Guide to mining projects and mining finance in Canada · A Norton Rose Fulbright Guide October 2013 Guide to mining projects and mining finance in Canada Yukon Northwest Territories

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Guide to mining projects and mining finance in Canada

A Norton Rose Fulbright Guide October 2013

Guide to mining projects and mining finance in Canada

Yukon

NorthwestTerritories

BritishColumbia

Alberta

Saskatchewan

Manitoba

Ontario

Quebec

Nunavut

NewBrunswick

Nova Scotia

PrinceEdwardIsland

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Norton Rose Fulbright

Norton Rose Fulbright is a global legal practice. We provide the world’s pre-eminent corporationsandfinancialinstitutionswithafullbusinesslawservice.Wehavemorethan 3800 lawyers based in over 50 cities across Europe, the United States, Canada, Latin America,Asia,Australia,Africa,theMiddleEastandCentralAsia.

Recognizedforourindustryfocus,wearestrongacrossallthekeyindustrysectors:financialinstitutions;energy;infrastructure,miningandcommodities;transport;technologyandinnovation;andlifesciencesandhealthcare.

Whereverweare,weoperateinaccordancewithourglobalbusinessprinciplesofquality,unityandintegrity.Weaimtoprovidethehighestpossiblestandardoflegalserviceineachofourofficesandtomaintainthatlevelofqualityateverypointofcontact.

Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP,NortonRoseFulbrightSouthAfrica(incorporatedasDeneysReitzInc)andFulbright&JaworskiLLP,eachofwhichisaseparatelegalentity,aremembers(‘theNortonRoseFulbrightmembers’)ofNortonRoseFulbrightVerein,aSwissVerein.NortonRoseFulbrightVereinhelpscoordinatetheactivitiesoftheNortonRoseFulbrightmembersbutdoesnotitselfprovidelegalservicestoclients.

Referencesto‘NortonRoseFulbright’,‘thelawfirm’,and‘legalpractice’aretooneormoreoftheNortonRoseFulbrightmembersortooneoftheirrespectiveaffiliates(together‘NortonRoseFulbrightentity/entities’).Noindividualwhoisamember,partner,shareholder,director,employeeorconsultantof,inortoanyNortonRoseFulbrightentity(whetherornotsuchindividualisdescribedasa‘partner’)acceptsorassumesresponsibility,orhasanyliability,toanypersoninrespectofthiscommunication.Anyreferencetoapartnerordirectoristoamember,employeeorconsultantwithequivalentstandingandqualificationsoftherelevantNortonRoseFulbrightentity.Thepurposeofthiscommunicationistoprovidegeneralinformationofalegalnature.ItdoesnotcontainafullanalysisofthelawnordoesitconstituteanopinionofanyNortonRoseFulbrightentityonthepointsoflawdiscussed.Youmusttakespecificlegaladviceonanyparticularmatterwhichconcernsyou.Ifyourequireanyadviceorfurtherinformation,pleasespeaktoyourusualcontactatNortonRoseFulbright.

Introduction 6A.TheMiningIndustryinCanada 6B.NortonRoseFulbright–MiningLawExperts 6OverviewoftheCanadianLegalSystem 8

Establishing a Canadian Business 8A. Corporations 8B. Partnerships 8C.Joint-Ventures 9D.Earn-InArrangements 10E.AlternativeMethodsofCarryingonBusiness 10F.MoreInformation 10

InvestingInorAcquiringaCanadianMiningProject 12A.AcquiringMineralTenure 121.BritishColumbia 122.Alberta 133.Saskatchewan 134.Manitoba 145.Ontario 146.Québec 157.NewBrunswick 168.NovaScotia 169.PrinceEdwardIsland 1710.NewfoundlandandLabrador 1811.Yukon 1812.NorthwestTerritoriesandNunavut 19

B.Royalties 20C.PublicM&A 21D.CompetitionandAnti-TrustLaws 221.Pre-Notification 222.SubstantiveMergerProvisions 23

E.ForeignInvestmentLaws 231.ReviewableTransactions 232.NotifiableTransactions 253.ImportantChangestotheReview ThresholdsarePending 25

4.AcquisitionofaCanadian-listedCompany withMinimalCanadianOperations 25

5.GlobalAcquisitionswithCanadianElements 256.TheReviewProcess 267.SpecialConsiderationsforStateOwnedEnterprises 268.NationalSecurityReview 28

F.MoreInformation 28AboriginalConsiderations 29

A.AboriginalLandRights 29B.TheDutytoConsult 29C.ImpactandBenefitAgreementsandAboriginalParticipation 31D.MoreInformation 31

FinancingMiningProjects 32A.CapitalMarketsinCanada 321.RegulatoryLandscape 322.CanadianStockExchanges 32

Contents

3.PublicOfferingsandPrivatePlacements 334.CapitalMarketProducts 335.DisclosureandReporting 346.SpecialDisclosureRulesforExploration andMiningCompanies–NI43-101 34

7. Governance 358.MoreInformation 36

B.ProjectFinance 371.Greasingthewheels:Projectfinancingisasolution toextensivecapitalrequirements 37

2.DebtFundingandSecurity 383.EquipmentFinancing 394.Streaming 395.Off-takerFinancing 396.EquityBridge 397.MoreInformation 39

Taxation 40A.CanadianFederalTax 40B.CanadianResourceExpenditures 40C.InvestmentTaxCredits 40D.CapitalCostAllowance 42E.DeductionforProvincialMiningTaxesandRoyalties 42F.FunctionalCurrencyReporting 42G.Flow-ThroughShares 42H.ProvincialIncomeTax 43I.ProvincialMiningTaxesandRoyalties 43J.OtherConsiderationsRelevanttoProcessingMinerals 43K.MoreInformation 43

MiningOperations 44A.Projectinfrastructure 441.PortInfrastructure 442.RailInfrastructure 44

B. Construction Contracts 44C. Services and Supply Contracts 44D.Sales,MarketingandOff-takeAgreements 45E.MoreInformation 45

Environmental 46A.FederalEnvironmentalAssessment 46B.Provincial/TerritorialEnvironmentalAssessment 47C. Environmental Permits, Approvals and Authorizations 47D.MoreInformation 49

WorkplaceHealthandSafety 50A.Workers’Compensation 50B.OccupationalHealthandSafety 50C.IncidentResponse 50D.MoreInformation 51

Anti-CorruptionandBriberyLaw 52A.CorruptionofForeignPublicOfficialsAct(Canada) 52B.DisclosureofPaymentstoGovernments 52C.MoreInformation 54

Disputes 55

06 Norton Rose Fulbright – October 2013

Guide to Mining Projects and Mining Finance in Canada

ThisGuidesummarizesmanyofthelegalandcommercialissuesthatexplorationandminingcompaniesarelikelytoencounterinCanada,frominitialexplorationthroughtoprojectdevelopmentandtheoperationalphase,aswellasCanadiancapitalmarketsandprojectfinanceconsiderationsforexplorationandminingcompanies.

A. The mining industry in Canada

Canadaoffersnumerousadvantagestominingcompanies.With a stable economy and political structure, highly sophisticatedinfrastructureandabundantresources,Canadaiswellplacedtoweatherglobalfinancialturbulence.Canada’scredentialsincludeitsvastsuppliesofresources,advancedmanufacturingexpertiseandahighlyeducatedworkforce,aswellasgeneroustaxresearchanddevelopmentincentives.

Canadaisoneofthelargestminingnationsintheworld,producingmorethan60mineralsandmetals.ThetotalvalueofCanadianmineralexportswasC$92.6billionin2012.GoldwasthetopmetallicmineralproductproducedinCanadain2012withshipmentsvaluedatC$5.6billion.Ironoreproductionwasnext(withC$5.3billion),followedbycopper(atC$4.5billion).Canadacontinuestobetheworldleaderintheproduction(byvolume)ofpotashandranksinthetopfivecountriesfortheproductionofaluminum,cadmium,cobalt,nickel,platinumgroupmetals,sulphur,titanium concentrates, tungsten, and uranium, and third in theproductionofdiamonds(byvalue)*.

Itsnorthernregion,inparticular,helpstomakeCanadaoneofthemostprosperousminingenvironmentsintheworld.ThediscoveryoflargediamonddepositsintheNorthWestTerritoriesin1988sparkedasurgeindiamondexplorationthat continues to this day. Similarly, Nunavut has large iron oredepositsandsignificanturaniumpotentialthathasattractedabundantexplorationsandexpenditures.Otherminerals sought in the Canadian North with success include tungsten, the rare earth elements, cobalt, coal, and the platinumgroupofelements.

Canada’sfinancialsystemhasbeenrankedasthesoundestintheworldbytheWorldEconomicForum.Itthereforecomesas no surprise that the economic intelligence unit has rated Canada the best place to do business in the G7 until at least 2015.

Canadianfinancialinstitutionsarestrong,stable,diversifiedandwell-funded.Thebankingsystem–withcapital

adequacyratiosabovetheinternationalMonetaryFund’sBaseminimumsforeffectivebankingsupervision–iswellinsulatedagainstloanlosses.ThestrongfinancialpositionofCanadianbanksmeanstheyborrowatratesconsiderablylowerthanthoseofmanyoftheirinternationalcounterparts.Canada’sindustryleadershipextendsbeyonditsbordersasthecountry’ssixlargestbanksareactiveintheUnitedStates,Latin America, the Caribbean and Asia.

B. Norton Rose Fulbright – mining law experts

Norton Rose Fulbright is ideally placed to advise mining companiesatallstagesofaprojectlifecycle.Wehaveconsiderableexperiencewithtenementacquisitionandadministration,projectstructuringandminingjointventures.Wealsoregularlyadviseonafullrangeofoperationalmattersincludingenvironmentallaw,minesafety,employmentandlabourmatters,supplyandoff-takearrangements,infrastructuredevelopment,androad,railandportaccessagreements.

WehavealonghistoryofrepresentingclientsindomesticandinternationalM&Atransactionsandstrongexperienceinbothdebtandequityfinance,includingsecuredprojectlending,initialpublicofferings(IPOs)andstockexchangelistings.Ourglobalfootprintenablesustoactforminingcompanieslookingtotakeadvantageofdualormultiplelistingsonallmajorminingexchanges,includingtheToronto,Australian,London,Johannesburg,HongKongandNewYorkstockexchanges.

NortonRoseFulbrightistheleadinggloballawfirminthe mining industry. We provide unsurpassed service and expertisethroughouttheworldtotheexplorationandminingsector.Someofourrecentrankingsandawardsinclude:

• Global Mining Law Firm of the Year, Who’s Who Legal Awards2010,2012and2013

• Projects and Energy: Mining and Minerals (Band 1), ChambersGlobal2013

• Lawyers of the Year for Aboriginal, Securities and Corporate Law (Canada),BestLawyers2013

Introduction

* Natural Resources Canada, “Key Mining Facts 2012” available online at: http://www.nrcan.gc.ca/minerals-metals/nmw-smc/4450

Norton Rose Fulbright – October 2013 07


• Band 1 – Employment and Labour (Canada), Chambers Global2013

• Spotlight table – Projects: Mining:LeadingCanadianFirms,ChambersLatinAmerica(LatinAmerica-wide)2012

OurglobalminingteamcombinesinternationalexperiencewithathoroughunderstandingofdoingbusinessinCanadatoassistminingcompaniesandtheirstakeholdersinmaximisingvaluefromtheirexplorationandminingprojects.

Formoreinformationonminingprojectsandminingfinancein Canada, please call your usual Norton Rose Fulbright contactoranyofourmininglawexpertsnotedthroughoutthis Guide. For additional resources and publications, see thechapter“NortonRoseFulbrightMiningGuidesandPublications”attheendofthisGuide.

Dawn P. Whittaker Canadian Leader – Mining Norton Rose Fulbright +416.216.1895 [email protected]



Overview of the Canadian legal systemCanadaisaFederalstatewith10Provincesand3Territories,each with its own government. The Constitution Act, 1867 divides legislative authority between the Federal and Provincialgovernments.TheFederalgovernmenthasexclusivejurisdictionovernationalmatterssuchastheregulationofinterProvincialandinternationaltradeandcommerce,bankruptcyandinsolvency,foreignaffairsandcriminallaw.TheFederalgovernmentalsohasjurisdictionovertheTerritories;however,theterritorialgovernmentsdohaveauthorityoveranumberoflocalgovernmentprograms.Correspondingly, the Provincial governments have legislative power in areas such as property and civil rights in the Province,education,andallmattersofalocalorprivatenature.AllProvincesandTerritoriesinCanadaarecommonlawjurisdictionswiththeexceptionofQuébec,whichisacivillawjurisdiction.Courtsinthecommonlawjurisdictionsapplyacombinationofstatuteandcommonlaw,whereascourtsinQuébecapplytheCivilCodeaswellasFederalandProvincial statues.

Establishing a Canadian businessBusinessmaybecarriedoninCanadathroughavarietyofmethods,includingthroughcorporations,partnerships,jointventures and other contractual relationships.

MostforeigninvestorschoosetocarryonbusinessinCanadathrough a Canadian subsidiary or by using a Canadian subsidiarytoacquireanexistingCanadianbusiness.However,aforeigninvestormayalsoconductbusinessinCanadabyestablishingabranchofficeorthroughagency,distribution,franchisingorlicensingarrangements.

LegalandtaxstructuringconsiderationsaretypicallykeydriversindeterminingthestructureofanyCanadianbusiness.

A. Corporations

A corporation may be incorporated under the Federal laws ofCanadaorunderthelawsofoneoftheProvincesorTerritories.WhileFederalandProvincialcorporatelegislationprescribesubstantiallysimilarrequirements,therearedifferenceswhichmaymakecertainjurisdictionsmoreattractivethanothers.Forexample,differencesindirectors’residencyrequirementsmaybearelevantconsideration.

Incorporationcanbeaccomplishedquicklyandrelatively

inexpensively.Itinvolvesthefilingofarticlesofincorporationwhichsetouttheprincipalattributesofthecorporation(i.e.,name,locationofregisteredoffice,numberofdirectors,compositionofsharecapitalandanyrestrictionsontheissue,transferandownershipofshares).Ruleswhichregulatehowthebusinessandaffairsofthecorporationwillbeconducted are generally set out in the corporation’s by-laws (i.e.,borrowingpowers,bankingarrangements,executionofdocuments,financialyearendandmeetingprocedures).Under both Federal and Provincial legislation there is flexibilitytocreatedifferentsharestructuresbyestablishingclassesofshareswithdifferentrightsregardingvoting,receiptofdividendsandotherdistributions,andprofitparticipation.Thisflexibilityisusefulinprovidingequityparticipationtolocalmanagement.UnlikemanyEuropeancountries,therearenostatutorypre-emptiverightsofsubscriptionattachingtosharesofCanadiancorporations,althoughsuchrightsmaybeprovidedforinthearticlesofacorporationorbycontract.

UnlikecertainEuropeancountriessuchasGermanyorEngland, one cannot distinguish between Canadian private and public corporations by the corporate name. Generally, the distinction between private and public corporations is based on whether or not the corporation has distributed its securitiestothepublicand/orwhethersuchsecuritiesarelistedonaCanadianstockexchange.Privatecorporationsnormally include restrictions in their incorporation documentsandsecurityholderagreementsonthetransferoftheir securities. Public corporations have no such limit on the transferofsecurities.

Aforeignparentcompanymayexecutea“unanimousshareholder agreement” with respect to its Canadian subsidiary,whichcaneffectivelytransferallthepowersanddutiesofthedirectorstooneormoreshareholders.ThisisparticularlyusefulwhereaforeigncompanyhasappointedCanadiandirectorsforthepurposesofcomplyingwiththeCanadianresidencyrequirements.Thedailyoperationsofacorporationaremanagedbyitsofficers.Officerscanbenon-residentsofCanadabutwillneedvalidimmigrationauthorizationstoworkinCanada.

B. Partnerships

Inapartnership,therelationshipofthepartnersisestablishedbycontractandissubjecttoapplicableProvinciallaws.SomeProvincesrequirethatpartnershipsberegistered.Apartnershipmaytakeoneoftwoforms:a“generalpartnership” or a “limited partnership”.



Inageneralpartnership,allpartnersareentitledtoparticipate in ownership and management, and each assumesunlimitedliabilityforthepartnership’sdebtsandliabilities,subjecttoanalternativearrangementasprovidedinthepartnershipagreement.Inalimitedpartnership,there is a separation between the partners who manage thebusiness(generalpartners)andthosewhocontributeonlycapital(limitedpartners).Alimitedpartnershipmusthaveatleastonegeneralpartnerwhowillbesubjecttounlimitedliabilityforthedebtsofthepartnership.Limitedpartners,incontrast,areliableonlytotheextentoftheircapital contribution provided they do not participate in the managementofthebusiness.

C. Joint-ventures

Ajoint-ventureisanassociationofpersons,naturalorcorporate, who agree, usually through contract, to engage inasingleundertakingforjointprofitbycombiningtheirrespectiveresources.Ajoint-venturemaytaketheformofajoint-venturecorporation,ageneralorlimitedpartnership,orsimply a contractual relationship between co-venturers, with varying advantages and disadvantages associated with each.

Themandateandgovernanceofajoint-venturecorporationisfrequentlylaidoutinaunanimousshareholderagreement,whereco-venturerscanoutlinetheparticularsofthecorporate and share structure and its distribution procedures, amongotherthings.AswiththeformationofanycorporationinCanada,ajoint-venturecorporationmaintainsaseparatelegalpersonalityandthereforeprovidesasignificantadvantageinthatliabilityfortheproject’sundertakenattractstothecorporationitselfandnottotheindividualco-venturers.Inaddition,thisstructureenablesaseparationbetween ownership and management in the corporation and the ability to create variance in share and loan capital that canbeanadvantageousfinancestructureforalong-termminingproject.However,undertheincorporatedjoint-venturestructure,itisimportantfortheco-venturerstobeawareoftheimplicationsofbecomingacorporation,and,inparticular,makingthemselvesdirectorsofsuchcorporationas such a position will bring with it corresponding duties owedtothecorporation(i.e.thedutytoactinthebestinterestsofthecorporation)thatmayhinderhisorherabilitytotakeforthemselvesparticularopportunitiesorinformationthatwouldbeadvantageoustothejoint-venturecorporation.

Inajoint-venturepartnership,themandateandtermsofthepartnership are laid out in a partnership agreement entered into by the co-venturers. However, the rights and obligations

ofeachco-ventureaspartnerarealsoprescribedbytheapplicablepartnershipstatute(subjecttobeingsupersededbythepartnershipagreement).Asthereisnoseparatelegalpersonalityforapartnership,suchdefaultprovisionsincludetheequalsharingofprofits,capitalandlossesincurredbythepartnership. Notably, partnership legislation also includes restrictions on what can be agreed to within a partnership agreement, as well as mandatory provisions that must be included.Ofparticularimportanceisthefiduciaryandstatutoryobligationsoftheco-venturerstooneanotherthatisimposedbypartnershipstatutes.Itisthereforepertinentthateachco-venturerturntheirmindtothefixedcharacteristicsofajoint-venturepartnershipandthecompatibilityofsuchprovisionswiththedesiredstructureoftheminingproject.

Co-venturers may also enter into a written agreement formingacontractualjoint-venture;howeversuchabusinessstructuremayalsobeinferredintheabsenceofanexpressagreementinparticularcircumstances.Theagreemententered into will outline the mandate, governance, structure andtermsoftheventure,includingtherightsandobligationsofeachindividualco-venturer.Acontractualjoint-ventureallowsthepartiesthefreedomtodictatethetermsoftheproject,theownershipanddivisionorassetsorrevenues,andthemanagementoftheproject’soperations.Asthecasewithajoint-venturepartnership,acontractualjoint-venturedoesnotformaseparatelegalentity,andthustheagreemententeredintowilldictatetheliabilityofeachventurers.Thedetailsofanyjoint-ventureagreementarethereforeoftheupmostimportanceandgreatcareandprofessionalguidanceshouldbehadinthedraftingofsuchagreement.Whilecostsmaybemarginallyreducedbyeliminatingtheprocessofincorporation,thenegotiationandpreparationofajoint-ventureagreementcanitselfbetimelyandcostly.



D. Earn-in arrangements

Earn-inagreementsareacommonmeansofacquiringinterestsinminingprojectsinCanada.Underanearn-in arrangement, the investor is given a right to earn an interestinaminingprojectjointventurebyfundingprojectexpendituresorcarryingthecostofcertainprojectactivities(usuallyexplorationorearlystagedevelopment).Theinterestintheprojectisconsideredearnedoncethefundingobligationissatisfied.

E. Alternative methods of carrying on business

AforeigninvestormayalsoconductbusinessinCanadathroughbranchofficesorthroughagency,distribution,franchisingorlicensingarrangementswhicharenotdiscussed in this Guide.

F. More information

For more details regarding establishing a Canadian business, seeourGuideentitledDoingBusinessinCanadaavailableatwww.nortonrosefulbright.com or contact us directly.


Robert Eberschlag Partner Norton Rose Fulbright +1416.202.6710 [email protected]

Marvin Singer Senior Partner Norton Rose Fulbright +1416.203.4426 [email protected]

Richard Lachcik Senior Partner Norton Rose Fulbright +1416.202.6711 [email protected]

Crae Garrett Partner Norton Rose Fulbright +1403.267.8254 [email protected]

Steve Malas Partner Norton Rose Fulbright +1514.847.4792 [email protected]

Jean-Philippe Buteau Partner Norton Rose Fulbright +1418.640.5069 [email protected]





Therearevariousmethodsbywhichinvestmentinamineralprojectcanbemadeorbywhichaminingprojectmaybeacquired.Forexample,aninvestormayacquireaninterestinsomeorallofamoreadvancedexplorationorminingprojectthroughtheacquisitionofindividualmineraltenureorrights,thepurchaseofassets,sharesorpartnershipinterests,orthroughajointventureorearninarrangement.

Regardlessofthemethodofacquisition,duediligenceiscriticaltounderstandingthenatureandvalueof,andtherisksassociatedwith,theinvestmentorprojecttobeacquired.Comprehensiveandaccurateduediligenceprovidesinvestors(andtheirlenders)withtheinformationnecessarytounderstandtheopportunitiesandrisksassociatedwiththeproject.Forminingprojectsinparticular,duediligenceiscriticaltounderstandrisksassociatedwithmineraltenureandenvironmentalandremediationissuesandrequirements.A comprehensive due diligence process can provide significantadditionalinputandvalue.

Withadiverseteamofrealproperty,miningandtransactionallawyers spreading across the country, Norton Rose Fulbright hasauniquestrengthinidentifyingandmanagingrisksassociatedwithminingprojectsinCanada.Formoreinformationonhowwecanassistyouinthediligenceprocessofanyandallstagesofyourproject,pleasecontactusdirectly.

A. Acquiring mineral tenure

1. British ColumbiaTherearevariousformsofmineraltenureinBritishColumbia,consistingprincipallyofProvinciallyadministeredminingclaims,miningleases,andfreeholdlands.

• Mineral Claims-Therightsandobligationsofindividualsand/orcorporations(Free Miners)whoexplorelandformineralsandsubsequentlyacquiremineraltenuresispredominantlygovernedbytheMineralTenureAct(BritishColumbia)anditsregulations.Thegovernmentalbodyresponsibleforover-seeingalloftheadministrativeprocessesunderthisframeworkistheMinistryofEnergy,MinesandNaturalGas(MEMN).AFreeMinermustapplytotheMEMNforaFreeMinerCertificatepriortoexplorationordevelopmentactivities.UponreceiptofaFreeMinerCertificate,FreeMinersmayconductasurfaceexaminationofthelandandmeasurementsofthesubsurface.Iffurtherexplorationintothesubsurfaceofthelandisrequiredbywayofelectronicmachinery,apermitmustbeobtainedbytheFreeMinerpursuantto

theMinesAct(BritishColumbia).FreeMinersmustalsoprovidepropernotice,asmandatedbytheMineralTenureAct,priortoenteringprivatelyownedlandforanymining-relatedactivity.AFreeMinermayregisteramineralclaim,atwhichtimetheFreeMineracquiresexclusiverightsoverthemineralsandmineralplacersstakedoutbytheclaim.TheFreeMinermayuseandoccupythesurfaceoftheland;however,theFreeMinerdoesnotacquireanyexclusiverightoverthesurfaceofthelanditself.Inordertomaintainandkeeptheclaimingoodstanding,aFreeMinermustpayanannualfeeorsubmitreportstotheMEMNconcerninganyexplorationanddevelopmentworkthathasbeencompleted.IftheFreeMinerwishestomoveforwardwiththeclaimandadvancetowardsproduction,stepsmustbetakentoreplacetheclaimwithamininglease.

• Mining Leases-TheMineralTenureActprovidesthatupon entering into a mining lease, the Crown conveys to theFreeMiner,thelessee,anexclusiverighttouse,enterandoccupythesurfaceofthelandfortheexplorationanddevelopmentorproductionofminerals.Theleasemaybegrantedforaperiodofupto30yearswiththepossibilityofrenewingforthoseleasesissuedbeforeDecember1,1995.Whereprojectsofsignificantscopeareundertaken,orwhereaprojectisspecificallydesignated,acertificatemustbeobtainedpursuanttotheEnvironmentalAssessmentAct(BritishColumbia).AminingleasemaybetransferredoncetheprerequisitesspecifiedintheMineralTenureActanditsregulationshavebeenmet,andconsentoftheMEMNisnotrequired.

• Freehold Lands/Patented Mining Claims-Anowneroffreeholdlandsholdsafeesimplerealpropertyinterest.Upuntil1957,theholderofaminingclaiminterestedinremovingmineralsfromthegroundcould,insteadofobtainingamininglease,applytotheProvinceofBritishColumbiafora“GrantofTitle”toextractminerals.Individualswhocurrentlyholdafeesimpleinterestovermineralsontheirpropertymaytransferthisright,whileretainingafeesimpleinterestinthesurfaceland.FreeholdmineralownersaresubjecttoannualminingtaxespursuanttotheMineralLandTaxAct(BritishColumbia).

• Online Resources-InBritishColumbia,searchesofmineral tenures proceed through the government-licensed “MineralTitlesOnline.”Theonlinesystemallowsuserstoconducttenuresearches,applyforaFreeMinerCertificate,acquireandmaintainmineralandplacertitles,andtransfermineraltitles.Formoreinformationonthisservice, visit www.mtonline.gov.bc.ca/mtov/home.do.

Investing in or acquiring a Canadian mining project



2.Alberta TherearevariousformsofmineraltenureinAlberta,includingprospectinglicenses,miningleasesandfreeholdlands.AlbertaisoneofthreeCanadianjurisdictionswhichfeaturea“Crowndiscretion”systemforthegrantingofminingleases.Tostakeamineralclaim,onemustobtainapermit.TheCrowndiscretionsystempermitstheProvincetorefuseanapplicationforalicense,ordefertheacceptanceofan application where it believes the application is not in the bestinterestsoftheProvince.

• Mineral Permits - Prospecting on public lands held by theCrownthatareopenforexplorationisgovernedbythe Mining & Mineral Act(Alberta)anditsregulationsandisadministeredbytheAlbertaCoalandMineralDevelopmentUnitoftheDepartmentofEnergy(DOE).Toobtainthemineralexplorationrightsinaspecifiedareawhere the Crown owns the mineral rights, a prospector mustobtainaMetallicandIndustrialMineralsPermit.Thispermitdoesnotgranttheholderanyrealpropertyinterest in the land, but allows the holder to conduct limitedexplorationworkwithrespecttosuchclaims.Thereafter,ifthepermitholderwishestocarryoutmoreextensiveexplorationworkand/ormovetoproduction,they have the right to obtain a mining lease. Permits are initiallyissuedforaperiodof14years,whicharefurtherdividedintosevenassessmentperiodsoftwoyears.

• Mineral Leases-MetallicandindustrialminingleasesenteredintobytheholderofapermitwiththeCrowncreate a leasehold real property interest. A permit holder mayapplytotheDOEforaminingleaseifprescribedtermsandconditionshavebeenmet.Miningleasesgrantanexclusiverighttothelesseetoenteruponthelandandsearchforandextractminerals,subjecttothelesseeobtainingotherrequiredpermitsandcompliancewithapplicableregulations.Miningleasesarefor15yeartermssubjecttorenewalonconditions.Aminingleasemaybetransferredbythelesseeuponapplicationto,andreceiptofapprovalfrom,theDOE.

• Freehold Lands / Mining Patents-Anowneroffreeholdlandsholdsafeesimplerealpropertyinterest.Traditionally,theholderofamineralpermitinterestedinremovingmineralsfromthegroundcould,insteadofobtainingamininglease,applytotheDOEtoacquirethefreeholdinterestinthesubjectlandsbywayoftheissuanceofaminingpatent.Miningpatentsmayincludesurfaceandminingrightsorsolelyminingrights.ThesepatentsvestinthepatenteealloftheCrown’stitletothesubjectlandsandtoallminesandmineralsrelatingto

suchlands,subjecttoanyreservationsspecified.FreeholdlandsaresubjecttoannualProvincialminingtaxesand,wheresurfacerightsareheld,Provinciallandtaxes.Astheholderofaminingpatentenjoysthefreeholdinterestinthelandsthatarethesubjectofsuchpatent,noconsentsarerequiredforthelandownertotransferormortgagesuch lands.

• Online Resources-Alberta’sElectronicTransferSystem(ETS)permitssecureaccesstoDOEpublicrecordsandprovidesforCrownsurfacelandandmineralsearchesandownershiptransfers.Formoreinformation,visit www.energy.alberta.ca/OurBusiness/minerals.asp.

3. SaskatchewanTherearevariousformsofmineraltenureinSaskatchewan,butconsistprincipallyofmineralclaimsandminingleases.

• Mineral Claims-MineralclaimsandminingleasesavailableforpubliclandsheldbytheCrownthatareopenforexplorationaregovernedbytheEnergyandMinesAct(Saskatchewan)andadministeredbytheSaskatchewanMinistryofEnergyandResources(MER). A claimholderhasexclusiverightstoexploreandprospectformineralsintheclaimarea.Thereafter,iftheholderwishestocarryoutmoreextensiveexplorationworkand/or move to production, they have the right to obtain a mining lease with respect to such claims under the claim rights(providedtheclaimsarekeptingoodstanding).AnyonemayprospectorstakeclaimsinSaskatchewan.Nolicenseisrequired.Aclaimmaybeheldfortwoyearsandmayberenewedfromyeartoyearsubjecttotheholdermakingtherequiredexpenditurestowardexplorationoperationsonthelandssubjecttotheclaim.Claimsaregenerallyacquiredbymapstakinginsurveyedareasorbygroundstakinginunsurveyedareas.AmineralclaimgrantedpursuanttotheEnergyandMinesActdoesnotgrantarighttoenteruponorusethesurfaceofthelands;permissionisrequiredfromthesurfaceowner,whetherCrown or private owners.

• Mining Leases-Aminingleasemaybeobtainedforareascoveredbyminingclaims,subjecttoprescribedrequirements.Aminingleasegrantstheexclusiverighttoexplorefor,dig,work,mine,recover,procureandcarryawaythemineralswithintheleaseareasubjecttothepaymentofroyalties.Leasesareissuedforatermoflessthan10years,andarerenewableforfurthertermsof10years,subjecttocompliancewithregulatoryrequirementsandannualleasepayments.Subjecttodueregistration,aminingleasecanbetransferredormortgagedbythe



lesseewithoutthepriorconsentoftheMER.Provincialminingprojectsthatareclassifiedbyregulationas“developments”alsorequirecompliancewithstringentenvironmental assessments.

• Online Resources-Saskatchewan’sMinistryoftheEconomy (ECON) maintainsanelectronicregistryfortheissuanceofmineraldispositionsgranted.Theregistrypermitsonlineacquisitionofmineraltenure,andreportingofworkassessmentexpenditures,claimsandleases,andanytransferorsurrender.InformationServicesCorporation(ISC)ofSaskatchewanistheProvincialagencyresponsiblefortheadministrationoftheProvinciallandtitlesregistry.CopiesofmineraltitlesareobtainedfromISCandmineraldispositionmapsareavailableonline.Formoreinformation,visitwww.er.gov.sk.ca/mines.

4. ManitobaTherearevariousformsofmineraltenureinManitoba,consistingprincipallyofunpatentedmineralclaims,miningleasesandfreeholdlands(includingpatented mineralclaims).

• Mineral Claims-ProvincialexplorationandminingrightstoCrownlandsareacquiredbywayofmineralexplorationlicences or mineral claims, governed by the Mines and Minerals Act (Manitoba)andadministeredbytheManitobaDepartmentofInnovation,EnergyandMines(DIEM).Explorationandminingrightsforsurfaceexplorationactivities must be made separately through arrangements withownersofprivatesurfacerights.InManitoba,claimsmaybestakedbylicencedprospectorsonly.HoldersofrecordedmineralclaimshaveexclusiverighttoexploreforanddevelopanyCrownmineralsfoundon,inorunder the lands covered by the claim, and claim holders mayenter,useandoccupythesurfaceofthelandtotheextentnecessaryforthesepurposes.Onceavalidclaimisrecorded,itisvalidfortwoyearsandcanberenewedannuallyforanindefiniteperiod.MineralclaimsmaybetransferredtoanewtitleholderthatisproperlyregisteredtodobusinessinManitoba.TheclaimholderisrequiredtocompleteannualassessmentworkasprescribedundertheMines and Minerals Act.FailuretocompletetherequisiteassessmentworkwillresultintheforfeitureoftheclaimsbacktotheCrownsubjecttocertainreliefprovisionsincludedintheMinesandMineralsAct.

• Mining Leases Issued through DEIM - A mining lease grantsexclusiverighttoCrownmineralsandmineralaccessrightsincludingextractionrights,therighttoopenandworkashaftorminewithinthelimitsofthemining

lease area, and to erect buildings or structures on the subjectlandasrequiredforthepurposeofworkingtheminingleaseandminingandproducingmineralsfromit.Miningleasesaregrantedforatermof21yearsandarerenewableindefinitelywhereproductionrequirementsaremet.Transfers,assignmentsandmortgagesofminingleasesarepermittedwiththeconsentoftheDIEM.

• Patented Mining Claims-TentedmineralclaimsareparcelsoflandgrantedundertheLand Titles Act (Canada)withoutareservationinfavouroftheCrowninrightofCanadainrespectofmineralsfoundin,onorundertheland.MiningpatentsmayincludesurfaceandminingrightsorsolelyminingrightsandvestinthepatenteealloftheCrown’stitletothesubjectlandsandtoallminesandmineralsrelatingtosuchlands,subjecttoanyreservationssetoutinthepatent.Astheholderofaminingpatentenjoysthefreeholdinterestinthelandsthatarethesubjectofsuchpatent,noconsentisrequiredforthepatenteetotransferormortgagesuchlands.

• Online Resources -iMaQs,Manitoba’sintegratedMiningandQuarryingsystem,allowsuserstosubmitapplications and maintain dispositions online. Users mayviewiMaQsmapsshowingcurrentdispositionsandcanperformsearchesonmineraldispositionsandopenassessmentfiles.Geologicalsurveyreportsandmapsarealsoavailabletodownloadfreeofcharge.Formoreinformation,visitwww.manitoba.ca/iem/mrd/geo/gis/activity/index.html.

5. OntarioTherearevariousformsofmineraltenureinOntario,consistingprincipallyofunpatentedmineralclaims,miningleasesandfreeholdlands(includingpatentedmineralclaims).

• Unpatented Mining Claims - Unpatented mineral claims andminingleasesavailableinrespectofpubliclandsheldbytheCrownthatareopenforexplorationaregovernedbythe Mining Act(Ontario)andadministeredbytheOntarioMinistryofNorthernDevelopmentandMines(MNDM).Unpatented mineral claims do not grant the holder any real property interest in the lands comprising such claims, butafterstakingandregistration,providetheholderwiththerighttoconductcertainlimitedexplorationworkwithrespecttosuchclaims.Thereafter,iftheholderwishestocarryoutmoreextensiveexplorationworkand/ormoveto production, they have the right to obtain a mining lease withrespecttosuchclaims.Theholderisrequiredtocompleteandfileannualassessmentworkasprescribed



under the Mining Act.FailuretocompletetherequisiteassessmentworkwillresultintheforfeitureoftheunpatentedclaimsbacktotheCrown(subjecttocertainreliefprovisionsincludedintheMining Act).Nomineralsmaybeextractedfromlandsthatarethesubjectofanunpatented mining claim; the holder must have a mining leaseorafreeholdinteresttominetheland.Subjecttodueregistrationandthepaymentofapplicablefees,anunpatentedminingclaimcanbetransferred,chargedormortgaged by the holder without obtaining any consents.

• Mining Leases - A mining lease entered into by a mineral claims holder with the Crown creates a leasehold real propertyinterestinfavourofthelessee.Miningleasesgrantanexclusiverighttothelesseetoenterupon,searchfor,andextractmineralsfromtheland,subjecttothelesseeobtainingotherrequiredpermitsandcompliancewith applicable regulations, including those prescribed bytheOntarioMinistryofNaturalResources(MNR)andtheOntarioMinistryoftheEnvironment.Typically,miningleasesareforatermof21years,includerenewalprovisions,aresubjecttoannualleasepaymentsandmaycoverminingandsurfacerightsorsolelyminingrights.AminingleasecannotbetransferredormortgagedbythelesseewithoutthepriorconsentoftheMNDM,whichprocessrequiresthelesseetosubmitvariousdocumentationandpayafee.

• Freehold Lands / Patented Mining Claims-Theowneroffreeholdlandsholdsafeesimplerealpropertyinterest.Historically,theholderofaminingclaiminterestedinremovingmineralsfromthegroundcould,insteadofobtainingamininglease,applytotheMNRtoacquirethefreeholdinterestinthesubjectlandsbywayoftheissuanceofaminingpatent.MiningpatentsmayincludesurfaceandminingrightsorsolelyminingrightsandvestinthepatenteealloftheCrown’stitletothesubjectlands and to all mines and minerals relating to such lands, subjecttoanyreservationssetoutinthepatent(asmaybevaried by the Public Lands Act(Ontario)).Newissuancesofminingpatentshavebeenreplacedbyissuancesofminingleases.PatentedclaimsaresubjecttoannualProvincialminingtaxesand,wheresurfacerightsareheld,Provincialminerallandtaxes.Astheholderofaminingpatentenjoysthefreeholdinterestinthelandsthatarethesubjectofsuchpatent,noconsentisrequiredforthepatenteetotransferormortgagethoselands.

• Online Resources-InOntario,onlineresourcesareavailableforunpatentedclaims.Thereviewofpatentedclaims is completed through title searches that are usually

completedbylawyersortheirlawclerks.Theonlineresourceforunpatentedclaimsis:www.mci.mndm.gov.on.ca/claims/clm_mmen.cfm.

6. QuébecQuébec’sminingframeworkisgovernedbytheProvince’sMiningActanditsregulationsandisadministeredbytheMinistèredesResourcesnaturellesetdelaFaune(theMinistryofNaturalResourcesandWildlife)(MNRW).TheframeworkprovidesforaleasingregimefortheextractionofmineralsbywayofaminingleaseonpubliclandsheldbytheCrownthatareopenforminingactivities.

• Mineral Claims-Mineralclaimsaregenerallyobtainedbymapdesignation(i.e.byselectingavailablelandonmapspreparedbytheMNRW)or,alternatively,throughthemoretraditionalstakingofclaims.

• Mining Leases-TheMining Actgovernsthegrantingofrightsfortheextractionofmineralsubstancesthroughtheissuanceofminingleases.MiningleasesareexclusiveimmovablerealrightsthatinQuébecconstituteseparateproperty.Toobtainamininglease,apartyholdinga previously-obtained and valid mineral claim must establishanddescribethepresenceofadepositandfiletherequisitelandsurveys.MiningleasesareissuedbytheMNRWupontheapprovaloftheArpenteurgénéralduQuébec(i.e.theSurveyorGeneralofQuébec).Miningleases grant a right to the lessee to enter upon, search forandextractmineralsfromtheland,subjecttothelesseeobtainingotherrequiredpermitsandcompliancewith applicable regulations, including environmental regulationsprescribedbytheMNRWandtheMinistèreduDéveloppementdurable,del’Environnement,delaFauneetdesParcs(theMinistryofSustainableDevelopment,Environment,WildlifeandParks).Miningleaseshaveaninitialtermof20yearsandcanberenewedevery10yearswhileminingcontinues.Theholderisrequiredtocompleteandfileannualassessmentworkasprescribedunder the Mining Act.Miningrightsmayberevokedwheretherehasbeennoexplorationworkorminingoperationsfor10years.Aminingleasecannotbetransferredormortgaged by the lessee without registration in the publicregisterofrealandimmovableminingrightsandthepaymentofapplicablefees.TheMNRWimposesnumerous environmental responsibilities on lease holders. Environmental rehabilitation and restoration measuresincludetheimpositionoffinancialguaranteesonthelesseesandarequirementthatanenvironmentalrestorationplanbesubmittedinadvanceofthecommencementofminingactivities.



• Online Resources-Québechasanadvancedonlineregistry system which provides access to data in the registerofrealandimmovableminingrightsinQuébec.Theonlinesystempermitsuserstosearchminingtitlesandcustomize,displayanddownloadmapsofminingtitles,aswellasapplyformapdesignationsorrenewclaims.Usersmaybuildspecificqueriesbyselectingcriteriaamongtitletypes, status, holders, mineral substance and declared work.TheonlinesystemnowalsoenablesuserstoviewQuébec’sminingtitlesinGoogleEarth.

7. New BrunswickNewBrunswick’smineraltenuresystemtakestheformofmineral claims and leases granted by the Crown, with the CrownretainingownershipofmostmineralsintheProvince(includingthoseunderlandheldinfeesimple).NewBrunswick,likeallCanadianjurisdictionsexceptforAlberta,NovaScotiaandPrince-EdwardIsland,hasadopteda“free-entry”system,allowingpersons(includingcorporations)toobtainminingleasesafterstakingaclaimonafirst-come-first-servebasissolongascertainminimumcriteriaaremet.

• Mining Claims - Under the Mining Act(NewBrunswick),Crown-ownedmineralsareavailableforexplorationandextraction,whethersuchmineralsareonprivatelyownedorCrownownedlands.MineralclaimsandminingleasesavailableinrespectofbothpubliclandsheldbytheCrownthatareopenforexplorationaswellasprivatelyownedlandsareadministeredbytheMinisterofNaturalResources(MNR).AlllandintheProvinceisopenforprospectingandregistrationofmineralclaims,subjecttoexceptions,includingbutnotlimitedto:wherethelandiscoveredbyaprecedingmineralclaimormininglease(thoughwherethatclaimisforcertainmineralsonly,aprospectormayprospectforotherminerals);andwheretheCrownhasgranted land and the minerals are vested in the grantee (though,again,ifthetransferisforcertainmineralsonly,aprospectormayprospectonthelandforotherminerals,subjecttothetermsofthemineralclaim).Mineralclaimsdo not grant the holder any real property interest in the landsbut,afterstakingandregistration,providetheholderwiththerighttoconductcertainlimitedexplorationworkwithrespecttosuchclaims.Thereafter,iftheholderwishestocarryoutmoreextensiveexplorationworkand/ormoveto production, they have the right to obtain a mining lease withrespecttosuchclaims.Subjecttodueregistration,amineralclaimcanbetransferred,chargedormortgagedbytheholderwithoutobtaininganyconsents.Mineralclaimscarryatermofoneyearandarerenewableforthreetermsofoneyear.Nomineralsmaybeextractedfromlandsthatarethesubjectofamineralclaimunlesstheholderalsopossesses a mining lease to mine the land.

• Mining Leases-AholderofarecordedmineralclaimingoodstandingmayapplytotheMNRtoobtainamininglease.Aminingleasegivesthelesseetherightoffreeaccess by any reasonable means to and over the lease area, andtheexclusiverighttoprospectandcarryonminingandproduction,subjecttothelesseemeetingcertainconditions,includingobtainingotherrequiredpermitsandcompliancewithregulationsprescribedbytheMNR,theMinisterofAgriculture,FisheriesandAquaculture,theMinisteroftheEnvironmentandlocalgovernment.Suchaleaseholdrealpropertyinterestisgovernedbythetermsofthemininglease.Miningleasesaresubjecttoannualrent,aregrantedforatermof20yearsandmayberenewedforthreeadditionaltermsof20yearseach,thoughconsentforadditionaltermsmaybewithheldbytheMinisterwhereitis in the public interest to do so.

• Online Resources-NewBrunswickmaintainsNBe-CLAIMS,anonlinemineralclaimacquisitionandadministrationsystem.NBe-CLAIMSprovidesfortheviewingandprintingofmapsshowingthelocationofmineraltenuresthroughouttheProvince,allowsforthequeryingofdatabasescontainingpublicinformationconcerningmineraltenuresandfortheacquisitionandmaintenanceofmineralclaims.Formoreinformation,visitwww.nbeclaims.gnb.ca/nbeclaims.

8. Nova ScotiaNovaScotia’sminingtenuresystemtakestheformofmineralrightsgrantedbytheCrown.NovaScotiaisoneofthreeProvincialandterritorialjurisdictionswhichfeaturea“Crowndiscretion”systemforthegrantingofminingleases.Thosewhowishtostakeclaimsmustobtainapermitwhichmayberefusedinaccordancewithadministrativelawprinciples.TheCrowndiscretionsystempermitstheProvincetorefuseanapplication,ordefertheacceptanceofanapplicationfora license where it believes the application is not in the best interestsoftheProvince.

• Mineral Exploration Licences - All minerals in Nova ScotiaarereservedtotheCrown(includingthoseunderlandheldinfeesimple)astheMineral Resources Act (NovaScotia)veststitletomineralsintheCrown.TheCrownretainstherighttoexplorefor,workandremovesuchminerals.Exploration,developmentorproductionofmineralsonaclaimorleasemayonlybecarriedoutwhere the person is the mineral right holder or does so withtheauthorityofthemineralrightholder.UndertheMineral Resources Act,theProvincemakesCrown-ownedmineralsavailableforexplorationandextraction,whethersuch minerals are on privately owned or Crown owned



lands.MineralrightsinNovaScotiaareacquiredandreferencedbymeansofamap-basedstakingsystem.Amineralexplorationlicenceisrequiredforthoseseekingtoprospectandsearchforminerals;extractmineralsfortestpurposes;orapplyforaminingleasewithinanareadesignatedbythelicence.ThelicenceisvalidforoneyearfromthedateitisissuedandisrenewablesubjecttotherequirementsoftheMineral Resources Act and itsregulations.Licenceholdersaregenerallyrequiredtocarryoutaminimumamountofexplorationand/orprospectingworkinordertorenewtheirlicence.Areportofassessmentworkandpaymentofafeeisrequiredannually. Applicants must meet certain eligibility criteria andmustobtainthelandowner’spermissionbeforeenteringonanylandforpurposesofexploration.InthecaseofCrownlands,anapplicantmustobtainpermissionoftheProvincialDepartmentofNaturalResources(DNR).AnexplorationlicencemaynotbetransferredwithoutthewrittenconsentoftheNovaScotiaRegistryofMineralandPetroleumTitles.

• Mining Leases-AminingleaseisrequiredforexclusiverightstospecifiedmineralsinNovaScotia.Suchrightsaresubjecttothetermsoftheleaseandpaymentofroyaltiesandrent.Noonemaycarryoutproductionofamineralexceptinaccordancewithaminerallease.Miningleases relate to public lands held by the Crown that are openforexplorationaswellasprivatelyownedlandsandareadministeredbytheDNR.AholderofamineralexplorationlicenceingoodstandingmayapplytotheMinistertoobtainamininglease,grantingtheexclusiverighttoallorspecifiedmineralsinorupontheleasedareaforthetermofthelease.Miningleasesaregrantedforatermof20years,andmayberenewedforanynumberofcoterminoustermsasapprovedbytheMinister.Wherethelesseebreachesatermofthelease,theleasemaybeforfeitedsubjecttocertainreliefprovisionsincludedintheMineral Resources Act.Aminingleasecanbetransferred,chargedormortgagedbytheholderuponfilingwiththeRegistrarintheprescribedmannerandform.

• Online Resources-TheMineralResourcesBranchoftheDNRmakesavailablealargenumberofgeosciencedigitalproducts, such as digital maps, digital images and digital databases,allofwhichcanbedownloaded.Formoreinformation,visitwww.gov.ns.ca/natr/meb/.

9. Prince Edward IslandPrinceEdwardIsland’sminingtenuresystemtakestheformofmineralrightsgrantedbytheCrown.PrinceEdwardIsland(PEI)isoneofthreeProvincialandterritorialjurisdictions

whichfeaturea“Crowndiscretion”systemforthegrantingofminerallicencesandleases.Thosewhowishtostakeclaimsmustobtainalicence.TheCrowndiscretionsystempermitstheMinisterofFinance,EnergyandMunicipalAffairstorefuseordefertheacceptanceofanapplicationforalicenseif,inthediscretionoftheMinister,theacceptanceoftheapplicationisnotinthebestinterestsoftheProvinceorwouldhindermineraldevelopmentofanyarea.

• Mineral Licences - The Mineral Resources Act (PrinceEdwardIsland)veststitletomineralsintheCrown.UndertheAct,theProvincemakesCrown-ownedmineralsavailableforexplorationandextraction,whethersuchminerals are on privately owned or Crown owned lands. A mineralexplorationlicenceisrequiredforthoseseekingtoprospectandsearchforminerals,extractmineralsfortestpurposes,ortoapplyforaminingleasewithinanareadesignatedbythelicence.Exploration,developmentorproductionofmineralsonaclaimorleasemayonlybe carried out by the mineral right holder or under the authorityofthemineralrightholder.Activitiescanincludeprospecting,surveywork,drillingandminorexcavationwork.Mineralexplorationlicensesarevalidforoneyearfromthedateissuedandarerenewableforfourtermsof1yeareach,subjecttotherequirementsoftheThe Mineral Resources Act.AmineralexplorationlicencemaynotbetransferredwithoutthewrittenconsentoftheMinister.Nolesseemayenteruponoruseforminingpurposesany private lands until the lessee has obtained the right toenteruponandusethesameforminingpurposesbyagreement with the owner.

• Mining Leases-AholderofanylicensemayapplyforaleaseprovidingforexclusiverightstospecifiedmineralsintheProvince.Suchrightsaresubjecttothetermsoftheleaseandpaymentofroyaltiesandrent.Noonemaycarryoutproductionofamineralexceptinaccordancewithaminerallease.MiningleasesaresubjecttoannualProvincialminingtaxesand,wheresurfacerightsareheld,Provinciallandtaxes.Miningleasesaregrantedforatermof20years,andmayberenewedforasubsequent20yearperiod.Wherethelesseebreachesatermofthelease,theleasemaybeforfeitedsubjecttocertainreliefprovisionsincluded in the The Mineral Resources Act. A mining lease canbetransferred,chargedormortgagedbytheholderuponobtainingwrittenconsentoftheMinister.Licenseesmustobtaintheconsentoftheowneroroccupantofthelands(whetherownedbytheCrownorprivately)inordertoenterthepropertysubjecttothelicence.Intheabsenceofconsent,aspeciallicencemaybeobtainedfromtheMinister.



• Online Resources-PEIdoesnotmaintainsignificantonlineresourcesofminingregistriesorlicencingprocesses.

10. Newfoundland and LabradorMineraltenuresinNewfoundlandandLabrador(NL)operateprincipallybywayofminerallicensesandminingleases.

• Mineral Exploration Licences-Bothmineralexplorationlicenses and mining leases relate to public lands held by theCrownthatareopenforexplorationandaregovernedby the Mineral Act(NewfoundlandandLabrador)andadministeredbytheDepartmentofNaturalResources(DNR).Acquisitionofmineralrights,describedinregulations under the Mineral Act, proceed by way online mapstaking.Amineralexplorationlicencegivesthelicenseetheexclusiverighttoexploreformineralsin,onorundertheareaoflanddescribedinthelicence.Amineralexplorationlicenceisissuedfora5yeartermandmayberenewedandheldforamaximumof20years,providedtherequiredannualassessmentworkiscompleted,reportedandacceptedbytheDNRandtherenewalfeesarepaid.Annualassessmentworkmustbecompletedonorbeforetheanniversarydateoflicenceissuance.Alicencemaybevalidlytransferred,mortgagedorassignedatanytimebywayofatransfersubmittedtotheMineralClaimsRecorder.Theholderofthemineralexplorationlicenseisentitledtoapplyforandwillgenerallyreceivetheminingleasetoperformtheextractionofminerals,subjecttotheclaim remaining in good standing.

• Mining Leases-AmineralexplorationlicenceholderhastherighttoconvertanypartofalicencetoaminingleaseprovidedallprovisionsoftheMineral Act are met. A mining lease issued under the Mineral Actconfersuponthelesseetheexclusiverighttodevelop,extract,remove,sell,mortgageorotherwisedisposeofallunalienatedmineralsdescribedinthelease,subjecttoregistrationunder the Province’s Environmental Protection Act and compliance with applicable regulations. A mining lease cannotbetransferredormortgagedbythelesseewithoutthepriorwrittenconsentoftheDNR.Typically,miningleasesareforatermofnotmorethan25yearswithrenewalspermittedforupto10years.

• Online Resources-TheMineralRightsAdministrationDatabaseprovidesuserswithanadvancedmineralclaimstakingprocessthatallowsreal-timeonlineacquisitionofminerallicences.MapsandmineralrightsinquiryformsarealsoavailableonlineandvariousprescribedformscanbefoundontheDNR’swebsiteatwww.nr.gov.nl.ca/nr/mines.

11.Yukon TherearevariousformsofmineraltenureintheYukon,consistingprincipallyofmineralclaimsandquartzleases(leasesforhardminerals).

• Prospecting In Yukon - A prospecting license is not requiredtoenteronavailablelandforminingpurposesortolocate,prospectormineforgoldandotherpreciousmineralsorstones.Anyone18yearsorolder,oranindividual authorized by any corporation authorized tocarryonbusinessinYukon,oranyoneonbehalfofsomeoneelse18yearsorolder,mayenteronavailablelandtolocate,prospect,andmineforgoldandotherprecious minerals or stones.

• MineralClaims-MineralclaimsandquartzleasesmaybeissuedforpubliclandsheldbytheCommissionerofYukonthatareopenforexplorationandaregovernedbyThe Quartz Mining Act(QMA)andadministeredbytheMiningRecorderOffice,Energy,MinesandResources(EMR).Mineralclaimsdonotgranttheholderanyrealpropertyinterestinthelandscomprisingsuchclaims,butafterstakingandregistration,providetheholderwiththerighttoconductcertainlimitedexplorationwork.Thereafter,iftheholderwantstocarryoutmoreextensiveexplorationworkand/ormovetoproduction,theyhavetherighttoobtainaminingleasewithrespecttosuchclaims.TheholderisrequiredtocompleteafullreportoftheworkdoneasprescribedundertheQMA.Failuretofilesuchareportwillresultinnon-renewalofmineralclaims.Nomineralsmaybeextractedfromlandsthatarethesubjectofamineralclaim;theholdermustpossesseitheraminingleaseorafreeholdinteresttominetheland.Subjecttodueregistrationofanysuchaction,aminingclaimcanbetransferred,chargedormortgagedbytheholderwithoutobtaining any consents.

• Quartz Leases-QuartzleasesarethemostsecureformofmineraltitleintheYukon.Onceamineralfindisconfirmedwithinthelimitsofamineralclaim,theclaimholdermayapplytoleasethesubsurfaceoftheirclaim.Quartzleasescreatealeaseholdrealpropertyinterestinfavourofthelesseeandtheexclusiverighttoenterupon,searchforandextractmineralsfromtheland,subjecttothelesseeobtainingotherrequiredpermitsandcompliancewith applicable regulations and land claim agreements. Typically,quartzleasesareforatermof21years,includerenewalprovisions,aresubjecttoannualleasepaymentsandmaycoverminingandsurfacerightsorsolelyminingrights.AquartzleasecannotbetransferredormortgagedbythelesseewithoutthepriorconsentoftheEMR.



• Online Resources-Yukonprovidesanonlineclaimssearchsystemandonlinemapsformineralandlandtenure, mining and land uses activities, First Nation TraditionalTerritoriesandSettlementLands,parksandprotectedareas.Formoreinformation,visit www.yukonminingrecorder.ca/.

12. Northwest Territories and NunavutTherearevariousformsofmineraltenureintheNorthwestTerritories(NWT)andNunavut,consistingprincipallyoflicenses to prospect, mineral claims and mining leases.

• Mineral Claims and Licences to Prospect-IntheNWTand Nunavut, mineral claims and mining leases are issued forpubliclandsheldbytheCrownthatareopenforexplorationandaregovernedbytheTerritorialLandsActand its related Northwest Territories and Nunavut Mining RegulationsandadministeredbytheMiningRecorder’sOffice,AboriginalAffairsandNorthernDevelopmentCanada(AANDC).Mineralclaimsdonotgranttheholderany real property interest in the lands comprising such claims,butafterstakingandregistration,allowtheholdertoconductlimitedexplorationworkwithrespecttosuchclaims.Thereafter,iftheholderwantstocarryoutmoreextensiveexplorationworkand/ormovetoproduction,they have the right to obtain a mining lease with respect tosuchclaims.AholderofanactivelicensetoprospectcanstakeaclaimonCrownlandopenforexplorationthatis not already under claim or under a prospecting permit. Onlytheholderofaprospectingpermitmayregisteraclaimwithintheprospectingpermitarea.TheholderoftheclaimisrequiredtocompleteandfileannualassessmentworkasprescribedundertheNorthwest Territories and Nunavut Mining Regulations. Failure to complete such assessmentworkwillresultintheforfeitureoftheclaimsbacktotheCrown(subjecttocertainreliefprovisions).Nomineralsmaybeextractedfromlandsthatarethesubjectofamineralclaim,astheholdermustpossesseitheraminingleaseorafreeholdinteresttominetheland.Amineralclaimcanbetransferred,chargedormortgagedby the holder without obtaining any consents, though in ordertoeffectarecordedtransferintheminingregistry,AANDC’sstandardformtransferdocumentmustbefiledandtheapplicablefeepaid. OnJune29,2013anewlyproposedregulation,therepealoftheNorthwest Territories and Nunavut Mining Regulations and its replacement with two separate regulations, the Northwest Territories Mining Regulations and the Nunavut Mining Regulations were pre-published inCanadaGazettePartIforconsultation.Theintentionistomodernizethemineraltenureprovisionsoftheexistingregulations to better meet current administrative, industry and legal standards so as to support the implementation

ofanewmapselectionsysteminNunavut(plannedforNovember2014)andtoprepareforthedevolutionoftheresponsibilities over lands and natural resources to the GovernmentoftheNorthwestTerritories(totakeeffectApril1,2014).

• Mining Leases - A mining lease entered into by the holderofmineralclaimscreatesaleaseholdrealpropertyinterestinfavourofthelesseegovernedbythetermsofthelease.Miningleasesgrantanexclusiverighttothelesseetoenterupon,searchforandextractmineralsfromtheland,subjecttothelesseeobtainingotherrequiredpermits and compliance with applicable regulations and landclaimagreements.Typically,miningleasesareforatermof21years,includerenewalprovisions,aresubjecttoannualleasepaymentsandmaycoverminingandsurfacerights or mining rights alone. A mining lease cannot be transferredormortgagedbythelesseewithoutthepriorconsentofAANDC,whichprocessrequiresthelesseetosubmitvariousdocumentationandpayafee.

• Online Resources-A“SpatiallyIntegratedDataset”permits users to view current data on mineral claims in theNWTandNunavut,researchgeographicaldataonlineandproducecustomizedmapsusingGISinformationwithspecificfocusessuchasminerals,andlandclaimsareas.Formoreinformation,visitwww.aadnc-aandc.gc.ca.

Formoreinformationregardingacquiringmineraltenureandmining rights in Canada, please contact us.

Miguel Manzano Partner Norton Rose Fulbright +1514.847.4813 [email protected]

Ned Steinman Partner Norton Rose Fulbright +1613.780.8692 [email protected]

Mario M. Caron Senior Partner Norton Rose Fulbright +1514.847.4525 [email protected]

Pamela Horton Partner Norton Rose Fulbright +1416.203.4432 [email protected]



B. Royalties

A royalty is a right to receive payment based on a percentage ofthemineralsorotherproductsproducedatamineoroftherevenuesorprofitsgeneratedfromthesaleofthosemineralsorotherproductsatamine.Typicallyaroyaltyisgrantedaspartoftheconsiderationpaidtolandowners(eitherprivateorpublicentities)fortheminingrightsortheinterestsinlandthattheminingcompanyacquires,inexchangeforcapitalorasaresultofconvertingsomeotherinterestintoaroyalty,suchasajointventureinterestorstreaminginterest.

Whileroyaltiesareusedfrequentlyintheminingindustry,itisnotpossibletosaythatthereisa“standardform”ofaroyalty.Themechanicsofaroyaltywillbedeterminedby agreement between the parties and may vary greatly. However,itispossibletoclassroyaltiesintofourgeneralheadings:

• Profit Based Royalties:arebasedontheprofitgeneratedbytheminingoperation;typicallynetprofits.Itisimportanttoidentifythecoststhatmaybedeductedinordertocalculatethenetprofitsoftheoperation.Thesearegenerallyrestrictedtothecostsofproductionaftercapitalcostshavebeenfullyrecovered.

• Net Smelter Return (NSR) or Gross Revenue Royalties: areverycommonroyaltiesforpreciousmetalsandarebasedonthevalueofproductionornetproceedsreceivedfromasmelterorrefinery(orpurchaser).Theproceedsreceivedfromthesmelter,refineryorpurchasermaybesubjecttodeductionsforinsurance,transport,refiningandsmeltingcosts,samplingandassayingandmarketingasset out in the royalty agreement. From the royalty holder’s perspective,anNSRprovidestheadvantageofprovidinganincomestreamthatisindependentofoperationalcostsofthemine,whicharetotallytheresponsibilityofthepayor.

• Production Royalty (Fixed Rate Royalty): are less commonastheyprovideafixedpaymentpertonneofproductionandthereforeessentiallyequatetoafixedcostofproductionwithoutreferencetoincreasesordecreasesinmarketpricesoroperatingcosts.Incertaincasessuchroyaltiescanmakesomedepositsuneconomicaltomine.

• Royalty in Kind: such as a stream, grant rights to the holdertotakedeliveryand/orpurchaseapercentageofproduction.

FormoreinformationortoobtainacopyofourGuideentitledFocus on Mining Royalty, please contact us.

Robert Mason Partner Norton Rose Fulbright +1416.216.2967 [email protected]

Janet Howard Partner Norton Rose Fulbright +1416.216.1918 [email protected]

Michael Sabusco Partner Norton Rose Fulbright +1416.202.6731 [email protected]

David McIntyre Partner Norton Rose Fulbright +1416.216.4090 [email protected]




C. Public M&A

Canadianpubliccorporationsaregenerallyacquiredbywayofatake-overbidormergertransactions.

A merger or business combination will typically be completed byan“arrangement”(acourt-approvedprocedureundercorporatelaw)but,incertaincircumstances,mayalsobecompletedbyanamalgamation(similartoaDelawaremerger).Anarrangementisonlypossiblewhereanagreementcanbenegotiated;whatisoftenreferredtoasa“friendly”transactionwiththepubliccompanytobeacquired.Howeveratake-overbidmaybeundertakenwithor without a negotiated agreement with the public company tobeacquired.Whenthereisnonegotiatedagreement,suchatake-overbidisoftenreferredtoasan“unsolicited”or“hostile” bid.

Atake-overbidisadirectoffertothesecurityholdersofthetargettoacquiretheoutstandingsecuritiesofthetarget.Thebidmaybeforallorpartofthesecuritiesofanissuerandabiddermayoffercashorsecuritiesoracombinationofbothasconsiderationforacceptanceofitsoffer.Wheresecuritiesareoffered,thetransactionisreferredtoasa“securitiesexchangebid”andtheofferrequiresprospectusleveldisclosureregardingthebidder.Takeoverbidsareusedinahostilesituationsincetheyareoffersmadedirectlytosecurityholders,andaresometimesusedinfriendlytransactions.

Аproposedtransactionconstitutesatake-overbidwhenadirectorindirectoffertoacquireoutstandingvotingorequitysecuritiesofaclass,togetherwiththetargetsecuritiesbeneficiallyowned,oroverwhichcontrolordirectionisexercisedby,thebidderoranyoneactingjointlyorinconcertwithit,constituteintheaggregate20%ormoreoftheoutstandingsecuritiesofthatclass,butdoesnotincludeanoffertoacquirewhichisastepinanamalgamation,merger,reorganizationorarrangementthatrequiresapprovalbyavoteofsecurityholders.Tocalculatethe20%threshold,abidderisdeemedtoownsecuritiesofthetargetwhichithastherighttoacquirewithin60daysandthoseownedbypersonsactingjointlyorinconcertwiththebidder.

Anarrangement(similartoa“schemeofarrangement”incertainotherjurisdictions)isacommonacquisitiontechniqueinCanadausedparticularlyinshareexchangetransactions,transactions where there are changes to the share structure, orothertransactionstobeeffectedinconjunctionwiththeacquisition.However,thisformoftransactionisalsousedwherecashconsiderationisoffered.Anarrangementrequiresaninterimorderofthecourttobegintheprocessaswellasfinalapprovalofthecourttoensurethatthearrangementis“fairandreasonable”tothepartiesaffected.Anarrangementalsorequiresapprovalofthetransactionbyvoteofcommonshareholdersofthepubliccompanytobeacquired,followed

bythefilingofacorporatedocumenttoamendthecompany’scharterdocuments.Theresultofasuccessfulacquisitionbywayofarrangementisthattheacquirerowns100%ofthesharesofthepubliccompanyandtheformershareholdersreceiveinexchangecashand/orsecuritiesasofferedinthetransaction.Thisisanallornothingacquisitionapproach.

Anarrangementisoftenusedbybidderswhowishtooffertheir securities as consideration to target shareholders as it allowsthebiddercertainadvantages,includingtheabilityforaCanadiansubsidiaryofthebiddertoissue“exchangeableshares” to Canadian shareholders in order to allow them to defertriggeringCanadiantaxconsequences.

Formoreinformation,seeourGuideentitledPublic Mergers & Acquisitions in Canada available at www.nortonrosefulbright.com or contact us directly.



Amar Leclair-Ghosh Partner Norton Rose Fulbright +1514.847.4612 [email protected]



Eric Reither Partner Norton Rose Fulbright +1416.216.4858 [email protected]

Ava Yaskiel Partner Norton Rose Fulbright +1416.216.3902 [email protected]



D. Competition and anti-trust laws

TheFederalCompetition Act(Canada)setsoutaframeworktopromoteandmaintainfaircompetitionandappliestoCanadiansandnon-Canadiansalike.TheCompetition Act prohibits certain anti-competitive business practices and provides the CommissionerofCompetition(theCommissioner),whoheadstheCompetitionBureau(theBureau),withtheabilitytoreviewmergeractivityinCanada.WheretheCommissionerbelievesatransactionislikelytoprevent or lessen competition substantially, he may challenge thetransactionbeforetheCompetitionTribunal(theTribunal),anindependentquasi-judicialbody.

TherearetwopartsoftheCompetition Act that apply to the acquisitionofanexistingCanadianbusinesswhichanyinvestormustconsider:

• thepre-mergernotificationprovisionsinPartIXoftheCompetition Act

• thesubstantivemergerprovisionsinPartVIIIoftheCompetition Act

Theseprovisionsapplyindependently.Thus,evenifatransactionisnotsubjecttomandatorypre-mergernotificationunderPartIX,itmaystillbesubjecttothesubstantivemergerprovisionsinPartVIII.

1. Pre-NotificationPre-mergernotificationisonlyrequiredforfivespecifictypesoftransactions(notifiabletransactions):

• theacquisitionoftheassetsofanoperatingbusiness

• theacquisitionofvotingsharesofacorporationthatcarries on an operating business that will result in the buyeranditsaffiliatesholdinggreaterthan(i)20%ofthesharesofapubliclytradedcorporation,(ii)35%oftheshareswherenoneofthesharesarepubliclytraded,or(iii)50%ofthesharesifthebuyer(s)alreadyownedmorethanthepercentagesin(i)or(ii),asthecasemaybe,beforetheproposedacquisition

• theacquisitionofagreaterthan35%interestinnon-corporate combinations

• theamalgamationoftwoormorecorporations

• theformationofacombination(e.g.,jointventure)oftwoor more entities which will carry on business otherwise than through a corporation

Notethatapre-mergernotificationisonlyrequiredinconnectionwithacquisitions,amalgamationsorcombinationsinvolvingan“operatingbusiness”(orentitiesthatcarryonanoperatingbusiness).TheCompetitionAct provides that “operating business” means a business undertakinginCanadatowhichemployeesemployedinconnectionwiththeundertakingordinarilyreportforwork.TheBureautakesaverybroadinterpretationof“employeesemployedinconnectionwith,”asitextendsbeyondthelegaldefinitionofemployees.Forexample,iftherearecontractorswhoregularlyprovideservicesataprojectsiteinconnectionwith the assets, that may be enough to be considered an “operating business.”

Ifatransactionrequirespre-mergernotification,itmaynotbecompleteduntilthepartieshave(i)filedapre-mergernotificationandwaiteduntiltheapplicablewaitingperiodhasexpired,beenwaivedorterminated;or(ii)obtainedanadvancerulingcertificate(ARC)fromtheCommissioner.ThetransactionmaythenbecompletedunlesstheTribunalhasissuedanordertopreventcompletionofthetransactionorthe parties have otherwise agreed with the Commissioner todeferclosing.Failuretofileapre-mergernotificationortocompleteatransactionpriortotheexpiry,waiverorterminationofthewaitingperiodarecriminaloffencesinCanada.

Pre-mergernotificationisonlyrequiredwhentwofinancialthresholdsarebothmet:

• Size of Parties Threshold*: the parties, together with their respectiveaffiliates,musthaveaggregateassetsinCanadaorannualgrossrevenuesfromsalesin,from,orintoCanadainexcessofC$400million;and

• Size of Transaction Threshold:thevalueoftheassetsinCanada,ortheannualgrossrevenuefromsales(generatedfromthoseassets)inorfromCanada,ofthetargetoperatingbusinessandifapplicable,itssubsidiaries,mustbegreaterthanC$80million.Inthecaseofanamalgamation,eachofatleasttwooftheamalgamatingcorporations(togetherwithitsaffiliates)mustexceedtheC$80millionthreshold.

* Thepartiestoasharetransactionarethepersonorpersonswhoproposetoacquirethesharesandthecorporationthesharesofwhicharetobeacquired.Affiliaterulesarecomplexandvarydependingonthenatureoftheentitiesinvolved(partnerships,corporations,etc.),butgenerallyinclude corporations under common control.



2.Substantivemergerprovisions ThesubstantivemergerprovisionsoftheCompetition Act applytoallmergersirrespectiveofwhetherpre-mergernotificationisrequired.Ifthetransactioninvolvestheacquisitionofcontrolover,orasignificantinterestin,thewholeorpartofabusiness,itisconsideredtobeamergerandanymergerwillbejudgedonthebasisofwhetheritislikelytopreventorlessencompetitionsubstantially.Thisanalysisinvolvesconsiderationofanumberoffactorsincludingwhetherthemergerremovesavigorousandeffectivecompetitor,whethertherewillbeeffectivecompetition remaining post-merger, the barriers to entry facingpotentialcompetitors,theavailabilityofsubstituteproducts,theimportanceofchangeandinnovationinaffectedmarkets,andwhetherthefirmbeingpurchasedisfailing.Thereisanexpressefficiencyexceptionwhichmay save an otherwise anti-competitive merger where theefficienciesfromthemergerarelikelytobegreaterthanandoffsetanyeffectsofthepreventionorlesseningofcompetition.MergersmayonlybechallengedbytheCommissioner,whocanapplytotheTribunaltodelayorblockclosinginthecaseofaproposedmerger,todissolvethemergerorseekdivestituresinwholeorinpart,or,withtheconsentoftheparties,foranyotherremedies.

E. Foreign investment laws

Ingeneral,anyacquisitionbya“non-Canadian”ofcontrolofa“Canadianbusiness”iseithernotifiableorreviewableunderthe Investment Canada Act(theICA).WhetheranacquisitionisnotifiableorreviewabledependsonthestructureofthetransactionandthevalueandnatureoftheassetsoftheCanadianbusinessbeingacquired,namelywhetherthetransactionisadirectorindirectacquisitionofcontrolofaCanadianbusiness.Inaminingtransaction,theFederalgovernmentmustbesatisfiedthatareviewabletransaction“islikelytobeofnetbenefittoCanada”beforeclosingcanproceed;notifiabletransactionsonlyrequirethattheinvestorsubmitabriefreportafterclosing.TheICAalsoprovidesthatany investment in a Canadian business by a non-Canadian is potentiallysubjecttoanationalsecurityreview.

Toconstitutea“Canadianbusiness”,thetargetmustbeabusinesscarriedoninCanadathathas(a)aplaceofbusinessinCanada;(b)anindividualorindividualsinCanadawhoareemployedorself-employedinconnectionwiththebusiness;and(c)assetsinCanadausedincarryingonthe

business.AccordingtoguidelinesissuedundertheICA,“anundertakingorenterprisemustbecapableofgeneratingrevenueandbecarriedoninanticipationofprofitbeforeitisconsideredtobeabusiness.Itmustthereforebeactivelyearning revenue or be in a present position to produce revenueearninggoodsorservices…feasibilitystudiesarenotbythemselvesconsideredactivitiescapableofgeneratingrevenue.Ifitisinapre-operationalstateduetothelackofanessentialasset,sourceofsupplyormanpower,itisnotconsideredtobeabusiness,withinthemeaningoftheAct.”Inaddition,theguidelinesprovidethat“mineralpropertieswhichareonlyattheexplorationstagearenotconsideredto be businesses. A producing mine, however, is considered tobeabusinessasisapropertyonwhichdevelopmentofaminehasbeencommencedforthepurposeofproduction.Amine which has been temporarily closed due to prevailing economicconditionsandnotduetodepletionoforereservesconstitutes a business.”

1. Reviewable transactionsAreviewabletransactionrequiresfilinganapplicationforreviewbeforeclosingandawaitingthedeterminationoftheMinisterofIndustrythatthetransactionis“likelytobeofnetbenefittoCanada.”Particularscrutinymaybeappliedtoinvestmentsbyforeignstate-ownedenterprises(SOEs)andsovereignwealthfunds.

AdirectacquisitionofcontrolofaCanadianbusinessbyorfromaWTOinvestor*canoccurbymeansofapurchaseofvoting interests or assets.

TheacquisitionofvotingshareswillbereviewablewherethereisadirectacquisitionofcontrolofaCanadiancorporation,andthevalueoftheassetsofthatentity,andofallotherentitiesinCanadathecontrolofwhichisacquired,isequaltoorgreaterthanthethresholdsetbylegislation.ForthepurposesoftheICA,anacquisitionofcontrolisdeemedtooccurwhenanon-Canadiandirectlyacquiresgreaterthana50%votinginterestinaCanadiancorporationandispresumedtooccurwherethereisanacquisitionofbetween33%and50%ofthevotingshares.

TheacquisitionofcontrolofotherCanadianentitiessuchasapartnership,trustorjointventure,withassetsgreaterthantheprescribedthreshold,willbereviewableifanon-Canadianacquiresmorethana50%interest.

AnacquisitionofallorsubstantiallyalloftheassetsusedincarryingonaCanadianbusinesswillbereviewableifthevalueofthoseassetsisequaltoorgreaterthanthethresholdamount.

* A corporation or other entity will be a WTO investor if it is ultimately controlled by individuals who are nationals of a country that is a member of the World Trade Organization





Atpresent,theprescribedthresholdfortransactionsinvolvingaWTOinvestorisC$344million.ThebookvalueoftheassetsoftheCanadianbusinessisgenerallydeterminedbyreferencetotheauditedfinancialstatementsoftheCanadianbusinessforitsmostrecentlycompletedfiscalyear.Thereviewthresholdisadjustedannuallytoreflectinflation.

Alowerthreshold(C$5million)appliesifaninvestorisfromacountrythatisnotamemberoftheWTO.

2. Notifiable transactionsAnytransactionthatisnotreviewableisanotifiabletransaction.

Anotifiabletransactiongenerallyrequiresthatapost-closingnotificationbesenttotheFederalDepartmentofIndustry.Thenotificationcurrentlyconsistsofatwo-pageformsettingoutbasicinformationregardingtheparties.However,onceamendmentspassedin2009comeintoforce,moredetailedinformationaboutthenon-Canadianinvestorwillberequired,includingspecifiedinformationregardingthenon-Canadian’sgoverningbody,thefivehighest-paidofficersoftheinvestorandanyindividualorentitythatowns10%ormoreoftheequityorvotingrightsoftheinvestor.Investorswillalsobeaskedtodiscloseanyownershipinterestbyaforeigngovernmentaswellasthenatureandlevelofthisinterest,thesourcesoffundingfortheinvestment,andthe2007NorthAmericanIndustryClassificationsSystem(NAICS)codesforproductsandservicesthatareorwillbemanufactured,soldorexportedbytheCanadianbusiness.

3. Important changes to the review thresholds are pending

WhentheICAwasamendedin2009,measureswereenactedtoincreasetheprescribedreviewthresholdfortheacquisitionofcontrolofaCanadianbusinesstoC$1billionoverafiveyearperiod.Inaddition,thewayinwhichthethresholdiscalculatedwillbechangedfromthebookvalueoftheassetsoftheacquiredCanadianbusinesstotheenterprisevalueoftheacquiredCanadianbusiness.Thedefinitionof“enterprisevalue”hasnotbeenfinalisedbutdraftregulationssuggestthatitwillbesimilartoapubliclytradedcompany’smarketcapitalisation, plus its liabilities, minus the entity’s cash and cashequivalents.Forassetacquisitionsoracquisitionsofcontrolofanon-publiclytradedentity,theenterprisevaluewouldbebasedonthetotalacquisitionvalueofthebusiness,plusitstotalliabilitiesminusitscashandcashequivalents.

Thesechangesarenotyetinforce,asregulationsmuststillbe enacted. However, once enacted, the review threshold will beC$600millioninenterprisevalue,increasingtoC$800

millionthefollowingyear,andC$1billionthereafter.Infollowingyears,thatamountwillbeadjustedforinflation.

Asdiscussedfurtherbelow,investmentsbySOEsattractincreasedscrutinyundertheICA.Pursuanttoamendmentsmadein2013,whereaninvestorisconsideredtobeanSOE, the review threshold will continue to be based on the bookvalueoftheassetsoftheCanadianbusinessandwillremainatC$344million(subjecttoannualadjustmentsforinflation).

4. Acquisition of a canadian-listed company with minimal canadian operations

FortheICAtoapply,theremustbeanacquisitionofcontrolofa“Canadianbusiness.”Asnotedabove,thisrequiresthatthetargethasaplaceofbusinessinCanada,anindividualorindividualsemployedorself-employedinconnectionwiththe business, and assets in Canada used in carrying on the business.ItisnotuncommonfornaturalresourcecompanieslistedonaCanadianstockexchangetomaintainaregisteredofficeinCanada,butnothaveanyoperationalassetslocatedinCanada(e.g.,thecompany’sminesmaybelocatedinAfricaorSouthAmerica).Althoughthismayappeartomeetthebroaddefinitionofa“Canadianbusiness,”theInvestmentReviewDivisionofIndustryCanadaalsoexaminestheextentoftheconnectionofthebusinesstoCanadaindecidingwhetherabusinessisa“Canadianbusiness.”Totheextentthat there are no operational assets in Canada and the directingmindsofthebusiness(i.e.,seniormanagement)arelocatedoutsideCanada,itispossiblethattheICAwillnotapply.Pre-filingdiscussionswiththestaffoftheInvestmentReviewDivisioncanconfirmthis.

5. Global acquisitions with canadian elementsAnindirectacquisitionofcontrolofaCanadianbusinessoccurswhenthereisanacquisitionofacompanyincorporated outside Canada that controls an entity in CanadacarryingonaCanadianbusiness(e.g.,theacquisitionofaforeigncompanythathasaCanadiansubsidiary).Pursuant to Canada’s international commitments, indirect acquisitionsbyorfromWTOinvestorsarenotreviewable,unless the Canadian business carries on a “cultural business” (e.g.).Insuchacase,andifthereviewthresholdisexceeded,therewillbeapost-closingreviewoftheinvestment.

Fornon-WTOinvestors,thethresholdisC$5millionforadirectacquisitionandC$50millionforanindirectacquisition.However,theC$5millionthresholdwillapplytoanindirectacquisitioniftheassetvalueoftheCanadianbusinessbeingacquiredexceeds50%ofthetotalassetvalueoftheglobaltransaction.



6.Thereviewprocess Ifaminingtransactionisreviewable,theinvestormustsubmitanapplicationtotheMinisterofIndustry.TheMinisterwilldeterminewhethertoapprovethetransaction(onthebasisthatitislikelytobeof“netbenefit”toCanada).IftheMinistermakesanadversedetermination,thetransaction cannot proceed.

TheICAcontainscriteriathatmustbeconsideredinassessingwhetheranacquisitionislikelytobeofnetbenefittoCanada.Asmaybeexpected,theyincludetheeffectoftheinvestmenton the Canadian economy, participation by Canadians intheinvestment,thecontributionoftheinvestmenttoCanada’stechnological,productiveandcompetitiveprofilesand whether the investment is consistent with Canadian industrial,economicandculturalpolicies(andwiththepoliciesofanyProvinceaffectedbythetransaction).

Insignificanttransactions,investorstypicallyagreetoprovidewrittencommitmentstotheresponsibleMinisterthatgoverntheconductoftheCanadianbusinessforthreeormoreyearsfollowingclosing.These“undertakings”typicallyrelatetomaintainingspecifiedlevelsofemployment,capitalexpenditures,researchanddevelopment,production,andCanadian participation in management at the Canadian business.TheMinistertakestheseundertakingsintoconsiderationinmakingthenetbenefitdetermination.

7. Special considerations for state owned enterprises

In2007,theMinisterofIndustrypublishedguidelinesthatapplytoinvestmentsbySOEs(the2007 SOE Guidelines).AnSOEwasdefinedas“anenterprisethatisownedorcontrolleddirectlyorindirectlybyaforeigngovernment.”The2007SOEGuidelinesestablishedadditionalcriteriatobeconsideredwhenmakingthenetbenefitdetermination,including:

• thegovernanceandcommercialorientationoftheSOE:

— theSOE’scorporategovernance(suchas“whetherthenon-CanadianadherestoCanadianstandardsofcorporategovernance”)

— reporting structure

— compliance with “Canadian laws and practices”

• theextenttowhichthenon-Canadianisownedorcontrolled by a state; and

• whethertheCanadianbusinesstobeacquiredbyanon-Canadian SOE will continue to have the ability to operate on a commercial basis.

ThemainconcernwithrespecttogovernancewaswhethertheCanadianbusinesswould,followingthetransaction,abidebyCanadianstandardsofcorporategovernance,which may include commitments to transparency, disclosure andindependentdirectorsandauditcommitteefunctions.CommitmentstothateffectwouldonlybesoughtattheleveloftheCanadianbusiness,nottheparentSOElevel.

Withrespecttocommercialorientation,the2007SOEGuidelinesindicatedthattheMinisterwouldassesswhetherthe Canadian business would continue to have the ability to operateonacommercialbasisregarding:

• wheretoexport;

• where to process;

• theparticipationofCanadiansinitsoperationsinCanadaand elsewhere;

• supportofon-goinginnovation,researchanddevelopment; and

• theappropriatelevelofcapitalexpenditurestomaintainthe Canadian business in a globally competitive position.

The2007SOEGuidelinesdidnotprovetobeabartosignificantinvestmentsinCanada,astherewerenorejectionsofanySOE-ledinvestments.Amongthemajorinvestmentsapprovedsince2007aretheacquisitionofNovaChemicalsbyInternationalPetroleumInvestmentCompany(ownedbytheAbuDhabigovernment);KoreaNationalOilCorp.’sacquisitionofHarvestEnergy;PetroChina’sacquisitionofinterestsintwooilsandsprojectsownedbyAlbertaOilSandsCorp.;Sinopec’sacquisitionofacompanyholdinga9%interest in oil sands producer, Syncrude Canada Ltd., and CNOOCLimited’sacquisitionofOPTICanadaInc.

However,severaltransactionsin2012changedtheenvironmentforSOEs.OnJuly23,2012,CNOOC,China’slargestproducerofoffshorecrudeoilandnaturalgas,announcedithadagreedtoacquireNexenInc.forapproximatelyUS$15.1billion.NexenhasinterestsintheCanadianoilsands,butalsohasprojectsinEurope,theUnitedStatesandAfrica.ThisannouncementfollowedtheJune28,2012announcementbyPETRONAS,theMalaysiannationaloilandgascompany(andoneofthelargestLNG



producersintheworld),thatitsCanadiansubsidiaryPETRONASCanadawouldacquireProgressEnergyResourcesCorp.forapproximatelyC$5.5billion.

Duringthecourseofthereviewsofthesetwotransactions,membersoftheCanadiangovernment,includingthePrimeMinister,indicatedthatfurtherguidancewouldbeforthcomingaboutthemannerinwhichthegovernmentwouldreviewinvestmentsbySOEs.Inannouncingtheapprovalofthetwotransactions,thePrimeMinisterstatedthat“thesedecisionsarenotthebeginningofatrend,butrathertheendofatrend.”

Underthenewrules,theacquisitionofcontrolofaCanadianoilsandsbusinessbyanSOEwillbefoundtobeofnetbenefit“onanexceptionalbasisonly.”ThegovernmentnotedtheywillcarefullymonitorinvestmentsbySOEsinothersectorsaswellwhereanindustrialsectorbecomessubjecttoaninordinateamountofforeignstateinfluence.

Highlightsofthegovernment’spolicystatementandupdatedguidelinesontheissueofSOEinvestments(andthemannerinwhichtheICAwillbeappliedtosuchinvestments)include:

• Broader definition of an SOE:Thedefinitionusedintheoriginal2007SOEGuidelineshasbeenbroadenedtoincludenotjustanenterprisethatis“ownedorcontrolled”directlyorindirectlybyaforeigngovernment,butonethatisinfluenceddirectlyorindirectlybyaforeigngovernment.Nodefinitionof“influence”wasprovided,butthetermisamenabletobroadapplication.TherevisedSOEguidelinesspecificallystatethat“SOEinvestorsareexpectedtoaddressintheirplansandundertakings,theinherentcharacteristicsofSOEs,specificallythattheyaresusceptibletostateinfluence.Investorswouldalsoneedto demonstrate their strong commitment to transparent and commercial operations.” At a minimum, SOE investors should be prepared to provide historical, anecdotal evidenceoftheindependencebetweenthegovernmentandtheSOEtosupportrelatedundertakings.

• Expanded inquiry into corporate governance:Thenewguidelines build on the governance issues raised in the 2007SOEGuidelinesandprovidethattheMinisterwillexaminewhether“thenon-CanadianadherestoCanadianstandardsofcorporategovernance(including,forexample,commitments to transparency and disclosure, independent membersoftheboardofdirectors,independentauditcommitteesandequitabletreatmentofshareholders),andto Canadian laws and practices, including adherence to freemarketprinciples.”

• Limits on SOE investments in the oil sands: Although not specificallyaddressedintheguidelines,thegovernmentindicated in a separate policy statement that investments bySOEstoacquirecontrolofaCanadianoilsandsbusinesswill,goingforward,befoundtobeofnetbenefitonanexceptionalbasisonly.SOEscancontinuetotakenon-controlling positions in oil sands businesses and carry outacquisitionsbelowthethresholdreview.However,no guidance was provided on what will constitute an exceptionalcircumstance,andfuturedialoguewiththegovernment on a case-by-case basis will be needed to assess whether the new policy is largely prohibitive or morerobustandabletotakeaccountofextra-ordinarynetbenefitinconjunctionwithclear“independentoperation”oftheSOE.Inaddition,anyinvestmentbyanSOEthatissubjecttoreviewanddoesnotinvolvetheoilsandswillcontinuetobecloselyexamined.

• Key additional scrutiny for SOE investments:Inadditiontothefactorsidentifiedinthe2007SOEGuidelines,theupdatedguidelinesnotetheMinisterwillcloselyexamine:

— thedegreeofcontrolorinfluenceanSOEwouldlikelyexertontheCanadianbusinessthatisbeingacquired

— thedegreeofcontrolorinfluenceanSOEwouldlikelyexertontheindustryinwhichtheCanadianbusinessoperates

— theextenttowhichaforeignstateislikelytoexercisecontrolorinfluenceovertheSOEacquiringtheCanadian business

A public announcement by the government states that, “whereduetoahighconcentrationofownershipasmallnumberofacquisitionsofcontrolbySOEscouldunderminetheprivatesectororientationofanindustry,andconsequentlysubjectanindustrialsectortoaninordinateamountofforeignstateinfluence,theGovernmentwillacttosafeguardCanadianinterests.”

• Lower review threshold for SOEs: As noted above, the ICAwasamendedin2009tochangethemannerinwhichthe review threshold is calculated to one based on the target’senterprisevalue,andtosignificantlyraisethereviewthreshold(toC$1billionoverfouryears).Thosechangeshavenotyetcomeintoforceasregulationsmustbefinalized.However,thegovernmentannouncedthatthecurrentthreshold,basedonbookvalueofassetsofthetarget,willremaininforceforacquisitionsbySOEs.ThethresholdiscurrentlyC$344millionbutwillcontinuetobeadjustedannuallyforinflation.



Thenewandupdatedpoliciesandguidelinesdonotprovideanyadditionalguidanceonthemeaningofthephrase“netbenefittoCanada,”buttraditionalmeasuressuchasincreasesinemploymentandcapitalexpendituresmaybeemphasizedmoreinreviewsoffutureproposedinvestmentsbySOEs.Thenewguidelinesprovideseveralexamplesofundertakingsthathavebeenusedinthepast,andwhichtheguidelinesnote“couldbeusedinthefuture,”including:

• theappointmentofCanadiansasindependentdirectorsontheboardofdirectors;

• theemploymentofCanadiansinseniormanagementpositions;

• theincorporationofthebusinessinCanada;and• thelistingofsharesoftheacquiringcompanyorthe

CanadianbusinessbeingacquiredonaCanadianstockexchange.

AmendmentstotheICAwereannouncedinApril2013andpassedbyParliamentinJune2013tocodifycertainelementsoftheDecember2012policies.However,theywillonlytakeeffectatastilltobedetermineddate.

8. National security reviewThe2009amendmentstotheICAauthorizedtheMinisterofIndustrytoreviewalmostanyinvestmentbyanon-Canadian,regardlessofthesizeoftheinterestacquiredorthevalueoftheassets,wheretheMinisterhasreasonablegroundstobelievethatsuchaninvestmentcouldbeinjurioustonationalsecurity.Thereare,therefore,nomonetaryorotherquantitativethresholdstoprovideguidancetoinvestorsontheissueofwhethertheirinvestmentwillbereviewed.Noguidelinesorotherexplanatorystatementshavebeenissuedtoprovideguidanceonthescopeofthe“nationalsecurity”reviewpower,andthegovernmentexplicitlyrejectedcallsforsuch guidance.

Todate,itisbelievedthatthenationalsecurityprovisionsfoundinPartIV.1oftheActhavebeeninvokedtwice,thefirstinvolvingtheproposedacquisitionbyaBelgianfirmofa Canadian company that owned uranium mines located in Africa.TherewereapparentconcernsaboutlinksbetweentheproposedbuyerandIran*.ThesecondhasreceivedlittleattentionandapparentlyinvolvedtheproposedsaleofaCanadiangeomaticsfirmtoaChinese-basedfirmthatispartlygovernmentowned**.

Itishopedthatinpractice,thegovernmentwillbeinfluencedbyexperienceintheUnitedStateswithnationalsecurityreviewsconductedbytheCommitteeonForeignInvestmentintheUnitedStates(alsoknownasCFIUS).GuidanceissuedbytheU.S.TreasuryDepartmenthasidentifiedtransactionsthat have raised national security considerations in the

past, including transactions involving US businesses with government contracts or with operations, products, or servicesrelevanttoenergy,transportationorfinancialmatters,UScriticalinfrastructure,theproductionofadvancedtechnologiesandactivitiesrelatedtoUSexportcontrols.Inaddition,concernscanberaisedbasedontheidentityofthepurchaser.

TheMinisterofIndustryhasprimaryresponsibilityforcommunicating with the non-Canadian investor on national securityquestions,butitisuncleartowhatextentheistobeinvolvedinthenationalsecurityassessment.IftheMinisterofIndustryhasreasonablegroundstobelievethatatransactionmaybeinjurioustonationalsecurity,hemustnotifytheinvestor.Thepartieswillbebarredfromcompletingtheirtransactionuntiltheissueisresolved.TheMinisterwillthenconsultwiththeMinisterofPublicSafetyandEmergencyPreparednessandmayreferthemattertoCabinet,whichcouldorderareviewoftheinvestment.Followingthatreview,Cabinetmayblockthetransactionorallowittoproceedsubjecttocertaintermsandconditions.

TheICAimposesrestrictionsontheMinister’sabilitytoshareprivilegedinformationthatitreceivesinthecourseofitsreviews.However,therecentamendmentsauthorizetheMinistertoshareprivilegedinformationwithcertainprescribedinvestigativebodiesorclassesofinvestigativebodies.

F. More informationFormoreinformation,seeourGuidesentitledDoingBusinessinCanadaandPublicMergersandAcquisitionsinCanadaavailable at www.nortonrosefulbright.com or contact us directly.

*CampbellClark,“NuclearWorriesBehindFailedForsysBid:Wikileaks,”TheGlobeandMail(January20,2011).

**ChinesemediareportedthatChinesefirmNAVinforeceivedaletterfromthegovernmentofCanadainAugust2012advisingthatthegovernmentdidnotapproveofNAVinfo’sproposedacquisitionofthesharesofPCIGeomaticsonthebasisofnationalsecurityconcerns.

Kevin Ackhurst Partner Norton Rose Fulbright +1416.216.3993 [email protected]

Denis Gascon Partner Norton Rose Fulbright +1514.847.4435 [email protected]



Aboriginal considerationsCanada’sAboriginalpeoplesconsistofthreegroups:FirstNations(orIndians),theInuit(whooccupytheCanada’sfarnorth),andtheMétis(peopleofmixedFirstNation-Europeanheritage).Section35oftheCanadian Constitution Act, 1982recognizesandaffirmsexistingAboriginalandtreatyrights,givingthemspecialprotection.AseriesofcasesfromCanadiancourtshaveelaboratedonthenatureandscopeoftheserights,butthisremainsanevolvingareaoflaw.TheCrownhasaconstitutionaldutytoengageinmeaningfulconsultation,andoftenaccommodation,whereitsactions(includingtheissuanceofregulatorypermits)mayadverselyaffectestablishedorcrediblyassertedAboriginaland/ortreaty rights.

Miningactivityhasthepotentialtoaffecttheserightsatallstagesofdevelopment.AlthoughtheFederalorProvincialCrownretaintheultimatedutytoensurethatadequateconsultationhastakenplace,therearemanyinstanceswherethe Crown will delegate some consultation obligations to miningcompanies(viaenvironmentalassessmentormininglegislationorpolicies).Furthermore,itisagoodbusinesspracticeforcompaniestodeveloppositiverelationshipswithAboriginalcommunitiesregardlessoftheCrown’sapproach.Astrong,mutuallyrespectfulrelationshipwithlocalcommunitiescanincreasesupportforaproject,facilitatethepermittingprocess,andimprovecertaintyofaccesstolandsand resources.

A. Aboriginal land rights

InmanyProvincesinCanada,historictreatiesweresignedbetweenFirstNationsandtheCrown,ofteninvolvingthesurrenderoflandbyanAboriginalgroupinexchangeforcertainbenefits(e.g.,moneyorReservelands)andthecontinuedrighttoutilizetheirtraditionalTerritories(e.g.,forhunting,fishing,etc.).Sincethe1970s,moderntreatieshavebeenenteredintoinQuébec,NewfoundlandandLabrador,BritishColumbiaandtheFederalTerritories.ThoseagreementsreservelargeareasoflandtotheAboriginalsignatories and contain sophisticated regulatory processes with respect to matters such as land use planning and watermanagement.InpartsofCanadawheretreatiesarenotyetnegotiated,includingmostofBritishColumbia,comprehensive land claim negotiations are currently underway.

The Constitution Act, 1982alsorecognizestheexistenceofAboriginalrights.Theprecisenatureoftheserightsremainsa

complexandevolvinglegalquestion.Suchrightsmayinvolvehunting,fishingortrappingprivilegesthatareexercisedonthetraditionallandsofanAboriginalcommunityortherighttothelanditself(Aboriginaltitle).

MiningdevelopmentthattakesplaceinoneormoreAboriginalcommunities’traditionalTerritoriesislikelytoimpactAboriginaland/ortreatyrights,triggeringthedutytoconsult.

B. The duty to consult

TheFederalandProvincialCrownshaveadutytoconsultwithAboriginalcommunitieswhentheyhaveknowledge(realorconstructive)ofsuchrightsandcontemplateconduct(e.g.,issuingapermittoallowforexploration)thatmayimpacttheserights.Thisdutyhasbeenelaboratedincourtcases,andexistsseparatefromotherstatutoryconsultationprocesses, such as that involved in the environmental assessmentprocess.BecauseofthehistoricalrelationshipbetweentheCrownandAboriginalpeopleandtheuniquenatureof,andprotectionfor,theirrights,Aboriginalconsultationrequiresadifferentapproachthangeneralpublic engagement.

Thescopeofthedutytoconsultcanvarywidelydependingonthestrengthoftheclaimedrightandthenatureandextentoftheimpactoftheproject/activity.Canadiancourtshave held that circumstances where the right is either established or credibly asserted, and the potential impact ishigh,attractahigherlevelofconsultation,andinsomecases,requireaccommodation.Accommodationmayinvolvedeeper participation by the community in the decision-makingprocess,aswellaschangestothedevelopmenttomitigatenegativeimpactsonthatcommunity.ThedutytoconsultdoesnotincludeavetooverdevelopmentforAboriginal communities, although in practice, new mining developments will endeavour to accommodate Aboriginal concerns(viamitigationmeasures)and/orattempttoprovideprojectbenefitstothelocalAboriginalcommunities.

Although the duty rests with the Crown, it may delegate proceduralaspectsofconsultationtothirdpartyproponents.Miningcompaniesareadvisedtobecomeinvolvedandinitiate engagement with Aboriginal communities regardless oftheCrown’sactions,andwhereappropriate,totaketheleadonconsultationandaccommodation.Developingastrongrelationshipcanyieldmanybenefitsandavoidcostsincluding litigation and delays.



ItisimportantwhenidentifyingpotentiallyaffectedAboriginalcommunitiesandtheirtraditionalTerritoriestorespectthediversityofcommunitiesandrecognizethattheymay not all share the same views. Aboriginal communities should be engaged as early in the mining development processaspossible,andshouldbekeptwell-informedthroughout.

VariousgovernmentsinCanadahaveandcontinuetoreleaseAboriginal consultation policies on land and resource developments which set out the government’s role in the AboriginalconsultationprocessanditsexpectationsofprojectproponentsandAboriginalcommunitiesinthatprocess.ThegoalistohelpensurethatresourcedevelopmentprojectsminimizeoreliminatepotentiallyadverseimpactsonexistingorassertedAboriginalandtreatyrights.Forexample:

• Canada-TheFederalgovernmenthasalsocreatedAboriginal Consultation and Accommodation-Updated GuidelinesforFederalOfficialstoFulfilltheDutytoConsultdatedMarch2011.

• Ontario - Ontario has an Aboriginal Consultation Policy:ConsultationandArrangementswithAboriginalCommunitiesatEarlyExplorationdatedSeptember2012,anddraftGuidelinesforConsultationwithAboriginalPeoplesrelatedtoAboriginalandTreatyRights.ItalsohasaPolicyonSitesofAboriginalCulturalSignificance-WithdrawalsandSurfaceRightsRestrictionsaswellasaPolicyforDisputeResolutionatEarlyExploration.

• Quebéc-QuébechasanInterimGuideforConsultingAboriginalCommunitiesdated2008.

• Newfoundland and Labrador-InApril2013,NewfoundlandandLabradorreleasedanAboriginalConsultationPolicyonLandandResourceDevelopmentDecisionsandwasworkingonconsultationguidelinestoimplement the policy.

• Alberta-OnAugust16,2013AlbertaofficiallyreleaseditsFirstNationsConsultationPolicy2013whichwillreplaceitspriorMay16,2005Policy.ThenewPolicyisexpectedtotakeeffectonceAlberta’snewAboriginalConsultationOfficeisoperational,expectedlikelyinFallof2013.TheProvince has also announced it will adopt Corporate and Operational Guidelines which include a Consultation ProcessMatrix,toclarifyanddirecttheconsultationprocess.DraftGuidelineshavebeenreleased.OnMay27,2013Alberta’sBill22AboriginalConsultationLevyAct(Alberta)receivedRoyalAssentandwillcomeinto

force“onproclamation”.TheBillwillchargealevytoproponents(e.g.personswhoundertakeaProvinciallyregulatedactivity)undertheActandproposedregulationsforthepurposeofmakinggrantstoFirstNationsorotheridentifiedaboriginalgroupstoassistthemincapacitydevelopmenttoparticipateinandmeetthecostsofanyrequiredCrownconsultationrespectingProvinciallyregulated activities.

Insomejurisdictionstheconsultationobligationshavebeencodifiedinlaw.Forexample,majoramendmentsmadetoOntario’smininglawsin2012and2013codifiedAboriginalconsultationrequirementsthatapplytobothjuniorandmajorminingexplorationcompanies.EffectiveNovember1,2012,anyonewishingtoapplyfororrenewaprospector’slicenceisrequiredtocompleteamineawarenessprogramwhicheducatesthemonthenewregulatoryrequirementsincludingAboriginalconsultation.Alsoeffectiveasofthesame date, Aboriginal communities have the right to apply totheMinistryofNorthernDevelopmentandMines(MNDM)tohavesitesofaboriginalculturalsignificancewithdrawnsothatlands,miningrightsorsurfacerightsthatareCrownpropertycannotbestaked,prospected,soldorleased.

EffectiveApril1,2013personsproposingtoundertakecertainearlyexplorationactivitiesinOntariomusteithersubmitanexplorationplantotheMNDMorapplyforanexplorationpermit(dependingonthenatureoftheproposedactivity-potentialloworhigherimpactonexistingorassertedAboriginalandTreatyrights)beforesuchactivitycanbeundertaken.Aboriginalconsultationisrequired.AboriginalconsultationisalsorequiredbeforeaproponentcansubmitacertifiedclosureplanorclosureplanamendmenttotheMNDM.

AlsoinOntario,onOctober25,2010theFarNorthActreceivedRoyalAssentandbecamethelegislativeframeworkforlanduseplanninginthefarnorthofOntario.ItsetsoutajointplanningprocessbetweenFirstNationsandtheOntario government that supports environmental, social and economicobjectivesforlanduseplanning,whichistobeeffectedinamannerthatisconsistentwiththerecognitionandaffirmationofexistingAboriginalandtreatyrightsinsection35oftheConstitutionAct,1982,includingthedutytoconsult.TheActmaysignificantlyaffectmineralexplorationanddevelopmentsinceitaimstoprotectareasofculturalvalueandecologicalsystemsbyincludingatleast225,000squarekilometresofthefarnorthinaninterconnectednetworkofprotectedareasdesignatedincommunitybasedlanduseplans.AnimportantpartoftheActisthedevelopmentofthe“FarNorthStrategy”which



willinclude:requirementsandrestrictionsforamendingcommunitybasedlanduseplans;categoriesoflandusedesignationsandcategoriesofprotectedareas.

InQuébec’sBill43,tabledonMay29,2013,anewMiningActisproposedthatwouldincorporateseveralprovisionsoftheexistingMiningActandwouldbringaboutsignificantamendmentstorulesgoverningmineexploration,extractionandoreprocessingandtorehabilitationandrestorationofminingsites.Section3oftheActspecifiesthattheActmustbe construed in a manner consistent with the obligations to consultFirstNationscommunities.TheMinistermustconsultFirst Nations communities separately, having regard to all the circumstances.

InQuébec,aplancalled“Nordpourtous”(NorthforEverybody)releasedbythePartiQuébecoisgovernmentin2013isaninfrastructureplanaimedatdevelopingQuébec’snorthinamannertomaximizespinoffsforlocalcommunitiesandQuébecasawhole.ThePlansetsupanewsecretariatfornortherndevelopmentundertheProvince’sdepartmentofnaturalresources,mandatedtoproduceanortherndevelopmentstrategythatwillfocusonthesocialdevelopmentofnortherncommunities,respectfortheenvironment and biodiversity and economic development. ThesecretariatwillofferassistancetonortherncommunitiesandsetuparoundtableforFirstNationsandInuit.ThePlanmaysignificantlyaffectmineralexplorationanddevelopment.

C. Impact and benefit agreements and aboriginal participation

As noted above, in many cases companies will become directly involved with local Aboriginal communities by negotiating corporate-Aboriginal agreements aimed at ensuringtheAboriginalcommunityhassufficientcapacitytoconsultwiththeprojectproponent,thattheyparticipateintheassessmentoftheprojectimpacts,andinmanycases,thattheyarecompensatedforprojectimpactsorshareintheprojectbenefits.Agreementsmaytakemanyforms,themostsubstantivebeinganImpactandBenefitAgreement(IBA).MostIBAsareconfidentialarrangementsbetweenthemining company and the local Aboriginal community. An IBAwilloftencontainprovisionsaimedatprovidingtraining,employmentandcontractingopportunitiesforqualifiedAboriginalpeoplesorbusinesses,andmayincludefinancialbenefits(profit-sharing,annualpayments,etc.).IBAsalsotypicallyrequiretheAboriginalgrouptosupporttheprojectonthebasisthattheIBA’sbenefitssufficientlymitigateor

compensatethelocalcommunityforanyimpactsoftheprojectonthecommunity’sexistingorasserted Aboriginal or treaty rights.

D. More information

FormoreinformationregardingAboriginalmattersinCanada, please contacts us.

Madeleine Donahue Senior Partner Norton Rose Fulbright +1416.202.6745 [email protected]

Pierre-Christian Labeau Partner Norton Rose Fulbright +1418.640.5008 [email protected]



Financing mining projectsExplorationcompanieswithoutincomeoftenlooktotheequitycapitalmarketstofundon-goingexploration.Theramp-up to commercial production is challenging and capital intensive.Smallercompaniesmaylookforanexitatthisstageintheformofadisposaloftheproject.Somemayseekadevelopmentpartnerwhohasthenecessarycapital,expertiseandresourcestodevelopandcommercialisetheproject.Othersmayseekprojectdevelopmentcapitalthroughtheequityanddebtcapitalmarkets.

A. Capital markets in Canada

CanadaisarecognizedworldleaderinresourcefinanceandoffersafavourableclimateforpubliclistingsandcapitalraisingforCanadianandforeignminingbusinesses.Listingand ongoing compliance costs in Canada may be less than otherfinancialcentres,includingmajorcentressuchasLondonandNewYork.ListinginCanadaallowsminingissuerseasyaccesstotheNorthAmericanmarketsandabroad investor base.

1. Regulatory landscapeEachofCanada’s13ProvincesandTerritorieshasitsownsecuritiescommissionorequivalentauthoritywhichoverseestheregulationofsecuritieswithinitsjurisdiction.

Notwithstandingthismulti-jurisdictionalframework,theProvincialandterritorialregulatorsworkcloselytogethertocoordinateandharmonizeregulationoftheCanadiancapitalmarketsthroughtheirumbrellaorganization,theCanadianSecuritiesAdministrators.Thepastdecadehasseensignificantconvergenceintherulesandpoliciesapplicabletosecuritiesmarketparticipantsandtheintroductionofapassportsystemforregulatoryapprovals.Thepassportsystemisbuiltonafoundationofharmonizedrules.Eachpublic company deals with a principal regulator. A decision oftheprincipalregulatortoreceiptaprospectusorgrantadiscretionaryexemptiongenerallyappliesautomaticallyineachnonprincipalpassportjurisdictionwheretheapprovalhasbeensought.Inaddition,therulesrelatedtoreportingand disclosure obligations are largely harmonized across the country.

2. Canadian stock exchangesStockexchangesinCanadaincludetheTMXGroupandtheCanadianNationalStockExchange(CNSX).

TheTMXGrouphastwoequityexchanges,theTorontoStockExchange(TSX)andtheTSXVentureexchange(TSX-V).TheTMXGroup,itselfapubliclylistedcompanyontheTSX,isthelargeststockexchangeinCanada,thethirdlargeststockexchangeinNorthAmericaandtheeighthlargestintheworld(basedonmarketcapitalization)withover3,750listedentities.TheTSXandTSX-Vtogetherrepresentoneoftheworld’slargestcapitalpools,givinglistedcompaniesaccesstoNorthAmericancapitalmarkets,abroadinvestorbaseandsubstantialliquidity.TheTMXGroup provides both established and growth oriented resourcecompanies,Canadianorforeign,witharangeofcapitalmarketopportunitiesthroughlistingonanexchangewithdemonstratedsuccessintheresourcesector.TheTMXGroup has more public mining companies listed than any otherexchangeandistheleadinginternationalexchangeforminingfinancing.

TheTMXGroupoffersS&P/TMXindiceswhichprovideaninternationalbenchmarkfortrackingcertainleadingminingcompanies.TheseindicesaretheS&P/TSXGlobalGoldIndex,GlobalBaseMetalsIndex,GlobalMiningIndexandtheCappedDiversifiedMetalsandMiningindex.

Currentlyover500TSXorTSXVlistedissuersarecrosslistedoninternationalexchanges,includingtheNewYorkStockExchange,theNASDAQ,theAustralianSecuritiesExchange,theAlternativeInvestmentMarket,theLondonStockExchangeandtheJohannesburgStockExchange.DualorinterlistingonaTMXexchangeisapopularoptionforinternationalcompaniesseekingtoaccessNorthAmericancapitalmarkets,toincreaseliquidityortoexpandtheirinvestorbaseandanalystcoverage.Inadditiontothenearly200AmericancompaniesinterlistedonaTMXexchange,therearealsoseverallistingsfromcompaniesbasedinAustralia, China and the United Kingdom, particularly in the mining sector.

Since2001,theCanadianSecuritiesAdministratorshavepermittedalternativemarketplacesinCanadaforthetradingofsecurities.ProminentalternativeexchangesincludetheCanadianNationalStockExchange(CNSX),OmegaATS,Chi-XCanada,AlphaandPureTradingmarkets,howeveradditionalexchangescontinuetoemergeinCanada.ThesealternativeCanadianmarketshelpcatertothewidevarietyofcompaniesseekingtolistinCanada,offeringuniquecharacteristicssuchashigh-frequencytrading,algorithmictradingordark



pools where participants are permitted to trade anonymously. ThesealternativemarketsseektobreakdownthebarriertolistingandtradingsecuritiesthatmightotherwiseexistforajuniorcompanyduetothehighcostsandlargecapitalizationrequirementsoflistingontheTSX,TSX-Vorothertraditionalstockexchanges.

CNSX,forexample,isaprivatelyownedstockexchangewithcomparativelylessexpensivelistingfeesandasimplifiedlistinganddisclosureprocessforjuniorandemergingcompanies.CNSXdoesnotrequiresponsorshipforalisting(unliketheTSX-V)anddoesnotimposeregulatoryapprovaloftransactionsenteredintobylistedentities(unliketheTSXandTSX-V).ThemajorityofCNSX’sapproximately200listedentities are in the mining and natural resources sector.

3. Public offerings and private placementsListingontheTSX,TSX-VoranalternativeCanadianmarketplacecanbeaccomplishedbyseveralmethods,includingbywayofaninitialpublicofferingofanissuer’ssecuritiestothepublic(IPO).AnIPOgenerallyrequirestheengagementofanunderwriteroragentandtheclearingofaprospectus with the relevant Canadian securities regulatory authority. A concurrent application is made to list the securitiesontheapplicablestockexchange.AfteranIPO,anissuercanissuefurtherequitythroughsecondaryofferings.

InadditiontocompletinganIPO,astockexchangelistingmaybeobtainedthroughanumberofothermechanisms.Thesemechanismsincludeobtaining(i)alistingbywayofareversetake-overofanexistinglistedentity(alsocalledareversemergerorbackdoorlisting);(ii)asecondaryoradditionallistingforissuersalreadylistedonanotherstockexchange;or(iii)alistingofaspecialpurposeacquisitioncorporationorcapitalpoolcompanyandthecompletionofasubsequentacquisition(thelatterofwhichisspecifictotheTMXGroup).

AparticularfeatureoftheCanadianregulatoryregimeisthatallissuershaveaccesstothe“shortform”systemprovidedtheyannuallyfileacomprehensivedisclosuredocumentcalledan“annualinformationform”or“AIF”andsatisfycertainotherqualificationcriteria.ThissimplifiedsystemallowsissuerstoaccessCanadiancapitalmarketsonanexpeditedbasisthroughclearingashortformprospectusorshelfprospectuswiththerelevantsecuritiesregulatoryauthority.Issuersusingthissystemarepermittedtoincorporatebyreferencemostoftheirfinancialinformationandpreviouspublicdisclosure.Thecombinationofashorterdisclosuredocument,quickerregulatoryreviewperiodandthepotentialavailabilityof“boughtdeal”financings

(wherebyanunderwriterorsyndicatecommitupfronttopurchasetheentireoffering)helptobothstimulateandfacilitatebroadaccesstotheCanadiancapitalmarkets

SecuritieslawsinCanadagenerallyrequirethatentitieswishing to sell their securities to the public provide investors with a prospectus that describes the entity and the securities beingoffered,andtoselltheirsecuritiesthrougharegistereddealer. However, securities regulators recognize that certainsophisticatedinvestorsandthosewithpre-existingrelationshipswiththeissuerdonotrequirethelevelofdisclosurerequiredinaprospectustomakeaninvestmentdecision. Both private and public issuers are permitted to raisemoneybywayofaprivatesale(aprivateplacement)oftheir securities to such investors without incurring the cost and time to prepare and clear a prospectus.

Althoughnumeroustypesofprospectusexemptionsareavailabledependingonthecontext,oneofthemostcommonexemptionsisinconnectionwithsalesto“accreditedinvestors”,whichinclude,amongothers,Canadianfinancialinstitutions,governmentsandpensionfunds,registeredsecuritiesadvisers/dealers,andindividualswithcertainprescribedandsignificantassetsorincome.

Inrecentyears,anewmethodofraisingcapitalcalled“crowdfunding”hasemerged(fundingaprojectorbusinessbypoolingsmallcontributionsfromalargenumberofindividualsthroughaninternetwebsite).AlthoughatthetimeofthiswritingitisnotpossibletouseacrowdfundingmodelwithoutaprospectustosellequitysecuritiesinCanada,theOntario Securities Commission and other Canadian securities regulatorsareexaminingthepossibilityofallowingsuchaprocessinthefuture.

4. Capital market productsIssuerstypicallychoosetoissueeitherequityordebtsecuritiesthroughapublicofferingorprivateplacement.

Equitysecuritiesincludecommonandpreferredshares.Inaddition, mining and resource companies with a Canadian project(s)mayalsoissue“flow-throughshares”.Theseflow-through shares, in a nutshell, are treasury issued common sharesthatallowinvestorstoclaimcertainCanadiantaxdeductionsorcreditsinrespectoftheissuer’seligibleexpendituresmadeonitsCanadianproject(s)andwithinaspecifiedperiod.Flow-throughshares,oftenissuedatahigherpricethanregularcommonsharesonaccountoftheirassociatedtaxbenefits,areparticularlysuitedforissuebycapital dependant mining and resource companies in respect oftheirCanadianprojectsbecausetheyessentiallyallowthe



issuertotransfercertaintaxdeductibleeligibleexpendituresto investors where the issuer may not otherwise be able to utilize those deductions in the short to medium term.

Othertypesofequitysecuritiesincludewarrants,whichgivetheholdertherighttosubscribeforsharesataspecifiedexerciseprice.Warrantsarerarelyusedasastand-alonemethodoffinancing,butratherasasweetenertostimulateinterestinanofferingalongsideothersecurities.

Bonds,debenturesandnotesareallcommonformsofsecuritiesissuedintheCanadiandebtmarkets.Theformandfeaturesofeachmayvaryanditmayormaynotbelistedonastockexchange.Convertiblebonds,forexample,whichare popular with mining and resource issuers in Canada, are ahybriddebt-equitysecuritythatgiveinvestorstherighttoconverttheirbondsintosharesoftheissuer(orsometimesintosharesofanotherentity)duringaspecifiedperiodandataspecifiedconversionprice.

5. Disclosure and reportingBroadlyspeakingdisclosureisatoolregulatorsusetoprotectinvestorsandfosterfairandefficientcapitalmarkets.PubliccompaniesinCanada(includingallcompanieslistedonastockexchangeinCanada)arerequiredtocomplywithcomprehensive continuous and periodic reporting obligations under Canadian securities laws. Listed issuers are also subjecttothecontinuedlistingrequirementsofthestockexchangeuponwhichtheyarelisted.

Periodicreportingrequirementsincludetheobligationtofilequarterlyandannualfinancialstatements,management’sdiscussionandanalysis,andrelatedCEOandCFOofficercertificates.Continuousdisclosurerequirementsincludetheobligationtofilenewsreleasesandtimelyreportsdisclosingmaterialchangesintheaffairsofthecompany.Aswell,insidersarerequiredtofileinsiderreportswithrespecttoacquisitionsanddispositionsofsecurities.

6. Special disclosure rules for exploration and mining companies – NI 43-101

Public mining companies in Canada, including those that thatarelistedonastockexchangeinCanada,arerequiredtomeettherequirementsofNationalInstrument43-101-StandardsforDisclosureforMineralProjectsadoptedbytheCanadianSecuritiesAdministrators(NI 43-101).Thisrule governs how mining companies disclose to the public scientificandtechnicalinformationabouttheirmineralprojects.

TherequirementsofNI43-101applytoallwrittenandoral disclosure made by public companies, including in prescribed public reports, news releases, websites and investor presentations.

NI43-101requiresalldisclosureoftechnicalorscientificinformation(includingmineralreservesandresources)relatingtoamineralprojectonapropertythatismaterialtothecompanytobebasedoninformationpreparedbyorunderthesupervisionof,orapprovedby,aqualifiedperson(aQP).WrittendisclosureoftechnicalorscientificinformationmustincludecertaininformationprescribedbyNI43-101including,forexample,thenameandrelationshiptothecompanyoftheapplicableQP,whethertheQPhasverifiedthedatadisclosedand,ifso,howsuchdatawasverified.ToqualifyasaQP,anindividualmust:

• be an engineer or a geoscientist with a university degree, orequivalentaccreditation,inanareaofgeoscience,orengineering,relatingtomineralexplorationormining;

• haveatleastfiveyearsofexperienceinmineralexploration,minedevelopmentoroperation,ormineralprojectassessment,oranycombinationofthese,thatisrelevanttohisorherprofessionaldegreeorareaofpractice;

• haveexperiencerelevanttothesubjectmatterofthemineralprojectandthetechnicalreport;

• beingoodstandingwithaprofessionalassociation;and

• inthecaseofaprofessionalassociationinaforeignjurisdiction,haveamembershipdesignationthat(i)requiresattainmentofapositionofresponsibilityintheirprofessionthatrequirestheexerciseofindependentjudgment;and(ii)requires(A)afavourableconfidentialpeerevaluationoftheindividual’scharacter,professionaljudgment,experience,andethicalfitness;or(B)arecommendationformembershipbyatleasttwopeers,anddemonstratedprominenceorexpertiseinthefieldofmineralexplorationormining.

MineralreservesandmineralresourcesreportedbyapubliccompanyarerequiredtomeetstandardsprescribedbytheCanadianInstituteofMining,MetallurgyandPetroleum(CIM)andtobereportedasspecifiedinNI43-101.Forexample:

• inpublicdisclosure,acompanymustnotaddinferredresourcestoothercategoriesofmineralresources;

• thequality,grade,ormineralcontentofadepositthathas



notbeencategorizedasaninferred,indicatedormeasuredmineral resource or as a probable or proven mineral reserve must not be disclosed; and

• theterms“preliminaryfeasibilitystudy”,pre-feasibilitystudy”or“feasibilitystudy”maynotbeusedinpublicdisclosure unless the study meets standards adopted by CIM.

Where a mining company is incorporated or organized in a foreignjurisdictionoritspropertiesarelocatedinaforeignjurisdiction,certainforeigncodesmaybeusedtodisclosereservesandresourcesasanalternativetotheCIMcode.Acceptableforeigncodesinclude,amongothers:

• theAustralasianCodeforReportingofExplorationResults,MineralResourcesandOreReserves(JORC);

• thePan-EuropeanCodeforReportingofExplorationResults,MineralResourcesandReserves(PERC);

• theSouthAfricanCodefortheReportingofExplorationResults,MineralResourcesandMineralReserves(SAMREC);and

• theminingindustryguideentitled“DescriptionofPropertybyIssuersEngagedortobeEngagedinSignificantMiningOperations”containedintheSecuritiesActIndustryGuidespublishedbytheU.S.SecuritiesandExchangeCommission(SEC Industry Guide 7).

Theuseofanyothercodethatis“generallyacceptedinaforeignjurisdiction”andthatdefinesresourcesandreservesinamannerconsistentwiththeCIMclassificationwillalsobeaccepted.IfanacceptableforeigncodeisusedinsteadofCIM,thecompanymustreconcileanymaterialdifferencesbetweentheforeignmineralresourcesandmineralreservecategoriesusedandtheCIMcategories.

NI43-101requirespubliccompanieswithmineralpropertiesorprojectstofilewithCanadiansecuritiesregulatorsandmakeavailabletothepublictechnicalreportspreparedbyQPswho,incertaincases,mustbeindependentofthecompany.AtechnicalreportmustbefileduponacompanybecomingareportingissuerinCanada(i.e.,uponthe company becoming a public company in Canada as a resultofanIPOorastockexchangelistinginCanadaorincertainothercases)anduponthehappeningofcertainotherevents(e.g.,inconnectionwithapublicofferingortake-overbidinvolvingthecompany)andmustbepreparedinaccordancewithformrequirementsprescribedbyNI

43-101.Theobjectiveofatechnicalreportistoprovideasummaryofscientificandtechnicalinformationconcerningmineralexploration,developmentandproductionactivitieson a mineral property that is material to a public company. TechnicalreportsmustbecertifiedbyeachQPresponsibleforpreparingorsupervisingthepreparationofalloranypartofthetechnicalreport.Aswell,QPsmustconsenttothepublicdisclosureofanytechnicalreportforwhichtheyareresponsible.

7. GovernanceOne important distinction in the Canadian securities regulatoryframeworkisthe“madeinCanada”responsetotheU.S.corporategovernancereformssetoutintheSarbanesOxleylegislation.TheCanadianapproachtoregulatinggovernance practices is less prescriptive than the U.S. rules and is largely principle based. As a result, the Canadian regimeprovidesmoreflexibilitytoissuers,especiallysmallerearly stage issuers, and is generally considered to be less costly to comply with.

DirectorindependencerequirementscompriseoneelementoftheCanadiangovernancelandscape.Forexample,securitieslegislationgenerallyrequirespubliclylistedentitiesinCanadatohaveafullyindependentauditcommittee(subjecttocertainexceptionsforsmallerissuers)comprisedofatleastthreememberswhomustbefinanciallyliterate.Toensuretheindependenceofanissuer’sexternalauditorsfrommanagement,theauditcommitteemustundertakecertainfunctionsincludingoversightoftheexternalauditor.Inadditiontoothermandatorygovernancerequirements(includingCEOandCFOdisclosurecertificationsandcertaingovernancedisclosurerules),thesecuritiesregulatorsprovide“guidance”ongovernancepracticesforpubliccompaniesinCanada, which include suggested practices concerning overall board independence, board interaction with management, boardassessment,andcompensationofdirectorsandseniorofficers.Whilesuchguidelinesarenotmandatory,annualdisclosureofacompany’sgovernancepracticesinlightofsuchguidanceisrequired.



8. More information

FormoreinformationregardingCanadianstockexchangelistings,capitalmarketfinancingsinCanadaandpubliccompanyobligations,seeourGuidesentitledMiningCompanies:AComparisonoftheRequirementsofFiveStockExchangesandListinginCanada:AnOpportunityforMiningIssuersorcontactusdirectly.



Andrew Grossman Partner Norton Rose Fulbright +1416.216.2312 [email protected]

Robert Mason Partner Norton Rose Fulbright +1416.216.2967 [email protected]


David Knight Senior Partner Norton Rose Fulbright +1416.203.4460 [email protected]

Cathy Singer Senior Partner Norton Rose Fulbright +1416.216.4053 [email protected]

Jean-Philippe Buteau Partner Norton Rose Fulbright +1418.640.5069 [email protected]

Sanjay M. Joshi Partner Norton Rose Fulbright +1416.216.3984 [email protected]


Pierre R. Dagenais Partner Norton Rose Fulbright +1416.216.1857 [email protected]



B. Project Finance

1. Greasing the wheels: Project financing is a solution to extensive capital requirements*

MiningcompaniesinCanadaarefeelingthepinchasemergingmarketgrowthwaversandcommoditypricesshowlittlesignofpickingup.

HometoheavyweightssuchasBarrickGoldCorp,FirstQuantumMineralsLtdandthePotashCorporationofSaskatchewanInc,theCanadianresourcesspaceisanythingbutawalkinthepark.Thisispotentiallybadnewsforlocalcommunities scattered around this vast country dependent onthesectorfortheireconomicwellbeing.

Miningcompanieshavereducedspending,scalingbackunnecessaryexplorationandpostponingexpansionplans.Whiletheglobaleconomicoutlookremainsuncertainandcommoditypricesvolatile,identifyingasourceoffinancingtostrengthenoperationsandprogressexpansionplanswillbekey.

Projectfinancingisbeingusedtotheextensivecapitalrequirementsofsomeminingcompanieswithsustainablelong-termprojects.Thisfinancinginvolvesthelong-termfundingofasingle-purposeprojectcompany.Therepaymentobligationsaresecuredbytheproject’sassetsandcashflow.

Projectfinancingisidealforacapital-intensivemajorinfrastructure,suchasaminingproject.Giventhelenders’exposuretoprojectrisk,theduediligenceoftheminingprojectanditsassociatedrisksisextensiveandthorough.

Thefollowingarecriticalelementsinminingprojectfinancing.

Strong sponsorship and committed equityLenderswillneedtobeconfidentthe projectisbackedby strong and competent sponsorshipandsufficientandavailable equity.Juniorminingcompanieswilllikelybe requiredtofullycommittheirequityor ensureitisfullyaccessible to the lenders beforeanylenders’fundsaredisbursed.Deferredequityreturninstalments(pro-rated todisbursements)maybepermittedforthemorerobustcompanies, particularly those offeringstrongcorporatecompletion guarantees during construction.

Aboriginal rights and the duty to consultAboriginal and treaty rights are entrenched in the Canadian Constitution,whichmakesthemakeyconsiderationinduediligence.Mining exploration,atallstages,fromtheissuanceoftheinitialregulatorypermitstomineclosure and remediation,hasthepotentialtoadverselyaffecttheserights.

While the duty to consult with Aboriginal communities rests with the Crown, mining companies are strongly advised to get involvedearly,engagewithAboriginalcommunitiesandtakethe lead on consultation and any necessary accommodation ofAboriginalconcerns.

Suchaccommodationcouldbethroughmitigatingrisks,creatingjobsorprofitsharing.LenderswillexpecttobeinformedoftheeffectofAboriginalandtreatyrightsontheproject,andwillseekassurancesthatsuitableaccommodationsandriskmitigantsareinplace.

Environmental ConcernsInanefforttopromotesustainabledevelopment,theWorldBankanditsfinancingarm,theInternationalFinanceCorporation(IFC),developedtheIFCPerformanceStandardson Environmental & Social Sustainability, most recently updatedin2012.

TheyareincorporatedbyreferenceintheEquatorPrinciples,acreditriskmanagementframeworkusedtodetermine,assessandmanagetheenvironmentalandsocialrisksassociatedwithcertainprojectbasedfinancing.Therearecurrently79signatoryfinancialinstitutionscommittedtocomplyingwiththeprinciples.Asa‘DesignatedCountry’undertheEquatorPrinciples,Canadaisconsideredtohavesufficientlyrobustenvironmentalandsociallawsandcompliance regimes designed to protect people and the environment.

SecurityLenderstypicallyexpecttobegrantedsecurityoverbothland rights and personal property rights. Not all lenders will befamiliarwithCanadianlawsandpractices.Aspartoftheduediligenceprocess,lendersmayneedtobegivencomfortthattheirsecurityinterestswillbevalid,perfectedandcanbeeffectivelyenforced.Canadianlawisrelativelyflexibleinrespectofgrantingsecurityandsharingsecuritythroughacollateral agent or trustee.

* ThisarticlefirstappearedinMining Journal’sspecialPDACpublication,February2014.



Thereare,however,detailedrulesthatmustbefollowedinrelationtotheperfection,registrationandenforcementofcollateralsecurity.Effectivesecuritymaybetakenovermostassets, including shares, moveable and immoveable property, contractual rights and receivables, intellectual property and futureassets.

Thepriorityofsecuritydependsonthetimeofcreationandanyrelevantregistration,publicationornoticerequirements,subjecttocertainstatutoryprioritiesandsuper-priorities.Securitycan,inmostcases,beenforcedwithoutcourtapprovalthroughareceiverorotherofficerappointedtocollectandsellassetsforthesatisfactionofthedebt.

Ethics and anti-corruption AsamemberoftheOrganisationforEconomicCo-operationandDevelopment(OECD)andsignatorytotheOECDAnti-Corruption Convention, Canada has statutory anti-corruption safeguards.Althoughanti-corruptionlegislationhasexistedfordecades,recenthigh-profilecasesinCanadahavereneweddiscussionsandfocusonthisarea.

BroadnewamendmentstoCanada’sCorruptionofForeignPublicOfficialsActalsocameintoforceinJune2013.InJanuary2014,theResourceRevenueTransparencyWorkingGroup–comprisingtheMiningAssociationofCanada,theProspectorsandDevelopersAssociationofCanada,PublishWhatYouPayCanadaandtheRevenueWatchInstitute–releaseditsfinalrecommendationsoncreatingmandatorytransparency standards.

ThesewouldrequireminingcompaniesthatarepubliclytradedonCanadianstockexchangestopubliclydisclosepayments to governments. Contractual anti-corruption provisionsarenotuncommon.Alllenderswilllikelyrequireanti-corruption and bribery covenants as a condition to disbursement.

International financingPracticesintheinternationalproject-financemarketmaynotalwaysmirrortheCanadianapproachoneveryaspectofthetransaction.Internationallendersmayrequireadditionaldiligenceordocumentarydeliverablesatclosing.Miningcompaniesshouldbepreparedfortheserequestsand,asnecessary,beflexibleintheirapproach.

2.Debtfundingandsecurity Projectfinancebankdebtisacommonformoffinancingforthedevelopmentofminingprojects.Oneorseverallendersmakingavailablelongtermbankdebttoaprojectcompanywithrecourselimitedtotheassetsandincomeoftheproject.Theloanisdisbursedprogressivelyduringtheconstructionperiodandisrepaidthereafterfromtheincomegeneratedbytheoperationofthemine.

Dependingonthetypeofprojectfinancesought,extensivelegalduediligencewilllikelyberequired.Fromalender’sperspective, such due diligence would primarily be undertakentoascertainthebankabilityofaproject.

Adetailedpackageoffinancedocumentsisnegotiatedandenteredintotodocumentandsecuretheloan.Thesedocuments will, among other things, provide the lender securityoverallorsubstantiallyallprojectassets.Additionalrights may be included to protect the lender’s interest, such as, forexample,arightforthelenderto‘step-in’andundertakeminingoperationsforadefinedperiodifamaterialdefaultiscommittedbytheminingcompanyorakeycontractor.

Typically,inCanada,lenderstakesecurityagainstlandandpersonalproperty.Securityisperfectedindifferentways,butgenerally by registration at various registers in relation to each typeofsecurity(e.g.,landandpersonalproperty).

SecurityoverpersonalpropertyinterestsisgovernedinQuébecbytheCivilCodeofQuébecandinallotherProvincesandTerritoriesofCanadabytheapplicablePersonalPropertySecurityAct.AllProvincesandTerritoriesmaintaintheirownpersonalpropertysecurityregistrar(calledtheRegisterofPersonalandMovableRealRightsinQuébec)whereinthirdpartiescansearchthedatabasetodeterminewhetheranitemofpersonalpropertyhasbeenusedtosecurealoanorissubjecttoalien.Totheextentthecollateralsubjecttothesecurityinterestconsistsofmineralclaimsorminingleases,suchsecurityneedsto be registered in both the appropriate personal property securityregisterandtheappropriatelandregister.Inaddition,security against mining concessions and mineral claims or leasesmayalsoneedtoberegisteredinaspecificregistermaintainedbytheappropriateProvinceorTerritory.

BanksalsohavetheabilitytotakesecuritypursuanttotheBankAct(Canada)againstspecificclassesofminingassets.WhenabanktakessecurityundertheBankAct,itmustregisterthesecuritywiththeBankofCanadaintheProvincewherethedebtor’sprincipalplaceofbusinessislocated.Oncefiled,thissecurityiseffectiveacrossCanada.



3. Equipment financingAminingcompanywillneedtoacquireexcavationequipmentandmachineryforminingextractionandoperationoftheminegenerally.Financingtheacquisitionofequipmentcanbeachievedinvariousways.Itmay,forinstance,formpartofthegeneralbankfinancingfortheproject.Alternatively,therequiredequipmentmaybefinancedthroughseparateleasingarrangements.Inthiscase,aninter-creditoragreementwiththeprojectfinancelendersmaybeadvisable.

4. StreamingStreamingfinanceisraisedbysellingarighttoacommodityinexchangeforanup-frontpayment.Astreamisdistinctfromaroyaltyasitcreatesarightforthepurchasertopurchasealloraportionofoneormoremetalsproducedfromamineratherthan,inthecaseofaroyalty,creatingarighttoapercentageofrevenuefromthesaleofproduction.Streamingdealscanprovideanattractivealternativetoequityanddebtfinancinginachallengingmarket.Advancestagemining companies are able to access a non-dilutive source ofcapital,allowingmanagementtheopportunitytoretaincontrol over the company.

5. Off-taker financingThepurchaseroroff-takeroftheproductionofaminecanbeagoodsourceofadditionalfinance.Tradingcompaniesorendusers,ofteneagertosecuresupplyofthemine’sproduction,commonlyprovideadditionalfundingtominingprojects.Off-takersmaybepreparedtomakeanequityinvestmentand/orprovidestraightcommercialdebt(insomecasessubordinated).However,themostcommonformofoff-takerfinancingisacombinationofanadvancepaymentforfutureproduction(aprepayment)whichisamortisedagainstdeliveriesandadiscounttomarketpriceundertheoff-takeagreement.

6. Equity bridgeIntimesofuncertainequitycapitalmarkets,privateequityinvestors,hedgefundsandotherinvestorsarepreparedtoprovideequitybridgeloanstobridgethegapuntilequitycapitalmarketsreturn.Anequitybridgeloanisusuallypricedlikeequityandmayincludeotherenhancedreturnsthroughthegrantorroyaltiesorwarrants.Anequitybridgeisusuallyfullysecuredagainsttheprojectassets.

7. More informationToobtainacopyofourGuidesentitledFindingFinanceintheMiningandMetalsSector,AlternativeFinancingSourcesforMiningCompaniesandFocusonStreamingorformoreinformationregardingprojectfinanceintheminingindustry,contact us.

Robert Borduas Partner Norton Rose Fulbright +1514.847.4524 [email protected]


Sandra Nissan Partner Norton Rose Fulbright +1416.216.3930 [email protected]

Geoffrey G. Gilbert Partner Norton Rose Fulbright +1613.780.3764 [email protected]

Peter J. Wiazowski Partner Norton Rose Fulbright +1514.847.6047 [email protected]

Alison Babbitt Of Counsel Norton Rose Fulbright +1613.780.8665 [email protected]



Taxation

CanadiantaxesareadministeredandleviedatboththeFederalandProvinciallevel(forpurposesofthisdiscussion,referencetoaProvinceincludesreferencetoaTerritoryofCanada).CompaniescarryingonminingoperationsinCanadawillgenerallybesubjecttothreeseparatetaxes:CanadianFederalincometax,Provincialincometax,andProvincialminingspecifictaxesand/orroyalties.

A. Canadian federal tax

ThereisnospecificCanadianFederalminingtaxorFederalroyalty regime applicable to mining companies operating in Canada. Rather, mining companies resident or operating in CanadaaresubjecttothesamegeneraltaxundertheIncome Tax Act(Canada)(theTax Act)applicabletoallcorporatetaxpayersregardlessofindustry.Acorporatetaxpayer’sliabilityundertheTaxActisgenerallydeterminedbyapplyingtherelevantcorporatetaxratetothetaxableincomeearnedinthetaxationyear.

ThebasicCanadianFederaltaxrateapplicabletoacorporation’staxableincomeisgenerally15%fortaxationyearsstartingin2012.ThistakesintoaccountaspecialProvincialtaxabatementof10%andageneralratereductionof13%,whichmaynotbeavailableinallcircumstances.WhencombinedwithProvincialincometaxes,discussedbelow,aminingcompanywillgenerallybesubjecttoincometaxatarateofbetween25%and31%,dependingontheProvinceorProvincesinwhichitoperates.Taxableincomeforacorporatetaxpayeris,verybroadly,thesumofacompany’sprofitsfromcarryingonbusiness,incomeearnedfrompropertyandnetgainsfromdispositionsofcapitalproperty,less available deductions.

Whileminingcompaniesaregenerallysubjecttothesameratesoftaxapplicabletoallcorporatetaxpayers,theTax Actcontainsanumberofspecialrulesapplicabletominingcompanies(andotherresourcecompanies),particularlywithrespecttocreditsanddeductions.CertainofthesespecialrulesandotherselectfeaturesofCanada’sFederalincometaxsystem are summarized below.

B. Canadian resource expenditures

ToencourageandpromotethedevelopmentCanada’sresource industry, including the mining industry, the CanadianFederalincometaxsystemallowsfordeductionsagainsttaxableincomeforexpendituresincurredin

connectionwiththeexplorationanddevelopmentofCanada’s natural resources, including mineral resources. AmongtheseexpendituresarethosethatqualifyasCanadianexplorationexpenses(CEE)andCanadiandevelopmentexpenses(CDE).

Inthecontextofminingcompanies,CEEbroadlycapturesexpensesincurredforthepurposeofbringinganewmineintoproductioninreasonablecommercialquantitiesandincurredbeforethenewminecomesintoproductioninsuchquantities.Thisgenerallyincludesexpensesforprospecting,geological,geophysicalorgeochemicalsurveys,drillingand/ortrenchingandpreliminarysampling.Suchexpensesaretrackedinataxpayer’s“cumulativeCanadianexplorationexpense”accountandaredeductibleatarateof100%.Startingin2015,certainpre-productionminedevelopmentexpenseswillceasetobeeligiblefortreatmentasCEE,andwillinsteadbetreatedasCDE.Thischangewillbephasedin,andwillbefullyimplementedby2018.

CDEgenerallyincludesthecostsofacquiringrealpropertyforthepurposeofmining,orinterestsinsuchproperty,aswellascertaincostsofpermitsandlicensesrequiredformining.Italsoincludescertainexpensesincurredafteraminehascomeintoproduction,includingexpensesincurredinsinkingorexcavatingmineshafts,mainhaulagewaysorsimilarundergroundworkforamines’continueduse.Suchexpensesaretrackedinataxpayer’s“cumulativeCanadiandevelopmentexpense”accountandaredeductibleatarateof30%onadecliningbalancebasis.

Dispositionsofproperty,acquisitionsofcontrol,applicationofinvestmenttaxcredits(asdiscussedbelow)andothereventscanimpacttheavailabilityofthesedeductionstoamining company.

C. Investment tax credits

InadditiontothedeductionsavailabletoaminingcompanyinrespectofCanadianresourceexpenditures(suchasCEEandCDE,discussedabove),therearecertaininvestmenttaxcredits that may be available to mining companies.

Specifically,aminingcompanymaybeeligibleforataxcreditforaportionofpre-productionminingexpenditures,generallybeinggrassrootsexplorationandpre-productiondevelopmentexpendituresincurredinCanadaforqualifyingmineralsbeforeanewminecomesintoproductioninreasonablecommercialquantities.Qualifyingmineralsforthis purpose are diamonds, base or precious metals and



industrial minerals that become base or precious metals throughrefining.Thesetaxcreditsarebeingphasedout,andwillbeentirelyeliminatedafter2015.

Miningcompaniesmaybeeligibleforcreditswithrespecttoqualifyingexpensesincurredinconnectionwithscientificresearchandexperimentaldevelopment(SR&ED)inCanadathat “will lead to new, improved, or technologically advanced products or processes.” New procedures or technologies developedinconnectionwiththeoperationsofaminingcompanymaygiverisetoSR&EDcredits.

D. Capital cost allowance

Canada’sFederaltaxsystemallowsfordeductionsfromtaxableincomeinrespectofthecostofdepreciableproperty.Thisdeductionisreferredtoascapitalcostallowanceandthevalueofthedeductioninaparticularyearisdependentonthebalanceofataxpayer’s“undepreciatedcapitalcost”account.Thisaccountismaintainedwithrespecttoadefinedclassofdepreciablepropertyacquiredandheldbyataxpayertowhichtheacquisitioncostsofdepreciablepropertyofaspecifiedclassareaddedandfromwhichclaimeddeductionsinrespectofcapitalcostallowancearesubtracted,amongother additions and subtractions.

CapitalpropertyacquiredbyaminingcompanywillcommonlyfallwithinClass41ofprescribeddepreciableproperty which, very generally, includes buildings, machinery andequipmentacquiredforuseinminingoperations.CapitalcostallowanceinrespectofClass41assetsmaybeclaimed,subjecttocertainlimits,atarateof25%peryearonadeclining balance basis.

Tofurtherbenefitminingcompanies,anacceleratedcapitalcostallowance(ACCA)of100%isgenerallyavailablewithrespecttocertainClass41assetsacquiredbeforecommercialproductionfromamine(aswellascertainotherassets)totheextentofincomeearnedfromamine.AsdescribedbyNaturalResourcesCanada,“theACCAactstoprovidethefullwrite-offofcapitalcostsbeforeaminestartstopayincometax.Assuch,thistaxprovisionallowsforprotectingtheearlyincomeofaminesothatthisincomecanbeappliedtoreducedebtandminimizethefinancialvulnerabilityofthemineduringcyclicaldownturns.”Beginning2017,however,theACCAwillbephasedoutandwillbeentirelyeliminatedafter2020.

E. Deduction for provincial mining taxes and royalties

Generally,anyProvincialmining-specifictaxesand/orroyalties(discussedbelow)paidtoaProvinceinataxationyeararedeductibleincomputingtaxableincomeforthepurposesoftheTaxAct.

F. Functional currency reporting

OfbenefittocertainminingcompaniesthathaveinterestsoroperationsoutsideofCanadaistheabilitytoelecttoreportCanadiantaxresultsina“functionalcurrency”otherthanCanadiancurrency.Ataxpayer’sfunctionalcurrencyisgenerallytheprimarycurrencyinwhichataxpayermaintainsitsrecordsandbooksofaccountforfinancialreportingpurposes,providedthattheprimarycurrencyisa“qualifyingcurrency.”Presently,qualifyingcurrencyincludethecurrencyoftheUnitedStates,theEuropeanUnion,theUnitedKingdom and Australia.

G. Flow-through shares

Toenhancetheattractivenessofinvestinginminingoperations(aswellasotherresourcebasedoperations),theFederalincometaxrulesallowso-called“principalbusinesscorporations,” which include corporations the principal businessofwhichisminingorexploringforminerals,toissue“flow-throughshares.”

Flow-through shares are shares issued by a corporation to an agreement under which the corporation agrees to incur CEEorCDE(asdiscussedabove)withinaspecifiedperiodoftimeandtorenouncesuchCEEorCDEforthebenefitofthoseshareholderswhohavesubscribedforflow-throughshares.Ashareholderwhosubscribesforflow-throughsharesandwhoreceivesrenunciationsofCEEorCDEonthoseflow-throughsharesinaccordancewiththeprovisionsoftheTaxActwillbeentitledtodeductfromitsincomeamountsinrespectofsuchCEEorCDEasiftheyhadbeenincurreddirectlybythatshareholder.

WhereCEEisincurredandrenouncedtoasubscriberofflow-throughshareswhoisanindividual(otherthanatrust)andsuchCEErelatestocertainminingexplorationactivityfromorabovethesurfaceoftheearth,theholderofthoseflow-throughsharesmaybenefitfromanadditionalinvestmenttaxcredit,referredtoasaflow-throughminingexpenditurecredit,equalto15%ofthequalifyingexpenses.Theflow-



throughminingexpendituretaxcreditiscurrentlysettoexpirein2014(howeveraseriesof1yearextensionstothecredithavebeenmadeoverthepastseveralyears.).

Certain Canadian Provinces also provide additional credits to eligibleholdersofflow-throughshares.

H. Provincial income tax

InadditiontoFederalincometax,miningcompanieswillbesubjecttoincometaxontaxableincomethatisallocatedto a Province in Canada. Such allocation is generally based onthepresenceofapermanentestablishmentinaProvinceandtheproportionofrevenuethatcanbeattributedtothatpermanent establishment, determined in accordance with prescribed regulations.

TaxableincomeforProvincialpurposesisgenerallyequivalenttotaxableincomedeterminedundertheFederalincometaxrulesandwiththeexceptionofAlbertaandQuébec,ProvincialincometaxesareadministeredFederally.For this reason, the credits and deductions applicable in determiningtaxableincomeforFederalincometaxpurposesaregenerallyapplicableforProvincialpurposes.

ThegeneralProvincialincometaxratesasatthetimeofwritingareasfollows(combinedFederalandProvincialratesarepresentedinbrackets):

• Alberta–10%(25%)• BritishColumbia-11%(26%)• Manitoba–12%(27%)• NewBrunswick–12%(27%)• NewfoundlandandLabrador–14%(29%)• NorthwestTerritories–11.5%(26.5%)• NovaScotia-16%(31%)• Nunavut–12%(27%)• Ontario–11.5%(26.5%)• PrinceEdwardIsland–16%(31%)• Québec11.9%(26.9%)• Saskatchewan–12%(27%)• Yukon–15%(30%)

I. Provincial mining taxes and royalties

InadditiontoProvincialincometaxes,eachProvincealsoadministersandleviesaseparateminingtaxorroyalty.TheexactnatureandextentofthesetaxesandroyaltiesvariesdependingontheProvince,thestageand/ormaturityofminingactivity,andonthemineralresource(s)beingmined,

and can be based on either gross revenues, net revenues or productionlevels(oracombination)thereof.

Asnotedabove,royaltiesandminingtaxesleviedbyaProvincearegenerallydeductibleincomputingtaxableincomeforthepurposesoftheTax Act.

J. Other considerations relevant to processing minerals

ManyProvincesregulatetheprocessingofmineralsextractedwithintheirborders.Forexample,inOntariotheMining ActrequiresthatallmineralsextractedintheProvincebeprocessedwithinCanadatoproduce“metalusefulintheartswithoutfurthertreatment”,thoughitispossibletoobtainanexemptionfromthisprovisionfromthegovernment.InNovaScotia,ifmineoutputisremovedfromCanadafortreatment,itispossiblethattripletheamountofthetaxesorroyaltiesotherwise payable would be imposed as a penalty. Still other ProvincesdisallowdeductionsforexpensesincurredoutsidetheProvinceofextractionwhencomputingProvincialminingtaxesandroyalties.

K. More information

FormoreinformationregardingtaxationandminingprojectsorminingfinanceinCanada,pleasecontactus.

Adrienne F. Oliver Partner Norton Rose Fulbright +1416.216.1854 [email protected]

Barry Segal Partner Norton Rose Fulbright +1416.216.4861 [email protected]

Derek G. Chiasson Partner Norton Rose Fulbright +1514.847.6114 [email protected]



Mining operations

A. Project infrastructure

Aminingprojectmayhaveanumberofinfrastructurerequirements,includingroadsandpowercorridors,processingandtailingsfacilitiesand,forlargerscaleprojects,portandrailinfrastructure.Miningleasesandotherinfrastructuretenementscanfacilitateaproject’slandtenurerequirements.However,otherapprovals,suchasbuildinglicensesandfacilityspecificenvironmentalapprovals,mayalsoberequired.

1. Port infrastructurePortsareakeycomponentofexportbasedminingprojects.Ports in Canada may be either privately or publicly controlled. Larger public ports are operated and monitored by port authoritiesinaccordancewithspecificportlegislation.Portsareakeycomponentofexportbasedminingprojects.Portsin Canada may be either privately or publicly controlled. Larger public ports are operated and monitored by local Federally incorporated non-share capital port authorities governedbytheCanadaMarineAct.SmallerpublicportsareoperateddirectlybytheCanadiangovernment.Inadditionthere are some ports which are operated by Provincial or territorial governments.

Miningcompanieswillusuallyidentifyasuitableportfortheirexportoperationsduringthefeasibilitystudyphase.Early discussions would then be commenced with the relevant port owners and operators to ascertain, among otherthings,theavailabilityofcapacity,thesuitabilityofportinfrastructureandthepotentialforfutureexpansion.Ifanewportistobedevelopedforaminingproject,thendetailedconsultationwithallrelevantstakeholderswillberequired.Suchconsultationwouldnormallybeco-ordinatedbythegovernmentoftheProvinceorTerritoryinwhichthe new port is to be located, as well as with the Federal government. Environmental impact assessment review will alsoberequired.

Inthecaseofpublicports,usuallyaportfacilitiesagreementand/orleasewillbeenteredintobetweentheportauthorityandtherelevantminingcompany.Thisagreementmayprovidefortheinvestmentofcapitalbytheminingcompanytosupportportinfrastructureconstruction.Inexchangeforthis capital investment, port capacity would be reserved to servicetheminingcompany’sexportrequirements,aswellasrightstouseportlandsandassociatedfacilities.Theagreementmayalsoprovideproceduresforthirdpartiesto

accesscommonuserportinfrastructureandcapacitysharingarrangementsbetweenportusers.Theportdevelopmentprocessisoftentimeconsuming,soitisimportanttoengagewith the relevant port and governmental authorities as early as possible.

2. Rail infrastructureRailinfrastructureisakeycomponentofmanyCanadianminingprojects.Thedevelopmentofarailway,inmostcases,needstobespecificallyauthorizedbylegislation.Thelevelofgovernmenthavingauthorityoverarailwaydependsonthereachofsuchundertaking.IftherailwayrunsexclusivelywithintheboundariesofaProvinceorTerritory,thenitwillbesubjecttotheexclusivecontroloftheGovernmentofsuchProvinceorTerritory,unlessitisdeclaredtobeforthegeneraladvantageofCanada,inwhichcase,itwillbegovernedbyFederal legislation as will be railways connecting two or more ProvincesorTerritoriesorCanadawiththeUnitedStates.

Duetothesignificantcapitalexpenditureinvolved,smallerminingcompaniesusuallyseekaccesstoexistingrailinfrastructurethroughconfidentialcontracts,theprocessofwhich can be time consuming.

B. Construction contracts

Thecommencementofconstructionisanimportantmilestoneinthedevelopmentofaminingproject.Constructioncontractsarecriticaltothedevelopmentofamineandrequirecarefulcommercialconsideration.Areasofparticularnegotiationarelikelytobeeventsofdefault,delay,changesandunforeseensiteconditions,terminationrightsandpaymentontermination,forcemajeureandchangeinlawprovisions.Thelevelofprotectionaffordedbytheseprovisionswillneedtobecarefullyconsideredinlightoftheproject’sindividualcircumstances.

Aminingcompanyshouldalsoensurethatithasadequateprotection in its construction and development contracts toavoid,orotherwisereducetheimpactofcostoverrunsoccurring during the construction phase or delays and other liabilitiesthatmayresultfrombreachesoflegislation,permitsor approvals.

C. Services and supply contracts

Variousservicecontractswillneedtobeenteredintotosupportmineoperations.Forexample,aminingcontractormay be engaged under a mining services contract to manage



extractiveandprimaryprocessingoperations.Thiscontractormayalsoberesponsibleformanagingtheinterfacebetweentheprojectowners,othercontractorsandthirdpartiespresenton the mine site.

Thetypesofserviceagreementsrequiredwilldependontheproject’songoingoperationalrequirements.Servicesagreementsmaybeenteredintoformineralsampling,transportationandthesupplyofmineequipment.Powerandgassupplyagreementsarealsokeydocumentsforaminingproject.Theserviceandsupplyagreementsshouldbecarefullymanagedtoensurethatthemineoperatessmoothlyand according to schedule.

D. Sales, marketing and off-take agreements

Off-take,marketingandlong-termsaleagreementsarekeyforbulkcommoditiessuchascoalandironore.Thepriceagreed under long term sale contracts may be determined accordingtoindustrybenchmarks(asisgenerallythecaseforironore).However,increaseddemandforrawmaterialsin recent times has resulted in some mining companies departingfromthetraditionalbenchmarksystem,preferringtosellalloraportionofmineoutputonthemorelucrativespotmarkets.

Often,lenderswillrequireaprojecttobeunderpinnedbylongtermsalecontractstoensureadequatecashflowavailablefordebtservice.Formajormineprojectstherewilloftenbemultipleofftakerstoaminingprojectwhichwillspreadcreditriskandimprovetheproject’sbankability.Inthesecases,therewillbeaneedtonegotiateinterfacearrangementsbetweentheofftakerstodetermine,forexamplewhichhasprioritytospecifictonnage.

E. More information

ToobtainacopyofourGuidesentitledFeasibility, a Guide to Feasibility Planning for Junior Mining Companies; NegotiatingaMineralDevelopmentAgreement,TenThingstoKnowandECPandCPCMContracts-aGuidetoECPandECPMContractsforJuniorMiningCompaniesortoobtainmoreinformationregardinginfrastructureandminingprojectsinCanada,pleasecontactus.

Richard Desgagnés Partner Norton Rose Fulbright +1514.847.4431 [email protected]


Robert Borduas Partner Norton Rose Fulbright +1514.847.4524 [email protected]

Michael Sabusco Partner Norton Rose Fulbright +1416.202.6731 [email protected]


David McIntyre Partner Norton Rose Fulbright +1416.216.4090 [email protected]

Andrew Grossman Partner Norton Rose Fulbright +1416.216.2312 [email protected]



EnvironmentalCanadaisbothacommonlawandcivillawjurisdiction.MiningactivityinCanadaissubjecttoavarietyofenvironmentallawsandregulationsfromdifferentlevelsofgovernment – Federal, Provincial or territorial, municipal and even Aboriginal, depending on whether the activity isearlyphaseexploration,advancedexploration,mining,milling,smeltingandrefiningormineclosure.Generally,Provincial/territorialgovernmentstaketheleadinregulatingenvironmental matters although the Federal government also hassomelegislationaffectingmining.Consequently,miningproponentsmustbeconsciousofthepotentialforregulatoryoverlap.Miningprojectsoractivitiesmaybesubjecttotwotypesofrequirements:anenvironmentalassessmentoftheeffectsofaproposedprojectthatmustbeundertakenbeforeproceedingwiththeprojectand/orlicensing,approvalorpermittingrequirementsunderminingandenvironmentalprotectionlegislation.ThebulkofthelatterareattheProvincial/territoriallevel.EnvironmentalassessmentsandspecificapprovalsmayberequiredbyboththeFederalandProvincial/territorialgovernmentsdependingonthenatureofproposedminingprojectoractivities.

A. Federal environmental assessmentTheprincipalFederalenvironmentalstatutesaretheCanadianEnvironmentalProtectionAct(CEPA),theCanadianEnvironmentalAssessmentAct(CEAA 2012)whichrequires,amongotherthings,anenvironmentalimpactstudyforprojectsthatmayhavesignificantadverseenvironmentaleffectsuponcomponentsoftheenvironmentwithinFederaljurisdiction)andtheFisheriesAct(Canada)(FisheriesAct)whichprohibitstheharmfulalteration,disruptionordestructionoffishhabitatanddepositpermittingthedepositofdeleterioussubstancesinwatersfrequentedbyfishorinaplace under any conditions where the deleterious substance oranydeleterioussubstancethatresultsfromthedepositofthe deleterious substance may enter any such water.

TheFederalgovernmentmadeamendmentstotheFisheriesActinJune2012which,whenfullyineffect,willfocustheAct’sfisheriesprotectionprovisionsonmanagingthreatstothesustainabilityandproductivityofcommercial,recreationalandAboriginalfisheries,ortofishthatsupportsuchafishery.

FisheriesandOceansCanadaiscurrentlyworkingonaregulatory proposal to implement the Fisheries Act changes. Inthemeantime,thecurrentprovisionsoftheFisheriesActandexistingguidanceandpoliciescontinuetoapply.TheFisheriesActisimportanttotheconductofminingactivities;

thus attention must be given to the amendments that will comeintoforceinwavesasthegovernmentdevelopstheregulations.

TheCEPAisaimedatthepreventionandmanagementofrisksposedbytoxicandotherharmfulsubstancesandmanagementofimpactsonhealthandtheenvironmentfromanumberofaspects,including,hazardouswastes,environmental emergencies, vehicle emissions, and other sourcesofpollution.Itregulatestheimport,export,use,storage, processing, sale, release into the environment and disposalof“toxicsubstances”.Onceasubstanceislistedastoxic,theFederalgovernmentmayestablishregulations,someofwhichmayberelevanttominingoperations.CEPA also allows the government to collect environmental datafromindustryincludingforairemissions.Pollutionpreventionandemergencyplanningcanalsoberequiredinrelationtotoxicsubstances.

FederalenvironmentalassessmentsarerequiredifaproposedprojectisdesignatedbytheRegulationsDesignatingPhysicalActivitiesundertheCEAA2012asatypeofprojectthatislikelytohavesignificantadverseenvironmentaleffectsoriftheMinisteroftheEnvironmenthasmadeanorderdesignatingaprojectnotwithstandingthatsuchRegulationmaynotrequireit.Therearetwolevelsofenvironmentalassessment:astandardenvironmentalassessmentandapanelreview.Thestandardenvironmentalassessmentisthedefaultlevelofassessmentapplicabletoadesignatedproject.TheFederalauthorityresponsibleforcarryingoutthestandardenvironmentalassessmentandforpreparingthefinalreportis,inmostcases,theCanadianEnvironmentalAssessment Agency. A standard environmental assessment mustbecompletedwithin365days,extendibleundercertaincircumstances.

Thesecond,higherlevelofenvironmentalassessmentisapanelreview.TheMinisteroftheEnvironmentmayrefertheenvironmentalassessmentofadesignatedprojecttoapanelofexpertsiftheMinisterisoftheopinionthattodosoisinthepublicinterest,consideringvariousstipulatedfactors,includingwhethertheproposedprojectmaycausesignificantadverseenvironmentaleffectsandthepublicconcernsrelatedtothoseeffects.Whereareviewpanelconductstheenvironmentalassessment,itmustmakeallrelevantinformationpublicandholdhearingsthatofferinterestedparties an opportunity to participate in the environmental assessmentbeforethepanelsubmitsitsrecommendationstotheMinister.Theentireprocessislimitedtotwoyears,extendibleundercertaincircumstances.Incaseswhereanotherjurisdiction(Provincialorterritorial)requiresan



environmentalassessmentofthesameproject,theMinisterhasthepowertoestablishajointpanelwiththatjurisdictionso as to eliminate duplicate processes.

Following a standard environmental assessment or a panelreview,theMinisteroftheEnvironmentconsidersthe environmental assessment report and decides whether thedesignatedprojectislikelytocausesignificantadverseenvironmentaleffects,takingintoaccountappropriatemitigationmeasures.Ifsignificantadverseenvironmentaleffectsarenotlikely,theprojectisallowedtoproceedsubjecttotheproponentimplementinganyspecifiedmitigationmeasuresandafollow-upprogram.Ifsignificantadverseenvironmentaleffectsarelikely,thematterisreferredtotheGovernorinCouncil(Cabinet)forafinaldecisiononwhetherornotthoseeffectsarejustifiedinthecircumstancesandthereforewhethertheprojectwillbepermittedtoproceed,andsubjecttowhatconditions.Ineithercase,theproponentreceivesadecisionstatementwhichispostedontheInternet,setting out the decision as well as any conditions which the proponentmustcomplywithifitispermittedtocarryoutthedesignatedproject.Theconditionssetoutinthedecisionstatementarelegallyenforceable.

TheCEAA2012includesprovisionstoreduceduplicationofenvironmentalassessmentprocesses.TheFederalenvironmental assessment process may be delegated to a ProvincialjurisdictioniftheMinisterisoftheopinionthatsuch assessment would be an appropriate substitution and thatjurisdictionrequeststhesubstitution.TheMinistermayalso substitute an Aboriginal environmental assessment processfortheFederalprocessifthesubstitutionisappropriate.Attheendofthesubstitutedenvironmentalassessment,thefinaldecisionrestsnotwiththeProvincialauthority but with the Federal government. Panel reviews cannotbesubstitutedbutmaybecontinuedasajointFederal-Provincialpanelreview.TheMinistercanalsoapproveasubstitutionofaProvincialassessmentafteraProvincialassessmenthasbeencompleted.TheCEAA2012alsoincludesequivalencyprovisionswherebytheMinistermayexemptaprojectfromtheapplicationoftheActentirelywhencertainconditionsaremet.Ifthatoccurs,theProvincecarriesouttheenvironmentalassessmentandmakesthefinaldecisionaboutwhetherthedesignatedprojectmayproceed,subjecttomitigationmeasures,includinganymeasurestoprotectcomponentsoftheenvironmentunderFederaljurisdictionsuchasfisheries.

B. Provincial/territorial environmental assessment

Provincial environmental assessment regimes – which vary accordingtotheProvinceorTerritory–mayalsoapplytominingprojects.Provincialenvironmentalassessmentstatutesandregulationsmayrequireenvironmentalassessmentsofcertainprojectsorassessmentsmayberequiredundermoregeneralenvironmentalprotectionlegislation.ThepotentialforoverlapbetweenFederalandProvincial/territorialassessmentshasresultedinvariousbilateralagreementsbetweensomejurisdictionsandtheFederal government to ensure a “harmonized” process and to avoidduplicativeprocess.AsaresultofthenewCEAA2012the Federal-Provincial harmonization agreements that were previously in place are now having to be re-negotiated so as toachievea“one-project,onereviewprocess”forprojects.

C. Environmental permits, approvals and authorizations

Inadditiontoenvironmentalassessmentprocesses,otherpermitsandapprovalsaretypicallyrequiredundervariouslawsbeforeeitheradvancedexplorationormineoperationscanbecommencedorre-commenced.Thesevaryfromjurisdictiontojurisdiction.ThepermittingregimerequirementsariseunderProvincial/territorialmininglegislationaswellasfromenvironmentallegislation(e.g.fordischargestoair,waterandland).ThereisalsospecificFederallegislationgoverningminingofsubstancessuchasuranium and thorium. Federal and Provincial or territorial legislation regarding endangered or threatened plant and wildlifespeciesandtheirhabitatsmayalsorestrictoraffectmining activities.

Miningpermits(authorizations)areusuallygrantedbyProvincialminesministries,whereaspermitsfordischargestoair,landandwaterarehandledbyProvincial/territorialenvironmentministriesand/orFederalauthorities(e.g.EnvironmentCanadaorFisheriesandOceansCanada),dependingonthelegislationinvolved.Mininglegislationitselfcontainselementsofenvironmentalregulationdealingwith matters such as land reclamation and rehabilitation, mineclosureandfinancialsecurityrequirements.ItmayalsocontainsignificantAboriginalconsultationanddisputeresolutionrequirementsaswellasprovisionsforprotectingsitesofAboriginalculturalsignificancefromminingimpacts.RecentdevelopmentsinOntarioandQuébecdealingwithminedevelopmentintheCanadianfarnorth(muchofwhichisnotyetadoptedorinforceandisbeingphasedin)willhave





asignificantimpactonminingprojectsandapprovals.TherearealsoavarietyofFederalandProvincialmininglawsthatmay allow governments to withdraw certain Crown-owned landsfromminingactivity.

InOntario,asanexample,miningoperationswouldtypicallybesubjecttotheEnvironmentalProtectionAct(EPA)and/ortheOntarioWaterResourcesAct(OWRA)andassociatedregulationsunderboth.Thesearecomprehensiveenvironmental laws which, among other things, provide generalprohibitionsonpollution,requirethereportingandclean-upofspillsofpollutants,establishwastemanagementrules,establishalicensingandpermittingprogramforvariousdischargesofcontaminantstotheenvironmentoractivities,setoutrequirementsforwater-takingpermits,andcontainprovisionsthatallowtheOntarioMinistryoftheEnvironmenttoissueanassortmentofremediationorpreventive measures orders to various responsible persons. Thelegislationestablishesanextensivelistofoffencesandadministrativepenaltiesandimposesapersonaldutyofcareonofficersanddirectorsofcorporationstotakeallreasonablecaretopreventthecorporationfrombreachingenvironmentallaws.Breachofthedutyofcareisanoffenceforwhichadirectororofficermaybechargedandprosecuted,regardlesswhether or not the corporation has been prosecuted and convicted.

MiningprojectsinQuébec,asanotherexample,aretypicallysubjecttothatProvince’sEnvironmentQualityAct, which obligates mining proponents not to pollute, to report accidental discharges and to clean up contamination. CertificatesofauthorizationmustalsobeobtainedinQuébecbeforeundertakingavarietyofactivitiesassociatedwithminingprojects(e.g.constructionorotherindustrialactivity)ifthereisthepotentialforreleaseofcontaminants.QuébecisacivillawregimethereforetheQuébecCivilCodeaddsanotherlayeroflegislationthatmustbeconsidered.

ProponentsinitiatingprojectsinCanada’sfarnorth–thethreenorthernTerritoriesofYukon,theNorthwestTerritoriesand Nunavut – must also be attentive to a complicated andever-changingenvironmentalframeworkapplicabletoCrownorFirstNations(i.e.Aboriginal)ownedlands.While the Federal government continues to have overall responsibilityforthemanagementofwaterresourcesintheseareas(administeringCrownlandsintheNorthwestTerritoriesandNunavutundernumerousstatutes),ithastransferredcertainresponsibilitiesthroughthenegotiationoflandclaimsagreements,FirstNationsself-governmentandotherformsofdelegationtoterritorialauthorities.Inthe

NorthwestTerritories,forinstance,whereaminingprojectinvolvestheuseofwatersordepositofwasteinwaters(e.g.tailingsponds),aproponentmayrequireawaterlicencefromthe“NorthwestTerritoriesWaterBoard”undertheFederalNorthwestTerritoriesWatersAct.ElsewhereinCanada’sfarnorth,theresponsibilityformanaginglandorwaterresourcesisentrustedtoregionalboards.ForsignificantareasofFirstNationsownedlands,thetermsofnumerous,specificlandclaims settlement agreements and First Nations regulatory agencyrequirementsmustalsobeconsidered.

D. More information

FormoreinformationregardingenvironmentalmattersandminingprojectsinCanada,contactusdirectly.

Jean Piette Senior Partner Norton Rose Fulbright +1514.847.4584 [email protected]

Madeleine Donahue Senior Partner Norton Rose Fulbright +1416.202.6745 [email protected]

Alan Harvie Partner Norton Rose Fulbright +1403.267.9411 [email protected]



Workplace health and safetyAcrossallCanadianjurisdictions,employersaresubjecttorigorousoccupationalhealthandsafety(OHS)andworkers’compensation legislation.

A. Workers’ compensation

WorkplacesafetyandinsurancelegislationintheProvinces/Territoriesestablishesstatutoryinsuranceregimeswhichcompensateworkersandtheirfamilieswhenaninjuryorfatalityarisesinorfromemploymentorduetooccupationaldiseases.Typically,Workers’Compensationlegislationoperatestoprecludeworkersfromsuingtheiremployersfordamagesarisingfromworkplaceinjuries.Instead,aworkerwhoisinjuredorsuffersfromanoccupationaldiseasewillgenerallyreceivecompensationfromtheworkplacesafetyandinsuranceboardinthejurisdictioninwhichtheemployeroperates.

Typically,employersmustregisterwiththeworkplacesafetyandinsuranceboardintheProvinceorTerritoryofoperationwithinacertainnumberofdaysofthedateofhireofthefirstemployee.Theemployeristhereafterrequiredtopaypremiumstotheworkplacesafetyandinsuranceboardbasedupontheearningsofitsemployees.

B. Occupational health and safety

Occupationalhealthandsafetylegislationtypicallyestablishesasetofrightsandresponsibilitiesapplicabletoabroadrangeofworkplaceparties.Theserightsandresponsibilities are proscriptive in nature; the various OHS statutesandtheirregulationssetoutgeneralandspecificstepsthatmustbetakenintheworkplacewhencarryingoutworkinordertoprotectworkers(includingsubcontractors)andothersfrominjuryoroccupationaldisease.Generally,governmental labour ministries or agencies administer these laws.

OHS legislation is applicable to mining and construction projectowners,contractorsandsubcontractors,employers,officersanddirectors,andworkers.OHSlegislationregulatesahostofissuesincluding,butnotlimitedto:exposuretohazardous materials, ambient air standards, handling and storageofexplosivesandgenerationofhazardousmaterials

orwaste;establishmentoffieldcamps,firstaid,theuseofpersonalprotectiveequipmentandtools,emergencyresponse,mineoperations(bothundergroundandabove-ground),workingalone,confinedspaces,andviolenceandharassment.Inaddition,thereexiststhegenerallegaldutytotake“allprecautionsreasonable”toprotectthehealthandsafetyofworkers.

Generally, OHS obligations cannot be evaded by contracting outtheperformanceofworktoothers(i.e.theworkcanbecontractedoutbutresponsibilityforhealthandsafetycannot).IndividualsandcorporationsthatarelookingtooperatewithinCanadamustthereforebeawareofthevariousOHSobligationsimposeduponthemandshouldseekprofessionaladviceinrespectofthoseobligationsinordertoensure that they are not breached. Even inadvertent breaches ofOHSlegislationcangiverisetoquasi-criminalprosecutionsthatmaycarrysignificantmonetarypenaltiesand,forindividuals,jailterms.

The Criminal Code(Canada)establishesapositivedutyonindividualsandorganizationstotakereasonablestepstopreventbodilyharmtoworkers,thepublic,andothersinvolvedinworkplaceactivities.Anorganizationisresponsibleforthenegligentactsoromissionsofitsrepresentatives(includingdirectors,partners,members,agents,contractorsandemployees)actingwithinthescopeoftheiremployment.Itisalsoliableforcriminalnegligencewhenaseniorofficer(anypersonintheorganizationhavingexecutiveoroperationalauthority)orseniorofficers,collectively,isorareapartytoanoffenceorknowingthatarepresentativeisorisabouttobeapartytoanoffence,failstotakeallreasonablemeasurestopreventtherepresentativefrombeingapartytotheoffence.

C. Incident responseIncidentresponseplanningiscriticaltominingactivitiesand operations and to those who advise mining companies. Healthandsafetyregulatorsgenerallyhaveverybroadpowerstoenterintoaworkplaceatanytimeinordertoassesswhetherhealthandsafetylegislationhasbeencompliedwith.Theyaremorelikelytodosowhenaninjuryorfatalityhasoccurredinrespectofworkplaceactivity.Inaddition,theremaybeanobligationtonotifytheOHSregulatorofaworkplaceincidentleadingtoaccident,injuryorfatality.Failingtonotifytheregulatormaygiverisetoanindependentbreachofhealthandsafetylegislation.Insomejurisdictions

* The Criminal Code (Canada)makesitacriminaloffencetobribeaCanadianofficial.



notificationmusttakeaveryspecificformandlegislativerequirementsshouldbeconsultedinallcases.Inadditiontoanystatutoryobligationtoreportahealthandsafetyincident,miningcompaniesmayseektocarryouttheirownincident response and investigation where a potential breach ofOHSlegislationhasoccurred.Theymaydosoinordertoassess(a)thelikelihoodthatchargesmaybelaidbytheOHSregulator,(b)whetherinternalhealthandsafetystandardscanbeimproved,or(c)whetheranythirdpartyisresponsibleforthebreach.Itshouldbenotedthatsuchinternalinvestigationsmustbecarefullycarriedout;theregulatormaytakethepositionthatitisentitledtoreviewinternalreviewsaspartofitsmandatetoassesswhetherabreachofOHS legislation has occurred.

D. More informationFormoreinformationregardingworkplacehealthandsafetymattersrelatingtominingprojectsinCanada,please contact us.

Michael McFadden Partner Norton Rose Fulbright +1416.216.3973 [email protected]

Madeleine Loewenberg Associate Norton Rose Fulbright +1416.216.3932 [email protected]



Anti-corruption and bribery law

A. Corruption of foreign public officials act (Canada)

TheCorruption of Foreign Public Officials Act(CFPOA)makesitacriminaloffenceinCanadatodirectlyorindirectlybribeaforeignpublicofficialinordertomaketheofficialdoorrefrainfromdoingsomething,ortousehisorherpositiontoinfluencetheactsordecisionsofaforeignstateorpublicinternationalorganization*.Abribeincludesvirtuallyallformsofeconomicbenefitthatmightbegivenorpaidtotheforeignpublicofficial.Aforeignpublicofficialincludesofficialsofforeigngovernments,officialsofvariousgovernment entities including a person employed by a board, commission, corporation or other body or authority establishedtoperformthedutyorfunctionofaforeignstatesuchasstate-ownedenterprises,andofficialsofpublicinternational organizations such the United Nations and the WorldBank.

Under the saving provision, no person or company will be guiltyofanoffenceiftheeconomicbenefit:

• ispermittedorrequiredunderthelawsoftheforeignstateor public international organization;

• wasmadetopaythereasonableexpensesincurredingoodfaithbytheforeignpublicofficialinthecourseofamarketingprogramorintheperformanceofacontractbetweenthepersonandtheforeignstate;or

• isinthenatureofa“facilitationpayment”,whichisapaymentmadetoexpediteorsecureactsofaroutinenaturebyforeignpublicofficialswithincertainprescribedcategories(asdiscussedbelow,thisprovisionisbeingeliminatedatalaterdate).

OnJune19,2013,amendmentstotheCFPOAcameintoforcethataligncertainprovisionsoftheCFPOAmorecloselywiththeU.S.ForeignCorruptPracticesAct(US FCPA)andtheU.K.BriberyAct(UK Bribery Act),andthatotherwisestrengthenCanada’santi-briberyandcorruptionlaws.Certainkeyamendmentsincludethefollowingnewprovisions:

• Nationality Principle-TheneedtoestablishthataportionoftheCFPOAoffencehasa“realandsubstantiallink”toCanadahasbeeneliminated.InlinewiththeUSFCPAandtheUKBriberyAct,CFPOAoffencescannowbeprosecutedagainstCanadiannationals(includingCanadiancitizens,Canadian permanent residents and organizations that are incorporatedorotherwiseorganizedunderthelawsofCanadaorofaProvince),operatinganywhereintheworld.

• Not-for-Profits-Thedefinitionof“business”hasbeenexpandedtoincludeanybusinessorundertakingofanykind,whetherornotforprofit.Asaresult,charitiesand other non-governmental organizations that were previouslyexemptundertheCFPOAarenowcovered.

• Books and Records Offence-Anew“booksandrecordsoffence”makesitanoffencetofalsifybooksandrecordsinordertoconcealabribetoaforeignpublicofficial.Thisprovision is in line with the US FCPA, with the important differencethattheUSFCPAprovisionisenforcedundercivil proceeding s, while the CFPOA provision must be enforcedundercriminalproceedings(whichhaveahigherburdenofproof).

• Facilitation Payments-Thesetypesofpayments,whichare already prohibited under the UK Bribery Act, are being eliminated at a later date to be determined.

• Penalties -ThemaximumjailtermundertheCFPOAhasbeenincreasedfromfiveto14yearsimprisonment.

TheseamendmentsarepartofthegovernmentofCanada’seffortstoincreasinglycombatbriberyandcorruption.In2008,theRoyalCanadianMountedPoliceestablishedanInternationalAnti-CorruptionUnitdedicatedtoenforcingtheCFPOA.OnFebruary5,2013,theGovernmentofCanada announced that to date, three companies had been convicted under the CFPOA, two cases were pending and that there were 35 ongoing investigations. Since that time, one individual has also been convicted under the CFPOA.

B. Disclosure of payments to governmentsOnJanuary16,2014,theResourceRevenueTransparencyWorkingGroup(theWorkingGroup)releaseditsfinalrecommendationsforthecreationofmandatorytransparencystandards that would see mining companies publicly traded onCanadianstockexchangespubliclydisclosepaymentstogovernments.

TheWorkingGroup,consistingoftheMiningAssociationofCanada,theProspectors&DevelopersAssociationofCanada,PublishWhatYouPayCanadaandtheRevenueWatchInstitute,wasformedinSeptember2012withtheobjectiveofimprovingtransparency in the mining sector in Canada and overseas. Our legalupdatefromJune2013providesanoverviewoftheWorkingGroup’sbackgroundandtheinternationalmovementtowardincreased disclosure.

Thegroup’sfinalrecommendationswillweighheavilyonlegislators,whoareexpectedtointroducelegislationformandatoryreportingin2014.



ThisupdatewilloutlinetheWorkingGroup’srecommendations.Publicissuersintheminingindustryshouldexpectthatsuchrecommendationswillbecomepartoftheirdisclosurerequirementsinthenearfuture.

Scope of reportingTheWorkingGroup’srecommendationsareforallreportingissuers,asdefinedunderCanadiansecuritieslaw,topubliclydisclosecertaincategoriesofpaymentsmadetonationalandsub-national authorities, including states, provinces, counties, districts,municipalitiesandstate-ownedenterprises.Inaddition,companieswillneedtodetailtheminingprojecttowhichthesepayments are associated.

Toincreasethecomplexityofthisissue,theCanadiangovernment’s announcement to develop mandatory payment transparency standards includes a commitment torequirethedisclosureofpaymentstoFirstNationsself-governments.TheWorkingGroupdidnotaddressthisissueinitsrecommendations;however,itpromisestobeanareaofcontentionasthefederalgovernmentmovesforwardwithitscommitment.

Control/subsidiariesInitsdraftrecommendations,theWorkingGroupincludedreferencestotherelationshipsbetweenparentandsubsidiarycompanies,recognizingthatpublicminingcompaniesoftenholdprojectsbywayofsubsidiarycompanies.Thefinalrecommendationshaverefinedthisrelationshiptorequirereportingbyallcompanies,theirsubsidiariesandjointlycontrolledand/orassociatedentities.TheWorkingGroup’srecommendationsrelyondefinitionsofcontroloutlinedintheInternationalFinancialReportingStandardsandrequirethatcompaniesreportonentitiesundertheircontrol,jointcontrol,andtowhichtheyexertsignificantinfluence,totheextentthatthecompanyisabletoaccessthisinformation.

When to discloseTheWorkingGroup’srecommendationssuggestthatpaymentsshouldbedisclosedoverthelifeoftheproject—fromexplorationtoremediation—andoverthevaluechainoftheproject,fromexplorationtoexport.Thisrecommendationisspecificallydesigned to capture environmental remediation payments, paid afteracompanymayhavesoldorrelinquisheditsinterestinagivenproject.

What to discloseThecategoriesofpaymentshavestayedconsistentfromthedraftrecommendations,withthenotableexceptionoftheremovaloffinesandpenalties.Thepaymentcategoriesoutlinedintherecommendationsalignwiththoseinsection1504oftheDodd-

FrankAct,theaccountingandtransparencydirectiveintheEUandtheExtractiveIndustriesTransparencyInitiative,withtheadditionofonepaymentcategory:transportationandterminaloperationfees.ThefinalcategoriesofpaymentsrecommendedbytheWorkingGroupareasfollows:

• Profittaxes(includingprofit,incomeandproductiontaxes);

• Royalties(includingroyalties-in-kind);

• Productionentitlements(byvalueandvolume);

• Bonuses(includingsignature,discoverandproductionbonuses);

• Dividends(i.e.,withholdingtax);

• Infrastructurepaymentsasrequiredbylaworcontract(e.g.,constructionofaroadorrailway);and

• Transportationandterminaloperationsfees.

Thevaluethresholdforanyoftheabove-notedpaymentshasbeensetat$100,000forcompaniestradingontheTorontoStockExchangeand$10,000forcompaniesontheTSXVentureExchange.TheadditionofthelowerthresholdforjuniorminingcompaniesmarksadeparturefromboththeDodd-FrankActandtheEUrequirements,whichsettheminimumthresholdat$100,000.

TheWorkingGroupnotedthiswastoensurethe“madeinCanada”approachincludedalowerthresholdforjuniorminingcompanies,whichcomprisealargeportionofCanadianpublicmining companies. When companies are calculating whether apaymentistobedisclosedornot,theyshouldkeepinmindthepaymentsareona“disaggregated”basis,meaningifaTSXVentureissuermakesasingularpaymentofmorethan$10,000,oraseriesofrelatedpayments(suchasalease),ofmorethan$10,000,thenthatpaymentistobedisclosed.

Form and forum of disclosureFollowingthereleaseofitsdraftrecommendations,theWorkingGroupreceivedcommentsonboththeformandforumofdisclosure.Inresponse,thefinalrecommendationsincludeanewsectionontheformofdisclosure,namelythatcompaniesshalldisclosetheirpaymentsonaseparateform,tobefiledonSEDAR,onanannualbasis.Byrequiringaseparateformtomeetthesuggesteddisclosurerequirements,companieswillnothavetoincludepaymentdisclosureinaprospectusorotherofferingdocument,thusmitigatinganyriskofpaymentdisclosurecausingdelayinpublicofferings.



ThevenueofpaymentdisclosureisboththeWorkingGroup’sandthefederalgovernment’snextchallenge.TheWorkingGrouprecommendsthatthevenueforpaymentdisclosurebewithinprovincialsecuritiesrequirements.Itrecognizesthechallengeinherenttopassinganewdisclosurerequirementwithout a national securities regulator, but cites the Canadian Securities Administrators’ past successes in developing national instrumentsformandatorydisclosure,suchasNationalInstrument43-101.

InthewakeoftheSupremeCourtofCanada’sdecisioninReferencereSecuritiesAct*,however,wheretheSupremeCourtmadeitclearthattheday-to-dayregulationofsecuritiesisthepurviewoftheprovinces,theannouncementbythefederalgovernmentthispastsummermayrequirethefederalgovernmenttoworkwiththeWorkingGroup,investorgroupsandtheminingindustrytopushfortheharmonizationofprovincialsecuritiesregulators,ratherthanpassingfederallegislation.Thefederalgovernment,however,wouldhavebeenwellawareofboththeSupremeCourt’sdecisionandtheconstitutionalframeworkitfacedpriortoitsannouncementthispast summer.

We will monitor the situation closely and provide updates as required.Inthemeantime,itwouldbehelpfulforcompaniestoprepareinternalaccountingsystemstotrackpaymentdisclosurebyprojectinthecomingyearstoensurecompliancewiththeregulationsexpectedtobepassedintolawwithinthenexttwoyears is not a costly or overly burdensome process.

C. More information

Formoreinformationregardinganti-corruptionandbriberylaw in Canada, please contact us directly.

*2011SCC66,[2011]3S.C.R.837.

Janne Duncan Partner Norton Rose Fulbright +1416.202.6715 [email protected]

Sally A. Gomery Partner Norton Rose Fulbright +1613.780.8604 [email protected]

François Fontaine, Ad E Senior Partner Norton Rose Fulbright +1514.847.4413 [email protected]

Michael Torrance Associate Norton Rose Fulbright +1416.216.1908 [email protected]

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DisputesAswithanyminingproject,inCanadaorelsewhere,theriskofadisputewithacontractualpartnerorgovernmentregulatorrequiresplanningtomanagepotentiallycostlydisputeproceedings.Disputeresolutionplanningmaybeassimpleasidentifyingthelawgoverningacontractandanydisputesarisinginconnectionwithit.Complextransactionsontheotherhand,mayrequireatailoredapproach,suchasconsiderationofamulti-tiereddisputeresolutionclauseprovidingforthenegotiation,mediation,and/orarbitrationofanydisputearisinginconnectionwiththerelevantagreements.Whereinvestorsand/ortheirinvestmentscross a border, dispute resolution planning may also involve structuringtheinvestmentatitsinceptionsoastobenefitfromtheprotectionsavailableunderaninvestmentprotectiontreaty.

InCanada,formalcourtproceedingsrepresentthemostcommonforumfortheresolutionofcommercialdisputes.Therearenospecializedcourtswithexclusivejurisdictionover mining matters in Canada. Rather, most disputes may beheardbeforeaSuperiorCourtintheProvinceinwhichthedisputearoseorbeforeaFederalCourt,wherethematterisgovernedbyFederallaw(e.g.,taxation).TheSupremeCourtofCanadahearsappealsfromProvincialappellatecourtsandtheFederalCourtsonleaveinrespectofcivilmatters.Several Canadian Provinces have administrative tribunals, suchastheMiningandLandsCommissioninOntario,whichareresponsibleforavarietyofmattersincludingstakingdisputes,miningclaimtenure,landdevelopmentapplicationsandlandclassificationissues.

Alternative dispute resolution and, in particular, arbitration isalsoavailableinCanadaandisofparticularimportanceto the mining sector. Legislation has been adopted at the FederallevelandinmostoftheProvincesandTerritoriestoimplementtheUNCITRALModelLawonInternationalCommercial Arbitration, in addition to legislation in many Provinces governing purely domestic commercial arbitrations. ForeignarbitralawardsareenforcedinCanadapursuanttothe1985ConventionontheRecognitionandEnforcementofForeign Arbitral Awards, which limits the grounds on which theenforcementofsuchanawardmayberesisted.Canadahas also entered into over two dozen investment protection treatiesandoverhalfadozenfreetradeagreementsthatextendprotectionstoforeigninvestorsandtheirinvestmentsin Canada and abroad.

Thesetreatiesprovidedirectrecourseforinvestorstoresolvetheir disputes with the host government through arbitration under international rules. Canada generally has a positive trackrecordofhonouringadverseawards,aswellassettlingmeritorious investment claims.

FormoreinformationregardingdisputeresolutioninCanada,please contact us directly.

Steve J. Tenai Partner Norton Rose Fulbright +1416.216.4023 [email protected]

François Fontaine, Ad E Senior Partner Norton Rose Fulbright +1514.847.4413 [email protected]

Jeremy Devereux Partner Norton Rose Fulbright +1416.216.4073 [email protected]



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Pleasecontactusdirectlytoobtainfurtherinformationregarding these publications.

InadditiontothisGuide to Mining Projects and Mining Finance in Canada, Norton Rose Fulbright also has available anumberofotherGuidesthatentrantsintotheCanadianminingindustryorcapitalmarketswillfindusefulincluding:

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• The Decision to Go Public: Key Factors to Consider

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