New corporation an excellent idea

In March 2007, people lucky enough to own shares in a small Ontario company called Wolfden Resources made a lot of money — on the back of a major set of Nunavut mineral properties that have yet to produce even a single gram of ore.

Wolfden’s shareholders, including no doubt, various company officers, likely realized a profit of at least 180 per cent when a big Australian firm called Zinifex paid them $346 million to buy up all of Wolfden’s shares.

Since then, the huge Izok Lake and High Lake projects and four other mineral deposits in the Kitikmeot, once controlled by Wolfden, have changed hands twice. Those properties now lie in the hands of a company controlled by China Minmetals — and have yet to be turned into working mines.

Until that occurs, few benefits will ever flow to the Inuit of the Kitikmeot region — even as outsiders get rich by making shrewd bets on the market value of mineral assets that never get developed.

That’s because Inuit impact and benefit agreements, and other provisions aimed at giving Inuit a piece of the action, apply only to working mines, not undeveloped exploration projects.

And at the same time, Inuit do not have the power to decide when such projects will be developed. To get that power, you have to own the company that owns the mineral property.

It’s this kind of situation, and others, that likely persuaded the Kitikmeot Inuit Association to propose the creation of a new, Inuit-owed resource development company: the Nunavut Resources Corp.

Charlie Evalik, the president of the Kitikmeot Inuit Association and chair of the new corporation, said as much in the corporation’s announcement.

“While our current benefits plans get us the jobs and contracting opportunities we deserve, and our land holdings will generate royalties, Inuit still depend on others to make the development decisions and investments,” Evalik said.

It’s still too early to say if the Nunavut Resource Corp. will achieve its stated goals. The company formed just this month and is still assembling a board of directors.

But it’s an excellent idea, and the Kitikmeot Inuit Association deserves praise for pushing it forward. It’s a bold new idea that might just pay off. Its board of directors, incidentally, is to include members with expertise in finance and mineral development — a sign the new company will get the best advice possible.

It’s clear the Inuit of the Kitikmeot and other regions are tired of watching promising mining projects sit undeveloped in places that suffer some of the highest unemployment rates in Canada.

To fix that, they plan to use the new corporation to buy into such projects, and then exert more influence over when and how they are developed. At the same time, the corporation will give Inuit access to some of the enormous profits those projects are capable of producing. Our only question is why it took so long for someone to come up with such a plan.

Of course, direct investment in mining projects carries enormous risks. The market value of a mining property rests heavily on the market value of the minerals it holds — and these prices can fluctuate wildly. Another big constraint is the lack of transportation infrastructure. Without at least some help from government to build ports and roads, some mineral properties will never be viable.

The Izok Lake project, for example, was expected to be developed into a mine in the early 1990s. But the company that owned the property then was forced to put it into mothballs — the price of zinc was just too low. And the site is still unconnected to the sea by a road and port.

There are other questions surrounding the Nunavut Resource Corp. that can’t be answered until after the new company matures and executes its plans.

For example, how will the corporation report its financial performance to beneficiaries? Historically, land claim based organizations have not, to say the least, been known for their transparency and accountability.

If the resource corporation earns profits, how will they be used? How will the corporation and its owners handle conflicts of interest and other ethical issues? What mineral projects will they invest in and will they be profitable?

These and other questions, all of which are vital to the interests of owners and beneficiaries of the new corporation, will likely be answered in time.

But in leading the way towards the creation of this new company, the Kitikmeot association demonstrates once again why it’s likely the best-led and best-managed Inuit association in Nunavut. The Nunavut Resource Corp. should get a chance to show what it can do. JB