Introduction to Québec's mining sector
The world-class jurisdiction continues to excel
The history of mining in Québec dates as far back as the history of the province itself. While Jacques Cartier may not have been the first foreigner to arrive on the North American shores, his Atlantic voyages, commissioned by the King of France in the 1530s, put Canada on the map for his European counterparts. His arrival brought many changes to the lands – even the name Canada, a word he adopted from the Huron-Iroquois ‘Kanata,’ meaning village – but Cartier returned with his pockets full as well. Believing he had found diamonds and gold on the slopes of Cap Diamont, Cartier brought back to France what actually turned out to be quartz and pyrite. Albeit misguided, he thus initiated a tradition of mineral exploitation and exportation that has carried into the present day.
The Canadian province routinely ranks among the top within the Fraser Institute’s annual survey of worldwide jurisdictions. In 2021, the think tank placed Québec sixth for investment attractiveness and fifth for policy perception. According to Québec’s Ministry of Energy and Natural Resources, the province has the most diverse resource base in the country and accounts for one-fifth of Canada’s overall mineral exploitation. In addition to its world-class endowment, Québec hosts a favorable financial environment, access to skilled labor, and publicly available geoscientific data – the latter of which the provincial government invests C$15 million annually to acquire, process, and publish. The mining industry is also largely well understood by a general public that recognizes the role it plays within Québec’s regional economy and the international energy transition.
“An ideal relationship with a mining company would be one where economic development and job creation for the community is the first priority.”
Brant Blackned, President, Tawich Holdings Corporation
Stability – at what cost?
Amidst an extended run of geopolitical uncertainty, one of the most important facets of Québec’s mining industry is that it is governed by a stable and transparent legal framework. Mining is a long-term process, and it is any junior’s nightmare to build up value for shareholders only to lose it all to a dramatic change in mining code or the rule of law. Québec attracts investor attention due to its strong level of certainty; if a company finds a commercial-scale ore body, there is a fair chance it will be put into production. “The province provides a lot of public information and has a clear mining rights regime, which is key because if an exploration company doesn’t have a clear title, it has nothing,” explained Frank Mariage, a partner at the Canadian law firm Fasken. “Mining investment is venture capital given how risky it is. Investors are used to that – what they dislike is uncertainty because uncertainty cannot be measured.”
Éric Gamache, vice president of TACT, a Québec-based public relations and communications firm, believes that so long as mining companies follow the right steps, they will receive government support. “The current government is open and willing to make deals to ensure the industry remains healthy and attractive,” commented Gamache. “If a company has a transparent approach to its projects, ensures local communities are engaged, and the social and economic impact is taken into account, then the government will be unlikely to stand in the way of a project.”
Though the province ranked highly for policy perception, many exploration companies believe the length and complexity of the permitting process is hindering development. Mariage agrees: “In the past, there was not enough consultation required to put a mine into production,” he said. “We are now on the other end of the spectrum, though, and we have to find a middle ground.”
The need to simplify the permitting regime is particularly important amidst a push towards resource nationalism and Québec’s determination to position itself as a supplier of strategic minerals. As Western economies might profess a commitment towards securing their own materials and production capabilities in the desire to become less reliant on countries like China and Russia, the current amount of time it takes to put a mine into production poses a conflict of interest.
The Québec Mining Association (QMA) serves as a liaison between the provincial government and the mining industry to support the sustainable development of the mining sector. The association’s president, Josée Méthot, cites the need to streamline the permitting process as one of the QMA’s current focuses. Méthot points out that companies looking to develop a mine must go through several departments to obtain different permits. She believes that this could be drastically simplified if companies could simply submit their documents to a single platform. Additionally, she believes the provincial and federal governments should further harmonize when it comes to environmental impact assessments, which are required at both levels. "Some might say that we should simplify regulations, which is interpreted as a wish for fewer regulations," said Méthot. "But really, it is the administrative burden of regulations that must be reduced and simplified."
To this effect, Québec’s government set up the Bureau de coordination des droits (BCD) in 2019 to shorten the length of time it takes to grant necessary permits and authorizations for mining companies to carry out a project in the province. Most, if not all, functioning bureaucracies face the challenge of acquiescing to the contradictory demands for more streamlined processes and more stringent regulations. Yet the breaking down of silos between departments would allow the province’s mining sector to further prosper without having to sacrifice the government’s commitments to important topics including protecting the environment and promoting good social governance.
“One thing we are particularly aware of is that a large segment of the mining population is about to retire, and the new people who will take their place will need training.”
Walter Schmidt, Director of Project Development, ORE+PROS
Growing pains
"Québec is in a position such that if all mining projects currently on the table are realized, the scarcity of skilled labor will intensify, and we will face a new issue with the availability of electricity," commented QMA's Méthot.
Though the likelihood of even a majority of projects currently underway coming to fruition simultaneously is slim to none, industry players throughout the value chain are already experiencing a strain on talent supply, among other resources. While the challenge is not unique to mining nor to Québec, whose unemployment rate has hovered at slightly over 4% for most of 2022, the industry does face an added layer of complexity: a significant percentage of its workforce is about to retire. “When we look at the average age of employees in the mining sector, it becomes clear that we really need to incentivize young workers and entrepreneurs to enter the mining business,” commented Mathieu Savard, chairman of the board of the Quebec Mineral Exploration Association (AEMQ).
According to Savard, the labor shortage will become worse over the next few years before it gets better, stating: “The peak of the manpower shortage is predicted to be in 2030, so we will need to implement various incentives rather than relying on a single solution.”
Walter Schmidt, director of project development at ORE+PROS, a provider of temporary staffing for various roles in the mining industry, is keenly aware of the difficulties that arise when a large segment of an industry’s population is set to retire. “The new people who will take their place will need training,” said Schmidt. “The management staff in mining has to oversee more than simply mining-related activities. They have to look at food provisions, transport for fly-in fly-out operations, personnel sickness and injuries, all while being at the mercy of weather.”
In this capacity, Nolinor Aviation offers a range of services to assist mining clients with more remote operations. "We will transport fuel to the mining site during the exploration stage, and once the project reaches maturity and construction starts, we have bigger aircrafts to meet increased cargo and passenger requirements," explained president Marco Prud'Homme.
Several proposals for initiatives to attract talent – especially young talent – are currently being investigated. Savard and Méthot both highlighted the possibilities of increasing training initiatives for indigenous communities and even looking at immigration to increase the labor pool altogether.
Brant Blackned, president of Tawich Holdings Corporation, which serves as the economic arm for the Cree Nation of Wemindji, believes mining companies should prioritize job creation for indigenous groups as a solution. “Anytime there is a job that a Tawich company can do, we should have the first option on it,” he said.
Tawich’s Wolf Camp corporation provides food, catering, and janitorial services to Newmont’s Éléonore mine, and its construction companies have worked with mining clients in the past.
While a lack of manpower has stagnated the operations of several companies, it has forced the industry to adopt certain technologies faster than it might have otherwise. “The silver lining to the lack of manpower exacerbated by the pandemic is that it has forced innovation,” remarked René Branchaud, a partner at Lavery, a law firm headquartered in Montreal that has been involved in Québec’s mining industry for over fifty years. “We now see more miners working in their office with a joystick to operate various pieces of equipment. This is great, as it is better to send a machine to the bottom of a mine than a person.”
“In our country, we are blessed with an abundance of natural resources. What we lack are the human resources to match.”
John McVey, CEO, Procon
Defining the future of ESG
A few decades ago, the governing themes behind ESG were on the radar of few mining executives’ minds. Five years ago, they were topics of discussion. Today, environmental, social, and governance-related considerations are the driving forces that determine which projects gain the support necessary to make it off paper.
In Québec, the Ministry of Energy and Natural Resources (MERN) plays an important role from a project’s inception. Before a company applies for a mining lease, it has to file a rehabilitation and restoration plan with the MERN as well as provide a financial guarantee for the proposed mine’s closure, the first 50% of which must be paid within 90 days of receiving approval. The MERN also helped finance the development of ECOLOGO, the first sustainable development certification in mining exploration, and which has since been widely adopted throughout the province.
One of the main initiatives of the AEMQ is to help companies obtain ECOLOGO certification through providing support programs specifically tailored for exploration companies. “This is especially helpful for smaller exploration companies that may not have the in-house resources to go through the process on their own,” commented Mathieu Savard, chairman of the board. “I am enthusiastic about the adoption of ECOLOGO standards in the industry because it is really changing the narrative from being reactive to being proactive when it comes to several sustainability measures and initiatives.”
Furthermore, the Mining Association of Canada’s Towards Sustainable Mining (TSM) standard has become a globally recognized sustainability program, having been implemented by mining associations in Finland, Australia, Sweden, and throughout South America. In Québec, companies must adopt TSM measures if they wish to retain membership within the QMA.
The engineering and geosciences company Terrapex launched its auditing segment Auditex in May 2022 to offer environmental auditing services for industries like mining. It offers services to train companies on the protocols of the TSM program, such as looking at various health and safety measures. From director Jean-Marc Léger’s perspective, the spirit behind the standards is taking root. “Mining operations must move as an entity, and as soon as one operation is breaking the ice, others will follow,” said Léger. “Within today’s mining industry, there is a competition over who is the most proactive when it comes to minimizing their carbon footprint.”
“Understanding and ensuring the social acceptability of a project at the early stages is vital for long-term success.”
Éric Gamache, Vice President, TACT
Québec is serving as a world leader in the creation and adoption of ESG standards within the mining industry. The current challenge from a legal standpoint is how to make the frameworks more adaptable to the stage of development of the corporations in question. Industry players have demonstrated their commitment to clean operations clear through a willingness to increase transparency and adhere to initiatives as they evolve. Yet with no flexibility in standards, complications arise; the challenges of a mine operator are far different from an early-stage exploration company.
Interestingly, this lack of clarity has flipped the narrative on who gets to define the rules. “While the government has not provided specific legislation for ESG, some issuers have started to produce their own annual reports,” explained Branchaud. “For example, our client Dynacor Gold Mines recently issued its second annual ESG report. Other issuers have started to do so as well, constructing reports based on disparate pieces of legislation rather than what will inevitably become uniform.”
Within the current legislative regime, institutional investors have the opportunity to define their own standards, and in doing so force corporations to adapt to receive financing. Benjamin Gross, a partner at Borden Ladner Gervais LLP (BLG), has noticed a similar trend: “One of the most interesting aspects of ESG is when clients ask us to design their internal ESG policies that we then build into a credit agreement. BLG is at the forefront of this practice, as we are involved in creating what policies will look like overtime.”
The emerging field of green finance – such as sustainability-linked bonds and green loans – is creating a new niche for corporate finance lawyers and potentially catching the attention of investors who had not previously considered the mining sector as attractive. “These new financing tools based on ESG factors or green taxonomies will favor participants in the mining industry that have integrated ESG factors in their operations or who are engaged onto a carbon neutral pathway, protection of biodiversity and air and water pollution mitigating measures,” commented Bruno Caron, a partner at Miller Thomson. “These new financing tools have the potential to attract new investors who are not currently investing in mining companies because of their perceived negative environmental and social impacts.”
The evolution in the relationships between mining companies and First Nations communities is a hallmark example of just how quickly the landscape can evolve. Mining companies used to get their mining titles and immediately begin exploring, only sitting down with nearby communities once they had found something of value. Now, exploration companies must communicate with local stakeholders from day one. “First Nations communities are more business-oriented and organized than they were even 10-15 years ago,” said Josianne Beaudry, a partner at Lavery. “These negotiations take on a completely different nature today.”
To help fortify communication between mining project promoters and local stakeholders, the provincial government has deployed a network of project managers throughout all regions of Québec to provide both parties with information and key updates. The Québec government has been proactive in creating its own agreements with indigenous communities as well. As of 2021, the province had already signed treaties with the Cree, Inuit, and Naskapi nations that cover nearly 1.1 million square km, equivalent to over 65% of the province’s total area. The Grande Alliance, signed in February 2020 by the Québec government and the Cree Nation to allow for the planning and execution of a 30-year infrastructure program, is indicative of the degree of collaboration between industry and communities.
Image courtesy of Hecla
“ECOLOGO provides a management system that helps verify appropriate management of environmental, accounting, and safety aspects with the objective of minimizing our footprint as much as possible.”
David Bradley, Co-Owner, RJLL Drilling