Brett A. Kagetsu
Associé
Article
14
The Prospectors & Developers Association of Canada (PDAC) held its annual convention from March 6-9, 2016, in Toronto. Now in its 84th year, the convention attracted more than 22,000 attendees from over 100 countries, comprising investors, analysts, mining executives, geologists, government officials and service providers to the mining industry, including members of the legal profession.
Although attendance was slightly lower than expected, the atmosphere at the conference was one of renewed confidence and positivity, in spite of the challenges facing the industry. The uplifting mood and surprisingly temperate weather paired well with the reports on the market — where metal prices are finally no longer free-falling and share values are increasing.
Gowling WLG had an active presence at PDAC, hosting a number of events and serving as a forum for discussion of the most relevant issues affecting the mining industry at the moment. The following is a summary of our observations and what we have identified as trends to watch out for in the upcoming year.
The convention hosted its inaugural International Mines Ministers Summit (IMMS), which brought together 16 national mining ministers from around the world. The summit was led by Canada's minister of natural resources, the Honourable Jim Carr. The objective of the gathering was to strengthen mining relations and foster collaboration between key international partners, non-governmental organizations and industry leaders. The discourse took place against the backdrop of the theme "The Mineral Industry as a Building Block of Strong Nations." The ministers noted that mining is a key sector in their economies, and discussed at length the critical role that governments play in ensuring that clear and stable regulatory frameworks and processes are in place to promote investments in the sector.
In our Toronto office, Avril Cole, a partner and co-leader of our Africa Desk, moderated the firm's first ministerial roundtable on mining alongside Glenn Mullan, first vice-president of PDAC and chairman & CEO of Golden Valley Mines. The seminar entitled "Enabling Successful Mining Investments: Connecting the Dots Between Africa and Ontario" was chaired by the Hon. Michael Gravelle, Ontario's minister of northern development and mines, and included mining ministers from South Africa (Hon. Deputy Minister Godfrey Oliphant), Rwanda (Hon. Minister Evode Imena), Sierra Leone (Hon. Minister Alhaji Minkailu Mansaray), Kenya (Hon. Principal Secretary Dr. Ibrahim Mohammed) and Sudan (Hon. Minister Dr. Ahmed Mohammed M. Elsadig Elkaroui).
Each of the ministers outlined recent developments in the mining sector in their respective jurisdictions and discussed the critical role of government in addressing the issues the mining sector faces and improving the competitiveness of the sector. The discussion covered a broad range of topics of interest to the investment community, including the importance of regulatory certainty (particularly predictability in mining taxation), resource revenue sharing, the development of infrastructure, the role of innovation and technology, and stakeholder participation.
The ministers from Africa also commented on the continuing significance of China's role in the development of Africa's infrastructure and mining sector.
The ministers spoke of the need to look beyond commodity cycles and address the issues facing the mining industry on the African continent in a manner that enhances value for both investors and host governments, as reflected in the Africa Mining Vision.
For the Canadian counterpart, as well as industry attendees, the event provided a unique opportunity to hear directly from key members of various African governments on what the future may hold for the mining industry in Africa.
Gowling WLG carried this theme over to South America as France Tenaille, a partner and co-leader of our Latin American Desk, hosted and moderated a panel of government representatives from Argentina. Opening remarks were shared with Miguel Morley, president of the Argentine-Canadian Chamber of Commerce.
The seminar titled "Argentina Mining: The Best is Yet to Come" included a panel formed by Argentina's Federal Secretary of Mining Daniel Meilán, the Sub-Secretary of Mining Development Mario Capello and the Minister of Mines of the Province of San Juan Alberto Hensel. Other provincial governors and relevant Argentine mining authorities were also present, including the Canadian ambassador to Argentina, Hon. Robert Fry, and the Argentinean ambassador to Canada, Hon. Norma Nascimbene de Dupont. The panel discussed the shift in mining and foreign investment policies that is expected from the new Macri government, as well as the changes that have already taken place. The commitment of the new Argentine administration to engaging with the international mining community is a clear political and ideological change, which will no doubt restore competitiveness to the mining industry in the jurisdiction.
Gowling WLG also co-sponsored a dinner to welcome the Argentine delegation to the convention, and leaders of several Canadian mining companies with interests in Argentina were in attendance and were as impressed as we were about the promising direction that the Macri government is taking the Argentine mining industry.
The terms corporate social responsibility (CSR) and community consultation are vital components of the mining industry, as they connect mining companies to host communities. This year at PDAC, the issues surrounding CSR and community engagement resonated in the many languages spoken at the conference. It was the main topic at the IMMS, where ministers from around the world highlighted the need to ensure that exploration and mining projects are carried out in a sustainable manner with the inclusion of the communities and indigenous peoples.
At the African ministerial roundtable, the countries represented (South Africa, Sierra Leone, Rwanda, Sudan and Kenya) agreed that despite their need for foreign direct investment, they each have the expectation that foreign companies will reduce the negative impact of their mining operations while improving the economic and living conditions of local communities.
The need to engage meaningfully with and respect communities is apparent in Latin America. In past years, the industry has been plagued with negative news and controversies — from the lawsuits over human rights abuses in Guatemala to the massive tailings dam spill in Brazil. Panel member practitioners in our "Legal Trends in Latin American Mining" seminar stressed the need for companies at all levels of development to consult with the communities affected and take responsibility for the implications of their extractive operations.
The provincial and federal government representatives from Argentina that participated in our "Argentine Mining: The Best is Yet to Come" seminar also indicated that without community approval, mining developments would likely face regulatory roadblocks due to the pressure legislators face when communities oppose projects, therefore highlighting the importance of community consultation and obtaining social license prior to development. All the members of the panel agreed that mining education was a key factor in effecting change in the perception of the mining industry, and Argentina is committed to making great strides in this field.
CSR was also an important theme at the annual China Mining Investment Symposium, another event sponsored by Gowling WLG. Maya Stano, of Gowling WLG's Vancouver office, a professional geological engineer who advises on Aboriginal and environmental law matters with a focus on natural resource development, spoke on a panel to the large Chinese delegation at the symposium about the importance of the social licence in Canada, and how critical it is to meaningfully engage with the local community.
Scott Smith and Paul Seaman of Gowling WLG's Vancouver office continued this theme at their presentation titled: "Effective Strategies for Partnership with Indigenous Communities." They explained the importance and role of Aboriginal consultation, which was strengthened after the Supreme Court of Canada's Tsilhqot'in decision, where Aboriginal title was formally recognized. Now consent is the "gold standard," which consequently enhances the position of Canadian indigenous communities regarding mining developments. Arguably, after the Tsilhqot'in decision, Aboriginal titleholders can say no to development on their lands, even in situations where companies have already invested and started developing projects. Canada is fully committed to partnering with communities and Prime Minister Justin Trudeau is taking the lead on this, having stated that it is time for a "nation-to-nation relationship…based on recognition of rights, respect, co-operation and partnership."
R&D, innovation and the use of technology in the mining industry were also much-discussed themes at this year's PDAC as the industry comes to grips with the fact that in the face of rising costs and declining margins, it has to embrace innovation to extract more value from the minerals it mines.
At the ministerial roundtable on connecting the dots between Africa and the province of Ontario, the importance of African mining projects utilizing new, safer and cleaner technologies was touched upon. Although South Africa is still wrestling with the issue of the mechanization of its mines, the country's Council for Geoscience has been improving its technological capabilities to create an enabling environment for greenfield exploration.
The province of Ontario is also being urged by the Ontario Chamber of Commerce to increase investment in mining research and innovation to ensure the continued competiveness of the industry in the province.
During our Africa and Latin America events, we were fortunate to receive valuable updates and insight directly from our panelists — senior government officials and veteran lawyers from those regions. Below is a summary of updates we gathered from them:
Africa is rich in resource wealth. It holds approximately 30 per cent of the world's mineral resources, including bauxite, cobalt, copper, gold, graphite, iron ore, manganese, nickel, phosphate, platinum, and many other rare metals and elements. Although its wealth in resources is irrefutable, investors and multinational companies have been cautious about entering or staying in the market given the issues of political volatility, regulatory uncertainty and infrastructure challenges. Nevertheless, mining is a growing industry in Africa and it accounts for 20 per cent of the continent's economic activity.
Kenya is revising its mining policy with the goal of luring foreign investment; the new regulatory platform will provide increased certainty on the stability of licence tenures and greater transparency.
The mining industry in Sierra Leone is recovering from the combined misfortunes of the Ebola epidemic and low commodity prices. Though progress has been slow, the country is eager to welcome foreign direct investment in the mining sector and the opportunities there are vast. The Tonkolili Iron Ore project, the most important mine currently active in Sierra Leone recently resumed operations.
Despite the numerous headwinds the South African mining industry faces, the Government of South Africa remains committed to creating an enabling environment for investment in the sector, including resolving recent energy challenges. The South African Government hopes to introduce certainty to the regulatory environment through the finalization of the Mineral and Petroleum Resources Development Amendment Bill.
The mining minister from Rwanda, Evode Imena, is currently engaged in talks with the World Bank with regard to setting up a fund to guarantee loans to local miners. This new fund could facilitate early exploration development, which has been stalled by the systematic refusal of Rwandan banks to lend to local mining ventures. Minister Emena also commented on the great strides Rwanda, a producer of 3T minerals, has made in addressing issues relating to "conflict minerals" regulations, including the Dodd-Frank Act .
Despite the difficulties Sudan faces due to U.S. sanctions, the country is determined to attract international investors and has become the third-largest gold producer on the continent — behind South Africa and Ghana.
In Latin America, the country making the biggest splash is Argentina. With a new pro-business and investment government, President Macri is resolute to make mining a priority in the country's economic agenda. This marks a complete shift from last year's PDAC, and it is one accompanied by favourable fiscal policies and economic stability.
Peru continues to be an important mining jurisdiction, as evidenced by their strong presence at PDAC. Peru's Mines Deputy Minister Guillermo Shinno announced the entry into operation of mega-projects such as Toromocho, Constancia, Antapaccay, Las Bambas and the recent expansion of Cerro Verde. He also stated that Peruvian mines will produce over two million tons of copper by the end of 2016.
Chile will benefit from the growing demand for lithium, which is being driven by its use in electric vehicles, mobile phones and the renewable energy industry. Chile is one of the world's biggest lithium-producing nations, only rivaled by Australia, and followed by China and neighbouring Argentina.
Colombia's reputation for being a difficult mining jurisdiction is about to change as the country has recently launched a six-pillar mining strategy with the goal of boosting confidence and investor appeal. These pillars cover the issues of legal certainty, improvement of infrastructure, investment on geological mapping and strengthening the ministry of mines.
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