Rio Tinto’s legal battle with Quebec Innu intensifies

VANCOUVER — Mega-miner Rio Tinto (NYSE: RIO; LSE: RIO) is staring down the barrel of a potentially costly legal battle with a pair of First Nation groups whose traditional Nitassinan territory covers a large part of northeastern Quebec and Labrador.

On Jan. 7 the Quebec Court of Appeal — the province’s highest court — shot down an appeal of a September 2014 Quebec Superior Court judgment that rejected Rio’s motion to dismiss a $900-million legacy lawsuit.

The Innu First Nations of Uashat Mak Mani-Utenam (Uashaunnuat) and Matimekush-Lac John (MLJ) are seeking compensation from Rio Tinto subsidiary Iron Ore Co. of Canada (IOC) for allegedly violating rights and aboriginal titles over the past 60 years by extracting minerals and building a railway on the Nitassinan territory.

“This is a project that has a serious history and been a pillar of the Quebec and Canadian mining industries. They have successfully dodged the rise of native empowerment up until now,” comments lawyer and aboriginal land claims expert Bill Gallagher, author of the book Resource Rulers.

“What happened is that Rio has lost two procedural cases where they’ve tried to out-manoeuvre the Innu push to hold them accountable for the legacy in traditional lands. If you’re going to be in the blender with the First Nations in Canada, this is a hell of a time to be in that spin cycle. The First Nations have now won over 200 court cases and are redrawing the map of Canada. The lawyers involved in this court case have a successful track record in the native empowerment winning streak, and this ruling at the appellate level assures them they will get their day in court,” he adds.

IOC operates a mine, concentrator and a pelletizing plant in Labrador City, N.L., as well as port facilities in Sept-Îles, Que. The company also runs a 418 km railroad that links the mine to the port. IOC has 2,500 employees.

Back in May 2010 IOC announced a resumed expansion program, with an ultimate US$732-million capital cost, to increase its annual concentrate production capacity by 4 million tonnes. The investment was the first stage of a three-stage expansion that could bring concentrate annual capacity to 30 million tonnes.

The large mining operation started up in the 1940s and includes 20 abandoned mines in Schefferville, Que., nine mines at the mining centre in Labrador City and three hydroelectric plants, as well as the port and railway.

Rio Tinto had reportedly tried to sell its 58.7% stake in the operation. Mitsubishi holds a 26.2% stake and Labrador Iron Ore Royalty (TSX: LIF) holds the remaining 15.1% stake, and receives a 7% gross royalty on all iron ore sales.

The First Nation groups claim the “megaproject permanently devastated the [Nitassinan] and forced the eviction of Innu families from their homeland while illegally dispossessing them of what was the essence of their traditional way of life.”

Real Mckenzie Chief Matimekush-Lac John commented that “while we have made every effort possible to come to an agreement with the company, [Rio Tinto] was more negative than ever this fall. And yet we have had no trouble in coming to terms with all other mining operators on our territory. In this matter, Rio Tinto continues to act as a rogue company: it seems to believe that norms concerning the respect of the rights of First Nations do not apply.”

The Innu communities have reached agreements with miners ArcelorMittal (NYSE: MT), Cliffs Natural Resources (NYSE: CLF), India’s Tata Steel, New Millennium Iron and Labrador Iron Mines (TSX: LIM; US-OTC: LBRMF) that outline financial compensation for mining activities.

The lawsuit and a motion seeking an injunction to stop all mining activity were first filed in March 2013 in the Quebec Superior Court. Rio Tinto hoped to have the suit dismissed by arguing that the provincial government is the one that should be targeted, and not the company.

Rio Tinto’s decision to pursue the matter through the court system could be viewed as questionable due to the heightened state of First Nation empowerment in Canada.

“How many times does a company have to strike out before they realize there is a better way to do business?” Gallagher muses. “I rarely consider an interim, procedural case as part of a winning streak because it’s not a final ruling. But in this case the overarching context is the clout that First Nations have on aboriginal title, and I think that’s the fact that has this thing running on high-test. It shows that judges are prepared to give these cases a day in court.”

On June 26, 2014, the Supreme Court of Canada recognized for the first time a First Nation’s aboriginal title over an area outside a reserve in Tsilhqot’in Nation vs. British Columbia. And Quebec has seemed more than willing to adopt the concept that natural resource and infrastructure development requires local acceptance and social license.

“It’s important to note that when this Tsilhqot’in court case came down, native groups made pronouncements that it was going to apply in spades to huge parts of Quebec, which is dead centre in the region we’re talking about in this instance,” Gallagher continues. “So that is out there, and while we should expect them to say that, I’d note that Quebec’s Aboriginal Affairs Minister said pretty much exactly the same thing in June — the basic message being that there would be major repercussions for the province.”

But Gallagher says there is a “better way of doing business” in Quebec, and across Canada. He cites the success of Stornoway Diamond (TSX: SWY; US-OTC: SWYDF) in achieving the social license to build its Renard mine, 350 km north of Chibougamau in the James Bay region.

“It just goes to show that those who go out and get social license and work with First Nations have a much better shot at getting up and running,” Gallagher concludes.

Rio Tinto was not immediately available for comment, and the allegations have not been proven in court.