On February 7, 2014, BCAMTA opened its office in Terrace to guide and support aboriginal people towards gaining employment in the mining and exploration industry. There are a number of mines planned in the Terrace area and the need for employees, particularly those who have local connections would assist the mining sector for employing local people.
The mineral exploration tax credit has been extended for a further one-year period. This provides a 15% tax credit for flow-through share investors. Other items which would impact the mining industry include amendments to the Hazardous Products Act, an allotment of $40 million for the Norther Economic Development Program over a two-year period and a number of Human Resource initiatives, principally with respect to training.
The government has also proposed changes with respect to corporate transparency, particularly in the area of access to information and corporate beneficial ownership.
Julie Gelfand has been appointed environment commissioner effective March 24, 2014. She was most recently the Chief Advisor and Rio Tinto Canada and Vice President of Environmental and Social Responsibility at the Rio Tinto Iron Ore Company of Canada. She was also formerly the vice-president of the sustainable development at the Mining Association of Canada.
The commissioner is responsible for determining whether federal government departments are meeting their sustainable development goals and for overseeing the environmental petitions process and reports to Parliament on behalf of the Auditor General.
Environment minister tasked with reviewing the Environmental Assessment Office for effectiveness and efficiency
In a speech to the Association for Mineral Exploration of British Columbia, Premier Christy Clark advised that the environment minister, Mary Polak, has been given the task of reviewing The Environmental Assessment Office to make it as effective and efficient as possible.
The Premier indicated that the current process has become less certain, less predictable and probably not efficient. Premier Clark insisted that the process would remain rigorous, clear and that it would be timely.
It will be interesting to see the result of the review, particularly in light of the recent Pacific Booker decision in the British Columbia Supreme Court where the Court was ordered the Environmental Assessment Office to reconsider its earlier rejection of Pacific Booker’s application to develop the Morrison deposit in British Columbia. The government has decided not to appeal that decision.
The Yukon government has increased its Yukon mineral exploration program by $630,000 for the coming field season. Premier Darrell Pasloski said in Vancouver in late January at the Mineral Exploration Roundup of the Association for Mineral Exploration for B.C. annual meeting the program provides a portion of the exploration expenditures to assist mineral exploration in the territory and in 2013 some 55 Yukon exploration projects received funding through the program. The program is merit based and provides partial funding for those projects most likely to succeed.
Nacho Nyak Dun, theTr’ondek Hwech’in (two First Nations), the Canadian Park sand Wilderness Society and the Yukon Conservation Society are suing the Yukon government over the land use plan for the Peel River watershed on the basis that it violates land claims agreements signed by the First Nations. The government indicated that it would not ban mining in an area the size of the Peel River watershed and allows mining in about 70% of the region, subject to many restrictions on the exploration activities and allows existing mining properties to remain open for exploration and development, subject to the terms of the watershed development plan.
Lean times may call for lien measures – What you need to know about miners’ liens in Northern Canada
Given the present economic climate of falling metal prices and depressed equity markets for mining companies, many owners and operators of mines are experiencing cash flow and working capital shortages. As a result, contractors and others who provide services or materials to mines, whether in the exploration, development, or production phases of such projects, are increasingly looking to miners lien legislation to help them increase their leverage when seeking payment of outstanding accounts.
Miners’ liens are unique legal and potentially powerful tools. Therefore, those involved in working on or operating a mine, as well as lenders, should have some awareness of the impact of the filing of such liens on mineral tenures and on the interests of any secured creditors.
What is a lien?
In general terms, a lien is a charge against property, including mineral tenures, granted to a person who provides services or materials which improve that property as long as there has been compliance with the rules in the applicable lien legislation. The property acts as security for the debt owing to the lien claimant. Therefore strict compliance with the statute is required in order to get the benefits of the lien.
Lien legislation is different in each province and territory. All Canadian jurisdictions have builders lien legislation that applies generally to improvements and services provided to property, but the northern territories have special miners lien legislation. Where miners lien legislation exists, it is that legislation and not the builders lien legislation that applies to mining projects.
Miners Lien Acts north of 60 – who can lien for what?
In each of the Yukon, Northwest Territories and Nunavut, the applicable Miners Lien Act provides a statutory framework for claiming a miners lien. There are currently two different lien legislation regimes: one in the Yukon and another in the Northwest Territories and Nunavut.
In the Yukon, a lien is provided to a contractor or subcontractor who provides services or materials to a mine “preparatory to, in connection with, or for an abandonment operation in connection with” the recovery of a mineral. The lien is provided on “all the estates or interests in the mine or mineral concerned” as well as on the mineral itself “when severed and recovered from the land while it is in the hands of the owner”. The lien is also on “the interest of the owner in the fixtures, machinery, tools, appliances and other property in or on the mines or mining claim”. In addition, a person who rents equipment to an owner, contractor or subcontractor has a lien for the rent while the equipment is being used or reasonably required to be available for the purpose of the mine.
In the Northwest Territories and Nunavut, a person who performs any “work or service on or in respect of” or “places or furnishes any material to be used in the mining or working of a placer or quartz mine or mining claim” has a lien for the price of the work, service or material on “the minerals or ore produced from and the estate or interest of the owner in the mine or mining claim”.
How to claim a lien and time limits
Under the Miners Lien Acts, there are two initial steps required to claim a lien: first, file a claim of lien, and second, start an action.
Firstly, a lien claimant must file a claim of lien in the mining recorder’s office against the applicable mineral tenures within the prescribed time period. This time period differs between the Yukon and the Northwest Territories/Nunavut. The applicable time periods are summarized in the chart below. The claim of lien must be supported by an affidavit which verifies the facts in the claim of lien, and the claim of lien must include:
- The name and residence of the claimant, owner of the property and of the person for whom the work, service or material was provided;
- A description of the work or service performed or material furnished and the time period within which it was performed or furnished;
- The amount claimed as due or to become due;
- The description of the property to be charged; and
- The date of the expiration of the period of credit agreed to by the lien holder for payment for the work, service or material of the lien holder where credit has been given.
Secondly, a lien claimant must start an action within the prescribed time period in the Supreme Court in the Yukon or the Northwest Territories or in the Nunavut Court of Justice in Nunavut. In addition, the lien claimant must file a certificate from the court in the mining recorder’s office against the liened mineral tenures. Again, this time period differs between the Yukon and the Northwest Territories/Nunavut, and the applicable time periods are summarized in the chart below. The certificate notifies anyone searching at the mining recorder’s office that the mineral tenure is subject to a legal proceeding.
Assuming there has been compliance with the legislation, a miners lien gives a lien claimant limited priority over mortgage and other encumbrance holders. This priority can be important if the mineral tenures are subject to secured financing the amount of which is equal to or exceeds the value of the mineral tenures. In such a scenario, the lien claimant may only be able to recover the amounts which have priority over the secured financing. Therefore it is important for all the players to understand the scope of the priority.
The following chart summarizes the applicable steps and timelines to claim a miners lien in Yukon and in the Northwest Territories/Nunavut, and the priority granted by such liens.
|Yukon||Northwest Territories and Nunavut|
|Time for filing a claim of lien||Before the expiration of 45 days from the last day on which the work or service or material which is the subject matter of the claim, was performed.||Before the expiration of six months from the last day on which the work or service or material, the subject-matter of the claim, was performed or placed or furnished or, where credit has been given, from the time fixed for payment.|
|Time for commencing an action and filing a certificate.||60 days after deposit of the claim of lien.||90 days after filing of the claim of lien.|
|Priority||A lien takes priority over any mortgages or encumbrances to the extent the lien arises from work, services, or materials provided to the mine for a period of up to 60 days.The purpose of this limitation is to provide certainty to financiers of mines that any miners lien has a limited priority. The commencement of this 60 day period is not expressly stated in the Miner Lien Act. The Yukon Territory Supreme Court has indicated that this period should be calculated from the last day of the provision of work, services or materials, and that accordingly it may be different for each lien claimant. However, this case law is not binding, and therefore this legislation may be interpreted differently by a future court.||A lien takes priority over all mortgages and encumbrances registered on or after March 23, 1937, as to 1/2 of the output from the applicable mine or mining claim.This priority typically extends to half of the minerals or ore when recovered from the mine, and, if so ordered by a court, may also extend to half of any net proceeds recovered from the sale of such minerals or ore.|
Impact of liens
Some of the key impacts of miners’ liens for participants in mining projects are summarized below:
Owners & Operators: Owners and operators should be aware of the impact miners liens can have on their debt covenants and should properly manage relationships with contractors, suppliers and lenders when experiencing cash flow and working capital shortages.
Contractors & Suppliers: Contractors and suppliers should be aware of lien legislation, and take timely action to perfect a lien because failure to comply with the strict requirements in lien legislation can have dire consequences. Once perfected, a lien can provide leverage to a contractor or supplier in the settlement of outstanding accounts with an owner.
Lenders: Lenders need be aware that a portion of their security may be subordinated to lien claims. Lenders can ensure there are protective covenants in security documents which contemplate the lenders’ recourse in the event a claim of lien is filed.
On February 6, 2014, the Ontario Securities Commission (“OSC”) released OSC Staff Notice 51-722 Report on a Review of Mining Issuers’ Management’s Discussion and Analysis Guidance (the “Report”). The Report summarizes the results of a review conducted by the OSC of the annual and interim Management’s Discussion and Analysis (MD&A) filed by 100 mining companies with market capitalization of less than $100 million (the “Review”) and is designed to serve as a tool to assist small mining companies to navigate regulatory requirements.
The Review focused on:
- venture issuer disclosure;
- discussion of operations;
- liquidity and capital resources disclosure;
- disclosure of transactions between related parties;
- disclosure of risk factors and uncertainties; and
- reporting on use of financing proceeds.
It should be noted that at the time of the Report there were approximately 449 Ontario mining issuers for which the OSC was the principal regulator and approximately 374 of these issuers (approximately 83%) had a market capitalization of less than $100 million. Out of the 100 Ontario mining issuers surveyed, 54% had a market capitalization of less than $25 million and 28% had a market capitalization of less than $10 million. In terms of stage of development, the majority of the issuers, 53%, were at the mineral resource stage, 23% were at the exploration stage and 24% were at the development or production stage.
Given the limited funding available for junior mining companies at the exploration and development stage, coupled with fluctuating precious and base metal prices, it should come as no surprise that the Review found the following deficiencies among junior mining companies:
- venture issuers without significant revenue from operations were found to not provide an adequate breakdown of exploration and evaluation assets or expenditures;
- exploration stage companies do not adequately discuss or itemize their exploration expenditures;
- issuers with working capital deficiencies provide only very general discussions or none at all about potential sources of financing and how they plan to continue operations; and
- issuers do not appropriately disclose the identity of related parties involved in related party transactions.
The Report also included examples of boilerplate language which lacked certain specificities required under Part 5 of National Instrument 51-102 Continuous Disclosure Obligations. In many instances issuers simply repeated information previously disclosed in an earlier MD&A without updating the information for the current year.
The reality on the ground is that many small mining issuers are quickly running out of cash and are trying valiantly to reduce their overhead by withholding salaries or hiring skeleton staff, such as part-time CFOs, just to keep the lights on. Perhaps this is the reason why junior mining companies were found to have cut corners when preparing MD&A disclosure. Nevertheless, tough market conditions should not be used as an excuse to justify disclosure deficiencies.
As stated by the OSC, the MD&A is a summary written through the eyes of management which allows management to provide insights beyond the numbers found in the financial statements. Therefore, deficiencies in MD&A disclosure prevent investors from making informed investment decisions. While there are some who might grumble that the new disclosure guidance is burdensome and that junior mining issuers cannot be expected to adhere to these guidelines, one must recall that the OSC’s mandate is to not only administer and enforce securities law, but to provide protection to investors and foster fair and efficient capital markets. The guidelines provided by the Report fulfill this mandate.
A copy of the Report is available on the OSC website at: OSC Staff Notice 51-722 Report on a Review of Mining Issuers’ Management’s Discussion and Analysis Guidance
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.
Dentons is a proud to be a Gold Sponsor in support of mining exploration and development at Mines and Money London, Europe’s leading mining investment and capital raising conference and exhibition.
Please visit members of the Dentons mining team, Tom Eldridge, Imogen Addington, Will Gunston, Neil Nicholson, Neil Vickers and Nigel Webber from Dentons UK and Alan Hutchison and Carole Turcotte from Dentons Canada at Dentons booth G26 and join us for a panel discussion on The Future of the Funding Mix at 17:20 on Tuesday, December 3rd.
We look forward to getting together with you for five days of business matching, knowledge sharing and deal-making!
Please join us on Tuesday, November 26th as we discuss:
- Did the TSX Raise the Bar for a Mining Listing? – Jessica Yee
- The 2014 AGM Season – A Look Ahead – Michael Stephens
- What Not to Say: Avoiding Liability in 43-101 Reporting – Brian Abraham
This session is complimentary but seating is limited. Please RSVP by November 21st, 2013.3
7:30 AM – Registration and breakfast
8:00 AM – Presentations
9:15 AM – Conclusion
Date and Location:
November 26, 2013
07:30 AM – 09:15 AM PDT
Terminal City Club Metropolitan Room
837 West Hastings St.
Vancouver, British Columbia
On March 28th, Québec Environment minister Yves-François Blanchet announced that the Bureau d’audiences publiques sur l’environnement (BAPE) will hold public hearings on the uranium sector in Québec. These hearings are scheduled for the Fall of 2013 and will focus on the environmental and social impacts of exploration and mining of uranium in Québec. The Minister also indicated that no authorization certificates for uranium exploration or mining projects in Québec will be issued until the BAPE’s independent study is completed and its report is issued.
The Minister stressed the importance for the Government to respect the principles relating to the protection of the social environment and the protection of Aboriginal peoples, their societies, their communities and their economy. Aboriginal organizations will therefore be invited to play a significant role in the consultation. The Minister indicated that the BAPE’s study will be conducted in collaboration with the review committees and advisory committees provided for in the James Bay and Northern Québec Agreement, the Northeastern Québec Agreement and the Environment Quality Act.
The Government’s press release is available here (in French only): http://www.mddefp.gouv.qc.ca/infuseur/communique.asp?no=2383
Dentons emerges from the merger of SNR Denton, Fraser Milner Casgrain LLP and Salans with 2,500 lawyers in 79 locations in 52 countries. For our mining clients this means improved access to the lawyers in many jurisdictions around the world including the financial centers of London and New York.
We plan to expand our mining blog to cover many new topics from around the world in the numerous matters that affect our clients and friends wherever their activities and operations currently exist or take them in the future.
Any questions, please call us.