Canada: Quebec To Increase Financial Guarantee Requirements For Mine Restoration

On February 13, 2013, amendments to the Regulation respecting mineral substances other than petroleum, natural gas and brine (the Draft Regulation), introduced by Ms. Martine Ouellet, the Quebec Minister of Natural Resources, (the Minister) were published.

The proposed amendments seek to increase the amount of the financial guarantee required to secure mine restoration costs, accelerate the payment schedule for the guarantee and broaden the scope of exploration projects for which a financial guarantee will be required. These amendments have been expected for a long period of time and follow a report published in April 2009 by Quebec's Auditor-General that criticized Quebec's management of its mine rehabilitation regime.

The changes to the mine restoration and rehabilitation framework are expected to be part of a broader set of changes to mining legislation in Quebec, expected to be announced by the government in the near future.

Proposed Changes

The Draft Regulation includes the following proposed changes to the mine restoration regime:

  • Increased financial guarantee. Under the current regime, the financial guarantee that must be provided to secure the mine restoration plan is set at 70% of the anticipated cost of restoring accumulation areas only. The proposed amendments will increase the guarantee requirement to 100% of the anticipated rehabilitation cost of the entire mine site.
  • Basis for calculating the guarantee amount. It is important to note that it is proposed that the amount of the guarantee will be based on the anticipated closure cost of the entire mine site and not only accumulation areas.
  • Payment schedule for providing financial guarantee for plans related to exploration work. Currently, for plans filed to carry out exploration work, the guarantee is not payable until the plan has been approved and, in addition, payment can be made over time annually, based on the anticipated duration of the exploration work. The proposed amendments will require 100% of the anticipated cost of carrying out the plan to be filed before exploration work begins.

These changes will not apply to plans that are approved before the date that the amendments become effective. However, the changes will begin to apply when the plan relating to the exploration work is revised.

  • Payment schedule for providing financial guarantee for plans related to non- exploration work. For all other closure plans related to mining operations, concentration plants or mining operations related to tailings, the current regime allows payment to be made on a schedule based on the anticipated life-of-mine up to a period of 15 years, with the bulk of the payments due as the mine or operation approaches closure.

The amendments propose that the financial guarantee is to be paid in three annual payments. The first payment would represent 50% of the total amount of the guarantee and is to be provided within 90 days of the approval of the restoration plan by the Ministry of Natural Resources. The two subsequent payments would represent 25% of the total amount of the guarantee, and is to be provided on the first and second anniversary of the approval of the plan.

With respect to those restoration plans that were approved before the date that the amendments become effective, the proposed amendments provide that the payment of the guarantee (100% of the anticipated rehabilitation cost of the entire mine site) be made over a three-year period. The first payment covering 50% of the cost is to be made within one year of the date that the amendments become effective. The second payment covering 25% of the costs is to be made on the first anniversary of the first payment and the third payment covering the final 25% of the costs is to be made on the second anniversary of the first payment.

  • Certain forms of guarantee no longer accepted. The current regime sets out the forms of security that are acceptable. The Draft Regulation proposes that: (1) security or a guarantee policy issued on behalf of the Quebec government; or (2) security provided by a third person on behalf of the Quebec government will no longer be accepted as a form of guarantee; and
  • Lower threshold for filing a plan related to exploration work. The Draft Regulation proposes that the requirement to carry out restoration and submit a restoration plan will be triggered if the exploration work involves the movement of 1,000m3 or more of unconsolidated deposits, as opposed to the current 10,000 m3 threshold.

Further Changes to the Mining Act

Quebec mining-industry watchers may recall that a previous Quebec government proposed significant amendments to the Mining Act, known as Bill-79, in December 2009 and subsequently Bill 14 in May 2011. While Bills 79 and 14 were the subject of extensive parliamentary and public debate, they died after the National Assembly was prorogued. The Minister has announced her intention to table a new mining bill in the first few days of the parliamentary session which began on February 12, 2013, which will be the subject of a separate Blakes Bulletin when it is released.

In addition, we point out that during the fall election campaign, the Parti Québécois undertook to increase mining royalties. The Minister of Natural Resources and the Minister of Finance have recently announced that a stakeholder forum on mining royalties will be held on March 15, 2013. The government has indicated that it intends to announce its proposed royalty regime shortly thereafter. A consultation paper is to be published shortly in connection with the forum.

Consultation Period

The Draft Regulation is now subject to a 45-day consultation period, ending on March 30, 2013, during which stakeholders may submit written comments on the Draft Regulation to the Ministry of Natural Resources.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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