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Legal Update

The New NI 43-101/ Financing Implications of Aboriginal Relations

Kenning Marchant, D. Jur.
The Marchant Practice Legal Update

www.themarchantpractice.ca

A feature of the new NI 43-101 is a requirement to report on relations, negotiations and agreements with affected communities such as First Nations.

The new standards are effective June 30, 1011.

Consider two recent scenarios.

In September 2009, 8 First Nations and Brett Resources Inc. signed an MOU to develop and implement an Impact Benefits Agreement for the Hammond Reef gold property northwest of Thunder Bay.

By April 2010, there was a friendly takeover of Brett by Osisko Mining Corporation at a substantial premium on Brett’s share price.

By December 2010, the 8 First Nations signed a further Resource Sharing Agreement with Osisko Hammond Reef Gold Ltd. to move the project ahead.

In contrast, on May 30, 2011, Hudson River Minerals Ltd. announced the start of a drilling program on its Glenrock gold property north of Sault St. Marie; then, on June 13, suspended the program.

The Batchewana First Nation threatened to deny access to the camp unless the company first acquired a Batchewana First Nation Exploration Drill Permit.

An Ontario Ministry of Northern Development, Mines and Forests (MNDMF) official is quoted in the Sault Star that it is a “business decision” whether a company complies with such a requirement. Meetings are planned with the First
Nation and the Ministry.

It is unclear whether First Nation claims of regulatory jurisdiction off reserve lands can be resolved without expensive litigation, possibly to the Supreme Court of Canada.

It is clear that relations with aboriginal communities can add significant share value when they are collaborative; and halt projects in their tracks when confrontation occurs.

First Nation mining blockades in Ontario have a long history. In 1849, Batchewana and Garden River First Nation members chased miners from a copper property on Lake Superior when representations by their Chiefs to the
Governor in Montreal did not yield results. A year later the Robinson-Huron Treaty was signed.

Beginning in 2005 Kitchenuhmaykoosib Inninuwug First Nation motor boats prevented Platinex Inc. from accessing their Nemeigusabins Lake properties by float plane. The properties were eventually re-acquired by the Ontario
Government after prolonged litigation.

In January 2010, the Webequie and Marten Falls First Nations blockaded Kopper Lake landing strip access to the Ring of Fire McFauld’s Lake camp.

On the other hand, more than 80 aboriginal-industry mining and exploration agreements have been signed in Ontario in the last decade, and many more across Canada, with many more under discussion or negotiation.

The new requirements are set out in Form NI 43-101F – Technical Report:

Item 20 : Environmental Studies, Permitting, and Social or Community Impact -- Discuss reasonably available information on environmental, permitting,
and social or community factors related to the project. Consider and, where relevant, include
.....
(d) a discussion of any potential social or community related requirements and plans for the project and the status of any negotiations or agreements with local communities The full text and annotation of NI 43-101 changes is on the Ontario Securities Commission website: http://www.osc.gov.on.ca/en/SecuritiesLaw_ni_20110624_43-101_mineral-projects.htm. htm

This very broad language accommodates a wide range of possible developments in aboriginal or community relations affecting the timing and cost of exploration, development and production.

NI 43-101 does not expressly require quantitative standards of disclosure analogous to those for mineral resources and mineral reserves.

However, the unveiling in Washington, DC of a new financial evaluation tool for sustainability investments, also on June 30, 2011, may point the way to the future. The tool challenges the impression that social responsibility initiatives are “soft” and can’t be quantified with hard data.

The tool includes methods to quantify direct results – for example, how investing in health facilities can lower employee absenteeism – and indirect results – such as how investing in regional or community infrastructure can lessen requirements for security facilities and personnel.

The framework includes quantitative comparisons and risk profiles of alternative portfolios of sustainability and social investments to help determine what mix will deliver the best returns over the lifetime of a project.

Deloitte Canada developed the financial evaluation tool for sustainability investments in conjuction with Rio Alcan and the CommDev Fund of the International Finance Corporation. It promises to be in growing use as a management tool in Canada and abroad. More information is available at http://commdev.org/section/tools

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