TORONTO (miningweekly.com) – Northern Ontario’s junior exploration and mining sector is facing challenging times and not just because of the current market turbulence. New amendments to the province’s Mining Act introduced on a voluntary basis in November 2012 became mandatory on April 1. The impact has left some companies reeling.

Under the new rules, those wishing to prospect and explore must now submit detailed plans to Ontario’s Ministry of Northern Development and Mines before work can start. Companies must also consult with affected landowners, surface-rights holders and, importantly, local First Nations communities.

Processing submissions and issuing permits should take between 30 days and 50 days, although the government reserves the right to extend the timeframe if additional planning or consultation is deemed necessary.

The resultant flurry of permit applications and consultation requests with First Nations bands have left many across the spectrum struggling to fulfil their tasks, the Toronto Star reported on April 12.

Critically, those companies waiting for permits have suddenly found themselves in limbo; they are legally obliged to halt work until approval is given.

"Everything stopped April 1. The drilling company I'm involved with, Cyr Drilling, has 22 drill rigs and the two that were active in northern Ontario had to shut down,” Aurcrest’s president, CEO and director Ian Brodie-Brown, who has extensive industry experience working alongside First Nations partners, told Mining Weekly Online.

“I recently met with a company we’d engaged to undertake an airborne geophysics program and had to apologise; I had to explain that we couldn’t raise money and progress with the campaign until the permit comes through. I’ve also applied for 6 000 m of drilling and again, I can’t progress until I have a permit,” he said.

The goal to bolster First Nations’ rights by amending the Mining Act was a step in the right direction but one that has been poorly implemented, Brodie-Brown argued. The confusion has also caused misplaced anger. “Many people are confused and angry, and they’re often blaming the wrong people – the First Nations.”

The onus should have been on fostering closer business co-operation, Brodie-Brown said, adding that the model built up between Cyr Drilling, Aurcrest, and First Nations communities may offer a more suitable and productive alternative to the current situation.

Brodie-Brown’s team started exploring northern Ontario’s Ring of Fire a few years ago, he explained. “We made a small discovery and wanted to further our presence in the area. We also knew the Mining Act would be amended and that the changes would concern the duty to consult.”

“So I went to meet the local native band, the Webequie. During my discussions, I asked what their local unemployment rate was. The reply was staggering: 95%. It’s a statistic that I found deeply disturbing and it convinced me to return with five business opportunities,” he said.

“The deal was this: the Webequie would have to invest their own money to acquire a key stake in whatever opportunity they liked best. Not only would this give them an interest in the company subsequently formed, but they’d also have a say in its day-to-day running,” he continued.

The Webequie opted to help establish a drilling concern, the band initially investing $196 000 to help secure two drills. Brodie-Brown and his colleagues doubled this amount and, with Cyr Drilling International, established a First Nation subsidiary.

“We were successful. In fact, Cyr soon decided to role-in the native-owned company with the parent company and create a new entity. Because Cyr had more equipment and assets etc., the First Nations’ share was reduced to 12%. However, it meant they now had an important stake in a company with 22 rigs,” he said.

Brodie-Brown continued to grow his involvement with the First Nations. “Sam Manitowabi and Christopher Angeconeb from Lac Seul visited me and requested help in establishing an Ojibwe exploration company,” he said.

“My proposal to them was this: I’d take my public company [Aurcrest] and consolidate it at one-for-five, producing a reasonable number of shares that they could buy and secure a respectable stake with. We’d then rebrand the company and start looking for gold in their traditional territory,” he said.

Manitowabi and Angeconeb discussed the deal with their community. The band agreed to invest an initial $500 000, which helped Aurcrest to then make a notable gold discovery on their lands. Meanwhile, Angeconeb was subsequently elected to Aurcrest’s board of directors. “So we ended up growing the company and its First Nations ties from the inside out,” Brodie-Brown said.

“This model of First Nations bands holding an influential stake in a company through their own investment has superb potential and could become increasingly important,” he added.

“If you explain the model to the juniors, and show them that there’s profit to be made by working closely with the First Nations, they’ll start trying to make friends very quickly. Concurrently, First Nations investors will obtain a stake in a company that will hopefully produce jobs, achieve success and appreciate in value,” he said

Built-in First Nations ownership could also find support from Bay Street, Toronto, the home of Canada’s finance industry, Brodie-Brown said.

“Bay Street will realise that a company with First Nations stakeholders has an inherent stability. It will also note the First Nations have invested their own money and have vested interest in the company’s success,” he said.

Majors will also appreciate the presence of First Nations stakeholders. “The model enables major mining companies to buy juniors with greater confidence,” he added.

“In the future, I believe that majors seeking to acquire a junior will expect and demand the built-in First Nation stakeholder presence. If a major is investing serious money, it will want to know the corporate social responsibility has already been fully integrated,” he said.

“And for those companies that say consulting is more than enough, well this won’t be sufficient in the future. The majors want security and they’ll want to know the First Nations are fully on board and supportive,” he said.

“And it’s better to get things done right, so as to avoid future problems. The model of First Nation investment, ownership and vested interest is the best, most sensible and, for the First Nations, most equitable way of achieving this,” he added.