First-step analysis: mining in Canada

Mining industry

What is the nature and importance of the mining industry in your country?

Mining accounts for a significant portion of Canada’s economy. In 2019, Natural Resources Canada pegged domestic mineral production at C$48.1 billion. Gold (C$10.3 billion), coal (C$5.8 billion), iron ore (C$5.6 billion), potash (C$5.5 billion) and copper (C$4.3 billion) account for two-thirds of Canada’s total mineral production.

The Canadian mining and mineral processing industry employs nearly 409,000 people in mineral extraction, related support activities, smelting and refining, fabrication and manufacturing. It also accounts for more than half of Canada’s rail freight and high portions of the country’s port and marine cargo. Canada’s mining and exploration companies are also dominant players in the global mining industry. In 2018, Canadian companies had mining and exploration assets worth C$272 billion invested in Canada and abroad (over 100 countries), including regions such as Africa, Australasia, Europe, South America and the United States. Canadian companies have interests in more than 4,000 properties spanning more than 100 countries, including projects held domestically and those in the regions mentioned above. Foreign assets of Canadian mining companies total some C$174 billion.

Almost 50 per cent of the world’s public mining companies are listed on the Toronto Stock Exchange (TSX) and the TSX Venture Exchange (TSX Venture), with 29 new mining listings in 2019. During 2015 to 2019, 37 per cent of global mining equity financings’ value was raised on TSX and TSX Venture, while in 2019 they handled 56 per cent of the equity capital raised globally for mining (C$12.5 billion) and 48 per cent of financing transactions.

What are the target minerals?

Canada is a leading global producer of several minerals and metals, ranking at the top in the global production of potash, and a top-five producer of primary aluminium, gemstones, graphite, diamonds, gold, nickel, indium, niobium, platinum group metals, salt, titanium concentrates and uranium. Key exports include aluminium, coal, copper, diamonds, gold, uranium, nickel, potash, zinc, iron ore and steel. Canada continues to focus on minerals used in battery technology such as lithium, nickel, graphite and cobalt. Canada is also a global leader and emerging supplier in responsible and sustainable mining of critical minerals including rare earth elements, lithium, vanadium, manganese, phosphate and magnesium. There continues to be ongoing advanced exploration in cobalt, graphite and lithium across most of Canada.

Which regions are most active?

All provinces and territories produce minerals but British Columbia, Ontario, Quebec and Saskatchewan are the largest producers. For additional information, including statistics on indigenous participation in the minerals and metals sector, see the Natural Resources Canada – Minerals and Metals Facts website (https://www.nrcan.gc.ca/mining-materials/facts/20507) and the Minerals and the economy section (https://www.nrcan.gc.ca/mining-materials/facts/minerals-economy/20529#indigenous).

Legal and regulatory structure

Is the legal system civil or common law-based?

Canada’s legal roots are firmly entrenched in the systems of its founding nations: England and France. The federal government, nine of the 10 provinces, and the three northern territories have adopted a common law legal system similar to the common law systems in Australia, the United Kingdom, the United States and elsewhere.

Quebec has adopted a civil law-based system that has some similarities with countries throughout Africa, Asia, Europe and South America. However, some aspects of the Quebec system are governed by federal laws and are therefore common law-based.

How is the mining industry regulated?

Canada’s legal, regulatory and policy environment promotes mineral exploration, mining operations and investment. Mining law is divided between the federal and provincial governments. Ownership of lands and minerals generally belongs to the province in which they are situated. The provinces have jurisdiction over mineral exploration, development, conservation and management. The federal government shares jurisdiction with the provinces on some related matters (eg, taxation and the environment) and has exclusive jurisdiction over areas such as exports, foreign investment controls and nuclear matters.

The exception is uranium, a strategic mineral, which is also regulated by federal laws. Although exploration is an exclusively provincial matter, the federal government regulates all downstream aspects, including mining and milling, processing, transporting and export.

What are the principal laws that regulate the mining industry? What are the principal regulatory bodies that administer those laws? Were there any major amendments in the past year?

Federal and provincial legislation affecting mining activities tends to fall into two main categories:

• private matters of title and taxation; and
• economic, social and environmental policies.

Significant decision-making powers are delegated to subordinate bodies or officers to deal with the complexity of the various matters dealt with under the second category.

Each province and territory has its own laws regulating mining activity (with varied names such as the Mineral Act, the Mining Act, the Mineral Resources Act and the Mineral Exploration and Tenure Act). Some provinces have, over the years, amended their legislation to take into account current attitudes related to environmental protection, sustainable development and consultation with local communities, in particular, aboriginal communities – known in Canada as the First Nations. For example, the Quebec Mining Act was amended several years ago and contains provisions specific to First Nation communities, including a provision whereby the Quebec government must draw up, make public and keep up to date a consultation policy specific to the mining sector. On 22 October 2019, the Minister of Energy and Natural Resources published the Aboriginal Community Consultation Policy Specific to the Mining Sector (the Policy), which sets out general and specific guidelines for the purposes of the aboriginal communities consultation process, to foster and maintain better relationships with these communities (https://mern.gouv.qc.ca/wp-content/uploads/PO-consultation-mines_MERN-ANG.pdf). The Policy makes recommendations with respect to the relationships mining proponents must maintain with aboriginal communities throughout the development of a mining project – starting as soon as claims, permits, authorisations or other mining rights are granted.

Federal and provincial or territorial laws and regulations related to environmental protection, labour and employment relationships, occupational health and safety matters, etc, also apply to mining activities.

A major change in Ontario was the passing of the Aggregate Resources and Mining Modernization Act 2017. As a result, traditional claim staking in Ontario ended and all mining claims are now registered through an online system, bringing Ontario into line with other provinces that have already moved to online registration systems.

What classification system does the mining industry use for reporting mineral resources and mineral reserves?

Canada adheres to the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards, which were adopted in 2005 to establish definitions and guidelines for the reporting of exploration information, mineral resources and mineral reserves in Canada. They are incorporated by reference into the Canadian Securities Administrators’ National Instrument 43-101 (NI 43-101), which sets the standards for all technical public disclosure for mineral projects. Mining companies listed on the Toronto Stock Exchange (TSX) and TSX Venture must comply with NI 43-101. The CIM is a member of the Committee for Mineral Reserves International Reporting Standards (CRIRSCO) and the CIM Standards are consistent with other members:

• Australia (JORC);
• Chile (National Committee);
• South Africa (SAMREC);
• the United Kingdom (National Committee);
• the United States; and
• western Europe.

Canadian companies dual listed in the United States are now subject to the new requirements of the US Securities and Exchange Commission with the replacement of Industry Guide 7 with S-K 1300 relating to mineral disclosure. Although the new system is based on CRIRSCO standards, the new rules will result in additional reporting requirements for Canadian dual-listed companies.

Mining rights and title

To what extent does the state control mining rights in your jurisdiction? Can those rights be granted to private parties and to what extent will they have title to minerals in the ground? Are there large areas where the mining rights are held privately or which belong to the owner of the surface rights? Is there a separate legal regime or process for third parties to obtain mining rights in those areas?

All lands and minerals that have not been granted to private persons are owned by the Crown (which in Canada refers to either the federal or provincial government in the name of Her Majesty the Queen), in the case of lands and minerals within the territory of a province, vested to it by the Canadian Constitution. The federal government owns minerals underlying federally owned lands, including, for example, reservations set up for many of Canada’s First Nations, federal national parks and public harbours, and in the Northwest Territories, Nunavut, and underlying Canada’s territorial waters and continental shelf.

Generally, minerals underlying lands within the territory of a province (privately owned or Crown lands) belong to the Crown in right of such province. Mineral rights are obtained and maintained through mining laws; typically, for exploration activities (in Quebec, other than surface mineral substances), by map-designation of mining claims, performing prescribed exploration or assessment work and then obtaining leases or similar forms of tenure to conduct mining operations. The provincial governments (and in some cases the federal government) set out operating terms and conditions on leased mineral lands and may impose taxes and royalties. The contractual capacity of the Crown as owner provides a means by which governments supplement their authority as legislators.

Once private parties obtain the right to mine Crown minerals through the legislated leasing process, such minerals are held by the private party for the tenure of the lease. In Quebec, the right to extract minerals belongs to the holder of a lease but the minerals remain the property of the Crown until extraction. Subject to compliance with general laws and, in some provinces, obtaining government consents, the leases can be encumbered for security purposes in financings, transferred and renewed.

There are some areas in certain Canadian provinces where minerals or mining rights are privately held, either because of land grants made in the 1800s and early 1900s (or in the case of Quebec, as early as the 1600s) when minerals, in whole or in part, or the right to mine, were attached to surface right or land grants, or as a result of earlier mining legislation that provided for grants of ‘freehold’ tenure or outright ownership of mineral rights or substances. In those instances, if a company is interested in acquiring rights to explore or develop such privately held minerals or mining rights, it is a matter of private negotiation with the landowner. Mining activities on those lands are, nevertheless, subject to the same environmental, labour and other laws as those applicable to mining activities involving Crown minerals.

What information and data are publicly available to private parties that wish to engage in exploration and other mining activities? Is there an agency which collects mineral assessment reports from private parties? Must private parties file mineral assessment reports? Does the agency or the government conduct geoscience surveys, which become part of the database? Is the database available online?

Information and data related to exploration and mining activities in Canada are available through the following:

• provincial and territorial mining recorders’ offices – these provide services related to staking, ownership and mining claim maintenance, including receiving ‘assessment work’ reports and filings of exploration activities;
• provincial geological surveys – most provinces gather geological information and may conduct broad ground or aerial surveys and publish maps, reports and digital data on geology and other technical information (eg, www.geologyontario.mndm.gov.on.ca); 
• provincial and territorial land title and registry offices – these record information about the title of leasehold and freehold property (including minerals), which is available (usually online) for a fee; and
• Natural Resources Canada publishes Commodity Reviews (www.nrcan.gc.ca/mining-materials/publications/18733) and maintains a detailed listing of Canada’s operating mines and mineral processing facilities (www.nrcan.gc.ca/mining-materials).

What mining rights may private parties acquire? How are these acquired? What obligations does the rights holder have? If exploration or reconnaissance licences are granted, does such tenure give the holder an automatic or preferential right to acquire a mining licence? What are the requirements to convert to a mining licence?

Prospectors can explore ‘open’ Crown lands (or in Quebec, lands that are privately owned), with a prospecting permit, and can ‘stake’ the mineral rights if the land has not already been located and recorded by another party. Most provinces have now adopted ‘map designation’ in lieu of ground staking, where claims are delineated online using a grid system based on global positioning system technology (in either instance, claims that are ‘ground staked’ or ‘map designated’ are referred to as being ‘located’).

Mining claims that are located and recorded are generally referred to as ‘unpatented’ mining claims (in Quebec, merely ‘mining claims’) and are subject to certain payments and prescribed exploration or assessment work obligations. Failure to meet such requirements within time periods set by law or regulations can result in automatic forfeiture of the claim and the subject area will become open for staking by others (a use-it-or-lose-it type regime). Many provinces now allow for payments in lieu of meeting applicable prescribed exploration or assessment work requirements to renew mining claims. The conversion of a mining claim to a lease varies by province, but generally can be done after a specified assessment work requirement has been met (the need for a discovery prior to lease conversion is no longer required in most provinces). In Quebec, the conditions that a claim holder must meet to obtain a mining lease include having to establish the existence of indicators of the presence of a workable deposit. No other party can acquire a mining lease over the particular area other than the claim holder. Leases are usually for 21 years or longer with an opportunity to renew if mining activity is occurring or if it can be shown that the lessee is committed to developing the mineral potential on the leased area (in Quebec, the first term of a mining lease is 20 years, renewable for 10 years but not more than three times, except at the discretion of the minister for additional terms of five years each).

What is the regime for the renewal and transfer of mineral licences?

In most provinces, mining claims can be transferred by filing a simple transfer form and paying a fee to the government. The transfer and new owner would then be noted on the abstract or register for the mining claim. For lease transfers, government consent may be required from the particular mining department (eg, in Ontario, section 81(14) of the Mining Act restricts transfer of a lease until the consent of the Minister of Energy, Northern Development and Mines is obtained). In Quebec, there is no fee or consent required for a transfer of interests in mining rights such as those granted by a mining claim or a mining lease. However, to have effect against the government (the Crown in right of the province of Quebec), evidence of the transfer must be filed at the public register.

What is the typical duration of mining rights?

Leases are usually for 21 years or longer with an opportunity to renew if mining activity is occurring or if it can be shown that the lessee is committed to developing the mineral potential on the leased area (in Quebec, the first term of a mining lease is 20 years, renewable for 10 years but not more than three times, except at the discretion of the minister for additional terms of five years each).

Generally, the ability to extend or renew a mining claim or lease is in the control of the holder. Governments possess no ability to revoke or cancel mining claims except in the case of fraud or misrepresentation. Mining claims will forfeit automatically (with no act required on the part of the government) for failure to complete exploration or assessment expenditures within the prescribed period of time. Regarding leases, the provincial mining ministry will normally have the authority to cancel or revoke rights where the lessee fails to comply with the terms of the lease or fails to pay annual rent, taxes or royalties, or both.

Is there any distinction in law or practice between the mining rights that may be acquired by domestic parties and those that may be acquired by foreign parties?

There is no distinction in Canada between the acquisition of mining rights by domestic and foreign parties (foreign parties may be required to have an address for service within the province where they are operating).

How are mining rights protected? Are foreign arbitration awards in respect of domestic mining disputes freely enforceable in your jurisdiction?

Mining rights are protected by independent administrative tribunals. Appeals against these tribunals’ decisions lie with the Canadian courts. Mineral tenures are generally granted by Canada’s free-entry mining system, which limits the government’s involvement in disputes over mining rights. In all other situations, the exercise of governmental discretion over mining rights and disputes is subject to the rules of Canadian administrative law.

The provinces have broad jurisdiction over most international arbitrations and have passed legislation governing the conduct and enforcement of international arbitral proceedings. Canada’s federal Commercial Arbitration Act applies to arbitrations involving the federal Crown and Crown-owned corporations as well as to maritime and admiralty matters. In 1986, Canada adopted the UNCITRAL Model Law on International Commercial Arbitration and signed the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Canada signed the International Convention on the Settlement of Disputes (the ICSID Convention) in December 2006. After a seven-year delay, Canada ratified the ICSID Convention on 1 November 2013, coming into force on 1 December 2013.

What types of surface rights may mining rights holders request and acquire? How are these rights acquired? Can surface rights holders oppose these requests?

In all but some very remote parts of Canada, the Crown lands available through the claim-staking and leasing process consist only of the mining rights because the surface rights are owned privately by another party. The owner of the mining rights is nevertheless entitled to conduct exploration and even mining activities on the leasehold interest, subject to compensation (and in some cases, advance notice) to the surface rights owner. Disputes arising in these situations can be settled through special tribunals (eg, the Mining and Lands Tribunal in Ontario) or through the courts. However, a mining rights lessee would be well advised to negotiate the acquisition of the surface rights privately.

Does the government or do state agencies have the right to participate in mining projects? Is there a local listing requirement for the project company?

Governments do not participate in mining projects in Canada and limit their role to one of regulation. However, in Quebec, there are government entities that do invest and sometimes retain ownership interests in such projects and, indeed, have even sometimes acted as proponents of such projects (eg, Ressources Québec, a wholly owned subsidiary of Investissement Québec).

Are there provisions in law dealing with government expropriation of licences? What are the compensation provisions?

There are general statutes dealing with expropriation in Canada, which provide for compensation. Mining tenure cannot be expropriated or cancelled unilaterally by governments. Instances of expropriation might include land needed for transportation corridors (road and rail), transmission lines and parkland.

Are any areas designated as protected areas within your jurisdiction and which are off-limits or specially regulated?

Responsibility for environmental protection, including setting aside areas as parks and other forms of protection from development, is shared by the federal and provincial or territorial governments. Local governments can also protect certain areas from development by creating parks or specifically protected areas, or by limiting development through the enactment of by-laws and official community plans. Development is restricted according to the level of protection assigned to a protected area. Provincial and territorial governments have jurisdiction over 57 per cent of all terrestrial conserved areas. Parks Canada and Environment and Climate Change Canada are responsible for 30 per cent and 11 per cent of Canada's terrestrial conserved areas, respectively.

As at the end of 2018:

• 11.2 per cent of Canada's terrestrial area (land and freshwater) was conserved, including 10.9 per cent in protected areas;
• 7.9 per cent of its marine territory was conserved, including 3.1 per cent in protected areas;
• the terrestrial area conserved has increased by 66 per cent in the past 20 years, and by 6 per cent in the past five years; and
• the marine area conserved has increased by a factor of more than 16 in the past 20 years, and by more than five times in the past five years.

Conserved areas include protected areas, as well as areas conserved with other measures (areas that do not meet the formal definition of protected area but are managed in a way that biodiversity is conserved). Both protected areas and areas conserved with other measures contribute to Canada's conservation network. Conserved areas are lands and waters where use is limited. In some cases, certain commercial activities and harvesting of biological resources may be allowed so long as biodiversity is conserved.

Areas conserved with other measures include marine refuges. These are long-term fisheries area closures identified as ‘other effective area-based conservation measures’ as described in Aichi Target 11.

The distribution and size of conserved areas is variable. Larger terrestrial conserved areas tend to be located in northern Canada, where there is less intensive use of land for agriculture, settlement and road networks. Larger marine conserved areas tend to be in offshore areas, where human uses are often less intense. In landscapes and seascapes with competing uses, conserved areas tend to be smaller but more numerous.

Duties, royalties and taxes

What duties, royalties and taxes are payable by private parties carrying on mining activities? Are these revenue-based or profit-based?

Corporations carrying on mining activities in Canada are subject to the general income tax rules applicable to all corporations. Federal income tax is levied under the Income Tax Act (Canada); the provinces and territories also have their own income tax statutes. A number of unique tax measures and rules also apply specifically to Canada’s mining industry.

As a general matter, royalties and mining taxes are imposed separately from income taxes by the province or territory in which the minerals are mined. The rates and basis of royalties’ calculation and mining taxes vary depending upon the type of mineral and the jurisdiction. In some jurisdictions, many minerals are not subject to provincial mining taxes or royalties. In other jurisdictions, the mining tax is levied on the basis of a progressive-rate system based on the mining profits or value of output, depending upon the particular jurisdiction. When the tax is computed by reference to mining profits, the rules for computing mining profits generally differ significantly from those applicable for income tax purposes. In many cases, an attempt is made to roughly calculate the mining profits at the pithead by permitting a processing allowance.

What tax advantages and incentives are available to private parties carrying on mining activities?

Recognising that mining is a highly cyclical and capital-intensive industry with a long lead time between initial investment and commercial production, the income tax systems and provincial mining taxes provide a generous treatment of exploration and other intangible expenses. They allow mining companies to recover most of their initial capital investment before paying a significant amount of taxes.

Canada’s Income Tax Act segregates exploration and development expenses into various pools and permits deductions for the pools in a specified order. The classification of an expense into a particular pool depends on the date the expense was incurred, the nature of the expense and certain other considerations. Precise rules govern how these exemptions can be calculated. Examples of these exemptions are as follows:

• Canadian Exploration Expenses (CEE) – expenses incurred to determine the existence, location, extent or quality of a mineral resource in Canada and expenses incurred prior to the commencement of commercial production to bring a new mine into production (recent changes to the definition of CEE will include the costs associated with undertaking environmental studies and community consultations that are undertaken to obtain an exploration permit, a right, licence or privilege for the purpose of determining the existence, location, extent or quality of a mineral resource).
• Canadian Development Expenses (CDE) – expenses incurred prior to the commencement of commercial production to bring a Canadian mineral resource into commercial production.
• Earned depletion allowance – certain depletion allowances are permitted as deductions from income since mineral resources are wasting assets.
• Purchase and sale of resource properties – the cost of acquiring a Canadian resource property is generally deductible on an annual 30 per cent declining-balance basis as a CDE.
• Flow-through shares – corporations carrying out exploration in Canada can pass on the deduction associated with certain types of expenses to shareholders by issuing flow-through shares. Investors that acquire flow-through shares may be eligible to a 15 per cent tax credit on flow-through mining expenditures that are incurred with the proceeds of the flow-through shares. This credit is usually only made applicable to expenditures prior to a certain date and is usually renewed for another year as part of the Federal Budget measures. In the November 2018 Economic Statement, the federal government decided to support mineral exploration efforts by extending the credit until 31 March 2024.
• The Economic Statement also provides an additional first-year Canadian development expense deduction for a taxpayer’s ‘accelerated Canadian development expenses’ of 15 per cent for taxation years ending before 2024, and 7.5 per cent for taxation years ending after 2023. This amount will be added to taxpayers’ cumulative Canadian development expenses at the end of the year, to determine the total amount deductible. For this purpose, an accelerated Canadian development expense is generally a Canadian development expense that is actually incurred after 20 November 2018 and before 2028. This includes development expenses renounced under flow-through share agreements entered into after 20 November 2018.
• Further, the Economic Statement also provides for an additional first-year oil and gas expense deduction for taxpayers’ ‘accelerated oil and gas property expenses’ of 5 per cent for taxation years that end before 2024, and 2.5 per cent for taxation years that end after 2023. This amount will be added to a taxpayer’s cumulative Canadian oil and gas property expenses at the end of the year, to determine the total amount deductible. For this purpose, an accelerated oil and gas property expense is generally a Canadian oil and gas property expense that is actually incurred after 20 November 2018 and before 2028.
• As part of the 2018–2019 Quebec Budget, Quebec announced the introduction of an environmental studies allowance, similar to the community consultation allowance. Thus, an operator may deduct, in computing its annual profit for a fiscal year for purposes of the Mining Act (Quebec), an amount on account of the environmental studies allowance with respect to environmental studies expenses incurred.

Most machinery, equipment and structures used to produce income from a mine or an oil or gas project are currently eligible for a capital cost allowance (CCA) rate of 25 per cent on a declining-balance basis.

In addition to the regular 25 per cent CCA deduction, accelerated CCA is provided for certain assets acquired for use in new mines or eligible mine expansions. The accelerated CCA takes the form of an additional allowance that supplements the regular CCA deduction.

The Income Tax Act was amended in 2013 to phase out the additional allowance available for mining (other than for bituminous sands and oil shale, for which the phase-out was completed in 2015). The additional allowance will be phased out over 2017–2020. Taxpayers will be allowed to claim a percentage of the amount of the additional allowance otherwise permitted under the existing rules according to the following schedule:

The definition of CEE in the Income Tax Act was amended in 2013 to gradually remove certain pre-production mine development expenses from the definition of CEE and gradually treat such expenses as CDE. In accordance with the current definition of CEE, in addition to the expenses associated with the physical exploration for the resource, eligible expenses can include the cost of certain environmental studies and community consultations that are carried out for the purpose of facilitating the physical exploration; however, certain of these expenses have not qualified and have been treated as part of the cost of a licence. Provinces and territories are increasingly requiring mining, oil and gas companies to undertake environmental studies and community consultations (eg, with local communities, neighbouring landowners, traditional and recreational users of the land) as a pre-condition to obtaining a permit or licence to explore. However, where environmental studies and community consultations are a pre-condition to obtaining such permit or licence, the expenses may be treated as part of the cost of the permit or licence. As part of the 1 March 2015 Federal Budget, the Canadian government announced that the rules would be amended to provide that CEE treatment would not be denied for the cost of otherwise eligible environmental studies and community consultations solely because they are a pre-condition to obtaining an exploration permit or licence. The cost of obtaining a permit or licence does not qualify for CEE treatment and is not eligible for flow-through share treatment. As a result, certain expenses related to environmental studies and community consultations have been treated differently for tax purposes from one jurisdiction to another, depending upon the requirements of the regulator. To ensure the appropriate treatment of such expenses, the definition of CEE has been amended for expenses incurred after February 2015 to include the cost of otherwise eligible environmental studies and community consultations required to obtain an exploration permit or licence, a right or a privilege for the purpose of determining the existence, location, extent or quality of a mineral resource.

Does any legislation provide for tax stabilisation or are there tax stabilisation agreements in force?

Canada does not legislate for tax stabilisation; no tax stabilisation agreements are in force.

Is the government entitled to a carried interest, or a free carried interest in mining projects?

This is not practised in Canada. The federal and provincial governments do not get involved by holding any interests in mining projects.

Quebec is an exception to this rule, as government entities do invest and sometimes retain ownership interests in mining projects and have even acted as proponents of such projects (eg, Ressources Québec, a wholly owned subsidiary of Investissement Québec). However, this interest would never be carried. 

Are there any transfer taxes or capital gains imposed regarding the transfer of licences?

Canadian residents are subject to income tax on gains arising from the transfer of leasehold interests.

Is there any distinction between the duties, royalties and taxes payable by domestic parties and those payable by foreign parties?

Canadian residents are subject to tax on their worldwide income. A non-resident of Canada is subject to Canadian income tax on income from employment exercised in Canada, income from carrying on business in Canada and gains arising from the disposition of ‘taxable Canadian property’, which includes any interest in resource properties in Canada. A non-resident corporation that carries on business in Canada is also liable to pay branch taxes equal to 25 per cent of its profits, to the extent such profits are not reinvested in the Canadian business.

Certain types of property income paid to a non-resident by a Canadian resident (including rents and royalties) are subject to a 25 per cent non-resident withholding tax. Canadian income taxes payable by a non-resident of Canada may be reduced or be eligible for exemptions under an applicable tax treaty. In some provinces, there is potential for non-residents to be subject to land transfer taxes and equivalent duties on the acquisition of mining properties in Canada at tax rates that are higher than those imposed on Canadian residents.

Business structures

What are the principal business structures used by private parties carrying on mining activities?

Canada’s open, free-market economy allows for a wide range of business structures and forms, including corporations, partnerships, limited partnerships, joint ventures and trusts.

Corporations are popular with offshore investors because they are relatively simple to establish, can grow with the business, and offer flexibility in terms of business and tax planning. Corporations can be incorporated under the federal Canada Business Corporations Act or the laws of a province (each province has its own business corporations’ legislation).

Offshore investors typically prefer to carry on business in Canada through a Canadian subsidiary because of concerns about limited liability, privacy, creditor protection and a local preference for dealing with a Canadian company. Financing options from Canadian lenders tend to be more favourable for locally incorporated subsidiaries compared with branch offices of foreign business concerns.

Is there a requirement that a local entity be a party to the transaction?

There is no such requirement, although for tax planning or other reasons, a foreign entity may choose to conduct Canadian activities through a local entity.

Are there jurisdictions with favourable bilateral investment treaties or tax treaties with your jurisdiction through which foreign entities will commonly structure their operations in your jurisdiction?

Canada has developed an extensive network of bilateral and multilateral free trade and investment protection treaties, together with a network of double taxation agreements to promote and encourage foreign investment in the Canadian mining sector.

Canada is one of the founder members of the World Trade Organization and is a signatory to numerous bilateral and multilateral free-trade agreements (FTAs), many of which contain both trade and investment protection provisions. The most influential in terms of day-to-day imports is the North American Free Trade Agreement with the United States and Mexico. Canada has 10 other FTAs that are in force. In October 2016, Canada and the European Union signed the Canada-European Union: Comprehensive Economic and Trade Agreement (CETA). Most CETA chapters came into force on a provisional basis on 21 September 2017 while awaiting ratification by Canada and EU member states. While CETA contains an investment protection chapter, that chapter will not come into force until the agreement has been ratified by all parties to the agreement. Following the US withdrawal from the Trans-Pacific Partnership, the remaining 11 countries concluded the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in March 2018. The CPTPP contains investor protection provisions that are significantly weaker than those normally encountered in traditional trade or investment agreements

While Canada’s FTA template calls for the inclusion of investor protection provisions in all such agreements, Canada has also concluded stand-alone foreign investment and protection agreements (FIPAs) with more than 40 countries, more than two-thirds of which are in force. In 2014, the Canada-China FIPA entered into force. Canada is currently negotiating FIPAs with 11 additional countries including India, Indonesia and Vietnam. Canada has some 90 bilateral taxation treaties with other countries, eight treaties that are under negotiation or renegotiation and 11 treaties signed, but not yet in force. Such treaties are generally based on the OECD model for tax convention and alleviate double taxation of companies doing business in both jurisdictions. Among treaties of interest for foreign investors in the Canadian mining sector are the Canada-Barbados Double Taxation Agreement, signed in 1980 and the Canada-Cyprus Double Taxation Agreement, signed in 1984.

Financing

What are the principal sources of financing available to private parties carrying on mining activities? What role does the domestic public securities market play in financing the mining industry?

At the exploration stage, mining activities not financed by ‘grubstakers’ (a term used by Canada’s mining industry for private funds) or under a farm-in arrangement are often financed by the issuance of common shares (stock-exchange listed or otherwise), the sale of limited partnership units or the sale of flow-through shares.

At the extraction stage, financing is more frequently by debt instruments, which are often in the form of syndicated loans from chartered banks or their overseas agencies. Some production financing is also done by means of:

• business unit;
• unit issuance;
• production payments;
• advances against the purchase price;
• offtake agreements;
• streaming arrangements; and
• royalties.

Does the government, its agencies or major pension funds provide direct financing to mining projects?

Governments will sometimes provide funding of infrastructure required to regions requiring transportation in order to make projects in the area viable. More importantly, various pension funds in Canada have actively invested in projects across the country and internationally. In June 2016, the Bank of Canada released the ‘Large Canadian Public Pension Funds: A financial System Perspective’ report. Pension funds are important sources of retirement income for Canadians, which deploy investment capital for the global economy. The pension fund sector holds about 15 per cent of the total assets of the Canadian financial system, or C$1.5 trillion. About two-thirds of pension assets are managed by the eight largest public pension funds in Canada (the Big Eight), which are among the world’s largest. All eight were included in a list of the 100 largest pension funds, three of which being ranked among the 20 largest. The Big Eight are ranked by size of gross pension assets under management as follows:

• the Canada Pension Plan Investment Board (C$319 billion);
• the Caisse de dépôt et placement du Quebec (C$291 billion);
• the Ontario Teachers’ Pension Plan Board (C$263 billion);
• the British Columbia Investment Management Corporation (C$127 billion);
• the Ontario Municipal Employees Retirement System (C$129 billion);
• the Healthcare of Ontario Pension Plan (C$147 billion);
• the Public Sector Pension Investment Board (C$125 billion); and
• Alberta Investment Management Corporation (C$100 billion).

Please describe the regime for taking security over mining interests.

The title regimes are regulated by province and are similar in many respects. The following is an example from Ontario: in respect of patented freehold and leasehold title, the land registry system governs title and registration matters. A lender can take security over the subject property and register a mortgage, charge or debenture against the subject property in the relevant land registry office by submitting a mortgage, charge or debenture, together with the requisite fee, electronically. Under the Mining Act (Ontario), there is an additional requirement in connection with charging leasehold interests. Prior to registration, a lender is required to submit a full copy of the executed mortgage, charge or debenture together with the requisite fee and confirmation that all rents have been paid to the Ministry of Energy, Northern Development and Mines (MENDM) and obtain the consent of the Minister or an officer duly authorised by the Minister prior to registration of a mortgage or charge over the subject leasehold property. The consent process generally takes between four and six weeks. In respect of unpatented mining claims and licences of occupation, a lender can record a mortgage, charge or debenture over the subject property with MENDM by submitting a fully executed copy of same with the requisite fee.

Restrictions

What restrictions are imposed on the importation of machinery and equipment or services required in connection with exploration and extraction?

Canada does not control or restrict the importation of industrial machinery or equipment. Most goods from most countries of origin can be imported upon the payment of the applicable customs duties and taxes. As a general rule, the applicable customs duties are relatively low or, in many cases, no duty is assessed. The exact amount of duty payable is dependent on the classification of the equipment and its value.

Anyone importing goods into Canada must register with Canada Border Services Agency to obtain an importer number. A non-resident can register and can act as the importer of record into Canada.

Foreign workers coming to perform work in Canada may require work permits from the federal government and, if coming to provide services in the province of Quebec, an authorisation from the latter. Qualified technical workers are exempt from the requirement to obtain a work permit if they come temporarily to supervise installation, or provide training in association with the sale of equipment to a Canadian company. In other circumstances, when a work permit is needed, the requirements vary depending on the nature of the work and the citizenship of the incoming foreign worker. Certain professionals from countries with which Canada has signed a free-trade agreement, such as the North American Free Trade Agreement, the Canada-European Union: Comprehensive Economic and Trade Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, benefit from facilitative provisions to obtain work permits.

Which standard conditions and agreements covering equipment supplies are used in your jurisdiction?

Equipment-supply agreements in Canada do not typically follow a standard form. Equipment suppliers tend to have their own forms that they will present to the purchaser. The ability of the purchaser to negotiate the supplier’s standard form will depend on many things, including the amount of the deal, and its relationship with the supplier. Disputes are generally referred to arbitration.

What restrictions are imposed on the processing, export or sale of minerals? Are there any export quotas, licensing or other mechanisms that prevent producers from freely exporting their production?

Some provinces require extracted minerals to be processed domestically, notably nationally by Ontario’s Mining Act (section 91), and in-province by Newfoundland’s Mineral Act (sections 31(5) and 31.1) and as a requirement of the lease. In the absence of legislation, some provinces may attempt to negotiate processing requirements for a specific period of time as part of the general approvals process. In Quebec, for example, a mining lease application must be accompanied by a variety of documents, including a scoping and market study as regards processing in Quebec, and such a study must also accompany an application for renewal of a lease at the end of its initial term (as well as at time of renewal of the subsequent 10-year terms). In addition, when granting such a lease, the government of Quebec may, on reasonable grounds, require that economic spinoffs within Quebec of mining mineral resources be maximised.

What restrictions are imposed on the import of funds for exploration and extraction or the use of the proceeds from the export or sale of minerals?

Canada imposes no controls on the import or export of capital and has no repatriation, domestic use or export performance requirements.

Environment

What are the principal environmental laws applicable to the mining industry? What are the principal regulatory bodies that administer those laws?

Both federal and provincial (and, in Canada’s north, territorial) environmental laws apply to the mining industry.

The federal government has legislative jurisdiction over fisheries, navigable waters, federal lands (including Indian reserves and federal national parks) and environmental matters of international and inter-provincial concern. Certain projects may be required to complete a federal environmental assessment under the Impact Assessment Act (IAA). The IAA replaced the former Canadian Environmental Assessment Act 2012 and made significant changes to the environmental assessment regime in Canada, including by broadening the range of effects considered during an impact assessment and providing greater opportunities for public and Indigenous participation in  impact assessments conducted at the federal level. In the context of a mining project, an environmental assessment under the IAA will be triggered where production capacity of the proposed mine exceeds a specified threshold. For example, a new metal mine (other than a rare earths mine), or a coal or diamond mine, with an ore production capacity of 5,000 metric tons per day or more is a designated project and will require an impact assessment, whereas a new rare earths mine will require an impact assessment if it has an ore production capacity of 2,500 metric tons per day or more. The Canadian Metal and Diamond Mining Effluent Regulations covers the discharge of mine effluent and mine waste into waters frequented by fish. It provides authorised limits for deposit of deleterious substances in water. In 2018, the Canadian government introduced amendments to this regulation. The main changes include lower limits for specifics deleterious substances and new substances have been added.

The provinces and territories are generally responsible for matters within their boundaries. Each province and territory has adopted laws and by-laws dealing with environmental protection to regulate the discharge of:

• mine effluent;
• atmospheric emissions;
• water resources; and
• the management of solid waste, noise and other environmental impacts.

These laws provide a regulatory framework to prohibit and limit the discharge of contaminants into the environment. This regulatory framework provides for a permitting system to authorise, subject to various conditions, activities that have or may have an impact on the environment. Most provincial and territorial jurisdictions require that mining projects be subject to an environmental impact assessment prior to the issue of the required authorisations.

Whether a project will be subject to an environmental assessment under provincial, territorial or federal environmental laws typically depends on the type and size of the project, the types of approvals required for the development of the project and the significance of the potential environmental and socio-economic impacts that could arise from the project. The outcome of the environmental assessment may result in the regulators imposing conditions or restrictions with respect to the environmental impact of the project.

The provinces and territories have also adopted requirements with respect to mine reclamation and closure as well as the requirement to provide financial guarantee. These are generally administered by provincial or territorial ministries responsible for mines or natural resources.

All three levels of government provide also a legislative framework in the event of failure to comply with the laws or by operating in violation with the term of, or without having first obtained, the necessary authorisations.

What is the environmental review and permitting process for a mining project? How long does it normally take to obtain the necessary permits?

Depending on the type, location and size of a mining project, it may be subject to both federal and provincial or territorial permitting requirements and environmental assessment processes. In northern Canada (Northwest Territories, Nunavut and Yukon), the federal environmental assessment legislation generally does not apply. Environmental assessments in these territories are regulated by local laws, namely:

• the Mackenzie Valley Resource Management Act (Northwest Territories);
• the Nunavut Land Claims Agreement (Nunavut); and
• the Yukon Environmental and Socio-economic Assessment Act (Yukon).

In all jurisdictions, where a proposed project is subject to environmental assessment, the project may not proceed before the environmental assessment process is complete and a positive determination is granted.

The environmental assessment process typically requires the preparation of an environmental study (as well as potentially a social impact study) and a public information and consultation stage. The thresholds that trigger the process and the requirements for information disclosure and public consultation vary depending on the particular jurisdiction in which the assessment takes place. Generally, the process seeks to identify impacts, addressing them through the implementation of mitigation measures. The provincial and federal governments are also required to consult with aboriginal communities whose rights may be impacted by the proposed project. The time required to complete the process varies depending on the location and can be lengthy in certain jurisdictions. One should anticipate at least two years to complete the environmental assessment process, although the timing can vary depending on the level of assessment required, the potential impacts and the complexity of the proposed project.

On 23 March 2018, the province of Quebec amended the Environment Quality Act and enacted the new regulation respecting the environmental impact review and assessment of certain projects. Note that the revised Environment Quality Act will require a series of modifications to the existing regulations, anticipated for adoption within the next year. The new legal framework significantly impacts the province’s environmental assessment and review procedure as follows:

• it affords the government greater flexibility in subjecting projects to the Environmental Assessment Procedure;
• it provides the public with greater opportunities to intervene in the process prior to the conduct of an environmental impact assessment; and
• it ensures greater transparency in the authorisation process.

In terms of timeline to obtain the authorisation for a mining project, the new legal framework provides that, as of the date on which an environmental impact assessment statement is filed with the Minister of the Environment, the Minister must, within a period not exceeding 13 months, send it to the government for its decision. The period excludes any period during which the minister is waiting for supplementary information that he or she requested from the project proponent, as well as the time to prepare an additional study or research made at the request of the minister.

The federal government has implemented measures to avoid duplication of the environmental assessment process in circumstances where both federal and provincial environmental assessment processes are triggered with respect to the same project. Eight provinces and territories (excluding New Brunswick, Northwest Territories, Nova Scotia, Nunavut and Prince Edward Island) have entered into cooperation agreements with the federal government with a view to avoiding duplications.

At the federal level, the IAA introduces a new Planning Phase intended to assist the Assessment Agency of Canada (the Agency) in deciding whether to carry out an assessment, whether to coordinate with other jurisdictions or agencies (such as a provincial government, federal authority or Indigenous governing body) and what the scope of the assessment will be. The Agency must decide within 180 days of posting the project description online whether to commence an impact assessment. The Agency must finalise its impact assessment report and submit it to the Minister of Environment no later than 300 days after it determined that the proponent provided all required information. This timeline can be extended to 600 days if the project is, for example, regulated under the Nuclear Safety and Control Act.

Do government agencies or other institutions in your jurisdiction provide incentives or publish environmental and social governance (ESG) guidelines for green projects?

Similar to the area of corporate social responsibility, Canada currently has no overarching and uniformly applicable law addressing environmental, social and governance (ESG) for green projects, whether at federal or provincial levels (this includes formal legislation  in respect of the implementation of additional disclosure requirements obligating businesses to disclose information such as environmental impact assessment reports, corporate governance documentation, and other social impact reports stemming from business operations, whether in relation to green projects or other sustainability targets).

Notwithstanding this, ESG is taking on an increasing significance, in the environmental area and otherwise, and lawmakers, securities regulators, financial institutions and overseeing professional bodies have published or are starting to publish ESG-related guidelines and investment procedures on their websites. Some examples of these include:

• Toronto Stock Exchange: ‘A Primer for Environmental & Social Disclosure’;
• Chartered Professional Accountants Canada: ‘Environmental, Social and Governance (ESG) Issues in Institutional Investor Decision Making’;
• CFA Institute: ‘Environmental, Social and Governance Factors at Listed Companies’; and
• Canadian Coalition for Good Governance: ‘The Directors’ E&S Guidebook’.

The increasing emphasis on green projects is further evidenced by growing number of incentive programmes at both the federal and provincial levels aimed at various aspects of green projects – whether research and development, technology, financing or sustainability, and with either direct or indirect implications for the mining industry. Some of these programmes include:

• the federal NRCan’s Clean Growth in Natural Resource Sectors Program;
• the federal Low Carbon Economy Fund and the Low Carbon Challenge Fund;  
• Ontario’s Green Investment Fund; and
• Quebec’s Programme d’appui à la recherche et à l’innovation du domaine minier. 

The federal government has also released the Final Report of the Expert Panel on Sustainable Finance published in June 2019. The Expert Report and the recommendations within it were broadly accepted by the government as well as industry bodies and the federal government has indicated that its next budget will be supportive of the fight against climate change, with such support being evidenced by an evaluation and discussion of the Expert Report’s recommendations with Canadian provinces and municipalities. Several of the 15 recommendations in the Expert Report deal with incentives and guidelines for green projects. 

Finally, the federal Greenhouse Gas Pollution Pricing Act addresses emissions, requires compliance by certain mining companies and provides for related incentives through the federal Low Carbon Economy Fund and the Low Carbon Challenge Fund. Certain mining projects in Canada with significant carbon emissions may also be under some form of obligation to address the volume of such emissions through cap-and-trade programmes. Some of these programmes are currently province-specific and include Quebec’s mandatory cap-and-trade system for greenhouse gas emission allowances that applies to mines that emit 25,000 metric tons of CO2 equivalent (t CO2 eq) or more annually, which is linked to California’s as part of the Western Climate Initiative.

What is the closure and remediation process for a mining project? What performance bonds, guarantees and other financial assurances are required?

Canada’s provinces and territories impose mine closure and reclamation obligations. Generally, this requires the preparation and filing of a mine closure plan before mine production can proceed. As part of the plan, mine closure costs are estimated and financial guarantee must be provided to the government to cover the closure costs. Increasingly, progressive reclamation obligations are being considered. The method used to calculate the amount and the acceptable forms of financial guarantee (eg, letters of credit, government bonds, cash and mine-reclamation trusts) vary depending on the jurisdiction.

What are the restrictions for building tailings or waste dams?

While federal laws and regulations, such as the Fisheries Act, may apply in certain respects, tailings and waste dams are predominantly regulated under provincial and territorial legislation. Three provinces in Canada – Alberta, British Columbia and Quebec – have specifically adopted dam safety regulations. Other provinces impose requirements through legislation related to water management.

Taking Quebec as an example, any construction or alteration of a high-capacity dam must be accompanied with a rehabilitation plan to be approved by the Minister of Natural Resources and Wildlife (section 232 of the Mining Act). The plan must contain a description of the rehabilitation procedure to be put in place for the tailing activities and a description of the infrastructure needed to prevent any environmental damage that might be caused by the dam’s presence. Depending on the type of dam, approval for construction is contingent on either an impounded water management plan or an emergency action. In both cases, an engineer will design a plan describing all the procedures to be followed in particular during situations in which persons or property are at risk. Inundation plans must be kept up to date and forwarded to local municipalities in the event of an emergency. Although the legislation is silent with regards to the professional requirements of a person in charge of the operation and management of a dam, every high-capacity dam must regularly undergo a safety review by an engineer to assess its safety in terms of good practice and regulatory safety standards. Mining facilities may be inspected by the authorities ‘at any reasonable time’ and, depending on their category, dams will be inspected between one and 12 times a year.

In British Columbia, tailings storage facilities are regulated under the:

• Mines Act;
• Health, Safety and Reclamation Code for Mines in BC (the Code);
• Environmental Management Act; and
• Environmental Assessment Act.

The manager of each mine with a tailings’ facility must designate a qualified person (typically an engineer) to ensure safe management and operation of all tailings dams. Tailings storage and water management facilities and associated dams must be inspected annually; they are also inspected periodically by the provincial government. The Code requires that mines develop and implement a surveillance monitoring programme to safely operate and monitor the condition and performance of tailing storage facilities, dams, structures and associated facilities to avoid or detect and address any changes, deterioration or hazardous conditions. While mines are not explicitly required to conduct emergency drills with local communities, the Mines Act and the Code require mine managers to develop and maintain a Mine Emergency Response Plan to ensure that sufficient personnel, equipment and facilities are available for emergencies. Also, trained mine-rescue personnel are required at underground and open pit mines.

Health and safety, and labour issues

What are the principal health and safety, and labour laws applicable to the mining industry? What are the principal regulatory bodies that administer those laws?

Canada’s Constitution divides the authority to enact labour and employment laws between the federal government, provinces and territories. Approximately 90 per cent of employees in Canada fall under the jurisdiction of provincial or territorial laws. While the laws and statutes vary between jurisdictions, there is a fair amount of uniformity across the country regarding basic labour and employment matters.

Employment statutes regulate matters such as:

• minimum employment standards;
• labour relations;
• human rights;
• occupational health and safety;
• workers’ compensation;
• universal health insurance; and
• privacy.

Minimum employment standards’ laws cover:

• minimum wages;
• hours of work;
• overtime hours and premiums;
• rest and meal periods;
• mandatory holidays;
• holiday periods and pay;
• leave (pregnancy, parental, emergency and family medical);
• termination notice and severance pay; and
• unjust dismissal hearings (in some jurisdictions).

Labour relations’ statutes govern how employees may become represented by a trade union, as well as the rights and obligations of unions and employers once a union is designated to represent a group of employees. Such union ‘bargaining units’ are generally limited to a particular business establishment in a defined location or locations.

In addition to these statutes, many non-union employment rights are governed by common law and enforced through the courts. Unionised employees’ rights are generally enforced through tribunals.

The principal federal law governing occupational health and safety matters is Part II of the Canada Labour Code. Most of the provinces and territories have specific statutes and regulations dealing with mining operations.

What are the rules related to management and recycling of mining waste products? Who has title and the right to explore and exploit mining waste products in tailings ponds and waste piles?

Ownership rights to tailings and waste dumps often remain with the entity that originally mined the minerals; particularly when the waste products are deposited on mine property. In other circumstances, the rights may be held by the owner of the property where the tailings currently lie, independent of the mining company that processed the material. In either instance, ownership depends on legislation and the contractual arrangements between the parties at the time the tailings were deposited. In situations where the Crown owns the tailings, the lands are not likely to be open for staking and would be subject to a remediation process. Any company wishing to process such tailings would need to obtain a special lease or permit from the Crown, and to file a closure plan that contemplates the long-term remediation of the site.

In British Columbia, tailings and waste dumps are included under the definition of ‘mineral’ under the Mineral Tenure Act. As a result, tenure holders are entitled to explore and exploit the rocks and other materials from mine tailings, dumps and previously mined deposits.

Any processing of mining waste products would need to be conducted pursuant to approvals issued under provincial environmental protection legislation, or in certain instances, pursuant to the Federal Transportation of Dangerous Goods Act.

What restrictions and limitations are imposed on the use of domestic and foreign employees in connection with mining activities?

Canada’s rules for foreign workers and business visitors apply to the mining industry. With certain exceptions, to work in Canada, a foreign national needs to apply for a work permit. The federal government administers the Temporary Foreign Worker Program through:

• Immigration, Refugees and Citizenship Canada;
• Employment and Social Development Canada (ESDC); and
• Canada Border Services Agency.

Generally, a labour market impact assessment (LMIA) from the ESDC is needed before issuance of a work permit. LMIA confirmations are granted in situations where the employer is able to demonstrate that there are no qualified Canadian citizens or permanent residents to fill the job position and that the hiring of the foreign national will not have a negative impact on the Canadian labour market.  In other words, the ESDC ensures that the employment of foreign workers does not deprive Canadian workers of an employment opportunity. Quebec Immigration authorities also participate in decisions relating to the issuance of LMIA-based work permits in Quebec. There are several exemptions to the LMIA requirement, including the intra-company transfer exemption and the North American Free Trade Agreement professionals’ exemption. In the latter cases, issuance of a work permit follows a simpler procedure, which is exempt from the LMIA requirement.

Business visitors from visa-exempt countries can be admitted to Canada to participate in business meetings without having to go through any particular formalities, except to request an Electronic Travel Authorization. Those from non-visa-exempt countries need to apply for a temporary resident visa to a Canadian embassy or consulate abroad.

As a result of the covid-19 crisis, travel restrictions are being imposed and certain usual immigration procedures have changed to control the spread of the disease.  

Social and community issues

What are the principal community engagement or CSR laws applicable to the mining industry? What are the principal regulatory bodies that administer those laws?

Canada has no overarching law regarding corporate social responsibility (CSR). However, various federal, provincial and territorial laws embed CSR principles into Canadian law, including laws related to health and safety, labour relations, environmental protection and environmental assessment.

For the Canadian government, CSR is about companies doing business responsibly in an economic, social and environmentally sustainable manner. It is conduct demonstrating respect for human rights at home and abroad, consistent with applicable laws and internationally recognised standards. CSR emphasises positive voluntary contributions that businesses can make to sustainable development and inclusive growth; and avoiding negative impacts, including on human rights, and addressing them when they do occur.

In recent years, various groups have expressed concerns with respect to Canadian companies doing business and operating abroad. In response, and as a commitment to advance human rights and to assist Canada in fulfilling its international human rights obligations, the federal government announced the creation of the independent Canadian Ombudsperson for Responsible Enterprise (CORE) in 2018, and appointed Mrs Sheri Meyerhoffer as Canada’s first Ombudsperson for Responsible Enterprise on 8 April 2019. The CORE’s mandate includes to promote the implementation of the UN Guiding Principles and the OECD Guidelines; to advise Canadian companies on their practices and policies with regard to responsible business conduct; to review complaints submitted by or on behalf of an individual, organisation or community concerning an alleged human rights abuse; and to review, on its own initiative, alleged human rights abuse. The CORE may also refer matters to the appropriate law enforcement authorities where there is evidence of criminal wrongdoing.

How do the rights of aboriginal, indigenous or currently or previously disadvantaged peoples affect the acquisition or exercise of mining rights?

Although mineral rights can often (but not always) be obtained without involvement of Indigenous people, any exercise of mining rights will typically involve a Crown licence or permit, which, in turn, is likely to engage the Crown’s duty to consult with affected Indigenous groups. While many Indigenous peoples have signed treaties with the Crown and have constitutionally protected treaty rights, many have not. As a result, large parts of Canada are subject to claims based on aboriginal title or aboriginal rights.

Where indigenous peoples assert aboriginal rights, aboriginal title or treaty rights, the Crown owes a duty to consult when making decisions that have the potential to affect those rights. The duty to consult is triggered when the Crown has knowledge of the potential existence of an aboriginal right or aboriginal title and undertakes conduct that might adversely affect it. The level of consultation required exists on a spectrum. At one end, where the claim to title is weak, the aboriginal right limited, or the potential for infringement minor, the only duty may be to give notice, disclose information, and discuss any issues raised in response to the notice. At the other end, where there is a strong claim, an established aboriginal right, significant infringement, and the risk of non-compensable damage is high, deep consultation and potentially accommodation may be required.

In Tsilhqot’in Nation v British Columbia (2014), the Supreme Court of Canada recognised that the Tsilhqot’in Nation holds aboriginal title to a large area of territory in the interior of British Columbia. This decision also reaffirmed that once title is proven, government actions that impact the land, not consented to by the title holder must be justified. Although governments may act without consent in the context of proven aboriginal rights, the bar is set very high to justify such action.

Canadian courts have confirmed that the duty to consult is imposed on Crown, not private parties, however the Crown may delegate procedural aspects of the duty to private parties. In reality, much of the consultation process is carried out by proponents. In particular, project permits often impose requirements on proponents to consult with Indigenous groups and other stakeholders.

Additionally, there are specific (usually not expansive) areas within Canada set aside for the use and benefit of indigenous communities called Indian reserves. Management and control of reserve land is provided for under the Indian Act, with some powers vested in the First Nation band and others in the Federal Department of Crown-Indigenous Relations and Northern Affairs. Determining the ownership rights to minerals on reserves is complex and has involved disputes between the provinces, the federal government and First Nation bands. The combination of complexity, contested legal entitlement and meagre returns has dampened mineral exploration on reserve lands.

In 2017, the federal government officially endorsed the UN Declaration on the Rights of Indigenous Peoples (UNDRIP). In 2018, it announced that it would create a new framework for the recognition and implementation of indigenous rights in Canada, and simultaneously launched a national engagement with indigenous peoples to conduct consultations and ultimately table legislation. It remains to be seen what this framework will look like when implemented, although its process seems to be delayed owing to resistance from some indigenous communities. The government-stated purpose of the framework is to ensure that the federal government recognises, respects and implements constitutional rights of indigenous peoples of Canada, including inherent and treaty rights, and provides mechanisms to support self-determination.

On 24 October 2019, British Columbia introduced draft legislation to implement UNDRIP and on 28 November 2019, the Declaration on the Rights of Indigenous Peoples Act (DRIPA) became law. The DRIPA is not expected to affect how decisions are made at an operational level in the near term. However, the expectation from Indigenous communities is that this is a historic step that recognises a right to free, prior and informed consent. This gap in expectations may be the source of conflict and uncertainty in the near term as the reality of what DRIPA means is dealt with by government’s operational decision makers – conflict that may end up in court.

In tandem with these developments, the federal government has also adopted new legislation to replace the Canadian Environmental Assessment Act 2012 with the new Impact Assessment Act (IAA), which entered into force in August 2019. The IAA broadens project reviews from the previous environmentally focused assessments to consideration of a wider range of effects, including formal requirements for consultation with indigenous peoples throughout all stages of the impact assessment process.

What international treaties, conventions or protocols relating to CSR issues are applicable in your jurisdiction?

Canada has adopted a number of voluntary aspirational conventions regarding CSR, including:

• the UN Guiding Principles on Business and Human Rights (2011);
• the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (2011); and
• OECD Guidelines for Multinational Enterprises (1976).

These documents are used in assessing mining operations within Canada, and Canadian mining companies operating internationally.

Anti-bribery and corrupt practices

Describe any local legislation governing anti-bribery and corrupt practices.

Generally, the Corruption of Foreign Public Officials Act (CFPOA) is Canada’s principal law aimed at prohibiting bribery and corruption of foreign public officials for the purpose of obtaining or retaining business in foreign markets. Violation of the law can result in fines of up to any amount at the discretion of the court or up to 14 years’ imprisonment. The CFPOA applies to a transaction or attempted transaction when it is committed in whole or in part in Canada or when there was a real and substantial link between the offence and Canada. The CFPOA also applies to Canadian citizens wherever those Canadians are located and to permanent residents who return to Canada after committing an offence under the CFPOA. The CFPOA also includes a separate criminal offence for illicit accounting for the purpose of hiding a bribe to a foreign public official. The Criminal Code was amended in September 2018 to permit deferred prosecution agreements, referred to as Remediation Agreements (RA), for offences that include violations of the CFPOA bribery provisions, provided certain conditions are met such as a reasonable prospect of conviction and that the agreement is in the public interest, which does not include the national economic interest or the indemnity of the organisation or individual involved. Under the Criminal Code amendments, RAs may include:

• fines;
• remediation measures;
• intensified reporting requirements;
• improving internal procedures relating to compliance; or
• allowing a third party to monitor the corporation’s compliance.

Specific to the mining sector, following the 2013 G8 summit, member-state leaders issued a communique agreeing that raising global standards of transparency in the extractive sector will reduce opportunities for corruption. The Canadian government committed to launching consultations with stakeholders to develop a mandatory reporting regime for extractive companies. Arising from this, the Extractive Sector Transparency Measures Act (ESTMA) became law on 1 June 2015. The purpose of ESTMA is to deter corruption of both Canadian and foreign public officials in the mining (and oil and gas) sector. To date, ESTMA imposes on Canadian extractive issuers and certain privately held companies in the extractive sector a detailed reporting requirement for payments made to Canadian and foreign governments including any corporation established to perform government duties or functions. As of 1 June 2017, reporting obligations apply to indigenous (aboriginal) governments in Canada and corporations established to perform the functions of indigenous governments in Canada. ESTMA does not define an indigenous government.

Payments to government payees, including to indigenous governments, must be publicly reported no later than 150 days after the end of the company’s fiscal period if the total of all payments in a particular category of payment is at least C$100,000 for a financial year. ESTMA defines ‘payments’ to include taxes (excluding consumption and personal income taxes), royalties and fees. For payments to indigenous governments, as of 1 June 2017, reportable payments must be included in the report following the end of a reporting entity’s financial year.

ESTMA’s reporting obligation applies to all entities listed on a Canadian stock exchange, engaged in the ‘commercial development’ of minerals (and oil and gas), including their exploration or extraction. It also applies to the acquisition or holding of a licence or other authorisation to carry out any of these activities. It also applies to any other corporation engaged in the commercial development of oil, gas or minerals that has a place of business in Canada or does business in Canada or has assets in Canada and meets two of the following three conditions in one of its two most recent fiscal years:

• at least C$20 million in assets;
• at least C$40 million in revenue; and
• at least 250 employees.

Penalties for non-compliance can be severe. Failing to meet ESTMA’s reporting obligations is a criminal offence punishable by a fine of up to C$250,000 per day that the offence continues. A reporting violation of six months’ duration subjects a company to criminal liability of up to C$45 million. Moreover, any officer, director, or agent of a company subject to the reporting obligations that directed or authorised or participated in this reporting failure is equally liable to the same criminal punishment.

Do companies in your country pay particular attention to any foreign legislation governing anti-bribery and foreign corrupt practices in your jurisdiction?

Yes. The US Foreign Corrupt Practices Act, like the CFPOA, prohibits the offering, promising, or authorising or the giving of anything of value to a foreign official for the purpose of obtaining or retaining business. It also has extraterritorial reach; it not only applies to US corporations or any person acting on behalf of such corporations or US citizens, nationals or residents, it also applies to foreign and US issuers or foreign persons and entities while in the territory of the United States. Companies also pay attention to the UK Bribery Act, which has a similar coverage.

Also, under section 1504 of the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank) the US Securities and Exchange Commission (SEC) is directed to ‘issue final rules that require each resource extraction issuer to include in an annual report . . . information relating to any payment made . . . to a foreign government or the [US] Government for the purpose of the commercial development of oil, natural gas, or minerals’. In June 2016, the SEC issued reporting rules (the SEC transparency rule) requiring extractive issuers to disclose payments such as those under ESTMA of at least US$100,000 during the same fiscal year to the US government or any foreign government regarding the commercial development of oil, natural gas or minerals, or the acquisition of a licence for any such activity. However, following a vote by the US Congress to repeal the SEC transparency rule under the Congressional Review Act, a law that permits Congress to abrogate agency regulations, the US administration signed the repeal vote into law on 14 February 2017. The June 2016 SEC transparency rule has been repealed. However, section 1504 of Dodd–Frank has not been repealed.  

In 2019, the SEC proposed a new version of the 2016 reporting rule. The proposed rule requires extractive issuers to disclose payments of at least US$75,000, as opposed to US$100,000 under the 2016 rule. The proposed rule allows for alternative reporting. Issuers who must disclose a similar disclosure report in a foreign jurisdiction that the SEC considers to satisfy the transparency objectives of section 1504 may submit the report submitted to such foreign jurisdiction in lieu of the section 1504 report. The rule has yet to be issued by the SEC.

Has your jurisdiction enacted legislation or adopted international best practices regarding disclosure of payments by resource companies to government entities in accordance with the Extractive Industries Transparency Initiative (EITI) Standard?

ESTMA came into force in 2015. This Act fulfils an EITI-like role by requiring extractive entities active in Canada to publicly disclose, on an annual basis, specific payments made to all governments in Canada and abroad. The general obligation under ESTMA is that every entity covered by it, not later than 150 days after the end of each of its financial years, shall provide Natural Resources Canada with a report disclosing the reportable payments made during that year to any and all payees identified under ESTMA. The reports are posted on Natural Resources Canada’s website. As of 2017, payments made to indigenous governments are also caught by the Act.

The province of Quebec also adopted similar legislation, namely the Act respecting transparency measures in the mining, oil and gas industries, which also came into force in 2015. Under both acts, payments made to indigenous governments now have to be reported.

Canada has also signed the OECD International Convention on Combating Bribery of Foreign Officials 1997. This Convention led to the Corruption of Foreign Public Officials Act 1999, which criminalises the bribing of foreign officials.

Foreign investment

Are there any foreign ownership restrictions in your jurisdiction relevant to the mining industry?

The Investment Canada Act (ICA) is a law of general application. While it does not set out specific foreign ownership limits or restrictions with respect to the mining industry, it contains provisions requiring pre-transaction approval of certain investments in Canada by non-Canadians. Under the ICA, acquisitions of Canadian businesses by non-Canadians may be subject to a ‘net benefit to Canada’ review if certain specified thresholds are exceeded or a ‘national security’ review at the discretion of the Minister of Innovation, Science and Industry, or both.

The Non-Resident Ownership Policy in the Uranium Mining Sector, as set out in a letter issued by the then Minister of Natural Resources in 1987, remains the current statement of Canadian policy with respect to the foreign ownership of Canadian uranium-producing mining properties. The policy provides that:

• at the first stage of production, a minimum of 51 per cent Canadian resident ownership is required for uranium-producing mining properties in Canada;
• resident ownership for uranium-producing properties in Canada of less than 51 per cent may be permitted if control in fact by Canadians can be established (as defined in the ICA); and
• exemptions to the ownership restrictions may be granted by cabinet only if Canadian partners in a mining development cannot be found.

In 2015, Canada granted its first exemption since the policy was introduced. An Australian company demonstrated that there were no Canadian partners interested in developing the subject uranium project and, as such, was permitted to acquire a majority in a Canadian uranium mine.

The policy does not apply to foreign participation in uranium exploration in Canada but will apply if such exploration activities result in a uranium-producing mine. Additionally, certain ‘grandfathered’ foreign-owned uranium mining properties remain exempt from the policy provided that equity divestments associated with such properties do not result in an increase in non-resident ownership.

While comments have been made from time to time regarding the general need to liberalise the policy, there has been no formal announcement by Canada that it has any immediate intention to do so. However, both the Canada-European Union: Comprehensive Economic and Trade Agreement between Canada and the European Union and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership among Canada and its Pacific Rim trading partners contain provisions that investors covered by those trade agreements, in seeking an exemption to the policy, will not be required to demonstrate that a Canadian partner cannot be found.

International treaties

What international treaties apply to the mining industry or an investment in the mining industry?

Canada is a signatory to numerous foreign investment and protection agreements (FIPAs) and many of its free trade agreements, including the North American Free Trade Agreement (NAFTA) and the latest agreements with the European Union, South Korea, and the 11 countries of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, contain investment protection chapters. As a general rule, these provisions protect investments in the mining industry by requiring national treatment for foreign investments and prohibiting expropriation without compensation, restrictions on the repatriation of funds and performance requirements. Canada has more than 30 bilateral FIPAs now in force, including one with China that came into force in 2014. Although most chapters of the Canada-European Union: Comprehensive Economic and Trade Agreement are now in force on a provisional basis, the investor protection chapter is not, and is unlikely to come into force until the entire agreement is ratified by all EU member states.

Canada, the United States and Mexico have now ratified the United States–Canada–Mexico Trade Agreement (USMCA), which, when it comes into force, will replace NAFTA. The USMCA eliminates the NAFTA investor protection provisions. Under the USMCA, US and Mexican investors already present in Canada will be allowed to use investment arbitration for limited legacy claims for another three years. After that, the only recourse will be to the Canadian courts. The USMCA could come into force as early as 1 July 2020, but that may be delayed because of the current covid-19 crisis.

Update and trends

What were the biggest mining news events over the past year in your jurisdiction and what were the implications? What are the current trends and developments in your jurisdiction's mining industry (legislation, major cases, significant transactions)?

While 2018 was a largely stagnant year for the global mining market, 2019 brought large mergers that impacted the Canadian mining space including Barrick Gold Corporation’s merger with Randgold Resources Limited, and Newmont Mining Corporation’s merger with Goldcorp Inc, a trend which has trickled down to mid-tier firms, as seen through Zijin Mining Group Co, Ltd’s takeover of Continental Gold, and Equinox Gold Corp and Leagold Mining Corporation’s merger.

In addition to activity in mergers and acquisitions, in Canada, new legislation was enacted in connection with advancing First Nations’ rights. On 28 November 2019, British Columbia’s Declaration on the Rights of Indigenous Peoples Act received Royal Assent. This resulted in British Columbia becoming the first jurisdiction in Canada to pass legislation that would implement the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) into its own laws. Although Canada initially opposed the UNDRIP (along with the United States, Australia and New Zealand) it conditionally endorsed it in 2010 as a document that would have no impact on Canadian law. 

In terms of legislative decisions, the start of 2020 has provided Canada with two seminal decisions that impacted mining companies. First, on 7 February 2020, the Federal Court of Appeal upheld the approval, granted by the Canadian government on 18 June 2019, to build the proposed Trans Mountain Pipeline Expansion Project in its decision in Coldwater First Nation v Canada (Attorney General). Second, on 28 February 2020, the Supreme Court of Canada rendered its decision in Nevsun Resources Ltd v Araya, which held that a private, non-state actor, in this instance a Canadian mining company, can be held liable in Canada for its alleged breaches of customary international legal norms abroad. 

Finally, Canadian mining has been directly impacted as a result of the covid-19 pandemic. The approach as to whether mining companies were deemed to constitute an essential service differed in each respective province and territory across the country. Ultimately, it is anticipated that supply chain shortages, labour shortages and increased volatility in the stock market will cause certain mining companies to have to enter into restructuring procedures and potentially declare bankruptcy.

Some of the information contained in this chapter was drawn from Fasken’s 2020 Canadian Mining Law, which was edited by Virginia Schweitzer (from the Second Edition of the American Law of Mining).

With special thanks to contributors Peter Kirby, Claude Jodoin, Tanneke Heersche, Christopher Steeves, Pierre-Olivier Charlebois, Clifford Sosnow, Gilda Villaran, Alison Lacy, Kevin O’Callaghan, David Johnson, Andrea Centa, Huy Do, Doug New, Martin Ferreira Pinho, Emilie Bundock, Rosalind Cooper, Laura Konkel, Denis Dupont, Jianping Zhang, Dean McPherson, Cheryl Mascarenhas and Julio Mena.

Law stated date

Give the date on which the information above is accurate.

1 April 2020.