On June 12, 2013, Canadian Prime Minister Stephen Harper announced the introduction of a new transparency initiative in Canada that will require Canadian companies in the extractive industries, including mining, oil and gas, to disclose their payments made to domestic and foreign governments.
This Canadian initiative follows similar measures being adopted in the European Union and the United States, both of whom are already implementing mandatory payment reporting requirements for their mining, oil, and gas companies.
U.S. Dodd Frank Payment Disclosures
The U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd Frank),1 requires oil, gas and mining companies listed on U.S. stock exchanges to disclose payments made to host governments. Companies engaged in the commercial development of oil, natural gas and minerals are required to include in their annual reports information relating to any payment made by the company, a subsidiary or an entity under the company’s control to the U.S. federal government or a foreign government for the purpose of such commercial development. According to the U.S. Security and Exchange Commission (SEC), the reporting requirement affects more than 1,100 companies, including around 90 percent of internationally operating oil companies.
New Mining Act
On May 29 2013, the Québec Minister of Natural Resources tabled the proposed new Mining Act, Bill 43. This is the latest in several recent attempts by governments of Québec to reform Québec mining legislation. Bill 43 would replace the entire Mining Act. It retains most of the current rules in the Mining Act pertaining to rights and ownership, but provides for several significant changes, including with respect to the rights of municipalities, environmental oversight, public interest considerations, economic benefit measures and First Nations consultations. We have highlighted below certain key changes that would be made by Bill 43 to current Québec mining legislation.
Bill 43 proposes to grant new rights and authority to municipalities in relation to mining activities within their territories. For instance, a claim holder would be required to notify a municipality that it had acquired a right with respect to municipal lands and, would be required to inform the municipality prior to carrying out any work in respect of the claim.
Bill 43 also proposes amendments to the Act Respecting Land Use Planning and Development to allow regional county municipalities to designate portions of their lands as “incompatible” with mining activities, or to provide that such activities will be subject to conditions determined by Minister of Natural Resources.
We note that these proposed changes could eventually apply to approximately 300,000 square kilometers in Northern Québec under the jurisdiction of the Cree Nation Government and Eeyou Istchee James Bay Regional Government. The Québec government is currently required to notify these governments of the grant of any new mining claims on land located below the 55th parallel on the territory of the James Bay and Northern Québec Agreement. Continue Reading
Last December, the Canadian government announced that the review threshold under the Investment Canada Act (Act) for investments by state-owned enterprises (SOEs) would be amended and, as a result, would not increase in the same way that non-SOE investments would.1 At that time, the government also introduced revised guidelines for the review of SOE investments, including its position that acquisitions of control by SOEs of a Canadian oil sands business will be found to be of “net benefit to Canada” on an exceptional basis only. These new SOE specific measures necessitate a change in the law to allow foreign investors to determine whether they are SOEs for purposes of the Act and therefore, whether and how their investments will be treated under the Act. Continue Reading
The Québec Minister of Finance and the Economy, Nicolas Marceau, with the Québec Minister of Natural Resources, Martine Ouellet, yesterday, on May 6, 2013, made public the new mining tax regime for Québec, a fiscal measure that will apply to an operator’s fiscal year that begins after December 31, 2013. Considered as a hybrid of different mining taxation regimes, the new regime provides for mining taxes that are equal to the greater of (i) the minimum mining tax of an operator for the relevant fiscal year, and (ii) the mining tax of an operator’s annual profit for the relevant fiscal year. The Québec Mining Tax Act will be amended to implement the new mining tax regime.
This system will replace the tax regime that was instituted under the previous government which, as of January 1, 2012, had provided for a fixed tax rate of 16% on the operating profits of a given mine. The new regime announced today will retain, to a certain extent, this “mine-by-mine” basis for taxation.
On April 23, 2013, the Government of Newfoundland and Labrador (NL) released its updated “Aboriginal Consultation Policy on Land and Resource Development Decisions” (Policy). A copy of the Policy can be found here.1
The Policy provides guidance regarding the process and expectations for proponents where the Crown’s duty to consult is triggered. The Policy also imposes new, onerous requirements on proponents, and in some respects, it significantly shifts the burden of consultation and accommodation from the Crown onto proponents. Certain requirements in the Policy appear to be at odds with Canadian law, including decisions of the Supreme Court of Canada (SCC) regarding consultation and accommodation, and in particular, the obligations of proponents in consultation. Continue Reading
For those who may be interested, McCarthy Tétrault has just launched our sixth blog, the Ontario Employer Advisor. This blog offers the firm’s perspectives on the latest legal developments applicable to the workplace and of interest to our clients, particularly in Ontario. It provides our insights on legislative and regulatory developments, as well as new case law, with practical tips for employers and their human resources professionals when managing the workforce. We welcome you to visit the blog.
The following post by Anthony Alexander of the Opinions Group of McCarthy Tétrault may be of interest to readers of this blog.
The Second Opinion: International Uranium Dispute Undermined by the Hague Convention
A very recent ruling of the Ontario Court of Appeal, Khan Resources Inc. v. Atomredmetzoloto JSC, 2013 ONCA 189, is significant for two reasons: first, it provides appellate authority addressing the interaction between domestic civil procedure rules and international conventions; and, secondly, it highlights a potential pitfall facing Canadian companies doing business with foreign entities (and particularly state-controlled foreign entities). Read more.
In our last post, we outlined some of the reasons why corporate spin-offs are used in the mining and mineral resource sectors. In this post, we address some of the most common methods used to implement the corporate spin-off, as well as some of the expected risks.
How Do I Implement It?
In some cases, a Canadian public corporation seeking to distribute shares of Spinco to its shareholders will be able to do so by a divisive reorganization known as a “butterfly transaction”. The advantage of a butterfly transaction is the deferral of Canadian income tax both at the corporate and shareholder level. The tax rules governing butterflies are highly complex and various restrictions, including prohibitions on certain pre and post-butterfly transactions, may preclude the Parent from availing itself of this method.
It is not an easy time for mining companies looking to raise financing. With that stark reality in mind, our colleagues Gary Litwack, Roger Taplin and Sam Adkins recently presented on a variety of alternative financing solutions for mining companies. A copy of their presentation, delivered at the 2013 Prospectors & Developers Association of Canada convention, can be found here.
In assembling their list of alternative financing solutions, the focus was on companies with limited mining assets (and possibly as few as one). For companies with a number of mining assets, however, there are other avenues available to help stimulate investment – foremost among them the spin-off transaction.
On March 14, 2013, the Canadian Securities Administrators (otherwise known as the “CSA”) published a request and notice for comments regarding Proposal National Instrument 62-105 – Security Holder Rights Plans, the purpose of which is to introduce the CSA’s proposed regulatory regime for rights plans.
The proposed rule, which is discussed in more detail in our publication Securities Regulators Proposed New Rules for Shareholder Rights Plans, does not address other defensive tactics.
In addition, the Autorité des marchés financiers has published An Alternative Approach to Securities Regulators’ Intervention in Defensive Tactics, (the “AMF Proposal”), which will be the subject of a separate publication by McCarthy Tétrault. The AMF Proposal is more general and far reaching in that it applies not just to Rights Plans but to all defensive measures adopted by a board to fend off a hostile bid, and does not contemplate any shareholder approval or ratification requirement. The AMF approach in particular would bring the Canadian regime as regards defensive measures more in line with the US (Delaware) regime, where boards have generally been able to “just say no” to a hostile bid by implementing a rights plan or other defensive measures.