Quebec's Plan Nord Excludes Uranium Mining; Strateco Resources Continues with Lawsuit

As the Quebec government moves ahead with its revised Plan Nord project, one commodity has been left out of the equation: uranium. However, the province’s sole uranium exploration company, Strateco Resources (TSX:RCS), isn’t planning to take the exclusion lying down — it intends to continue its lawsuit against the government.
Plan Nord is a mining development plan aimed at attracting investors to the north of Quebec, and a revised version of it was released in early April. However, uranium has been an issue in the province for longer than that — a temporary uranium moratorium was put in place in 2013, with the result being that no permits for uranium exploration or mining could be issued until an independent study on its environmental and social impact was conducted. The province’s environment minister, Yves-Francois Blanchet, requested that the Bureau d’audiences publiques sur l’environnement du Québec (BAPE) complete the studies.

BAPE recommendations released

Fast forward two years and the BAPE has finally released its 626-page recommendation. It states that allowing uranium mining operations would be “premature” as there are too many uncertainties and unanswered questions in regards to the risks involved. The report, which is based on one year of public consultations, also notes that Quebec should weigh the legal and economic impacts that a temporary or permanent ban on uranium extraction could have.
“During its inquiry and hearings, the commission found that substantial progress has been made in recent decades in the areas of mining technology and waste confinement strategies, as a result of uranium mining experience in Canada and elsewhere in the world. On the other hand, many scientific and technological limitations and uncertainties still persist and numerous questions have yet to be answered,” the BAPE report reads.
Now that the report has been released, the Quebec government will establish an interdepartmental committee to assess the findings.

Court proceedings moving along

Strateco Resources’ president and CEO, Guy Hébert, was not surprised by the recommendations.
“We were expecting that report since day one, and it came as no surprise,” Hébert said. “In our case, the BAPE has no jurisdiction because our project is under James Bay territory, and the BAPE has no jurisdiction [there] by its own law. That’s the reason they don’t mention the name Strateco anywhere in the report.”
The company is currently suing the Quebec government for $190 million in damages for the loss of its investment in the Matoush project, a process that began in December 2014 and has been moving along since then.
“We are in court, it is going well. The government is following the agenda — we received on June 26 the defense from the government, we were interrogated last week after the defense interrogation and it went well. Now it is our turn to interrogate the government people; we have until the third week of September to complete it, and all the documentation for the court has to be ready by mid-October. We have special case management and we have a judge appointed, so that saves a lot of time,” he explained.
The company was issued protection under the Companies’ Creditors Arrangement Act in June and was given an extension from the Supreme Court of Quebec until September 3 in order to finalize its efforts to finance the lawsuit.
Hébert said that the judge has recommended mediation before going to trial to see if the two parties can settle out of court. He also said the reason Strateco is fighting is to be able to pay its debt to its creditors; any other money garnered will be distributed to shareholders.
Analysts find government’s decision confusing
Raymond James analyst David Sadowski told The Globe and Mail that the Quebec government’s position on uranium is puzzling considering that secure mining and management of its radioactive effects have been established over the years, with no safety or environment concerns to note in Saskatchewan, which is Canada’s uranium mining hub.
“They should be opening the door on every commodity, on every mineral,” Sadowski told the publication. “A commodity like [uranium] can really add jobs and revitalize part of Northern Quebec.”
What’s more, Strateco is one of only four uranium companies that has been qualified by the Canadian Nuclear Safety Commission (CNSC).
“We have been qualified by the CNSC. Only four companies in Canada have been qualified — Cameco (TSX:CCO,NYSE:CCJ), AREVA (EPA:AREVA), Denison Mines (TSX:DML,NYSEMKT:DNN) and Strateco. We have qualified for four years, we know all the rules, we have to know everything and comply to everything,” Hébert said. “We were the first in 30 years to receive an exploration license from the CNSC in Canada and the first ever in Quebec, so we are qualified.”
He also said that when the government announced the BAPE would be evaluating the industry, the company wrote a letter to ask to participate. However, the offer was quickly refused by the agency.
While the fate of Strateco Resources’ lawsuit remains to be seen, Hébert said the damage is already done — Strateco has been delisted, it has sold off equipment and now its main focus is to get paid for its losses.
The company’s Matoush project, which is located in the Otish mountains of Northern Quebec, has an inferred resource of 2.04 million tonnes grading 0.43 percent U3O8 and containing 19.22 million pounds of U3O8. Its indicated resource is estimated to be 453,000 tonnes grading 0.78 percent U3O8 for 7.78 million pounds of U3O8. According to Hébert, the company invested an average of $20 million per year on the project from 2006 to 2012 during a time when there was no existing legal or regulatory framework suggesting uranium to be problematic.
Given the history of the project, it will certainly be interesting to see how Strateco’s lawsuit progresses. Investors will no doubt be watching for the next move.

Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article.
Related reading:
The Battle Over Uranium Mining in Quebec