STAGE 1: EXPLORATION

This first stage of mining includes prospectingProspecting: the first step in exploration in which prospectors search for clues of the presence of valuable mineralMineral: A naturally-occurring, homogeneous substance that has a definite chemical composition and (usually) a crystalline structure. deposits. The objective of prospecting is to identify a target worthy of further testing by more expensive exploration methods.Prospecting: the first step in exploration in which prospectors search for clues of the presence of valuable mineralMineral: A naturally-occurring, homogeneous substance that has a definite chemical composition and (usually) a crystalline structure. deposits. The objective of prospecting is to identify a target worthy of further testing by more expensive exploration methods.; geological, geochemical, and geophysical 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..; drillingDrilling: the primary means of bringing rock samples to the surface. Often called “diamond drilling” since the bit used is made of diamond. Drilling is a major expense, costing $50 or more per metre. and the evaluation of drilling results; 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. studies; and possibly prefeasibility studies. These activities can cost from $50,000 to $20 million/year. Their cost can total anywhere from $20 million to over $150 million before construction of a mine actually begins.³ It can take 3-10 years before feasibility decisions are made.

There are three types of exploration:

• Initial or “grassroots” exploration: searching for a deposit in an area where the mineralMineral: A naturally-occurring, homogeneous substance that has a definite chemical composition and (usually) a crystalline structure. has not been found before.
• “Brownfield” exploration: searching for additional deposits on land where the mineral has been found before.
• On-mine-site exploration: searching for more mineral deposits on a property where mining is already occurring.

Although every mine starts as an exploration project, most exploration projects do not become mines. The success rate is particularly low for “grassroots” exploration. Less than 1 in 10,000 mineral showingsShowings: a rock specimen revealing the presence of a certain mineral. actually become a mine. The capability of a mine will depend on the amount and quality of ore that can be recovered there. The price of this ore (or “commodityCommodity: physical substances, such as metalsMetals: one of more than a 100 basic earth elements, grouped under minerals. Includes iron, lead, zinc, and copper., that can be sold or exchanged in a marketplace.”) can change, depending on the demand for it in the global marketplace. When an economically-viable mineral deposit is discovered, there can be great financial and professional rewards for the companies and people involved.

The exploration companyExploration Company: a company whose principal activity is that of exploration. will use a scoping study to begin to determine the deposit’s economic viabilityEconomic Viability: the degree to which a mining project can proceed and return a profit to investors.. This is a rough evaluation. Researchers apply their experience and industry standards to a small amount of the data collected locally, for example, through drilling. The study outlines the market value of the minerals and all the costs associated with building, operating, and reclaiming a mine there. Scoping studies are generally a “guesstimate,” that is, their accuracy is border-line.

The next step is the prefeasibility study. It may be used at the Exploration StageExploration Stage: the whole range of activity from searching for and developing mineral deposits. to determine if continued exploration is justified. It can also be used to decide whether or not to move to a full feasibility study (which occurs in 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.) or to search out a 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.) partner for the next stage of the project.⁴ Prefeasibility studies have a higher level of accuracy than scoping studies. The projection of the site’s potential is based on more detailed local data, instead of industrial experience and standards. Enough drilling and testing has occurred to support a basic engineering analysis. Prefeasibility studies can cost $50,000-$500,000. They may also identify issues or problems that require further research during the Feasibility and Planning Stage.

After the prefeasibility study comes the feasibility study, which examines these matters in still greater depth during the mine’s Feasibility and Planning Stage (see below, p. 2-16). Prefeasibility studies sometimes occur early in the Feasibility and Planning Stage, too.

Exploration Companies

The Exploration Stage is dominated by the Juniors. They do a wide range of exploration work, but are usually the ones that do “grassroots” exploration. Juniors generally just employ a few professional geologists and have annual expenditures of $250,000-$5,000,000. Some Juniors work with Joint Venture partners or contract out all their work to other firms.

Juniors typically finance their exploration on the stock exchange. They raise money by selling shares to people willing to take a risk in hopes of a big pay-off. They sometimes carry out scoping and prefeasibility studies in order to make a property more attractive to investors or buyers. Canada is the world’s leading centre for acquiring the 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. money needed for mineral exploration.⁵

Majors engage in exploration too. They can often use their own revenues to finance exploration, and have the largest exploration budgets. Yet Juniors have discovered most of the major mineral deposits in the past 20 years. Why?

• Majors spend their exploration budgets drilling around known deposits (their own).
• Majors focus their efforts on searching for large deposits.
• Majors are not as willing as Juniors to take risks.
• Majors have higher overhead and bigger bureaucracies.
• Majors like to reduce their risk by buying into deposits after Juniors have made the discovery.
• There are many more Juniors than Majors.

Over the past five years, a lot of money has been spent on mine exploration in Canada. This is because global demand has driven up the prices for mining commodities of all kinds.

Approximately 150 exploration projects were undertaken in Yukon in the summer of 2008. The largest was the Selwyn project of Selwyn Resources Ltd. (a Junior). Since 2005 the company has spent almost $50 million on exploration, feasibility, and environmental programs. The company hopes to take Selwyn into the Operation StageOperation Stage: stage in mining in which the metal or mineral is extracted from the ground and processed on site or off-site.. Whether it can or not depends on its ability to attract capitalCapital: cash, property, equipment, services, and contracts or leases. or, at the very least, to attract a Major as a partner.

Acts and Regulations

A prospecting license is not required in Yukon. In Yukon, you stake a claim by going into the field and personally driving stakes into the ground around the place of interest. A single mineral claim in Yukon can be up to 1500 square feet in size. Multiple claims may be staked at one time. In B.C., you can use the Internet to make a claim.

To record a claim, prospectors submit an application and a fee to the Mining Recorder’s Office. Once a claim is staked and approved by the appropriate government agency, the prospector has the exclusive right to explore that piece of ground for a certain time. Any area of open 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. Land can be staked, including land traditionally used by Aboriginal people and communities. Land cannot be staked on an Indian Reserve or Category A Settlement LandsCategory A Settlement Lands: in Yukon, lands in which a specified First Nation owns both the surface and the subsurface.. Someone who has a new mineral right on Category B or Fee Simple Settlement Land has a right to access that claim without First Nation permission so long as no heavy equipment is used. (However, First Nations are asserting their rights on traditional territory in ways that are extending their influence at this stage. See Module 3: Getting the Most Out of Leverage.)

Environmental Impact

Prospectors and exploration companies sometimes carry out an inventory of environmental features, or conduct an environmental baseline studyBaseline Study: a report on soil and vegetation types, wildlife, and water analysis. Some also include social and cultural conditions. The background data provide a reference point that can be used to measure the impacts of a mining project over time. If the project goes ahead, that can be used in the environmental assessments., early in this stage. As official records of the condition of the natural environment before any mining occurs, these studies help establish a mine’s feasibility. Federal, provincial, and territorial governments encourage (but do not require) prospectors and exploration companies to communicate with Aboriginal people during environmental baseline studies. Consequently, these studies can be a good opportunity for Aboriginal people to enhance the prefeasibility and feasibility process with 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. (TK).

In the past, traditional knowledge was not very important to baseline studies. Researchers only took scientific information seriously. Some Aboriginal people consider traditional knowledge confidential, and some do not. Now, the Yukon Environmental and Socio-economic Assessment ActYukon Environmental and Socio-economic Assessment Act (YESAA): a federal law, passed by Parliament in May 2003. It establishes a process to assess the social, economic, and environmental effects of projects on the Yukon. The Act is a requirement of the 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. and Yukon First Nation final agreements. See http://www.yesab.ca/about_us/faqs.html (YESAA) and the processes of many other jurisdictions recognize traditional knowledge to be just as important as scientific information. Some exploration companies understand how traditional knowledge can help establish the conditions under which a mine may be more feasible. (For example, by understanding local patterns of animal behaviour, the company can work around migration routes and rutting grounds.) There is still a ways to go, but there is a growing realization of the value that traditional knowledge can add to the mining industry. (For additional information about traditional knowledge, see Module 3, “YESAA,” p. 3-9.)

4 Classes of Exploration Program

The government of Yukon divides exploration programs into four classes. Each class disturbs the environment to a different degree, so each class is subject to a different level of assessment and approval.

• Class 1 programs cause minimal disturbance and do not require government approval, but are subject to operating conditions.
• Class 2 programs cause moderate disturbance and require government approval.
• Class 3 programs cause significant disturbance. They require the submission of a detailed operating plan prior to approval.
• Class 4 programs cause significant disturbance. They require the submission of a detailed operating plan and possibly public consultation as well, prior to approval.

During the Exploration Stage, Class 1 and Class 2 exploration programs are most common. Class 3 and Class 4 programs typically occur in the second stage of mining, Feasibility and Planning. Class 2, Class 3, and Class 4 programs all also require assessment under YESAA. The regulations that apply to them are explained under the topic “Special Yukon Legislation,” p. 2-19 below.

The table below summarizes the approval requirements for all four classes of exploration program.

Engagement Protocols

Engagement protocols (or policies) are a way for Aboriginal communities to restrain the expectations and practices of companies before Class 2 exploration begins.

Engagement protocols are guidelines for companies to follow, step by step, when they wish to develop resources in traditional territories. These protocols can be very valuable to both a community and to a mining company. They make clear the community’s expectations as to how development inquiries are to be made and the issues to discuss. When Aboriginal communities have to negotiate several agreements over a short time, an engagement protocol can reduce the expense and the fatigue involved.

In the case studies selected for the Aboriginal Mining Guide, many Aboriginal communities wrote protocols as a result of their experience in negotiations. The Innu Nation involved with the Voisey’s Bay mine (see *Case Study #4, p. Intro-39) wrote A Matter of Respect: Guidelines to the Mining Industry. The protocol written by the Lutsel K’e Dene (see *Case Study #1: NWT Diamond Mines, p. Intro-10) has 12 clear guidelines for outsiders who wish the community’s permission to undertake activities. Alexco and NaCho Nyäk Dun wrote a Cooperation Engagement Protocol as a result of their consultations (see *Case Study #5: Keno Hill Silver District, p. Intro-45).

In B.C., Tahltan Nation has had a very detailed mining protocol since the late 1980s. In 2006, the Tahltan signed a SEPA with NovaGold Canada for a copper, gold, and silver mine at Galore Creek. The protocol helped to ensure that the agreement reflected the desires of the Tahltan.

An engagement protocol should be written in close consultation with the whole community. It should reflect the community’s long-term goals, values, and interests. The protocol should be clear in its expectations. It should avoid vague, general statements that people can misinterpret. In other words, even when the authors of the protocol are not around, development and negotiations should proceed in about the same way every time.

Some protocols are very detailed. Others instead describe a policy for engagement with resource developers. Each community will express its expectations in the way it finds most suitable. (Protocols that are extremely complex and demanding will be useful neither to the community nor to developers, however.) Just by clarifying its expectations, a community will help itself develop a long-term strategy of economic development.

See Appendix 1 for samples of Engagement Protocols.

Benefits and Opportunities

Exploration historically has occurred without much benefit going to Aboriginal communities. A Junior may employ a few Aboriginal people to provide some services. But it does not usually have the money or the motivation to do much more.

This has started to change over the last ten years. Communities that learn about the needs of the exploration companies are capturing benefits. Catering, transportation services, or direct employment on the exploration crew are all possible. Unlike a mine, that usually operates year round, almost all the benefits possible at the Exploration Stage are seasonal. But work experience gained at this stage can help build skills and knowledge that prove useful in other areas, whether or not a mine actually starts up.

Agreements

Agreements are of three types at this stage: Memorandums of UnderstandingMemorandum 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., 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. , and Joint VenturesJoint Venture: commonly, a business to which two or more parties contribute the essential land, capital, and services, in return for a share in its ownership and control. (Note: the Joint Venture is very strictly defined under Canadian law.).

Memorandums of Understanding

At the outset of exploration a community may want to consider negotiating a Memorandum of UnderstandingMemorandum 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. (MOU) with an exploration company. An MOU explains the principles that the signatoriesSignatory: any person or organization who has signed as a signatory to a document or agreement. will follow in order to work together for mutual benefit. Both sides make concessions. A community generally promises the company access to its lands for exploration, and not to interfere with permit applications. A company generally promises to take measures to protect the community’s environment or way of life. In some circumstances compensationCompensation: something (such as money) given or received as payment or reparation (as for a service or loss or injury). or access fees have been included as part of the agreement.

In the Exploration Stage, an MOU could also set out terms for future negotiations between a community and a mining or exploration company and for the capture of potential benefits. While MOUs have rarely been used this way in the past, recent experience indicates that it may be very worthwhile.

MOUs are not legally binding contracts. You are not obligated by the law to carry them out after you have signed. (An MOU may develop into a contract, however.)

Negotiation Agreements

Another option is for the community and the company to make a Negotiation Agreement. Negotiation Agreements are legally binding. They detail the principles under which the parties will make future agreements, if the mine continues to go forward.

Sometimes both a Memorandum of Understanding and a Negotiation Agreement are concluded. NaCho Nyäk Dun First Nation and Alexco Resources Corporation did that when they bargained over the development of Yukon’s Keno Hill Silver District. The MOU affirmed the First Nation’s cooperation and support for mining in the District, and for the mine’s eventual closure and reclamation. The Negotiation agreement expanded the MOU into a legally binding contract. (See *Case Study #5: Keno Hill Silver District, p. Intro-45.)

Joint Ventures (JVs)

There are contract opportunities to be gained during the Exploration Stage. Some of the best JVs available are for providing services to exploration companies. Catering, camp construction, equipment supply, sampling, fuel hauling, and expediting are examples of these services. Additionally, more Aboriginal groups are getting involved in exploration work itself, like diamond drilling. This involves some highly technical skills. JVs are one way for an Aboriginal community or organization to boost its capacity and take advantage of these opportunities.

Webequie First Nation is the only community near a nickel-copper deposit found by Noront Resources in the James Bay lowlands of northern Ontario. The community decided that a JV was the way to capture some benefit from the Exploration Stage. Webequie negotiated a JV with Cyr Drilling Ontario Ltd. in August 2008. Webequie owns 20% of the Joint Venture company. Cyr provides the training and jobs. Webequie has the option to buy out Cyr in 2013. Mining might go ahead at the site, or it might not. Either way, Webequie is positioned to capture benefits from exploration activity right away and can contract out to other exploration companies that may come into their area.⁶

Webequie and NaCho Nyäk Dun used different types of agreement to achieve different purposes. In NaCho Nyäk Dun’s case, an MOU and a Negotiation Agreement assured the mining company of community support for mining and cooperation. The First Nation then built into the Exploration Cooperation Benefit Agreement the opportunity to capture business contracts. NaCho Nyäk Dun is currently building sample boxes to hold drilling samples. In Webequie’s case, a JV helped the community to carry out the actual drilling.

Never Too Early for an Agreement

Despite a growing number of court cases about Aboriginal title and rights (see Module 3: Getting the Most Out of Leverage), exploration companies legally still have “free entry” to Crown land in Canada. Searching for and exploiting minerals gets a higher priority than nearly every other land use - including Aboriginal use of traditional lands.

Nevertheless, a recent study reveals that Aboriginal communities have won significant benefits from agreements made early in the mining process. The study documents several examples of Juniors who agreed to financial benefits to Aboriginal communities at the Exploration Stage. Interviews with many Juniors show that their exploration budgets are not as tight as many people believe. Six of these companies were willing to offer First Nations free or subsidized equityEquity: the dollar value of what a person or organization owns (as opposed to debt, which indicates what a person or organization owes). A person or organization can have an equity interest in something if they have part or full ownership. interest in a property. One Junior offered a 25% equity interest. Three Juniors were willing to pay First Nations a $70,000 compensation fee during the Exploration Stage. Many Juniors say they earmark 5-10% of their exploration budgets for the expenses relating to consultation with Aboriginal communities.⁷

It therefore makes sense to give attention earlier rather than later to negotiating agreements with exploration companies.