1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar

Caveat Optionor: Canadian court strikes a blow for mineral exploration companies

In interpreting an exploration option agreement, a recent court of appeal decision recognized the inherent challenges faced by junior exploration companies, in both good times and bad. See our Dentons Insight to learn more: Caveat Optionor: Canadian court strikes a blow for mineral exploration companies

Caveat Optionor: Canadian court strikes a blow for mineral exploration companies

Mining Issuers: Ensure your Websites and Investor Presentations Comply with NI 43-101

Mining issuers have their qualified persons (“QPs”) and occasionally legal counsel review technical disclosure, including news releases and technical reports, to ensure they comply with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”). Some mining issuers might not realize that information found on their websites and other presentations, including investor relations materials, is captured by the definition of “written disclosure” in NI 43-101 and disclosure requirements apply. Common areas of non-compliant disclosure on mining issuers’ websites include investor presentations, fact sheets, media articles, failure to update material information and links to third party content.

Staff Notice 43-309

On April 9, 2015, the Canadian Securities Administrators published CSA Staff Notice 43-309 Review of Website Investor Presentations (“Staff Notice 43-309”), which highlighted findings from a review of investor presentations on mining issuers’ websites, conducted by staff of the British Columbia Securities Commission, the Ontario Securities Commission, and the Autorité des marchés financiers (collectively, the “Regulators”). This review also included a review of mining issuers’ forward looking information (“FLI”) against the requirements of Part 4A of National Instrument 51-102 Continuous Disclosure Obligations (“NI 51-102”).

The Consequences

Of the 130 mining issuers reviewed, the Regulators sent letters to 49 mining issuers requiring them to amend their investor presentations and correct the non-compliant disclosure, resulting in outcomes from mining issuers confirming future compliance with the requirements, to issuing a corrective news release, to filing or refiling a technical report. The majority of the corrective news releases and technical report filings or refilings resulted from non-compliant disclosure of economic studies, preliminary economic assessments (“PEAs”), mineral resources, mineral reserves, exploration targets, historical estimates, or overly promotional language.

Practical Tips to Avoid Trouble

The take away for mining issuers is to ensure all written disclosure on their website complies with NI 43 101. Fortunately, Staff Notice 43-309 included the following practical advice to assist mining issuers in designing investor presentations and websites that meet their disclosure obligations:

A. Areas where there is a high level of non-compliance

1. Naming the QP: An issuer must include the name of the QP and their relationship to the issuer for all documents containing scientific or technical disclosure, including websites and investor relations materials. All technical information must either be approved by a qualified person or based upon information prepared by or under the supervision of a qualified person. In the latter case, an issuer must ensure that the technical information is consistent with the information provided by the QP. An issuer should consider having the QP review disclosure that summarizes or restates a technical report or technical advice or opinion to ensure that the disclosure is accurate.

2. PEA cautionary statements: Disclosure of the results of a PEA must provide appropriate cautionary statements to ensure the public understands the limitations of the results of the PEA. The following cautionary language, stated with equal prominence, must be included in disclosure of a PEA that includes inferred mineral resources:

“The preliminary economic assessment is preliminary in nature, it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary economic assessment will be realized.”

3. Mineral resources and mineral reserves:

a. Caution that mineral resources are not mineral reserves: The disclosure of results of an economic analysis of mineral resources must include an equally prominent statement that “mineral resources that are not mineral reserves do not have demonstrated economic viability”.

b. Inclusion or exclusion of mineral reserves in mineral resources: When reporting both mineral resources and mineral reserves, an issuer must include a clear statement whether mineral resources include or exclude mineral reserves. While practices on this matter vary, the CIM Estimation Best Practice Committee from 2003 recommends that mineral resources should be reported separately and exclusive of mineral reserves.

4. Exploration targets: If an issuer discloses an exploration target, both the potential quantity and grade of the exploration target must be expressed as ranges and be accompanied by an equally prominent statement that “the potential quantity and grade is conceptual in nature, there has been insufficient exploration to define a mineral resource” and that “it is uncertain if further exploration will result in the target being delineated as a mineral resource”.

5. Historical estimates: Each time an issuer discloses historical estimates, the issuer must include information about the source, date, reliability, key assumptions and other factors, and the following, equally prominent statements: “a qualified person has not done sufficient work to classify the historical estimate as current mineral resources or mineral reserves” and “the issuer is not treating the historical estimate as current mineral resources or mineral reserves”.

B. Areas for Additional Improvement

1. Taxes in economic studies: Financial results and the cash flow model for an “advanced property” (which includes results of a PEA, pre-feasibility or feasibility study) must include assumptions that have an economic impact such as taxes, royalties, and other government levies. In respect of such tax matters relevant to a technical report, we note that a QP may rely on a report, opinion or statement of another expert who is not a QP, or on information provided by the issuer, and may include a limited disclaimer of responsibility, provided the QP discloses: (i) the source of the information relied upon, including the date, title, and author of any report, opinion, or statement; (ii) the extent of reliance; and (iii) the portions of the technical report to which the disclaimer applies.

2. Metal price assumptions: When reporting mineral resources and mineral reserves, an issuer must ensure the assumed metal or commodity price, and the cut-off grade, are clearly stated, as well as the effective date of the reported estimate. For investor presentations, this information could be provided in an appendix.

3. Technical report triggers: An issuer must ensure that PEA disclosure on its website is supported by an existing technical report. Disclosing economic projections in investor presentations, fact sheets, posted or linked third party reports[1], or any statements on the issuer’s website may trigger the filing of a technical report to support the disclosure. Such PEA disclosure can include forecast mine production rates that might contain capital costs to develop and sustain the mining operation, operating costs, and projected cash flows.

4. FLI compliance: An issuer should ensure that FLI disclosure in investor presentations provides the material factors and assumptions used to develop the FLI. Examples of FLI include metal price assumptions, cash flow forecasts, projected capital and operating costs, metal or mineral recoveries, mine life and production rates, and other assumptions used in preliminary economic assessments, pre-feasibility studies, and feasibility studies.

5. Overly promotional terms and potentially misleading information. An issuer should avoid terms and statements that may be overly promotional or misleading. Terms which may be used inappropriately in certain circumstances include, “world-class”, “spectacular and exceptional results”, “production ready”, “ore” in relation to mineral resources, and “management estimates”.

6. Ability to rely on previous disclosure: An issuer must include in any written disclosure the following information, but may be able to comply with these requirements by including a reference to the title and date of a document previously filed on SEDAR that contains this information:

a. Exploration information about quality assurance/quality control and naming the laboratory.

b. Data verification – data verification is the process of confirming that the data underlying the written disclosure has been properly generated, was accurately transcribed, and is suitable for the purpose that the data is used.

c. Information about the nature and context of drilling results such as true width and higher grade intersections. In some cases, investor presentations may be able to include representative drill sections or other figures showing mineralized intervals to assist in providing the necessary information.

d. Metal price assumptions. However, if the assumed metal or commodity price is significantly below or above current prices, an issuer should clearly state the key assumptions to ensure the disclosure is not misleading.

Ultimately, if an issuer is in doubt about whether disclosure on its website or in its investor presentations complies with NI 43 101, the issuer can have a QP or legal counsel review the applicable disclosure.

 

[1] We also recommend that an issuer’s website does not include links to third party content, such as analysts’ reports.  National Policy 51-201 Disclosure Standards (“NP 51-201”) provides that if an issuer elects to post to its website or otherwise publish the names of analysts who cover the issuer and/or their recommendations, the names and/or recommendations of all analysts who cover the issuer should be similarly posted or published.  This applies whether the analysts’ coverage of the issuer is positive or negative.  NP 51-201 also provides that an issuer that redistributes an analyst’s report risks being seen as endorsing that report.  This may trigger a requirement for the issuer to file a technical report, depending on the content of the analyst’s report.

Mining Issuers: Ensure your Websites and Investor Presentations Comply with NI 43-101

Welcome Tax Measures Announced at the PDAC 2015 Convention

On Sunday March 1, 2015, the Honourable Joe Oliver, Federal Minister of Finance addressed the Prospectors & Developers Association of Canada (“PDAC”) at the annual PDAC Convention in Toronto and announced certain proposals aimed at bolstering Canada’s junior mining industry. First, the Government has announced that it intends to extend the 15% Mineral Exploration Tax Credit (“METC”) for flow-through share investors for an additional year. The METC was scheduled to expire on March 31, 2015. The METC was first introduced in 2000 as a temporary measure which expired in 2003. Since 2003, the Department of Finance has extended the METC annually, one year at a time.

The Government has also modified its previous position with respect to the types of expenses that will qualify as Canadian exploration expenses (“CEE”). Expenses which qualify for CEE treatment are 100% deductible in the year they are incurred. Additionally, certain types of CEE may be renounced to investors pursuant to flow-through share agreements which enable junior mining companies to raise capital and fund exploration programs. In a letter to PDAC dated September 19, 2007, the Canada Revenue Agency (“CRA”) provided certain guidelines in determining whether certain expenses incurred at the exploration stage qualified as CEE. In that 2007 letter, the CRA took the position that environmental assessments and community consultations undertaken to meet a legal requirement to obtain a permit would not be eligible for CEE treatment as these costs are not incurred for the purpose of determining the existence, location, extent or quality of a mineral resource in Canada.

In his speech, Minister Oliver announced the government’s intention to modify the definition of CEE contained in the Income Tax Act (Canada) to provide that effective March 1, 2015, the costs associated with undertaking environmental studies and community consultations as a pre-condition to obtaining a licence or permit to explore will qualify as CEE.

These proposed tax measures are welcome particularly since many mining companies are facing challenges in securing capital.

Welcome Tax Measures Announced at the PDAC 2015 Convention

PDAC

Only going to one mining investment show? Make it this one. PDAC International Convention, Trade Show & Investors Exchange is the world’s leading Convention for people, companies and organizations in, or connected with, mineral exploration.

The four-day annual Convention held in Toronto, Canada, has grown in size, stature and influence since it began in 1932 and today is the event of choice for the world’s mineral industry. In addition to meeting over 1,000 exhibitors, 25,122 attendees from over 100 countries, it allows you the opportunity to attend technical sessions, short courses as well as social and networking events.

For more information on PDAC, or to register, please visit the PDAC website.

Dentons Sponsored Events:

Your place ore mine?

Join Dentons for our annual cocktail reception during PDAC.

Come catch up with fellow stakeholders in the mining industry over an enjoyable evening of Hors d’oeuvre, drinks and networking.

We look forward to seeing you!

Date & Time
March 2, 2015
4:00 PM – 7:00 PM

Location
InterContinental Toronto Centre
Sapphire/Turquoise Room
225 Front Street West
Toronto
(Connected to the Metro Toronto Convention Centre)

Dentons is proud to support the Women in Mining – International Networking Reception

Take advantage of a global networking opportunity at the 8th annual Women in Mining International Reception hosted by Women in Mining Canada, designed to bring together industry leaders, academia, employers, students and job seekers from around the world. Here, you can connect with the people and personalities who comprise this dynamic industry and celebrate the global contributions that women have made to this vibrant industry – this reception is full of the energy that will fuel your PDAC experience. Afternoon appetizers and refreshments will be served.

Visit Women in Mining (WIM) Canada on the Trade Show floor at Booth 913, pre-and post-reception.

Become a member, learn how to become involved through volunteering or participating on committees, catch up with old friends and grow your network.

WIM Canada is a national not-for-profit organization formed in 2009 and focused on advancing the interests of women in the minerals exploration and mining sector.

For more details please contact: info@wimcanada.org

Date & Time
March 3, 2015
3:00 PM – 5:00 PM

Location
Metro Toronto Convention Centre
Room 105, North Building
Toronto

For more information on Dentons’ involvement at PDAC or to attend an event, please contact Kylie Panciuk.

PDAC

Mining seminar

Please join Dentons’ Mining Group at the Terminal City Club on Tuesday, November 18, 2014, as we discuss the following topics:

  • “Tax pitfalls and planning for the mining sector,” presented by Anne Calverley, Partner (Dentons Calgary); and Lori Mathison, Managing Partner (Dentons Vancouver)
  • “M&A in the trough–practical tips for the urrent market environment,” presented by Alan Hutchison, Partner; and Daniel Katzin, Associate (Dentons Vancouver)

Accreditation: Each presentation is approved for 30 minutes of CPD credit with the Law Society of British Columbia for a total of one hour.

This session is complimentary but seating is limited. Please RSVP by November 10, 2014, by clicking on the blue arrow.

Date and time
November 18, 2014
7:30-9:15 a.m.

Location
Terminal City Club Metropolitan Room
837 West Hastings Street
Vancouver, BC
V6C 1B6

Relevant sectors

Mining

Contact information
RSVP to Kelly Tsang, Specialist, Marketing and Events at kelly.tsang@dentons.com.

Please let me know if you have any questions. Thanks!

Mining seminar

INFONEX – MD&A for mining (2014)

INFONEX – MD&A for mining (2014)

Relaunching the Northern Plan

The Northern Plan will focus on the integrated and coherent development of the area covered by the Northern Plan which includes all of Québec located north of the 49th degree of north latitude and north of the St. Lawrence River and the Gulf of St. Lawrence. There are several mining exploration projects and major mining projects at various stages of development in the north, some of which require significant access to infrastructures. The Government of Quebec intends to take steps to facilitate the implementation of mining and other projects in the area. With confirmation by the Government of Québec of its intention to relaunch the Northern Plan by introducing Bill 11, An Act respecting the Société du Plan Nord, on September 30, 2014, the implementation of the Northern Plan continues. Bill 11 reiterates the majority of the elements included in the former Bill 27, An Act respecting the Société du Plan Nord, introduced in 2011, which was examined by a parliamentary committee. However, Bill 11 contains new elements and incorporates differences when compared to the previous version as outlined in Relaunching the Northern Plan: Introduction of the Bill to establish the Société du Plan Nord. Mr. Couillard’s government seems determined to proceed with the implementation of all mechanisms required for the orderly deployment of the Northern Plan while the mining sector and international business community continue to demonstrate interest in this major plan.

Relaunching the Northern Plan

Mining & Investment Latin America Summit, Lima, Peru, October 27-28, 2014

Dentons is proud to be a Silver Sponsor of Mining & Investment Latin America Summit, the largest mining and investment event in Latin America.

Mining & Investment Latin America Summit is the only event that focuses on mining investment and efficiency strategies in Latin America, bringing together mining companies; companies with mining assets in Latin America; local, regional and international investors and financial service providers.

Please join us on Day 1 at 9:40 a.m. for a government and mining company panel discussion regarding optimizing the relationship between both parties to ensure long term growth and development. The distinguished panelists include Dr. Beatriz Uribe, President of Mineros; Patricia Fortier, Ambassador, Embassy of Canada, Peru; and Brian Abraham, Partner, Mining, Dentons Canada LLP.

Dentons Canada mining partner Jaime McVicar will also attend the Summit.

Brian and Jaime look forward to getting together with you for two days of business matching, knowledge sharing and deal-making.

Mining & Investment Latin America Summit, Lima, Peru, October 27-28, 2014

Case Bulletin: R v Karigar, 2014 ONSC 3093

For the first time in Canada, an individual has been sentenced to jail time for bribing a foreign public official. The three-year penitentiary sentence was handed down by the Ontario Court of Justice under the Corruption of Foreign Public Officials Act, SC 1998, c 34 (the “CFPOA”).

The imposition of a jail sentence constitutes a major milestone in Canada’s drive towards tackling bribery in international business ventures, and should serve as a stark reminder to all Canadian companies active internationally of the critical importance of having in place a strong anti-corruption compliance program.

In 2013, Nazir Karigar (“Mr. Karigar”) was convicted of breaching section 3(1) of the CFPO for conspiring with employees and associates of Cryptometrics Canada Limited to bribe officials of Air India, a state-owned Indian airline, and an Indian Cabinet Minister in order to secure a business contract. On May 23, 2014, Mr. Karigar was sentenced to a three-year term of imprisonment.

Following recent amendments to the CFPOA, the maximum sentence for the offence committed under the CFPOA is now 14 years. However, at the time Mr. Karigar committed the CFPOA offence, the maximum sentence was only five years. The sentence was therefore towards the higher end of the applicable range.

The Court found that the aggravating factors in sentencing included: (i) the sophisticated nature of the bribery scheme; (ii) attempts at concealment by the creation of a fake competitive bid to create an illusion of a competitive bidding process; (iii) Mr. Karigar’s “sense of entitlement” which led to him openly tell a Canadian trade commissioner of the bribes; and (iv) Mr. Karigar’s deep personal involvement in the scheme.

The mitigating factors included: (i) Mr. Karigar’s cooperation in the prosecution, which avoided a lengthy trial; (ii) his prior clean criminal record; and, perhaps most interestingly, (iii) that the bribery scheme was a “complete failure”. At first blush, the success or failure of a bribery scheme might seem an odd factor to take into account when fixing a sentence; however, the Court noted that because of the failure of the scheme, the harm caused was relatively limited.

The Court’s closing remarks left no room for doubt about the serious nature of CFPOA violations:

“[a]ny person who proposes to enter into a sophisticated scheme to bribe foreign public officials to promote the commercial or other interests of a Canadian business abroad must appreciate that they will face a significant sentence of incarceration in a federal penitentiary”.

Canadian Courts are clearly prepared to play their part in delivering the message that Canada is serious about the enforcement of its anti-corruption laws. For Canadian companies doing business abroad the warning is clear – they must take business ethics seriously and ensure they have clear policies and vigorous compliance programs in place.

Case Bulletin: R v Karigar, 2014 ONSC 3093

Current Permitting Processes and Challenges for New Mines and Re-opening Old Mines

Current Permitting Processes and Challenges for New Mines and Re-opening Old Mines

Avoiding Deal Killers – Understanding Technical Report Triggers Under NI 43-101

Avoiding Deal Killers – Understanding Technical Report Triggers Under NI 43-101

2nd Coaltrans Conference – West Coast

2nd Coaltrans West Coast, Four Seasons Hotel, Vancouver, Canada, 7-8 May 2014

Dentons is proud to be a Silver Sponsor in support of trade between North America’s coal producers and Asia’s buyers at the 2nd Coaltrans West Coast conference in Vancouver.

Coaltrans will harness its international network of contacts to bring together regional coal producers and service providers with existing and potential coal buyers and investors.

Please join us on Day 1 during Session 2 for a presentation by Leanne Krawchuk on Options for Balancing the Deal Risks in Your Coal Supply Agreements beginning at 10:50 am. Visit members of the Dentons Canada mining team, Leanne Krawchuk, Wei Shao and Carrie Schroeder at the Dentons booth during the exhibition.

We look forward to getting together with you for two days of business matching, knowledge sharing and deal-making!

2nd Coaltrans Conference – West Coast

Mining Seminar

Please join us on Thursday, May 15th as we discuss:

Dealing with First Nations – IBAs and other relationship building tools
Mai Rempel, Counsel

Avoiding Deal Killers – Understanding Technical Report Triggers Under NI 43-101
Alan Hutchison, Partner

Event Schedule

7:30 a.m. Registration and breakfast
8:00 a.m. Presentations
9:15 a.m. Conclusion

Location 

Terminal City Club
Metropolitan Room
837 West Hastings Street
Vancouver, B.C.

To RSVP

RSVP to Kelly Tsang, Specialist, Marketing and Events at kelly.tsang@dentons.com.

This session is complimentary but seating is limited. Please RSVP by May 9, 2014. 

Mining Seminar

British Columbia Aboriginal Mentoring and Training Association (“BCAMTA”)

On February 7, 2014, BCAMTA opened its office in Terrace to guide and support aboriginal people towards gaining employment in the mining and exploration industry. There are a number of mines planned in the Terrace area and the need for employees, particularly those who have local connections would assist the mining sector for employing local people.

Additional information is available here.

British Columbia Aboriginal Mentoring and Training Association (“BCAMTA”)

2014 Federal Budget

The mineral exploration tax credit has been extended for a further one-year period.  This provides a 15% tax credit for flow-through share investors. Other items which would impact the mining industry include amendments to the Hazardous Products Act, an allotment of $40 million for the Norther Economic Development Program over a two-year period and a number of Human Resource initiatives, principally with respect to training.

The government has also proposed changes with respect to corporate transparency, particularly in the area of access to information and corporate beneficial ownership.

2014 Federal Budget

Government appoints new commissioner of the environment and sustainable development

Julie Gelfand has been appointed environment commissioner effective March 24, 2014. She was most recently the Chief Advisor and Rio Tinto Canada and Vice President of Environmental and Social Responsibility at the Rio Tinto Iron Ore Company of Canada. She was also formerly the vice-president of the sustainable development at the Mining Association of Canada.

The commissioner is responsible for determining whether federal government departments are meeting their sustainable development goals and for overseeing the environmental petitions process and reports to Parliament on behalf of the Auditor General.

Additional information is available here.

Government appoints new commissioner of the environment and sustainable development

Environment minister tasked with reviewing the Environmental Assessment Office for effectiveness and efficiency

In a speech to the Association for Mineral Exploration of British Columbia, Premier Christy Clark advised that the environment minister, Mary Polak, has been given the task of reviewing The Environmental Assessment Office to make it as effective and efficient as possible.

The Premier indicated that the current process has become less certain, less predictable and probably not efficient.  Premier Clark insisted that the process would remain rigorous, clear and that it would be timely.

It will be interesting to see the result of the review, particularly in light of the recent Pacific Booker decision in the British Columbia Supreme Court where the Court was ordered the Environmental Assessment Office to reconsider its earlier rejection of Pacific Booker’s application to develop the Morrison deposit in British Columbia.  The government has decided not to appeal that decision.

Environment minister tasked with reviewing the Environmental Assessment Office for effectiveness and efficiency

Funding increase from Yukon government for prospectors

The Yukon government has increased its Yukon mineral exploration program by $630,000 for the coming field season. Premier Darrell Pasloski said in Vancouver in late January at the Mineral Exploration Roundup of the Association for Mineral Exploration for B.C. annual meeting the program provides a portion of the exploration expenditures to assist mineral exploration in the territory and in 2013 some 55 Yukon exploration projects received funding through the program. The program is merit based and provides partial funding for those projects most likely to succeed.

Additional information is available here.

Funding increase from Yukon government for prospectors

Peel River watershed decision results in environment groups suing Yukon government

Nacho Nyak Dun, theTr’ondek Hwech’in (two First Nations), the Canadian Park sand Wilderness Society and the Yukon Conservation Society are suing the Yukon government over the land use plan for the Peel River watershed on the basis that it violates land claims agreements signed by the First Nations.  The government indicated that it would not ban mining in an area the size of the Peel River watershed and allows mining in about 70% of the region, subject to many restrictions on the exploration activities and allows existing mining properties to remain open for exploration and development, subject to the terms of the watershed development plan.

Additional information is available here.

 

Peel River watershed decision results in environment groups suing Yukon government

Lean times may call for lien measures – What you need to know about miners’ liens in Northern Canada

Given the present economic climate of falling metal prices and depressed equity markets for mining companies, many owners and operators of mines are experiencing cash flow and working capital shortages.  As a result, contractors and others who provide services or materials to mines, whether in the exploration, development, or production phases of such projects, are increasingly looking to miners lien legislation to help them increase their leverage when seeking payment of outstanding accounts.

Miners’ liens are unique legal and potentially powerful tools.  Therefore, those involved in working on or operating a mine, as well as lenders, should have some awareness of the impact of the filing of such liens on mineral tenures and on the interests of any secured creditors.

What is a lien?

In general terms, a lien is a charge against property, including mineral tenures, granted to a person who provides services or materials which improve that property as long as there has been compliance with the rules in the applicable lien legislation.  The property acts as security for the debt owing to the lien claimant.  Therefore strict compliance with the statute is required in order to get the benefits of the lien.

Lien legislation is different in each province and territory.  All Canadian jurisdictions have builders lien legislation that applies generally to improvements and services provided to property, but the northern territories have special miners lien legislation.  Where miners lien legislation exists, it is that legislation and not the builders lien legislation that applies to mining projects.

Miners Lien Acts north of 60 – who can lien for what?

In each of the Yukon, Northwest Territories and Nunavut, the applicable Miners Lien Act provides a statutory framework for claiming a miners lien.  There are currently two different lien legislation regimes: one in the Yukon and another in the Northwest Territories and Nunavut.

In the Yukon, a lien is provided to a contractor or subcontractor who provides services or materials to a mine “preparatory to, in connection with, or for an abandonment operation in connection with” the recovery of a mineral.  The lien is provided on “all the estates or interests in the mine or mineral concerned” as well as on the mineral itself “when severed and recovered from the land while it is in the hands of the owner”.  The lien is also on “the interest of the owner in the fixtures, machinery, tools, appliances and other property in or on the mines or mining claim”.  In addition, a person who rents equipment to an owner, contractor or subcontractor has a lien for the rent while the equipment is being used or reasonably required to be available for the purpose of the mine.

In the Northwest Territories and Nunavut, a person who performs any “work or service on or in respect of” or “places or furnishes any material to be used in the mining or working of a placer or quartz mine or mining claim” has a lien for the price of the work, service or material on “the minerals or ore produced from and the estate or interest of the owner in the mine or mining claim”.

How to claim a lien and time limits

Under the Miners Lien Acts, there are two initial steps required to claim a lien: first, file a claim of lien, and second, start an action.

Firstly, a lien claimant must file a claim of lien in the mining recorder’s office against the applicable mineral tenures within the prescribed time period.  This time period differs between the Yukon and the Northwest Territories/Nunavut.  The applicable time periods are summarized in the chart below.  The claim of lien must be supported by an affidavit which verifies the facts in the claim of lien, and the claim of lien must include:

  1. The name and residence of the claimant, owner of the property and of the person for whom the work, service or material was provided;
  2. A description of the work or service performed or material furnished and the time period within which it was performed or furnished;
  3. The amount claimed as due or to become due;
  4. The description of the property to be charged; and
  5. The date of the expiration of the period of credit agreed to by the lien holder for payment for the work, service or material of the lien holder where credit has been given.

Secondly, a lien claimant must start an action within the prescribed time period in the Supreme Court in the Yukon or the Northwest Territories or in the Nunavut Court of Justice in Nunavut. In addition, the lien claimant must file a certificate from the court in the mining recorder’s office against the liened mineral tenures. Again, this time period differs between the Yukon and the Northwest Territories/Nunavut, and the applicable time periods are summarized in the chart below. The certificate notifies anyone searching at the mining recorder’s office that the mineral tenure is subject to a legal proceeding.

Priority

Assuming there has been compliance with the legislation, a miners lien gives a lien claimant limited priority over mortgage and other encumbrance holders.  This priority can be important if the mineral tenures are subject to secured financing the amount of which is equal to or exceeds the value of the mineral tenures.  In such a scenario, the lien claimant may only be able to recover the amounts which have priority over the secured financing.  Therefore it is important for all the players to understand the scope of the priority.

The following chart summarizes the applicable steps and timelines to claim a miners lien in Yukon and in the Northwest Territories/Nunavut, and the priority granted by such liens.

 

  Yukon Northwest Territories and Nunavut
Time for filing a claim of lien Before the expiration of 45 days from the last day on which the work or service or material which is the subject matter of the claim, was performed. Before the expiration of six months from the last day on which the work or service or material, the subject-matter of the claim, was performed or placed or furnished or, where credit has been given, from the time fixed for payment.
Time for commencing an action and filing a certificate. 60 days after deposit of the claim of lien. 90 days after filing of the claim of lien.
Priority A lien takes priority over any mortgages or encumbrances to the extent the lien arises from work, services, or materials provided to the mine for a period of up to 60 days.The purpose of this limitation is to provide certainty to financiers of mines that any miners lien has a limited priority. The commencement of this 60 day period is not expressly stated in the Miner Lien Act. The Yukon Territory Supreme Court has indicated that this period should be calculated from the last day of the provision of work, services or materials, and that accordingly it may be different for each lien claimant. However, this case law is not binding, and therefore this legislation may be interpreted differently by a future court. A lien takes priority over all mortgages and encumbrances registered on or after March 23, 1937, as to 1/2 of the output from the applicable mine or mining claim.This priority typically extends to half of the minerals or ore when recovered from the mine, and, if so ordered by a court, may also extend to half of any net proceeds recovered from the sale of such minerals or ore.

 

Impact of liens

Some of the key impacts of miners’ liens for participants in mining projects are summarized below:

Owners & Operators: Owners and operators should be aware of the impact miners liens can have on their debt covenants and should properly manage relationships with contractors, suppliers and lenders when experiencing cash flow and working capital shortages.

Contractors & Suppliers: Contractors and suppliers should be aware of lien legislation, and take timely action to perfect a lien because failure to comply with the strict requirements in lien legislation can have dire consequences.  Once perfected, a lien can provide leverage to a contractor or supplier in the settlement of outstanding accounts with an owner.

Lenders: Lenders need be aware that a portion of their security may be subordinated to lien claims. Lenders can ensure there are protective covenants in security documents which contemplate the lenders’ recourse in the event a claim of lien is filed.

Lean times may call for lien measures – What you need to know about miners’ liens in Northern Canada