Recent changes, and proposed changes, in legislation in Canada and the United States will affect the business, operations and disclosure requirements of
Canadian mining companies in the upcoming year and beyond. This article provides a brief summary of some of these current or proposed legislative changes.
NI 43-101: proposed changes for 2011
On April 23, 2010, the Canadian Securities Administrators (CSA) published for comment proposed changes to National Instrument 43-101 Standards of
Disclosure for Mineral Projects (NI 43-101). The proposed changes were developed in consultation with the mining industry and are expected to streamline
and clarify required disclosure. They include:
- Permitting an issuer to have a Qualified Person (QP) who approved the disclosure of the scientific and technical information, as an alternative to naming
the QP who performed or supervised the preparation of the information.
- Expanding the definition of “preliminary economic assessment” to include an economic analysis of the potential viability of a mineral resource at any
stage of the project that includes, or is based on, Inferred Mineral Resources or a permitted estimate.
- Eliminating the requirement upon becoming a reporting issuer to file updated certificates and consents of a QP when relying on a previously filed
technical report, provided the report is current and it meets the applicable independence requirements.
- An exemption from the filing of a technical report for an issuer that holds only a royalty interest in a property in certain circumstances where
information regarding the property is already publicly available.
- Changes to the definition of “historical estimates” to permit disclosures of estimates prepared by third parties regardless of when prepared, subject to
- An extension in the filing deadline of a technical report from 45 days to six months for first-time disclosure, if the prior owner of the property has
previously filed a technical report and it remains current.
- Revisions to the technical report requirements to make the form more suitable for advanced-stage and producing properties.
- An expansion of the acceptance of certain foreign regulatory authorities, foreign standards regarding the classification of reserves and resources and
The CSA is also considering eliminating the current requirement to file a technical report concurrently with the filing of a short form prospectus.
The period for comments on the proposed amendments closed on July 23, 2010 and it is expected that the amendments to NI 43-101 will be finalized and become
effective in 2011.
CSA Staff Notice 41-305: IPO share structure issues
On September 24, 2010, the CSA released a Staff Notice describing certain factors that are considered by Canadian regulators when assessing a proposed
share structure in an initial public offering (IPO) and whether the proposed structure would be contrary to public interest resulting in the refusal of a
receipt. Among the concerns is the issuance of a large number of shares for nominal cash consideration to founders, particularly when the business has a
limited history of operations and the IPO financing is relatively small. This is a common profile of junior mining companies that are considering an IPO.
The regulators believe this could lead to future market manipulation and excessive dilution of invested capital at the time of the IPO. Several factors will be considered by the regulators including the share price, the number of shares outstanding and the involvement of the founders to ensure that the capital from the IPO purchasers is not significantly disproportionate to their equity interest.
Dodd-Frank Wall Street Reform and Consumer Protection Act – United States
New disclosure requirements will apply to Canadian mining companies whose securities are publicly traded in the United States as a result of the enactment
of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) in the United States on July 21, 2010.
- Under Dodd-Frank, an issuer that is an operator of a mine is required to include in its quarterly and annual disclosure, information regarding mine
safety matters, violations of standards and enforcement actions under the U.S. Mine Safety and Health Act.
- Dodd-Frank requires that issuers engaged the commercial development of oil, natural gas or minerals that includes exploration, extraction, processing,
exporting or the acquisition of a license for any of these activities disclose in their quarterly and annual disclosure with the U.S. Securities and
Exchange Commission (SEC) any non de minimis payments related to that commercial development made by the issuer to any foreign government or the U.S.
federal government. The final disclosure rules are due from the SEC by April 17, 2011, and the disclosure requirement will take effect one year after the
final rules are issued.
- Additionally, any issuer that uses conflict minerals in its products will be required to determine if the minerals originated in the Democratic Republic
of Congo (DRC) or any country bordering the DRC and then file a report with the SEC, among other things, delineating the source and the chain of custody of
Foreign private issuers will be required to include the mandated disclosure in Form 20-F or Form 40-F annual reports.
Far North Act, 2010 – Ontario
In Ontario, the Far North Act, 2010 was passed on September 23, 2010. The Ontario government has touted this legislation as promoting economic development,
cooperation with First Nations and environmental protection in the Far North, which encompasses approximately 225,000 square kilometres and includes the
“Ring of Fire.” The legislation is designed to protect land north of the 50th parallel from industrial development without community-based land-use
planning that directly involves First Nations. There has been significant resistance to the legislation from all sectors, including the mining industry,
municipalities in the Far North and First Nations. There are concerns that the act will limit development by compromising the mining sector’s ability to
operate in the Far North as a result of reducing the available land base in the Far North by 50 per cent. In addition, lack of regulation and funding to
implement the proposed land-use planning regime has already created a climate of uncertainty for industry and investors as to future project development
and timing. Although in favour of community-based land-use planning, First Nations are objecting to the new legislation as it imposes regulation that may
override existing Aboriginal treaty rights and may also limit First Nations involvement in the economic development of the Far North.
Virginia Schweitzer is a partner at Fasken Martineau in Ottawa. Her practice includes corporate finance, M&A, securities, and mining and technology law. She advises corporations, including non-profit organizations, on corporate governance and restructuring matters. She also acts as corporate secretary for several boards of directors.