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. (NRN) and Mistango River Resources Inc. (MIS), 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.
‘More Restrictions’
“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. (G) and chairman of Toronto- based explorer Lexam VG Gold Inc. (LEX), 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.
New Rules
“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. (SLD) 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.
Exploration Plan
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.
For the rest of this article, please go to the Bloomberg.com website: http://www.bloomberg.com/news/2012-10-09/mine-explorers-see-cost-rising-from-2013-rules.html