A Canadian federal court slapped Imperial Metals Corp. in September with a significant regulatory setback in its bid to develop the copper-and gold-rich Red Chris project in northwest British Columbia.

But the results of its 2007 drilling program and some progress toward bringing power to the property gave the mid-tier mining company some good news.

Located 280 miles north of Smithers, B.C., and 11 miles southeast of the village of Iskut, the Red Chris porphyry copper-gold deposit is considered one of the most production-ready properties in the province.

Imperial is pursuing startup in 2008 of a C$228-million open-pit development expected to produce 110 million pounds of copper and 75,000 ounces of gold in concentrates during its first five years in operation. It would employ about 250 people with annual spending of about C$70 million.

The Federal Court of Canada ruled Sept. 26 that the federal environmental assessment of the Red Chris project was procedurally incorrect and should have been carried out by way of a comprehensive study review and not as a screening level review.

Court says regulators overstepped authority

The court found that Canada's Department of Fisheries and Oceans and Natural Resources Canada did not have the authority under Canadian law to re-scope the project to a screening level review after they had determined a comprehensive study review was needed.

The judgment set aside a federal environmental assessment completed in May 2006, which determined that the Red Chris project wasn't likely to cause significant adverse environmental effects. As a result, the Department of Fisheries and Oceans and Natural Resources Canada will be required to revisit the environmental assessment of the project under the Canadian Environmental Assessment Act.

The federal court ruling does not affect an environmental assessment certificate issued by the B.C. government in August 2005. Provincial regulators also had concluded the project was unlikely to cause significant adverse environmental impacts, according to Imperial.

Still, the federal decision is a setback for environmental review of projects in Canada because it significantly limits the ability of federal and provincial authorities to harmonize their respective review processes and avoid costly duplication and uncertainty, the company said.

Vancouver, B.C.-based Imperial said it would confer with Fisheries and Oceans and Natural Resources to determine how the agencies would proceed.

Red Chris cores encouraging

Meanwhile, Imperial reported very encouraging assay results from tests of samples taken during drilling of six holes on the Red Chris this summer. Samples taken from Hole RC07-335, drilled vertically in the East Zone, yielded the longest mineralized intersection in the company's history, and graded 1.01 percent copper, 1.26 grams per metric ton gold and 3.92 g/t silver over 1024.1 meters. A vertical hole, RC07-336, drilled in the core of the Main Zone intersecting 996.4 meters graded 0.4 percent copper, 0.38 g/t gold and 1.29 g/t silver.

Imperial said both holes bottomed in strong mineralization and demonstrate that the Red Chris mineral system is much more extensive at depth than previously outlined.

Imperial drilled four other holes, three in the Main Zone and one in the East Zone. Test results from these penetrations are pending.

Further work will be required to define the Red Chris system dimensions at depth, the company added.

Green light given for new power line

The company also said it welcomed the B.C. government's recent announcement that it will proceed with the construction of the Northwest Transmission Line, a new 287 kilovolt line that will extend about 208 miles from Terrace, north to Bob Quinn Lake. The new power line will bring a 287 kV power supply to within 75 miles of the Red Chris project.