A Sudbury-based junior mining company isn't ruling out a settlement agreement with the province to relinquish its claims on its dormant gold properties in northwestern Ontario after a dispute with a First Nation community.
Northern Superior Resources is suing the Ontario government for $110 million for failing to consult with the Sachigo Lake First Nation after multiple disagreements with the band caused the company to abandon exploration on its mining claims in late 2011.
"I have no ambition to go to court," said company president and CEO Tom Morris. "It serves no purpose to any party. But we do need to get this resolved."
The gold exploration outfit claims the company was hurt by the inaction of the Ontario government and wants compensation for the $15 million invested in exploration since 2005 as well as the estimated value of its three gold properties located near the Manitoba border.
Northern Superior filed a statement of claim with the Ontario Superior Court last October.
The company accuses the province of failing to protect its interests in a remote area of Ontario that’s become a hotbed for First Nation-industry conflict in recent years.
The lawsuit stems from a series of incidents in which the company alleges Sachigo Lake made unreasonable monetary demands, and even briefly detained company employees and equipment, as the miner moved toward a major gold discovery about 740 kilometres northwest of Thunder Bay.
A once-smooth working relationship with Sachigo quickly soured when the company claims the band demanded a 24 per cent “administration fee.” The fee was to be pulled from the company’s upcoming exploration budget on its Rapson Bay property, believed to be in the $10-million range.
Northern Superior refused to pay and shut down exploration.
A Ministry of Northern Development and Mines spokesperson said the province has prepared a statement of defence which would be delivered to the company shortly.
In early January, Morris said his lawyers had not received it but were expecting it by month’s end.
The company claims it lost out on a golden opportunity in 2011 when exploration financing was easier to obtain and talks were underway with potential options partners.
After Northern Superior halted its exploration program, the Ontario government created a huge 23,000-square-kilometre exclusion zone close to the company’s claims in early 2012 that banned mining and exploration in the area. It was designed to ease local tensions that involved a combined $8.5-million government buyout of the claims of two other juniors, Platinex and God’s Lake Resources, that had confrontations with the Kitchenuhmaykoosib Inninuwug First Nation.
Scott Parsons, Northern Superior’s vice-president of operations, said the zone effectively boxed them out of staking more ground to follow gold mineralization along surface.
“To not even consult us before drawing an arbitrary boundary shows the complete lack of understanding of the industry’s perspective from the government.”
First Nations in the area declared a mining moratorium which the company intends to respect while it focuses on its Quebec gold properties.
In the meantime, Morris said they are re-applying through the Freedom of Information Act for internal government communications regarding the settlement with Platinex and God’s Lake.
“The last batch of correspondence was heavily redacted. We’re looking to see if we can extract anything that will give us a hint as to what motivated the government to come to a settlement and the reasoning behind the exclusion zone.”
Morris was reluctant to put a dollar figure on what would be acceptable by way of a settlement, but said it would likely be more than what was previously doled out.
“Unlike Platinex and God’s Lake, we actually found stuff,” he said. “Do I expect to get $110 million from the Ontario government? Maybe in my dreams, but I’ve spent $15 million on the properties and we warned the government if we couldn’t get a settlement and we had to go to court, it would increase with time.”
Northern Superior’s situation sheds light on what prospectors and junior miners have privately complained about for years: that under-the-table deals with First Nation bands are sometimes necessary to gain access to claims on Crown land that Aboriginal people consider traditional territory.
It’s not known of the regularity of these confidential deals, but many believe it sets an ever-increasing and dangerous precedent of cash payouts that hurts the industry at its grassroots stage.
“It’s not the first, it’s not going to be the last,” said Garry Clark, executive director of the Thunder Bay-based Ontario Prospectors Association, on Northern Superior’s case.
While supportive of the company’s efforts, Clark said the publicity of a court case can be detrimental in attracting investment to Ontario at a time when it’s tough for juniors to raise exploration capital.
“Our biggest fear is the uncertainty that it shows in the province and people will look at it and shy away from coming here.”
First Nation consultation can be difficult with little public information available on overlapping territorial boundaries and cultural misunderstandings between industry and First Nations.
“It’s part of a two-sided sword,” said Clark. “The First Nations don’t understand exploration, and they need capacity building for that, and the companies don’t understand how First Nations operate. There’s education to do on both sides.”
Parsons said Ontario’s revised Mining Act offers no guidance on how to react to monetary demands by First Nations.
He noted another junior mining company in the northwest was “throwing shares on the table” to reach an agreement with a local band.
“The problem with doing that is you’re going to ratchet up the bar higher every time and there’s nothing to control that because the act doesn’t address using money by payment or shares to get a deal done.”
Ken Coates, a researcher of Aboriginal and natural resource issues at the MacDonald Laurier Institute for Public Policy, said the law concerning the government’s obligation to consult and accommodate with First Nations is quite clear, but the desired outcomes are not always spelled out.
“When you don’t have clear rules and don’t put down a definitive strategy, you end up with conflict.”
Coates said it’s up to provincial governments to formalize a process on natural resource development and properly advise First Nations on what they can expect by way of economic return.
“Resource revenue sharing sets the bar for everyone as to what First Nations can expect out of a land claim settlement, out of a resource project, and what the companies are expected to do.”
A lurking danger, said Coates, is that good viable projects can be delayed for years because of land title and accommodation issues.
“Uncertainty for a junior (miner) can be an absolute killer,” he said. And leaving disputes in the hands of the courts can be a “difficult and messy process” and may drive exploration dollars away from Ontario.
“You can create an environment where it’s in nobody’s best interests,” said Coates. “I’m of the view we can get resource development right in this country and we can find a way to ensure Aboriginal people are partners in the process in a way that’s fair to companies, First Nations and is ratified by government.”
In the meantime, Northern Superior is concentrating on its gold properties in west-central Quebec where the company inked a pre-development agreement last summer with the Grand Council of the Crees and the Oujé-Bougoumou Cree Nation.
Morris said Quebec has a “superior” tax regime for mineral exploration with the province providing tax breaks to companies of up to 42 per cent on exploration expenditures. “It’s why it’s a great place to work.”