How will juniors handle Ontario’s new permitting regime?

New rules designed to lessen conflict between the mining sector and aboriginal communities in Ontario kicked in on April 1, but neither cash-poor juniors nor the province’s First Nations seem ready for them.

Under the province’s Mining Act, which was modernized in 2009, the new rules require “plans” to be submitted to the Ministry of Northern Development and Mines (MNDM) for some early stage exploration activities, and for the first time in Ontario since 1996, permits for activities such as drilling.

In late March, Garry Clark, executive director of the Ontario Prospectors Association (OPA), said that while the changes have been made on a voluntary basis since November, a lot of companies are likely to be “offside” of the law when the plans and permits system becomes mandatory April 1.

“The biggest fear I have . . . is that there are companies out there that believe that if they started work prior to April 1, they don’t need a permit and they can just continue working,” Clark said. “At the other end of it, the government’s worked fairly hard at trying to get the word out that this starts April 1. But I don’t think it’s penetrated.”

In the short-term, if the ministry takes a hard line on companies that are operating in contravention of the law, this could mean big costs from idled drills if it issues stop-work orders.

“I’m hoping that the ministry is going to work diligently with these people if they do find that they’re offside,” Clark says.

When asked in late March whether there would be consequences for companies conducting drilling or other such activities without a permit in April, ministry spokesperson Julia Bennett did not provide a direct answer, saying only that individual companies should contact the Mineral Exploration and Development section of the ministry with their questions.

“As of April 1, 2013, mining companies must have an exploration plan or exploration permit for prescribed early exploration activities, regardless of when those activities began,” she said in an email. “For example, if a company started a project last fall and it is not completed before April 1, then that project cannot continue as of April 1 unless a plan or permit is in place. MNDM officials are working closely with the industry to provide support, as the plans and permit application process becomes mandatory.”

During the voluntary phase of the new regulations, 45 exploration plans and 101 permit applications were submitted to the ministry.

There could be some hiccups adjusting to the new regime, but hopes are that in the long run, the changes will help to get a dialogue going between industry and Ontario’s First Nations — which has, in some cases, been missing.

The rules were developed to encourage mineral exploration and mining while recognizing aboriginal treaty rights such as hunting, fishing and trapping. A number of court cases and conflicts between First Nations and industry — such as the dispute between junior Platinex (PTX-V) and the Kitchenuhmaykoosib Inninuwug First Nation, which first made headlines in 2006 and resulted in the removal of more than 23,000 sq. km of land from staking and exploration last year — revealed serious weaknesses in the Mining Act. After updating the act in 2009 to address aboriginal treaty rights, which are constitutionally protected, the government spent more than two years putting together the new system of plans and permitting, along with rules around consultation.

“We’re hoping to provide some certainty and clarity to the industry about their obligations around consulting with First Nations and Métis, but we’re also hoping it creates the tools and the opportunity and information-sharing to build relationships,” said Robert Merwin, director of the Mining Act Modernization Secretariat at the MNDM at the recent Prospectors and Developers association of Canada convention (PDAC) in Toronto.

The duty to consult and accommodate aboriginals regarding activities that could affect their treaty rights belongs to the Crown, but courts have ruled that procedural aspects of consultation can be downloaded onto companies.

The updated Mining Act, Merwin noted, “expressly recognizes aboriginal treaty rights” for the first time in Canadian mining legislation.

Under the new regulations, aboriginal communities are notified and engaged earlier in the exploration process.

Under the new system, government now informs companies which communities they need to consult with once a claim has been staked, as well as notifying First Nations. In addition, dispute resolution rules with specific timelines have been built into the process.

The rules also require companies to notify private land owners of activity nearby.

The new framework is going to be a “social experiment,” said consultant Michael Fox of Fox High Impact Consulting during a presentation at the PDAC.

“People across the country are watching this,” Fox said. “What was before a hands-off process is now a hands-on one, in some ways — and when’s the hand-off when it comes to the Crown’s role?”

The new rules

Some exploration activities can be conducted without a plan or permit: soil sampling, grab sampling, geological mapping, stripping or trenching on a small scale, transient geophysical surveys (such as radiometric and magnetic) or taking baseline data, for example.

An exploration plan is required, however for “non-mechanized” work, including geophysical surveys that require a power generator, line-cutting where the width of the line is 1.5 metres or less, drilling with a drill that is 150 kg or lighter and small-scale mechanized surface stripping, pitting and trenching.

Once submitted to the MNDM, the exploration plan is sent to affected aboriginal communities to inform them of the activity. The date the communities are notified is called the “circulation date,” and while plans do not require ministry approval, companies cannot start their planned activities until 30 days after the circulation date. Companies are encouraged to begin consultation with aboriginal communities at this stage, but are not required to do so.

Permits are more involved. At this stage there is a duty to consult with aboriginal communities whose treaty rights may be affected. An exploration permit is required for “mechanized activity,” including drilling where the weight of the drill is over 150 kg, and larger-scale mechanized surface stripping, pitting and trenching. Companies are required to consult with communities and report back to the ministry on their efforts.

Once the ministry receives a permit application, it sends the application to affected aboriginal communities for comments. A permit decision can take 31 to 50 days. Again, the clock only starts ticking as of the circulation date, and a decision can take longer if the ministry requires additional consultation.

Clark’s membership at the OPA is divided between those who believe the new regulations will help companies get aboriginal communities onside and allow work to move forward, and those who feel the rules have only added another layer of bureaucracy and red tape that will slow them down and increase expenses.

The truth is likely in between. And with most juniors unable to raise funds right now because of a risk-averse market and flat commodity prices, the timing of implementing the new rules may be less than ideal.

“It’s hard to tell because a lot of these companies aren’t working,” Clark says. “It is extra money — it’s going to cost us more.”

The regulations also have a cost for First Nation communities with limited
resources.

Because aboriginal communities in many cases lack the resources and capacity to participate equally in the consultation process, the province is investing $4.5 million over the next three years to develop pilot projects that build capacity at the tribal council level to support communities.

But in his presentation at PDAC, Fox pointed out that internal governance issues are equally important.

“The internal procedure of a community becomes important — not the process between the CEO of a company or the chief and council of a community, but the internal consultation procedure — how does the representative, the elected council engage their members? And that’s something that’s not explicit in many communities.”

Fox noted that if the process is not explicit, the Crown will have difficulty in judging whether the internal process is adequate.
The province is also conducting “Mining 101” sessions in communities with high mineral potential, providing information on the mining sequence. In many communities, it’s assumed that exploration companies have lots of cash, and there’s little appreciation of the difficulty and long odds of finding an economic deposit.

In a recent interview, PDAC president Glenn Nolan said that such education is critical to the industry and the responsibility of the provincial and federal governments.

“There has to be a collaboration between government and industry to have some sort of timing strategy to go into the communities,” he said during the PDAC convention. “We’ve asked the . . . various provinces that they should be out there working with the communities to give them the information about our industry so that when our members go in — whether it’s in Manitoba, Saskatchewan or wherever — the community has a good, basic understanding of our industry,” he said.
“That then allows them to be able to make an informed decision on the stories that they’re hearing from those unique, individual projects that our companies are presenting to them.”

Clark says the original idea behind the new regulations in Ontario was a way to notify aboriginal communities of activities taking place on their traditional lands. He and Ontario Mining Association president Chris Hodges lobbied for such a system in 2008, but the end result is a little different than what they had anticipated.

One unforeseen complication introduced by the new regulations is the involvement of the province’s environmental bill of rights, which allows the public to weigh in on proposed developments that could affect the environment. Permits must be posted on the province’s environmental registry for 30 days — a process that involves public comment.

“If we had known that the word permit caused such a problem, we would have just said Level 1 and Level 2 plans so they would be more of a notification tool, they wouldn’t be as involved as they are as a permit,” Clark says.

Currently, there’s no direct fee for plans and permits, but as of June 1, the ministry is planning to charge $200 for permits, an additional cost explorers will have to bear.

“So the reality is, if you have some ideas of your exploration project over the next couple of years, you should actually get a permit in before June 1 to save the $200,” Clark advises.

When asked for confirmation of the fee, ministry spokesperson Bennett could only say that “a fee for a permit application is currently under consideration.”

In the end, Ontario’s exploration regime will be fundamentally altered by the new regulations.

“The time to wait before you can start on the land is going to be something in Ontario that’s very new,” Clark says. “We’re used to being reactive — we find something today, we drill it tomorrow type of thing. Now if we find something today, prospecting or doing whatever, most likely to get the drill out there it’s going to be fifty-five days to get the permit issued.”

With juniors largely unable to raise money, exploration spending in Ontario has been hard hit, declining from $1 billion in 2011 to $900 million last year and an expected $750 million this year. Whether the new regulations will further dampen exploration spending will take some time to assess.

Companies with questions should contact the Mineral Exploration and Development section of the ministry at 1-888-415-9845, ext. 5815.

—This article originally appeared on www.miningmarkets.ca.