The section of Quebec’s proposed Mining Act that makes mine developers wary
Posted on July 8, 2013
On May 29 the Quebec government tabled Bill 43, the Mining Act. The purpose of Bill 43 is to replace provisions of the current Mining Act that deal with minerals, momentarily leaving untouched the sections dealing with petroleum, natural gas and underground reservoirs. (As mentioned in an earlier post we expect a separate oil and gas law to be tabled in the fall.)
This is Quebec’s third attempt in as many years comprehensively to revamp its mining legislation. The National Assembly will examine Bill 43 in detail when it reconvenes in September.
Earlier, on May 6, Quebec announced its proposed new mining tax regime [PDF] which, if adopted, will come into force as of January 1, 2014. The proposed mining tax regime was the object of vociferous debate throughout much of winter, and there was considerable relief when the government produced a regime tempered by compromise.
The gestation of Bill 43 was similar. A sometimes acrimonious debate produced a result that while not perfect in the eyes of many, including municipalities, is acknowledged by most in the industry as having been written with a spirit of compromise. Bill 43 is an attempt to modernize Quebec’s mining regime whilst preserving the current mineral tenure system, including the “free-entry system” dear to the prospecting and exploration side of the industry.
In essence, Bill 43 tries to dovetail Quebec’s mining regime with the wants and needs of a modern, urbanized society.
Bill 43, among other things, increases environmental protection and mine rehabilitation, promotes transparency by requiring yearly reports of extracted tonnage and paid royalties, restricts mining expropriation powers, allows Quebec to auction claims in targeted areas, and grants regional county municipalities a greater say in whether mining can be carried out on their territory.
There is, however, one Bill 43 innovation that may have considerable adverse unintended consequences. Bill 43, section 122 requires that an “ore processing feasibility study” be sent to the minister of natural resources before beginning mining operations and every 20 years thereafter. Section 122 further provides that the minister may, before the commencement of mining operations and every 20 years thereafter, require that an agreement be entered into to maximize the economic spinoffs of mining Quebec mineral resources.
At this time, Bill 43 is silent as to what constitutes an ore processing feasibility study, or the criteria that must be taken into account before the minister may require an agreement.
Whilst government has promised to fill the vacuum with objective conditions, this may not be enough to assuage prospective mine developers.
In Quebec, developers tend to be large foreign entities with a multitude of projects each vying internally for development funds. If developers avoid Quebec because they are uncertain as to whether they will obtain a mining lease, or whether such a lease will allow them to meet their investment criteria, this will hurt prospecting and exploration firms.
Prospecting and exploration firms tend to be smaller and local. They need to attract large amounts of equity in order to carry out their activities in the hope of finding the next world class project. If Quebec is likely to be bypassed by mine developers and operators, why should someone fund prospecting and exploration in Quebec?
In its proposed mining tax regime, the government offers tax incentives for those companies processing in Quebec, including a 10-year income tax holiday for large projects and increased processing allowance. In the eyes of industry and many observers, an improved macro-economic environment is the preferred avenue to achieve government’s laudable goal of increased downstream activities in Quebec.