1. PROJECT OVERVIEW

1.1 INTRODUCTION

This chapter of the Application for an Environmental Assessment Certificate (the Application) provides an overview of the Proponent, AuRico Metals Inc. (AuRico), and the proposed Kemess Underground Project (the Project). The chapter identifies the Project location and access, Project setting and history, mineral resources, geology and mineralization, project components and activities, project schedule, and project benefits.

1.2 PROPONENT DESCRIPTION

1.2.1 Proponent

AuRico is a precious metals royalty and development company whose royalty assets include a 1.5% Net Smelter Royalty (NSR) on the Young-Davidson Gold Mine, a 0.25% NSR on the Williams Mine at Hemlo, and a 0.5% NSR on the Eagle River Mine – all located in Ontario, Canada. AuRico also has a 2% NSR on the Fosterville Mine, located in Victoria, Australia, and 100% ownership of the proposed Kemess Underground Project. The company was incorporated in Ontario (Corporation Number 1935481) on May 7, 2015 and registered in BC (Registration Number A0095422) on May 15, 2015, pursuant to the Business Corporations Act (2002a). On July 2, 2015 following the merger of AuRico Gold Inc. and Alamos Gold Inc., the Kemess Property was divested into the sole ownership of the newly formed AuRico Metals Inc. AuRico is listed on the Toronto Stock Exchange, and its trading symbol is TSX:AMI.

1.2.2 Corporate Governance

AuRico is governed by a board of directors with eight members, including a chairman. The board of directors is responsible for governance and stewardship of the company. AuRico is managed under the direction of:

Chris Richter, Chief Executive Officer John Fitzgerald, Chief Operating Officer Rob Chausse, Chief Financial Officer Chris Rockingham, Vice President, Development

AuRico’s head office is in Toronto, Ontario, and also has an office in Smithers:

110 Yonge Street, Suite 1601 Toronto, ON M5C 1T4 Telephone: 416-216-2780 (switchboard) Facsimile: 416-216-2781 Internet: www.auricometals.ca

AURICO METALS INC. Kemess Underground Project | 1-1 APPLICATION FOR AN ENVIRONMENTAL ASSESSMENT CERTIFICATE

1076 Main Street, Suite 2 PO Bag 3519 Smithers, BC V0J 2N0 Telephone: 250-877-7855 Facsimile: 888-501-4522

Communications regarding this Application should be directed to:

John Fitzgerald, Chief Operating Officer Email: [email protected]

Chris Rockingham, Vice President, Development Email: [email protected]

Harold Bent, Director, Environment Email: [email protected]

1.2.3 Corporate Social Responsibility and Environmental Policies

AuRico strives to be a good neighbour and understands the importance of supporting and contributing to the communities and regions where it operates while minimizing the company’s environmental footprint.

AuRico’s Corporate Social Responsibility (CSR) Policy focuses on achieving a balance of economic prosperity, environmental stewardship and social responsibility through the consideration of employees and their families, communities where they work and the environment. Some of the keys commitments under the CSR include:

• health and safety of workforce;

• accountability, transparency, ethical behaviour and human rights;

• sustainable development and performance;

• minimizing environmental footprint;

• building relationships within communities of operation;

• supporting local suppliers; and

• promoting a fair and positive outcome for all parties.

AuRico’s Environmental Policy focuses on environmentally responsible practices to minimize the company’s environmental footprint. The policy includes commitment to environmental protection, obeying local laws, maintaining a high level of emergency preparedness as well as reducing the impact on natural resources. Additionally, Aurico’s Health and Safety Policy focuses on providing a safe and healthy work environment and maintaining a goal of zero injuries.

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1.2.4 Consultants

ERM Consultants Canada Ltd. (ERM) has been retained by AuRico to manage the environmental assessment (EA) process for the Project, including preparation of documentation for the Application. ERM offers a wide range of scientific, engineering, and socio-economic services to the resource development industry. ERM contact information is provided below.

ERM 15th Floor, 1111 West Hastings Street Vancouver, BC V6E 2J3 Telephone: 604-689-9460 Facsimile: 604-687-4277

Anne Currie, Partner in Charge Email: [email protected]

Greg Norton, Project Manager Email: [email protected]

1.3 PURPOSE OF THE PROJECT

The purpose of the Project is to develop the Kemess Underground copper-gold deposit to help meet world demand for gold and copper in a manner that benefits Aboriginal groups, local communities, and federal, provincial, and municipal governments, without compromising the ability of future generations to meet their own needs.

The Project consists of the economic extraction of copper and gold ore from the underground deposit using panel caving techniques and processing approximately 9 million tonnes per year (Mt/year) (average 24,650 tonnes per day (tpd) equivalent) with an average annual production rate estimated at 105,000 ounces of gold and 44 million pounds of copper, for a total of 1.3 million ounces of gold and 563 million pounds of copper produced over a mine life of approximately 13 years.

Copper is mainly used in building wiring and plumbing, but also in other applications such as automotives and telecommunications. The demand for copper drives world mine production and usage, which increased by 16% in 2009 and 28% in 2014 (ICSG 2015). In 2014, the largest mine production of copper by country included Chile with 5,800 thousand metric tonnes, China with 1,620 thousand metric tonnes, Peru with 1,400 thousand metric tonnes and the United States with 1,370 thousand metric tonnes (Investing News 2015a). Canada was in the ninth place with a total mine production of 680,000 tonnes, representing production growth of 8% over 2013. The current price of copper is above US$ 2 per pound, however, economic conditions including a stronger US dollar and a slowing demand growth in China have the potential to drive this price below this level (Investing News 2015b).

The consumer market for gold is dominated by India and China, which together account for 60% of the global jewelry sector and as much as 50% of the total bar and coin demand. Most of the gold production in the province of BC is exported to other countries. In 2008, the top destination countries

AURICO METALS INC. Kemess Underground Project | 1-3 APPLICATION FOR AN ENVIRONMENTAL ASSESSMENT CERTIFICATE for the export of gold, in its primary stage, included Japan (57%), South Korea (21%), and China (20%). The United States imports BC gold in a more refined stage that includes pure mineral, semi-finished and/or finished products (BC MEM Statistics 2013). The demand for gold is volatile and depends on gold prices and the state of the economy, that is, at lower prices the demand is higher (World Gold Council 2013).

It is expected, therefore, that the Project will support industrial development needs, help to meet the overall global copper and gold demand, as well as contribute to the provincial total exports and economic growth.

1.4 PROJECT LOCATION AND ACCESS

The Project is located at 57°0′N latitude by 126°45′W longitude, approximately 250 kilometres (km) north of Smithers, and 430 km northwest of Prince George (Figure 1.4-1). The Project is located on provincial Crown land in the Peace River Regional District (PRRD; UTM coordinates: Easting 636295 and Northing 6326428, NAD83). The Project is accessed via the existing Omineca Resource Access Road (ORAR) from Mackenzie. The closest communities to the Project by air are Kwadacha (Fort Ware; 79 km), Tsay Keh (111 km), and Takla Landing (182 km). The Project will use the existing airstrip, which serviced the past-producing Kemess South (KS) Mine (described in Section 1.5), to facilitate scheduled year-round flights from surrounding communities.

1.5 PROJECT HISTORY

Mineral exploration has taken place in the Kemess area since 1889. A gold and copper deposit in the Kemess North area (the same area as the Kemess underground deposit) was first explored between 1966 and 1971 by Kennco Explorations (Canada) Ltd., who conducted soil, silt and bedrock geochemical sampling, drilling and geological mapping. In 1975 and 1976, Getty Mines Ltd. conducted further geotechnical mapping and limited geochemical work and drilling in the Kemess North area. In 1986, El Condor Resources optioned the property from Kennco, and completed electromagnetic surveys up to 1992 which led to the discovery of Kemess South (KS). In 1996 Royal Oak Mines acquired the KS property. A proven exploitable deposit identified to the south of Kemess North and named KS was pursued by Royal Oak Mines, and an environmental assessment certificate for the KS Project was received from the provincial government in 1996. In 2000, Northgate Minerals Exploration acquired a 95% royalty interest in the KS Mine and the associated Kemess North property following the bankruptcy of Royal Oak Mines.

1.5.1 Kemess South Mine Project

Construction started in 1996 and the open pit mine operated from 1998 to 2011. The KS Mine’s average daily production rate was approximately 48,000 tonnes, for a total production of 3.0 million ounces of gold and 749 million pounds of copper from 218 Mt of ore.

1-4 | Kemess Underground Project ERM | PROJ #0196303 | REV H.1 | MAY 2016 Figure 1.4-1 Kemess Underground Project Location

130°0'0"W 125°0'0"W 120°0'0"W 115°0'0"W

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Kilometres Contains information licensed under the Open Date: October 16, 2015 Government Licence – British Columbia and Canada. Projection: NAD 1983 BC Environment Albers Source: Copyright:© 2014 Esri

130°0'0"W 125°0'0"W 120°0'0"W

AURICO METALS INC. - Kemess Underground Project Proj # 0196303-0005 | GIS # KUG-15-069 APPLICATION FOR AN ENVIRONMENTAL ASSESSMENT CERTIFICATE

The KS Mine was accessed via the ORAR, which was maintained as an all-weather access road from Mackenzie, providing transportation of mine supplies and concentrate. Since the closure of the KS Mine, the ORAR has been maintained during the summer months. Mine personnel were transported via charter aircraft from various communities within BC. As of November 2015, there are six on-site personnel who fly in from Prince George and Smithers.

Infrastructure

The major components of the KS Mine site were:

• an open pit mine, that contained 41.7 Mt supergene ore and 154 Mt of hypogene ore, grading an average of 0.22% copper and 0.62 grams/tonne gold;

• a ~ 56,000 tpd process plant, using conventional crush, grind, and staged flotation system for copper and gold recovery;

• a tailings storage facility (TSF) that contained tailings sand from the plant process and a relatively small volume of mine waste rock;

• a water diversion system to divert water around the TSF and into the lower reaches of South Kemess Creek;

• a waste rock dump adjacent to the open pit, containing approximately 175 million tonnes of waste rock material;

• workshop, warehouse, and administration complex;

• a 300-person accommodation camp, dining hall and recreation facility;

• an all-weather, 1,600-m-long and 45-m-wide gravel airstrip; and

• a 380-km, 230-kV electric transmission line from the BC Hydro Kennedy Substation, near Mackenzie, to the mine site.

KS Mine infrastructure that has not yet been reclaimed will be used for the proposed Project. This includes the process plant, KS open pit (which has been designated as the KUG TSF), electrical supply network, water management ponds, pumps and water lines, and onsite access roads and administrative/service complex/accommodation facilities. The existing airstrip will also be used.

Disturbance

Most of the ground disturbance occurred as the mine site was constructed, including the airstrip, tailings coffer dam, pumphouses and operational dump ponds, service and process plant complexes, accommodation camp, haul roads, open pit, and waste rock dump. During the operations phase of the KS Mine, the area of disturbed land resulted from the gradual expansion of the waste rock dump, permitted pit expansions, and the incremental raising of the tailings dam. The total area of primary disturbance was approximately 1,240 ha, of which 525 ha has been reclaimed.

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Closure and Reclamation

Progressive reclamation of exhausted borrow areas and access corridors was initiated in 2000, and large-scale closure activities began in 2008 with reclamation of the downstream buttresses of the tailings dam. Key reclamation activities have included:

• removal of temporarily stockpiled potentially acid-generating (PAG) rock and disposal in the open pit (final phase of the waste rock characterization and management program);

• dismantling and removal of the sands plant located at the KS TSF and fixed equipment;

• re-contouring, capping and re-vegetation of the waste rock dump;

• reclamation of the temporary ore stock piles;

• application of bioengineering techniques; and

• collection, propagation, and planting of native seed.

The overall end land use objective of the reclamation program at the KS Mine site is to achieve adequate capability for wildlife habitat.

In recognition of the ongoing reclamation efforts, the BC Technical and Research Committee on Reclamation awarded the KS Mine citations for outstanding achievement in reclamation at a metal mine in 2002, 2009, and 2010.

The KS Mine site is currently under care and maintenance. The Proponent’s existing closure and reclamation plan for the KS Mine will complement the closure and reclamation plan for the KUG Project.

1.5.2 Kemess North Project

In the years leading up to the depletion of the KS deposit, Northgate Minerals Exploration made plans to extend operations by developing the known Kemess North (KN) deposit, located 6.5 km north of the KS Mine. The proposed Kemess Mine Expansion development, referred to in this overview as the KN Project, included development of a new open pit, a new TSF facility, modification of the existing mill, and related infrastructure. The Project proposed to increase the milling capacity to 120,000 tpd. The Project was subject to the British Columbia Environmental Assessment Act (2002b) and the Canadian Environmental Assessment Act (1992). The federal and provincial governments established the Kemess North Joint Review Panel in May 2005 to conduct an assessment of the potential environmental, economic, social, health, and heritage effects of the proposed KN Project, including effects on Aboriginal people. The Proponent filed an Environmental Impact Assessment in October 2005, as well as further submissions to respond to concerns raised by review participants. Public hearings were held in Prince George, Smithers, and Kwadacha between October 2006 and May 2007. On March 7, 2008, the federal and provincial government announced that they accepted the Panel’s recommendation that the proposed KN Project should not proceed in its present form. Notwithstanding the Panel’s recommendation, the Proponent was invited to re- design the project to address the factors considered by the Panel. The Proponent considers that the current design of the Kemess Underground Project addresses these factors.

AURICO METALS INC. Kemess Underground Project | 1-7 APPLICATION FOR AN ENVIRONMENTAL ASSESSMENT CERTIFICATE

1.5.3 Kemess Acquisition

The KS Mine and the associated KN tenures were acquired by AuRico Gold Inc. in 2011. Following the AuRico Gold Inc. and Alamos Gold Inc. merger in July 2015, these assets were transferred into the sole ownership of the newly formed AuRico Metals Inc.

The KN deposit is the ore body targeted for extraction by the proposed underground Project. In early 2014, AuRico filed a project description for the current underground Project with the EAO, identifying plans to develop the KN deposit by means of underground mining, resulting in the name “Kemess Underground (KUG) Project”. Significant improvements have been made to the mine plan, resulting in several key differences between the current Project and the KN Project. The proposed Project is an underground mine that will be developed by panel cave mining (minimizing waste rock) and the deposition of waste rock and tailings will be within the mined-out KS open pit. Therefore less infrastructure will be required and the Project will have a smaller footprint. The Project proposes to use the existing KS Mine infrastructure, wherever feasible, and to develop additional infrastructure to safely extract the ore from the deposit with minimal adverse environmental and social effects. Additional information related to the Project components and activities can be found in Chapter 5, Project Description.

1.6 FEDERAL LANDS, FUNDING AND TRANSBOUNDARY EFFECTS

Federal lands in the area of the Project include Indian reserves, which are listed in Table 1.6-1. The closest federal port to the Project is located in Prince Rupert, approximately 380 km southwest of the Project. The closest Migratory Bird Sanctuary is the Nechako River Migratory Bird Sanctuary, located approximately 380 km south of the Project. The closest military base is the Canadian Forces Station Baldy Hughes, which is located approximately 450 km southeast of the Project. There are no National Wildlife Areas and no national parks or federal protected areas located near the Project. The closest national park is the Gwaii Haanas National Park Reserve and Haida Heritage Site, located 568 km southwest of the Project.

Table 1.6-1. Indian Reserves and Proximity to the Project

Reserve Name Proximity (km) Aboriginal Group Fort Ware No. 80 76 Kwadacha Nation Sucker Lake No. 130 78 Kwadacha Nation Bear River (Sustut River) No. 3 88 Takla Lake First Nation Bear River 3 88 Gitxsan Nation Klewadusks (Cataract) No. 6 93 Takla Lake First Nation Klewaduska 6 93 Gitxsan Nation Bear Lake (Fort Connelly) No. 4 96 Takla Lake First Nation Weissener Lake No. 85 96 Kwadacha Nation Bear Lake 4 96 Gitxsan Nation Tsupmeet (Patcha Creek) No. 5 98 Takla Lake First Nation

(continued)

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Table 1.6-1. Indian Reserves and Proximity to the Project (continued)

Reserve Name Proximity (km) Aboriginal Group Tsupmeet 5 98 Gitxsan Nation Bear Lake (Tsaytut Bay) No. 1b 106 Takla Lake First Nation Bear Lake 1B 106 Gitxsan Nation Tsay Tut Island 1C 107 Gitxsan Nation Tsaytut Island No 1c 108 Takla Lake First Nation Bear Lake 1A 120 Gitxsan Nation Bear Lake No. 1a 121 Takla Lake First Nation Police Meadows No. 2 123 Tsay Keh Dene First Nation Driftwood River No. 1 127 Takla Lake First Nation Driftood River 1 127 Gitxsan Nation Kotsine (Skutsil) No. 2 139 Takla Lake First Nation North Takla Lake (N End Meadow) 11a 153 Takla Lake First Nation North Takla Lake (Bates Creek) No. 10 154 Takla Lake First Nation Cheztainya Lake No. 11 165 Takla Lake First Nation North Takla Lake No. 7 182 Takla Lake First Nation North Takla Lake No. 7a 182 Takla Lake First Nation Fort Nelson 2 182 (closest parcel)* Fort Nelson First Nation North Takla Lake (W Landing) No. 8 183 Takla Lake First Nation North Takla Lake No. 12 191 Takla Lake First Nation Takla Lake (Ferry Landing) No. 9 199 Takla Lake First Nation Kispiox 1 199 Gitxsan Nation Sik-e-Dakh 2 203 Gitxsan Nation Gitanmaax 1 207 Gitxsan Nation Finlay Bay 21 218 McLeod Lake Indian Band Gitsegukla 1 229 Gitxsan Nation Gitwangak 1 231 Gitxsan Nation Weston Bay 20 232 McLeod Lake Indian Band Prophet River 4 268 Prophet River First Nation Tutu Creek No. 4 283 Tsay Keh Dene First Nation Mackenzie 19 298 McLeod Lake Indian Band Halfway River 168 299 Halfway River First Nation Parsnip No. 5 318 Tsay Keh Dene First Nation McIntyre Lake 23 320 McLeod Lake Indian Band Blue Lake 24 324 McLeod Lake Indian Band Pack River 2 325 McLeod Lake Indian Band McLeod Lake 1 326 McLeod Lake Indian Band

(continued)

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Table 1.6-1. Indian Reserves and Proximity to the Project (completed)

Reserve Name Proximity (km) Aboriginal Group McLeod Lake 5 326 McLeod Lake Indian Band War Lake 4 326 McLeod Lake Indian Band Carp Lake 3 328 McLeod Lake Indian Band Fontas 1 329 Fort Nelson First Nation West Moberly Lake 168A 330 West Moberly First Nations Quaw Island 25 334 McLeod Lake Indian Band Snake 5 336 Fort Nelson First Nation Weedon Carp 6 341 McLeod Lake Indian Band East Moberly Lake 169 341 Saulteau First Nations Tom Cook 26 345 McLeod Lake Indian Band Blueberry River 205 347 Blueberry River First Nations Weedon Lake 27 352 McLeod Lake Indian Band Kerry Lake East 9 358 McLeod Lake Indian Band Kerry Lake West 8 359 McLeod Lake Indian Band Beaton River 204 (South Half) 364 Blueberry River First Nations Beaton River 204 (North Half) 364 Doig River First Nation Tacheeda Lake 14 373 McLeod Lake Indian Band Kahntah 3 377 Fort Nelson First Nation Davie Lake 28 379 McLeod Lake Indian Band Sas Mighe 32 382 McLeod Lake Indian Band Doig River 206 385 Doig River First Nation Hominka 11 398 McLeod Lake Indian Band Arctic Lake 10 432 McLeod Lake Indian Band

*Part of Fort Nelson 2 is located just south of Muncho Lake Park along the Toad River, and the main part of Fort Nelson No. 2 is located adjacent to Fort Nelson, approximately 350 km from the Project.

No federal funding has be provided for the Project and there is no potential for transboundary effects outside of BC as the Project is a 230-km straight-line distance from the BC/Alaska border, and none of the drainages from the Project flow into the US.

1.7 MINERAL RESERVES AND RESOURCES

The Project’s mineral resource and reserve estimates are shown in Tables 1.7-1 and 1.7-2 (SRK 2015). The mineral resources are contained within a portion of the resource block model and considered to be potentially minable by panel caving. The Project’s mineral resources have been classified according to the Canadian Institute of Mining’s Estimation of Mineral Resource and Mineral Reserves Best Practices Guidelines (2010) and are reported in accordance with the Canadian Securities Administrators’ National Instrument 43-101.

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Table 1.7-1. Mineral Reserve Statement, Kemess Underground Project, December 31, 2012

Contained Metal Reserve Tonnes Cu Grade Au Grade Ag Grade Category (000s) (%) (g/t) (g/t) Cu (000s lb) Au (000s oz) Ag (000s oz) Proven 0 0.00 0.00 0.00 0 0 0 Probable 100,373 0.28 0.56 2.05 619,151 1,805 6,608 Proven and 100,373 0.28 0.56 2.05 619,151 1,805 6,608 Probable

Notes: Estimated at US$3.00/lb Cu, US$1,300/oz Au and $23.00/oz Ag, using a cut-off NSR (net smelting return) value of CDN$15.3/t. Metallurgical recoveries were estimated at 91% for Cu and 72% for Au, and 65% for Ag. Mineral reserve tonnage and recovered metal have been rounded to reflect the accuracy of the estimate, and numbers may not add due to rounding.

Table 1.7-2. Mineral Resource Statement, Kemess Underground Project, December 31, 2012

Resource Tonnes Cu Grade Au Grade Ag Grade Contained Metal Category (000s) (%) (g/t) (g/t) Cu (000s lbs) Au (000s oz) Ag (000s oz) Measured 0 0.00 0.00 0.00 0 0 0 Indicated 65,432 0.24 0.41 1.81 346,546 854 3,811 Measured + 65,432 0.24 0.41 1.81 346,546 854 3,811 Indicated Inferred 9,969 0.21 0.39 1.57 46,101 125 503 Notes: Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resources estimated will be converted into Mineral Reserves. Resources stated as contained within a potentially economically mineable solid above 15.00/t NSR cut-off. A variable specific gravity value was assigned by lithology domains for all model blocks. NSR calculation is based on assumed copper, gold, and silver prices of US$ 2.80/lb, US$1,100/oz and US$20.00/oz, respectively. Mineral resource tonnage and contained metal have been rounded to reflect the accuracy of the estimate; numbers may not add due to rounding. Mineral resources are exclusive of mineral reserves. Source: SRK (2015).

1.7.1 Regional and Project Geology and Mineralization

The Project orebody is a large copper-gold porphyry deposit and is typical of calc-alkaline porphyry copper-gold deposits in the western Cordillera. The deposit has a low-grade ore zone at a depth of 150 m below the surface on its western flank and a higher grade zone 300 m to 550 m below the surface on the eastern side, which forms the Project. The Project deposit is located in the southern end of the Toodoggone mining camp. The district comprises Early Jurassic Hazelton Group rocks represented by the Toodoggone Formation calc-alkaline volcanics, as well as coeval plutonic and sub-volcanic intrusive rocks (Black Lake Intrusions). Toodoggone rocks unconformably overlie submarine sedimentary and igneous arc rocks of Permian age. The deposit is centered on a mineralized porphyritic monzodiorite/diorite pluton and associated west-southwest trending dikes, which extend to the southwest. Higher-grade copper-gold mineralization is characterized by secondary biotite alteration in volcanic and the eastern plutonic host rocks. More detailed

AURICO METALS INC. Kemess Underground Project | 1-11 APPLICATION FOR AN ENVIRONMENTAL ASSESSMENT CERTIFICATE information can be found in Section 5.4, Geology and Mineralization, and Section 5.5, Mineral Resources of this Application.

1.8 PROJECT COMPONENTS AND INFRASTRUCTURE

The KUG deposit will be mined using underground panel cave mining, also referred to as panel caving or cave mining. The main Project components include:

• underground workings

• portal area infrastructure

• access corridor

• KUG TSF; and

• process plant and ancillary facilities.

Detailed information on mining activities, including underground development, can be found in Chapter 5 (Project Description).

1.9 LAND USE

This section describes land uses in the area of the Project, including private or fee simple land, Aboriginal treaty boundaries and traditional territories, provincially approved land use plans, Crown-designated lands, Crown-issued tenures, and public recreation. The information in this section is informed by the KUG Project Non-traditional Land Use Baseline Report in Appendix 17-A. Consultations with tenure holders and private land owners, and issues and/or concerns raised during consultations are provided in Chapter 3, Section 3.8.1.4 and Appendices 3-L and 3-M. Commercial land use income and earnings, where information is available, is reported in Sections 4.3.4 (guide outfitting) and 4.4 (trapping) in Appendix 17-A.

Aside from a regional caribou study to refine herd boundaries for the Chase, Spatsizi, Frog, and Finlay herds as discussed in Chapter 15, Section 15.4.3.1 (Wildlife Effects Assessment), the Proponent is not aware of any other existing and/or proposed management and monitoring programs or regional studies in the area of the Project.

1.9.1 Private and Fee Simple Land

The Project does not overlap any private land, including freehold land held in fee simple, and AuRico is unaware of any such land within the immediate vicinity of the Project. There is a private parcel located on the western shore of the north end of Thutade Lake, located 15 km straight-line distance from Kemess (District Lot 6006; Figure 4.9-1 in Appendix 17-A).

1.9.2 Aboriginal Treaty Boundaries and Traditional Territories

The Project is located within the traditional territories of the Takla Lake First Nation (TLFN) and Tsay Keh Dene Nation (TKDN). The traditional territory of the Kwadacha Nation (KwN) is adjacent

1-12 | Kemess Underground Project ERM | PROJ #0196303 | REV H.1 | MAY 2016 PROJECT OVERVIEW to and downstream from the Project. In relation to the Project, these three First Nations are jointly represented by the Tse Keh Nay (TKN). The TKN is an alliance of three First Nations: TLFN, KwN, and TKDN. Through this alliance, the TKN often work together when engaging with government and industry on projects or other matters of shared interest. Each First Nation within the TKN is represented by their respective Chief and decisions of the TKN are made by consensus. The alliance formed by the TKN Nations also has its origins in a shared ancestry, history, and culture (R. Lamont, pers. comm., 2015).

The TLFN is a member of the Carrier Sekani Tribal Council (CSTC), and its traditional territory is included within the larger tribal council territory for treaty negotiations. TLFN entered the BC Treaty process independently, and has its own traditional territory.

Tsay Keh Dene Nation entered the BC Treaty process in 1994 and is currently in Stage 4 of the process. In 2010, the Tsay Keh Dene Nation temporarily suspended negotiations to allow new leadership to consider available options and consult members. In 2011, they resumed tripartite negotiations and these negotiations are ongoing (R. Lamont, pers. comm., 2013).

The KwN is a member of the Kaska Dene Council, and its traditional territory is included within the larger tribal council territory for treaty negotiations. Figure 1.9-1 shows the locations of the traditional territories of the CSTC, TKDN, and Kaska Dene Council in relation to the Project.

The Gitxsan Wilp Nii Kyap traditional territory is located west of the Project (Figure 1.9-1).

The Project is located within an area under dispute by the Canadian federal and provincial governments; the western boundary of Treaty 8. Canada alleges the western boundary is the Arctic/Pacific watershed and BC takes the position that the western boundary is to the east, along the central range of the Rocky Mountains. This matter is before the BC Supreme Court. The disputed federal and provincial western boundary of Treaty 8 and Treaty 8 Nations Indian Reserves are shown on Figure 1.9-2.

The Métis Nation of BC (MNBC) is also represented throughout the region including through “chartered community” associations in Smithers, Terrace, Chetwynd, Prince George, and Fort St. James.

1.9.3 Provincial Land and Resource Management Plans

The Project is located within the area encompassed by the Mackenzie Land and Resource Management Plan (LRMP; BC ILMB 2000) (Figure 1.9-3). The LRMP was approved by the British Columbia government in November 2000 and provides general management direction related to biodiversity, air quality, soils, fish and fish habitat, wildlife and wildlife habitat, caribou and grizzly bear management, guide outfitting and trapping, resource development, and access management. The LRMP also identifies resource management zones and established new protected areas. Section 6.14 of the plan provides management direction and objectives related to minerals. The management direction for minerals states that the objectives are to “maintain the opportunities for the development of mineral values and the significance of mineral potential” and to “maintain opportunities and access for mineral exploration, development and transportation”.

AURICO METALS INC. Kemess Underground Project | 1-13 Figure 1.9-1 Aboriginal Traditional Territories in relation to the Kemess Underground Project

130°0'0"W 128°0'0"W 126°0'0"W 124°0'0"W 122°0'0"W 120°0'0"W

Northwest Main Map

Territories 60°0'0"N ¤£1 Yukon ¤£97 Alberta

60°0'0"N ¤£37 ± British Columbia Kemess ^_ Underground Project a, sk ¤£97 a A !. Mackenzie Al Smithers US !. ¤£16 Prince !. George ¤£16 British Columbia ¤£97

Dease Lake !. Vancouver !. ¤£1 58°0'0"N 58°0'0"N Kemess ¤£37 Underground Kwadacha (Fort Ware) Project !.

Bob Quinn ^_ !. Lake !.Tsay Keh

Fort St. Williston John !. Lake Meziadin 56°0'0"N !. Junction 56°0'0"N

Takla Landing !. !.Mackenzie Alaska, Takla Gitanyow USA !. Lake ¤£16 Babine Lake ¤£16/37 !. Smithers

Burns !.Lake

Prince 54°0'0"N Kitimat !. François Lake George !.

54°0'0"N Nechako Reservoir

Contains information licensed under the Open Government Licence – British Columbia and Canada. Copyright:© 2014 Esri

!. Community Traditional Territory1 Provincial Treaty 8 Boundary1 Kemess Underground Carrier Sekani Tribal ^_ Project Council Traditional Federal Treaty 8 1 Omineca Resource Territory Boundary in BC Access Road Gitxsan Nation 1 Source: DataBC 2015 Highway Traditional Territory 1:4,500,000 Forest Service Road Kaska Dena Council 0 50 100 52°0'0"N Railway Tsay Keh Dene Traditional Territory

52°0'0"N Date: January 08, 2016 Kilometres Projection: NAD 1983 UTM Zone 9N

130°0'0"W 128°0'0"W 126°0'0"W 124°0'0"W 122°0'0"W

AURICO METALS INC. - Kemess Underground Project Proj # 0196303-0005 | GIS # KUG-19-064 Figure 1.9-2 Treaty 8 First Nations Indian Reserves and Treaty 8 Disputed Area

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AURICO METALS INC. - Kemess Underground Project Proj # 0196303-0005 | GIS # KUG-19-065 Figure 1.9-3 Provincial Land and Resource Management Plan in relation to the Kemess Underground Project

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580000 680000

AURICO METALS INC. - Kemess Underground Project Proj # 0196303-0013 | GIS # KUG-11-067 PROJECT OVERVIEW

The Project falls within Resource Management Zone 7—Mining and Wildlife Special Resource Management Zone. The LRMP indicates that the intent of this zone is to manage for the conservation of non-extractive values such as wildlife and wildlife habitat, fish and fish habitat, heritage and culture, scenic areas and recreation and tourism (BC ILMB 2000). This zone has special emphasis on mineral development and related access, including providing for opportunities for exploration and mine development of mineral resources and maintaining a minimal permanent network of primary roads in the zone.

1.9.4 Provincial Parks and Protected Areas

The Project itself does not overlap any provincial parks or protected areas (Figure 1.9-4). The closest provincial parks and protected areas to the Project are: Tatlatui Provincial Park, located approximately 15 km west of the Project; Spatsizi Plateau Wilderness Park, located approximately 47 km northwest of the Project; Finlay–Russel Provincial Park, located approximately 35 km north- northeast of the Project; and the Finlay–Russel Protected Area, located approximately 47 km northeast of the Project. There are no formally designated environmentally sensitive areas (e.g., ecological reserves) in the area of the Project.

1.9.5 Guide Outfitting

Components of the Project (e.g., mine site infrastructure, access corridor, and subsidence zone) occur within Guide Outfitting Licence 700004. The airstrip and portions of the ORAR and transmission line occur within Guide Outfitter Licence 600447 (Figure 1.9-5). AuRico has an agreement in place with the holder of Guide Outfitting Licence 600447. Northgate Minerals Exploration had an agreement with the holder of Guide Outfitting Licence 700004 during the operation of the KS Mine, and AuRico intends to negotiate a similar agreement with this licence holder. Guide Outfitting Licences 600164, 701140, 701158 and 701176 are located within the area of the Project (Figure 1.9-5).

1.9.6 Trapping

The Project and portions of the ORAR and transmission line fall within Trapline TR0739T006. There are five trapline cabins and two hunting cabins within the area of the Project (Figure 1.9-6). Other registered traplines in the area of the Project include: TR0620T001, TR0739T002 to TR0739T005, TR0739T008 and TR0740T005.

The nearest trapline cabin is located 19 km southeast of the Project, and the closest hunting cabin is located 37 km southeast of the Project. AuRico is unaware of any other seasonal or temporary residences located within the Project area.

During the operation of the KS Mine, Northgate Minerals Exploration reached a compensation agreement with the holder of Trapline TR0739T006 in 2001. A second agreement was negotiated in 2005 for the proposed Kemess North Project. AuRico completed negotiations on an agreement with this trapline holder in December 2014 for compensation related to the KUG Project.

AURICO METALS INC. Kemess Underground Project | 1-17 Figure 1.9-4 Provincial Parks and Protected Areas in relation to the Kemess Underground Project

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AURICO METALS INC. - Kemess Underground Project Proj # 0196303-0005 | GIS # KUG-11-052 Figure 1.9-5 Guide Outfitting Licences in relation to the Kemess Underground Project

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v i Licence – British Columbia and Canada.

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AURICO METALS INC. - Kemess Underground Project Proj # 0196303-0005 | GIS # KUG-11-053 Figure 1.9-6 Registered Traplines and Cabins in relation to the Kemess Underground Project

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AURICO METALS INC. - Kemess Underground Project Proj # 0196303-0005 | GIS # KUG-11-054 PROJECT OVERVIEW

1.9.7 Grazing

The Project and portions of the ORAR and transmission line fall within Range Tenure RAN075961, held by Guide Outfitter Licence 600447. Other range tenures in the area of the Project include RAN076771 and RAN 076324 (Figure 1.9-7).

1.9.8 Water Use

Apart from water licences held by AuRico (C118554 and C110454), there are two water licences (C054864 and C112534) held by other parties in the area of the Project (Figure 1.9-7).

1.9.9 Forestry

The Project is located in the Mackenzie Timber Supply Area (TSA), which covers 6.4 million hectares. Other TSAs in the area of the Project include the Cassiar and Prince George TSAs (Figure 1.9-7).

1.9.10 Mineral Exploration

There were 362 mineral claims and 9 placer claims in the area of the Project as of June 5, 2015 (Figure 1.9-8). Companies holding mineral tenures covering more than 5,000 ha (apart from AuRico) in the Project area include Cascadero Copper Corporation-Gold Fields Toodoggone Exploration Corporation, Electrum Resource Corporation, Finlay Minerals Ltd., Multinational Mining Inc., and Stealth Minerals Ltd. AuRico holds 57 mineral claims and 4 mining leases. AuRico’s existing mining leases cover the Project’s proposed mine infrastructure.

1.9.11 Oil and Gas

There are no oil and gas tenures in the Project area; the closest oil and gas tenure (i.e., a pipeline tenure) is located 218 km east of the Project.

1.9.12 Energy

There are no Land Act (1996) tenures for wind power purposes in the Project area; the closest wind power-related tenure is located 148 km southeast of the Project. The hydroelectric W.A.C Bennett Dam at Williston Lake is located 303 km southeast of the Project, and the Forest Kerr 195 MW run-of-river hydroelectric project is located 215 km west of the Project.

1.9.13 Aboriginal Fisheries

AuRico is not aware of any commercial or Aboriginal fisheries in the Project area. AuRico is aware that First Nations fish in the area of the Project.

1.9.14 Land Act Tenures

Figure 1.9-9 identifies Land Act (1996) tenures in the area of the Project. These tenures are for the following purposes: agriculture, commercial, commercial recreation, industrial, residential, utility and forestry. There are no Agricultural Land Reserves in the area of the Project. There is a fishing camp located 84 km southeast from the Project (Figure 4.3-2 in Appendix 17-A). Licence 7406950 on Figure 1.9-9 is the existing power line that will be used for the Project.

AURICO METALS INC. Kemess Underground Project | 1-21 Figure 1.9-7 Range Tenures, Water Licences and Timber Supply Areas in relation to the Kemess Underground Project

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u e Kemess Mines Ltd t R P Prince S e ¤£16 Multinational Mining Inc s George ou Pelly Peak Wilderness r ce A ccess ¤£97 Lodge Ltd R o c British a ty el 3 t ly C Range Tenure d A reek Columbia Proposed RAN076771 r e Underground v RAN076324 i Workings R l ¤£1 RAN075961 e e ss t me Cre 1 s e e Timber Supply Area e Amazay K k ir Proposed Conveyor . C118554 F N 6325000 6325000 Lake Cassiar F r e MacKenzie d C110454 r i Proposed Tailings k F s Prince George l Storage Facility o a Kemess Creek n m

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v i Contains information licensed under the Open Government Licence – British Columbia and Canada. N C112534 Kilometres Source: Esri, DigitalGlobe, GeoEye, Earthstar Geographics, Date: January 05, 2016 CNES/Airbus DS, USDA, USGS, AEX, Getmapping, Aerogrid, IGN, IGP, swisstopo, and the GIS User Community Projection: NAD 1983 UTM Zone 9N Copyright:© 2014 Esri reek 605000 630000 655000 680000

AURICO METALS INC. - Kemess Underground Project Proj # 0196303-0005 | GIS # KUG-11-055 Figure 1.9-8 Mineral Tenures in relation to the Kemess Underground Project

605000 630000 655000 680000 6350000 6350000 D elta C re ¤£ ¤£97 ek 37 Main Map Alberta Kemess r ^_ ± ive Underground R , Project rdee R ly a u ive O a t r n sk k S m i a e i A e !. n F Al r Mackenzie e US Smithers C c y!. a ll e R P Prince !. e George ¤£16 s ou el r ce te Access ¤£97 s R e British r r o i e ce iv a ty l Columbia F t ly R d A Creek Proposed Mineral Claim1 Mining Lease1 Underground Workings AuRico Gold Inc./ AuRico Gold Inc./ Vancouver !. ¤£1 or AuRico Metals Inc. AuRico Metals Inc. mess Cr e ee Canasil Resources Inc Multinational Mining Inc. Amazay K k Proposed Tailings . 6325000 6325000 Lake N Gold Fields Toodoggone 1 Placer Claim Storage Facility Proposed Conveyor Exploration Corporation (51%) CAI Gold Ltd. Cascadero Copper Individual Existing Mill, Kemess Creek Corporation (49%) F Service Complex, l (Client #201845) F a and Accomodation r m Electrum Resource Existing e d e

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605000 630000 655000 680000

AURICO METALS INC. - Kemess Underground Project Proj # 0196303-0005 | GIS # KUG-11-056 Figure 1.9-9 Land Act Tenures in relation to the Kemess Underground Project

605000 630000 655000 680000 6350000 6350000 7407681 De lta Cr ee ¤£97 k ¤£37 Main Map Alberta 7404972 r Kemess ive ^_ r R Underground ± e y 7404972 iv la , Project O n a k R m i e sk e e in F a A r !. e e Al C Mackenzie c US d ly r a Smithersl !.

u e t R P Prince !. S e ¤£16 s George ou r ce A ccess ¤£97 Crown Land Tenure1 R o yce British a tt lly C Agriculture d A reek Columbia Proposed Commercial r e Underground v i Workings Commercial Recreation R l Vancouver7402190!. ¤£1 e e ss Industrial t me Cre s e e e Amazay K k Residential ir Proposed Tailings .

F N 6325000 6325000 Lake Storage Facility F Utility Proposed Conveyor r e 7407233 7404949 d 2 r Forest Tenure i k F Kemess Creek s l Recreation Reserve Existing Mill, o a Service Complex, n m C e

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AURICO METALS INC. - Kemess Underground Project Proj # 0196303-0005 | GIS # KUG-11-057 PROJECT OVERVIEW

1.9.15 Other Resource Developments and Potentially Foreseeable Future Developments

Other resource developments and activities that may have overlapping effects with the KUG Project and future developments and activities that are reasonably foreseeable and sufficiently certain to proceed are described in Chapter 8, Tables 8.7-1 and 8.7-2 (Environmental Assessment Methods).

1.10 PROJECT SCHEDULE AND ACTIVITIES

The Project will have four phases as listed in Table 1.10-1.

Table 1.10-1. Project Phases

Phase Project Year Length of Phase Construction -5 to -1 5 years Operations 1 to 13 13 years Closure 14 to 19 6 years Post-Closure 20 to 59 40 years

1.10.1 Construction Phase

The Construction phase will include the development of the access road and access tunnel, three declines (access decline, conveyor decline, and ventilation decline) and underground development. Portal facilities, including laydown, construction offices, workshop, stores, electrical substation, stockpiles (organics, temporary ore and waste rock) and water-handling infrastructure will also be established. At the existing KS Mine site additional water management infrastructure including a selenium treatment plant and discharge pipeline to Attichika Creek will be constructed and water discharge from the KUG TSF will commence. Undercutting of the ore body will commence to establish the panel cave layout in preparation for Operations. Some ore will be crushed and transported to surface stockpiles and the process plant will be recommissioned in the final year of construction. Receiving environmental monitoring will be conducted through all project phases.

1.10.2 Operations Phase

The Operations phase will include underground panel cave mining, and crushing and conveying ore to the surface for processing. Production levels will ramp up to the projected 9 Mt/year by year three of Operations. During the Operations phase, any waste rock will be trucked from the underground mine to the KUG TSF for subaqueous disposal, and tailings from processing of the ore will be pumped to the KUG TSF for subaqueous disposal. Discharge of treated water from the KUG TSF to the receiving environment will be required on a seasonal basis throughout Operations. In approximately year seven of Operations, construction will commence on a tailings dam on the east end of the KUG TSF which will be raised through the Operations phase to accommodate additional storage requirements. Mine production will occur from Year 1 to Year 13 with progressive development of the panel cave, after which the Closure phase will commence.

AURICO METALS INC. Kemess Underground Project | 1-25 APPLICATION FOR AN ENVIRONMENTAL ASSESSMENT CERTIFICATE

1.10.3 Closure Phase

Disturbed areas that are no longer required for the Project will be reclaimed. For example, diversion ditches will be backfilled, and site roads will be ripped. Soil stockpiled during the Construction phase will be spread on the disturbed surfaces. The soil-covered areas will be reclaimed in accordance with Chapter 6 (Closure and Reclamation) of the Application. Project components that are no longer required will be decommissioned, dismantled, or taken off-site for disposal. Concrete foundations will be broken up and buried on site. The underground mine will be flooded and water- retaining bulkheads will be established within each of the three declines. The water treatment plants will be required until discharge from the KUG TSF meets relevant water quality guidelines at which point the water from the TSF will be allowed to flow to Waste Rock Creek via a closure spillway. The transmission line and mine site access roads will be retained as long as electric power is required at the site. The Closure phase will extend as long as active water treatment of water in the KUG TSF is required, which is currently estimated at 6 years duration. Further details of the closure and reclamation plan can be found in Chapter 6 (Closure and Reclamation) of the Application.

1.10.4 Post-Closure Phase

Following Closure, the underground mine will continue to flood until the local water table rebounds to its final recharge elevation. The underground workings are predicted to re-flood to stable levels in approximately 36 years following cessation of underground dewatering. Water-quality monitoring programs will continue until water quality within the receiving environment is shown to consistently achieve site water quality objectives. Reclaimed areas will be monitored to assess the effectiveness of the reclamation for controlling erosion and sedimentation, and where appropriate for re-vegetation success. Once Post-Closure monitoring demonstrates that water quality objectives have been met, there will be further decommissioning of the water treatment plant and associated site infrastructure.

1.11 PROJECT BENEFITS

This section is based on information that has been provided by the Proponent, including estimates of capital cost and operating expenditures, employment, wages and salaries, and employment policies and local purchasing strategy (AuRico 2014b). Indirect employment, Gross Domestic Product (GDP) and tax revenue estimates are derived from the British Columbia Input-Output Model (BCIOM; April 2015) prepared by BC Stats. The results of the BCIOM as well as the description of the modelling methodology and assumptions are included in Appendix 16-B: Economic Model Report: Kemess Underground Project.

1.11.1 Project Economics

1.11.1.1 Capital Construction Costs

The construction of the Project will take approximately five years; however, capital construction costs will extend into the Operations phase as some construction activities will continue during this phase. There will also be capital costs associated with recommissioning and refurbishing the existing KS infrastructure, including the process plant, camp, offices, workshops, water management infrastructure and former open pit (the KUG TSF).

1-26 | Kemess Underground Project ERM | PROJ #0196303 | REV H.1 | MAY 2016 PROJECT OVERVIEW

The total capital expenditures (CAPEX) are estimated at $683.9 million; this includes pre-production expenditures of $481.3 million, sustaining capital of $157.2 million, and water treatment of $45.4 million in 2014 dollars. Capital expenditures are further divided into underground (79.8%) and surface expenditures (20.2%; Table 1.11-1). An estimated 63.1% of CAPEX, or $431.4 million, represents the initial capital construction cost. The remaining construction cost will be for site development activities during the Operations phase, including dam construction and development associated with panel cave mining (Table 1.11-1).

Table 1.11-1. Capital Expenditures

Annual Expenditures (Million; 2014 Canadian Dollars) Year Underground Surface Total Year -5 NA NA NA Year -4 $15.4 $16.8 $32.2 Year -3 $44.5 $11.4 $56.0 Year -2 $108.2 $14.5 $122.7 Year -1 $119.0 $31.2 $150.2 Total Construction $287.1 $74.0 $361.1 Year 1 $69.50 $0.80 $70.30 Year 2 $71.50 $0.00 $71.50 Year 3 $31.60 $0.00 $31.60 Year 4 $21.70 $0.00 $21.70 Year 5 $20.40 $0.00 $20.40 Year 6 $11.60 $0.00 $11.60 Year 7 $10.40 $0.30 $10.70 Year 8 $3.80 $11.40 $15.20 Year 9 $4.30 $5.10 $9.40 Year 10 $6.30 $5.10 $11.40 Year 11 $6.30 $6.60 $12.90 Year 12 $1.30 $0.00 $1.30 Year 13 $0.00 $34.30 $34.30 Total Operations $258.7 $64.1 $322.8 Total $545.8 $138.1 $683.9 (100.0%)

Source: AuRico (2014b)

Underground development and construction costs include mobile equipment purchases (29.4%), owner manpower (27.0%), mine development (19.9%) and other costs (Table 1.11-2). Surface costs comprise water treatment (32.9%), the construction of the tailings storage facility (20.6%), the development of the surface road to portals (20.2%), and the purchase of process mill equipment (15.1%; Table 1.11-3).

AURICO METALS INC. Kemess Underground Project | 1-27 APPLICATION FOR AN ENVIRONMENTAL ASSESSMENT CERTIFICATE

Table 1.11-2. Underground Costs

Cost (Million; Share of Total Item 2014 Canadian Dollars) Underground Costs (%) Conveyor and Crusher $39.7 7.3% Underground Infrastructure $10.0 1.8% Mine Development $108.6 19.9% Batch Plant $0.6 0.1% Underground Power Distribution $8.3 1.5% IT and Process Automation $2.7 0.5% Owner Manpower $147.2 27.0% Mobile Equipment Purchases $160.2 29.4% Fixed Equipment Purchases $5.4 1.0% Electricity $5.6 1.0% Diesel Fuel $9.8 1.8% Propane $5.5 1.0% Surface Waste Handling $5.8 1.1% Contractor Indirects $36.5 6.7% Total Underground Capital $545.8 100.0%

Source: AuRico (2014b)

Table 1.11-3. Surface Costs

Cost (Million; Share of Total Item 2014 Canadian Dollars) Surface Costs (%) Pre-construction Owners Costs $4.5 3.3% Process Mill Equipment $20.8 15.1% Process Mobile Equipment $0.7 0.5% Camp Renovations $4.4 3.2% Surface Road to Portals $27.9 20.2% Power Line to Portals $1.2 0.9% Tailings Storage Facility $28.5 20.6% Surface Administration $4.7 3.4% Water Treatment $45.4 32.9% Total Surface Capital $138.1 100.0%

Source: AuRico (2014b)

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1.11.1.2 Operating Costs

The total operating cost for the Project is estimated at $1,408.1 million in 2014 Canadian dollars (excluding labour cost; Table 1.11-4). This cost includes Construction phase costs estimated at $73.6 million, which encompass expenditures related to human resources and camp expenses (56.1%), administration (21.6%), concentrate marketing (5.7%), processing (6.2%), mining (6.1%) and environmental expenses (4.3%; Table 1.11-4). Operations phase costs are estimated at $1,334.3 million (excluding labour), which encompass expenditures related to concentrate marketing (30.8%), milling (processing; 29.8%), mining (20%), human resources and camp expenses (10.5%), administration (7.7%), and environmental monitoring (1.2%; Table 1.11-4). The Operations phase will extend over 13 years.

Mining costs include costs associated with development, production drilling and blasting, and loading and hauling supplies. Processing costs relate to power expenses, and grinding, reagents, and maintenance supplies. Administration expenses include property taxes, insurance, IT and communications, freight, road maintenance and other. Human resource and camp costs consist of recruitment and training costs, safety and camp costs, snow removal, catering, flights, and other. Environmental costs relate to monitoring, permits, and consulting. Finally, concentrate marketing includes expenses for smelting, refining, and transport.

1.11.1.3 Closure and Post-Closure Costs

The Closure phase will commence in Year 14 and the Post-Closure phase will commence in Year 20. Costs associated with water treatment and closure are estimated at $35 million; these costs are included in the total life of mine capital cost for the Project.

1.11.2 Project Workforce

1.11.2.1 Direct Employment Opportunities

The Project is expected to provide benefits to local and regional communities, including Aboriginal peoples, through training, skills development, and employment opportunities. Project employment will also contribute to employment in BC and Canada.

Employment estimates are expressed as the number of jobs and are based on the Project’s labour requirements for the Construction and Operation phases. Employment numbers reflect wages paid and hours spent on the job by a typical worker in an industry. Additionally, a full time equivalent (FTE) measure is provided. The FTE adjustment factor for estimating the number of FTEs from the number of jobs is set at 0.977 for Construction employment, and at 1.034 for Operations employment. The FTE measure assumes 2,080 hours of work in one year, typically implying 12-hour work days with two weeks on the job and two weeks off the job. FTE measures will be similar to the number of jobs in industries where workers work full time, but will be different for industries where part-time work is more common. Further, if overtime work is more common, the number of FTEs will be higher than the number of jobs; similarly, if part-time or seasonal work is more common for a given position, the corresponding number of FTEs will be lower.

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For the Construction phase, contractor employment is estimated at 508 jobs (496 FTEs). A total of 116 jobs will be required for surface construction (e.g., camp renovation), and road and access corridor construction, and 392 jobs will be required for underground development and construction (Table 1.11-5). The Construction phase will provide 593 direct Project jobs (613 FTEs; Table 1.11-6). Of that, 406 jobs (68.5%) will be required for underground mining activities, 170 jobs will be in administration and 19 in processing (Table 1.11-6). In total, 1,101 direct Project jobs will be created during Construction.

The Operations phase will provide an additional 163 contractor jobs (159 FTEs) and 4,737 direct Project jobs (4,896 FTEs), for a total of 4,900 jobs (Tables 1.11-5 and 1.11-6). Contractors will be used for tailings dam construction (Table 1.11-5). Direct jobs will be used for mining (63.4%), process plant (20.3%), and administration (16.3%; Table 1.11-6).

The Project will employ hourly and salaried staff that will rotate on either a two week on-site and two week off-site schedule or four day on-site and three day off-site schedule. There will be no part-time positions as they are not feasible in the remote Project setting. Short-term jobs may be available if short-term projects arise. For the Operations phase, most jobs will be for the life of the mine (13 years) and it is expected that most workers will be retained for long-term employment. This approach was successfully applied during the KS Mine, where the annual turnover was below 5%.

Production and maintenance employees, including warehouse employees, will work on a two-week on/two-week off work rotation schedule. Management positions (general foreman, superintendents, general manager), clerical positions, and health and safety positions will follow a four-days on and three-days off rotation schedule.

With respect to supervision, during Construction, there will be 26 contracted supervisors. AuRico will employ seven supervisors at the beginning of the Construction phase, increasing to 39 in the last year of Project Construction. For Operations, there will be 39 AuRico supervisors at the beginning of Project Operations, decreasing to 29 towards the end of mine life, for an average of 33 supervisors per year.

The cost of labour is considered the primary driver of operating costs given that the total wage bill (CDN $580.7 million in 2014 dollars) represents 29.2% of total operating costs (Table 1.11-4). This excludes recruitment and training costs and camp costs.

The average annual wage for mining employees, including benefits, is estimated at $150,000. Employees in processing will earn an average wage of $115,000, whereas those in administration (administrative positions, human resources, and environmental monitoring) will earn an average of $130,000 per year (Table 1.11-7)1. Wages and salaries for the Construction and Operations phases will total $580.7 million (Table 1.11-4).

1 These estimates of salaries include benefits (and burden). The actual wages are expected to be lower.

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Table 1.11-4. Operating Costs (Million; 2014 Canadian Dollars)

Mining Processing Administration Human Resources/Camp Environmental Sub-Total Human Wages & Processing Wages & Administration Wages & Resources/ Wages & Environmental Wages & Concentrate Sub-Total Wages & Year Mining Cost Salaries Cost Salaries Cost Salaries Camp Cost Salaries Cost Salaries Marketing Cost Salaries Total Year -5 NA NA NA NA NA NA NA NA NA NA NA NA NA NA Year -4 0.0 0.0 0.0 0.0 1.3 0.2 7.3 3.1 0.4 0.3 0.0 9.0 3.6 12.6 Year -3 0.0 0.0 0.0 0.0 1.6 0.4 8.8 4.1 0.6 0.4 0.0 11.0 4.9 15.8 Year -2 0.0 0.0 0.0 0.0 5.8 2.6 11.1 3.4 1.0 0.6 0.0 17.9 6.6 24.5 Year -1 4.5 4.4 4.6 1.1 7.2 3.3 14.1 3.2 1.2 0.7 4.2 35.7 12.7 48.4 Total Construction 4.5 4.4 4.6 1.1 15.9 6.5 41.3 13.8 3.2 2.0 4.2 73.6 27.8 101.3 Year 1 10.8 8.7 13.7 3.3 8.0 3.8 13.1 3.3 1.2 0.7 16.0 62.9 19.8 82.7 Year 2 15.0 11.4 22.2 5.5 8.0 3.8 12.6 3.3 1.2 0.7 27.1 86.1 24.7 110.8 Year 3 29.9 37.8 35.1 9.4 8.0 3.8 12.6 3.3 1.2 0.7 45.9 132.7 55.0 187.7 Year 4 30.0 37.5 35.2 9.4 8.0 3.8 12.5 3.3 1.2 0.7 42.9 129.8 54.7 184.5 Year 5 28.3 36.5 35.2 9.4 8.0 3.8 12.0 3.3 1.2 0.7 41.5 126.1 53.7 179.9 Year 6 20.8 29.1 35.2 9.4 8.0 3.8 9.6 3.3 1.2 0.7 38.2 113.0 46.3 159.4 Year 7 20.5 29.0 35.2 9.4 8.0 3.8 9.7 3.3 1.2 0.7 35.3 109.9 46.2 156.1 Year 8 20.3 28.2 35.2 9.4 8.0 3.8 11.1 3.3 1.2 0.7 34.0 109.9 45.4 155.3 Year 9 20.3 28.7 35.2 9.4 8.0 3.8 10.4 3.3 1.2 0.7 33.2 108.3 45.9 154.2 Year 10 20.4 28.3 35.2 9.4 8.0 3.8 10.2 3.3 1.2 0.7 32.0 106.9 45.6 152.5 Year 11 20.6 27.9 35.2 9.4 8.0 3.8 10.2 3.3 1.2 0.7 31.0 106.1 45.1 151.2 Year 12 19.3 24.8 34.4 9.1 8.0 3.8 9.1 3.2 1.2 0.7 27.3 99.3 41.6 141.0 Year 13 11.6 19.4 9.2 2.2 7.2 3.3 7.7 3.1 1.2 0.7 6.4 43.3 28.8 72.1 Total Operations 267.8 347.3 396.2 104.7 103.2 48.9 140.8 42.6 15.6 9.1 410.8 1,334.3 552.8 1,887.4 Total $272.2 $351.7 $400.8 $106.2 $119.4 $55.2 $182.1 $56.1 $18.7 $11.6 $414.9 $1,408.1 $580.7 $1,988.8

Source: AuRico (2014b)

PROJECT OVERVIEW

Table 1.11-5. Contractor Employment (Number of Jobs and Full Time Equivalents)

Surface Tailings Dam Underground Construction Construction Development Total FTEs Period Onsite Total Onsite Total Onsite Total Onsite Total Total Year -5 21 22 0 0 22 25 43 47 46 Year -4 62 63 0 0 23 35 84 98 96 Year -3 24 27 0 0 61 97 85 124 121 Year -2 2 4 0 0 66 104 68 108 106 Year -1 0 0 0 0 84 131 84 131 128 Total Construction 109 116 0 0 256 392 365 508 496 Year 1 0 0 0 0 33 52 33 52 51 Year 2 0 0 0 0 0 0 0 0 0 Year3 0 0 0 0 0 0 0 0 0 Year 4 0 0 0 0 0 0 0 0 0 Year 5 0 0 0 0 0 0 0 0 0 Year 6 0 0 0 0 0 0 0 0 0 Year 7 0 0 3 3 0 0 3 3 3 Year 8 0 0 38 38 0 0 38 38 37 Year 9 0 0 20 20 0 0 20 20 20 Year 10 0 0 20 20 0 0 20 20 20 Year 11 0 0 20 20 0 0 20 20 20 Year 12 0 0 10 10 0 0 10 10 10 Year 13 0 0 0 0 0 0 0 0 0 Total Operations 111 111 33 52 144 163 159 Year 14 0 0 0 0 0 0 60 96 94 Year 15 0 0 0 0 0 0 50 79 77 Year 16 0 0 0 0 0 0 39 62 61 Year 17 0 0 0 0 0 0 28 45 44 Year 18 0 0 0 0 0 0 18 28 27 Year 19 0 0 0 0 0 0 7 11 11 Total Closure 0 0 0 0 0 0 202 321 314 Years 20 to 59 0 0 0 0 0 0 0 0 0 Total Post-Closure 0 0 0 0 0 0 0 0 0

Source: AuRico (2014b) Note: Numbers in the table may not add up due to rounding. FTEs estimated from the number of jobs using a 0.9771056697 adjustment factor.

Workers are expected to come from northern BC and other areas of the province. AuRico expects the workforce will show a similar regional distribution as the operational workforce for the KS Mine; therefore, northern BC residents (including the Project Potentially Affected Communities (PACs)) are expected to make up a minimum of 50% of the workforce.

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At the end of the Operations phase, there will be a loss of Project-related employment. Employment for the six-year Closure phase is estimated at 642 jobs (an average of 107 jobs per year) being equally distributed among AuRico and contractors (Tables 1.11-5 and 1.11-6). Ten jobs per year will be needed for duration of the Post-Closure phase (40 years; Table 1.11-6). By the end of the Post-Closure phase, all Project-related jobs are expected to dissipate. Consequently, during Closure and Post-Closure, some direct employment will continue; however, there will be a decrease in the size of the direct workforce as compared to the Operations phase.

Based on the KS Mine experience, it is assumed a minimum of 10% of the on-site jobs will be held by Aboriginal people. Aboriginal employment at the KS Mine was not influenced by an impact-benefit agreement (IBA) or other form of agreement with the TKN or any other Aboriginal group. However, in 2012, AuRico and TKN signed an Interim Measures Agreement (IMA), which includes consultation and engagement provisions related to training, employment (including reviewing barriers for Aboriginal employment) and business opportunities. In February 2015, an Employment and Contract Subcommittee was established with representation from TKN and AuRico. This Subcommittee was established to communicate employment and contracting opportunities to TKN.2 In addition, in April 2015, in accordance with the objectives of the IMA, AuRico and TKN began to negotiate the terms of an Impact Benefits Agreement (IBA) for the Project, which includes training, employment and business provisions; the IBA must be ratified by each of the TKN First Nations’ communities. The following analysis is conservatively based on an assumption that a minimum of 10% of the Project workforce will be Aboriginal (potentially including TKN First Nations and other Aboriginal groups), although it is possible that the actual proportion of Aboriginal employment will exceed this estimate, at least for some periods of the mine life. Based on the estimates that a minimum of 10% of the Project workforce will be Aboriginal, Aboriginal employment for the Construction phase is estimated at 110 jobs (or an average of 22 jobs per year)3. For the Operations phase, based on the same assumption, Aboriginal employment is estimated at 490 jobs (or an average of 38 jobs per year)4.

It is expected that general positions or job categories accessible to local and regional workers will include:

• managers/supervisors; • equipment operators;

• administration; • labourers;

• technical; • trucking and transportation; and

• trades; • camp services (including catering, janitorial, and other services).

2 Between 2013 and 2015, there were 70 TKN First Nations employed in exploration, environmental roles and camp services at the Project First Nations. TKN First Nations have also been hired for short-term contracts (i.e. to help build the core shack expansion). Additionally, there were other TKN members working for TKN contractors at site. 3 This estimate is based on a total of 1,101 jobs for the Construction phase, including 593 direct Project jobs with AuRico and 508 contracted jobs. 4 This estimate is based on a total of 4,900 jobs for the Operations phase, including 4,737 direct Project jobs with AuRico and 163 contracted jobs.

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Table 1.11-6. AuRico Employment (Number of Jobs and Full Time Equivalents)

Underground Mine Process Plant Administration Total Staff Hourly Staff Hourly Staff Hourly Staff Hourly Total AuRico FTEs Period Onsite Total Onsite Total Onsite Total Onsite Total Onsite Total Onsite Total Onsite Total Onsite Total Onsite Total Total Year -5 0 0 0 0 0 0 0 0 7 10 3 5 7 10 3 5 10 15 16 Year -4 1 2 1 2 0 0 0 0 7 10 6 13 8 12 7 14 15 26 27 Year -3 5 7 3 6 0 0 0 0 9 13 9 17 14 20 12 23 26 43 44 Year -2 21 30 56 112 0 0 0 0 19 24 14 24 40 55 70 136 110 190 196 Year -1 26 39 104 208 19 19 0 0 22 28 16 26 67 85 119 234 186 319 330 Total Construction 53 78 164 328 19 19 0 0 64 85 48 85 136 182 211 412 347 593 613 Year 1 26 39 125 250 15 19 20 25 28 34 16 26 69 92 161 301 230 393 406 Year 2 25 37 146 292 16 21 24 33 28 34 16 26 69 92 185 350 254 442 457 Year 3 25 37 146 293 19 27 35 55 28 34 16 26 72 98 197 374 269 472 488 Year 4 25 37 145 290 19 27 35 55 28 34 16 26 72 98 196 371 268 469 485 Year 5 25 37 134 268 19 27 35 55 28 34 16 26 72 98 184 349 256 446 461 Year 6 22 31 82 164 19 27 35 55 28 34 16 26 69 92 133 245 202 337 348 Year 7 22 31 82 164 19 27 35 55 28 34 16 26 69 92 132 245 201 337 348 Year 8 20 29 81 162 19 27 35 55 28 34 16 26 67 90 132 243 199 333 344 Year 9 20 29 81 162 19 27 35 55 28 34 16 26 67 90 131 243 198 333 344 Year 10 20 29 77 154 19 27 35 55 28 34 16 26 67 90 128 235 195 325 336 Year 11 20 29 77 154 19 27 35 55 28 34 16 26 67 90 128 235 195 325 336 Year 12 20 29 64 128 19 27 35 55 28 34 16 26 67 90 115 209 182 299 309 Year 13 20 29 49 99 15 19 20 25 22 28 16 26 57 76 85 150 142 226 234 Total Operations 290 423 1,289 2,580 236 329 414 633 358 436 208 338 884 1,188 1,907 3,550 2,791 4,737 4,896 Year 14 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 60 96 99 Year 15 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 50 79 82 Year 16 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 39 62 64 Year 17 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 28 45 47 Year 18 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 18 28 29 Year 19 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 7 11 11 Total Closure 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 202 321 332 Years 20 to 59 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 10 10 10 Total Post-Closure 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 400 400 413

Source: AuRico (2014b) Note: FTEs estimated from the number of jobs using a 1.033653846 adjustment factor.

PROJECT OVERVIEW

Table 1.11-7. Average Annual Wages and Benefits by Project Phase

Process Plant General & Administrative Phase Mining Employees Employees Employees Construction (Years -5 to -1) $143,558 to $167,823 $117,888 $129,749 Operations (Year 1 to 13) $141,634 to $157,963 $102,156 to $113,032 $129,749 to $144,165

Source: AuRico (2014b)

1.11.2.2 Indirect Employment Opportunities

The Project will also provide indirect and induced employment opportunities, creating positive effects in the local, regional, and provincial economies. The majority of indirect and induced employment opportunities are expected to take place in BC, with some benefits extending to the rest of Canada. At a regional level, positive effects are predicted for the Peace River Regional District (PRRD), the Regional District of Fraser-Fort George (RDFFG), the Regional District of Kitimat- Stikine (RDKS), as well as the Regional District of Bulkley-Nechako (RDBN). Indirect impacts measure the impacts of the Project on BC industries supplying goods and services to the Project. Induced impacts measure the impacts that spending by workers (employed by the Project or by direct/indirect suppliers) will have on the economy (BC Stats 2015).

BC Stats estimated indirect and induced employment impacts for BC, including impacts at the regional level. As the BCIOM provides Project impacts only for the BC economy, national impacts were estimated by ERM based on Statistics Canada input-output multipliers (Statistics Canada 2014). The multipliers are based on the structure of the economy as it was in 2010. Two types of multipliers were used to assess Project impacts during Construction and Operation. For the Construction Phase, multipliers for “Other Engineering Construction No. 29 (BS23C500)” were used. For the Operations Phase, the averages of multipliers for “Gold and Silver Ore Mining No. 11 (BS212220)” and “Copper, Nickel, Lead and Zinc Ore Mining No. 12 (BX212230)” were used. The multipliers, to avoid double-counting, were adjusted to account for the impacts estimated by BC Stats for the province of BC. Table 1.11-8 presents the calculated multipliers.

Table 1.11-8. Provincial Input-Output Multipliers for Employment

CAPEX OPEX Economic Indicator Indirect Induced Indirect Induced Employment 1.22 1.50 0.82 0.78

Source: Statistics Canada (2014)

During the Construction phase, the total employment impacts in Canadian suppliers industries are estimated at 4,246 jobs (Table 1.11-9). Of that, 2,946 jobs (69.4%) will benefit BC. Regional impacts will total 826 jobs (Table 1.11-9). Occupations to benefit from the Construction phase of the Project include architectural, engineering, and professional services, as well as occupations in retail and wholesale trade, manufacturing, and food services (BC Stats 2015).

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Table 1.11-9. Employment Impacts (Number of Jobs) in Supplier Industries for the Construction Phase

Construction Phase Operations Phase Location of Indirect Induced Total Indirect Induced Total Impacts Impacts Impacts Impacts Impacts Impacts Impacts Total BC 2,202 743 2,946 5,370 2,259 7,629 • Regional 675 152 826 1,842 461 2,305 • Rest of BC 1,529 591 2,121 3,529 1,798 5,324 National 805 495 1,300 3,017 1,610 4,627 Total 3,007 1,238 4,246 8,387 3,869 12,256

Source: BC Stats (2015) and estimates by ERM Note: Numbers in the table may not add up due to rounding. Estimates of employment impacts for the Construction and Operations phases in this table are provided according to the NI 43-101 Technical Report for the Kemess Underground Project, British Columbia, Canada prepared for AuRico Gold Inc. by SRK Consulting (2012). The estimates in this table do not fully correspond with estimates of direct employment provided elsewhere in this chapter due to recent adjustments to the definition of the Construction and Operations phases of the Project. The Operations phase has changed from a 12-year to a 13-year period and now includes what was previously considered to be the last year of the Construction phase (for reference see Appendix 16-B). Consequently, in this table the indirect and induced impacts reported for the Construction phase are slightly overestimated, whereas impacts reported for the Operations phase are slightly underestimated.

In Canada, the total employment impacts in suppliers industries, as a result of the Operations phase, are estimated at 12,256 jobs. Of that, 7,629 jobs (62.2%) will benefit BC, with regional employment impacts of 2,305 jobs (Table 1.11-9). Occupations to benefit from the Operations phase of the Project include occupations in food services, retail, transportation, wholesale trade, and repair construction (BC Stats 2015).

In general, the construction and operation of the Project will create an estimated 16,502 indirect and induced jobs in supplier industries.

1.11.2.3 Local Employment Trends

In 2011, the regional labour force in PRRD, RDFFG, RDBN, and RDKS totaled 125,490 people; of that, 11,965 (9.5%) were unemployed. Provincially, the average unemployment rate was 7.8% (Table 1.11-10). This implies that there are a substantial number of unemployed and underutilized workers who could potentially obtain employment at the Project. Several plans and strategies will be put in place to ensure that the Project will have an opportunity to draw workers from the currently underutilized pool of local and regional workers (Section 1.11.2.4). These program and policies include a development and training policy, and an apprenticeship program for trades training. Further, the Project will also provide on-the-job and specialised skill training. These programs and strategies will support training of the local labour force to maximize the number of local workers employed by the Project. Further, engagement with the TKN communities under the terms of the Impact Benefit Agreement (IBA) that AuRico anticipates signing with the TKN will allow for continuing communication of employment opportunities.

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Table 1.11-10. Regional Labour Force Characteristics, 2011

Labour Force PRRD RDFFG RDBN RDKS BC Population 15 years and over 46,465 74,260 30,780 29,795 3,646,840 In the labour force 34,750 51,355 20,855 18,530 2,354,245 • Employed 32,525 46,195 18,665 16,135 2,171,465 • Unemployed 2,220 5,160 2,190 2,395 182,775 Not in the labour force 11,720 22,900 9,925 11,265 1,292,595 Participation rate 74.8% 69.2% 67.8% 62.2% 64.6% Employment Rate 70.0% 62.2% 60.6% 54.2% 59.5% Unemployment Rate 6.4% 10.0% 10.5% 12.9% 7.8%

Source: Statistics Canada (2013)

1.11.2.4 Employment Policies

AuRico will aim to maximize employment benefits within local communities (including Tse Keh Nay communities), the region, and the province as a whole. Activities to achieve this goal will include communication of: the Project development schedule, including timing of major activities and key milestones; workforce requirements; and the hiring schedule, including types of experience and qualifications required to work at the Project, in particular once the Project enters the Operations phase. Additionally, training and skill development, including on-the-job training, will be offered to Project employees across departments in order to support ongoing enhancement of worker skillsets and internal job advancement.

AuRico’s operations are guided by the company’s policies for sustainability and corporate social responsibility. The Project will provide and support training opportunities, such as specialised skill training and on-the-job training. AuRico has a development and training policy in place that was used at KS; this training policy will be also implemented at the proposed Project. The Project will also offer an apprenticeship program for trades training. Similarly, the KS operation had an on-the- job First Nations Training Program that will potentially be revised to reflect the training needs for the Project. The Project will also provide short term temporary coverage for vacation, maternity leave, parental leave, and short/long term disability; however, these shouldn’t affect the long-term nature of the jobs.

In June 2012, AuRico signed an Interim Measures Agreement (IMA) with the Tse Keh Nay (TKN) First Nations. Under the IMA, several commitments regarding employment and training related to exploration and advanced exploration activities are made. AuRico is negotiating an IBA with the TKN First Nations. The commitments under the IMA relate to the following.

Employment Preference:

• circulate job postings;

• interview and hire Tse Keh Nay on priority basis if qualified; and

• use reasonable efforts to have contractors and subcontractors respect this provision.

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Training:

• provide training for on-the-job opportunities; and • provide letters of support for training funds.

Education and Training and Employment Opportunities:

• provide ongoing opportunities for TKN First Nations to become qualified for employment opportunities on all phases of the Project including reducing barriers.

1.11.2.5 Training

In general, two types of training will be required for Kemess Underground. The first type is training for new employees as the mine goes into production. The second type of training that is required is the ongoing training throughout the life of the mine. More specifically:

1. Mine start-up training for new employees who have no underground mining experience: College programs such as a four-month Underground Mining Essentials Program are designed for individuals seeking the opportunity to enter the mining industry. Training is designed for individuals with limited experience who have a desire to work in the field and gain the fundamental skills to pursue entry level positions in the mining industry. Skills gained in the program are directly transferable to entry level positions in operations specific to underground mining.

2. Examples of ongoing training for operational requirements (in no order of importance) include, but are not limited to:

− new employee orientation; − trades apprenticeships; − first aid and occupational first aid; − occupational health and safety; − WHMIS; − management and supervisory skills; − mine rescue training; − computer software training; − mill operator training; − fall arrest training; − avalanche training; − hoisting and rigging training; − confined space training; − respiratory fit test training; − fire extinguisher training; − bear awareness training; and − spill response training.

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The number of employees who will require training is currently unknown, however, it is expected that all employees will obtain site-specific or/and safety training. Potential training will include health and safety, site orientation, equipment training, confined spaces, basic spill management, supervisor ticket, and other. There are no targets for local or regional employment at the Project. However, the first opportunity for employment will be provided for qualified candidates in the following order:

1. TKN (i.e., TKDN, TLFN, and KwN members). 2. Residents of northern BC communities and Aboriginal groups. 3. Residents of BC. 4. Workers from outside of BC.

Preference will be placed on hiring workers from the TKN First Nations, and from northern BC including the PACs, RSA, and other regional Aboriginal groups. All workers will need to meet basic employment requirements, which will vary depending on the position. Following first opportunity to workers from northern BC, priorities will be to hire workers from elsewhere in BC, followed by the rest of Canada. Prospective candidates will be informed in advance regarding the necessary requirements and qualifications needed for the job, service, or function.

For comparison, at KS, following a First Nation training program, First Nations employment averaged 16% without an agreement in place. Further, of the 1,200 employees that worked at KS from 2000 to 2011 under Northgate, 18% were First Nations. In December 2010, there were 40 First Nations members (including TKN First Nations and other Aboriginal groups) working at Kemess prior to shut down in March 2011.

1.11.3 Other Project Impacts

1.11.3.1 Government Revenues

Property tax (included in the Administration Cost in Table 1.11-4) is estimated at $14.8 million for the Construction and Operations phases (Year-5 to Year 13) for an average of $0.87 million per year. The provincial and federal corporate taxes paid directly by the Project are, estimated at $63.8 million and $87.0 million respectively (Table 1.11-11). Additionally, the BC mineral tax is estimated at $86.0 million.

Table 1.11-11. Project Taxes

Total Amount Tax (Million; Current Canadian Dollars) Property tax $14.8 Provincial corporate tax $63.8 Federal corporate tax $87.0 BC mineral tax $86.0 Total $251.6

Source: SRK (2015)

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As a result of direct Project spending during the Construction phase, the Project is predicted to contribute $49.1 million to government revenue, of which $22.5 million will be in federal taxes, $23.2 million in provincial taxes, and $3.3 million in local taxes as described in Table 1.11-12. Direct Project spending during the Operations phase will contribute $138.2 million to government revenue, of which $69.5 million will be collected in federal taxes, $61.8 million in provincial taxes, and $6.9 million in local taxes as described in Table 1.11-12.

Table 1.11-12. Tax Revenue Derived from Direct Project Expenditure (Million; 2014 Canadian Dollars)

Construction Phase Operations Phase Federal Provincial Local Total Federal Provincial Local Total Total, all sources $22.5 $23.2 $3.3 $49.1 $69.5 $61.8 $6.9 $138.2 Taxes on products $1.3 $12.3 $0.0 $13.5 $6.9 $36.0 $0.0 $42.9 Taxes on factors of production $0.0 $1.7 $3.3 $5.1 $0.1 $3.6 $6.9 $10.6 Personal income tax $21.0 $9.1 $0.0 $30.1 $62.4 $22.2 $0.0 $84.7 Federal income tax $0.2 $0.1 $0.0 $0.3 $0.0 $0.0 $0.0 $0.0

Source: BC Stats (2015). Note: Numbers in the table may not add up due to rounding. Provincial and federal tax revenues include federal and provincial personal income and corporate taxes, provincial sales tax (PST), goods and services taxes (GST) and other taxes such as gas, liquor and lottery taxes and profits, air transportation, and duties and excise taxes. Local tax revenue is primarily accommodation tax. Estimates of impacts for the Construction and Operations phases in this table are provided according to the NI 43-101 Technical Report for the Kemess Underground Project, British Columbia, Canada prepared for AuRico Gold Inc. by SRK Consulting (2012). The estimates in this table do not fully correspond with estimates of direct expenditures provided elsewhere in this chapter due to recent adjustments to the definition of the Construction and Operations phases of the Project. The Operations phase has changed from a 12-year to a 13-year period and now includes what was previously considered to be the last year of the Construction phase (for reference see Appendix 16-B). Consequently, in this table the indirect and induced impacts reported for the Construction phase are slightly overestimated, whereas impacts reported for the Operations phase are slightly underestimated.

For the Construction phase, induced activity in supplier industries will further contribute $57.8 million to government revenue, with $30.1 million in federal taxes, $21.9 million in provincial taxes, and $5.8 million in local taxes as described in Table 1.11-13. Similarly, for the Operations phase, Project-induced activity in supplier industries will contribute $176.5 million to government revenue, with $89.0 million in federal taxes, $67.8 million in provincial taxes, and $19.7 million in local taxes as described in Table 1.11-13.

1.11.3.2 Contractor Supply Strategy

The Project will encourage the involvement of local and regional businesses interested in opportunities to directly and indirectly supply the Project to maximize the benefits within the region. Suppliers will be selected based on location, quality, price, delivery, and support services with the standards for purchasing determined during the initial stages of the Project. The Procurement Strategy to be developed by the Proponent is expected to encourage the procurement of goods and services from both local and Aboriginal-owned suppliers, where such goods and services are competitive in quality and price.

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Table 1.11-13. Tax Revenue Derived from Indirect and Induced Impacts of Project Expenditures (Million; 2014 Canadian Dollars)

Construction Phase Operations Phase Indirect Induced Total Indirect Induced Total Tax sources Impacts Impacts Impacts Impacts Impacts Impacts Total tax revenue $44.4 $13.4 $57.8 $135.8 $40.7 $176.5 Federal $24.4 $5.7 $30.1 $71.5 $17.5 $89.0 • Personal income tax $20.2 $5.1 $25.2 $51.2 $15.4 $66.6 • Corporate tax $3.8 $1.1 $5.0 $18.8 $3.4 $22.3 • Net taxes on products $0.3 -$0.4 -$0.1 $1.5 -$1.4 $0.1 Provincial $16.8 $5.1 $21.9 $52.3 $15.4 $67.8 • Personal income tax $10.2 $2.6 $12.8 $25.9 $7.8 $33.7 • Corporate tax $1.8 $0.5 $2.3 $8.9 $1.5 $10.4 • Net taxes on products $4.8 $2.0 $6.9 $17.6 $6.1 $23.6 Local $3.2 $2.6 $5.8 $11.9 $7.8 $19.7 Source: BC Stats (2015). Notes: Numbers in the table may not add up due to rounding. Provincial and federal tax revenues include federal and provincial personal income and corporate taxes, PST, GST and other taxes such as gas, liquor and lottery taxes and profits, air transportation, duties and excise taxes. Property tax revenues are not included in the estimates. Local government revenue is primarily accommodation tax. Estimates of impacts for the Construction and Operations phases in this table are provided according to the NI 43-101 Technical Report for the Kemess Underground Project, British Columbia, Canada prepared for AuRico Gold Inc. by SRK Consulting (2012). The estimates in this table do not fully correspond with estimates of direct expenditures provided elsewhere in this chapter due to recent adjustments to the definition of the Construction and Operations phases of the Project. The Operations phase has changed from a 12-year to a 13-year period and now includes what was previously considered to be the last year of the Construction phase (for reference see Appendix 16-B). Consequently, in this table the indirect and induced impacts reported for the Construction phase are slightly overestimated, whereas impacts reported for the Operations phase are slightly underestimated.

The types of goods and services most likely to be procured from the regional and local area include transportation (concentrate and materials haulage; air charter for workers), fuel and lubricants, heavy machinery parts and service, reagents, explosives, and groceries.

Also, rail is being considered for shipping/transportation. Concentrate will be trucked from the mine approximately 400 km along the ORAR to Mackenzie where AuRico has a rail load-out facility. The concentrate is expected to be transported via rail and/or ship to where the concentrate contract is in place (SRK 2015).

Contractors will be employed for surface construction and underground development (Table 1.11-5). A company will be also contracted for the tailings dam construction during the Operations phase. Total capital expenditures associated with these works are listed in Table 1.11-1.

Contracting companies during Operations can also include:

• catering, with an estimated 30 workers, including cross-shifts; hauling concentrate/trucking, with an estimated 16 workers, including cross-shifts;

• explosives delivery;

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• diesel, gasoline and propane delivery; and

• air carrier flight services.

Businesses/contractors (by work type or work scope) likely to benefit from the Project at the local, provincial, and national level are listed in Table 1.11-14.

Table 1.11-14. Businesses/Contractors (by Work Type/Scope) to Benefit from the Overall Project

Level Services Equipment/Supplies Local Drill road access & pads Construction aggregate Environmental monitoring Core boxes Environmental works Roadbed aggregate Exploration assistants Exploration drilling assistants Exploration geotechs Helicopter ORAR maintenance Power line brushing Local/Provincial Access road construction Batch plant Camp & kitchen Cement Camp & kitchen upgrades Diesel Charter flights Electricity Communications KUG lateral development materials Concentrate haulage KUG workshop Conveyor install Process water pipeline Environmental studies Propane Exploration drilling Warehousing & storage spares KUG TSF dam raising Water discharge pipeline KUG TSF spillway Laboratory analysis - exploration Mine dry construction ORAR avalanche control Process E&I & mechanical install Process water pipeline install Supplies freight Surface rock haulage Training Water discharge pipeline install Local/National Flotation circuit re-build Assay lab consumables Mill maintenance general spares Reclaim water circuit spares UG (underground) miscellaneous spares UG compressors spares UG production drilling steel UG workshop spares

(continued)

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Table 1.11-14. Businesses/Contractors (by Work Type/Scope) to Benefit from the Overall Project (continued)

Level Services Equipment/Supplies Local/International Concentrate dewatering circuit spares Concentrate dewatering consumables Conveyor spares Flotation circuit spares Flotation consumables Grinding media Grinding mill & cyclone circuit spares Grinding mill liners Process E&I & mechanical equipment Stacker-reclaim spares Tailings pump circuit spares UG auxiliary fans spares UG main fans & heaters spares UG pumps spares Provincial EA application Provincial/National Access tunnel development Electrical power distribution Access tunnel portal construction KUG dewatering pumps Crusher install KUG fuel bay Fine grind mill install Rock pass infrastructure Kemess Lake Valley civil works Secondary ventilation fans KUG dewatering pumps install Surface mobile equipment KUG fuel bay install UG explosives – production KUG lateral development Ventilation infrastructure KUG return ventilation raise KUG workshop install Primary ventilation fans install Secondary ventilation fans install Triple decline portals construction Triple declines portal bulkheads Ventilation infrastructure install Water treatment plants Provincial/International Crusher spares National Drill Survey Equipment

(continued)

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Table 1.11-14. Businesses/Contractors (by Work Type/Scope) to Benefit from the Overall Project (completed)

Level Services Equipment/Supplies National/International Conveyor Crusher Exploration Supplies Fine grind mill equipment Flotation circuit equipment KUG communications & controls Mobile equipment - development & support Mobile equipment - production Mobile equipment parts Mobile equipment parts Primary ventilation fans Water treatment plants equipment Water treatment plants reagents

AuRico does not have local purchasing commitments or targets; however, the Project is expected to have an expenditure pattern that is similar to what occurred during the operation of KS. Following that example, expenditures by region are expected to be: 50% in Northern BC, 30% the rest of BC, and 20% outside of BC. Further, the approach to hiring suppliers will be to provide first opportunity in the following order:

1. northern BC suppliers; 2. suppliers from the rest of BC; then 3. suppliers from outside of BC.

Table 1.11-15 shows the expected number of contracts in a specific value range, by Project phase. As estimated, the construction of the Project is expected to award $50 to $92 million every year in contracts, plus up to $64 million during the entire Construction phase for services and/or equipment and supplies. The Operations phase will award $52 to $77 million in contracts to various businesses at the local, provincial, and national level.

Table 1.11-15. Estimated Value of Supply-Service Contracts

Value of Contracts Number of Contracts (Million Current Canadian Dollars) Exploration Construction Operations Closure Services < C$100K 1 1 3 1 < C$100K/year 1 3 0 0 C$100-500K 1 1 0 0 C$100-500K/year 14 6 6 6 C$500-1,000K 0 1 0 1 C$500-1,000K/year 2 4 2 1

(continued)

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Table 1.11-15. Estimated Value of Supply-Service Contracts (completed)

Value of Contracts Number of Contracts (Million Current Canadian Dollars) Exploration Construction Operations Closure Services (cont’d) C$1-5M 2 2 0 1 C$1-5M/year 1 4 2 0 C$5M 2 7 0 0 >C$5M/year 0 1 3 0 Equipment/Supplies C$5M 0 4 0 0 >C$5M/year 0 5 4 0

Top industries that will benefit from the overall proposed Project (GDP impact) at a regional and provincial level are provided below. The BCIOM provides GDP impacts in the top five supplier industries as a result of Project expenditures. This also serves as an approximation of potential business benefits from the Project.

In BC, GDP impacts5 in top five supplier industries as a result of the Construction phase are estimated to be:

• Direct suppliers:

− professional, scientific and technical services ($28.1 million); − manufacturing ($25.5 million); − wholesale trade ($15.0 million); − transportation and warehousing ($13.6 million); and − accommodation and food services ($9.8 million).

5 Estimates of GDP impacts for the Construction and Operations phases are provided according to the NI 43-101 Technical Report for the Kemess Underground Project, British Columbia, Canada prepared for AuRico Gold Inc. by SRK Consulting (2012). The estimates however do not fully correspond with estimates of direct expenditures provided elsewhere in this chapter due to recent adjustments to the definition of the Construction and Operations phases of the Project. The Operations phase has changed from a 12-year to a 13-year period and now includes what was previously considered to be the last year of the Construction phase (for reference see Appendix 16-B). Consequently, GDP impacts reported for the Construction phase are slightly overestimated, whereas impacts reported for the Operations phase are slightly underestimated.

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• Other suppliers: − finance, insurance, real estate and rental & leasing ($10.5 million); − professional, scientific and technical services ($7.2 million); − transportation and warehousing ($5.8 million); − manufacturing ($5.3 million); and − mining and oil and gas extraction ($2.2 million). • Induced impact: − finance, insurance, real estate and rental & leasing ($29.0 million); − retail trade ($7.8 million); − information and cultural industries ($2.9 million); − accommodation and food services ($2.8 million); and − non-profit institutions serving households ($2.7 million).

Similarly, regional GDP impacts (PRRD, RDFFG, RDKS, and RDBN) in top industries are:

• mining and oil and gas extraction ($10.0 million); • accommodation and food services ($10.0 million); and • construction ($5.0 million).

For the Operations phase, GDP Impacts in top five supplier industries are:

• Direct suppliers: − transportation and warehousing ($149.5 million); − utilities ($62.2 million); − manufacturing ($48.7 million); − wholesale trade ($34.2 million); and − accommodation and food services ($23.0 million). • Other suppliers: − finance, insurance, real estate and rental & leasing ($27.3 million); − transportation and warehousing ($19.6 million); − construction ($18.4 million); − professional, scientific and technical services ($13.8 million); and − wholesale trade ($12.7 million). • Induced impact: − finance, insurance, real estate and rental & leasing ($88.1 million); − retail trade ($23.6 million); − information and cultural industries ($8.9 million); − accommodation and food services ($8.6 million); and − non-profit institutions serving households ($8.3 million).

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Similarly, regional GDP impacts (PRRD, RDFFG, RDKS, and RDBN) in top industries are:

• construction ($36.0 million);

• accommodation and food services ($36.0 million);

• mining and oil and gas extraction ($36.0 million); and

• transportation and warehousing ($36.0 million).

1.11.3.3 Project Contribution to Community Development

Community development will be enhanced through employment and procurement opportunities that support the further economic development of the communities within the region. AuRico will encourage the involvement of local and regional businesses interested in the opportunities to directly and indirectly supply the Project to maximize the benefits within the region. AuRico is committed to being a good neighbour and participating in local events that are consistent with our CSR policy.

AuRico is committed to community development through contributing to and working with local communities including the TKN First Nations. In the past, monetary and sponsorship contributions to local communities of Smithers, Houston, Burns Lake, Hazelton, Takla Landing, Tsay Keh, Kwadacha, Mackenzie and Prince George included (Aurico 2013, 2014a):

• 2015:

− local sports teams; − fishing derby; − local career fairs; − Pacific Northwest Science Fair; − Minerals North (Mackenzie); and − BC & Yukon Veterans.

• 2014:

− donations made to each First Nations children's Christmas Fund; − Pacific Northwest Science Fair; − Minerals North (Vanderhoof); − local spring expos; and − local career fairs.

• 2013:

− science fair - Smithers High School; − University of British Columbia - National Research Council - Science camp - Takla Lake; − donations made to each First Nations children's Christmas Fund; − local sports teams; and − fishing derby.

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• 2012:

− local area schools: o monetary prize donations for educational contests promoting mining, o science fairs, o donated retired pieces of equipment to a trades school in Prince George for use in apprenticeship mine training programs; − Salvation Army; − Mining for Miracles fundraising campaign for BC Children’s Hospital; − sports teams; − fishing derbies; − Canada Day events; and − theatre programs.

AuRico works with local groups and communities to identify key matters of interest and corporate social responsibility activities/initiatives important to the region. One of such initiatives is the IMA with TKN First Nations that highlights AuRico’s commitment to community development and generating economic opportunities through employment and business. Under this agreement, as related to Project benefits, the focus is on providing employment opportunities and skills training while generating local business opportunities for the community (Aurico 2013, 2014a).

Future community development initiatives will continue to include many of the initiatives in which AuRico has already been involved, and the company is committed to continued involvement with the communities in which they work.

1.11.4 Local Facilities

On-site infrastructure consists of offices, maintenance facilities, a 300-person accommodation camp, process plant, crusher, raw ore stockpile areas, access and service roads, an airstrip, explosive magazines and tailings storage facilities (SRK 2015). The majority of workers will work on a two-weeks on and two-weeks off schedule, with fly-in fly-out commuting from regional centres including Smithers and Prince George, as well as other communities in BC that can be cost-effectively justified. Employees are responsible for their own transport to and from their departure point to their place of residence. Consequently, some transportation companies may see an increase in demand for transportation services.

The Project will be supplied by an existing 380-km, 230-kV power line from the BC Hydro Kennedy substation to the mine site substation. Concentrate will be trucked from the mine approximately 400 km along the ORAR to Mackenzie where AuRico has a rail load-out facility. Market conditions and supply will govern where the concentrate will be shipped and smelted.

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REFERENCES

1992. Canadian Environmental Assessment Act, SC. C. 37. 1996. Land Act, RSBC. C. 245. 2002a. Business Corporations Act, SBC. C. 57. 2002b. Environmental Assessment Act, SBC. C. 43.

Aurico. 2013. 2012 Sustainability Report. http://www.auricogold.com/files/doc_downloads/ corporate_governance/sustainability_reports/2012%20AuRico%20Gold%20Sustainability%20Rep ort_v001_k920fb.pdf (accessed April 2015).

Aurico. 2014a. 2013 Sustainability Report. http://www.auricogold.com/files/doc_downloads/ download_documents/Final%20AuRico%20Gold%20Sustainability%20Report%202013.pdf (accessed April 2015). AuRico. 2014b. CAPEX and OPEX input data provided by the Proponent of the Project (Kemess UG for EA V2.xlsx). BC ILMB. 2000. Mackenzie Land and Resource Management Plan. British Columbia Integrated Land Management Bureau: Victoria, BC. BC MEM Statistics. 2013. Imports and Exports Overview (XLS), 2008. http://www.empr.gov.bc.ca/Mining/MineralStatistics/MineralEconomySnapshot/1980toPrese nt/Exports/Pages/default.aspx (accessed NA). BC Stats. 2015. BC Input-Output Model Report: Kemess Underground Project. Report prepared by BC Stats for ERM Rescan: Vancouver, BC. ICSG. 2015. Table 1. World Refined Copper Production and Usage Trends 2009-2015. http://www.icsg.org/index.php/component/jdownloads/finish/165/871 (accessed November 2015).

Investing News. 2015a. 10 Top Copper-producing Countries. http://investingnews.com/daily/resource- investing/base-metals-investing/copper-investing/2013-top-10-copper-producing-countries/ (accessed November 2015).

Investing News. 2015b. Will Copper Prices Fall Below $2 per Pound? http://investingnews.com/ daily/resource-investing/base-metals-investing/copper-investing/copper-price-below-two-dollars- glencore-freeport-mcmoran/ (accessed November 2015). SRK. 2015. NI 43-101 Technical Report for the Kemess Underground Project (February 19, 2015). Report Prepared for AuRico Gold Inc. by SRK Consulting: British Columbia, Canada. SRK Consulting. 2012. NI 43-101 Technical Report for the Kemess Underground Project, British Columbia, Canada. 2CN025.001. Report Prepared for AuRico Gold Inc. by SRK Consulting. Effective December 31, 2012: Vancouver, BC. Statistics Canada. 2013. Health Profiles, December 2013.

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Statistics Canada. 2014. National and Provincial Multipliers, 2010 (15F0046X). Issue # 2014000. http://www5.statcan.gc.ca/bsolc/olc-cel/olc-cel?lang=eng&catno=15F0046X (accessed November 2014). World Gold Council. 2013. Investment: Demand and Supply Statistics, Gold Demand and Supply – Q2 2013. http://www.gold.org/investment/statistics/demand_and_supply_statistics/.

Personal Communications

Lamont, R. 2013. Email from Raymond Lamont (Tsay Keh Dene Nation) to AuRico Gold Inc. Director Government and Community Relations. Personal Communication: December 11, 2013. Lamont, R. 2015. Email from Raymond Lamont (Tsay Keh Dene Nation) to AuRico Gold Inc. Director Government and Community Relations. Personal Communication: October 1, 2015.

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