05/29/2012 04:21 EDT | Updated 07/29/2012 05:12 EDT

Cline Mining sues B.C. government for loss caused by Flathead Conservation Act

VICTORIA - Cline Mining Corp. (TSX:CMK) is suing the Province of British Columbia for potentially hundreds of millions of dollars in compensation as a result of passage of the Flathead Watershed Area Conservation Act.

The notice of claim dated May 28, 2012, has been filed in the Supreme Court of British Columbia, the company said Tuesday.

In its notice, Cline seeks a declaration that its coal licence and coal licence applications rights for the Lodgepole, Sage Creek and Cabin Creek properties were "expropriated, taken or injuriously affected" by the act, and other measures which created a mineral and coal land reserve on all lands within the Flathead River Watershed Area.

Cline said the compensation it seeks includes, but is not limited to, the loss of the value of the licences and applications for licences for the properties, "estimated at in excess of $500 million on a net present value basis over the expected lives of the mines."

On Tuesday, the B.C. Energy and Mines Ministry issued a statement, saying the two sides have been attempting to negotiate a settlement but remain apart.

"There are 10 mineral tenure holders in the Flathead Watershed Area and we’ve settled with six of them for a total of $4.9 million," said the statement. "We are far apart on negotiations with Cline which is one of the tenure holders and have been trying to come to a reasonable settlement."

The ministry statement said there would not be further comment because Cline's claim is now being before the courts.

"There are cases where government makes decisions to balance development with environmental values and land and resource management initiatives. The establishment of the Flathead Watershed Area Act is one of these decisions," said the statement.

Toronto-based Cline has retained counsel at Fraser Milner Casgrain LLP in Vancouver.