Canada: Cliffs Denied Easement Over Canada Chrome Mining Claims

Last Updated: October 4 2013
Article by Neal J. Smitheman and Kimberly Potter

Cliffs Natural Resources Inc. ("Cliffs") lost its application for an easement over a series of mining claims held by Canada Chrome Corporation ("CCC"), a subsidiary of KWG Resources Inc. ("KWG"). The mining claims that were the subject of the application were staked along a series of linear sand ridges from the Big Daddy chromite deposit in the McFaulds Lake region of Northern Ontario, commonly referred to as the "Ring of Fire", south to Exton, Ontario (the "CCC Claims").


In 2008, KWG discovered the Big Daddy deposit in a joint venture with Spider Resources Inc. ("Spider"). In 2009, KWG approached Cliffs to become a shareholder of KWG for the purpose of assisting with the development of Big Daddy. With Cliffs' support, KWG staked the CCC Claims for the purpose of, among other things, building a railway that would connect the Big Daddy deposit with a distribution point in the south.

After CCC staked the CCC Claims and began performing assessment work, Cliffs acquired the Black Thor chromite deposit in the Ring of Fire through its acquisition of Freewest Resources Canada Inc. Cliffs then bought out Spider, which left KWG in a minority position with respect to the Big Daddy deposit. Cliffs attempted to acquire KWG's remaining interest in Big Daddy; however, KWG was not willing to accept Cliffs' terms. Although Cliffs was initially supportive of KWG's plans to build a railroad to Big Daddy, Cliffs began to promote the idea of building a road instead. When CCC did not consent to Cliffs' use of the surface rights over the CCC Claims, Cliffs brought an application before the Mining and Lands Commissioner (the "MLC") seeking an order dispensing with the need for CCC's consent. Under s. 51 of the Mining Act, a mining claim holder has a prior right to surface use for prospecting and the efficient exploration, development and operation of the mines, minerals and mining rights.

The Decision of the Mining and Lands Commissioner

The MLC found that there was ample evidence demonstrating that the easement sought by Cliffs would interfere with the development of the CCC Claims. The proposed easement follows a line of boreholes drilled by Golder Associates on behalf of KWG, which indicate where high ground is located. The MLC found that the importance of the borehole locations could not be underestimated, as both parties face topography and geography that offers little in the way of choice when it comes to the location of a road or railroad. No evidence was led to support an argument that a road and railroad could coexist within the available space.

One of the arguments advanced by Cliffs was that staking the CCC Claims for the purpose of building a railway was invalid. In rejecting this argument, The MLC found that the Mining Act does not say anything definitive about the uses that a mining claim holder may put to the surface. Moreover, the MLC found that it was disingenuous for Cliffs to act as though the claims had been staked for a purpose with which they did not agree or considered invalid when these claims were staked for this purpose, among others, with Cliffs' support. The MLC noted that there had been no challenge by the Ministry to the legality of the CCC Claims under s. 54 of the Mining Act.

The MLC further rejected Cliffs' argument that CCC had the burden of demonstrating that a conflict existed between the easement and CCC's intended use of the CCC Claims. Cliffs was obliged to provide information that would assist the tribunal in deciding whether the consent of CCC should be dispensed with. In this respect, the MLC found that CCC's complaint that it had difficulty obtaining sufficient information about Cliffs' proposed activities on the surface of the CCC Claims was valid. Indeed, the MLC shared in CCC's frustration in having to ask for information that it felt was necessary to make an informed decision. The MLC further found that CCC did not have time to properly understand, let alone describe, how its interests would be negatively affected by the easement; by the time Cliffs requested consent to the use of surface rights from KWG, Cliffs had already notified the Ministry of Natural Resources of its intentions to apply for an easement.

Finally, the MLC rejected Cliffs' submission that there was a public component to Cliffs' application. The MLC noted that no one from the Ministry participated in the hearing to speak to this issue. Instead, the MLC saw Cliffs' actions as confined to protecting its own corporate goals. 

This decision is sure to have far-reaching impact not only in the Ring of Fire, but on the rights of mining-claim holders across Ontario.

CCC was represented by senior litigation lawyer, Neal Smitheman, with the assistance of Kimberly Potter, an associate in the litigation group, and Michael Bourassa, Global Mining Group, who provided assistance on corporate matters and issues in the Mining Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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