December 20, 2011

On December 8, 2011, the Mackenzie Valley Environmental Impact Review Board (MVEIRB) released its Report of Environmental Assessment and Reasons for Decision for Canadian Zinc Corporation's proposed Prairie Creek Mine (Environmental Assessment Report) – a Zinc/Lead mine that is surrounded by the recently expanded Nahanni National Park Reserve in the Northwest Territories.  Although the mine has broad support in local communities and from First Nations, there was a strong push to have the level of environmental protection be higher than what might otherwise be permitted, due to the location within the Park.

The EA Report is the product of a comprehensive process that included: technical sessions, information requests, community hearings and a two-day public hearing.  At the conclusion of this process, the MVEIRB concluded that the proposed development is not likely to have any significant adverse impacts on the environment or to be a cause for significant public concern and, therefore, concluded that the mine could proceed to the regulatory phase after a mandatory ten day waiting period. 

This result emphasizes two key elements to a successful approach to environmental assessment: (1) taking a flexible approach with a willingness to redesign some aspects of the project in order to avoid impacts; and (2) pursuing relationships with First Nations with the goal of coming to agreements that provide benefits to both parties.

Fasken Martineau's Kevin O'Callaghan advised Canadian Zinc throughout the process and represented the company at the public hearing.

Background

The Prairie Creek mineral deposit is composed of zinc, lead and silver. The mineral resource at the Prairie Creek Project comprises total Measured and Indicated Resources of 5,840,329 tonnes grading 10.71% zinc, 9.90% lead, 0.326% copper, and 161 grams silver per tonne and a large Inferred Resource of 5,541,576 tonnes grading 13.53% zinc, 11.43% lead, 0.514% copper and 215 grams silver per tonne.[1] Canadian Zinc anticipates that the resource is capable of supporting a mine life in excess of fourteen years.

The proposed new operation at Prairie Creek utilizes the existing infrastructure and facilities that were built in the 1980s and will be upgraded and enhanced to meet current-day environmental standards. The improvements proposed for specific site facilities will further mitigate the potential impact the Project may have on the environment. Specifically, the Company proposes to place waste rock and tailings underground in a cemented backfill mix, use the existing large pond for temporary water storage, and place development waste rock in an engineered facility removed from the Prairie Creek floodplain.

In June 2009 new legislation was enacted to provide for the expansion of Nahanni National Park, resulting in an expansion of 30,000 square kilometres, making it the third largest national park in Canada. The expanded park covers most of the South Nahanni River watershed and completely encircles the Prairie Creek Mine. However, the Mine itself and a large surrounding area of approximately 300 square kilometres is specifically excluded from the park and is not part of the expanded park. The legislation enables Canada to consent to use of the expanded park for the purposes of a mining access road leading to the Prairie Creek Area, including the sites of storage and other facilities connected with that road.

In pursuit of development of the Prairie Creek Mine, Canadian Zinc submitted an application for a water licence and accompanying land use permits in May and June 2008.  Pursuant to authority granted to them under the Mackenzie Valley Resource Management Act (MVRMA), on August 8, 2008, Aboriginal Affairs and Northern Development Canada (AANDC) referred the Prairie Creek Mine development to environmental assessment. The referral was based on a request from the Nahanni Butte Dene Band. On August 11, 2008, the Review Board notified the developer that it had initiated an environmental assessment of the Prairie Creek Mine.

The environmental assessment process proceeded from August 2008 through to December 2011.  The steps in this process are reflected in the below chart from the EA Report[2] (p. 15):

Throughout this time and in parallel with this process, Canadian Zinc has developed relationships with the local First nations and communities and has received significant support – support that was recognized by the MVEIRB in the EA Report (p.vii):

The Prairie Creek Mine project has broad support from First Nations and communities within the Dehcho Region. Impact Benefits Agreements have been signed between Canadian Zinc Corp. and the Nahanni Butte Dene Band and Liidlii Kue First Nation respectively. In the Review Board's view, socio-economic impacts and benefits are appropriately addressed through the Socio-economic Agreement between Canadian Zinc Corp. and the Government of Northwest Territories.

The Environmental Assessment Report

The EA Report is over 130 pages long, but the key elements are included in the Executive Summary – the four pages at the beginning of the document.  The central findings of the MVEIRB are summarized by the board as follows:

The Review Board finds that the Prairie Creek Mine is not likely to have significant adverse impacts on the environment or to be a cause of significant public concern. The Review Board has therefore concluded that an environmental impact review of this proposed development is not necessary and that the Prairie Creek Mine project should proceed to the regulatory phase for approvals.

The Review Board based its decision on the assumption that Canadian Zinc Corp. will fulfill its commitments made during the proceedings. In the Review Board's opinion, it is therefore important that the developer, appropriate regulatory authorities and government agencies ensure that the developer fulfills its commitments listed in Appendix B and described throughout this document.

The entire development was reviewed, with particular attention paid to potential for impacts regarding:

• Water quality from mine effluent
• Water storage and treatment
• Ecological integrity of Nahanni National Park Reserve
• Tailings storage
• Winter road construction and operation
• Closure and reclamation
• Flooding, slope stability and emergencies
• Social and human environment

The MVEIRB was complimentary of Canadian Zinc's approach to the environmental assessment, noting that the company had proposed design modifications to the mine site and winter access road throughout this environmental assessment to improve the project and minimize potentially adverse impacts to the environment.  As a result, the MVEIRB concluded that the commitments made by the company were sufficient to mitigate any potential for adverse effects.

The MVEIRB did, however, have three suggestions that it felt would assist the regulatory agencies in monitoring and management of the potential impacts of the development.  With respect to water storage, the board suggested that, "construction of a second pond may address a broader range of risks and result in better water management on site and improved water quality in Prairie Creek."  The board considered that a detailed Tailings Management Plan should be developed through the regulatory phase, and suggested that it be a part of the water licence.  Finally, the board suggested that, "the developer use secondary containment of concentrate during transport along the winter road to reduce the risk of contaminant dispersal", however left the details of that up to the regulatory agencies.

The EA Report reflects the decision of the MVEIRB, however, two of the seven board members did not entirely agree with the decision of the majority and wrote a short dissenting opinion (which does not form part of the board's final decision).  It should be noted that in conclusion the dissenting board members are not against the mine being developed, but just of the opinion that the company's commitments and the suggestions be framed as binding mitigation measures under the MVRMA.

The EA Report and Decision has been forwarded to the Honourable John Duncan, Federal Minister of Aboriginal Affairs and Northern Development. The Review Board has concluded that an environmental impact review of this proposed development is not necessary and that the Prairie Creek Mine project should proceed to the regulatory phase for approvals.

The regulatory stage, managed by the Mackenzie Valley Land and Water Board (MVLWB) with input from territorial and federal agencies, will be the permitting stage in which the permits and licences are issued by the Water Board. These permits may include the suggestions included in the EA Report.

The MVRMA provides that no regulatory authority can issue a licence, permit or other authorization before the expiration of ten days after receiving the Report of Environmental Assessment from the Review Board. The MVRMA also provides that the Minister may order an environmental impact review of the proposal, notwithstanding the Review Board's determination.

Conclusion

The positive EA Report is very encouraging news for mining in the Northwest Territories, providing needed confidence that the environmental assessment process, although lengthy, can be worth the effort.  Important to note are the comments the MVEIRB made regarding the approach the company took to design modifications and commitments to avoid potential impacts, as well as the emphasis the board placed on the agreements that the company had in place with First Nations, as well as the socio-economic agreement with the NWT.

The decision of the MVEIRB can be found here: http://reviewboard.ca/upload/project_document/EA0809-002_Report_of_Environmental_Assessment_and_Reasons_for_Decision_1323385214.PDF

The full press release from Canadian Zinc can be found here: http://www.canadianzinc.com/docs/NR120911.pdf

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[1] Technical Report October 2007, Minefill Services Inc Dr. David Stone and Stephen Godden, Qualified Independent Persons, in compliance with NI 43-101

[2] Report of Environmental Assessment