Doug Ashbury
Northern News Services

Yellowknife (Jan 31/00) - Uncertainties in Canada's regulatory regime are not helping the country's junior mining companies, Mike Vaydik, executive director of the NWT Chamber of Mines, said.

Junior mining companies like Aber Resources, which owns 40 per cent of the Diavik diamond project, are the companies that "find the ore bodies," he said.

But what is the point of exploring for and finding an ore body if it can't be funded to production, he added.

Vaydik made the comments after the federal government declined to issue a land-use permit to Diavik Diamond Mines earlier this month. If Diavik does not get the permit soon, it will have to delay the project a year and that means higher costs.

Aber still has a fairly difficult job ahead -- trying to raise more money for production -- and news of a possible delay doesn't help, Vaydik adds.

Aber has raised $215 million so far, about 40 per cent of what it needs, for its share of construction costs. Aber president Bob Gannicott could not be reached for comment.

A (delay) may be one thing for Rio Tinto, which owns 60 per cent of the Diavik project, but it's another for Aber Resources. They're still in the process of taking a discovery to production, Vaydik said.

Diavik needs the permit to prepare its Lac de Gras site for fuel and equipment, which is to be trucked via the ice road over the next eight weeks. If the site is not ready, materials cannot be delivered and construction of the mine will be delayed a year. As of Thursday, it was still unknown if the delay would occur.

The recent permit development creates uncertainty in the minds of investors, Vaydik said.

Following low commodity prices, high-risk investors are turning to Internet stocks and away from Canadian juniors, he said.

"It (a delay) sets Aber up for a takeover."

Aber's stock declined with the recent announcement that construction of the project could be delayed.

After news of possible delay, Aber's stock hit a 52-week low of $7.10. By Thursday afternoon, it rebounded to $8.15. But the price is still well below its 52-week high of $16.10.

Company raises holdings

Franco-Nevada Mining has taken advantage of Aber's low stock price by raising its ownership in Aber. The gold royalty company recently raised its holdings in Aber to 14.3 per cent from 12.4 per cent by buying 1.06 million shares for $8.3 million. Franco-Nevada now holds 7.7 million Aber shares.

Todd Ferguson, an investment advisor with TD Evergreen in Edmonton, said the increase is a "significant" amount.

Asked if Aber could be a takeover target, Ferguson said, "potentially."

"The frustrating thing with Aber is that the (Diavik) deposit is so valuable. The value of the deposit is not anywhere near reflected in the share price."

Ferguson went on to say delays raise costs and at some point Rio Tinto may put the project on ice. If that happens, the real losers are in the North, he said.

People will miss out on jobs and other benefits. Canada loses because its reputation is tarnished on the investment stage and the federal government loses tax revenue, he adds.

"I can appreciate the minister (Indian Affairs and Northern Development Minister Robert Nault) saying they don't want another Giant, but Giant is a result of horrific mismanagement," Ferguson adds. Environmental cleanup at Yellowknife's Giant mine could cost the federal government $250 million.

For its part, the federal government said there will be no permit until Diavik concludes its environmental agreement required under the Comprehensive Study Report.

In response to the decision over the permit, Vaydik wrote to Minister Nault asking for a copy of all regulations pertaining to mining in the NWT.

"I ask that you particularly highlight the sections that indicate that a development proponent will be required to sign an environmental agreement and negotiate socio-economic and impact benefit agreements before operating permits will be issued.

"We are very familiar with the regulations affecting our industry and have never been able to find these particular requirements," he wrote.

In fact, the environmental agreement is a recommendation of the project's Comprehensive Study Report conducted by federal departments. Impact Benefit Agreements are private contracts between companies and aboriginal groups. DIAND has nothing to do with IBAs.

As for BHP, majority-owner of the Ekati diamond mine, spokesperson Graham Nicholls said BHP had a significant amount of infrastructure in place in the fall of 1996 under approvals related to bulk sampling. Ekati went into production in October 1998.

As for BHP's environmental agreements and IBAs, Nicholls said in the fall of 1997, the federal government established a 60-day timeframe for these agreements to be completed or substantially completed.

The environmental agreement as well as the two most significant IBAs were completed in time, he said. The Akaitcho Treaty 8 and Dogrib Treaty 11 IBAs were signed before water licence and final land-use permits were issued, he added.

Two remaining IBAs were substantially completed by the deadline and finished soon after, he said.