Financial Post

(From left): Randy Hepper, general manager GM Ventures West, Ivo Mitev, owner of Midnight Sun Energy Ltd., and Jasper Lamouelle, president of Tlicho Investment.

Handout/Tlicho Investment.(From left): Randy Hepper, general manager GM Ventures West, Ivo Mitev, owner of Midnight Sun Energy Ltd., and Jasper Lamouelle, president of Tlicho Investment

Many First Nations groups are involved in Canadian mining developments, but few can claim to have their own mining division. That’s exactly the ambition of the Tlicho, a self-governed First Nation with a sprawling land base in south central Northwest Territories.

As part of a ratified treaty with the Canadian government signed in 2005, the Tlicho gained subsurface rights to 39,000 square kilometres of land with known deposits of gold, cobalt, diamonds and other minerals.

For years the four communities within the Tlicho have been involved in the territory’s diamond mining industry, and today there are several First Nations-owned mining service companies within Tlicho Investment Corp., its local holding company.

The modern-day treaty could allow the Tlicho to go beyond simply offering mining services. The group is now considering early-stage geological tests on its prospective lands and, eventually, exploring the possibility of developing the mines themselves.

“We’re just taking one step further toward controlling our own resources,” says Jasper Lamouelle, the president of Tlicho Investment.

It is a notion that is gaining popularity among First Nations. After a series of recent legal decisions that have gradually bolstered the rights of Canadian aboriginals, many are now looking at ways to invest real equity into resource developments taking place on their traditional lands.

It could mark a stark shift in how resources are developed in Canada, particularly in the far North.

Most of the benefits seen by First Nations from mining developments on their lands tend to flow through mandatory impact benefit agreements (IBAs), which are structured on a case-by-case basis. Whether those agreements have been ultimately successful varies widely depending on the project in question, though the consensus seems to be that mining companies and aboriginals are gradually—though imperfectly—improving the effectiveness of IBAs.

But aboriginal leaders are now looking further afield. First Nations ownership in resource development is an obvious next step says Harold Calla, executive chair of the First Nations Financial Management Board (FNFMB) based out of Vancouver.

Not only would that include the potential for financial gain, it would also give First Nations more leverage in discussion over environmental stipulations and mitigation efforts.

“If you have a substantive enough equity position you find yourself at the board table,” Calla says.

Industry, according to several surveys, is supportive of the idea. The challenge for First Nations is securing the up-front capital required to buy a financial stake in a company or a resource.

Mining developments (including oil and gas projects) tend to be capital-intensive, requiring vast sums of capital for aboriginals to acquire a meaningful stake. Few communities possess the collateral needed to apply for a conventional bank loan.

“The reality is that First Nations don’t have the strength of balance sheet to support it,” he says. “We’ve been locked out of the economic mainstream for so long that we haven’t had 150 years to develop knowledge, expertise and wealth.”

Calla, like others, says that in order for aboriginals to meet those initial capital requirements, the government could offer federal loan guarantees to reduce risk.

First Nations could also band together, bolstering their collective buying capacity. An example is the Nations Major Projects Coalition, a coalition of 27 aboriginal groups in British Columbia, which is currently assessing whether it could make sizeable investments in both extractive and non-extractive industries.

Proponents of federal loan guarantees to First Nations like to refer to the issue as a “non-partisan” one, but the safety of the investment would likely need to be especially certain to make such loans politically tenable.

Making large, collective investments will require very complex and sophisticated legal and financial frameworks. Calla says the FNFMB is studying a hypothetical pipeline project with a 30 per cent First Nations equity position. It plans to publish its findings at the end of the year.

Assuming financial risks would also force First Nations to take a more direct interest in the health of the development, says Brian Lee Crowley, managing director of the Macdonald-Laurier Institute.

“Our view is that equity participation is a particularly useful way to get aboriginal people involved, because it ties their interest in that development to the development’s long term success.”

In the long term—and in an ideal scenario—he says that aboriginal communities could begin to build self-sufficient mining divisions with deep knowledge bases, in turn harnessing even more control over local resource developments.

“This is not going to be a cap-in-hand moral suasion kind of thing,” he says.

“I think you’re going to find that they are savvy business people who have made a lot of money developing resources.”

For their part, the Tlicho are considering running early-stage tests on some of their prospective lands to eventually prove up reserves. In time, they hope to attract outside investors to the region. One company is already conducting a feasibility study in a small slice of Tlicho property with gold and cobalt deposits, Lamouelle says.

It is far from certain whether the lands will be developed—and if so, whether it will be a prosperous undertaking. But having ownership over the land will at least give the Tlicho a meaningful position of influence if it does.

“There’s no project that’s going to go ahead without the local aboriginal approval,” Lamouelle says. “So the next step for aboriginals is to buy an equity stake or develop some of these resources on their traditional territory.”