A recently signed accommodation agreement between Avalon Rare Metals Inc. and the Deninu K’ue First Nation (DKFN) has raised the industry bar on
Aboriginal engagement. Avalon’s agreement with the DKFN provides for business, employment and training opportunities, but it also goes beyond these
typical components of Impact Benefit Agreements (IBAs) by proposing a limited partnership. The DKFN will acquire a 3.3 per cent limited partnership stake
in the company. Along with the accommodation agreement, Avalon has agreed to transfer 10,000 of its common shares and 50,000 share purchase
warrants to the DKFN, subject to various contractual and statutory restrictions.
“This type of agreement is an advancement of the IBA model as it offers equity ownership rather than just cash transfers,” said Avalon president Donald
Bubar. “It’s new to the Northwest Territories [NWT], and while there are other examples in Canada, not many of them are in mining.”
The formal signing ceremony in July attracted local and federal politicians, including federal cabinet minister Tony Clement and NWT Premier Bob McLeod.
Bubar says Avalon hopes to finalize accommodation agreements soon with two other First Nations (Yellowknives Dene and Lutsel K’e Dene) near its Nechalacho
project, situated about 100 kilometres southeast of Yellowknife. These efforts are assisted by the Vancouver office of Fasken Martineau (previously Fasken
Martineau and DuMoulin). The law firm has helped apply the equity-based Aboriginal partnership model, used more widely in the energy sector, to mineral
projects. The firm’s Aboriginal practice group was strengthened by its 2000 merger with Vancouver-based Russell & DuMoulin, as many Aboriginal rights
cases affecting resource development originated in British Columbia.
Avalon’s new accommodation agreement builds on the experience of Vancouver-based Polaris Minerals Corp., which invited First Nations to participate in the
development of its Orca sand and gravel project on Vancouver Island in 2005. Fasken Martineau DuMoulin was involved in the development of a groundbreaking
limited partnership which resulted in the Namgis First Nation holding 12 per cent of the project and Polaris holding the balance. The Kwakiutl First Nation
participates in the Orca project through a traditional IBA.
Many Aboriginal groups are seeking direct partnership roles in resource projects within their traditional lands, as recently articulated by Shawn Atleo,
chief of the Assembly of First Nations. But the promise of equity-based participation is no guarantee of future Aboriginal support, as proponents of some
high-profile energy and pipeline projects have found.
In the case of Nechalacho, Chief Louis Balsillie insists that development will not come at the expense of the traditional lands where the DKFN continue to
hunt and trap. He publicly stated in July, “The mitigation of the environmental impacts and provision for environmental monitoring on these lands are
crucial to our members.”
For Avalon, the DKFN agreement and the potential of others to follow are critical in the development of what is considered to be the world’s largest rare
earth element deposit outside China. Bubar says Avalon is well-funded to complete a bankable feasibility study by 2013. If all goes according to plan,
construction would follow with a production start in late 2016.