Taseko’s BC Mine Hangs in the Balance
By Greg Klein
“The message is simple,” the Vancouver Sun quoted Grand Chief Edward John of B.C.’s First Nations Summit last August. “If you’re going to develop a mine or oil and gas, you need to ensure First Nations people are involved.”
That’s been the guiding principle of resource development in British Columbia for several years now. But a proposal by Taseko Mines Ltd TSX:TKO shows how the extraordinary rights—and additional potential rights—of a few thousand aboriginals might block a project that could provide jobs for themselves and many thousands of others.
Taseko’s gold-copper mine proposed for south-central BC is back before the Canadian Environmental Assessment Authority. On October 19, BC aboriginal leaders held an Ottawa press conference calling on the federal government to reject the New Prosperity project without even studying it. One year earlier, native concerns prompted the feds to reject Taseko’s earlier Prosperity proposal. Now the CEAA has until November 7 to decide whether to accept the company’s revised plan as is, allowing the proposal to move further into the permitting stage for construction, or spend up to 12 months on another study. Taseko has spent over $110 million on the project, which first entered the environmental review process in 1993.
A November 2010 CEAA study killed the previous proposal. The report’s conclusions expressed relatively little concern about the environmental impact but had surprisingly much to say about aboriginal rights, potential rights and spirituality. The three-person CEAA panel’s mandate did not include making recommendations, but its report nevertheless persuaded Canada’s Minister of the Environment, then Jim Prentice, to reject the proposal.
Now Taseko is back with a $300-million alteration, bringing the adjusted cost to $1.1 billion. The extra expense is the cost of preserving Fish Lake, a 118-hectare body of water that was originally considered for a tailings dump. That was a primary focus of CEAA concern. Rising metal prices, Taseko says, now make it possible to relocate the tailings two kilometres away, saving the lake and, the company hopes, the mine.
New Prosperity would be one of Canada’s largest gold-copper mines, an open-pit project with a measured and indicated resource estimated at 5.3 billion pounds copper and 13.3 million ounces gold, including proven and probable reserves of 2.4 billion pounds copper and 7.7 million ounces gold. Its 2007 feasibility study projects a 20-year mine life producing an annual average 300,000 ounces gold and 130 million pounds copper for the first five years.
Its economic impact would be massive, according to a Taseko-commissioned report by the Centre for Spatial Economics—71,000 direct and indirect jobs, $4.3 billion in federal taxes, $5.52 billion in provincial taxes, an $11-billion increase in Real GDP and a 5,400-person increase in BC’s population.
To emphasize the industry’s importance overall, on October 25 the Mining Association of BC released a report commissioned from PricewaterhouseCoopers. It says the mining sector spent $5.2 billion in BC last year for a total output of $8.9 billion, attributing for each dollar spent $1.73 in direct, indirect and induced total impact. Taxes paid by this sector in 2010 were $449.2 million at the federal level, $414.8 million provincial and $74.6 million municipal, with an additional $364 million in royalties and land taxes. The industry provided 45,703 jobs direct, indirect and induced. The report also notes that BC has “the world’s largest concentration of exploration firms and mining professionals.”
For all that, BC ranks surprisingly low as a mining-friendly location. The Fraser Institute’s 2010-2011 survey rates the province 36th out of 79 jurisdictions internationally. That’s a slight improvement over 2009-2010, but the score still lags behind the three previous annual studies.
“We’ve studied British Columbia since the 1990s, and things have improved a lot,” says Fraser Institute spokesperson Jean-Francois Minardi. “But the mining community believes there are still problems. There seems to be a lack of trust in the government. The main reason is the uncertainty, the sudden policy changes, especially with recent decisions concerning uranium, the Prosperity mine and Flathead.”
In February 2010, after years of protests from environmentalists in Canada and the US, the BC government banned mining in the Flathead Valley in the province’s southeastern corner. About 10% of the region had already been staked. One of the companies effectively expropriated was Max Resource TSX:MXR, which had spent $750,000 on its Crowsnest gold project. “The reason to kick them out was arbitrary,” Minardi says. As a result the industry now fears “the possibility that official land use plans will be overturned without due consultation.”
In March 2009, the BC government banned uranium and thorium exploration “even though Canada is the world’s largest exporter of uranium and has the most stringent regulations and safeguards,” Minardi says. “Metals and minerals do not occur in isolation,” he adds, “so a ban on uranium could affect other types of mining, like rare earths.”
There seems to be a lack of trust in the government. The main reason is the uncertainty, the sudden policy changes, especially with recent decisions concerning uranium, the Prosperity mine and Flathead —Jean-Francois Minardi
Once again, on October 21, the uranium ban hit the fan. The Vancouver Sun reported that Boss Power Corp TSXV:BPU received a $30-million out-of-court settlement, considerably more than its estimated sunk costs of $4 million to $5 million. Court documents show the BC government admitted that its deputy minister of mines ordered his chief inspector to ignore the company’s application for an exploration permit, an order that contradicted advice from the attorney-general’s department. The ban on uranium mining came three days later.
A week after reporting the Boss payout, the province’s media learned that BC Hydro, the Crown electrical utility, has an undisclosed $2.2 billion in deferred debt, an amount expected to hit $5 billion by 2017. Richard Stout, spokesperson for the Association of Major Power Customers of BC, said the problem exacerbates concerns about future rate increases that could hinder large-scale industrial development.
The Prosperity project, Minardi says, creates further uncertainty. The proposal passed the BC environmental assessment only to be rejected at the federal level, largely because it would destroy the 118-hectare Fish Lake. The region’s aboriginal groups had turned down a revenue-sharing plan (see below). “The lack of aboriginal treaties is a big problem with [its concomitant] lack of clarity.” Minardi declares. He doesn’t, however, see any solution.
Mining Association President/CEO Karina Briño says BC’s mining outlook has improved during the last year, emphasizing that the province’s revenue-sharing program for aboriginals is “a policy that’s making a difference.” She adds, however, that miners would like “one environmental assessment process that meets the requirements of both federal and provincial levels of government.”
She emphasizes, “We need more clarity in the scope of the assessment and the requirements expected of proponents.”
The provincial government extended the revenue-sharing policy from forestry to mining in August 2010, with two agreements that will transfer nearly one-third of the provincial mineral tax royalty from two mines to local aboriginals.
One of the deals concerns Thompson Creek Metals’ TSX:TCM Mount Milligan Copper-Gold Mine. The McLeod Lake Indian Band will get $35 million to $40 million over the mine’s 15-year life. The band’s population is currently estimated at 491.
Provincial revenue from New Gold’s Inc TSX:NGD New Afton Copper-Gold Mine will bring the Tk’emlups and Skeetchestn Indian Bands, currently estimated to have a combined population of about 1,500 people, about $30 million over 12 years.
As the deal was announced, Black Press quoted Tk’emlups Chief Shane Gottfriedson as saying his band expected more money to come. “While this agreement is specifically for the mine tax for the New Afton mine located on our territory, we look forward to a more comprehensive agreement on all revenues generated by such projects.”
But the Tsilhqot’in National Government, representing five bands totalling about 3,100 people, steadfastly spurns any such benefits from the New Prosperity proposal. They won’t even talk to Taseko. And so the $1.1-billion proposal remains at an impasse.