International mining inundated by tsunami of rules and regulations

August 22, 2013

minersThere is a strange perception which has been accepted by many members of the general public.  Just as multitudes blame “de-regulation” for the financial crisis of 2007-09, many people—but NOT those in the mining industry—also seem to believe that the world of mining is some sort of free-for-all existing under minimal government oversight.  In fact, few industries on earth are as hamstrung by excessive regulation as the world of mining exploration, development and production.

It can be truly stated that many of these regulations tend to increase the costs and complexities of the entire process of moving a mineral discovery through to eventual production.  As a result, in recent years, fewer metals discoveries are being made, fewer projects are being advanced to actual production and the danger of a future serious metals supply shortage is steadily increasing.

The enormous variety of laws relating to mining is truly mind-boggling but I would suggest that this trend is indicative of actions within the general societies of Canada, the U.S. and other “advanced” nations.  An examination of the number, complexity and intrusiveness of many laws, some containing more than 2,000 pages, could easily lead to the conclusion that most people believe that societal problems can only be solved either by new laws and regulations or by adjusting existing ones.

The situation has grown so perilous to many that the Wall Street Journal recently carried two articles entitled “Red Tape Record Breakers” and “Government Gone Wild” and noted economist Niall Ferguson recently authored a piece noting that historically, America was truly the land of the free while France was the land of intrusive socialist government.  However, after examining recent trends relating to regulation in America, Ferguson concluded, “…at some point between 1833 and 2013, France must have conquered the United States.”

If anyone believes that this pattern of intense regulation is limited to Canada and the U.S.A., they should think twice; a recent article out of China related to furious anger, leading to one bureaucratic death, caused by their complex “one-child” laws; and legal complexity is so overwhelming in nations such as Egypt and India that articles abound of people driven to actual suicide.

Our main interest, of course, is in relation to metals prospecting, exploration and development and to say there is no shortage of regulations impeding mining operations would be a substantial under-statement.  Because of an abundance of available information on the subject, we focus this article on Canadian mining laws and regulations.

A short list of federal agencies involved directly or peripherally in regulating mining would include Environment Canada; the Canadian Environmental Assessment Agency; Fisheries and Oceans Canada; Indian and Northern Affairs Canada; Natural Resources Canada; and Health Canada.

6a00e5520572bb88340147e07b007f970b-800wiAfter examining reams of printed materials and numerous federal and provincial information sites, it is reasonable to report that the total body of laws, rules and regulations relating to mining in Canada is almost beyond comprehension.  Taking as our pattern the flow of work from original discovery to mine closure, what follows is a partial listing of associated legal intrusions into the mining processes.


The act of recording a discovery is called “staking a claim” and involves placing physical “stakes” to mark the area involved, although in recent years several provinces have turned to electronic recording of claims.  Once the claim has been recorded, various laws come into play relating to the work which must be done in order to maintain the claim in good standing.

Excluded Areas

Numerous laws are in effect which define those areas in which any form of mining cannot take place.  These areas include national parks, national park reserves, national wildlife areas, migratory bird sanctuaries, protected watershed areas and United Nations biosphere reserves.

Indigenous Peoples Consultation

If there is one area of mining law that has the capacity to confound industry entrepreneurs, it is Aboriginal law.  The Canadian Constitution Act defines Aboriginal and treaty rights.  The United Nations Declaration of Rights specifies Free Prior Informed Consent procedures to be followed with First Nations peoples.  Numerous land claims agreements specify aboriginal privileges.

Permit Approval Review Processes

Mining permit approval processes involve numerous laws originating with both the federal and provincial governments.  These include the “Canadian Environmental Assessment Act”; the “Nunavut Impact Review Board”; the “Mackenzie Valley Review Board”; “Health, Safety and Reclamation Code”; “Fisheries Act”; “Environmental Assessment Act”; “Metals Mining Effluent Regulations” and the “Canadian Environmental Protections Act.”

Assuming a company eventually enters production and actually makes a profit, there are likewise numerous taxation and income redistribution laws which lie in waiting.  These include:  Nunavut and N.W.T. sliding-scale royalty laws; Ontario Mining Tax; Manitoba Mining Tax; royalties to indigenous peoples defined by agreements like the Nunavut Land Claim Agreement and the Inuit Impact Benefit Agreement.  These are all in addition to the “normal” federal and provincial corporate tax laws.

Reclamation Upon Mine Closure Laws

These require such measures as the creation of a mine closure plan as specified in the “National Orphaned and Abandoned Mining Initiative”; posting of guarantees to ensure financial capacity to follow-through with such plans; and an elaborate array of regulations requiring protection of water resource purity following reclamation.

Sometimes the specific wording of laws implies a standard which might be impossible to meet, such as the Department of Fisheries and Oceans requirement that mining companies which use ponds for tailings storage are required to “recreate the lost habitat” without defining exactly how this is to be accomplished.

We have used Canada as our primary example, but rules and laws are similar in both nature and complexity in other important mining nations such as the U.S.A. and Australia.

It is also worth noting that regulations in far-flung nations are having their impact on North American miners, as well.  Kinross Gold recently pulled out of a major project in Ecuador because of that country’s tax laws.  Barrick Gold recently took a huge write-down on its Chile/Argentina Pascua-Lama project, citing environmental laws and government interference.

Going forward, there is little indication that the overall situation is improving. Canada just announced that tougher new regulations for mining companies operating in foreign lands are in the process of being written, following consultation with the provinces, territories, First Nations groups, Aboriginal groups, the mining industry and various interested civil groups. And Quebec has just imposed their new, complex Bill 43 which will replace their existing Quebec Mining Act of 1987.

Somehow the public must realize that almost every facet of our modern existence is dependent upon a steady and reliable flow of an enormous variety of metals which must be mined to come into usable existence.  Unless the present situation is reversed and new mining ventures are quickly brought to production, it is relatively easy to forecast serious, perhaps crippling future metals shortages as old mines play out.

The situation has become so perilous for small miners that a new organization, the “Venture Capital Markets Association”, has been formed with the rallying cry of “Zealous over-regulation by a multitude of governing organizations is rapidly bringing venture funding to a halt.”

It is that serious.

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