Ontario serves up miner with Statement of Defence – Ian Ross (Northern Ontario Business – January 27, 2014)

Established in 1980, Northern Ontario Business provides Canadians and international investors with relevant, current and insightful editorial content and business news information about Ontario’s vibrant and resource-rich North. Ian Ross is the editor of Northern Ontario Business ianross@nob.on.ca.

The Ontario government says it’s not liable for any damages incurred by a Sudbury-based junior miner after a dispute between the company and First Nation forced it to abandon exploration work in northwestern Ontario.

The province submitted its Statement of Defence with the Ontario Superior Court of Justice on Jan. 21 in response to a $110-million lawsuit filed against the Crown last October by Northern Superior Resources (NSR).

The company accuses the government of failing in its legal duty to consult with the Sachigo Lake First Nation after a series of disagreements with the band caused the company to suspend exploration on a promising gold property in late 2011.

In an 18-page document outlining its position and version of the chain of events, the government calls the company’s claims for compensation “exaggerated, excessive, remote” and said they should be dismissed.

The government “denies that NSR suffered damages as claimed” and that any losses were caused by any actions taken or omissions of the Crown.

The government contends Northern Superior’s decision to stop exploration was a company decision and the Crown is not responsible for any demands made on the company by Sachigo, or the company’s decision to reject them.

In its statement, the government outlined that from 2006 to 2011, Northern Superior annually entered into a series of impact benefit agreements with the band. The company routinely remitted 25 per cent of its exploration budget to the community for salaries, infrastructure, capacity building and donations.

All this was done with the knowledge, but without the assistance, of the Ministry of Northern Development and Mines (MNDM).

Northern Superior and Sachigo enjoyed a good relationship until it began to deteriorate in 2011. The final straw was the band’s imposition of a 24 per cent “administration fee” that was to come out of the company’s upcoming exploration budget.

The government contends any community consultation carried out by Northern Superior was done without ministry assistance and any agreements signed with the First Nation were for the company’s own benefit.

The province said no request was ever made by the company to intervene and facilitate a resolution of the disputes. And the ministry was only told of the backstory when Northern Superior sent them a letter in September 2012.

When Sachigo imposed a June 2012 deadline on Northern Superior to either complete an impact agreement or the relationship would be terminated, the company replied that it was suspending all activity in the band’s traditional territory and was heading elsewhere where its efforts would be “understood, appreciated, respected by the local community and not continually being negotiated.”

The government maintains it “made reasonable and good faith efforts” to repair the relationship, and did its best to encourage reconciliation by asking the company to participate in meetings with Sachigo Lake, which it refused.

During meetings with the band, the ministry said it heard complaints about the company’s “conduct” which included staking claims without informing the band and beginning exploration outside of any agreements with the community.

Northern Superior was also “invited” by the government to “voluntarily” participate in a new “plans and permits” regulatory process under the provincial Mining Act in November 2012, which was not yet mandatory.

The company was unwilling to do that, the government said.

The regulations came into force in April 2013, but prior to that the government soft-launched it in November to encourage industry to become familiar with the process.

The new regulations now require prospectors and companies to submit exploration plans or apply for exploration permits before starting early work. Part of the process requires companies to consult with affected First Nation communities.

Northern Superior is also challenging the government’s decision to impose an exclusion zone very close to its claims. After the company stopped exploration, the province closed off a 23,000-square-kilometre tract of Crown land from further staking in January, 2012.

Northern Superior claims this would hamper any future exploration efforts in following its gold discovery.

The government responds it did so at the request of the Kitchenuhmaykoosib Inninuwug First Nation, which asked for an embargo on mineral exploration on its traditional territory until it could finish an assessment, estimated to take three to five years.

The province said Northern Superior held no right and no title to that tract of Crown land and “the Crown owed no duty to NSR to consider its interests in advance of withdrawing said lands from staking.”