On January 29, the Ministère de l’Énergie et des Ressources naturelles (the “MERN”) issued two directives, one of which deals with the duty of the grantee of a mining concession to undertake mining operations no later than December 9, 2018 (the “Directive”), as provided for in section 118 of the Mining Act (the “Act”).
The Directive, which came into force last February 1, determines the extent of this duty and the means available to comply with it. Recall that section 118 was passed in the wake of the enactment, on December 10, 2013, of Bill 70 which amended several significant provisions of the Act (the “Amending Act”), and followed several unsuccessful attempts at reforming the Act.
The Duty to Commence Mining Operations by December 9, 2018
This significant amendment passed in 2013 requires grantees to commence mining operations within five (5) years following December 10, 2013. This means that, failing initiation of one of the five steps identified by the MERN in the Directive within the allotted timeframe, a grantee can have its mining concession revoked by the Ministre de l’Énergie et des Ressources naturelles (the “Minister”).
In order to maintain its rights to a mining concession, a grantee must prove to the MERN, no later than December 9, 2018, that such concession is in operation or has moved past one or several of the following phases:
- It has forwarded to the MERN a feasibility study in compliance with the departmental directive made under section 101;
- It has obtained the environmental certificate of authorization required pursuant to the Environment Quality Act (the “EQA”);
- It has installed a processing plant on the concession lands that is in operational mode or in care and maintenance mode;
- It must be using the existing accumulation or developing areas and using a new accumulation area on the concession lands;
- Over the past two (2) years, it must have conducted work on the concession mining operations or development, or conducted a minimum of $10M in pre-production development work.
Accordingly, if the concession is not operational, the grantee must meet one of the above criteria to show that it has undertaken mining operations in order to comply with the Directive. It is a rather restrictive list when compared to the definition of “mining operation” found in the Mining Tax Act (the “MTA”) which specifically includes “all work related to the various phases of mineral development, namely exploration, pre-production development, post-production development, the reclamation or rehabilitation of land situated in Québec, (…)”. We, therefore, note that the MERN wishes to restrict the type of qualifying work under the circumstances despite the existence of a clear definition in another mining-related statute.
Failing compliance with this duty, the grantee risks the suspension or revocation of its mining rights. This discretionary authority is granted to the Minister pursuant to section 279 of the Act.
The Process for Abandoning a Concession
The Directive also covers the issue of the abandoning of a mining concession, and determines the process and conditions applicable to such a decision. Indeed, section 122 of the Act provides that a grantee may abandon his right in respect of all or part of the land subject to his concession.
To do so, the grantee must comply with four (4) conditions. First, an application for abandonment must be made to the MERN. Such application must contain the following:
- The plans showing geological and geophysical findings as well as samples with their content in metals or minerals;
- A record of all drill-holes indicating their location, direction, angle, name and description of the rocks intersected and their thickness and the samples taken;
Thereafter, the grantee will be required to pay the duties payable under the MTA and to comply with the other duties set out in section 122 of the Act, namely forwarding to the MERN the plans, registers and reports referred to in section 226 of the Act and complying with the annual requirements provided for in section 119 of the Amending Act (duty to carry out exploration work).
Once the application has been made, the Minister will send a notice to the grantee’s creditors who have registered an instrument, defined in paragraph 3 of section 13 of the Act in the register of real and immovable mining rights (the “Register”), in order to obtain any comments from them within 30 days following the forwarding of the notice.
Finally, for the instrument of relinquishment of mining rights to be in final form and approved by the Minister, the MERN will have to wait for expiry of the 30-day time period following notification of the creditors and it must have received the notice of prior approval from the Minister of Sustainable Development, Environment and the Fight against Climate Change (“MSDEFCC”). Currently, there is some uncertainty as to time required to obtain such an approval from the MSDEFCC, which, therefore, prompts us to recommend that grantees wishing to undertake this process for the voluntary abandonment of their mining rights initiate the process as soon as possible.
It is worthwhile noting that the authorization to abandon the mining concession in no way releases the grantee from its rehabilitation and restoration duties under the Act, or from those provided for in the EQA.
The abandonment process culminates in a signature by the Minister of an abandonment instrument that will be recorded on the Register. Note that section 123 of the Act grants the grantee a priority of 30 days from the date of abandonment of the concession enabling the latter to register, by notice of map designation, a claim in respect of all or part of the land that was subject to the abandoned title.
Therefore, all owners of mining concessions should be on notice to stake a claim on the affected land following the voluntary abandonment of their concession: do not wait until the last minute to engage such a process, or else you might be in for an unpleasant surprise!