Up Here Business

For the first time, Northern First Nations are taking ownership shares in mining projects on their land. Here’s how the new arrangements are shaking out so far. Story by Eva Holland | Photo by Cathy Archbould 

Cooperation agreements. Participation agreements. Impact benefit agreements. Call them what you will, they’re the building blocks on which First Nation governments and mining companies form their relationships. And this year, in the North, they’re undergoing a critical evolution.

Ottawa-based consultant Doug Paget has been tracking mining agreements across Canada, including those with First Nations, for more than two decades. A few years back, he noticed a new trend developing: Instead of offering a straight cash infusion alongside the standard-issue educational, training and employment opportunities, mining outfits were offering First Nations ownership stakes. For the first time, aboriginal governments were buying shares – often at a fixed or reduced rate – in mining projects on their land.

The first such agreement to catch Paget’s eye was signed by the Naskapi Nation of Kawawachikamach, an Innu community located near Schefferville on the Quebec-Labrador border, in 2004. The Naskapi received a 20-per-cent stake in an iron ore project nearby; similar agreements soon followed in Ontario and elsewhere. “It’s interesting,” says Paget. “In almost all regards, the North has led the way on IBAs [the ubiquitous shorthand for impact benefit agreements].” But, he says, this is one trend that definitely got its start down south.

Paget sees the new arrangement as advantageous on several levels. First and foremost, it encourages transparency. Where equity is concerned, approval is required by the Toronto Stock Exchange – and so, immediately, the arrangements become public. Further, he thinks that having a financial stake in the success of a mining project encourages greater community buy-in from the affected First Nation. If any given project does “prove out to be a darn good mine,” says Paget, “there’s a huge upside.”

This summer, three Northern First Nations got in on the game. Here’s where those three projects – the first in the North to include a First Nations ownership stake – stand right now. 

Brewery Creek

Current status: According to Golden Predator’s vice-president of communications and First Nations relations, Janet Lee-Sheriff, the gold mine is “moving toward production.” The project should be producing ore by 2014.

What’s at stake: An array of scholarships, preferential hiring and contracting for Tr’ondek Hwech’in First Nation (THFN) citizens and businesses, an annual grant for a community legacy project, and a defined process for THFN input and review of Brewery Creek permitting applications. THFN will also acquire an equity interest which, though unspecified at this time, Lee-Sheriff describes as “within industry standards.”

In July, Golden Predator and the THFN signed the “2012 Amended and Restated Socio-Economic Accord” for Brewery Creek. Golden Predator has been one of the more prominent, active outfits in the Yukon’s recent exploration boom; at Brewery Creek, the company is aiming to re-open a mine site that closed in 2002 due to low gold prices. (The earlier mine was operated by Viceroy Resource Corp.)

“After intense negotiations, the Tr’ondëk Hwëch’in are pleased to be forging a beneficial relationship with Golden Predator,” Tr’ondek Chief Ed Taylor wrote in a statement announcing the deal. “We support their efforts to re-open the Brewery Creek Mine. We believe this mine can operate in an environmentally responsible way, and provide substantial benefits to both the Tr’ondëk Hwëch’in and the community of Dawson. We appreciate the open spirit in which Golden Predator is undertaking this task, and our people look forward to the training, employment and contractual opportunities which will be available.”

“I think it’s very important that the First Nation has an active interest in projects in their traditional territory,” says Lee-Sheriff, who takes the lead on the company’s First Nation relations, “[and that] they have an opportunity to create wealth” from those projects. She points out that when the new equity trend in mining IBAs started down south, Yukon mining was in a lull – and the territory was still adjusting to the impact of land claims settlements and devolution. So there was a bit of catching up to do.

“This is just the beginning,” says Lee-Sheriff. “The communities are looking for jobs and business opportunities… There will be more agreements like this.” Eventually she’d like to see full equality in ownership stakes: “We want 50-50 joint ventures,” she says. “We want them to be active partners and over time be in a position where they could look at driving a mining project.” First, though, industry has to prove itself to the First Nations. “We have to earn trust and respect,” she says. “We have to do what we say we’re going to do.” 

Wellgreen

Current status: The project is at the advanced exploration stage, and things are looking promising. There are still studies to be done and permits to be issued, says Prophecy director and general manager Joseph Li. “But if everything goes well, it should be in production in 2018 or 2019.”

What’s at stake: An unspecified equity position for the Kluane First Nation, plus training and employment opportunities, service contracts for businesses run by KFN citizens, and a shared environmental protection process.

The Wellgreen platinum property dates back to a discovery made 60 years ago.The area supported an underground mine, briefly, in the 1970s, and now the deposit is being explored by Prophecy. The company signed a cooperation and benefits agreement with KFN, located in the Yukon’s Kluane Lake region, in early August.

According to Li, Wellgreen has “the potential to be one of the best projects in North America.” The deposit includes platinum itself alongside platinum-group metals palladium and rhodium, as well as nickel and copper. Prophecy was pleased to offer KFN equity in the project. Says Li, “It’s important to us because it means they’re in it for the long haul.”

KFN Chief Mathieya Alatini points out that her First Nation had already been working informally with Prophecy for some time now, encouraging the employment of locals and aiming to help supply services like expediting, groceries and cooks. “We met them down at Mineral Roundup [a major annual geosciences and mining conference] in Vancouver,” she says.

The newly signed agreement is “about formalizing the relationship” and ensuring maximum economic benefits to her community. (The KFN has been pro-active with mining in general, issuing a “proponents’ engagement guide” that sets out protocols for their territory and offers a structure for addressing environmental concerns.) Asked about the risk inherent in taking an ownership stake over a cash payout, she notes that equity is “only a small portion of the benefit that the community will  see.” 

Nechalacho

Current status: With exploration complete, the project is in its final round of feasibility studies and is moving steadily through its environmental assessment. Avalon expects to complete its final feasibility study in the second quarter of next year. Construction could begin later in 2013, with production coming on line in 2016 or 2017.

What’s at stake: A 3.3-per-cent stake in a limited partnership (3,333 of 100,000 available units), plus the usual business and employment opportunities and environmental responsibility guarantees. The 3.3 per cent is part of an overall 10-per-cent stake Avalon has offered to split evenly between three First Nations in the area (the other two being the Yellowknives Dene First Nation and the Lutsel K’e First Nation).

The Nechalacho deposit at Thor Lake, which is 100 kilometres southeast of Yellowknife, is one of the world’s largest undeveloped rare earth troves. The project positions Avalon to challenge China’s near-monopoly on the in-demand rare earth elements used in tech and green energy industries.

Avalon Rare Metals and the Deninu K’ue signed the “accommodation agreement” for the project in late July. In a statement, Deninu K’ue Chief Louis Balsillie called the deal “a significant milestone for our First Nation.” He added: “The Barrenlands that the Nechalacho project is located on are an integral part of our traditional territory, which we continue to hunt and trap on today. The mitigation of the environmental impacts and provision for environmental monitoring on these lands are crucial to our members… We appreciate Avalon’s efforts to respect our relationship to our territorial lands and waters.”

Avalon president Don Bubar believes that the new trend in Northern IBAs is “a natural progression, reflecting First Nations’ growing capacity to participate” in business and mining at a higher level. The earlier agreements, which offered direct cash transfers, helped “build some capacity,” he says. Some remote First Nations used the money to develop locally based support services for mines and other mining-related businesses, and now they’re ready to increase their involvement even further.

Bubar thinks that limited partnerships will bring a more stable, longer-term income stream for the North’s First Nations, rather than a one-time cash infusion. Eventually, he expects to see First Nations initiating mining projects on their own terms, bringing proposals to investors rather than having the plans offered to them by outsiders. “This is the
 future,” he says.