The study by the Canadian Environmental Assessment Agency, released late Thursday, concluded the open pit gold and copper mine proposed by Taseko (TSX:TKO) in B.C.'s central Interior would pose "several severely adverse environmental effects" on water quality, fish and fish habitat in a lake considered sacred by the area's First Nations.
The project would likely pollute Fish Lake, known as Teztan Biny to First Nations, and endanger the aboriginal way of life and cultural identity, the report said.
This is the second time the federal review panel has rejected the project. The original proposal for the site southwest of Williams Lake was approved by the provincial government, but rejected by the federal government in 2010 because the plan was to drain the lake for use as a tailings pond.
The Tsilhqot'in National Government, which claims the mine site as part of its traditional territory, is calling the panel's decision a victory, and chairman Chief Joe Alphonse said the federal government would be foolish to approve the mine.
"The cards are stacked against them now," he said in a phone interview on Friday. "We have all the ammunition we would need to put on a very strong legal challenge if the federal government were to try to move this project forward."
However, Taseko sees the report in a different light, and interprets the panel's conclusions as saying the risks are modest and the social and economic benefits are enormous.
Spokesman Brian Battison said the project has the support of locals in the Cariboo region.
"(The federal government's) decision will affect the lives of tens of thousands of people," he said in an interview. "This project is really a once-in-a-generation opportunity and they'll take that into consideration as well."
The company estimates the New Prosperity Mine would generate 550 direct jobs and $11 billion in real gross domestic product over 20 years.
Battison also pointed out that the assessment concluded the mine would not put areas such as the Taseko River at risk, and that mitigation measures proposed by the company to reduce impacts on the threatened South Chilcotin grizzly bear population may actually leave the animals in better shape.
"It will be enhanced by the project, not threatened by the project," he said.
Battison said the company disagrees with the panel's findings about the project's environmental impact on Fish Lake.
Taseko said in a news release that the revised proposal preserves the lake, and that the company plans to challenge the panel's findings.
Alphonse said First Nations and commercial fishermen have been relying on the Fish Lake area for a living for centuries, and those economic benefits far outweigh any proposed by Taseko.
"What's going to bring in more money, the 20-year mine life, or the ability to continue that way of life for the next hundred, 200, 300 years?" he said.
The First Nations Summit, which represents dozens of B.C. aboriginal groups within the treaty process, also called on Ottawa to reject the project following the report.
"Clearly this report should provide the federal government the necessary evidence to immediately reject, yet again, Taseko's Prosperity Mine proposal", said summit executive Grand Chief Edward John in a news release.
Taseko's revised proposal said it could prevent contamination from groundwater seepage from a tailings pond several kilometres away, but the review panel said it was not convinced pollution of the lake could be avoided.
"The Panel has determined that the proposed target water quality objectives for Fish Lake are not likely achievable and, even with expensive water treatment measures, the protection of Fish Lake water quality is unlikely to succeed in the long term," the report said.
Moreover, the adverse effects on water quality in Fish Lake would result in a ”significant adverse effect on fish and fish habitat” in the lake, the report stated.
It also said the proposed tailing storage facility for the mine impact the surrounding Nabas area, where the Tsilhqot'in and Secwepemc carry out ceremonial and spiritual practices.
"In the Panel's view, the loss of Nabas and the changes to the environment caused by the mine components would reduce the area where the Tsilhqot'in can practice their traditional harvesting activities, disturb the cremation sites that are of great importance to them and endanger their ability to sustain their way of life and cultural identity," the report said.
The final decision on allowing the mine to proceed must be made within 120 days by federal Environment Minister Leona Aglukkaq. She declined comment on Friday.
B.C. Energy and Mines Minister Bill Bennett said he wasn't surprised by the panel's findings, as mines cannot be built without causing significant environmental issues. However, he said the project's social and economic benefits need to be considered.
"The vast majority of people who live in the Cariboo want this project to happen because they want to work," he said.
"They want to live in the Cariboo where they grew up... and they want to have a job that pays good money and will sustain their families."
Bennett admitted he is "not at all confident" that the federal government will approve the project after having rejected Taseko's original proposal, but he believes the company should be allowed the opportunity to show it can manage the environmental risks noted in the latest assessment.
"I hope the federal cabinet really considers the extent to which this project is important to the region, but perhaps even more importantly than that, I hope they consider there is a way to allow this company to show it can build this mine in such a way that it will adequately mitigate the environmental risks," he said.
B.C. NDP Environment Critic Spencer Chandra Herbert is urging rejection of the proposal.
"The federal government rejected this project the first time even though B.C. said it should go ahead," he said. "So unless the federal government wants to reject science, reject First Nations constitutional rights, I don't think the project is going ahead as it stands."
On Friday, Taseko shares closed down 25 cents, or nearly 10 per cent, to $2.31 on the Toronto Stock Exchange.
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