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In earlier negotiations with China Minerals, the province rejected the company’s two suggestions for a resolution.DAVID BECKER/Reuters

A junior miner with offices in Vancouver and Beijing is taking the government of British Columbia to court over a treaty-related transfer of land to a First Nations group that the company says should concern all resource companies in the province.

China Minerals Mining Corp. and its subsidiary Cassiar Gold Corp. have filed a petition with the Supreme Court of British Columbia that seeks to reverse a portion of the B.C. government's transfer of Crown land near the Yukon border in northern B.C. to the Kaska Dena Council. The transfer was done through an incremental treaty agreement, an arrangement in which the province can grant treaty-like benefits to First Nations groups in advance of a formal modern treaty – a process that could take many years in a province where most First Nations never signed treaties.

China Minerals, which holds mineral tenure on a portion of the land transferred to a company owned by the Kaska Dena and has invested about $36-million in exploration and drilling, said the company was not consulted by the government in the process and that the Kaska Dena plan to develop a "run-of-river" hydroelectric project on the site that is incompatible with developing existing mine sites into active gold mines.

"It's effectively terminated the company's ability to proceed, without knowing in advance," says Joan Young, a partner at McMillan LLP in Vancouver. "I think any resource company should be concerned about that.… It was effectively expropriated."

The case, in some ways, adds a slightly new twist to the at-times confusing regulatory situation on the West Coast, where the natural resource sector is often engaged in a push-and-pull battle with First Nations groups, who want to protect their way of life and traditional lands, and environmentalists. Several high-profile projects – such as proposed pipelines and liquefied-natural-gas export terminals – have wound up in a state of near-permanent limbo as executives face regulatory reviews and entrenched opposition in a province where very few can agree on the balance between exploiting natural resources and preserving B.C.'s natural wild beauty.

Since many resource projects across B.C. are situated or proposed on traditional First Nations territory, the incremental treaty negotiation process seems to have added another question mark in an already fraught process, at least for China Minerals, which is listed on the TSX Venture Exchange. B.C. now has 18 such agreements with 20 First Nations.

Edward Hill, a spokesman for the Ministry of Aboriginal Relations and Reconciliation, says B.C. acted "in accordance with all legal and statutory obligations and regulations" in striking the deal with the Kaska Dena, and that these incremental agreements are part of a broader process that will "build goodwill between the First Nation and the province, create incentives to reach further treaty milestones and provide increased certainty over land and resources."

Mr. Hill says the province, which financially supports First Nations in pursuing hydroelectric and other green energy projects, considers the overlap between China Minerals' tenure and the treaty lands as small – 5.6 hectares out of 58,900 hectares.

In earlier negotiations with China Minerals, outlined in e-mails submitted to the court, George McRae, a senior negotiator with the ministry, had rejected the company's two suggestions for a resolution: That the ministry either "not effect" the transfer of lands or else enter into a legally binding contract with China Minerals to compensate the company for potential losses. "We are unable to accept this proposal given that the province has acted in accordance with its legal obligations," Mr. McRae wrote.

One B.C. lawyer who regularly helps Chinese resource companies in B.C. says navigating First Nations issues is one of the top issues facing Chinese companies in the province, along with regulatory delays and a lack of infrastructure.

"This is similar to expropriation or nationalization, in a sense; it's not as if you can take that into consideration in an agreement," the lawyer said. "This means additional due diligence and figuring out the lay of the land."

The chair of the Kaska Dena Council, as well as a chief of the Dease River First Nation, declined to comment.

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