The British Columbia Securities Commission is reviewing a sharp drop in the stock of Taseko Mines Ltd. weeks before Ottawa blocked its proposal to build a mine in B.C. due to environmental concerns.
The provincial regulator confirmed on Thursday that it is following up on a referral from the Investment Industry Regulatory Organization of Canada (IIROC) after Taseko shares plunged nearly 40 per cent within seconds on the afternoon of Oct. 14.
The wild trading happened more than two weeks before the federal government announced on Nov. 2 that it was blocking the firm's plans to develop the $815-million Prosperity gold and copper mine near Williams Lake in the B.C. Interior.
The federal opposition Liberals said Thursday they will ask the RCMP to investigate whether leaks in Ottawa triggered a selloff in the shares. Liberal MP Mark Holland is writing the Royal Canadian Mounted Police's commercial crimes unit on the matter. It will be up to the Mounties to determine whether there are grounds to launch a probe.
Taseko shares climbed to $7.27 in mid-afternoon trading on the Toronto Stock Exchange on Oct. 14, and within seconds plunged 37 per cent to $4.58.
Within minutes, regulators called the company to find out the cause of the drop. The company couldn't explain it.
About 10 minutes before markets closed for the day, Taseko issued a news release saying it was "unaware of any information that would cause the price of the company's stock to change materially."
The stock recovered somewhat to close at $6.21 that day, down 10 per cent.
Russell Hallbauer, chief executive of the Vancouver-based miner, said the company then asked its lawyers to look into what happened.
There was no word of a regulatory review until late Wednesday, when it was reported by CBC News.
"We are a bystander to this," Mr. Hallbauer said in an interview on Thursday. "We want to find out for our shareholders what went on."
Citing an unnamed source, the CBC reported that federal government officials fear the steep drop in the stock price may have been caused by a leak of information that the development would be stopped. It said the decision was made secretly, in hopes of preventing such stock market fluctuations.
"From the company's perspective it's a little disturbing, obviously," Mr. Hallbauer said, in particular after the company was already dealt a blow with the rejection of its permit to build the mine. "Now we are caught up in this. It's difficult for our staff and its obviously difficult for the shareholders to understand."
He is confident the regulators will get to the bottom of the irregular trading activity. "They always seem to."
IIROC spokeswoman Connie Craddock confirmed the regulator noticed "unusual trading" in Taseko shares on Oct. 14, and immediately contacted the company for an explanation.
After Taseko reported it did not know of anything that would account for the trading, Ms. Craddock said IIROC then referred the case to the BCSC for review.
IIROC's role is only to monitor trading in the market and not to further investigate unusual activity, Ms. Craddock said.
"In this case, our role is market surveillance and when we detect unusual trading patterns, the protocol calls for us to refer them to the appropriate regulator," she said. "It's standard procedure for us.
The BCSC said Thursday it doesn't comment "on matters under review."
Taseko shares traded in the $6 to $6.50 range after the Oct. 14 share drop, until Ottawa announced after markets closed on Nov. 2 that it wouldn't approve the permit for the mine. The next day, shares fell 25 per cent to $4.94 and have been trading below $5 since then.
Ottawa said the mine could not proceed due to adverse environmental effects that included turning Fish Lake - once featured in a tourism campaign - into a tailings dump.
The Prosperity project was seen by many in the province, especially in Williams Lake, as a lifeline for a forestry-dependent region crippled by slumping lumber markets and a pine beetle infestation. Located about 125 kilometres southwest of Williams Lake, the proposed mine has been on and off the shelf in B.C. for nearly 20 years, with the most recent plans in full swing since 2005.
Under a provincial review process, B.C. gave the Prosperity mine a green light in January, saying environmental effects would be outweighed by jobs, spin-off benefits and millions of dollars in tax revenue for regional and provincial governments.
In July, a federal panel - which did not take economic factors into account - found that the proposed mine would have significant adverse environmental effects on such things as fish and fish habitat and "potential or established Aboriginal rights or title."
The Tsilhquot'in National Government, which represents six bands in the area, was the main opponent of the project, saying it would destroy a pristine lake and threaten area watersheds.
With files from Wendy Stueck