. ELLIOTT: Yes. Again, it's constant product handling and processing and again, the 15 years, if the property, which we hope, is larger, that the 15 years may be longer, obviously. The projected recovery rates are quite aggressive on the 15 years so if we have more of it, I don't think we could pump it through that much faster so you may find out that it's a 20-year to 25-year mine life on it.
MR. EPSTEIN: Local purchases, I suppose, would be another category of benefits. I'm just wondering, though, what kind of purchasing might occur locally, either initially when you are anticipating setting up your processing mills or on an ongoing basis?
MR. ELLIOTT: Well, the processing equipment is really only made in two places, a company out of Finland, and a company, MD Mineral Technologies out of Australia. They are the only ones who make the processing equipment. I was just talking to Allan today. The lease is up on our car. So we have to buy another car. So anything other than the equipment that's not available in Canada would be purchased locally.
MR. EPSTEIN: Construction jobs?
MR. ELLIOTT: Yes, of course.
MR. EPSTEIN: Do I take it that then the processing that would be done here to produce the concentrate, that's the extent of what you anticipate really as industrial applications here in Nova Scotia?
MR. ELLIOTT: That's right.
MR. EPSTEIN: So some of the other things you were fairly explicit that paint isn't likely to be something you would be involved with?
MR. ELLIOTT: No, it's just so you understand, the pigment manufacturers make pigment, which is the largest, most expensive component of paint. They then sell it to Sherwin Williams, say, or ICI, who make the paint. DuPont makes paint as well as supplying pigment to Sherwin Williams, for example. What I want to stress is that the most value added that can be obtained for Nova Scotia will be obtained. The only other value added would be to turn it into pigment, which would be done in one of the U.S. pigment manufacturing plants.
MR. EPSTEIN: But other industrial applications. You mentioned your own hip replacement and you mentioned sports equipment and eyeglasses and plastics and so on. It doesn't really seem that those are on the agenda for us here at the moment and probably not in the foreseeable future?
MR. ELLIOTT: No. Most of the titanium sponge is manufactured in Nevada. Again, that's another value-added stage in the process to make the metal forms. So for Nova Scotia, making concentrate is the highest return of economic value to the province.
MR. EPSTEIN: So is there any other category of benefits in Nova Scotia that we should be thinking of? We've had jobs, we've had construction during the time any of your plants are built, ongoing purchases at some level and royalties, that's about it, is it?
MR. ELLIOTT: Yes, I think that really sort of covers the waterfront from a generality point of view. I would stress, you know, that we've invested well over $1 million to date and you can probably throw in another couple hundred thousand with our new equipment in this mineral processing facility at Dalhousie University. Part of our commitment to Dalhousie was that when we're finished and we're going on into commercial production, that all of that equipment is being donated to Dalhousie University so, you know, if you don't understand, the Mineral Engineering Centre at Dalhousie has a world-class reputation of being one of the finest, independent mineral testing facilities in the world. By leaving this equipment with them, we feel that's only going to enhance that ongoing reputation that they have.
MR. EPSTEIN: I'm not being critical, Mr. Elliott, I'm just looking for information at the moment.
MR. ELLIOTT: No, I didn't take it that way either. It is just that sometimes I forget to mention that and I think it has been a wonderful sharing of private industry and the academic community to do that plant. If we had to go out and build the facilities ourselves, we would probably be getting into an uneconomic situation. On the other hand, Dalhousie students have been learning about mineral processing, it's an industry that's unknown in
Canada and I think we have done a good job of raising the profile of the mineral sand industry in Canada.
MR. EPSTEIN: If we think as research as another potential category of benefit, do you anticipate that after the bench testing that's being done at Dalhousie, that you're likely to be funding any further research or is research that is likely to go on, will it go on elsewhere in the world?
MR. ELLIOTT: Based on the equipment we have and what I'm told by our professionals is that that equipment at Dalhousie is capable of testing - it's the best independent laboratory anywhere in the world for testing heavy minerals. There are laboratories at Lakefield, in Ontario, there are laboratories in Australia but none of them have a complete little mini-processing plant that is set up at Dalhousie.
There are other mineral sands projects being looked at in South America, Central America and some other places is North America, just because there's such a shortage coming of this material. But all of those sands still have to be tested, they have to be processed somewhere. So there's every indication that on an ongoing basis, that Dalhousie's Mineral Engineering Centre would be the place where other companies would send their mineral sands to be tested.
MR. CHAIRMAN: Mr. Chataway.
MR. JOHN CHATAWAY: Mr. Chairman, I appreciate this opportunity. After hearing this presentation I certainly am far more informed than I was before I walked through that door, thank you, very much.
MR. ELLIOTT: I'm pleased to hear that.
MR. CHATAWAY: It is a very good presentation because I'm not a mineralogist or anything like that. Just out of curiosity, is there any other place in Canada - here's Canada, the second biggest country in the world - titanium is mined or thought about?
[2:15 p.m. Mr. Brooke Taylor resumed the Chair.]
MR. ELLIOTT: That's a very good question, yes, there is. One of the biggest deposits in the world is owned by Rio Tinto in Sorel, Quebec. It's the largest, single producer of titanium, except it doesn't come from sand. It's a hard-rock ilmenite deposit and what they have to do there is they basically take a cob of ore, then they have to use electricity and grind that down to the size of a grain of sand and then start processing it from there. It has been a very, very profitable division for Rio Tinto and it has benefited by a fair degree of subsidy with regard to electricity from Hydro Quebec. It has been a major employer and it is the major exporter from this country.
It's interesting to note, if you look in the U.S. Geological Survey, although it's two years out of date, when the U.S. Government talks about worldwide titanium interests, Canada is indicated there and it's indicated primarily because of Rio Tinto and its QIT operations. But our former public company, NAR Resources, has a little squib in there and that little squib will, we hope now that it's Titanium Corporation, change more and more so that the Titanium Corporation in Nova Scotia can get much more predominance with regard to manufacturing.
Rio Tinto has an excellent, excellent business in Quebec. They, however, make a very expensive product. They have what's called low-grade ilmenite, which has to be upgraded by putting it through a slagging operation. By putting it through the slagging operation they make about 90 per cent pure TiO2 that can be ground to the right size to put in a chlorinator for a pigment plant but the pigment companies pay dearly to get that product from them. Hopefully, sometime you can make a competitive product to them that like any other industrial mineral, if you can sell your stuff for 1cent a pound less than anybody else, then your contract will get bought. There are other deposits in Canada, that's the main one.
MR. CHATAWAY: How long has that operation in Quebec been going on?
MR. LINES: You're looking at the 1970s.
MR. ELLIOTT: I guess it has been going on for 20 years and it's a huge deposit, it will go on for another 20 years. The biggest deposit in the world is Richards Bay, South Africa, that's been going since about 1974, again, owned by Rio Tinto. It's operating, as they say, on fumes today and it was valued just as recently as 1995 at over $2.2 billion U.S. It's a combined pigment manufacturing and smelting operation that they've paid off all of their capital costs. They have been in business since about 1974 in Richards Bay and if they hadn't paid off all of that infrastructure cost, they're now processing less than 1 per cent heavy mineral recovery rate in South Africa. Richards Bay shuts down in another 10 years so that's going to put another demand on the feedstock supply problem in the world.
MR. CHATAWAY: I can certainly see why the interest is in this business, it's fascinating.
MR. ELLIOTT: Well, very simply put, you can't recycle paint, people are always going to paint their houses and you can't make paint without titanium . . .
MR. CHATAWAY: Especially in the Maritimes, too, we're painters down here.
MR. ELLIOTT: Not a bad business to be in.
MR. CHATAWAY: Basically, I'm sort of naive - not as naive as I was at 1:00 o'clock - but what kinds of risks are involved in a project of this magnitude when you get into production? You know, you are just at the experimental stage but say it got into production?
MR. ELLIOTT: You would find the risks are at the stage we're at now in the metallurgy. We can define how big it is, we can pretty well define that we can pull off in excess of 2 per cent total heavy mineral recovery rate. But you may not be able to make an acceptable product that the pigment manufacturer can use because no matter what, you've got too much silica in it or you have some other impurity in it that you just cannot get out. That's the big risk and we're well on our way to removing that risk but I won't say we're 100 per cent there.
Once that's done, the scale-up even from a bench-scale laboratory situation, the equipment you're using is the same equipment that was manufactured by the full-scale commercial people. All you end up with is bigger machines handling more volume, so there isn't a big risk. Ramp-up, in a lot of other industrial applications, there's a big risk in it. It may work in the lab but it doesn't work in the commercial application. We don't anticipate that risk, we anticipate the risk we're in right now is, can we make an acceptable product that can be turned into pigment. That's the stage we're at.
MR. CHAIRMAN: Mr. Dooks.
MR. WILLIAM DOOKS: Just a quick question. We're talking about a freshwater river, and we're talking about a saltwater bay, the bay being fairly large in size. How will the marine life in the bay and the river adapt to this project? Who determines the impact on the marine life?
MR. ELLIOTT: I think the way to address that is to refer back to the Martec Engineering baseline environmental study that was done, which basically said the river is a supersaturated river right now with clays in it. As you know, if you go out and put your hand in the river and you put it down about a foot and a half, you can't see your fingers. That's because it is supersaturated in sediments. The report indicated that the marine life had been living in that environment for hundreds of millions of years and had adapted to that environment.
What we're going to do with regard to processing, removing the 2 per cent heavies from the river, is not going to put anything in the river that isn't already in the river right now. Based on the baseline environmental impact study, they didn't see that that was going to be any particular concern to the marine life in the river, in that you can't put any more super-solids in the river. All we're going to do, in fact, is remove some heavy minerals, none of which - by the way, people thought that the black heavy minerals held the sandbars in
place. There's a specific gravity difference between the clear sand and the heavy sand, not sufficient to make any difference in that whatsoever.
Again, that will also be proven out with regard to the study that was going on on the sandbars. In the sandbars themselves there is no vegetation. There is small vegetation on the mud flats that are on the shoreline, but we have no exploration claims with regard to the mud flats that are on the shoreline. We don't intend to dredge them at all.
MR. CHAIRMAN: Mr. Dillman just wanted to make a comment on that.
MR. ELWOOD DILLMAN: If I could, just to clear up Mr. Dooks' point about the river, the river is salt.
MR. DOOKS: Is it? It's partially salt, isn't it?
MR. DILLMAN: No, it's all salt, so it's the same water that's in the bay. It's salt. I thought I heard you say it was fresh.
MR. DOOKS: I did say freshwater, but I had an understanding that it was partially salt and mostly fresh. So you're just going to dredge the sandbar, the area with sand, so we wouldn't expect to see anything like a lobster or a crab in the bay because it's not to their liking to cohabit or to live in the sand but in a rockier bottom. So there's no rock or anything like that in excavation. The sand is basically . . .
MR. LINES: I just wanted to respond to that. We've drilled approximately 200 holes now, and I've personally logged most of the drill core. Our drill logs are with the Department of Natural Resources and they're available for examination. We've noted every time we found a shell. You're not looking at an environment where very much lives. There's the occasional tiny clamshell, but that could also be washed in. There's not much living there, except on the mud flats, which we're not interested in anyway.
MR. DOOKS: But the province will monitor certain parts of this operation, will it not? What I'm trying to do is - let's say in freshwater lakes we have logs that have been on the bottom for a hundred years and if anybody so wishes to lift the log up from the lake, there's quite a process which they have to go through. They have to get certain environmental clearances, they have to deal with the province and then the federal government, as a matter of fact they have to go to the extent of underwater video. It's quite an operation to ensure that by removing the log they're not going to impact on any of the marine life that would be in the lake or hurt the environment.
So I'm just saying, in a small freshwater lake, to lift a log, the process seems to be quite lengthy. I'm just wondering, by removing a whole sand bottom, it doesn't seem to be as cumbersome as that.
MR. ELLIOTT: Well, if you think about the fact that those sandbars move themselves, what we are going to do, as you say, artificially, is really nothing different than what nature is doing anyway and that is part of the Daborn study. We anticipate to prove that out. It's pretty well all just plain, homogeneous sand right down to bedrock. There are no surprises in it.
We are well aware of the limited number of marine life that's in it. That's part of the fish count that's going to be done this summer so we have a legitimate review done about exactly how many fish there are, where they are, what time of the year they are there and then you would obviously plan your dredging operations around that, at any given time, when you are doing your dredging operation, you are working on maybe a 30-yard to 40-yard swing of the dredge. If you have a sandbar, the dredge dredges enough so it floats the boat, basically, and then it's about an 18-inch diameter suction dredge with a discharge pipe about 500 feet up river from that. But again, all the environmental approvals will have to be obtained and we are well aware of that and are anticipating that.
MR. DOOKS: Good, thank you. Thank you, Mr. Chairman.
MR. CHAIRMAN: Thank you, Mr. Dooks. Mr. MacKinnon.
MR. MACKINNON: Mr. Elliott, here in Nova Scotia, we had at one time quite an active coal mining industry. There was always a requirement, provincially, that a certain percentage, like a dollar fee, was attached for every ton of coal that was taken out of the ground to be set aside for environmental remediation. Well, unfortunately, up until I believe it was the early 1990s, that fee was only about 10 cents per ton and then it was increased, I'm not sure if it was 30 cents per ton or 50 cents per ton, but to fast-forward with regard to your particular mining operation, has there been any discussion about setting dollars aside for environmental remediation in the event that something goes wrong that you don't foresee? Has there been any discussion with the government on that?
MR. ELLIOTT: There always is the authority at the time you get your mining licence granted to you that you are going to be required to be responsible for any remediation that may occur. In practicality, I really don't see a remediation situation with regard to what we are anticipating doing. It's not like you are digging an open pit coal mine which has to be filled in and revegetated but the mining Act does provide that they may well make orders for you that you have to put a fund up.
MR. MACKINNON: Are you aware of any such requirements in other jurisdictions? You mentioned a Quebec site. Is there a requirement there for environmental remediation?
MR. ELLIOTT: I personally don't know but I would anticipate there is. I think most mining operations almost always come with a situation that - I know if you have a copper tailings pond or a nickel tailings pond in a mine in Ontario, I'm not, per se, a mining person -
you don't get your licence to do that until you are going to prove to the satisfaction of the regulators that when you are finished mining there is a fund available to clean up that tailings pond or you won't get your mining licence. That's a standard industry operative. Now I'm not sure it really applies with regard to remediation as we anticipate operating on the river and the bay because we don't think there would be anything necessary to remediate.
MR. MACKINNON: Is this the only titanium site proposed in the world that would come directly out of a riverbed?
MR. ELLIOTT: Yes. It has its unique challenges but it has unique benefits too in that if it is to come into production, it clearly will be the lowest cost extractor anywhere in the world and that gives a major competitive advantage to this operation. This operation, by no means, is going to be the world's largest titanium deposit. There are deposits in Mozambique that run into billions of tons of sand. However, they also run into tremendous infrastructure and cost problems that are not attributable to a project in Nova Scotia.
MR. MACKINNON: Would your company support such a fund?
MR. ELLIOTT: Well, I don't see why we wouldn't. That's like good housekeeping.
MR. MACKINNON: That's not answering the question though.
[2:30 p.m.]
MR. ELLIOTT: Of course you would support a fund if, in fact, you were going to do something that was going to require remediation. I don't see how you would ever get a mining licence if you weren't prepared to either support a fund or put up a bond or whatever was necessary under the regulations for remediation. We just don't anticipate, as contemplated today, that you have a remediation problem with regard to the operation.
That's why I say I think this is one of the most interesting natural resource commercializations that you could find in the world, that there's the least intrusion on the natural resource to produce a commercial product. I think that's a great story for Nova Scotia. There's no other deposit of titanium in the world that comes out of this type of resource.
MR. MACKINNON: One final question, if I could. I'm just curious, what attracted you to Nova Scotia? How did you become aware of this particular site?
MR. ELLIOTT: By accident, in effect. The company was drilling for copper, the geologists were basically saying, can we go back to the old copper mines of the 1880s and said, with new technology today, whether they're worthwhile. That didn't look good. Copper prices were not exciting. The geologists came to us and said we are finding, however, signs
of rutile, ilmenite and leucoxene, which are the titanium elements, would you give us some money so we could go find out where they're coming from.
In fact that led them to the United States geological paper, which indicated that there were huge deposits of rutile, that's the purest form of titanium out in the Gulf of Maine that they were estimating were being flushed down from New Brunswick and Nova Scotia, but they weren't sure, it could have also been going the other way with the tides, back up into the bay. So we put more money into that. There was a paper filed with the Department of Natural Resources as far back as 1974 saying that the Shubenacadie River was rich in titanium-bearing minerals, and that paper was put in a drawer and forgotten about.
We're a small company that backed into a huge industry. It's going to be quite exciting for me to appear with companies like Rio Tinto and Millennium and DuPont, who are the world's biggest titanium manufacturers. I will be down in Miami representing Titanium Corporation and Nova Scotia in about two weeks, and I find that pretty darn exciting, frankly, I really do. I think it's very exciting.
MR. DILLMAN: I would like to follow up on the human interest comment on Mr. MacKinnon's question. I was walking on a sandbar, not far from the farm where I grew up, with a fisherman, it may have been one of your constituents, Mr. Chairman. I asked him, sometimes we don't always see what we're looking at, so I said, as we walked along the sand that looks just like that, how come, Bill, you fished this river and I've travelled this river and we've never noticed this before? It was here, why didn't we see it? He said, we were looking for fish. So maybe that goes to the root of this. When you're looking for one thing, you don't really see something else unless it's by accident. Bill's comment, we were looking for fish, that's why we didn't see that.
MR. CHAIRMAN: If I could, Russell's line of questioning kind of leads me to wonder as to whether or not titanium is considered to be a Crown resource or a non-Crown resource. Then, of course, whether or not a type of royalty regime has even been discussed at this point. I know it's a world-class project, ever-evolving, but . . .
MR. ELLIOTT: It is a Crown resource and a royalty regime will have to be discussed but has not been discussed.
MR. CHAIRMAN: Do you have any idea what might be in place in other jurisdictions, relative to a percentage per ton? The company has to have some type of expectation or speculation regarding a royalty regime.
MR. ELLIOTT: We've got expectations, I'm not sure it's the time to share them right now. I want to make sure I have a business first, and then I will talk about that. We can certainly find out in discussing with other operations, whether it's South Africa, Mozambique, the east coast of India, DuPont in Florida. They will have royalty regimes in
place, all those constituent governments are not giving their resource away. There's bargaining periods, you may have deferrals for a certain period of time based on employment, et cetera. That's all the give-and-take of tough bargaining between the private sector and government.
As for what goes on in other jurisdictions, Mr. Chairman, I don't specifically know that. We just anticipate that the Nova Scotia Government is entitled to a royalty and that there will be the usual good hard bargaining if we get down to where, God willing, everything drops into place and we're going to go forward to make sure that Nova Scotia is getting its fair treatment out of that royalty.
MR. CHAIRMAN: That's fine. I was just curious as to whether or not there had been any discussion on a royalty regime.
MR. ELLIOTT: No, that's a little premature.
MR. EPSTEIN: Mr. Elliott, I read in the U.S. Geological Survey minerals yearbook, their description of the Rio Tinto operation in Sorel as being an upgraded slag plant. That's not a term I knew, and I take it that it doesn't mean that it's a recycling operation.
MR. ELLIOTT: No, what it means is most of the world's deposits are what they call low-grade ilmenite, sand having a TiO2 content in excess of say 45 per cent. In order to get that percentage of titanium up around 90 per cent, which is what the chlorinators want in the pigment industry, they basically put it through a slagging operation with the by-product of pig iron and titanium slag. The titanium slag is then about 90 per cent titanium, and then it can be ground to a perfect grain size to go into a chlorinator. So it's not a recycling, it's an expensive upgrading of low-grade titanium. Most of the world's operations have that.
Whether this deposit will have to go that route or not remains to be determined. I think we were perhaps overly optimistic that we would have a very high, really pure rutile that wouldn't have to be upgraded. I think in reality the product we make may well be sent to an upgrader. They put a smelter in Norway that's sitting empty because a huge company in Australia misjudged its operation. They went through $200 million, but they're probably going to lose $400 million U.S. on a project that they opened in Australia that didn't work.
MR. EPSTEIN: Can I just shift to another topic briefly? Your company went public in 2000, was it?
MR. ELLIOTT: NAR Resources was a public company that had been in operation for a number of years. It had a one-third working interest in the property, shared with a private Nova Scotia company called Titanium Corporation of Canada. Those two companies merged to form our existing company today in July 2001.
MR. EPSTEIN: There are a couple of things I wonder. You said you have equity but no debt at the moment.
MR. ELLIOTT: That's correct.
MR. EPSTEIN: If you get around to building your processing plants, do you anticipate that you will have to raise that money through borrowing rather than through equity?
MR. ELLIOTT: Probably, but what you would do at that stage is you have a long-term supply contract in place, say DuPont says we will buy all you can make for the next 15 years and we will pay escalating prices for it, and then you take that contract to the bank and based on that contract they lend you the money to build the plant.
MR. EPSTEIN: And what's happened to your share price over the last two years?
MR. ELLIOTT: It's stayed pretty well constant, at $2, say.
MR. CHAIRMAN: I just have a quick question in conclusion, at least if other members don't have questions. What are the energy requirements, if in fact the project continues to proceed and it looks like its potentially commercial? Obviously the company has given some consideration to energy requirements at the plant. I appreciate the commitment to build a dry plant here in Nova Scotia somewhere. We would like to know, have you considered natural gas, are you looking at coal, or what . . .
MR. DOOKS: Wind power.
MR. CHAIRMAN: Mr. Dooks suggests wind power. Or have you had any thoughts or discussions that you want to share with the committee along those lines?
MR. ELLIOTT: Obviously the dredging operation is diesel-electric, your energy consumption there is diesel. The main plant works strictly off electricity. Mr. Chairman, I'm really not the one to answer that. I can undertake to get back to the committee. My original thought was that it was a considerable amount of power. As I'm learning this industry from a technical point of view, it's nowhere near as much as I anticipated. Actually, Mr. Rankin, who is a Nova Scotia businessman, Stephen Rankin, who is on our board of directors, has been very helpful in advising me about sources of electricity in Nova Scotia, et cetera. By all means, I can undertake to get back to you as chairman, what we think the potential kilowatt usage would be but I don't think it was anywhere near as excessive as I thought it might be two years ago when we first started getting involved in this.
MR. CHAIRMAN: On behalf of the committee, Mr. Elliott and your colleagues, we would like to thank you for coming in and making that very comprehensive presentation and we appreciate that commitment to the Province of Nova Scotia should the mineral deposits be commercially viable. You are certainly welcome to take a couple of minutes, if you would like, each individual . . .
MR. ELLIOTT: Yes, I would just like to say, I know you are all very busy members, et cetera, but if you would like, we have a little demonstration over here where you can see a cut of raw sand right off the river compared with the first cut of a concentrate. You can very quickly see why its called heavy minerals. As most people thought, that was just mud out there, and when you have a little look under the microscope here, if you are so inclined, you will see it's a very interesting - when you look in the concentrate you can see the zircon shining at you like little diamonds. Everybody knows about cubic zirconia being phony diamonds. You can actually see the rutile and the ilmenite that we are going to process. I invite the committee members, or the press if they would like, to look at that. We also have some more handouts here to give to your committee members if you would like to pick them up on the way out.
I want to take this opportunity to thank members of the committee for an opportunity of speaking with you today. (Applause)
MR. CHAIRMAN: Maybe we could take five minutes. We have some housekeeping, about five minutes' work here to do regarding future schedules and things of that nature.
MR. ELLIOTT: Would you like us to excuse ourselves while you do that?
MR. CHAIRMAN: Oh, no. We can work right through that. Maybe I could just point out, we have scheduled, or at least Darlene - and Mr. Elliott made some very appropriate comments about Darlene, I think all you folks around the table would agree how well she keeps us prepared every meeting, meeting in and meeting out. Scheduled for February 4th is Irving Shipbuilding Incorporated and I understand, Mr. Epstein, you would like to speak to that scheduled hearing.
MR. EPSTEIN: Thank you very much. It happens that our Party has a caucus retreat scheduled for February 3rd to February 5th. We are all going to be out of town, up in the Valley, and I'm wondering if it's at all possible to try to shift our meeting date that is now on this tentative agenda as February 4th, I wonder if we could try to find another date.
MR. CHAIRMAN: I think we could perhaps accommodate, could we not, committee members? The next scheduled hearing then will be February 18th, and we have Nova Scotia Business Inc., or at least Darlene has Nova Scotia Business Inc. lined up to come in, 1:00 p.m. to 3:00 p.m., February 18th, and then perhaps the following week we can look at an
agenda-setting session, something organizational, the three caucuses could bring in their witness list and we could hash that out a little bit.
MRS. DARLENE HENRY (Legislative Committee Clerk): We already have that. It's just the unapproved section.
MR. CHAIRMAN: Yes, and there may be some new names come up and we have our witness list that you were asked to take at the last hearing.
MR. MACKINNON: Mr. Chairman, perhaps March 4th would be a good day to have the Irving Shipbuilding Inc. to come in.
MRS. HENRY: If they are available to come in on March 4th.
MR. CHAIRMAN: Okay, sure. Is that agreed? Okay, I'm looking for a motion.
MR. MACKINNON: I so move.
MR. CHAIRMAN: The meeting is adjourned.
[The committee adjourned at 2:44 p.m.]