NNSL Photo/Graphic


Home page text size buttonsbigger textsmall textText size Email this articleE-mail this page

Inuit to get first mineral royalty
Payment by Agnico-Eagle Mines Ltd. for Meadowbank gold mine territory's first project in production

Thandie Vela
Northern News Services
Published Friday, December 2, 2011

For the first time in the history of Nunavut, the Inuit will collect a royalty payment for their land's minerals.

NNSL photo/graphic

Production drills in the Goose pit at the Meadowbank gold mine last September. Mine proponent Agnico-Eagle Mines Ltd., has cut the first royalty cheque for the mineral title. - photo courtesy Agnico-Eagle Mines Ltd.

And thanks to a recently passed resource revenue sharing policy, Nunavut Tunngavik Inc. (NTI) the default designated Inuit association knows what will be done with the 12 per cent net profit interest royalty from Agnico-Eagle Mines Ltd.'s Meadowbank gold mine.

"We established the 12 per cent, and now all of a sudden Agnico-Eagle is cutting a royalty cheque," said Terry Audla, CEO of NTI. Agnico-Eagle paid $2.3 million to the federal government, which is to pass it on to NTI.

Since the ratification of the Nunavut Land Claims Agreement in 1993, mining and exploration companies have been required to pay a minimum $12 royalty for every $100 of net profits from mineral titles on Inuit-owned land.

Meadowbank is the first mining project to reach production since, and prior to the resource revenue policy being passed by NTI at its Nov. 23 annual general meeting, there was no plan in place as to how the Inuit association would handle mineral title royalty payments.

"It's a major issue for us based on the fact that all three regions and NTI have all agreed, are all on one page, for the mechanisms to be put in place," Audla said.

The money once it arrives from the federal government will go into a newly created Resource Revenue Trust established by NTI and will be used to fund projects, programs and activities in Nunavut's communities.

The money in the operating fund is to be distributed 30 per cent to NTI, 10 per cent to each regional Inuit association, with the remaining 40 per cent distributed to the regional Inuit associations on a per-capita basis.

As for the money in the endowment fund, the policy states it should be distributed annually according to the existing formula after it exceeds a $100-million threshold.

While the royalty payments will depend on several factors including market commodity prices and expenses to the mining company for its operations and construction NTI is hoping this threshold will be reached within five years.

Agnico-Eagle made the royalty payment of $2.3 million in April to the Government of Canada because the Meadowbank lease is grandfathered (it was titled prior to the land claim agreement during the project's exploration stage). Under the terms of the Canada Mining Regulations, the federal government is to forward the payment to NTI.

NTI has not yet received the payment, which is still going through Aboriginal Affairs and Northern Development Canada's internal processes. It is unknown when the payment will be issued to NTI, and a department official was not available before press time.

A mining company will never be required to pay the net profit royalty to both the federal government and the Inuit association because land claims are clearly settled in the territory. The rates are about the same, NWT and Nunavut Chamber of Mines executive director Tom Hoefer said.

"They set the royalty years ago, approximately the same as what the federal government charges on Crown lands," Hoefer said. "So basically nothing would change for industry if they're working on NTI or Crown lands, from a royalty payment perspective. That's a good thing."

The maximum 13 per cent net profit royalty rate is also competitive with jurisdictions around the world, Hoefer added, pointing to a study done three years ago by the Mining Association of Canada and Aboriginal Affairs.

All of Nunavut's mining projects that are currently in the exploratory, pre-construction, and environmental assessment stage are on Inuit-owned land, Audla said, including Baffinland Iron Mines Corp.'s Mary River project, and Meliadine, Agnico-Eagle's second Kivalliq region gold project.

Agnico-Eagle has an estimated 2.6 million ounces of probable gold reserves at Meliadine, and 3.5 million ounces of proven and probable gold at Meadowbank.

Production initially began at Meadowbank in March 2010.

Shares of Toronto-based Agnico-Eagle closed at $44.93 Thursday on the Toronto Stock Exchange.

E-mailWe welcome your opinions. Click here to e-mail a letter to the editor.