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Peel River watershed decision results in environment groups suing Yukon government

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.

Additional information is available here.

 

Peel River watershed decision results in environment groups suing Yukon government

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:

  1. The name and residence of the claimant, owner of the property and of the person for whom the work, service or material was provided;
  2. A description of the work or service performed or material furnished and the time period within which it was performed or furnished;
  3. The amount claimed as due or to become due;
  4. The description of the property to be charged; and
  5. 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.

Priority

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.

Lean times may call for lien measures – What you need to know about miners’ liens in Northern Canada

Vancouver Mining Seminar

Please join us on Tuesday, November 26th as we discuss:

This session is complimentary but seating is limited. Please RSVP by November 21st, 2013.3

Event Schedule:

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
Canada

Vancouver Mining Seminar

Proposed Amendments to the Yukon Quartz Mining Act and Placer Mining Act

As a result of the Ross River Dena lawsuit against the Yukon Government with respect to consultation on the granting of rights to miners to conduct work without consulting and accommodating First Nations, the Yukon Court of Appeal has given the Yukon Government until December 27, 2013 to amend its legislation specifically with respect to Class 1 activities. Class 1 activities can include construction of lines, corridors, trenching, clearing for helicopter pads and camps, construction of access roads and use of explosives.

There were four areas of concern identified as part of the proposed amendments and they include, environmental protection and monitoring, consultation with First Nations, security for Class 1 exploration and identification of areas for specific operating conditions.

The objectives for the amendments were to ensure the duty to consult First Nations was met, improved information sharing, enhanced environmental protection and management of multiple resources. In the case of Class 2 to 4 exploration programs, notice to the Chief of Mining Land Use (“CMLU”) is required.

The proposed amendments include notification by the operator prior to the commencement of a Class 1 program so that additional conditions may be placed on the program by the CMLU if there was significant environmental risk.

CMLU would have the authority to do the following:

1. propose mitigation procedures on potential environmental socioeconomic or adverse impacts on treaty rights of First Nations;

2. refuse the program;

3. provide security; and

4. issue a certificate of compliance.

Upon receipt of a notice, the Chief of Mining Land Use would first determine if there was any potential adverse environmental impact to be mitigated and advise potentially affected First Nations. There would be a 25 day notice reply period and then if no notice is received the proponent could undertake its program. There would be a provision with respect to avoiding undue hardship in proceeding with programs. In addition, there would be “identified areas” where additional requirements could be imposed.

The deadline for review process is July 31, 2013 for comments.

The discussion paper is available on the Yukon website at www.emr.gov.yk.ca/mining.

Comments:

A principal concern with this legislation will be the capacity of First Nations to have a good understanding of the program and its impact on their traditional territories and what responses are appropriate.

One concern will be that the 25‑day period is unlikely to be met and therefore proponents should be prepared to file their possible exploration programs as early as possible in order to address time delays.

An further concern is that a program can be refused if the environmental or socioeconomic effects cannot be mitigated or that treaty rights are “asserted” if aboriginal rights cannot be eliminated or accommodated. What procedures will be in place to address this problem?

One potential solution in this proposal is to perhaps bring in a definition like that in Section 10 of the Mines Act in British Columbia which requires notice when there is a mechanical disturbance. This would still allow general prospecting geochemical and geophysical exploration to take place.

Proposed Amendments to the Yukon Quartz Mining Act and Placer Mining Act

OSC Staff Notice 43 705, Review of Technical Reports by Ontario Mining Issuers

On June 27, 2013, the OSC issued Staff Notice 43‑705 addressing OSC concerns with respect to disclosure in technical reports.

Out of the 50 reports reviewed, 40% had at least one major non‑compliance concern, 40% had some concerns, and only 20% were in compliance with the requirements of Form 43‑101F1.

59% of the issuers were at the mineral resources stage. 26% at the development or productions stage and 15% were at the exploration stage.

Most of the jurisdictions for the properties were in North America, South America, Africa, Russia or China and Australia and the principal mineral commodities were gold, copper and iron. 54% of the reports were prepared by regional firms and 20% from global firms.  Independent sole proprietor qualified persons (“QPs”) comprised 14% of the authors of technical reports and 12% were prepared by in‑house QPs.

In 58% of the cases, reports were filed pursuant to a disclosure trigger which arose from a material change in relation of the issuer or a change in the mineral resources in the most recently filed report. The areas of significant deficiencies in the technical reports included mineral resource estimates, environmental studies, permitting and social or community impact, capital and operating costs, economical analysis and interpretation and conclusions. Other frequent disclosure deficiencies included the summary, history and certificate of the QP. The significant areas of concern included the following:

1. Mineral Resource Estimate. Some 25% of the reports did not provide the required information in that the key assumptions parameters and methods used to estimate the resources are not provided and the requirement for “reasonable prospects for economical extraction” were not clearly disclosed.

2. Environmental Studies Permitting and Social or Community Impact. These were not addressed in some 32% of the reports and often remediation and reclamation matters were not discussed, particularly in relation to advanced properties.

3. Capital and Operating Costs. Some 26% of the reports did not adequately disclose information on these matters and that qualified persons are reminded to provide more context and justification for the capital and operating cost estimates for advanced properties.

4. Economic Analysis. Thirty seven percent of the reports on advanced properties did not sufficiently disclose the economic analysis including the impact of taxes on the projects where an economic analysis has been carried out. It is not acceptable to only include pre tax cash flows in economic outcomes.

5. Interpretations and Conclusions. The authors are reminding issuers that it is a new requirement to disclose significant risks and uncertainties and any related foreseeable impacts of risks and uncertainties on the project and some 36% of the reports did not disclose specific project risks on potential outcomes and mitigating factors.

In addition, QPs are reminded to briefly summarize the important information and key findings about the property including its description, ownership, data verification, site visits, resource and reserve estimates, if applicable, mining studies, economic analysis, if applicable, and the QPs conclusions and recommendations.

In some 28% of reports, the disclosure of the historical estimate did not state that it was not a current resource and was not being treated as a current resource.

In some 24% of the certificates, there were errors in the QPs certificate.

OSC Staff Notice 43 705, Review of Technical Reports by Ontario Mining Issuers

Accessing Asian Capital by Canadian Companies – the case for listing in Hong Kong

Why Hong Kong

Michael Chan, Assistant Vice President of the Global Markets Division of the Hong Kong Stock Exchange (“HKEx”), was recently in Canada, visiting Calgary, Toronto and Vancouver and delivering a presentation entitled “HKEx – the Listing Venue of Choice”.  There was interest from many representatives from the local financial and business communities, reflecting an interest in accessing Asian capital.

The Toronto Stock Exchange (“TSX”) and TSX Venture Exchange (“TSXV”) have flourished as listing platforms for mining and other resource companies, both for domestic Canadian companies and for companies from outside of Canada. The flexibility of the Capital Pool Company (CPC) has over the years attracted many businesses, including those from Asia, into utilizing the TSX and TSXV as a capital markets gateway. As a result, TSX and TSXV have been arguably the most successful markets in drawing resource company IPOs.

Hong Kong has a user-friendly common law legal system, minimal government interference with business, a highly sophisticated banking structure, lack of foreign exchange controls, as well as a collection of financial institutions and markets characterized by a high degree of liquidity. Its geographical accessibility and absence of language barriers has made it a magnet for Mainland Chinese capital, and with it an eager investor population which has been ready to part with their cash.

Although 2012 was not the best year for fund-raising, the numbers are still significant.  According to government statistics, Hong Kong’s stock market was the sixth largest in the world and the second largest in Asia in terms of market capitalization as at the end of September 2012, even with the global slowdown of economic activity. Hong Kong was the most active market for initial public offering (“IPO”) funds raised globally in 2009, 2010 and 2011. Even with the growth slowdown of 2012, 1,533 companies were listed on the HKEx as at the end of September of that year, with a market capitalization of close to HK$ 20,000 billion (US$ 2,580 billion). Among them, 710 were Mainland Chinese enterprises which have together, since 1993, raised close to HK$3,400 billion (US$440 billion).
Chart1

How to get listed on the HKEx

You can go public in Hong Kong in one of three ways – an IPO, by introduction (where existing shares are listed with no fund-raising) and by acquiring a listed “shell”. For mid-cap and small-cap companies, however, the second method does not achieve the goal of raising new capital, whilst the third option is a costly exercise. That leaves the plain vanilla IPO.

Hong Kong boasts a substantial following of both retail and institutional investors and both local and overseas investors. This healthy mix gives the market a good volume of activity, hence liquidity.

Chart2

Minneral Companies

For resource companies, recent changes to Chapter 18 of the Listing Rules have made the HKEx a resources-friendly stock market.

Some features are worth noting:

  • Companies must demonstrate:
    • for petroleum companies, at least a meaningful portfolio of Contingent Resources; or
    • for mining companies, at least a meaningful portfolio of Indicated Resources.
  • New applicant Mineral Companies must demonstrate that they have rights to participate actively in the exploration for and/or extraction of minerals or petroleum;
  • The profit test, the market capitalization/revenue cash flow test and the market capitalization/revenue test can be waived if the HKEx is satisfied that the directors and management of the Mineral Company have sufficient and satisfactory experience of at least five years in mining and/or exploration activities. The management continuity requirement will still apply unless waived.
  • New applicant Mineral Company applicants must include independent technical reports (Competent Persons Report) on Reserves and Resources in their listing documents. If they have not commenced production, they must publicize their plans to proceed to production with indicative dates and costs. A Competent Person must provide an opinion to support this.
  • New applicant Mineral Company applicants must also have working capital for 125% of their present requirements for the twelve months following listing.
  • Possible Reserves, Contingent Resources or Prospective Resources carry no economic value.

As for mining and other resource companies listed in Hong Kong to date, count amongst them China Gold International Resources, South Gobi Energy Resources (both mentioned below), United Company Rusal, Glencore, Kazakhmys PLC, Mongolian Mining Corporation and Vale.

Are the provinces of Canada acceptable overseas jurisdictions for companies applying to list?

To date, Canadian companies listed in Hong Kong have come from British Columbia (SouthGobi Energy Resources Ltd. and China Gold International Resources Corp. Ltd.), Ontario (Manulife Financial Corporation) and Alberta  (Sunshine Oilsands Ltd.).

BC, Ontario and Alberta are, up to now, the only Canadian jurisdictions currently accepted by the HKEx. That’s not to say that Canadian companies incorporated in other provinces cannot list in Hong Kong. They just have to make a case that their shareholder protection provisions under local corporate law are just as protective as provisions under Hong Kong company law. This requirement in Hong Kong is a universal requirement for all companies from foreign jurisdictions wishing to list, even companies from Mainland China.

The HKEx has provided rather extensive information on a comparison of Hong Kong and Alberta corporate law. Hong Kong law governing companies lies mainly in the provisions of the Hong Kong Companies Ordinance (“CO“) which has tracked English company law for many years. The HKEx has noted that the Alberta Business Corporations Act (“ABCA“) is different in some ways, and has stated that a listing applicant can either change its constitutional documents to provide for equal protection to that of the CO or provide full disclosure in the listing prospectus so that investors can assess whether they feel safe enough to invest. Amongst the matters with respect to the ABCA which were considered were:

  • The CO requires a three-fourths majority to vote through issues relating to variation of incorporation documents, share class rights, voluntary winding-up and share capital reduction, while the ABCA requires only a two-thirds majority.
  • The CO allows holders of greater than 10% of the issued shares of a certain class to petition the courts to cancel a variation in class rights. The ABCA, on the other hand, only has shareholders’ rights of dissent to require the company to purchase their shares in the case of a fundamental amendment to the company’s articles; and
  • The ABCA provides different ways to effect a repurchase of shares, dividend distribution, share capital reduction, etc.

Is it worthwhile?

To be sure, Hong Kong is not the easiest place in the world to get listed. The HKEx micro-manages the listing process, rather than leaving it to the investors’ own devices to sue if something goes wrong. This is due to the large retail investor population in the region. In fact, in the case of United Company Rusal, the HKEx took the unprecedented step of setting a minimum amount of investment in an effort to deter retail investors.

Another issue to consider is cost. Hong Kong regulators place a huge responsibility on investment banks to do due diligence on the companies they seek to bring to the market, and as a result, bankers will look to spend a substantial amount of fees conducting as thorough due diligence as possible, fees which they will pass on to the listing applicant.  This process becomes disproportionately costly if not properly controlled.

All in all, the market is open for business – international companies and resource companies are welcome and companies seeking to take the next step to a dual listing can look to the “Eastern Promise”.

Chart3

Chart4

*All charts from Hong Kong Stock Exchange and sources quoted therein.

Accessing Asian Capital by Canadian Companies – the case for listing in Hong Kong

New Bill Heightens Potential for More Investment Canada Reviews of SOE Acquisitions

Last week the Canadian Government introduced amendments to the Investment Canada Act (ICA) to implement its revised policy towards state-owned enterprises (SOEs) which it announced in December last year. At that time, while it approved the acquisition by Chinese SOE, CNOOC, of Canadian oil and gas company, Nexen, the Government announced its intention to prohibit acquisitions of control of Canadian oil sands businesses by SOEs except on an exceptional basis. It also stated that joint ventures and minority investments were welcome. In addition, the government indicated it would closely monitor SOE acquisitions in other sectors of the economy and would distinguish between SOE and non-SOE investments when setting the ICA review threshold. (See Focus on Foreign Investment Review, December 2012)

As expected, the proposed amendments would retain for SOEs the current review threshold which is based on the target Canadian business’ book value of assets ($344 million in 2013) while non-SOEs would be subject to a higher review threshold based on enterprise value (to be set at $600 million when implemented, rising to $800,000 in two years and then to $1 billion four years later). The result is that, relative to non-SOE investments, SOE investments will be more often subject to Ministerial approval on the basis of the “net benefit to Canada” test, enabling closer scrutiny of SOE investments in Canada.

What may be surprising about the proposed amendments is that they give the Government very broad latitude to ignore the general ICA rules in making a number of critical determinations that affect whether a proposed transaction is subject to review under the ICA. If reviewable, a transaction will be subject to a time-consuming process, potential delays to closing (and in rare cases, rejection) and almost always significant commitments to the Canadian Government on a broad range of issues. The uncertainty generated by the Government’s discretion under the amendments is exacerbated by the potentially very broad scope of the term “SOE”.

Potential for Increased Government Scrutiny of SOE Investments

The proposed amendments could significantly increase the number of SOE investments requiring Ministerial approval by permitting the responsible Minister (the Minister of Industry except where the target industry is cultural) to avoid the general ICA rules and presumptions:

  • defining when an acquisition of control occurs. The ICA general rules establish presumptions regarding when control is acquired. For example, they state that the acquisition of less than one-third of the voting shares of a corporation or of less than a majority of the economic interests of a partnership is deemed not to be an acquisition of control. If there is no acquisition of control, there is no requirement for a “net benefit” review under the ICA. For an SOE, these rules need not be applied if the Minister concludes based on “any information and evidence” made available to him that the SOE will acquire control in fact.
  • determining whether one entity is controlled by another. The ICA general rules set out rules and presumptions regarding when control exists. However, the proposed amendment would permit the Minister to go beyond those rules in assessing whether an SOE controls another entity in fact.
  • whether an investor is Canadian or not. The ICA establishes rules to determine the Canadian status of an investor. Pursuant to the proposed amendment, an entity that would otherwise be considered Canadian-controlled may be judged to be an SOE if the Minister concludes that it is controlled in fact by an SOE.

All of the above decisions may be retroactive to April 29, 2013.

As noted above, the repercussions of bypassing the normal presumptions and rules on these points could be serious for an SOE investor. A decision by the Minister that the investor is controlled in fact, directly or indirectly, by a foreign state means that the transaction will be subject to a lower review threshold. In addition, a transaction that would not otherwise be subject to the ICA “net benefit” review and notification regime – such as a minority investment, including a 50% interest in a partnership or joint venture – because it did not constitute an acquisition of control, could be reviewed because of the Government’s determination that control in fact was acquired. As an assessment of “control in fact” can be relatively subjective and depend on a detailed analysis of the terms of the investment, it may be unclear, especially early on the deal process, whether the SOE investment is an acquisition of control in fact under the ICA and therefore potentially reviewable.

Uncertainty regarding the Scope of an SOE

The uncertainty described above may be exacerbated by the vague definition of an “SOE”. As contemplated in the Government’s statements on its new SOE policy in December last year, the definition of an SOE now includes not only the government of a foreign state or agency of such government and an entity that is controlled, directly or indirectly, by such a government, but also an entity that is influenced, directly or indirectly, by a foreign government. There is no guidance as to what constitutes “influence” which raises the spectre of foreign corporations being deemed to be SOEs because of the presence of foreign government representation on boards or because of senior management links to government officials (e.g., Huawei whose founder was a senior officer in China’s People’s Liberation Army) or to political parties (e.g., would the presence of party officials in key positions in major Chinese corporations make them “influenced” by a foreign government?).

Significantly, the definition of an SOE has also been expanded to capture individuals acting under the direction of a foreign government or under the direct or indirect influence of a foreign government.

As a result of the proposed amendments, private companies or individuals could be subject, at the Government’s discretion, to the lower SOE review threshold and to the potentially more stringent review process applicable to an SOE .

Longer Timelines for National Security

Finally, the proposed amendments would extend timelines for the national security review of transactions. There are numerous prescribed time periods in the review process and these are to be lengthened from five days to 30 days or as agreed to between the foreign investor and the Government.

Conclusion

The Government’s message in the proposed ICA amendments is clear but also muddied. What is clear is that the Government will be watching out for SOE investments and will scrutinize such transactions more closely. What is muddied is the reviewability of investments by SOE investors (especially minority investments) as well as the potential application of the lower SOE review threshold to investments by individuals and private companies that are not owned, directly or indirectly, by foreign governments, but somehow subject to foreign government influence. While investors may request a Ministerial opinion to clarify whether a given investment is subject to review, there is no requirement under the ICA for the Minister to provide such an opinion, unless the request relates to a determination about the Canadian status of the investor (and even this exception is to be limited under the proposed amendments to transactions in which the target Canadian business is in a cultural industry).

In short, as a result of the proposed amendments, SOEs and foreign investors that might possibly be viewed as SOEs may, depending on the type of investment planned, face a higher risk that their investments will require Ministerial approval in order to close compared to non-SOEs investing in Canada.

If you would like further information, please contact Sandy Walker at Dentons Canada LLP.

New Bill Heightens Potential for More Investment Canada Reviews of SOE Acquisitions

The Government of Québec imposes a temporary moratorium on uranium exploration and development

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

This article was written by Ann Bigué and Dominique Quirk.

The Government of Québec imposes a temporary moratorium on uranium exploration and development

Our clients are global and now so are we!

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.

Our clients are global and now so are we!

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

Consultation document for changes to the Québec mining royalties regime now available

Following the announcement that a forum on mining royalties will be held on March 15th, 2013 in Montréal, the Québec Ministries of Finance and Economy and of Natural Resources have made available, on March 8th, a consultation document entitled “Le régime d’impôt minier du Québec”. This document includes information on the mining sector in Québec and on the operation of the current Québec mining tax regime.

The Québec Mining Association and the Québec Mineral Exploration Association as well as several mining companies, groups and experts will be invited to provide their opinion and suggestions on this question. The consultations will culminate in the forum on mining royalties which will be co-presided by Mr. Jacques Fortin (HEC Montréal) and Mr. Pierre Lasserre (UQAM-CIRANO).

The consultation document is available here (in French only): http://www.finances.gouv.qc.ca/documents/autres/fr/AUTFR_RegimeMinier.pdf

This article was written by Ann Bigué and Dominique Quirk.

Consultation document for changes to the Québec mining royalties regime now available

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

Quebec tightens rules on financial guarantee requirements for rehabilitation and restoration plans

On February 13, 2013, a notice was published in the Gazette officielle du Québec by the Minister of Natural Resources, Martine Ouellet, announcing amendments to the Regulation respecting mineral substances other than petroleum, natural gas and brine (the “Regulation”). All of these amendments pertain to the rules applicable to financial guarantee requirements for rehabilitation and restoration plans under Section 231 and following of the Quebec Mining Act.

The draft regulation amends the Regulation by increasing from 70% to 100% the financial guarantee required to ensure performance of the work required by the rehabilitation and restoration plan and by broadening the scope of the guarantee from being required only for the rehabilitation and restoration of accumulation areas (for mineral substances, overburden, concentrates and tailings), to being required for the rehabilitation and restoration of the entire mine site.

The payment schedule for the financial guarantee will also be amended for companies who are currently engaging in exploration work as well as for those engaging in mining operations or operating a concentration plant.

In the case of companies engaging in exploration work, under the current Regulation, the total guarantee must be submitted within 15 days after the rehabilitation plan is approved, if the exploration work is expected to last 1 year or less, or the financial guarantee can be submitted in annual payments if the exploration work is expected to last more than 1 year. The amendments now provide that every holder of mining rights who engages in exploration work must provide the financial guarantee to the Minister before the beginning of exploration work.

For operators engaging in mining operations in respect of tailings or mineral substances set out in the regulations, or operating a concentration plant, the current Regulation provides that their annual payments will be made according to rules set forth in a table. However, the amendments to the Regulation provide that the guarantee must now be submitted to the Minister in three payments, the first of which would represent 50% of the total guarantee and would be paid in the 90 days after approval of the rehabilitation plan is received. The subsequent payments of 25% each would be made on the anniversary date of approval.

The draft regulation also reviews certain forms of financial guarantee and requires the filing of a restoration plan for the movement of 1000 m3 or more of unconsolidated deposits.

The new amendments will also apply to operators who are currently engaging in mining operations or operating a concentration plant and whose restoration plan has been approved prior to the draft regulation coming into force. These operators will also have to provide the financial guarantee for the restoration of the mine site in three payments, the first payment being required at the latest one year after the draft regulation comes into force.

The draft regulation is set to come into force on February 28, 2013.

The current Regulation is available here:  http://www2.publicationsduquebec.gouv.qc.ca/documents/lr/M_13_1/M13_1R2_A.htm

The draft regulation is available here:http://www2.publicationsduquebec.gouv.qc.ca/dynamicSearch/telecharge.php?type=1&file=2462.pdf

This article was written by Ann Bigué and Dominique Quirk.

Quebec tightens rules on financial guarantee requirements for rehabilitation and restoration plans

Quebec Government announces Forum on Mining Royalties, March 15th, 2013

Québec Minister of Finance and Economy Nicolas Marceau and Québec Minister of Natural Resources Martine Ouellet announce that a forum on mining royalties will be held on March 15th, 2013 in Montréal, during which the mining industry and groups affected by this issue will be consulted.

This announcement made at the Strategic Forum on natural resources which was held in Montréal on February 8th, 2013, follows the commitments undertaken by the Parti Québécois during the last election campaign to raise mining royalties. The forum will enable the parties to agree on the “best way to get there”, said Minister Marceau.

In his speech announcing the forum on mining royalties, Minister Marceau indicated that the following principles are guiding the Québec Government: royalties must be increased, the extracted mineral must generate royalties in all cases, the most profitable projects must generate more royalties and transformation in Québec must be encouraged. He also indicated that the challenge is to find the balance between maximizing royalties, maximizing investments and maximizing employment in the mining sector.

A consultation document will be made available by March 1st and will be available on the Ministry websites. The document will include information on the mining sector, on the operation of the current Québec mining tax regime and on the total amount of royalties collected from mining companies in Québec.

The Québec Mining Association and the Québec Mineral Exploration Association as well as several mining companies, groups and experts will be invited to provide their opinion and suggestions on this question. These consultations will culminate in the forum on mining royalties which will be co-presided by Mr. Jacques Fortin (HEC Montréal) and Mr. Pierre Lasserre (UQAM-CIRANO).

Minister Marceau also indicated that the Québec Government will be able to announce the details of the new royalty regime in early spring.

The press release is available in French only: http://www.finances.gouv.qc.ca/documents/Communiques/fr/COMFR_20130208.pdf

Minister Marceau’s speech from the Strategic Forum on natural resources is available in French only: http://www.finances.gouv.qc.ca/documents/Communiques/fr/COMFR_Allocution20130208.pdf

This article was written by Ann Bigué and Dominique Quirk

Quebec Government announces Forum on Mining Royalties, March 15th, 2013

Canadian Coalition for Good Governance Releases 2013 Executive Compensation Principles

The Canadian Coalition for Good Governance (“CCGG”) recently released its 2013 Executive Compensation Principles (the “2013 Principles”), replacing the previous version originally published in 2009. The original principles were designed to provide enhanced guidance to boards and to promote compensation decisions aligned with long-term company and shareholder success. According to the CCGG, the 2013 Principles offer an updated take on the principles set forth in the original report to reflect the continued evolution of both compensation practices and regulatory disclosure requirements.

According to the CCGG, the 2013 Principles focus on the concept of “pay for performance” and “the integration of risk management functions into executive compensation philosophy and structure”. The 2013 Principles are organized around six key principles:

1) A significant component of executive compensation should be “at risk” and based on performance.

2) “Performance” should be based on key business metrics that are aligned with corporate strategy.

3) Executives should build equity in the company to align their interests with those of shareholders.

4) A company may choose to offer pensions, benefits and severance and change-of control entitlements. When such perquisites are offered, the company should ensure that the benefit entitlements are not excessive.

5) Compensation structure should be simple and easily understood by management, the board and shareholders.

6) Boards and shareholders should actively engage with each other and consider each other’s perspective on executive compensation matters.

The CCGG notes that while Canadian disclosure obligations regarding executive compensation are limited to the “top five” executives at a company, boards should ensure that the above principles are used in determining company-wide compensation philosophy and structure.

Canadian Coalition for Good Governance Releases 2013 Executive Compensation Principles

TSX-V Extends Temporary Relief Measures for Private Placements

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.

TSX-V Extends Temporary Relief Measures for Private Placements

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

TMX Group Consultation Paper on Emerging Market Issuers

On December 17, 2012 the Toronto Stock Exchange (“TSX”) and TSX Venture Exchange (“TSXV” and together with the TSX the “Exchanges”) published a consultation paper on their respective listing requirements applicable to issuers with a significant connection to an emerging market jurisdiction (the “Paper”). The Paper follows the recent guide published by the Ontario Securities Commission: Staff Notice 51-720 – Issuer Guide for Companies Operating in Emerging Markets in which similar issues were identified and discussed. The principal purposes of the Paper are to: (a) present the potential risks associated with listing emerging market issuers (“EMIs”) that have been identified by the Exchanges; (b) provide preliminary guidance to issuers and their advisors with respect to listing considerations applicable to EMIs; and (c) solicit comments from market participants on matters related to listing EMIs, including possible new guidance or requirements that the Exchanges may implement.

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TMX Group Consultation Paper on Emerging Market Issuers

Private Placements by Acquisition Targets – Another Regulatory Grey Area

On November 28, 2012, the British Columbia Securities Commission (BCSC) issued the reasons for the decision it had made following a hearing to consider an application made by Inmet Mining Corporation for certain relief in connection with its hostile take-over bid for Petaquilla Minerals Ltd. The hearing had concluded with an unsurprising order to the effect that Petaquilla’s shareholder rights plan would be cease traded on a specified date unless Petaquilla waived the plan as against Inmet’s bid. What was less predictable was that the BCSC also cease traded a proposed private placement note financing by Petaquilla, unless Inmet did not purchase any Petaquilla shares under its bid.

Read full article here.

Private Placements by Acquisition Targets – Another Regulatory Grey Area

Updates to the ISS and Glass Lewis 2013 Proxy Voting Guidelines affecting TSX and TSX-V Companies

Both Institutional Shareholder Services Inc. (“ISS”) and Glass Lewis & Co. (“GL”) released updates in November 2012 to their proxy voting recommendation guidelines for the 2013 shareholder meeting season. Below is a summary of the changes relevant to TSX and TSX-V listed companies.

Read full article here.

Updates to the ISS and Glass Lewis 2013 Proxy Voting Guidelines affecting TSX and TSX-V Companies