Rio Tinto set to buy majority stake in proposed diamond mine east of Prince Albert

James Smith Cree Nation has vowed to fight the development, saying it infringes on trapping territory and would result in the destruction of a sacred burial site

The proposed project, as viewed from the air. Photo Courtesy Star Diamond Corp.

Alex MacPherson, Saskatoon StarPhoenix and Daily Herald staff*

One of the world’s largest mining companies is exercising its right to buy a majority stake in a proposed diamond mine east of Prince Albert for $75 million, years before it had to make a final decision on the project.

Saskatoon-based Star Diamond Corp. said Friday that Rio Tinto Exploration Canada Inc. sent notice that it plans to acquire a 60 per cent share in the site as outlined in an option agreement signed in the summer of 2017.

The Anglo-Australian mining giant’s decision comes well before the end of the seven-and-a-half-year deal, and just over a year after the Saskatchewan government gave the proposed mine environmental approval.

The announcement sent Star Diamond’s share price rocketing up to $0.26, its highest point in more than six months.

“I think this clearly shows the quality of the project in the heart of Saskatchewan. It’s exciting,” Star Diamond President and CEO Ken MacNeill said in a brief telephone interview Friday morning.

Rio Tinto is expected to continue taking samples and assembling a sample processing plant at the site 50 kilometres east of Prince Albert before, at some point in the future, deciding whether to take the project to a pre-feasibility study phase.

While the company’s commitment does not signal its intention to bring the project into production, a New York-based diamond industry analyst said Rio Tinto’s decision signals that is a “very, very realistic possibility.”

“It seems like they’re very enthusiastic about it,” Paul Zimnisky said.

Rio Tinto is regarded by mining industry insiders and investors as a serious player whose involvement in an exploration project indicates there is a real chance that project could be developed into a mine.

Star Diamond, formerly Shore Gold Inc., has been working to build the mine since 1995. The company issued a brief statement saying it would review Rio Tinto’s notice and provide further information after the review was complete.

In a preliminary economic assessment released last spring, Star Diamond shaved around $500 million from the expected cost of building the open-pit mine on its Star-Orion South property in the Fort à la Corne forest.

The project is now expected to cost $1.41 billion and have a lifespan of 34 years. It’s expected to employ roughly 730 people during full operation.

The environmental approval comes with multiple accommodations for nearby James Smith Cree Nation, including reserving a portion of the forest for band members’ use and $161,250 in annual payments for community programs from Star Diamond.

While James Smith Cree Nation didn’t respond to a request for comment Friday, they were vocal in their opposition to the project when the environmental approval was given.

Last October, they vowed to continue opposing the project, saying it negatively affects the community’s treaty rights and culture.

“The way things stand, everyone else will get the benefits of a mine while we are left with all the consequences,” James Smith Chief Wally Burns said in a written statement. “There will be no mine until our peoples’ interests are satisfied.”

Environment Minister Dustin Duncan gave official approval to the project’s environmental assessment on Thursday. In his decision, Duncan wrote that any harmful effects could be “eliminated or minimized,” if Star-Orion stuck to their proposal.

The company plans to use work camps and staggered shift changes to offset the increase in heavy traffic. They also included a decommissioning and reclamation plan, which includes removing facility infrastructure, capping and revegetating tailings piles and partially back-filling the Star pit once the mine is decommissioned. The company is also considering filling the pits with water from the South Saskatchewan River, however that plan is subject to further review.

In an interview with the Herald last year, Duncan said the government was confident the decision was the right one.

“Diamonds are not something that in the past we’ve seen as a commercial resource development of this size,” Duncan explained. “I think all of that factored into leading to what would certainly be considered the longest environmental assessment process that we’ve gone through.”

However, that decision didn’t sit well with leaders from James Smith Cree Nation. The community sits adjacent to the proposed development site, which is located roughly 65 km east of Prince Albert.

In a statement sent to the media late Thursday night, James Smith leadership accused the provincial government of failing to meaningfully address environmental concerns, while also violating traditional hunting rights by limiting access to areas where hardly anyone hunts, fishes or traps. The provincial government has set aside conservation areas adjacent to the mine for traditional uses, a decision made following consultation with local Indigenous leaders.

“The mine itself will require the permanent destruction of an irreplaceable sacred site, continuing the Indian Act and residential school legacy (of) crushing our spirituality so others can benefit,” Burns said. “Investors should beware. While this appears (to be) a major breakthrough for the mine, there will be no project until our interests have been satisfied. Shoving this mine down our throat will not work.”

Some leaders took issue with the environmental impact statement, which they said incorrectly states how much of the Fort à la Corne Forest will be affected. Other leaders, like Peter Chapman First Nation Chief Robert Head, said the more they looked into the environmental assessment, the less and less willing they were to support the project.

The provincial government had a working group that directly consulted with James Smith Cree Nation during the process. Duncan said he remains satisfied that they followed through on all their obligations to consult local First Nations on the project.

“It’s not going to satisfy everybody,” Duncan said. “We certainly understand that. Certainly from the proponent’s side, they would have like this process to have moved quicker, and certainly from some communities, they likely feel like the accommodations don’t go far enough, or that there wasn’t enough consultation.”

The project has already received federal approval from the Canadian Environment Assessment Agency.

* Original reporting from Alex MacPherson supplemented with reporting from last year by Jason Kerr of the Daily Herald