Oct. 9 (Bloomberg) -- Changes to century-old mining rules in Ontario signal delays and added costs for hundreds of explorers in a $1 billion industry that provides a crucial source of new deposits for global metal producers.
Prospectors such as Northern Shield Resources Inc. and Mistango River Resources Inc., which are accustomed to drilling their mining claims without permission in the Canadian province, will need to submit details of almost every stage of their exploration plans and consult with native groups under rules published last week that become mandatory April 1.
Ontario says the changes will provide certainty for exploration companies and will help pre-empt disputes with native groups, known in Canada as First Nations. Prospectors say the delays and expense resulting from the new rules will be an added burden in an industry that relies on hard-to-come-by financing from investors.
“There’s enough hurdles in mining exploration these days with market conditions and financing, First Nations consultations,” Ian Bliss, chief executive officer of Ottawa-based mineral explorer Northern Shield, said by phone last week. “Now we are just throwing in another complication which slows the process, and there’s a cost to it.”
Ontario’s Mining Act, which dates back to the 19th century, was largely unchanged until the province approved an amendment in October 2009 that introduced the requirement for explorers to consult with aboriginal groups. The new regulations detail how the broad principles in the amended Act will work in practice.
“Money is scarce right now to start with, and to put more restrictions in front and greater timelines is going to cause people to look to environments that are more welcoming,” Rob McEwen, the founder of Goldcorp Inc. and chairman of Toronto-based explorer Lexam VG Gold Inc., said in a phone interview last week.
Investments in mineral exploration in Ontario reached a record C$1 billion ($1.02 billion) last year and accounted for 26 percent of mining industry spending in Canada, according to the province’s Ministry of Northern Development and Mines. Ontario has more than 600 active mineral exploration projects, many owned by so-called juniors that operate hand-to-mouth, raising funds just in time to fund exploration work.
Waiting for First Nations’ response about permit applications may slow the exploration process, said Michael Fowler, a Toronto-based analyst at Loewen Ondaatje McCutcheon Ltd.
“Normally what happens is you are doing your exploration program and then you are also consulting with the First Nations at the same time,” Fowler said. “If you have to submit everything beforehand, of course that’s going to slow things right down and it’s going to be a nuisance I think for the juniors.”
Northern Shield has declined 50 percent this year in Toronto, while Mistango River has more than doubled. That compares with a 9.8 percent decline in the 432-member S&P/TSX Composite Venture index of small-cap companies.
Prospectors currently don’t need to get permission before undertaking so-called early exploration, including drilling programs. That has caused conflict with surface-right owners and local First Nations, as aboriginals in Canada are known.
Solid Gold Resources Corp. last month won leave to appeal a court ruling in January that prevented it from drilling its property while the company consulted with a First Nation.
It should be the government’s duty to consult with First Nations, not the mining industry’s, Solid Gold CEO Darryl Stretch said by phone Sept. 28.
Under the new rules, companies planning activities that would typically be visible on the land after the work is done will need to submit an exploration plan that will be distributed to the relevant native communities, said Robert Merwin, the ministry’s lead in the Mining Act Modernization Secretariat. If there aren’t any major concerns raised within 30 days, the company can go ahead and start its work, he said.
For work such as drilling with equipment bigger than 150 kilograms (331 pounds) or if there have been major concerns raised by native groups, companies will need to apply for exploration permits and the province will solicit comments on the proposed work from the affected groups.
The ministry is targeting a 50-day turnaround on exploration permits from the date they are distributed, though there will be an option to “stop the clock” if extra time is needed for consultation, said Cindy Blancher-Smith, a ministry official in the Mines and Minerals division. Exploration plans will be valid for two years and permits for three years, according to information posted on the ministry website.
The new rules “will definitely slow things down,” Jessica Bjorkman, a contract prospector in Ontario and director of the Northwestern Ontario Prospectors Association, said in a phone interview last week. “A lot of people don’t understand how the industry works, but it’s very last-minute.”
One concern about the new rules is that native groups in areas where there’s a lot of exploration activity will be inundated with requests for consultation that they’re not equipped for, said Madeleine Donahue, a partner at law firm Norton Rose Canada LLP.
The government is trying to pre-empt the issue by setting up training, and plans to provide resources like fax machines to native groups, Blancher-Smith said.
While the new rules may add some delays for the so-called juniors planning exploration work, the ministry hopes the regulations will encourage prospectors to start talking to native groups as early as possible, reducing the likelihood of serious disputes down the road, Blancher-Smith said.
“We’re trying to incent early and ongoing engagement,” she said. “We’re hopeful that at this stage of the mining sequence, the activities are of such minimal low impact that aboriginal concern about impacts on their rights will be addressed.”
The changes to the Ontario mining act were “drastically overdue,” Donahue said.
“There are certainly many mining companies including junior miners that are doing the best that they can, going up into these remote areas,” Donahue said. “Sometimes they’re at a bit of a loss on what do we have to do, how do we have to do it, what’s adequate.”
The Ontario rules haven’t been well received by the Anishinabek Nation, which includes 39 Ontario aboriginal communities.
Many of the proposed changes will infringe on Anishinabek’s constitutional rights, Lake Huron Regional Chief Isadore Day of Serpent River said in an Oct. 4 statement in response to the release of the rules.
“Anishinabek leaders recommended that First Nations be involved in the process from the outset and that they be provided with the opportunity for free, informed consent and the ability to reject a development that may have an adverse impact on their territory,” according to the statement.
And for many exploration companies, the perceived downsides of the new rules have overshadowed the positives.
“It’s going to cost a lot more now and there are going to be a lot more delays,” Mistango River CEO Robert Kasner said in an Oct. 5 phone interview. “I don’t think anybody’s very happy about it in the industry.”
To contact the reporter on this story: Liezel Hill in Toronto at firstname.lastname@example.org