Last week, at the official opening ceremony of the Prospectors and Developers Association of Canada (PDAC) International Convention, Trade Show & Investors Exchange in Toronto, Ontario, Canada’s Minister of Natural Resources Joe Oliver provided an update on the federal government’s commitment to adopt a G8 initiative requiring disclosure of payments by Canadian mining and oil and gas companies to foreign and domestic governments.
In his address, Minister Oliver encouraged the provinces and territories of Canada to implement, through their own securities regulators, transparency and accountability by way of mandatory reporting standards for Canadian extractive companies. He noted that if adequate standards were not implemented by the provinces and territories, the federal government would enact legislation by April 1, 2015 to move the initiative forward. Continue Reading
Settling international investment disputes has changed for Canadians. With the coming into force of the Settlement of International Investment Disputes Act (the Act) on November 1, 2013, Canada has now ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the Convention). The Convention is a multilateral international treaty which entered into force on October 14, 1966, and which has now been ratified by 150 of its 158 signatory countries (as of November 1, 2013). This facilitates international investment by providing a mechanism for settling disputes between governments and foreign investors. Although Canada signed the Convention in 2006 and passed the Act in 2008, ratification was delayed until all provinces and territories also passed implementing legislation.
Ratification means that Canada can join the International Centre for Settlement of Investment Disputes (the Centre), established in Washington D.C. by the Convention under the auspices of the World Bank. Canadian international investors can now take advantage of this forum for the conciliation and arbitration of investment disputes between countries that are parties to the Convention (Contracting States) and investors who are nationals of other Contracting States. Consent of the parties is required and cannot be unilaterally withdrawn once given. Continue Reading
On December 10, after three unsuccessful attempts in three years, Quebec’s National Assembly adopted Bill 70, An Act to Amend the Mining Act.
This success was made possible because the minority government received the support of the National Assembly’s third party, Coalition Avenir Québec (CAQ). The CAQ is keen to burnish its “common sense” credentials in the hope that it will be seen by the electorate as a credible alternative to the two parties that have dominated Quebec politics for nearly 50 years, the Parti Québécois and the Liberals.
Bill 70 was a quickly-adopted compromise. While the Bill did not introduce any conceptual surprises, it is fair to say that not all of its provisions were scrutinized in detail. As a result, some post-adoption assistance from government is required, preferably in the short term. Continue Reading
Last week, the Resource Revenue Transparency Working Group (Working Group) published a report entitled “Recommendations on Mandatory Disclosure of Payments from Canadian Mining Companies to Governments”, which resulted from more than a year of multi-stakeholder consultations, expert guidance, and a public comment process across Canada. The Working Group, which is comprised of Canada’s two largest mining industry groups (the Mining Association of Canada and the Prospectors and Developers Association of Canada) and two civil society transparency groups (Revenue Watch Institute and Publish What You Pay (Canada)) had originally issued a set of draft recommendations in June 2013 for the purposes of furthering consultations with stakeholders. The draft was issued two days after Prime Minister Stephen Harper announced that Canada was adopting a G8 initiative requiring disclosure of payments by Canadian mining and oil and gas companies to foreign and domestic governments.
New guidance for issuers seeking to list on the Toronto Stock Exchange (the TSX) was issued by the TSX on November 7, 2013 (the Staff Notice). The Staff Notice provides guidance with respect to: (i) issuers applying to list under the Mineral Exploration and Development-Stage Companies category; (ii) financial statements submitted to the TSX in support of an original listing application; and (iii) the pricing of stock options, rights and other entitlements granted by an issuer prior to its initial public offering (IPO).
With respect to Mineral Exploration and Development Companies, the Staff Notice outlines certain considerations that will be taken into account in assessing whether a mineral project qualifies as an Advanced Property. Emphasis is given to infrastructure considerations for certain projects (i.e. commodities typically shipped in bulk such as coal, iron ore, all base and precious metal concentrates, and industrial minerals, such as sand, gravel, limestone, commercial clay, and gypsum) located in remote or isolated areas that are not readily accessible (either by road, railway or port). The Staff Notice states that for such projects to satisfy the TSX requirement of having “economically interesting grades” the assumptions, plans and cost estimates for infrastructure should ideally be outlined in a technical report prepared by an independent qualified person in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects and supported by a Preliminary Economic Assessment, Pre-feasibility Study or Feasibility Study (as such terms are defined in “Estimation of Mineral Resources & Mineral Reserves best Practice Guidelines (May 30, 2003)” – Adopted by CIM Council on November 23, 2003). The Staff Notice goes on to state that where an issuer’s technical report does not address infrastructure, alternative supporting information may be accepted by the TSX, after consultation with the TSX, to satisfy the “economically interesting grades” requirement.
On August 6th, 2013, the Quebec Court of Appeal issued a noteworthy decision in the matter of Anglo Pacific Group PLC v. Ernst & Young Inc. et al. It is of particular interest to parties holding or considering obtaining mining royalties in the Province of Quebec.
The Court of Appeal analyzed for the first time the legal characterization of a royalty agreement under Quebec law, including whether it can create real rights. If real rights had been created and registration requirements were complied with, it would have been necessary to consider whether the real right in question was eligible to be purged by way of a vesting order in connection with a sale by a receiver in an insolvency context or other sale under judicial authority.
In the last three years Quebec has on three different occasions attempted to modernize its mining law. The latest attempt, Bill 43, seemed well on its way to becoming law when, on October 30, 2013, the two main opposition parties in the National Assembly voted against its adoption.
The Parti Quebecois government does not have a majority in the National Assembly. But the defeat of Bill 43 came as somewhat of a surprise. On October 10, the official opposition had issued a press release outlining four conditions for its support:
The recent In re Puda Coal, Inc. Stockholders Litigation decision serves as a cautionary note to directors of corporations with significant activities overseas. Specifically, the decision provides guidance to directors as to what is expected from them in order to fulfill their duties. While the case is not strictly applicable to Canadian domiciled companies, it is worth taking note of as Canadian courts have often referred to Delaware decisions when interpreting and applying directors’ duties under Canadian corporate statutes.
Puda Coal concerned a Delaware corporation listed on the New York Stock Exchange following a reverse triangular merger. The operating subsidiary and assets of the parent corporation, Puda Coal, were based in China. According to the plaintiffs, the corporation’s Chairman and Chief executive officer illegally sold the shares of the subsidiary to a third party, effectively looting the corporation of its assets.
The Corruption of Foreign Public Officials Act (CFPOA), Canada’s equivalent of the U.S. Foreign Corrupt Practices Act (FCPA), prohibits Canadian companies and individuals from giving or offering a benefit of any kind to a foreign public official with the ultimate purpose of obtaining or retaining a business advantage. While the CFPOA has been in effect since 1999, a recent set of amendments designed to strengthen the legislation should be on the radar screen of all Canadian companies and Canadian nationals that do business abroad. Canadian mining companies that do business in countries with less developed economies and legal systems, and who interact with foreign public officials in such countries on a regular basis, are particularly likely to be affected.
The recent amendments were in part a response to criticism from the OECD’s Working Group on Bribery that Canada’s enforcement efforts under the CFPOA have been inadequate. The amendments include the following:
On October 17, 2013, the B.C. Securities Commission (BCSC) released a report entitled “BC Junior Mining at a Crossroads: Executive Management’s Perspective“. The BCSC commissioned KPMG to prepare the report in order to help the BCSC to better understand industry challenges and perspectives about the current downturn, and the availability of financing for junior mining companies.
The report is based on interviews with senior executives from 15 junior mining companies headquartered in British Columbia. As KPMG itself cautions, given the small sample size (among other things), the report should not be considered to be statistically representative of industry opinion, but is merely indicative of potential industry opinion.