Eviction notice adds to gloom in mining sector

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This article was published 3/7/2013 (2596 days ago), so information in it may no longer be current.

These are not the best days to be in the mineral-exploration business in Manitoba.

Metal prices are low -- gold prices are at their lowest level in 36 months; nickel, lowest in 48 months; copper, lowest in 30 months; and zinc, lowest in 18 months -- investors' appetite for risky (albeit tax-deductible) exploration plays is just about non-existent and starting this week in Manitoba, there is an additional one percentage point of sales tax on expensive equipment.

On top of that there is the potentially deal-breaking uncertainty over treaty land claims.

One exploration company -- Mega Precious Metals -- that has been diligently working on a Manitoba gold property called Monument Bay for many years was surprised this week with an eviction notice from nearby Red Sucker Lake First Nation in northeast Manitoba.

In a news release, the band referred to the operation as "a mineral-exploration company operating illegally in Red Sucker Lake First Nation traditional territory."

But that same mineral-exploration company has been co-operating with the band for years and signed a memorandum of understanding (MOU) with Red Sucker Lake in 2010.

We all know MOUs don't mean money will be changing hands, but in the world of mining companies and their legislated duty to consult First Nations, whose treaty lands may be affected by a mining development, an MOU is typically a precursor to a more substantial industrial-benefits agreement.

Officials from the Mega Precious Metals office in Thunder Bay, Ont., are not returning phone calls, but one can only imagine an eviction notice, regardless of how enforceable it ends up being, has to be a setback for a development project that might be getting closer to a final push toward the actual development of a mine.

In a press release less than a month ago, Glen Kuntz, president and CEO of Mega, said its most recent measured and indicated resource estimates show "high-quality ounces with significant potential for resource expansion in a politically safe and mining-friendly Canadian jurisdiction giving Monument Bay the potential to become Canada's next great gold mine."

But Manitoba's status as a "mining-friendly Canadian jurisdiction" is declining rapidly.

In the Fraser Institute's annual Survey of Mining Companies, Manitoba has fallen from No. 1 in 2007 to 20th place in its 2012 report on mining-friendly jurisdictions.

A lot of that slippage has to do with uncertainty over treaty lands and the how duty to consult is being conducted.

Ed Huebert, executive director of the Mining Association of Manitoba, said there is a lot of frustration churning through the province.

Regarding the recent developments at Red Sucker Lake, Huebert said, "I'm at a loss."

But he voiced the sentiment echoed by industry officials across the country -- "We need to sit down and talk about these things."

Huebert said there has been more success in Saskatchewan, British Columbia, Ontario and the territories in establishing rules of engagement on issues such as aboriginal procurement, employment equity, industrial-benefit agreements and resource revenue-sharing.

"We have not done it here," Huebert said.

Of the 180-plus agreements that have been signed with aboriginal communities across the country, only three of them have been concluded in Manitoba.

But one of them was between Mega and Red Sucker Lake.

On Wednesday, Assembly of Manitoba Chiefs Grand Chief Derek Nepinak said RSLFN was obligated to take extraordinary measures after their concerns of environmental damage went unheeded by government and Mega Precious Metals Inc.

Provincial environmental regulations are in place and are supposed to be enforced.

The economics of mineral exploration is a weird science at the best of times but it doesn't help when Chief David Harper grand chief of MKO, the northern chiefs' organization, said in support of Red Sucker Lake, "Every single day, the mining industry in northern Manitoba creates more wealth from our treaty territories without sharing any of that wealth with northern First Nations."

Mega Precious Metals has spent millions of dollars at Monument Bay but has not made a penny of profit yet.

These are economically and environmentally important issues that require requisite attention by all of the parties involved rather than rash, unsatisfactory one-off deals.

martin.cash@freepress.mb.ca