STAGE 2: FEASIBILITY AND PLANNING

A lot of detailed research takes place at this stage to determine if a mine really is viable and if it is, to prepare for its construction.

Results from scopingScoping: a preliminary study undertaken to determine if it would be worthwhile to carry out a pre-feasibilityPre-Feasibility: a preliminary study undertaken to determine if it would be worthwhile to proceed to a Feasibility StudyFeasibility Study: a study of a proposed project’s product or service, market, competition, organization, and finances to determine if it can make a profit.. study. and prefeasibility studies during the Exploration StageExploration Stage: the whole range of activity from searching for and developing mineralMineral: A naturally-occurring, homogeneous substance that has a definite chemical composition and (usually) a crystalline structure. deposits. will have determined that further investmentInvestment: the purchase of a financial product or other item of value with an expectation of favourable future returns. Generally, “investment” means the deliberate use of money in order to make more money. makes sense. Feasibility studies and environmental assessmentsAssessments: the process of gathering and documenting information about a mine’s viability and impactsImpacts: the effect or impression of one thing on another such as the impact of a mining project on the life of an Aboriginal community.. are now necessary to determine the mine’s business viability, to raise financing, and to pass all the regulatory requirements.8 Exploration activities almost always continue during the Feasibility and Planning StageFeasibility and Planning Stage: the stage in mining when advanced explorationAdvanced Exploration: excavating an exploration shaft or other entry way; construction of an access road to the mine site; diversion or damming of a watercourse to permit bulk samplingBulk Sampling: taking samples in arbitrary, irregular units rather than discrete units of uniform size for analysis.; or other types of work that usually occur once significant mineralization is discovered. activities help develop and support Feasibility Studies and clarify the extent and nature of the mining project. Development of the necessary mining operation plans, permitsPermits: legally-binding permissions that govern activities that may occur during exploration or mine operation, like quarrying, use or impact on water, building of transmission lines, etc., and closure and reclamationClosure and Reclamation Stage: restoration of disturbed and/or mined land to its original contour, use, or condition. plans occur at this stage.. (They can even proceed while the mine is operating, in hopes of finding more ore.) The Planning and Feasibility Stage of a mine can take 2-7 years to complete.

Feasibility Studies

A feasibility studyFeasibility Study: a study of a proposed project’s product or service, market, competition, organization, and finances to determine if it can make a profit. determines whether a mine is likely to be a viable business. Researchers take all the test work and data gathered previously about the site and combine that with an engineering analysis and a detailed examination of markets and all costs that developing and decommissioning the mine will entail. (See Module 4 for more details). A thorough feasibility study can range in cost from $2-20 million and can take two or more years to complete.

A very detailed feasibility study may also be called a Bankable Feasibility StudyBankable Feasibility Study: a comprehensive analysis of a project's economics that banks and other financial institutions can use to make investment or lending decisions.. It is “bankable” because it is suitable for a mining company to present to financial institutions when applying for a loan for the project. In addition to a geological test results and an engineering analysis, the Bankable Feasibility Study specifies the assumptions under which the project would proceed, in addition to a strategy, development conditions, and outcomes for the project. With this information, a financial institution can determine the collateral, premium, repayment schedule, and the risks and rewards such a loan would involve

A Bankable Feasibility Study also gets several other important processes underway. It signals that the final engineering, business planning, and construction planning for the mine may proceed. It starts a process of government review. (The mining company submits a project description to governments or local boards.) It starts the environmental assessmentEnvironmental Assessment: a written report, compiled prior to a production decision that examines the effects that proposed mining activities will have on the natural surroundings. (EA) process that must be completed before construction commences. The Bankable Feasibility Study also triggers the negotiation of a SEPA.

Moving through all the steps of analysis from scoping to feasibility study can take 3-6 years. Costs start at $2 million.

They may go as high as $100 million if special testing facilities are required on-site. By the time the feasibility studies for the Howard's Pass lead-zinc mine in Kaska territory, Yukon, are complete, they will likely have cost the developer (Selwyn Resources) about $100 million.9

Acts and RegulationsRegulations: rules that govern activities that are occurring on the land.

Before mining activity may commence in any part of Canada, every project must first undergo assessment and second, regulation. Assessment identifies both the environmental and socio-economic effects a mine may have, their seriousness, and how they may be reduced. Regulation occurs when government agencies issue the permitsPermits: legally-binding permissions that govern activities that may occur during exploration or mine operation, like quarrying, use or impact on water, building of transmission lines, etc., licensesLicenses: documents that must be obtained in order to apply for or carry out certain activities., or other approvals for which they are responsible.

A great many regulatory requirements, licenses, permits, and leases apply to the Feasibility and Planning Stage of a mine. The regulations are meant to make the mine develop in a way that will benefit people and minimize harm to the environment. In Yukon, permits for exploration or mine feasibility will not be granted until an environmental assessment is done.

Mining leases

MineralMineral: A naturally-occurring, homogeneous substance that has a definite chemical composition and (usually) a crystalline structure. rights belong to the CrownCrown: the Crown refers to the sovereign or to the power and authority of the monarchy. In Canada, the powers and authority of the sovereign have been delegated to the Governor General of Canada. and in Yukon, to First Nations with Category A Settlement LandsCategory A Settlement Lands: in Yukon, lands in which a specified First Nation owns both the surface and the subsurface.. These rights can be leased by individuals or companies, but not purchased. A mining lease is a legal contract for the right to work a mine and extract the mineral for a specified length of time, in return for a specified fee, or royaltyRoyalty: in mining, a royalty is a tax that mining companies pay to government for the extraction of public resources. In Yukon, mining royalties are a percentage of an amount roughly equivalent to a company’s Annual Operating ProfitAnnual Operating Profit: a business’ Gross RevenuesGross Revenues: money generated by all of a company's operations, before deductions for expenses, sometimes simply called “the Gross.”, minus Variable and Fixed Costs... The lease sets the boundaries where the company can extract, build, and dump materials. To get a lease, the company must submit a mine closure and reclamation plan, a yearly fee, and large security deposits. Without a mining lease, you cannot develop a property into a mine.

In Yukon, new mineral rights on Category B Settlement LandsCategory B Settlement Lands: in Yukon, lands in which a specified First Nation owns the surface but not the subsurface. The First Nation has no ownership over whatever is under that ground. or Fee Simple Lands are regulated by the Placer Mining ActPlacer Mining Act: an Act respecting placer mining in Yukon Territory. Placer mining is the technique of recovering gold from gravel. (PMA) or the Quartz Mining ActQuartz Mining Act: controls and administers rights to explore and extract minerals on Crown land, and sets out the process for making mineral claims and the requirements for maintaining exclusive rights to mineral claims, for the purpose of mineral exploration, development, and production. (QMA).

Permits

The most important permits concern land and water use, mine closure, and reclamation.

Water licenses are provided by provincial and territorial agencies, which oversee water discharge. Water crossing permits are issued under the Navigable Water Protections ActNavigable Water Protections Act: an Act concerning the protection of navigable waters. For details, go to laws.justice.gc.ca/en/N-22.. If a mine is expected to have an impact on fish habitat, authorization under Section 35 of the Fisheries ActSection 35 of the Fisheries Act: a regulation that no person shall carry on any work or undertaking that results in the harmful alteration, disruption, or destruction of fish habitat. is required.

Any effects a mine might have on migratory wildlife have to be assessed under the provisions of the Canada Migratory Bird Convention ActCanada Migratory Bird Convention Act: most migrating birds found in Canada are protected under the Migratory Birds Convention Act (M.B.C.A.) of 1917. For details, go to www.pnr-rpn.ec.gc.ca/nature/migratorybirds/dc00s06.en.html and the Canadian Species at Risk ActCanadian Species At Risk Act: an Act respecting the protection of wildlife species at risk in Canada http://www.yesab.ca/about_us/faqs.html (YESAA) creates a single process of environmental and socio-economic assessment to cover all the federal government’s requirements for protecting the environment. It typically requires the completion of base-line studies that describe the physical, social, or economic environment of the area that the mine will impact. (These studies vary in their required scope and detail.) Reclamation and closure plans explain how the land will be repaired on an ongoing basis during mining operations as well as after they finish.

Yukon also divides mining exploration programs into four classes, depending on how greatly they may affect the environment. (See “4 Classes of Exploration Program,” p. 2-9.) Diagram 2-210 explains the assessment process under YESAA for Class 3 or 4 exploration programs.

It is desirable for mining companies to submit their proposal to the First Nation government between steps 1 and 2. This is not required, but it helps to foster good relations. This timing is of particular benefit if it raises issues (for example, the need to complete a heritage assessment) that are best dealt with before the submission of the YESAA Project Proposal.

Umbrella Final AgreementUmbrella Final Agreement: an agreement between the Government of Canada, the Council For Yukon Indians and the Government of Yukon. The Umbrella Final Agreement (UFA) was reached in 1988 and finalized in 1990. It is the overall “umbrella” agreement of the Yukon Land Claims package and provides for the general agreement made by the three parties in a number of areas. While the agreement is not a legal document, it is a political agreement made between the three parties. The UFA is the basis upon which final agreements with First Nations were negotiated. These are legal agreements and 11 of the 14 Yukon First Nations have concluded their final agreements.

In Yukon, the Umbrella Final Agreement (UFA) also establishes the unique water rights of First Nations. Water that is on or flows through or adjacent to the Settlement Lands of Yukon First Nations must remain substantially unaltered in quality, quantity, and rate of flow (including seasonal flow).

Water licenses are granted by the Yukon Territory Water BoardYukon Territory Water Board: an independent administrative tribunal established under the Waters Act. The Board is responsible for the issuance of water use licences for the use of water and/or the deposit of waste into water. (YTWB). The Board may grant a water license that interferes with a Yukon First Nation’s water rights, although by legislation (as stated in the UFA), that should only occur if there is no alternative. In that case, the Board will require the licensee to pay the First Nation compensationCompensation: something (such as money) given or received as payment or reparation (as for a service or loss or injury).. It is up to the water license applicants to prove to the Board that they will not make a significant impact on local First Nations water. Since First Nations representatives sit on the YTWB, they have direct input as to whether a license may be granted. So when a mining company applies for a water license, First Nations have an opportunity to leverageLeverage: strategic advantage or the power to act effectively. In negotiation, leverage is a measure of which side, at any given moment, has a greater ability to influence the other side. benefits.

Community Consultation

During the evermore detailed planning of the Feasibility and Planning Stage, Aboriginal communities have opportunities to enter into discussions with mining companies. It is also the point at which research must be carried out in support of any community opposition to the mine. Firm social, economic, or environmental grounds must be documented if a mine is going to be opposed.

An experienced and wise mining company knows to take the initiative and consult with Aboriginal communities well before it submits reports or proposals to government regulators. For this consultation to be meaningful, communities too must make an early start and define areas of interest and concern to discuss with the mining company. This will help shape later negotiations.

In Yukon, plans for large development projects must be submitted for assessment under YESAA. Prior to that submission, it is obligatory (and beneficial) for companies to consult the First Nations whose settlement lands or economic and social well-being may be harmed by such projects. For smaller projects, consultation may not be obligatory, but proactive companies will do so regardless. As well, for any project on Settlement A or Settlement B lands, companies are required to consult directly with the First Nation concerned. On those lands, the First Nation is a regulator of activities.

A wide range of community consultation often takes place during a mine’s Feasibility and Planning Stage:

• Public meetings and hearings
• Open houses
• Workshops
• Focus groups
• Interviews
• Meetings and discussions about environmental assessment and applications for licenses and permits

Consultations provide the larger community with an opportunity to provide feedback. By reviewing project descriptions and by leading scientific studies or studies of traditional knowledgeTraditional Knowledge (TK): the knowledge, observations, and understandings about the natural environment, and about the relationships between living beings and their environment, that Aboriginal people have accumulated over many generations. , communities can give input to the planning of the mine. Simultaneous with these consultations are discussions between top company officials and the community’s Chief and Council or other negotiator(s). It is at this point that the negotiation of agreements with the mining company can start to take shape.

Agreements

The Feasibility and Planning Stage is an excellent time for a mining company and an Aboriginal community to develop a good relationship. Indeed, an agreement may be even be struck during the Exploration Stage (p. 2-5, above). But it’s during the Feasibility and Planning Stage that the mining industry decides if a mine is feasible and who its owners and operators will be. This usually takes several years, though. So when should SEPA negotiations begin?

There is no single “best time” at which to start SEPA negotiations. Conserve your time, effort, and money for the time at which they can count. If negotiations start too early, when the mine’s feasibility is still in question, a lot of money could be wasted on what turns out to be a non-starter. If negotiations start too late, well after the mine’s feasibility is confirmed, the negotiations may be rushed.

The response of the mining industry to the prefeasibility or feasibility study is one good clue to the timing question, however. If the exploration companyExploration Company: a company whose principal activity is that of exploration. holds onto the property in order to operate a mine there, or if another company quickly buys up the property, the industry obviously considers the site promising. That is a good time to start building a relationship with the potential owner.

Were a Major to buy up the property, it may be worthwhile to negotiate downstreamDownstream: downstream business refer to suppliers of products and services such as exploration, production, processing, product development, technical services, marketing and sales that supply the mine but are not owned by the mine. benefits from just the ongoing exploration work. The service needs of geologists, drillers, and other workers may create business, jobs, and training opportunities for Aboriginal people. Financial benefits may also be negotiable, as during the Exploration Stage.

What’s of crucial importance is to conclude a SEPA before the Construction StageConstruction Stage: the stage in which all facilities, buildings, roads etc. necessary for the operation of a mine are built. commences. If construction gets underway without a SEPA in place, the Aboriginal community will have far less leverage during the negotiations.

To resolve the timing question, communities and companies often conclude Interim AgreementsInterim Agreement: an agreement that is put in place during a period in which final decisions or agreements are still being negotiated.. In an Interim Agreement, the parties “fill in” as many of the seven sections standard to a SEPA (see Module 5) as they can. For example, the parties may already agree on provisions for Community, Social, and Cultural Support. Or, they may already agree that the amount and schedule of compensation payments will only be finalized after completion of the environmental assessment.

Interim Agreements are agreements in principal. Their provisions can be readily amended during the SEPA negotiations. Interim Agreements are very useful, nonetheless. They help the parties begin to deepen their relationship by setting aside what they can agree on now, so they can focus on other, more sensitive and contentious issues later.

NaCho Nyäk Dun and Alexco concluded their various agreements during the Exploration and Feasibility and Planning stages.(See *Case Study #5: Keno Hill Silver District, p. Intro-45.) Since the mine is not a certainty yet, these agreements concern the terms of future agreements if the mine were to move ahead:
• how these future agreements will be implemented and monitored.
• the measures that Alexco will take to build the capacity of NaCho Nyäk Dun.
• the jobs or downstream business contracts Alexco will offer first to NaCho Nyäk Dun members who have the necessary experience and skills.

Indian and Northern Affairs Canada (INAC) often assists Aboriginal groups with the costs of negotiating agreements with mining companies. In 2008 INAC announced that it would provide Liard First Nation Development CorporationCorporation: the most common form of business organization. It pursues set objectives and is empowered with legal rights usually only reserved for individuals, such as to sue and be sued, own property, hire employees, or loan and borrow money. with $245,000 to help cover the cost of negotiating a SEPA with Selwyn Resources Ltd.11 This money would come from INAC’s Strategic Investments in Northern Economic DevelopmentStrategic Investments In Northern Economic Development: a set of programs offered by Indian and Northern Affairs Canada in the Yukon, Northwest Territories and Nunavut. The goal of this initiative is to promote the economic development of the North, strengthening territories’ economies and generating important economic opportunities for Northerners, their businesses, and their communities. program. Mining companies often pay the costs of negotiation, too. See Module 4, “Covering the Costs of Negotiation,” p. 4-31.)