Does a person forever abandon their personal property in extracted waste rock and tailings by complying with a Mines Act permit and placing it into a lake situated on lands leased from the government? That was the question at the heart of Skeena Resources Ltd. v. Mill, 2024 BCCA 249.
In that case, the mine owner, Skeena Resources Ltd. ("Skeena"), persuaded the Court of Appeal that the Chief Gold Commissioner ("CGC") erred legally and factually in concluding that Skeena and the prior owners of the mine ("predecessors" together, "Skeena") abandoned its personal property interest in waste rock and tailings put into a lake on land Skeena leased and over which it exercised exclusive occupation and control.
The Court agreed with Skeena that, on the record before the Court, Skeena did not abandon its property in the waste rock and tailings.
The Court of Appeal's decision provides an important confirmation of basic principles of property rights in the mining context, including the application of the common law of abandonment. The case also provides a useful confirmation that the statutory scheme does not itself cause a mine operator or owner to lose title to extracted minerals simply because they are moved or because those rocks and tailings extracted are, at the time of extraction, not valuable enough to exploit. In other words, "all that is gold does not glitter",1 at least, perhaps, at first.
Skeena was represented at the Court of Appeal by Andrew Nathanson, K.C., Tom Posyniak, Raylene Smith, and Emma Madden‑Krasnick (articled student).
Background
This case concerned the fabled Eskay Creek Mine in northern British Columbia. Between 1994 and 2008, Skeena's predecessors operated the mine as a productive gold and silver mine. It was understood that the production of the gold and silver would also produce waste rock and tailings that would not meet the threshold for production, process and sale. There was a risk that such waste rock and tailings would produce acid if exposed to oxygen, so it became a term of the mine's Mines Act permit that the waste rock and tailings would be placed and stored under water to prevent acid rock drainage.
Skeena's predecessors identified a site to place and store the waste rock and tailings: Albino Lake, which was a few kilometres away from the site in which the rocks and tailings were extracted.
In 1994, Skeena's predecessors entered into a 30 year lease with the Province for exclusive use and occupation of Albino Lake for "waste disposal site purposes". This site became part of the mine.
Over the life of the mine, approximately 1.75 million tonnes of waste rock and tailings was deposited and stored in Albino Lake. After the mine ceased operations, the waste rock and tailings were regraded to ensure it would be covered with water. Skeena and its predecessors continued to have obligations to, among other things, maintain and control access to the site, monitor water quality, and ensure the waste rock and tailings remained covered and did not cause environmental harm.
In 2020, Skeena purchased the mine and assumed all rights under the lease. In 2021, Skeena conducted an exploration program in Albino Lake that revealed potentially valuable mineralization. This was discovered by Richard Mill, the recorded holder of the mineral rights to the Albino Lake land.
Mr. Mill applied to the CGC for a declaration that he owned the mineral rights to the waste rock and tailings because he had rights to any and all "minerals" located within his claims under the Mineral Tenure Act ("MTA"), which he argued included any waste rock and tailings in or on the that land.
The CGC agreed with Mr. Mill that Skeena and its predecessors had abandoned all right and title to the waste rock and tailings once they put it in Albino Lake. In coming to this decision, the CGC relied on the fact that Skeena's predecessors deemed the waste rock and tailings not to have economic value at the time they were deposited in Albino Lake.
Skeena appealed the CGC's decision to the Supreme Court of British Columbia under the statutory appeal mechanisms in the MTA. The Supreme Court rejected Skeena's appeal, concluding the CGC made no obvious errors in his analysis: Skeena Resources Ltd. v. Mill, 2022 BCSC 2032. The Supreme Court concluded the CGC's decision was consistent with the MTA, which, in its view, provided that "mineral ownership rights do not travel with 'minerals' if they are moved from one location to another."
Skeena sought and was granted leave to appeal from the decision of the Supreme Court: Skeena Resources Ltd. v. Mill, 2023 BCCA 249.
The Court of Appeal allows the appeal
Skeena was successful in persuading the Court of Appeal that the CGC's decision was "clearly and palpably" wrong.
The Court of Appeal started by rejecting the proposition that mineral ownership rights "do not travel". This was plainly wrong: "[i]t is inherent in the mining process that mineral products must be moved to another location after they are extracted." They remain "the property of the Mine operator until they were sold."
The Court's focus was on the decision of the CGC. The Court concluded that the CGC had wrongly interpreted the lease between Skeena and the Province. The Court found that the CGC erred in allowing the supposed purpose of the lease (i.e., waste disposal site purposes) to override the actual text of the agreement, which made no other mention of waste materials or any transfer of ownership of such materials. This was not a waste disposal contract. The CGC erred in making it one.
These were obvious errors, but in the view of the Court of Appeal they did not necessarily change the result. The fundamental question was simply whether the Supreme Court was correct in finding that the CGC did not make a palpable and overriding error in finding that Skeena abandoned the waste rock and tailings—its personal property upon extraction—when it placed it in Albino Lake. Applying well-settled principles of property law and the law of abandonment, the Court found that the CGC did so err in both fact and law. It found on the record before it there was no overt act of abandonment or evidence of an intention on Skeena or its predecessors' part to abandon the waste rock and tailings.
The Court of Appeal found that the fact the waste rock and minerals were regarded as uneconomic to process at the time they were deposited did not answer whether they were abandoned. There was a reasonable inference that mine operators were aware that the waste rock and tailings might become more valuable as technology and ore values change in the future. Waste rock did not mean "garbage"; it meant not valuable enough to process at that time. Again, all that is gold does not necessarily glitter, at least when it is first deposited in a lake for storage and environmental protection.
In the result, the Court of Appeal allowed Skeena's appeal and remitted the case back to the CGC for rehearing and reconsideration in light of its reasons.
Takeaways
The decision of the Court of Appeal in Skeena is important for mine owners, operators, and other industry stakeholders.
First, the decision provides a good reminder of that settled principles of property law apply with full force to the mining context. The case confirms mine owners and operators have a personal property right in rocks and minerals from the moment of extraction. This includes rocks that are not valuable enough to process at the time. For the purposes of relevant B.C. legislation, extracted minerals are "goods" that may be sold and "personal property" that can be the subject of personal property security interests. Equally, the Court of Appeal confirmed that, as personal property, the law does not easily infer that a person abandons their property interest in minerals in extracted waste rock and tailings. The law assumes the opposite, especially where, as in this case, those rocks and tailings were held on leased land that the mine owner controlled.
Second, the Court of Appeal's analysis of the statutory scheme will also be of note to owners, operators, and stakeholders. The startling conclusion of the Supreme Court that "mineral ownership rights" do not travel under the MTA was corrected. The Court of Appeal sensibly upheld the expectations of industry participants, confirming that such an idea conflicts with the very nature of the mining industry.
Third, the Court of Appeal's finding that the MTA itself contemplates that "that market changes and new technologies may turn 'waste' into worthwhile raw material" is welcome confirmation of owners' rights and should help prevent similar future disputes. At the same time, owners and operators should carefully consider their tenures and other legal arrangements to ensure their rights to continued ownership of waste rock and tailings are clear, and to minimize the risk of conflict with the holders of other property rights.
Footnotes
1. J. R. R. Tolkien, "The Riddle of Strider", The Lord of the Rings: The Fellowship of the Ring.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.