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Stornoway wins ‘social licence’ in talks with Cree for Quebec diamond project

By · March 28, 2012 · 12:27 am · Leave a Comment

 

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By Nicolas Van Praet

MONTREAL • At a time tension between First Nation communities and the resource sector remains high in many parts of the country, one junior company is bending traditional corporate practice in an attempt to win a “social licence” for Quebec’s first diamond mine.

Stornoway Diamond Corp. on Tuesday signed a binding agreement with the Cree Nation of Mistissini and the Grand Council of the Crees for its Renard diamond project in the Otish mountains of northern Quebec. The deal governs the long-term working relationship between the miner and the Cree parties throughout the project’s development, up to and past its projected startup in 2015.

The agreement is unusual for the level of detail it discloses — a summary says the company will reserve a quarter of the Renard goods and services contract bidding invitations for Cree businesses, set up a mechanism allowing the Cree to benefit financially from the success of the mine over its estimated 20-year lifespan, and consult the aboriginal tallymen in the territory on no-fly zones into the mine site during spring goose and fall moose hunt seasons.

But it’s the genesis of the negotiation that’s really unique. Vancouver-based Stornoway has stoked a relationship with the Cree of the James Bay Eeyou region since it first set foot on the land years ago, appraising its leaders of the diamond play’s financial projections and costs. In a very real way, it brought the Cree in as corporate insiders.

It’s not the only company to have woven ties with Quebec’s aboriginal groups. Goldcorp Inc. last year struck an agreement with the Cree nation for its Eleanore gold project that many said would set the standard for others to come. But rarely has a miner gone as deep in its relationship with First Nations.

“We went under confidentiality with the Crees and gave them full access to every aspect of our project,” Stornoway chief executive Matt Manson said in an interview. “Quite often these agreements are negotiated in an adversarial context. And we sort of recognized that we were dealing with people who were very sophisticated. And we went in the opposite way” into nearly-full transparency.

The approach has its benefits, especially as it relates to securing a motivated workforce, Mr. Manson said. Stornoway’s biggest operating risk with the Renard mine will be finding skilled employees, and developing a close partnership with the Cree community will help offset that risk.

“We view the agreement positively as it demonstrates the company’s commitment to and success in obtaining a social licence for the project, above and beyond the satisfaction of regulatory environmental requirements,” Desjardins Securities analyst Brian Christie said.

Handout/Stornoway Diamond Corp.

The Renard mine site is located about 350 kilometres north of Chibougamau in the James Bay region. Stornoway’s feasibility study for the project estimates production would peak at 2.1 million carats per year.

The Renard mine site is located about 350 kilometres north of Chibougamau in the James Bay region. Stornoway’s feasibility study for the project estimates production would peak at 2.1 million carats per year, with an operating cost of $54.71 per tonne yielding a 68% operating margin over the first 11 years of mine life. Pre-production capital cost stands at $802-million.

One of the problems in Canada’s past has been to not involve First Nations or Inuit in resource projects until work begins, said Thomas Molloy, a native land claims expert with law firm Miller Thomson LLP in Saskatoon. “Meanwhile, a whole bunch of suspicion and mistrust foments. [In general] this is improving but it’s nowhere we it should be.”

The agreement signing comes as mining giant Rio Tinto revealed it has begun exploring a potential sale of its diamond business, which consists of three mines and an advanced project including the Diavik mine in the Northwest Territories. BHP Billiton is also trying to sell its nearby Ekati mine.

While demand for diamonds is growing, a lack of new discoveries is limiting the kind of expandability both companies are seeking in their resource assets.

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