British Columbia Mining

[Lone Clone]

Kemess Decision Increases Uncertainty, Could Lead to Investment Flight

By Peter Caulfield
20 Sep 2007 at 10:00 AM GMT-04:00

http://www.resourceinvestor.com/pebble.asp?relid=35859

VANCOUVER, B.C. (ResourceInvestor.com) -- The recent ruling by an environmental review panel in British Columbia against the proposed Kemess North mine means the project is a casualty of the continuing uncertainty in the province regarding aboriginal land claims and the lack of a clear government policy, according to a mining industry leader.

Mining Association of British Columbia president Michael McPhie told Resource Investor the joint panel created by the British Columbia and federal governments went beyond considering environmental questions when it made its recommendations.

“The panel got embroiled in discussions of unrelated land claims,” McPhie said. “The [environmental assessment and permitting] process can’t deal with land claims issues.”

He said the decision “could potentially mean the loss of hundreds of high paying jobs and the flight of investment from an area desperately in need of economic activity.”

Kemess North is a copper-gold mine project proposed by Northgate Minerals Corp. [TSX:NGX; AMEX:NXG]. It is situated in north-central British Columbia, about 250 kilometres northeast of Smithers and 450 kilometres northwest of Prince George.

Northgate’s proposal is for an open-pit mine about six kilometers from its existing copper-gold mine at Kemess South. The $190 million project would extend the life of the existing mine by 11 years and maintain nearly 500 jobs at the mine.

Northgate acquired Kemess North in early 2000. Diamond drill programs in 2000-2003 identified a significant mineral resource at Kemess North and confirmed it is a larger sister deposit of Kemess South that has not been eroded by glacial activity and weathering as Kemess South has.

A NI 43-101 report was compiled by Jim Gray, PEng, and a qualified person, and filed on SEDAR. The Kemess North reserve stands at 282 million tonnes proven, representing 2.6 million ounces of gold and one billion pounds of copper. In addition, there is 131 million tonnes of probable reserves which represents another 1.3 million ounces of gold and 0.465 billion pounds of copper.

Northgate’s plan calls for mine tailings to be disposed of by dumping them into nearby Duncan Lake. Northgate said lake disposal is the most effective and least expensive way of handling the tailings. But the plan is opposed by local native groups, who said the lake should not be used as a dumping ground for mine tailings.

In a report published 17 September 2007, the Kemess North Mine Joint Review Panel concluded:

“The economic and social benefits provided by the Project, on balance, are outweighed by the risks of significant adverse environmental, social and cultural effects, some of which may not emerge until many years after mining operations cease. The Panel recommends to the federal and provincial Ministers of the Environment that the Project not be approved as proposed.”

The panel went on to say:

“One of the most important components of a panel review is to integrate public values, as well as government policy expectations, into the review process. In order to weigh the Project development pros and cons in the context of public values and policy expectations, the Panel chose to adopt what it considered to be an appropriate sustainability assessment framework.”

The panel considered the project from five sustainability perspectives: environmental stewardship; economic benefits and costs; social and cultural benefits and costs; fairness in the distribution of benefits and costs; and present versus future generations.

“The Panel notes that the Project’s benefits accrue for only a relatively short period (two years of construction and 11 years of mining production). This period could be reduced if the Project, which is not economically robust, were to close prematurely. Key adverse effects include the loss of a natural lake with important spiritual values for Aboriginal people, and the creation of a long-term legacy of environmental management obligations at the mine site to protect downstream water quality and public safety.”

This is the first time in British Columbia that a public review panel has considered a mining project proposal.

The Mining Association’s McPhie said, “It is unfortunate that a project of such considerable importance to the entire province has been essentially halted by untested subjective concerns. The fact is that the conclusions of the report state clearly that the test of environmental stewardship, the key aspect of the environmental assessment process, has been met and the project would not cause significant adverse environmental effects.”

McPhie added, “It seems as if the unresolved social and cultural considerations of the region far outweighed the tangible economic and environmental factors being considered.”

The Mining Association said in a statement that it believes the ruling calls into question the Canadian environmental assessment process, and not just as it applies to mining.

“This ruling sends a poor message to the international investment community and implies that matters that are political in nature and not specifically relevant to environmental assessment can undermine the process. In the future, it can be expected that, without significant changes, industry will look upon panel hearings as potential political roadblocks rather than opportunities for a balanced view of good science.”

McPhie told Resource Investor that, in the future, mining companies that have to undergo a panel review “are going to have to do a lot of convincing to assure their investors they have the situation in hand.”

There are 26 projects in BC undergoing some kind of environmental assessment and permitting review at the moment. McPhie said “six or eight” of them are big enough to possibly be subject to a public panel review.

Aboriginal land claims and aboriginal-non-aboriginal relations in general are highly sensitive issues not only in British Columbia but in all of Canada, with public opinion highly polarized. As a result, federal and provincial politicians are often reluctant to get involved in disputes between aboriginals and non-aboriginals.