Canada: Osoyoos Indian Band And Merit Mining Corp. Achieve Milestone Impacts And Benefits Agreement

Last Updated: June 19 2008
Article by Michelle Pockey and Kevin O'Callaghan

Fasken Martineau DuMoulin LLP assisted Merit Mining Corp. (TSX: MEM) to negotiate and conclude an Impact and Benefits Agreement (IBA) with the Osoyoos Indian Band. The IBA relates to the development and operation of Merit's Greenwood Gold Project.

This, in and of itself, is not unique. What is so unique about this deal, however, is that the permits were issued in parallel with the completion of the IBA. This is rare since it can often take much longer to negotiate an IBA. The fact that these two documents were completed at the same time demonstrates that both Merit and the Osoyoos Indian Band approached their relationship willingly, professionally and collaboratively, which, in turn, assisted the government in expeditiously completing the regulatory process.

The Greenwood Project - located near Greenwood in south-eastern British Columbia near the Canadian-U.S. border - is comprised of two advanced-stage gold and copper deposits, as well as a copper and subordinate gold deposit. The deposits are located on three properties wholly owned by Merit, subject to underlying royalties. The Project is supported by existing infrastructure: transportation, power, and natural gas, and a local skilled work force.

Development of the Greenwood Mill - a centralized 200 tonne per day gravity/flotation mill and tailings facility – has progressed rapidly. Construction commenced in late August 2007 and was completed ahead of schedule in the first quarter of 2008. Commissioning of the Greenwood mill commenced in March 2008. Processing of the 10,000 tonne bulk sample from one of the gold and copper deposits was completed in the second quarter of 2008.

The Mines Act permit application for full production at 200 tonnes per day was submitted to regulatory authorities in November 2007 with the company being issued the required permits to start production upon completion of the underground bulk sample. Fred Sveinson, Merit's president and CEO, following the ribbon cutting ceremony for the opening of the mine, stated: "We received our mining permit at the same time that we signed the Impacts and Benefits Agreement last week. Quite often you end up with your permit first and it takes quite a bit longer to get an Impact and Benefits Agreement in place, so we're really pleased." Although a signed IBA is not a pre-requisite to receiving the production mining permit, it demonstrates to the regulatory authorities that the company has consulted fully about the project with the First Nations and gives government confidence that its legal duty of consultation has been fulfilled. Production is expected to continue for the next five to ten years.

The IBA, specifically, supports construction and operation at the three mine sites. It also maintains that further agreements between the parties may be made if other new projects are considered for development in the Band's traditional territory.

The IBA was negotiated and concluded swiftly, due to the commitment of the parties to work together to identify, discuss and resolve the issues of concern. Key issues addressed in the agreement relate to business development, employment, training assistance and opportunities, and revenue sharing for the Osoyoos Indian Band. While the agreement is solely between Merit and the Osoyoos Indian Band, the interests of other First Nations in the area are expressly addressed. For example, by the terms of the agreement, the Osoyoos Indian Band will pass a portion of those revenues it receives to the members of the Okanagan Nation Alliance - an organization that represents the other aboriginal communities in the region. There are other provisions, including those respecting employment, that also provide for groups other than the Osoyoos.

Often it is difficult for project proponents to address successfully and in a timely manner the interests of aboriginal groups who have asserted traditional territories in the project area. The ability of the parties to structure the agreement to address such interests in such a short period of time is a testament to Merit's commitment to the local community in the area and to the recognition by the Osoyoos Indian Band of the benefits the Greenwood project can bring to the area and of its commitment to be inclusive of other aboriginal groups in the area in order to be able realize on that benefit for the short and long term.

Fasken Martineau's Kevin O'Callaghan provided strategic aboriginal advice to Merit in relation to the negotiation of this agreement. Michelle Pockey and Paul Wilson advised Merit in relation to the structure and drafting of the agreement. Merit also drew on Fasken Martineau's resources in specific areas, working with Georald Ingborg on securities issues and Josh Lewis on mining matters.

www.fasken.com

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