New Exploration Rules Spark Debate in Ontario’s Mining Industry

Controversial new mining rules in Ontario have sparked debate in the Canadian province’s junior mining community, with some fearing higher costs and more red tape and others arguing that the changes will bring clarity to the exploration and development process.

Hanging in the balance is an industry that’s of vital importance to the province. According to Ontario’s Ministry of Northern Development and Mines, a record $1 billion was spent on exploration activities in Ontario in 2011, or 26 percent of the national total.

First Nations consultation is at the center of the new mining rules

The new regulations seek to clarify a 2009 amendment to the province’s Mining Act that requires exploration firms to consult with any First Nations that may be affected by their activities.

Under the new rules, exploration companies must submit a detailed exploration plan to the ministry before they undertake certain early exploration activities — essentially anything more than hand samples — and must notify landowners, or “surface rights owners,” and local First Nations.

After they submit their plans, companies must wait 30 days before they can start work. During that time, the plan will be posted on the ministry’s website, and the government will distribute it to all affected First Nations communities for feedback. Exploration plans can be submitted on a voluntary basis after November 1, 2012, but they will be mandatory after April 1, 2013.

Further, any work that requires heavy equipment will require an exploration permit, which explorers will have to obtain using a similar process. The ministry is aiming for a 50-day turnaround from the time it hands out the plans to First Nations to when it makes a decision on whether to issue a permit, unless more time is needed for consultation.

In addition, after November 1, First Nations will be able to apply to the ministry to have sites of cultural significance excluded from any exploration activity.

“We’ve brought a 100-year-old piece of legislation into the 21st century,” said Rick Bartolucci, minister of northern development and mines. “Through these regulations, as well as our ongoing work with industry and Aboriginal communities, we can all ensure Ontario continues to be a leading jurisdiction for mineral exploration investment for decades to come.”

Industry association feels new rules will bring “regulatory certainty”

The ministry developed the legislation after consulting with industry stakeholders, First Nations and the public. The Prospectors and Developers Association of Canada (PDAC) was involved through its position on the Minister’s Mining Act Advisory Committee. The association’s executive director, Russ Gallinger, believes the changes will give explorers clearer rules to go by.

“The rules provide definite timelines and regulatory certainty,” he told Resource Investing News in a phone interview on October 12. “Yes, it does add another step, but it’s a matter of looking well ahead and incorporating these changes into your plans.”

In terms of First Nations consultation, Gallinger said that the new regulations simply codify what his organization considers a best practice. “We have always advocated for consultation with First Nations to occur early and often … In the past, some companies that have consulted later in the process have faced blockades and civil disobedience [from First Nations groups], for example.”

CEO fears changes will put the brakes on resource exploration

Michael Schuss, CEO of Canadian International Minerals (TSXV:CIN), sees things differently. In a phone interview on October 12, he said he’s concerned that the permitting process will quickly become bogged down, and that government hasn’t given miners enough information about the new system.

“It means we’ll have to spend time sending in paperwork, then we’ll have to wait three weeks for a response. They won’t be able to get to it in 30 days,” he said. “And if they don’t, First Nations will rightly say that they don’t have enough information to make a decision. If miners can’t get permits, it will scare off investors, and Ontario will go from one of the best places for mining in the world to one of the worst. Word will spread fast.”

Schuss also sees the new rules as yet another cost added to juniors’ tight budgets in a market where they are already struggling to find financing for their projects. “The requirements [on exploration firms] are so onerous,” he said. “In this bad market, many small companies will go off the board and not come back. Their administration costs will just get too high. Nobody really knows how this is going to work. Where are the forms we need to fill out? Has anyone seen them?”

Role of First Nations is causing further confusion

For their part, the province’s First Nations have raised concerns that the new rules still allow for “free entry,” which means that miners can stake claims without informing local First Nations or surface rights holders, and must only provide notification once they plan to start work. That has caused conflicts in the past, according to Harvey Yesno, grand chief of the Nishnawbe Aski nation. “It’s contributing, we believe, to the problems that industry is encountering with First Nations,” he recently told the CBC.

In addition, some First Nations feel the obligation to consult still gives miners the ability to go ahead, regardless of the feedback they get from local bands.

“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,” the Anishinabek nation said in a recent statement.

But that may be a moot point, according to Randy Hillier, a member of provincial parliament (MPP) for the opposition Progressive Conservative party, who recently told the Ottawa Citizen that the courts have often interpreted the requirement to consult as a need for outright consent anyway.

“In large part there’s a de facto veto on mining by First Nations,” he said.

Ontario explorers hope province’s favorable geology will trump new requirements

Even with the new rules, the PDAC’s Gallinger remains optimistic that Ontario’s competitiveness will remain intact. “At the end of the day, people will explore where there is good geology,” he said. “Just look at the success we’ve had in the Ring of Fire and with new gold projects.” In addition, he said that if the new rules do negatively impact investment in the sector, “there will likely be an opportunity to revisit them later on.”

Securities Disclosure: I, Chad Fraser, hold no positions in any of the companies mentioned in this article.