On November 2, 2010, despite prior approval by the British Columbia government, the Government of Canada denied approval of the Prosperity Gold-Copper Mine (the “Project”) proposed by Taseko Mines Ltd. (“Taseko”).

Taseko proposed a large open pit gold-copper mine 125-km south west of Williams Lake, British Columbia. In addition to the open pit mine, the Project proposal included an onsite mill and support infrastructure, a tailings storage facility, a 125-km long electrical transmission line, explosives factory and magazine and an access road. The mine site would cover a 35 square km area in the Fish Creek watershed, which drains into several other waterbodies in the surrounding area, including Taseko River, Fish Lake and Little Fish Lake. The development of the Project would result in the necessary destruction of Fish Lake, Little Fish Lake and portions of Fish Creek to allow for the tailings storage plan.

The Project was subject to both provincial review by the British Columbia Environmental Assessment Office (“EAO”) and federal review by the Canadian Environmental Assessment Agency (“CEAA”). The provincial and federal review processes were undertaken separately.

The provincial EAO review process was completed in December 2009. In its report, the EAO found that after mitigation, the Project would not result in significant adverse effects, with the exception of the loss of Fish Lake and Little Fish Lake. The EAO also found that the Project would make a significant economic contribution.

On the basis of the findings of the EAO report, and while the federal review was ongoing, the BC Minister of Environment and Minister of Energy, Mines and Petroleum Resources approved the Project on certain conditions on January 14, 2010.

A federal environmental assessment of the Project was also undertaken as the Project required authorization by the Department of Fisheries and Oceans to permit the destruction of fish and fish habitat, Natural Resources Canada for the construction and operation of an explosives factory and magazine and Transport Canada for the placement of the dam in Fish Creek and the placement of the transmission lines over Big Creek and the Fraser River.

In its July 2, 2010 report, the CEAA review panel concluded the Project would result in significant adverse environmental effects on fish and fish habitat, on navigation, on the current use of lands and resources for traditional purposes by First Nations and on cultural heritage and on certain potential or established Aboriginal rights or title. The federal panel also concluded that the Project, in combination with past, present and reasonably foreseeable future projects, would result in a significant adverse cumulative effect on grizzly bears in the region and on fish and fish habitat. Of particular interest is the Panel’s conclusion that Taseko would not comply with the DFO’s No Net-Loss Policy. The federal review panel did recognize that the potential employment and economic benefits of the Project were considered by many to be beneficial.

On the basis of the federal review panel’s report, the Government of Canada determined that the significant adverse environmental effects of the Project, specifically the permanent destruction of water bodies, could not be justified by the economic benefits of the Project and approval of the Project by any of the responsible federal authorities was denied.

The use of existing waterbodies as tailings impoundment areas has always been controversial and Taseko’s Project is not the first where this has been proposed and denied federal approval. The likelihood of federal approval for such a scheme is more unlikely when traditional users can demonstrate continued use or reliance on the waterbody. In addition, project proponents should consider compliance with DFO’s No Net-Loss Policy to be mandatory. Finally, while it is desirable that that end pit lakes or tailings impoundment areas contain suitable fish habitat post-closure, project proponents should not claim that this comprises suitable fish habitat compensation for the purposes of DFO’s Policy or to address local concerns.