Canada: Transparency Recommendations Released For Disclosing Canadian Mining Company Payments To Governments

On January 16, 2014, the Resource Revenue Transparency Working Group (the Working Group) released its final recommendations for the creation of mandatory transparency standards that would see mining companies publicly traded on Canadian stock exchanges publicly disclose payments to governments.

The Working Group, consisting of the Mining Association of Canada, the Prospectors & Developers Association of Canada, Publish What You Pay Canada and the Revenue Watch Institute, was formed in September 2012 with the objective of improving transparency in the mining sector in Canada and overseas. Our legal update from June 2013 provides an overview of the Working Group's background and the international movement toward increased disclosure.

The group's final recommendations will weigh heavily on legislators, who are expected to introduce legislation for mandatory reporting in 2014.

This update will outline the Working Group's recommendations. Public issuers in the mining industry should expect that such recommendations will become part of their disclosure requirements in the near future.

Scope of reporting

The Working Group's recommendations are for all reporting issuers, as defined under Canadian securities law, to publicly disclose certain categories of payments made to national and sub-national authorities, including states, provinces, counties, districts, municipalities and state-owned enterprises. In addition, companies will need to detail the mining project to which these payments are associated.

To increase the complexity of this issue, the Canadian government's announcement to develop mandatory payment transparency standards includes a commitment to require the disclosure of payments to First Nations self-governments. The Working Group did not address this issue in its recommendations; however, it promises to be an area of contention as the federal government moves forward with its commitment.


In its draft recommendations, the Working Group included references to the relationships between parent and subsidiary companies, recognizing that public mining companies often hold projects by way of subsidiary companies. The final recommendations have refined this relationship to require reporting by all companies, their subsidiaries and jointly controlled and/or associated entities. The Working Group's recommendations rely on definitions of control outlined in the International Financial Reporting Standards and require that companies report on entities under their control, joint control, and to which they exert significant influence, to the extent that the company is able to access this information.

When to disclose

The Working Group's recommendations suggest that payments should be disclosed over the life of the project—from exploration to remediation—and over the value chain of the project, from exploration to export. This recommendation is specifically designed to capture environmental remediation payments, paid after a company may have sold or relinquished its interest in a given project.

What to disclose

The categories of payments have stayed consistent from the draft recommendations, with the notable exception of the removal of fines and penalties. The payment categories outlined in the recommendations align with those in section 1504 of the Dodd-Frank Act, the accounting and transparency directive in the EU and the Extractive Industries Transparency Initiative, with the addition of one payment category: transportation and terminal operation fees. The final categories of payments recommended by the Working Group are as follows:

  • Profit taxes (including profit, income and production taxes);
  • Royalties (including royalties-in-kind);
  • Production entitlements (by value and volume);
  • Bonuses (including signature, discover and production bonuses);
  • Dividends (i.e., withholding tax);
  • Infrastructure payments as required by law or contract (e.g., construction of a road or railway); and
  • Transportation and terminal operations fees.

The value threshold for any of the above-noted payments has been set at $100,000 for companies trading on the Toronto Stock Exchange and $10,000 for companies on the TSX Venture Exchange. The addition of the lower threshold for junior mining companies marks a departure from both the Dodd-Frank Act and the EU requirements, which set the minimum threshold at $100,000.

The Working Group noted this was to ensure the "made in Canada" approach included a lower threshold for junior mining companies, which comprise a large portion of Canadian public mining companies. When companies are calculating whether a payment is to be disclosed or not, they should keep in mind the payments are on a "disaggregated" basis, meaning if a TSX Venture issuer makes a singular payment of more than $10,000, or a series of related payments (such as a lease), of more than $10,000, then that payment is to be disclosed.

Form and forum of disclosure

Following the release of its draft recommendations, the Working Group received comments on both the form and forum of disclosure. In response, the final recommendations include a new section on the form of disclosure, namely that companies shall disclose their payments on a separate form, to be filed on SEDAR, on an annual basis. By requiring a separate form to meet the suggested disclosure requirements, companies will not have to include payment disclosure in a prospectus or other offering document, thus mitigating any risk of payment disclosure causing delay in public offerings.

The venue of payment disclosure is both the Working Group's and the federal government's next challenge. The Working Group recommends that the venue for payment disclosure be within provincial securities requirements. It recognizes the challenge inherent to passing a new disclosure requirement without a national securities regulator, but cites the Canadian Securities Administrators' past successes in developing national instruments for mandatory disclosure, such as National Instrument 43-101.

In the wake of the Supreme Court of Canada's decision in Reference re Securities Act1, however, where the Supreme Court made it clear that the day-to-day regulation of securities is the purview of the provinces, the announcement by the federal government this past summer may require the federal government to work with the Working Group, investor groups and the mining industry to push for the harmonization of provincial securities regulators, rather than passing federal legislation. The federal government, however, would have been well aware of both the Supreme Court's decision and the constitutional framework it faced prior to its announcement this past summer.

We will monitor the situation closely and provide updates as required. In the meantime, it would be helpful for companies to prepare internal accounting systems to track payment disclosure by project in the coming years to ensure compliance with the regulations expected to be passed into law within the next two years is not a costly or overly burdensome process.


1 2011 SCC 66, [2011] 3 S.C.R. 837.

Norton Rose Fulbright Canada LLP

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Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.

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