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Vol. 16, No. 35 Week of August 28, 2011
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: First Nations, mines find common ground

Thanks to renewed commitments from government and industry, stakeholders make strides in aboriginal relations, sustainable mining

Rose Ragsdale

For Mining News

Though still a ways from completely sorting it out, the Government of British Columbia and the province’s mining industry have taken long strides recently toward mastering the intricacies of social responsibility, especially in meeting requirements of law and conscience in aboriginal relations.

During the past 12 months, the provincial government inked the first-ever mine revenue-sharing agreements with First Nations and BC Hydro successfully negotiated impact agreements with at least five First Nations as part of continuing consultations with these and other First Nations on similar and related issues.

Mining companies in northern and central British Columbia also reported progress recently in resolving environmental and socioeconomic disputes related to exploration and development of a number of significant mine projects.

Historic mineral revenue sharing

The Province of British Columbia signed a historic mining revenue-sharing agreement with the chief and council of the McLeod Lake Indian Band in August 2010, paving the way for that First Nation to benefit directly from development of the Mt. Milligan mine project, which is situated within the borders of the band’s traditional territory.

Under the Economic and Community Development Agreement, the province and the McLeod Lake Indian Band will work as partners along with mine owner Thompson Creek Metals Company Inc. in environmentally responsible mineral development of Mt. Milligan, a copper-gold project located about 90 miles (145 kilometers) northwest of Prince George in central British Columbia.

A 60,000-metric-ton-per-day open pit mine with an estimated capital cost of C$915 million is currently under construction at Mt. Milligan. It is expected to be in production in the fourth quarter of 2013 with annual metal production over a 22-year mine life forecast to average 81 million pounds copper and 194,500 ounces gold.

The agreement with the McLeod Lake Indian Band requires the government to share mineral tax revenue generated by the Mt. Milligan mine project and places a strong focus on community development to assist First Nations in achieving their social and economic goals. In October 2008, the province authorized its provincial negotiators to include revenue-sharing with First Nations on new mining projects.

“This agreement sets a new standard for participation by the McLeod Lake Indian Band in economic developments within our traditional territory,” said Chief Derek Orr at a signing ceremony a year ago. “We have secured benefits for all our members in a way that is environmentally responsible, and good for the McLeod Lake Indian Band, the region and the Province.”

The agreement is part of the province’s commitment to work with First Nations to implement the goals that provide financial resources to help the province’s First Nations achieve objectives they have identified for their communities.

The government also said it wishes to work with the First Nations to develop mining projects in British Columbia that meet some of the highest environmental standards in the world.

The B.C. government also signed a similar revenue-sharing agreement in August 2010 with the Stk’emlupsemc of the Secwepemc Nation for the New Afton Mine in southern British Columbia. Both pacts require the parties to keep confidential all sums paid to the First Nations from the mines’ mineral tax royalties going forward.

Laying plans for Northwest power line

To pave the way for construction of the Northwest Transmission Line project, BC Hydro, meanwhile, has signed impact benefit agreements with five First Nations at a steady pace since November.

In early June, the government-owned corporation reached an agreement with the Gitanyow First Nation that provides the First Nation with employment, contracting and other economic development opportunities related to building the power conduit, which is projected to cost C$364 million to C$525 million.

The power line will extend 344 kilometers (213 miles) north-northwest from a point near Terrace to a new substation near Bob Quinn Lake, passing through lands claimed by eight separate first nations.

Construction of the 287-kilovolt electricity transmission line, which was scheduled to begin this summer, is expected to create 280 direct jobs and generate numerous indirect employment opportunities, especially by spurring development of numerous mine projects that will boost the region’s struggling economy.

In May BC Hydro and the Province of British Columbia signed impact benefits and government-to-government agreements, respectively, with the Tahltan Nation that will provide economic development funds, jobs, training and skills development during construction of the line and a strengthened relationship with the Province of British Columbia that will focus on how decisions are made and future economic opportunities.

In February, BC Hydro and the Nisga’a Nation entered into a benefits agreement aimed at providing the Nisga’a Nation with financial, contracting and other benefits related to the construction and operation of the transmission line along the western alignment through Nisga’a lands. The agreement, endorsed by the Nisga’a Lisims government executive, provides for the establishment of rights-of-way through Nisga’a lands and the establishment of a small corridor through the narrowest portion of Nisga’a Memorial Lava Bed Park, and was approved by the Nisga’a Legislature Wilp Si’ayuukhl Nisga’a.

In December, BC Hydro and Metlakatla First Nation signed an impact benefits agreement related to its support for the construction of the line. The agreement provides support to Metlakatla First Nation for its economic development, training and energy conservation strategies.

And a month earlier, BC Hydro and Kitselas First Nation signed an impact benefits agreement that will provide that First Nation with economic development funds and training related to the construction of the Northwest Transmission Line.

In addition to the individual pacts, BC Hydro is facilitating training “boot camps” for the Nisga’a Nation and other First Nations to help build skills among their members that will be useful for construction of the line and other projects. By the time the line’s construction began this year, about 150 aboriginal people were expected to have received “shovel-ready” training for the project.

Despite the substantial progress made by BC Hydro since last fall, a recent dispute with the Lax Kw’alaams First Nation illustrates that the corporation still has a ways to go with First Nations consultations for the NTL project.

Members of the Lax Kw’alaams ordered a geotechnical drilling crew to stop work in early August on land they claim is traditional territory of the First Nation, arguing that BC Hydro should not be doing preliminary work in their traditional territories until they reach an agreement, according to an Aug. 9 report in the Globe and Mail.

Greg Reimer, B.C. Hydro’s executive vice-president for transmission and distribution, told the newspaper that the drill crew understood it was working in Kitsumkalum territory.

Reimer also said BC Hydro did not anticipate any further difficulties, and was hoping to get on with negotiations with the Lax Kw’alaams, which is one of three remaining First Nations currently negotiating agreements with BC Hydro that will facilitate completion of the transmission line.

New approach to sustainable mining

By implementing a new sustainable mining initiative, the Mining Association of B.C. is encouraging the industry to implement best practices and demonstrate continuous improvement in a number of critical fields of sustainable management including aboriginal and community relations.

“Particularly relevant for B.C.’s mining sector is the approach (the initiative) articulates for relations with First Nations,” said Pierre Gratton, president and CEO of the Mining Association of Canada and former president and CEO of the Mining Association of British Columbia.

In a May Vancouver Sun opinion column, Gratton said the initiative’s strong aboriginal focus indicates how far the industry has come in embracing First Nations partnerships.

“Fifteen years ago, there were fewer than 20 agreements between mining companies and aboriginal communities in Canada. Today, there are almost 200, and many more are being negotiated,” he said.

Reaching agreements and forming partnerships with First Nations is not always easy, and it sometimes feels like it’s getting harder. Industry is trying to navigate the changing landscape of aboriginal law, including the recent adoption by the federal government of the UN Declaration on Indigenous Peoples. The question of veto power on land use decisions creates a difficult situation, if not an impasse, for some negotiations, as companies navigate the grey area of pursuing greater levels of certainty for their land interest with the need, in a market economy, to provide a reasonable return to shareholders,” he explained.

“There are no clear rules or standards to apply to negotiations, only precedent, which is often unclear because agreements are private and confidential. Add to these challenges the B.C. reality of overlapping, unsettled land claims, and there emerges the reason why the Fraser Institute continues to rank B.C. near the bottom on the indicator of First Nations issues.

“But there is much we – First Nations, industry and governments – can do to make it easier. Industry embracing and implementing (the sustainable mining initiative) is one part of the answer,” he said.

That approach is paying off for at least one mining company.

Northgate Minerals Corp. Aug. 2 reported positive results from a NI 43-101 preliminary assessment report for its Kemess Underground Project located in north-central British Columbia about 5 kilometers from the Kemess South mine.

The results from the preliminary assessment outline development of an underground block/panel cave operation with average annual production of 95,000 ounces of gold at a below-industry cash cost of US$115 per ounce over a mine-life of some 12 years.

Highlights of the preliminary assessment, which employs base case commodity price assumptions of US$1,100 per ounce for gold, US$2.80 per pound for copper and US$20 per ounce for silver and an exchange rate of US$/Cdn$1.00, are as follows: Average annual production of 95,000 ounces of gold at a net cash cost of US$115 per ounce; average annual copper production of 41.4 million pounds; a total of 1.1 million recovered ounces of gold and 490 million pounds of copper over an approximate 12-year mine-life; pre-production capital cost of US$437 million; sustaining capital costs of US$286 million during the life of the mine; pre-tax operating cash flow of US$1.1 billion; pre-tax net present value of US$115 million based on a 5 percent discount rate; pre-tax internal rate of return of about 10 percent with a 6-year payback on the initial capital cost from the start of production. The project also has significant leverage to higher metal prices.

“The Kemess Underground Project represents significant development opportunity for Northgate, with a 12-year mine-life that would add to our growing production profile and reduce Northgate’s average net cash cost of production,” said Ritch Hall, the company’s president and CEO. “The preliminary assessment confirms the technical feasibility of a block caving operation at Kemess Underground. In today’s metal price environment, it is an extremely robust project with the ability to generate over US$2 billion in operating cash flow and pay back its capital in less than three years. Our next step will be to complete a feasibility study on the project over the next year.”

The preliminary assessment was prepared by AMC Mining Consultants (Canada) Ltd.

Northgate said its permitting/environmental assessment path included initiating discussions with First Nations with respect to additional wildlife and socio-economic studies that are of special interest to their communities. Northgate’s discussions with the Tse Keh Nay, a group of three First Nations in whose asserted traditional territory the Kemess project is located, are well advanced and proceeding in a positive tone.

Over the past several months, Northgate said it engaged in a number of meetings and have arranged site visits (and are ongoing) with both the TKN leadership and members of the community. In addition, there have been information-sharing sessions with other potentially affected First Nations. Northgate has given the First Nations its assurance that this project will not impact Amazay Lake (an issue that was divisive when the Kemess North Open Pit was being reviewed by the Federal Panel in 2006).

Northgate also said it is supporting the TKN in their discussions with the B.C. government with respect to revenue-sharing of the BC Mineral Tax, similar to those negotiated with two other new projects in the province.

Northgate Minerals also drew industry recognition by winning a 2010 Mining and Sustainability Award in May for work at Kemess South Mine, an open-pit copper-gold mine that closed in March after producing more than 2.7 million ounces of gold and 700 million pounds of copper in nearly 11 years of operation.

The Mining Association of British Columbia along with the B.C. government praised the company for its responsible mining practices.

Gratton said the province also can accelerate the negotiation and conclusion of resource revenue-sharing agreements with First Nations in relation to mining projects, and the mining industry can continue and enhance its investments in the Aboriginal Mine Training Association to provide the skills and opportunities for First Nations workers in the mining sector.

“And, last but not least, we can recommit to the hard, time-consuming but important work of treaty negotiations,” he said. “While not perfect, treaties are one of the best ways of providing a level of certainty on the land base and a vehicle for reconciliation with first nations. The federal government’s commitment to the B.C. treaty-making process has waned in recent years and (the province’s mining industry) joins its voice to that of First Nations calling for a recommitment to this effort,” he added.

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