Ian Mitchell Partner, Head of Mining GOWLING WLG
Can you introduce Gowling WLG to our audience?
Gowling WLG is an international sector-focused law firm with more than 1500 legal professionals globally. Gowling WLG is one of the few global firms focused on the mid-market, with the majority of deals falling in the C$50-500 million range. This sweet spot fits well with the mining sector in Canada. Our mining expertise encompasses a large number of areas, including corporate finance, commercial mining agreements, streaming and royalty transactions, M&A transactions, real estate, construction, environment, First Nations, health and safety, and employment, among others. Can you discuss the regulatory landscape in Ontario?
No doubt, the Mineral Exploration Tax Credit (METC) which is part of the Canadian flow-through share tax program, is a great advantage for the sector and investors, however, the funds raised with flow-through shares can only be spent on certain exploration activities to be eligible for the tax benefit. Companies still need to raise “hard” dollars to pay for all other costs. As a result, flow-through financings alone are insufficient to plug the current financing gap.
Additionally, the changes to the Investment Canada Act (ICA) have started to impact the Canadian mining sector – in 2023 we saw Chinese investors leaving the Canadian market and not bidding on projects in Canada or held by Canadian mining companies because they knew the Canadian government was unlikely to approve their transaction. The government is concerned with the disproportionate control of many critical minerals by Chinese state-owned or influenced companies. The risk for the Canadian market is that new investors will not step in to fill the gap left by the disappearance of Chinese investors. If new funding sources are not found, this will result in projects failing and companies either being forced to sell at below-market prices or risk insolvency. Companies may also look to leave Canada to avoid the jurisdiction of the ICA.
Ontario’s Building More Mines Act, 2023, is a step in the right direction toward securing Ontario’s place in the critical minerals supply chain. That being said, there remains a large, complex web of regulatory approvals in Canada if you want to build a mine.
Alexander Pizale Partner CASSELS BROCK & BLACKWELL LLP
Can you provide an overview of Cassels Brock & Blackwell LLP's services to the mining industry?
Cassels Brock & Blackwell LLP (Cassels) is a full-service law firm with a specialized focus on the mining industry. Our comprehensive services encompass significant mining-related transactions, including corporate finance and M&A, as well as real estate, employment, and regulatory matters. What major developments have you observed in the regulatory landscape for mining in 2023?
The increasing demand for electric and hybrid vehicles has prompted governments to take action, such as through the introduction of the critical mineral exploration tax credit (CMETC) in 2022. This tax credit, integrated into flow-through shares, has proven beneficial for Ontario companies seeking financing. Additionally, there have been changes to the Investment Canada Act, imposing restrictions on foreign investments in critical minerals. Ontario has also announced the Critical Mineral Strategy and the Building More Mines Act, 2023, aiming to streamline regulatory processes and facilitate mineral project advancements. Furthermore, the Canadian government's C$1.5 billion infrastructure fund is expected to bolster projects, particularly in regions like the Ring of Fire. What have you observed in the current financial landscape?
In the challenging market, especially for precious metals, we have observed increased creativity in financing among Ontario development companies. We have facilitated unique royalty-type transactions to raise funds, exploring alternatives to traditional financing. M&As are prevalent, with companies considering various options for growth, such as combining forces or securing financing alongside strategic activities. While these are ongoing endeavors, they showcase the industry's adaptability. Given the challenging financing landscape, what advice do you have for juniors?
Flexibility is paramount. Juniors must remain vigilant, identifying windows of opportunity for financing. Staying attuned to industry timing, knowing when to save and when to weather the storm, has proven crucial.