COVERING THE COSTS OF NEGOTIATION

The cost of negotiations may include the following:

• Meeting costs, including travel and accommodation for the negotiators.
• Cost of a hired negotiator. An experienced negotiator will charge $800-$1500 per day plus expenses “door to door.”
• Costs of specialized technical and legal assistance. Get estimates of fees and expenses if you intend to keep experts “on tap” during the course of negotiations. Estimate also the legal costs of finalizing an agreementAgreement: any explicit, signed document that is negotiated and includes mutual concessions or limitations placed on both sides. Examples are Negotiation AgreementsNegotiation Agreement: an early agreement in the mining process, likely to occur in the Exploration Stage, which would outline the basis of the relationship between the Aboriginal group and the mining company and how the relationship will evolve if the mine moves forward. , Exploration Cooperation Benefit Agreements, Socio-Economic Participation Agreements..
• Costs to your organization. The negotiations will have to be supported by staff and other organizational resources. Estimate the time and expenses that will involve. Although they may not be recoverable, these are real costs. They may have an impact on other parts of the organization’s mandate.
• Costs of Due DiligenceDue Diligence: a financial and technical investigation to determine whether an 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. is sound. Each party to a business agreement uses Due Diligence to ascertain the actual quantity and quality of the assets which the others claim they can contribute., feasibility analysis, and technical reporting. These are transaction costsTransaction Costs: a cost incurred in making an economic exchange. The negotiation of a SEPA has costs. These costs are related to all financial, staff and other costs incurred by either party to a negotiation to plan, negotiate and conclude a SEPA or Joint VentureJoint Venture: commonly, a business to which two or more parties contribute the essential land, capitalCapital: cash, property, equipment, services, and contracts or leases., and services, in return for a share in its ownership and control. (Note: the Joint Venture is very strictly defined under Canadian law.). you must incur in order to reach a reasonable and prudent deal, and they can be very high. A geologist may cost $10,000 -$30,000, for example.

Funding Options

For First Nation projects, the cost of negotiations can be supported through the 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. (SINED). It is funded through INAC’s Targeted Investment Fund. Some provincial governments also have programs that may help pay the transaction costs of a deal.

The mining company involved often covers costs of SEPA negotiations. This is more acceptable now that the negotiation of a SEPA has become standard procedure.

SEPAs are not just an agreement; they craft the basis for a cooperative relationship. It is therefore generally in the best interest of the company to ensure that the Aboriginal community has the resources to negotiate meaningfully. Mining companies also often prefer to ensure that negotiations are directly between them and the community, and that government is not involved.

Not all companies may be able to afford to do this, of course. Others may not want to. If not, a community must make certain it can get government funding. Otherwise it is unlikely that they will be able to afford meaningful involvement in the negotiation process.

If a company does choose to cover the costs of negotiations, it is up to the First Nation to treat that assistance with respect. A stronger, more trusting relationship with the company may then develop. This, in turn, can lead to better agreements.

NaCho Nyäk Dun entered into negotiations with Alexco Resources in 2007. (See *Case Study #5: Keno Hill Silver District, p. Intro-45.) In two years they developed an MOUMemorandum of Understanding: a document that records an understanding between a community and a mining or exploration company. The MOU defines principles for working together for mutual benefit., a Participation Agreement, and then an Exploration Co-operation Benefits Agreement. All these required money that the First Nation did not have.

Alexco knew this, and wanted to work with NaCho Nyäk Dun in good faith. The company covered the cost of the negotiations including the cost of travel, the hiring of technical people, and other expenses. NaCho Nyäk Dun was extremely grateful for this financial assistance and used it wisely. The negotiating team often chose to stay at the homes of friends when travelling, instead of incurring the cost of a hotel. They also planned the meetings carefully. When they were held in Vancouver, they would try to line up other necessary meetings there too, and then split the travel costs with other projects.

Alexco appreciated all this. The First Nation’s efforts showed respect for them and their assistance. As a result, NaCho Nyäk Dun and Alexco have a strong and trusting relationship, and both parties are very satisfied with their agreements. The way the costs of the negotiations were covered affected the whole deal.