01/25/2012 12:35 EST | Updated 03/26/2012 05:12 EDT

Miner Solid Gold sues Ontario over court ruling halting its operations

TORONTO - Solid Gold Resources Corp. (TSXV:SLD) says it plans to sue the Ontario government for $100 million over a ruling that temporarily prevents the junior mining company from drilling on Crown land near traditional First Nation territory.

The company alleges the province is liable for losses it suffered after a ruling earlier this month sided with the Wahgoshig First Nation in saying Solid Gold failed to consult before beginning its exploration.

Solid Gold has said any duty to consult with First Nations falls to the government, not the mining company, and it's not something the province can delegate.

Solid Gold president Darryl Stretch, who is appealing the injunction, said the ruling has far-reaching implications because it means it would now be up to companies to get consent from First Nations on any project that runs near their traditional land.

"It is very significant for industry as a whole all across Canada," he said.

"I have seen reports from British Columbia, for example, that are now linking the Solid Gold injunction as grounds for why Enbridge shouldn't be laying a pipeline across British Columbia."

Solid Gold has a 200-square-kilometre prospect at Lake Abitibi near the Porcupine Fault zone in Northern Ontario.

The issue is not about the land of the reserve itself, but the Crown land around the reserve which First Nations consider their traditional hunting and fishing ground.

Solid Gold, which says Ontario's Mining Act allows "free entry'' into all Crown lands available for prospecting, has argued the injunction jeopardizes its financial well-being because it essentially shuts down its operations.

The court ordered drilling to be halted for 120 days, during which time the company and the provincial government had to undergo a proper consultation process with Wahgoshig.

If the meetings are not productive, the court said, the community can go back to court to seek an extension on the injunction.

But Stretch said the more time passes the more his company's losses could grow, and that means the lawsuit against the province could go well above the $100 million currently suggested.

"We chose that figure because we believe we can prove that and more, but it depends on how things go, the losses may be much more significant," he said.

"We think that there are multiple mineral deposits in that ground and according to the law it's ours to get."

The minister of northern development and mines said Wednesday he was aware of the suit, but declined to comment on it directly since it’s before the courts.

"It's very, very important and it's incumbent upon government, because the Supreme Court of Canada has ruled that there is a duty to consult," said Rick Bartolucci.

"We take that very seriously."

New Democrat John Vanthof, who represents the area in the legislature, said this is another example of the Liberal government failing in its responsibility to consult.

"We're going to see more court battles unless the government takes the responsibility seriously," Vanthof said.

"In the long run, by ignoring First Nations at the outset of the exploration process, the government is in fact slowing down mine development and hindering economic opportunities throughout the province."

A formal statement of claim has not yet been issued, since a 60-day hold period must expire before the paperwork can be filed.

In seeking an injunction, the Wahgoshig First Nations had argued the company had staked claims with no consultation, even after it was instructed to contact them.

Wahgoshig said it discovered the drilling activity when two of its members stumbled upon workers last spring, but the crew refused to say who they worked for.

The Jan. 3 decision isn't the first in which the courts ruled to protect what's considered traditional aboriginal lands.

In August, the Grassy Narrows First Nation in Kenora declared victory in its 11-year court battle to stop logging on traditional lands after the Ontario Superior Court ruled the province didn't have the power to interfere with the First Nation's treaty rights.