Nunavut Water Board

Renewal of Licence Number NWB1BOS9801

Hope Bay Joint Venture - Boston Project

Indian and Northern Affairs Canada

Written Intervention

July 17, 2001

This contribution to the Nunavut Water Board (the Board) is made on behalf of Indian and Northern Affairs Canada (DIAND) on the renewal of Licence NWB1BOS9801 issued to Mirimar Hope Bay Ltd. - Hope Bay Gold Corporation Inc. ( HBJV ) for water use and waste disposal associated with advanced exploration at the Boston Project, located in the West Kitikmeot Region of Nunavut .

DIAND is responsible for the administration and enforcement of the Northwest Territories Waters Act (Act). As described in the objects of the Board in section 12, the Act provides for the "conservation, development and utilization of waters in a manner that will provide the optimum benefit therefrom for all Canadians and for the residents of the Northwest Territories in particular", and consequently Nunavut residents as well. The Department's comments and recommendations, therefore, are made with these objects in mind.

This submission will focus on aspects of HBJV 's operation that may affect the waters of Nunavut . Specifically, this contribution will address issues related to the following.

•	General Conditions

•	Conditions Applying to Waste Disposal

•	Conditions Applying to Studies

•	Security Deposit

2.0	General Conditions

The General Conditions include the requirement that the Licensee comply with the Surveillance Network Program annexed to the Licence. This Program does not include any sampling locations that will adequately represent the quality of the runoff water or standing water near the ore piles on this site.

According to site sampling conducted in the summer of 1999, standing water located downslope of the ore stockpiles contained high levels of metals (Al, As, Cr, Fe, Pb, Ni, Ag). The samples were high in sulphate indicating acid rock drainage; however, the pH was between 7.48 and 8.36 which suggests that the neutralizing potential of the ore is sufficient.

Given the high metal content of this water, the Department recommends that the Surveillance Network Program be modified to include sites that will enable effective monitoring of the quality of runoff water.

3.0	Conditions Applying to Waste Disposal

The water licence contains conditions related to waste disposal; notably, the effluent quality limits, sewage treatment, and hydrology; however, there are no conditions related to ARD mitigation and containment at this site.

3.1	Effluent Quality

The current water licence authorizes HBJV to discharge sewage effluent and minewater from the settling pond to the environment, provided the specified effluent quality standards are met.

With the exception of the aforementioned deficiency, the Department feels that the Surveillance Network Protocol from the previous licence is sufficient. The one proposed change is the addition of nutrients to the monitoring protocol for the station that discharge sewage effluent to Spyder Lake (1652-4,5).

Therefore, the Department recommends that the Board amend the Surveillance Network Protocol to add Nutrients (Total Phosphorous, Orthophosphorous, Total Nitrogen, Nitrate, Nitrite) to the sampling requirements for Station 1652-3 to be sampled periods of discharge from the TCA.

3.2	Acid Rock Drainage

Acid rock drainage (ARD) refers to the increased acidity and associated heavy metal contamination in runoff and seepage water from waste rock, exposed rock surfaces, disturbed areas and tailings containing sulphide minerals. Previous studies indicate that ARD may not be a significant issue; however, metal leaching has the potential to be problematic at this site.

The Rescan report prepared for HBJV in 1999 titled "The Hope Bay Belt Site Assessment" suggests that the stockpiles/orepiles be covered to minimize infiltration and that a collections/diversion system be installed to prevent drainage from entering receiving waters.

The Department recommends that the Board require HBJV to follow up on the suggestions contained in the Rescan report. If these options are deemed inappropriate by the Licensee, the rationale should be thoroughly explained in a report to the Board (see further water-related recommendations in Section 4.0).

4.0	Conditions Applying to Studies

For the purposes of this licence renewal process, DIAND retained an independent consultant to review previous submission pertaining to acid rock drainage by BHP and HBJV. The full report is included as Appendix A. It includes a literature review of the ARD and metal leaching data with recommendations for further analysis and mitigative steps. Prior reports prepared by Rescan and also contain recommendations that have not been implemented at the site. The Department recommends that the Board consider requesting studies that include, but not be limited to, the following:

Water Management and Metal Leaching

•	Evaluation of the need for tighter containment of waste rock and ore stockpile runoff and leachate.

•	Water extraction tests (Modified SWEP) should be conducted on uncrushed samples collected from the stockpiles which have been exposed for some period of time. This would indicate the presence/quantities of soluble metal products that are available for leaching from the rock surfaces

•	A water management plan should be completed and should include provisions to contain run off water from the waste rock piles, plan for the placement of newly excavated materials such that runoff and leachate can be collected and monitored, seepage monitoring should be conducted regularly

ARD, Metal Leaching Testing and Analysis

•	Further evaluation of the existing static test results on the basis of kinetic and on-site monitoring results.

•	Further analyses to determine the effect of the iron carbonates and a determination of the carbonate forms attributable to calcites, dolomites, and iron carbonates in the static test samples.

•	Field and laboratory kinetic tests should be initiated on additional samples (construction material, waste rock, etc.). Tests should be conducted on a variety of samples including basalts with varying amounts of alteration. Neutralization potential, metal and sulphide contents should be included in these tests to determine which materials will generate net acidity or metal leaching under neutral conditions.

Note:	Future static tests should include mineralogical assessments (Rescan, 1999) and laboratory corrections of neutralizations potential for siderite (might be conducted on archived samples, if these still exist).

Waste Rock Characterization

•	Re-evaluation of criteria for selection of suitable construction materials on the basis of current information (i.e. kinetic test results).

•	Results of surface rinse extraction tests on uncrushed samples of material currently stored on surface, including representative ore, waste rock and underlying pad material.

•	Sampling and analysis plan for newly excavated materials. This sampling should include siderite corrections, the use of ICP data to evaluate potential iron carbonate content as a fraction of reported carbonate content and kinetic tests on a range of materials, particularly basalt with carious amounts of alteration, neutralization potential, sulphide and metal content.

Abandonment and Reclamation

•	Future closure plans should assess the potential and timing for closure activities to fill with water and/or ice, evaluation of the space available below the active surface layer for disposal of waste rock in the decline from where it came.

5.0	Security Deposit

Facts:

The Kitikmeot Inuit Association (the "KIA") is the designated organization in whose name title to Inuit-owned land is vested pursuant to the Nunavut Land Claims Agreement (the "NLCA"). The KIA, on behalf of the Inuit, is the legal owner of the surface lands on which the Project is located. DIAND enforces the provisions of the Northwest Territories Waters Act1 (the "NWTWA"). Article 13 of the NLCA is entitled "Water Management." The NWB is established pursuant to subarticle 13.2.1 of the NLCA, which states in part:

[The NWB] shall have responsibilities and powers over the regulation, use and management of water in the Nunavut Settlement Area, on a basis at least equivalent to the powers and responsibilities currently held by the Northwest Territories Water Board under the Northern Inland Waters Act [sic] RSC 1985, c.N252, and any other responsibilities acquired under this Article.

By its decision dated April 21, 1999, the NWB ordered that the security instrument required as a condition of the WL be issued jointly to the KIA and to the Receiver General of Canada. The NWB also ordered that the security deposit be available:

a)	for reclamation or abandonment and restoration under the NWB water licence, and

b)	be accessed under the land tenure agreement that exists or will exist between KIA & BHP;

BHP was the licensee at the time of the NWB's decision. The current licensee is Hope Bay Joint Venture Boston Project, a joint venture between Miramar Mining Corporation and Hope Bay Gold Corporation Inc.

In addition, the NWB agreed that the form of security could include a pledge of assets by the licensee. Lastly, the NWB ordered that any security deposit problems that may arise be subject to ADR and set the terms of the ADR process to govern discussions between the KIA and the licensee. The ADR terms set by the NWB include directing the Government of Nunavut ("GN") and DIAND to appoint a mediator to a dispute between the KIA and the licensee and directing DIAND and the GN to appoint members of an arbitration committee3. It is these aforementioned conditions in particular to which DIAND objects.

Issues:

It is DIAND's contention that the decision by the NWB to impose the four contested conditions on the security deposit was made outside of the NWB's mandate. Secondly, it is submitted that the NWB's decision with respect to these conditions fetters the discretion of the Minister of DIAND. Lastly, it is submitted that the NWB's decision with respect to the security deposit is an inappropriate delegation of its authority.

1.	NWB's Mandate:

As indicated by subarticle 13.2.1 of the NLCA, the NWB has responsibilities and powers over "…the regulation, use and management of water." This provision goes on to state that the NWB's responsibilities and powers are at least equivalent to the powers and responsibilities currently held by the Northwest Territories Water Board (the NWTWB") under the Northern Inland Waters Act. Section 12 of the NWTWA states that the responsibilities of the NWTWB are to provide for "…the conservation, development and utilization of waters." The powers of the NWTWB include the issuance of licences "…to use waters or deposit waste, or both, in connection with the operation of the appurtenant undertaking", ss.14(1) of the NWTWA. "Waste" is defined in section 2 of the NWTWA in relation to water. Clearly, it lies within the responsibilities of the NWB to consider applications to use waters or dispose of waste into water, see Part 7 of Article 13. Subarticle 13.2.1 of the NLCA also states that the NWB has "…any other responsibilities acquired under this Article." According to Article 13, it is also the responsibility of the NWB to:

-	"…contribute fully to the development of land use plans as they concern water", 13.4.1;

-	to reject a water application that "…does not conform to land use plans", 13.4.2; and

-	to consider the determination and recommendation forwarded by the Nunavut Planning Commission regarding a water application that does conform with land use plans, 13.4.3.

Given the foregoing legislative provisions, it is submitted that the NWB's mandate, responsibilities and powers clearly relate only to water, and not to land. This notion is reinforced by section 17 of the NWTWA, which provides that the NWB may require security only for a water licence.

There is no provision in the relevant legislation or in the NLCA that gives power to the NWB to require a security deposit for a land tenure agreement. Security deposits required by the NWB to be furnished by a licensee should be available solely for water-related matters. It is submitted that the NWB exceeded its authority in requiring a security deposit for non-water related purposes by making the security deposit accessible under the KIA's land tenure agreement. The KIA's land tenure agreement is made between it and the licensee. DIAND is not a party to this contract nor is the NWB. Neither DIAND nor the NWB have any power or authority to dictate the terms of such an agreement. Neither DIAND nor the NWB has any control over how and for what claims on the security deposit under the KIA land tenure agreement could be made, for what purpose, or by whom. The result of the NWB's decision is that the security deposit is now available for non- water related purposes, without any relationship to the WL that was issued by the NWB.

The assessment of the amount of the security deposit should reflect the impacts to the land that is caused by water and water flow. In its decision, the NWB discussed at some length the interrelationship between water and land and concluded that "…the assessment of security deposits should reflect the potential for impacts to the land via either hydrological or hydro- geological pathways.", p.18. Such an assessment is consistent with the NWB's mandate. However, the fact that the NWB directed that the security deposit be accessible under the KIA's land tenure agreement exceeds the NWB's authority. An assessment of the potential for impacts to the land that may be caused by the Project should go well beyond the consideration of "hydrological or hydro-geological pathways". It is the owner of the land that has the right to insist on a security deposit in such an amount as to adequately cover the costs of reclamation of the owner's land. It is the KIA's right, and responsibility, to ensure it receives a sufficient security deposit for the reclamation of its lands. Although it may be difficult to determine what portion of an impact assessment should be designated as water-related and what is land-related, it is not impossible to do so. That this can be done is clearly demonstrated by the fact that the KIA came to an agreement to release BHP from its liabilities in exchange for a security deposit in the amount of $750,000., see Appendix B, clause 2.

4.	Fettering of the Minister's Discretion:

Security deposits required pursuant to WLs should be solely accessible by the Receiver General of Canada. Section 17 of the NWTWA indicates the Minister of DIAND has the sole discretion to determine the form of a security deposit and how it will be applied. Subsection 17(1) states that a Water Board may require an applicant to "…furnish and maintain security with the Minister…in a form prescribed by [the] regulations or a form satisfactory to the Minister." Since this legislation does not address the right of a landowner to request a security deposit (as this is a contractual right), there is no provision that indicates a WL security deposit may be furnished to anyone but the Minister of DIAND.

The purpose of the WL security deposit is to provide Canada with ready access to the funds to cover the costs of remedial action taken by DIAND as a result of breaches of the WL by the licensee or to compensate any person affected by the operations of the licensee. Subsection 17(2) states that the security may be applied to compensate a person who has taken all reasonable measures to recover compensation from a licensee, where that person has been adversely affected as a result of the issuance of a water licence or by an authorized use of water or deposit of waste, and has been unsuccessful in that recovery. The security may also be used to reimburse the Crown for reasonable costs incurred where the Crown has had to take measures to remediate because the responsible person has failed to do so.

The ability of DIAND to access funds has been inappropriately constrained by the NWB. Although the KIA has no water-related regulatory mandate, its consent is now required to enable Canada to recover remediation or to compensate affected persons from the security deposit. As the NWB has previously been advised by DIAND, both beneficiaries (or, payees) of the letters of credit pledged as security must consent before either party can access the security instrument. This results in the fettering of the Minister's discretion. For example, if a third party was adversely affected by the licensee's operations and, after every reasonable effort was made, did not receive compensation from the licensee then the Minister may decide that the third party should receive compensation from the security deposit. However, the KIA now has to agree that the third party should be compensated from the security deposit. The legislation authorizes no such role for the KIA. In addition, since the KIA has an interest in its being able to access the deposit there is an inherent bias to any decision that the KIA may make with respect to the availability of the funds to a third party. This is precisely why the KIA should (and has) requested security under its land tenure agreement. Any security required under the KIA's land tenure agreement with the licensee is not available to any party but the KIA.

Section 17 of the NWTWA also provides that the form of the security deposit must be acceptable to the Minister or must comply with the NWTWA Regulations. The Receiver General being named as a joint payee is not acceptable by the Minister nor is it provided for under the Regulations. As well, a pledge of assets as a form of security is not acceptable to the Minister nor is it authorized by the Regulations. Section 12 of the Regulations sets out the mandatory forms of security. These mandatory forms do not include a pledge of assets.

3.	Delegation of Authority:

It is submitted that the NWB inappropriately delegated its authority to determine the terms and conditions of a WL security deposit to the KIA and BHP (now HBJV). As mentioned before, it is the KIA and the licensee who negotiate the terms of the land tenure agreement. The NWB has no authority and no legal interest to dictate the terms and conditions of such agreement. The KIA and the licensee may agree to such terms and conditions as they see fit, without either the NWB or DIAND having any input into the matter. The NWB simply has no role to play in private contract negotiations.

The land tenure agreement may impose security deposit requirements contrary to the NWB's mandate. Those terms and conditions could impact access to the WL security deposit. Even if the KIA and the licensee have entered into a land tenure agreement which does not set the terms and conditions of the WL security deposit, the point is that these parties could do so. The NWB cannot control the terms and conditions of a private contract between the KIA and a licensee. By allowing the KIA access to the WL security deposit under its land tenure agreement, the NWB delegated its authority to set the terms and conditions of the WL security deposit to the KIA, without the authority to do so.

As set out in the letter from David Livingstone of DIAND to Thomas Kudloo, NWB Chair, dated Sept.17/99, the bank which issued one of the letters of credit has advised that it requires the consent of both beneficiaries before it will allow either party access to the secured funds. Besides fettering the discretion of the Minister, the authority of the Minister to compensate an affected person pursuant to s.17 of the NWTWA is also now delegated to the KIA. The decision of the NWB to name both the Receiver General and the KIA as joint payees of the security deposit has resulted in the unlawful delegation of the Minister's authority to the KIA. The KIA's regulatory role is limited to land-related matters. A security deposit for land-related liabilities should be a condition of the land use agreement, not the WL.

4.	Miscellaneous:

Besides the NWB's decision relating to the aforementioned conditions of the security deposit being ultra vires, fettering the Minister's discretion and unlawfully delegating authority, the decision also foists certain roles on DIAND. At a minimum, it seems inappropriate for the NWB to have bound DIAND (and the GN) to roles in an ADR process between the KIA and the licensee without its consent. On page 24 of its decision, the NWB sets the condition that there must be an ADR mechanism "…to resolve security deposit problems that may arise." Appendix A sets out the terms of the ADR procedure but refers only to a dispute between the KIA and the licensee. This presupposes that there will be no dispute between the licensee and DIAND and no dispute between the KIA and DIAND. Considering that the letters of credit currently name both DIAND and the KIA as payees, it is most likely that any dispute that may occur will be between DIAND and the KIA relating to access to the security deposit. The ADR mechanism set out by the NWB dictates that DIAND and the GN firstly appoint a mediator and then arbitrators to any dispute between the KIA and the licensee. There is no logical reason for either DIAND or the GN to be involved in a dispute between these two parties. We cannot speak for the GN but it is of concern to DIAND that the NWB has attempted to impose on DIAND a dispute resolution role without its consent.

In addition to the legal issues concerning the conditions placed by the NWB on the security deposit, the conditions present administrative difficulties and leave unanswered questions. For example, who monitors the terms of the land tenure agreement to ensure there is compliance in relation to the security deposit? No entity but the parties to the agreement have any say over how this private agreement is carried out. What triggers access to the security deposit by the KIA and pursuant to what authority? Is access to the deposit predicated on water-related issues only? In view of the additional security deposit obtained by the KIA under its assumption agreement with the licensee, is the current security deposit adequate to secure water and land obligations under the land tenure agreement and the WL? Is an additional agreement required between the KIA and DIAND concerning access to the security deposit? What are the legal authority and the common sense reasoning behind requiring an additional agreement that may only be required due to the NWB's decision? Rather than simplifying matters, it is DIAND's respectful submission that the NWB's decision concerning the security deposit conditions has unnecessarily complicated matters.

4.0	Conclusion

These are the submissions made on behalf of DIAND relating to the security deposit, general conditions, conditions applying to waste disposal, and conditions applying to studies. We respectfully request that the NWB consider our submissions, and feel free to contact us should there be any questions or comments.

Appendix A

Report by Peri Mehling

to the

Department of Indian Affairs and Northern Development

June, 2001

Mehling Environmental Management Inc.

3826 Balaclava Street

Vancouver, B.C., V6L 2S8

phone: (604) 731-4150

fax: (604) 733-4255

June 22, 2001	MEM Project #: 019-005-01

Michelle Johnson, M.Sc.

Kitikmeot and Kivalliq Regional Coordinator

Department of Indian Affairs and Northern Development

P.O. Box 2200

Iqaluit, NU X0A 0H0

Dear Ms. Johnson;

Re: Review of Hope Bay Joint Venture – Boston Project Geochemistry Issues

As requested in a memorandum dated May 23, 2001, Mehling Environmental Management Inc. (MEMi) has review the acid rock drainage (ARD) and metal leaching issues associated with the Boston Gold Project.

Documents that were included in MEMi's review included the following:

Section III, Licence NWB1BOS9801, in the name of BHP Diamonds inc., dated July 31, 1998. (19 pages)

Notice of Application for Renewal (file No NWB1BOS9801) from the Nunavut Water Board

Application for Renewal of Water licence No: NWB1BOS9801 – Advanced Exploration – Hope Bay Joint Venture. Dated 30 January 2001, including a Supplementary Questionnaire for Advanced Exploration, dated January 31, 2001.

Letter from M.J. Brodie, Brodie Consulting Ltd., to Mr. Philippe di Pizzo, Nunavut Water Board Re: Boston Gold Project ARD potential – Ore stockpiles, dated July 26, 2000.

Letter to Mr. Hugh Wilson, Hope Bay Joint Venture; Re: Review of Past ARD. Characterization at the Boston Property; from Mr. Larry Connell, Knight Piesold Ltd.; dated May 1, 2001.

BHP Diamonds Inc. (1998) Boston Gold Project, Aimaoktak Lake, N.T. Exploration and Bulk Sampling Program, Waste Rock Disposal Plan. October 1998.

Rescan Environmental Services Ltd. (1999); Acid Rock Drainage Characterization (Waste Rock) Boston Project; prepared for BHP World Minerals; February 1999.

The January 30, 2001 Renewal Application is to obtain water for advanced exploration purposes at a rate of 150 cubic meters per day, which is the same rate as in the existing licence. The renewal is to enable the continued advanced exploration program at Boston. The renewal is to cover prospecting, continued surface drilling, core splitting and logging on site, underground drilling/exploration and possible future development which may require handling of waste rock material and ore to be stored on surface on or adjacent to existing waste/ore pads, domestic use and associated activities and possible additional environmental baseline data collection.

The licence renewal application is for 5 years.

The Application notes that "any discharges would be minor amounts of water pumped form underground as a result of exploration drilling, which would have elevated levels of salt content. The waste would be disposed of into existing and approved disposal areas as allowed for in the existing licence", although the Application contains no detailed description of what the existing containment area consists of (i.e. foundation conditions, permeability of underlying materials, ability to collect and monitor drainage and/or runoff). The Abandonment and Restoration Plan previously submitted by BHP Diamonds Inc. is "seen to be valid", but it is not clear from the Application what the Plan entails.

Activities under this renewal that pertain to ARD/metal leaching issues include:

-	expanded underground development;

-	production and surface storage of waste rock (quantity unspecified) and ore (25 – 50 kg/day); and,

-	mine water, produced in association with underground wall rock, ore and waste rock in a region of continuous permafrost, such that the underground workings are reported to be dry (response to question 31).

The targeted ore body (B2 mineralized horizon) consists of "a broad, continuous, north- striking, shear-parallel zone of significant quartz-dolomite veining with associated pyrite mineralization…" (response to Question 22 in the Supplementary Questionnaire). Sulphide in the mineralization is estimated as pyrite (2-5%) (response to question 26, (Supplementary Questionnaire). The host rock in the immediate vicinity of the mineralization is a large carbonate alteration zone, which is made up mainly of iron carbonates." (response to question 23, Supplementary Questionnaire).

Previous Work and Reviews

The report of most interest is Rescan (1999) which discusses ARD and metal leaching data collected to date. The report described the static testing conducted on samples collected in 1994, 1996 and 1997/98. The most recent samples are broken down into several rock types:

unaltered basalt ,

weakly altered basalt,

moderately altered basalt,

strongly altered basalt ,

Zone B2 alteration halo,

Zone B2 mineralized zone,

Zone B3 alteration halo,

Zone B3 mineralized zone,

unaltered gabbro,

quartz/carbonate dyke,

unaltered metasediments, and,

strongly altered metasediments.

The majority of the host rock is identified as the basalt unit, with varying degrees of alteration.

Static tests were conducted on the samples, and results were compared to typical generic NNP and NPR criteria. Kinetic tests were conducted on only 3 rock units, as those were apparently identified by BHP geologists as the material that would likely be stored on surface. Kinetic tests were performed on samples of:

moderately altered basalt,

B2 mineralized zone, and,

B3 alteration halo.

Conclusions from this report are that:

Based on static test results, the majority of material contained in the Boston deposit has low acid-generating potential, and is unlikely to generate net acidity over the long term.

Kinetic testing indicated that the sample of B2 mineralized zone material would likely generate net acidity in the long term, while samples from the moderately altered basalt and B3 alteration halo would not.

All three samples submitted for kinetic testing demonstrated potential for metal leaching, especially arsenic, copper and nickel.

Altered basalt material should not be used for construction as, while not likely to generate net acidity, metal leaching is of concern.

The other tested materials (B2 mineralized zone material and B3 alteration halo material) should not be used for construction because of eventual long–term net acid generation or because of metal leaching concerns.

Water quality predictions suggested that individual seepages would be high in certain parameters (As, Ni, Cu).

Dilution from rain (range of 6:1) would render seepages to approximate federal water quality guidelines, and further dilution in Spyder or Stickleback Lakes would render impacts from individual seepages insignificant.

Actual field sampling of waters pooled on site demonstrated elevated levels of metals, including arsenic, nickel and copper.

Recommendations from that report are that:

Altered basalt should not be used for construction without further mineralogical analyses. If used, its use should be limited in extent and monitoring should be conducted.

Additional mineralogical analyses are required to understand metal sources.

Based on field water quality, existing piles of decline material close to the exploration camp should be covered to minimize infiltration and a diversion/collection system should be installed to prevent drainage from entering receiving waters;

Further develop should consider isolation of problematic materials to prevent potential contamination of receiving water. Suggested methods are covers and/or diversion ditches;

Additional kinetic tests should be conducted on material stored on surface or used for construction

Opportunistic seepage sampling should be conducted on site.

Brodie (1998) noted that during his site inspection, he observed numerous rock fragments on essentially ever ore stockpile contained sulphide mineralization, and that many were visually estimated to have a total sulphide content in excess of several percent. This did not appear to be consistent with the results of the 1998 ARD report. He also noted that there was no SNP station for monitoring the drainage water quality associated with the waste rock and ore stockpiles.

Connell (2001) explained Brodie's observations by noting that the areas examined were likely the ore and potentially acid generating wastes located on the stockpiles. Other materials, with lower sulphide content, had been used for construction around the site, so that the examined area would tend to be biased to higher sulphide values.

Connell noted (2001) that the three kinetic test results suggested that there was potential for the leaching of arsenic, copper and/or nickel from these three samples, and that the evidence suggests that neutral metal leaching (the release of metal contaminants under neutral pH conditions) may be an issues at the Boston Property. However Connell comments that the body of evidence regarding the potential for metal leaching is small and should not be relied upon at this stage to draw any final conclusions, and that some of the data is contradictory and cannot be explained by the current knowledge of ARD potential at this site. He notes that the data raises a flag, but that the prudent approach is to avoid jumping to any conclusions. He suggest that additional data on neutral metal leaching potential needs to be collected once further underground development work commences at the Boston Property.

Discussion

The Rescan report (1999) follows convention methods to assess acid generating potential by initially comparing static tests to generic criteria. However, the presence of iron carbonates (ankerite and siderite) in the samples has the potential to significant effect conclusion based on static tests. These minerals may report as neutralization potential (NP) in the Modified Sobek test method (depending on the timing of the back titration), but are not effective in buffering produced acidity.

Standard criteria assume that net acidity is unlikely to be generated at ratios higher than 4. However, 'safe ratios' for the prevention of net acidity are estimated as 5 for the B3 alteration halo, and 16 for the moderately altered basalt from the kinetic tests. Thus there appears to be substantial amounts of measured NP that is ineffective in buffering acidity, particularly in the altered basalt that forms the majority of the host material.

Mr. Connell notes (2001) that for the 1996 decline material samples (157 samples), the NPR ranged from a minimum of 1.1 to 331 with an average of 43.3. The standard deviation was 63.9, the 10 Percentile was 2.2, the median was 11.0 and the 90 Percentile was 136. If an NPR of 16 is required for prevention of net acidity, as suggested by the kinetic test on the moderately altered basalt, fully half of the tested samples would be considered likely to generate acid.

For the 1997 decline materials samples (126 samples), the NPR ranged from a minimum of 7.1 to 659.2, with an average of 69.3. The standard deviation was 71.8, the 10 Percentile was 18.0, the median was 52.6 and the 90 Percentile was 142.6. Again, some of these samples would be considered as likely to generate net acidity based on a safe NPR ratio of 16.

Thus it is essential that the existing static test database be further evaluated on the basis of the kinetic test results.

Additional analyses of the existing data should also be undertaken to shed additional light on the complicating presence of iron carbonates. ICP metal results (Ca, Mg, Fe) from the sample solids should be used in an attempt to estimate potential carbonate forms attributable to calcite and dolomite, as opposed to iron carbonate.

Future static tests should include mineralogical assessments (as recommended in Rescan, 1999), and laboratory corrections of NP for siderite (Skousen siderite correction.)

Also, as recommended by Rescan (1999), both field and laboratory kinetic tests should be immediately initiated on samples of materials used in construction and stored on site. A variety of basalt samples, with varying amounts of alteration, NP and metal and sulphide contents should be included in these tests to further define those materials that could be problematic for either the generation of net acidity, or the leaching of metals under neutral conditions.

Given the detection on site of ponded water with elevated metal levels (As, Ni and Cu), further seepage monitoring is essential (also recommended by Rescan, 1999). Storage of materials in a manner to allow collection of leachate is essential. It is not clear from the documentation what the foundations conditions are, or whether seepage and runoff from the surface stored materials can be readily collected for sampling.

MEMi also recommends that surface rinse analyses should be conducted on samples collected from around the site to estimate the quantities of soluble salts that might currently reside on site materials.

Conclusions

In summary, MEMi concurs with Rescan (1999) that the existing data indicates a potential for neutral metal leaching, and that the current knowledge of ARD and metal leaching potential at this site is incomplete. Additional information should be collected on further underground development work. In addition, further analysis of currently available information should be undertaken, and additional precautions should be developed to contain potential leachate from ore and waste rock stockpiles.

-	On basis of current information (i.e. kinetic test results), re-evaluate criteria for selection of suitable construction materials, and the need for tighter containment of waste rock and ore stockpile runoff and leachate.

-	Monitor any leachate from the construction and stockpiled materials. Connell states that "the material … has been stored in a manner appropriate to facilitate monitoring and control of any ARD that may occur…" but it is not clear from the documentation how this is being achieved. Material should be placed such that leachate can be collected and monitored.

-	Surface rinse extraction tests on uncrushed samples of materials currently stored on surface, including representative ore, waste rock and underlying pad material.

-	Newly excavated materials should be sampled and analysed on a routine basis.

-	Additional analyses should be undertaken on newly excavated material and should include siderite corrections, the use of ICP data to evaluate potential iron carbonate content as a fraction of reported carbonate content, and kinetic tests on a range of materials, particularly basalt with various amounts of alteration, NP, sulphide and metal content.

MEMi also concurs with the recommendations provided by Rescan (1999), outlined above, including onsite kinetic testing, development of diversion ditches and collection systems for runoff and leachate for existing and future rock/ore piles. Newly excavated materials should be placed such that runoff and leachate can be collected and monitored. MEMi does not concur with Mr. Connell's position that no additional precautions need to be taken over those already being instigated.

In MEMi's opinion, there is currently insufficient understanding of the ARD characteristics of the material stored on surface to plan for closure. The amount of material that may be considered potentially problematic may increase as further analysis of the existing data, and further monitoring of surface runoff and leachate are conducted. As noted by Connell (2001), a potential closure potion for the stockpiled material is to return them to the decline from where it came. This will provide the cold temperatures that would reduce the rate of sulphide oxidation, and may enhance freezing of the material and limit transport of any contaminants that are present at closure. However, the potential and timing for the workings to fill with water and/or ice should be evaluated, and should the available space available below the active surface layer.

We trust these comments meet your current requirements. If you have any questions, or wish further discussion in this manner, please do not hesitate to contact us

Yours truly,

MEHLING ENVIRONMENTAL MANAGEMENT INC.

Per:	Peri Mehling, P. Eng.

President and Senior Consultant

Appendix B

Assumption Agreement For Inuit Land Use Permit

Kitikmeot Inuit Association,

BHP Diamonds, and Cambiex Exploration Inc.

December 17, 1999