EXPLORING for GOLD: Lac Seul holds shares in junior explorer AurCrest Gold; Webequie part owner of Cyr Drilling – by Bryan Phelan (Onotassiniik – Fall 2013)

 Onotassiniik is Wawatay’s new mining quarterly.

Ian Brodie-Brown’s first contact with Lac Seul First Nation stood out. Then CEO of Tribute Minerals, a junior exploration company, Brodie-Brown hadn’t just sent a letter to the band. He had sent it voluntarily. “He was the first guy that I’d ever seen – the first company representative – approach a First Nation without being told to by the Crown,” recalls Chris Angeconeb, Lac Seul’s lands and resources co-ordinator at the time.

The introductory letter arrived almost seven years ago. Exploring for base metals at Confederation Lake, in Lac Seul’s traditional territory, Tribute was “basically trying to drum up support for a micro-mine with small output; a little underground project,” Angeconeb says.

Brodie-Brown says he expected new provincial rules for mineral exploration and consultation with First Nations would come eventually (regulations for exploration plans and permits, under a modernized Mining Act, finally took effect this spring). Instead of waiting, “We just decided to take a proactive role,” he says.

He followed his letter with visits from Toronto to Lac Seul, where he wandered around the community, hosted information sessions for band members, and several times sat with chief and council to explain his company’s exploration activities.

“We got to know them,” Angeconeb says of Brodie-Brown and Tribute.

About a year after their conversations began, however, the value of base metals nosedived, Angeconeb notes, and never fully recovered – at least not yet.

“We did find an asset in Confederation Lake,” adds Brodie-Brown, but “it was probably half the size it needed to be for it to have been a financial success for our investors.”

Still, his working relationship with Lac Seul has endured.

When Brodie-Brown joined the exploration rush northeast to the Ring of Fire, he carried along his positive Lac Seul experience. “My point of view when I got there, based on my relationship and my friendship with Lac Seul … was that this was something I was going to take forward.”

So when in discussion with Webequie he found the First Nation had an unemployment rate of 95 per cent, “I flagged that as the number one barrier to any (mining) development happening in the Ring of Fire,” Brodie-Brown says. “You cannot have 95 per cent unemployment of local communities and think you can viably develop a billion dollars worth of assets. So we needed to address it straight on.”

Brodie-Brown presented Webequie several options for getting involved with and benefitting from the mining industry. The band decided in 2008 to invest in a private drilling company he was associated with.

At first, Webequie’s investment of almost $200,000 entitled it to an ownership share of a new entity, Cyr Drilling Ontario, and its two drill rigs. But when the company got so busy it had to lease several more rigs from a parent company, Cyr Drilling International, it made more sense to combine the companies. Webequie now owns 14 per cent of Cyr Drilling International, which operates 22 drill rigs, and has a seat on the company’s board.

“We do have contracts in the Ring of Fire, but we’ve had contracts across Canada,” says Brodie-Brown, a Cyr vice-president, director and part owner.

Benefits to Webequie so far, he says, have included dividend payment, and training and employment for members as driller helpers. “It’s a business for them like any other business. When ultimately the government is unable to develop these ideas, then we’ve just gone ahead with the ones we don’t need their assistance with.”

Earlier this year, Cyr’s business had slowed to the point where the company had just one drill turning because of what Brodie-Brown called a “very stressed” mining environment tied to unfavourable global markets and lack of investment.

“We all go with the ups and downs,” he says. “That’s just the general course of business.”

Brodie-Brown also emphasizes the long industry track record of Cyr’s management. “Webequie has an investment in a team of professional drillers,” he says.

Back in Lac Seul, Angeconeb and Sam Manitowabi, the First Nation’s former general manager for economic development, “were discussing ways we could be a direct recipient of benefits from the mineral industry. And the only real way we could figure out how to do it was to be an actual Ojibwe mining company – a junior exploration company,” Angeconeb says. They discussed the idea with Brodie-Brown over a few months, and asked whether he could be involved as a director who would arrange investment for the proposed company.

Instead, they decided a better option would be to re-make Tribute by changing its focus to gold exploration in Lac Seul’s traditional territory, having the First Nation invest and giving the company a new name: AurCrest Gold.

Community members discussed and approved the investment made in 2011 – initially $500,000 for a 9.9 per cent ownership share of AurCrest (another $75,000 has since been invested in the company). Lac Seul also secured a board of directors position, to which it appointed Angeconeb.

The First Nation could afford its investment because of past grievance settlements and profitable economic development ventures, Angeconeb notes. Unfortunately, the value of its shares “is much less now that what we invested at,” he says, because of poor market conditions that immediately followed.

“Junior exploration is a very high risk investment because there’s no guarantee that your investment money is going to turn into a productive mine,” he adds – a point clearly made to Lac Seul members before they committed their money. “We were very open about it.” Depending on whom you talk to in the industry, the odds of a successful exploration project are anywhere from one in a hundred to one in a thousand, or worse.

Of course, the high risk can also result in high reward. “It’s the one area where you could invest $100,000 and see it come back at the discovery worth several million or more,” Brodie-Brown says.

With plans to further explore a “significant” AurCrest gold discovery made last year, he and Angeconeb express optimism about’s their company’s chances of success. AurCrest’s Richardson Lake find, in Lac Seul traditional territory next to a promising Gold Canyon Resources development, is an area where there had been some basic mining activity before – “a two-man operation with ropes and buckets,” says Angeconeb, now general manager of economic development at Lac Seul.

He’d like to Aurcrest follow the same path Rubicon Minerals has with its Phoenix Gold Project in Red Lake, which is expected to have a producing mine next year. “Taking the company from junior exploration to being a producer … is the ultimate goal,” Angeconeb says.

After seeing the mutual benefits of the Lac Seul and Webequie partnerships, Brodie-Brown now considers these types of arrangements as key to any industry undertaking. “Industry should not be going anywhere without local support, and local support means local ownership,” he says by cell phone from Montreal, where this was a central topic at a conference he just attended.

“Your money would tell the world that you’re interested in mineral assets being developed in your traditional territory, so much so that you’ve invested in the company – the drilling companies or the exploration companies – (so) that they may make that discovery,” he adds. It’s an important message in an industry that depends so much on investor confidence. Even to major mining companies, Brodie-Brown argues: “If the local people aren’t vested in the asset when the discovery is made and you move in to pay a billion dollars for it, you can no longer afford to buy it because for all sorts of reasons, they can stop that investment.”

Brodie-Brown has met with two other First Nations, Cat Lake and Slate Falls, whose territories overlap with Lac Seul’s, to invite their investment in AurCrest. The area First Nations of Mishkeegogamang, which shares the same watershed, and Wabauskang have also been offered the opportunity to buy shares.

“The questions is, ‘Are they capable of making an investment of that type that isn’t all risk to them?’ ” Brodie-Brown says. “Various communities are at different stages of corporate development, where some can participate and some can’t.”

To encourage more First Nations investment and ownership within the mining industry in future, he envisions what he calls a First Nations Wealth Fund – a pension fund with seed financing from the federal government.

For now, “A lot of junior exploration companies are coming up and saying ‘We know we’re in your territory and we want to talk,’ which five or six years ago was unheard of,” Angeconeb says. And when he speaks about the “Lac Seul model” at mining conferences with Brodie-Brown, he hopes to contribute to more positive change in relationships between industry and First Nations. “It’s largely (about) recognition and understanding of each other,” he says.

“If we can find a really significant mine site while we’re at it, so much the better,” he adds with a laugh.

In May, the province approved a permit allowing AurCrest to carry out more advanced exploration at Richardson Lake, including airborne geophysics at a cost of about $70,000 and a multi-million dollar drill program. The immediate challenge is to somehow raise the necessary funds from investors in a down market.

In the meantime, posters hanging just down the hall from Angeconeb’s office promote mining programs at the Lac Seul Training Centre of Excellence: driller helper, surface miner and underground common core.

“You can get into (mining) all different ways and we’ve tried getting in every which way we could,” Angeconeb says. “There’s no sense the entire industry carrying on in the First Nation’s backyard if the First Nation isn’t involved.”