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BC/Federal Environmental Assessment Process Update

The “British Columbia Environmental Assessment Office” (EAO) has entered into a Memorandum of Understanding (MOA) on the Substitution of Environmental Assessments with the Canadian Environmental Assessment Agency.

Under the memorandum, the EAO will conduct the environmental assessment for specific projects, including the procedural aspects of Aboriginal consultation. Federal departments will contribute their expertise. At the conclusion of the substituted environmental assessment, the respective federal and provincial ministers will reach separate decisions on the significance of the project’s environmental effects and the adequacy of Aboriginal consultation, based on the environmental assessment report prepared by the EAO.

The EAO has submitted requests to the Canadian Environmental Assessment Agency, CEAA to conduct substituted environmental assessments on behalf of the federal government for two proposed coal projects. The provincial environmental assessments will meet all federal and provincial requirements.

The MOU sets out an administrative framework for the use of the substitution provisions in the Canadian Environmental Assessment Act, 2012 (CEAA 2012).

The MOU outlines how information exchange will occur, describes the roles and responsibilities of the British Columbia Environmental Assessment Office EAO establishes the conduct of a substituted process leading to the respective environmental assessment decisions of federal and provincial ministers.

The CEAA commits to timelines in considering substitution requests from British Columbia.

A copy of the MOU can be found at here.

BC/Federal Environmental Assessment Process Update

Additions to the List of Foreign Associations and Membership Designations

The additional organizations listed below meet the definition of a “professional association” in NI 43‑101, and the membership designations listed meet the criteria in paragraph (e) of the definition of “qualified person” in NI 43‑101.

Foreign Association Membership Designation Date of Determination
 

The Institution of Engineers Australia (Engineers Australia)

 

Chartered Professional Engineer (CPEng)

 

   May 29, 2012

 

The Institution of Professional Engineers New Zealand (Engineers New Zealand, IPENZ)

 

Chartered Professional Engineer (CPEng)

 

   November 5, 2012

These associations and membership designations should be considered additions to the list of accepted foreign associations and membership designations in Appendix A of the Companion Policy.

Additions to the List of Foreign Associations and Membership Designations

2012 Mining Report British Columbia Securities Commission

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.

2012 Mining Report British Columbia Securities Commission

Commentary: Weighing Mexico’s security risks

By: Alan J. Hutchison, special to The Northern Miner

Back in 2004 I attended an annual general meeting for a client that had acquired a gold-silver mine in Mexico. It was one of many Canadian juniors at the time who had managed to acquire small-scale mines with good expansion possibilities and, in a rising commodity price environment, had the potential to turn an explorer into a producer virtually overnight.

The board of this company was comprised of a number of experienced explorers, developers and operators. As sometimes occurs at AGMs of small companies (much to the chagrin of legal counsel worried about disclosure issues), responses to questions from shareholders quickly unfolded into a discussion on the overall state of the mining industry, commodity prices and favourable jurisdictions.

Everyone seemed bullish on Mexico as the place to be. The argument seemed to make a lot of sense, too: good mineral endowment, a local mining culture and a U.S. dollar denominated economy all make for an attractive mining jurisdiction.

Moreover, the influence of the North American Free Trade Agreement in opening up Mexico to foreign investment was firmly taking hold, and extending to structural legal and regulatory reforms for the administration of mineral tenure.

Over the next few years Mexico’s star shone brightly in the mining industry.

Fast-forward to 2012: while the above argument is still valid (indeed, Mexico’s recently planned move to an electronic mineral tenure system is evidence of its continued commitment to efficiency), Mexico’s reputation as a favourable jurisdiction is not as secure. Security concerns seem to overshadow everything else these days.

This is especially the case for junior exploration companies, who seem to have been more adversely affected than the producers. Exploration companies do not have as much established infrastructure in and around their projects, and typically have smaller numbers of people working in more remote areas with limited-access options — often the same remote areas favoured by the drug cartels for their operations.

Explorers are also less able to implement security measures due to the costs involved and the pressures in a bear market to spend money wisely and “in the ground,” to the maximum extent possible.

A number of mining companies have quietly exited from some of Mexico’s more troubled states, unwilling or unable to pay maintenance costs in the face of so much uncertainty, and unable to attract joint-venture partners to share costs and risks.

But many companies remain in Mexico, and overall investment in the mining industry in Mexico remains strong, particularly with producing mines and late-stage development projects.

Strategies can be employed to manage the current security challenges for companies, and the central theme of many of these strategies is having community and social-relation (CSR) programs.

None of this is particularly new or really novel to Mexico — CSR programs are the key to developing a social licence to operate in any jurisdiction. The types of programs being conducted in Mexico are common to many developing jurisdictions where security issues are prevalent in remote areas.

The real issue in Mexico is the speed at which security issues have arisen after so much economic, social and political progress over the past 25 years.

The two most common approaches are quite different. Many companies seek to engage local communities from the outset and to forge relationships through social programs, infrastructure development and providing meaningful employment. At the other end of the spectrum, other companies are attempting to carefully manage interaction with local communities, limiting contact to maintain a more formal relationship. Typically these companies require expatriate employees to remain in camp and not visit the local communities. The goal here is to tread lightly on local customs, while avoiding any misunderstandings, problems and feuds that can quickly escalate into wider actions against the company.

In many regions where the drug violence is on the verge of being out of control, it is difficult for any CSR initiatives to bear fruit. Maintaining a low profile in the community is really the only way to try to stay clear of the potential violence in those areas.

Producers are more likely to maintain a low-profile approach, since operating mines typically have more on-site security in place and greater infrastructure to support operations, without as much interaction with nearby communities.

There is also the reality of producers having extracted mineral products on site, which is a significant security issue. Many gold producers maintain absolute secrecy over when gold pours take place at the mine site.

Similarly, transportation schedules are also a closely guarded secret. Rail service is not as widespread in Mexico, so many mines in Mexico ship products by truck over remote, single access roads that are prone to robberies.

Some companies are resorting to building airstrips to fly precious-metal mineral production to ports, but that bears its own risks, in addition to the cost. In certain remote areas, aircraft are generally either government security forces or drug cartels carrying out illegal activities, so mining companies need to constantly identify themselves over radios to avoid being mistaken for one or the other.

Site visits by directors and executive officers also tend to be closely guarded secrets in remote areas, to reduce possible kidnapping and extortion risks. It is a common practice to ensure that all cheques and banking transactions require two signatures, to avoid instilling too much operational authority in one person.

The good news is that Mexicans seem to understand these challenges, and despite the setbacks, the mining industry in Mexico continues to roll forward with significant levels of investment.

The challenge will be what happens next if security problems continue over the long term.

The key to long-term success for any country’s mining industry is exploration. As the current generation of mines become depleted, it is essential to replace that production with new discoveries.

Overall, Mexico is relatively unexplored compared to other jurisdictions, but if exploration companies are unable to raise money for Mexican projects and efficiently explore their properties, there may be continued challenges ahead.

Commentary: Weighing Mexico’s security risks

B.C. Court Rules Telephone Voting Requires Transparency and Verification

In a recent decision¹ the Supreme Court of British Columbia set aside and declared invalid an annual general meeting of shareholders and the resolutions passed at the meeting following a proxy fight between management and dissident shareholders. The Court found that management’s proxy solicitation firm had improperly executed proxies on behalf of shareholders based on instructions given by telephone to representatives of the proxy solicitation firm (the “TeleVote System”). The Court concluded that the TeleVote System failed to provide a contemporaneous, reliable and verifiable record of proxies and voting instructions with the result that the use of such a system was oppressive to shareholders.

Background

The Court’s decision arose in the context of a proxy fight between the incumbent slate of directors of Mosquito Consolidated Gold Mines Limited (“Mosquito”) and a dissident slate lead by two former directors of Mosquito. While in many cases the process goes sideways through illegal solicitation allegations, in this instance each side delivered information circulars to shareholders and engaged proxy solicitation firms to solicit proxies from shareholders.

Management’s proxy solicitation firms offered telephone and internet voting using a unique control number found on a shareholder’s proxy or voting information form. In addition, management’s firm used the TeleVote System. Under this system, a call centre was established in which representatives of management’s solicitation firm telephoned registered shareholders and non-objecting beneficial owners of shares to solicit their votes for the management slate. The call centre operators were permitted to accept verbal instructions from individuals and to execute proxies on their behalf.

At Mosquito’s shareholder meeting, the validity of the proxies obtained through the use of the TeleVote System was challenged by the dissident slate but the Chair of meeting ruled that the proxies were valid. The shareholder vote was in favour of the management slate, albeit by a narrow margin. Had the proxies obtained through the TeleVote System been excluded, the dissident slate would have been elected.

Oral Instructions by Telephone Not Standard Practice

A company controlled by one of the members of the dissident slate filed an application seeking a declaration that Mosquito’s annual general meeting was conducted in a manner that was oppressive to it as a shareholder of Mosquito, and orders nullifying the resolutions passed at the meeting and requiring a new shareholder meeting to be held.

In granting the application, the Court held that while Mosquito shareholders had a reasonable expectation that their proxies would be solicited by telephone, they did not reasonably expect that their proxies would be sought and votes cast at the same time. This process departed from the standard commercial practice of voting methods for shareholder meetings under securities instruments and the Securities Transfer Association of Canada Protocol. Moreover, the use of the TeleVote System was not disclosed in management’s information circular together with the other specified voting methods, including delivering a proxy by mail, hand or fax or appointing a different proxy holder by mail or through the internet.

Lack of Verification and Safeguards

While the Court noted that the use of telephone solicitation systems are a legitimate attempt to streamline shareholder proxy solicitations and the absence of guidelines does not automatically disqualify the use of such systems, it identified several problems with the use of the TeleVote System in the context of the battle for control of the board of directors of Mosquito. In particular, the Court criticized, amongst other deficiencies:

  • the acceptance of oral instructions without an immediate link to a verifiable, written confirmation;
  • the absence of a unique identifier to ensure the identity of the individual giving instructions;
  • the failure by management to make prior disclosure of the use of the TeleVote System;
  • the lack of sufficient safeguards to ensure that votes were taken in a manner that allows the shareholder to make his or her choices privately, on a fully informed basis and without undue pressure from a proxy solicitor; and
  • the imbalance between the use of the TeleVote System by the management slate where the dissident slate used the traditional proxy solicitation process.

Ultimately, the Court concluded that the use of the TeleVote System constituted oppressive and unfairly prejudicial conduct and impaired the right of shareholders to a fair and transparent voting process

Conclusion

In the event an incumbent slate of directors finds itself in a proxy contest, the management slate must ensure that the proxy solicitation tactics used by its proxy solicitors are fully disclosed in management’s information circular and that such tactics will produce verifiable and reliable results. The failure to ensure that sufficient safeguards exist risks invalidating the election of directors and other shareholder business at an otherwise valid shareholder meeting.

¹International Energy and Mineral Resources Investment (Hong Kong) Company Limited v. Mosquito Consolidated Gold Mines Limited, 2012 BCSC 1191

B.C. Court Rules Telephone Voting Requires Transparency and Verification

FMC Partner Ralph Shay speaks to Business News Network about policy of securities commissions in response to Jean Charest’s controversial proposal

With Quebec’s economic protectionism on the rise, leader Jean Charest has advised voters that, if re-elected, he would establish a $1-billion fund to assist Quebec companies to make foreign takeovers and would table a law allowing a board of directors to block a foreign takeover, even if shareholders support it.

According to Ralph Shay, partner and head of the Toronto Securities Group at Fraser Milner Casgrain LLP (FMC), allowing directors to evade the desire of shareholders does not align with the policy of securities commissions across Canada, as a board of directors is generally compelled to allow any takeover bid to be presented to shareholders, even if the board does not believe it is in the best interest of the company. “The securities commissions have a policy statement that says directors should not interfere with the right of shareholders to decide on a takeover bid,” he tells BNN. “The securities commissions don’t see it that way [that directors have the final say]…they feel that shareholders should have the right to decide when there is a takeover bid.”

Mr. Shay also said that this law, if it should become a reality, could negatively impact the share price of Quebec-based companies, because it would be less likely for shareholders to obtain a premium over the market price that normally comes with a takeover bid.

For more information, please read Business News Network’s article, Quebec election proposals felt across the country (August 14, 2012) or watch the broadcast interview on BNN’s Business Day (August 14, 2012).

FMC Partner Ralph Shay speaks to Business News Network about policy of securities commissions in response to Jean Charest’s controversial proposal

TSX and TMX to implement “Cancel on Disconnect” functionality

Further to its Notice of Proposed Changes of October 14, 2011, the TSX and the TMX have proposed the implementation of a “Cancel on Disconnect” functionality to allow for the automated cancellation of orders in the event of involuntary loss of connectivity between the TMX and the client site. According to the TSX and TMX, this functionality, which will be available for all gateway sessions connecting to TSX, TSXV and TMX Select, will assist traders in mitigating risks associated with having open orders exposed in their books that cannot be managed when there is an involuntary loss of connectivity.

The TSX and TMX received no comments on its October 14, 2011 proposal and have announced that they are expected to publish a notice indicating the intended implementation date of the proposed functionality.

TSX and TMX to implement “Cancel on Disconnect” functionality

OSC Approves Recognition of Alpha Trading Systems LP and Alpha Exchange Inc. as an Exchange

On December 8, 2011, the Ontario Securities Commission (the “Commission”) issued a Notice of Approval (the “Notice”) recognizing each of Alpha Trading Systems Limited Partnership (“Alpha LP”) and Alpha Exchange Inc. (“Alpha Exchange”, and together with Alpha LP, “Alpha”) as an exchange. Alpha currently operates as an alternative trading system, facilitating the trading of equity securities listed on the Toronto Stock Exchange and the TSX Venture Exchange through a transparent, continuous matching platform.

The Notice references an application by the Maple Group Acquisition Corporation (“Maple”) for recognition as an exchange in connection with its proposal to acquire TMX Group Inc. and create an integrated group of businesses that provide trading, clearing, settlement and depository services (which proposal is summarized in an earlier post). Following the proposed acquisition of TMX Group Inc., Maple intends to acquire Alpha LP and Alpha Trading Systems Inc. and maintain multiple trading platforms.

The recognition of each of Alpha LP and Alpha Exchange as an exchange is effective as at the later of February 1, 2012 and the date on which the operations of Alpha ATS Limited Partnership have been legally transferred to Alpha Exchange. The Commission will publish a notice confirming the effective date.

OSC Approves Recognition of Alpha Trading Systems LP and Alpha Exchange Inc. as an Exchange

First Nations Seek Consent for Work in James Bay Treaty Lands

Mushkegowuk Grand Council Chief Stan Louttit stated, at a Mining Ready Conference on October 26, 2011, that mining companies must go beyond consultation and obtain consent before work can proceed on the James Bay Treaty lands.

The James Bay Treaty – Treaty Number 9 was negotiated in 1905 and 1906. The Adhesions were negotiated in 1929 and 1930. The Treaty and the Adhesions were notable because they were negotiated and signed by the Province of Ontario and the Federal Government . The Treaty and the Adhesions cover those lands from the height of land – north of Thunder Bay to the Artic and from James Bay to the Manitoba border. Historically the Province of Ontario has absolutely controlled and regulated mining and forestry in this area. Subject to recent Supreme Court decisions both the federal and provincial governments are required to consult with First Nations before issuing any permits e.g. under the Mining Act for exploration and advanced activities. There have been numerous altercations and Court appearances of these matters – usually driven by the duty to consult. Another set of concerns will emerge driven by Nishnawbe Aski Nation and the Tribal Councils. Essentially the First Nations have begun to assert that the Treaty Number 9 and the Adhesions were not properly signed.

It should be expected that the First Nations will seek to ” re negotiate ” the Treaty and assert that there should be limited if any government regulation in the James Bay Treaty area and that there must be prior approval from the First Nations before provincial approvals, if any.

http://www.thesudburystar.com/ArticleDisplay.aspx?archive=true&e=3348600

http://www.timminspress.com/ArticleDisplay.aspx?archive=true&e=3347769

First Nations Seek Consent for Work in James Bay Treaty Lands

TSX Leads the World in New Listings (For Third Consecutive Year)

Yesterday the TMX Group confirmed that, as of September 30, TSX and TSXV together had more new listings in 2011 than any other exchange group in the world. To September 30, 2011, the TSX and TSXV saw 318 new listings, including 32 graduates from TSXV to TSX. This makes a “three-peat” for the TMX as they have led the world in new listings for three consecutive years.

The TMX Group ranked ahead of second place Shenzhen Stock Exchange, with 201 new listings, and Deutsche Börse at third, with 176 new listings.

We are pleased to pass along our congratulations to the TSX and TSXV and to our newly listed clients!

For the full story please see http://exchange.tmx.com/2011/11/08/leading-the-world-in-new-listings/

TSX Leads the World in New Listings (For Third Consecutive Year)