As noted in the September 1, 2015 posting below, recent rule changes have required senior Canadian public companies to disclose their policies and record on the appointment of women as directors and executive officers. Our recent Insight summarizes the initial results of and response to these new disclosure rules, and indicates what further changes may lie ahead. See our Dentons Insight.
What does the new “Comply or Explain” diversity policy imposed by the Canadian Securities Administrators mean for the mining industry?
Since December 31, 2014, the Canadian securities administrators, other than those of British Columbia, Alberta and Prince Edward Island, require non-venture issuers to disclose their diversity policies as well as information on the representation of women on their boards and executive officer positions. When the non-venture issuers do not have a diversity policy or women representation, they will have to explain why. Carole Turcotte will examine the regulatory requirements as well as the advantages and disadvantages associated with diversity.
Carole Turcotte, Partner, Dentons Canada SENCRL
On October 7 and 8, 2015, the Québec Mineral Exploration Association (QMEA) is hosting Xplor, a major event in Québec that brings together stakeholders in the mineral sector. This year, in addition to high-level presentations and workshops, the Association is introducing The Xplor Investors’ Rendez-vous, an exclusive activity between exploration companies and investors. To register for the event, please visit: AEMQ XPLOR 2015
We hope you will be able to attend.
October 7, 2015
AEMQ XPLOR 2015
Quebec Mining Exploration Convention
2:25 p.m. – 2:50 p.m. ET
Place Bonaventure, Montréal
The Province of British Columbia approved an Order in Council dated April 11, 2014 to establish environmental assessment fees in British Columbia for the review of environmental assessment applications, orders and enforcement fees.
The fee structure became effective on April 14, 2014.
There are three categories of fees: 1. pre-certificate fees; 2. transitional assessment fees; and 3. post-certificate fees.
There is an exemption fee of $10,000 payable when a party seeks an exemption from the requirement for an environmental assessment certificate. The first installment for an assessment fee ranges from “simple” at $25,000 to “typical” at $75,000 and the assessment fee for the second installment ranges from $25,000 to $75,000.
Transitional Assessment Fees
Transitional assessment fees range from “simple” at $37,500 to “complex” at $112,500.
Post certificate fees for an extension range from $2,000 to $10,000 and an amendment fee ranges from $2,000 to $50,000. In addition, there are inspection fees imposed and the timelines for the payment of the fees are as set out in the regulations. There are a number of factors that are used to determine the fees and these are set out in the materials available on the government website at http://www.eao.gov.bc.ca/fees.html.
After several failed attempts at reforming the Mining Act, on December 10, 2013 the National Assembly finally adopted Bill 70, An Act to amend the Mining Act (“Bill 70”).
Bill 70 draws upon a number of the measures that were proposed in Bill 43 of May 29, 2013 (“Bill 43”) as well as in Bill 14 of May 12, 2011 tabled by the previous government, which was actually a modified version of defunct Bill 79. For more details about the measures proposed in Bill 43, please see our May 13 article “Focus on Mining” (available here).
However, unlike the previous bills, which put forth a complete reconsolidation of the Mining Act, Bill 70 introduces a series of amendments to the existing act. It is also worth noting that Bill 70 is the result of certain compromises made by the government further to various comments received including from the mining industry, municipalities, environmental groups and aboriginal groups.
Essentially, the provisions that are amended by Bill 70 focus on three main aspects: mining titles, environment and communities and MRCs.
(a) Mining leases
Scoping and market study. As a precondition for the grant of a mining lease, Bill 70 requires, instead of a feasibility study on the processing of the ore in Quebec as proposed in Bill 43, a scoping and market study, which will be less stringent.
Economic spinoffs within Quebec. Bill 70 carries on one of the proposals contained in Bill 43 concerning the option for the Minister of Natural Resources (the “Minister”) to require, when granting a mining lease, that the economic spinoffs within Quebec from the mining of the mineral resources authorized under the lease be maximized. However, this requirement can now only be imposed on reasonable grounds.
Public consultation. Any metal mine project having a production capacity of less than 2,000 metric tons per day will be subject, before a mining lease is granted, to the holding of a public consultation. The conditions and form of the public consultation will be determined by regulation, so it is difficult for the time being to determine what the public consultation requirements will be. As for projects having a production capacity of 2,000 metric tons or more per day, they will also require a public consultation, but it will be held in the framework of the environmental assessment process described below.
The grant of a surface mineral substance operating lease for peat or a lease needed for an industrial activity or to engage in commercial export is also subject to a prior public consultation.
Reporting. Following in the footsteps of Bill 43, Bill 70 stipulates that holders of mineral rights have an obligation to provide information to the Minister on the quantity and value of the ore that is extracted, the duties paid under the Mining Tax Act and the overall contributions they have paid. In principle, this information is public, except for data appearing in the reports on exploration work involving amounts beyond the allowances claimable under the Mining Tax Act, which will remain confidential for a period of five years. This is an adjustment introduced in Bill 70. Similarly, the data contained in the agreements concluded with a community will not have to be made public and may only be used for statistical purposes.
(b) Mining Claims
Notice to the municipality and the landowner. Claim holders must notify the municipality and the landowner concerned within 60 days after registering a claim of the fact that they have obtained the claim, and must inform the municipality at least 30 days before performing any work.
Annual work report. Claim holders have an obligation to submit an annual report on the work that is performed. The requirement to submit an annual work plan to the Minister contained in Bill 43 was excluded from Bill 70.
Work credit. The radius within which the work credits accumulated for a claim could be used to renew other claims was reduced from 4.5 to 3.5 km in Bill 43. Bill 70 did not carry on such a measure, and the applicable radius therefore remains at 4.5 km. The 12-year limit on the lifespan of the work credits, as proposed in Bill 43, does remain however, along with an increase in the amount to be paid to double the cost of the work that should have been performed for purposes of renewing the claim.
Dropped measure: public auction. Bill 70 drops the measure proposed in Bill 43 which gave the Minister the option to auction off certain claims.
Environmental assessment. Bill 70 also provides for the amendment of the Regulation respecting environmental impact assessment and review, such that mineral processing plant construction and operation projects and mine opening and operation projects with a production capacity of 2,000 metric tons or more per day, as well as all projects involving the processing of rare earth (regardless of the processing or production capacity) will, going forward, be subject to the environmental assessment process stipulated in the Environment Quality Act. Note that Bill 43 provided instead that all of the aforesaid projects would be subject to such an assessment, regardless of their production capacity.
Mine site rehabilitation and restoration plan. Like Bill 43, Bill 70 stipulates that the grant of a mining lease is subject to approval of the mine site rehabilitation and restoration plan in accordance with the Mining Act and issuance of the certificate of authorization required for that purpose under the Environment Quality Act. However, where the time frame for obtaining the certificate of authorization is unreasonable, the Minister may still grant the lease.
Communities and MRCs
(a) Native communities
Bill 70 adds a new section to the Mining Act concerning the obligation to consult Native communities. This section draws on some of the provisions already contained in the previous bills. For more details on the new Bill 70 measures concerning Native communities, we invite you to read the bulletin published on that subject by our Aboriginal Law group (available here).
(b) Local communities
Monitoring committee. Bill 70 stipulates that all holders of mining leases must establish and maintain a project monitoring committee to foster local community involvement in the project as whole. The committee must comprise at least one representative of the municipal sector, one representative of the economic sector, one member of the public and, where applicable, one representative of a Native community consulted by the Government with respect to the project.
(c) Regional County Municipalities (MRCs)
Bill 70 also amends the Act respecting land use planning and development to allow the MRCs to delimit any mining-incompatible territory in their land use and development plan. However, it is in the Mining Act that particulars regarding what constitutes such territories will be found, as well as regarding the exclusion of the mineral substances found thereon from mining activities. Bill 70 did not keep the concept of a “territory compatible on certain conditions,” which was originally proposed in Bill 43. The power of the Minister of Natural Resources to review the delimitation of any mining-incompatible territory and to request changes to the land use plan to permit the conduct of mining activities (often referred to as a veto right) was also dropped in Bill 70.
Bill 70 also introduces a series of other amendments to the Mining Act, many of which were proposed in Bill 43.
- Obligation to provide financial guarantees covering the full costs set out in the rehabilitation and restoration plan;
- Obligation to disclose any uranium discovery;
- Limitation of the power of expropriation to the holders of mining rights that want to proceed to the mining stage;
- Power of the Minister to refuse, on public interest grounds, an application for a lease to exploit sand and gravel; and
- Updating of the penal sanctions system.
For any questions about Bill 70, please contact a member of our Mining Law group.
Amendments to the Corruption of Foreign Public Officials Act (CFPOA) that were proposed in Bill S‑14 earlier this year were passed into law on June 19, 2013.
The amendments are aimed at addressing international criticism of Canada’s efforts to implement the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the Convention). Specifically, the amendments address certain criticisms from the Organisation for Economic Co-operation and Development (OECD), an international organization of 34 countries of which Canada is a member. The OECD’s Working Group on Bribery had criticized the CFPOA as deficient in certain respects in a report issued in March 2011, but endorsed Bill S‑14 in its follow up report issued in May 2013 on Canada’s progress in implementing its obligations under the Convention.
The CFPOA makes it a crime to bribe a foreign public official in order to obtain or retain an advantage in the course of business. To date, three companies have pleaded guilty and been convicted of offences under the CFPOA, the latter two resulting in fines of approximately $10 million each. There are approximately 35 active investigations currently underway by the Royal Canadian Mounted Police (RCMP).
As a result of the passage of Bill S‑14 into law, the CFPOA has been amended as follows:
- the offence of bribing a foreign public official has been expanded beyond business carried on “for a profit” to include activities not carried on for profit. As a result, the CFPOA will apply to charities and other not-for-profit organizations in addition to for-profit corporations;
- the maximum period of imprisonment for bribing a foreign public official has been increased from 5 years to 14 years;
- instead of requiring a “real and substantial connection” between Canada and the location where acts of bribery occur as was previously the case, the CFPOA now applies to acts of bribery anywhere in the world where such acts are conducted by Canadian citizens, permanent residents present in Canada, Canadian corporations or other entities created under the laws of Canada or a province;
- “facilitation payments” (generally, payments to a public official to expedite a routine governmental act that is part of the official’s duties, and not to obtain or retain business or any other undue advantage), will be eliminated as an exception to the offence of bribing a foreign public official and will therefore become illegal at a future date to be set by the Governor in Council;
- a new offence of manipulation or falsification of accounting records to conceal bribery has been created, which attracts a maximum sentence of 14 years in prison; and
- the RCMP have been given exclusive jurisdiction to charge persons for offences under the CFPOA.
It is important for companies operating internationally, especially in developing nations, to have appropriate policies and procedures in place to ensure compliance with the CFPOA and other applicable anti-bribery legislation throughout the world. When entering into transactions with companies that also operate internationally, it is important to ensure appropriate due diligence is conducted and appropriate language is contained in contracts relating to the transaction to minimize the possibility that your corporation will attract liability through under the CFPOA and other applicable anti‑bribery legislation through its association with proposed business partners or other counterparties.
Dentons’ team of seasoned professionals throughout Canada, the US, Europe, Russia and the CIS, Africa, Asia Pacific and the Middle East represents corporate clients, boards of directors, board committees, hedge funds, partnerships and joint ventures, audit firms and individuals in connection with all aspects of anti-corruption compliance, enforcement and defense.
Please contact a member of our Global Anti‑Corruption Group for more information.
On April 12, 2013, the TSX Venture Exchange (“TSX-V”) extended to August 31, 2013, temporary relief from certain pricing requirements related to private placement financings that were originally granted on August 17, 2012, and extended and modified on December 12, 2012.
The temporary relief measures (the “Relief Measures”) are:
(a) allowing a share/unit offering with an offering price below $0.05 (the “Offering Price Relief Measure”);
(b) allowing a debenture offering with a debenture conversion price below $0.10 (the “Conversion Price Relief Measure”);
(c) allowing offerings involving a warrant with an exercise price below $0.10 (the “Exercise Price Relief Measure”); and
(d) with respect to the Offering Price Relief Measure and the Conversion Price Relief Measure, up to $50,000 of the gross proceeds raised by an issuer in reliance upon these Relief Measures can be used for general working capital purposes and is not subject to the “Maintain/Preserve Existing Business” or “No Payments to Related Parties” conditions.
The TSX-V also added the following temporary relief measures that are also in effect until August 31, 2013:
(a) with respect to the Offering Price Relief Measure and the Conversion Price Relief Measure, the TSX-V is modifying the 75% arm’s length requirement to allow up to an aggregate of $200,000 to be raised from related parties of the issuer without any arm’s length component to the private placement being required;
(b) with respect to the Exercise Price Relief Measure, the TSX-V is removing the 75% arm’s length requirement; and
(c) the TSX-V is clarifying that Capital Pool Companies, including those listed on NEX, are not permitted to rely upon the Relief Measures.
Specifics of the requirements and conditions associated with the use of the Relief Measures are detailed in the Corporate Finance Bulletin and Notice to Issuers.
As recently announced in a Corporate Finance Bulletin and Notice to Issuers (the “Bulletin”), the TSX Venture Exchange (“TSX-V”) has extended until April 30, 2013 three temporary measures (the “Relief Measures”) designed to provide relief to issuers from certain pricing requirements relating to private placement financings. The Relief Measures, originally implemented in August 2012, are as follows:
1) Allowing a share/unit offering with an offering price below $0.05.
2) Allowing a debenture offering with a debenture conversion price below $0.10.
3) Allowing offerings involving a warrant with an exercise price below $0.10.
In order to rely on the Relief Measures, an issuer must demonstrate that it is subject to immediate or imminent financial hardship and that it does not have the time or resources to undertake a share consolidation before closing the financing. In addition, the principal use of proceeds of the financing must be to maintain or preserve the existing business of the issuer and none of the proceeds may be used to compensate or satisfy obligations to related parties of the issuer.
The Bulletin includes an amendment to the originally-implemented Relief Measures by introducing the concept of an “Excluded Amount” with respect to financings with a share/unit offering price below $0.05 or a debenture conversion price below $0.10. The amended Relief Measures provide that up to $50,000 of the gross proceeds raised in a financing in reliance on the Relief Measures can be used for general working capital purposes and is not subject to the “Maintain/Preserve Existing Business” and “No Payments to Related Parties” conditions noted above.
Specifics of the requirements and conditions associated with use of the Relief Measures are detailed in the Bulletin.
On January 24, 2013, the BC Securities Commission issued a report (the “2012 Mining Report”) with respect to disclosure and interpretive issues under National Instrument 43 101, which is referenced as “the Mining Rule” in the report. Any questions or comments on the 2012 Mining Report can be submitted to Robert Holland or Ian McCartney of the B.C.S.C.
The report identifies a number of weaknesses in the disclosure of mining companies and provides a useful checklist for compliance measures in Appendix “A” which you can download by clicking ”Download PDF”, and a summary of the mining technical reviews disclosing the common compliance elves on the different disclosures which is also attached to this memo.
The report identifies the following common deficiencies encountered in reviewing technical reports including:
- Missing or altered statements in certificates and consents of the Qualified Persons;
- Not dated, signed, or addressed to the company;
- Non compliant disclaimers of responsibility or statements of reliance;
- Does not provide a summary of all material technical and scientific information for the entire property;
- Non compliant disclosure of historical estimates, exploration targets, or MRMR;
- Does not provide adequate or sufficiently transparent information on the key assumptions, parameters, and methodologies used in mineral resource estimates.
In addition, the report also references the CIM December 15, 2009 publication “Additional Guidance – Reasonable Prospects for Economic Extraction”.
The CIM statement emphasizes that the use of the words “reasonable prospects for economic extraction” in addressing mineral resources are:
- the responsibility of the Qualified Person;
- judgment based on the Qualified Person’s experience; and
- the methods used and assumptions made to determine if the project has “reasonable prospects” which must be presented explicitly in both public and technical reports.
Note that this clarification applies not only to measured and indicated resources, but also inferred reso 2012 Mining Report British Columbia Securities Commission urces and a copy is attached to this memo for reference.
To read Appendix A, click here.
Natasha Singh, articling student, assisted in the preparation of this article.
On January 24, 2013, the British Columbia Securities Commission (“BCSC”) released its 2012 Mining Report (the “Report”). The Report is the first of its kind for the BCSC and serves to strengthen the BCSC’s efforts to be Canada’s leading junior mining regulator. The Report provides an overview of the common pitfalls in mining disclosure and outlines areas where market participants could improve their disclosure.
The Report identifies and discusses the following common areas of deficiencies in mining issuers’ disclosure:
1. Technical Disclosure – The common downfalls in technical disclosure are (i) the failure to file current or fully compliant reports; (ii) the failure to include the required cautionary statements for preliminary economic assessments, historical estimates and exploration targets; (iii) disclosure of mineral resources and mineral reserves that do not fully comply with NI 43-101; (iv) misleading references to mining studies; and (v) the failure to name the qualified person.
2. Company Disclosure – In general, voluntary disclosure is less likely to comply with regulations when compared to required filings. For instance, an issuer’s website, investor relations materials and corporate presentations is less likely to comply with the BCSC’s rules and regulations when compared with required filings, such as technical reports and annual information form.
3. Technical Reports – The common problems in technical reports are (i) missing or altered statements in certificate or consents of qualified persons; (ii) prohibited disclaimers or statements of reliance on other experts; and (iii) non-compliant disclosure or mineral resources and mineral reserves, historical estimates, and exploration targets.
The BCSC is hoping that the Report will help issuers address the foregoing problems and in turn, avoid costly and time-consuming mining disclosure reviews. A copy of the Report can be found here.
On November 29, 2012, the Canadian Securities Administrators (“CSA”) announced the adoption of regulatory changes and amendments (the “Notice”) to National Instrument 54-101 – Communication with Beneficial Owners of Securities of a Reporting Issuer and National Instrument 51-102 – Continuous Disclosure Obligations. The amendments intend to improve the communications process between reporting issuers and shareholders. Specifically, the process by which reporting issuers send proxy-related materials to, and solicit proxies and voting instructions from, registered holders and beneficial owners of their securities.
The most significant features of the amendments are as follows:
• Providing reporting issuers with a new notice-and-access mechanism to send proxy-related materials to registered holders and beneficial owners of securities;
• Simplifying the process by which the beneficial owners are appointed as proxy holders in order to attend and vote at shareholder meetings; and
• Requiring reporting issuers to provide enhanced disclosure regarding the beneficial owner voting process.
The amendments will take effect on February 11, 2013. Certain other provisions apply as of February 15, 2013, while the notice-and-access provisions can only be used in respect of meetings occurring on or after March 1, 2013.
For more information, please refer to the Notice, which can be found here.
On November 1, 2012, new rules and changes to existing rules came into effect under the Mining Act in Ontario.
The Mining Act was originally enacted in the 19th century and has remained relatively unchanged since. Several key changes to the Mining Act were enacted in 2009 when the Mining Amendment Act, 2009 was passed.
The changes are geared towards exploration companies and focus on early consultation with Aboriginal communities. The changes have not been without controversy as many in the mining industry see the additional requirements under the Mining Amendment Act, 2009 as costly and time-consuming, and ultimately, as a hindrance to investment in Ontario.
The new rules are:
1. Anyone wishing to apply or renew a prospector’s license must complete the Mining Act Awareness Program.
2. Land may be withdrawn from prospecting or staking, or have its mining rights or surface rights withdrawn if it is a site of Aboriginal cultural significance.
3. An Exploration Plan must be submitted before certain early exploration activities are performed. Compliance with this requirement is voluntary from November 1, 2012 and mandatory from April 1, 2013.
4. An Exploration Permit must be obtained from the Ministry of Northern Development and Mines before certain early exploration activities are performed. Compliance with this requirement is voluntary from November 1, 2012 and mandatory from April 1, 2013.
Changes to existing rules regarding voluntary rehabilitation of existing mines, GPS georeferencing data on ground staked mining claims, assessment work credits, the amount of material that will be considered a bulk sample, and Aboriginal consultation on a mine closure plan have also come into effect.
For more details, please refer to the Ministry of Northern Development and Mines’ website, which can be found here.
Ara Basmadjian, articling student, assisted in the preparation of this article.
On October 11, 2012, the Toronto Stock Exchange (“TSX”) issued a request for comments on proposed amendments (the “Amendments”) to the TSX Company Manual (the “Company Manual”) and the TSX Rule Book (the “TSX Rules”). The Amendments provide clarification to the process of appeal with respect to listing-related decisions. Furthermore, the Amendments offer consistency between the appeal rules under the Company Manual and those under the TSX Rules.
The Amendments, which will become effective upon approval by the Ontario Securities Commission (“OSC”), include the following:
(1) changes to the composition of the appeal panel. An appeal will be heard by at least one and up to three senior TSX executives;
(2) codification of the common practice of submitting written requests for appeals and written submissions;
(3) clarification of the decision making responsibilities that are delegated to listing managers;
(4) clarification of the timeline to appeal delisting decisions; and
(5) revision and clarification of the rules relating to the suspension and termination of participating organizations.
The TSX will publish the Amendments for a 30-day comment period. Written comments are accepted until November 12, 2012.
TSX Requests Comments on Majority Voting Policy – Proposed Amendments to Part IV of the Company Manual
On October 4, 2012, the Toronto Stock Exchange (“TSX”) released a request for comments on proposed amendments to Part IV of the TSX Company Manual (the “Proposed Amendments”). The Proposed Amendments would require issuers listed on the TSX to have majority voting when electing directors at uncontested security holder meetings. As currently proposed, issuers may adopt a majority voting policy to comply with the requirement.
Under mandatory majority voting, security holders vote “for” or “against” each individual board nominee and only those directors who receive a majority of votes in their favour remain on the board. Typically, a majority voting policy provides that a director who receives a majority of “against” votes must immediately tender his/her resignation to the board of directors. The Proposed Amendments would require the board of directors to issue a news release disclosing: (i) the detailed results of the votes received for the election of each director; and, where applicable, (ii) whether a resignation was accepted and the board’s reasons for the decision.
As indicated by the Canadian Coalition for Good Governance, 39% of the listed issuers in the S&P/TSX Composite Index do not have majority voting. The TSX asserts that the Proposed Amendments will improve corporate governance standards, strengthening Canada’s international reputation.
Comments on the Proposed Amendments are being accepted until November 5, 2012. The TSX anticipates that the Proposed Amendments could become effective as of December 31, 2013.
TSX provides guidance with respect to disclosure and other related requirements for transactions requiring security holder approval
On September 28, 2012, the Toronto Stock Exchange (“TSX”) published a notice (the “Notice”) to provide guidance with respect to disclosure and other related requirements where a transaction is subject to security holder approval pursuant to the TSX Company Manual (the “Manual”). For security holders to make an informed decision whether to approve a transaction, listed issuers are required to disclose material terms of the transaction either in the circular that will be mailed to security holders or in the form of written consent. Under certain circumstances, certain disclosure is applicable to press releases disclosing the material terms of a transaction.
The guidance provided by the TSX generally applies to transactions involving the issuance of securities such as private placements and acquisitions, and also applies to transactions involving insiders or related parties of non-exempt issuers which do not involve the issuance of securities but which require security holder approval.
If the TSX requires security holder approval or exempts an issuer from security holder approval, listed issuers and their advisors must provide a draft of a circular to the TSX for review at least five business days in advance of finalization of the circular.
The disclosure should include certain terms, as applicable, details of which are outlined in the Notice. For more information, please refer to the Notice, which can be found here.
The Canadian Securities Administrators (CSA) have published CSA Notice of Republication and Request for Comment Regarding Proposed National Instrument 51-103 Ongoing Governance and Disclosure Requirements for Venture Issuers
On July 29, 2011, the Canadian Securities Administrators (“CSA”) published for comment a proposed rule and rule amendments (collectively, the “Original Proposals”) proposing a new tailored regulatory regime for venture issuers. After reviewing the comments received and further consideration, the CSA is proposing various changes to the Original Proposals. Consequently, on September 13, 2012, the CSA republished the proposed rule and rule amendments for a second public comment period.
Consistent with the Original Proposals, the CSA is proposing the adoption of a single new national instrument, National Instrument 51-103 – Ongoing Governance and Disclosure Requirements for Venture Issuers (“NI 51-103”) that, for venture issuers, will mandate most of their substantive continuous disclosure and governance obligations.
NI 51-103 introduces a proposed new tailored regulatory regime for venture issuers that are intended to streamline venture issuer disclosure to reflect the needs and expectations of venture issuer investors. The regime also aims to make the disclosure requirements more suitable and more manageable for venture issuers at this stage of their development. NI 51-103 replaces the disclosure obligations set out for venture issuers in National Instrument 51-102 – Continuous Disclosure Obligations, National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings, National Instrument 52-110 – Audit Committees, National Instrument 58-101 – Disclosure of Corporate Governance Practices and National Policy 58-201 – Corporate Governance Guidelines.
Further details can be found here.
The Canadian Securities Administrators (“CSA”) published Staff Notice 43-307 Mining Technical Reports – Preliminary Economic Assessments, which is intended to clarify the definition of “preliminary economic assessment” (“PEA”) in National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”). NI 43-101 defines a PEA as “a study, other than a pre-feasibility study or feasibility study, which includes an economic analysis of the potential viability of mineral resources”. The terms pre-feasibility study (“PFS”) and feasibility study (“FS”) have the meanings ascribed by the CIM Definition Standards for Mineral Resources and Mineral Reserves, as amended. The CSA notes that certain issues have been identified in monitoring PEA disclosure since June 2011 when this definition was included in NI 43-101.
The Notice emphasizes to issuers that a PEA is to be kept separate and distinct from both PFS and FS, which indicate more comprehensive studies, and provides further guidance to issuers on other aspects of PEA preparation and disclosure to address the issues that have arisen. The CSA notes that the definition of PEA has two elements that distinguish it from other studies, namely that, by definition it cannot be a PFS or FS and it can only demonstrate the potential viability of mineral resources, not the technical or economic viability of a project. The Notice provides guidance to issuers regarding how to properly identify and disclose a PEA and avoid the staff challenging the study or taking the position that the issuer is treating the PEA as a PFS.
Many of our mining clients do not appreciate the role of the Ministry of Natural Resources (“MNR”) and the regulation of Crown land through the Public Lands Act. While licenses for advanced prospecting and mine development are secured through the Mining Act, this is not the case with other critical infrastructure. Miners need to manage the requirements of the Public Lands Act that cover the approval of new access roads, electricity generation sites, transmission lines, and other infrastructure indispensible for developing mining operations on Crown land.
Common areas of governmental regulation that miners deal with such as securities, mining and environmental law have well worn rules contained in statutes, regulations or highly prescriptive guidance documents. This is not the case with the MNR and the Public Lands Act. The MNR relies far more on setting broad policy directions through guidance documents and on the discretion of staff in each field office than on prescriptive rules. There are also no appeal provisions under the Public Lands Act so there is no substantial body of legal decisions to help guide future decision-making. Understanding the MNR and the Public Lands Act is the key to obtaining approvals for mine infrastructure on Crown land. This will be especially true in the next few years with the MNR facing substantial staffing and budget cuts.
The MNR uses two main tools to determine what mining infrastructure is allowed in different locations:
1. the Crown Land Use Policy Atlas (the “Atlas”) and
2. the Guide to Crown Land Use Planning (the “Planning Guide”).
The Crown Land Use Policy Atlas
The Atlas sets our the land use designations, permitted uses, and Crown policies that apply to all Crown lands except for the northernmost 42% of Ontario which are governed by the Far North Act (See our July 2012 article on this issue).
The land use designations in the Atlas are divided into the following categories: Provincial Parks, Conservation Reserves, Provincial Wildlife Areas, Forest Reserves, Enhanced Management Areas, Wilderness Areas, and General Use Areas. As these names suggest, the designations represent the MNR’s various legislative and policy mandates. The exception here are General Use Areas that cover all lands not otherwise designated. Miners need to know and cope with the designation of any area where they may wish to develop infrastructure since this will dictate the uses permitted by MNR and any policies that may apply.
The Guide to Crown Land Use Planning
The Planning Guide describes how each of the different designations in the Atlas were developed and how the Atlas is to be applied in dealing with applications for access roads, transmission lines, and other infrastructure. All MNR polices must be consistent with both the Public Lands Act and the Atlas. This is particularly important since MNR staff often vigorously adhere to policies that do not have the force of law but that MNR staff view as binding.
In some circumstances there is an added complication. Regulations under the Public Lands Act require that the older MNR District Land Use Guidelines must be applied together with the Atlas in particular situations such as applications for road construction and servicing. These provisions can make it difficult for miners to know exactly what policy applies in their particular situation. These MNR practices reflect and are a continuation of past MNR policies.
Interaction with Other Legislation
In the real word where miners are applying for different approvals under different Ontario statutes, coordination between Ministries can be difficult. While there are administrative and policy mechanisms in place to enhance coordination between the Mining Act and the Public Lands Act regarding parks and conservation reserves, there is no explicit coordination for the development of access roads, transmission lines, and other mining infrastructure in areas other than the Far North. Further, unlike with municipal official plans, there is no requirement that the Altas conform to the Growth Plan for Northern Ontario. The Atlas is exempt from this requirement and does not interact in this respect with Ontario’s Planning Act.
The legislative and policy silos that exist between mining, economic development and the Public Lands Act will create difficulty for miners in obtaining the necessary approvals from each government ministry.
The FMC Mining Group will prepare a future article on how the Public Lands Act provides for the disposition, occupancy, and use of lands under various approvals such as road construction.
Shaira Nanji, articling student, assisted in the preparation of this article.
The Ontario Securities Commission (OSC) recently released its 2012 annual report (“Report”) which provides an update on the OSC’s intentions concerning potential reforms to the regulation of director elections. The Report discusses how to strengthen “shareholder democracy” and shareholder voting rights with regards to the uncontested director-elections process. The Report supports an earlier proposal made by the Toronto Stock Exchange (TSX) in September 2011 which suggested that:
• directors of listed issuers are elected individually and not by slate voting;
• listed issuers disclose the voting results from shareholders meetings (even if the vote was done by raising hands); and
• listed issuers disclose if they have a majority-voting policy when electing directors.
The TSX proposal also focuses on majority voting for director elections and includes a “comply or explain” disclosure-based regime. Since shareholder voting rights have a “significant impact on confidence in the capital markets,” the Report notes that these proposed initiatives will result in greater transparency and accountability of boards of directors. The OSC plans to work closely with the TSX to improve the director-elections process.
CSA Requests Comments on Proposed Consequential Amendments to Registration, Prospectus and Continuous Disclosure Rules Related to NI 25-101 (Designated Rating Organizations)
On July 26, 2012, the Canadian Securities Administrators (the “CSA”) released a request for comment on proposed consequential amendments to a number of national instruments, policies and forms related to National Instrument 25-101, Designated Rating Organizations (“NI 25-101”).
As discussed in a previous post, NI 25-101 requires credit rating agencies or organizations to apply to become a “designated rating organization” (“DRO”) if they wish to have their credit ratings eligible for use in securities legislation. DROs are also required to comply with a set of rules concerning conflicts of interest, governance, conduct, compliance and required filings.
The proposed amendments, among other things, will replace the terms “approved rating” and “approved credit rating” in a number of instruments, policies and forms with “designated rating” and will include a rating provided by a DRO affiliate (as defined in NI 25-101). Further, the references to “approved rating organization” and “approved credit rating organization” will be replaced with the term “designated rating organization”.
The CSA is also requesting comments on a consequential amendment to Item 7.9 of Form 44-101F1, Short Form Prospectus which will clarify that the disclosure of an issuer’s relationship with a credit rating agency or organization is limited to the securities being distributed under a short form prospectus.
Comments are being accepted until October 24, 2012
The Canadian Securities Administrators (CSA) have published CSA Notice 45-310 Update on CSA Staff Consultation Note 45-401 Review of Minimum Amount and Accredited Investor Exemptions
On November 10, 2011, CSA staff published CSA Staff Consultation Note 45-401 Review of Minimum Amount and Accredited Investor Exemptions (the consultation note). The consultation note provided information about the two exemptions under review and set out 31 consultation questions. The comment period closed on February 29, 2012.
On June 7, 2012 CSA staff published CSA Staff Notice 45-310 which updates market participants on the status of the consultation.
With respect to the Accredited Investor Exemption, some commenters supported retaining the accredited investor exemption and the definition of accredited investor in its current form while others suggested that the CSA could broaden the exemption to increase access to capital by businesses and opportunities to invest in the exempt market for more people.
With respect to the minimum amount exemption, many stated that the minimum amount is a flawed basis to measure investor sophistication or ability to withstand loss and operates to discourage diversification or appropriate investment strategies. Many recommended that the CSA repeal the exemption because of these concerns. Others recommended that the CSA keep the exemption at its current threshold despite these concerns. Their reasons for keeping the minimum amount exemption included: its usefulness as an alternative exemption when no other is available; its simplicity where investors are not willing to complete paperwork; and, the reasonable assumption that an investor would exercise care and caution before making such a large investment
Given the number of comments and the diversity of the feedback provided, the CSA indicated they would need further time to complete their review and consider the feedback. The CSA have indicated that they will finalize their review and publicly report on their conclusions later this year. A copy of the notice can be found here.