Canada: Greasing The Wheels: Project Financing Is A Solution To Extensive Capital Requirements

Mining companies in Canada are feeling the pinch as emerging market growth wavers and commodity prices show little sign of picking up.

Home to heavyweights such as Barrick Gold Corp, First Quantum Minerals Ltd and the Potash Corporation of Saskatchewan Inc, the Canadian resources space is anything but a walk in the park. This is potentially bad news for local communities scattered around this vast country dependent on the sector for their economic wellbeing.

Mining companies have reduced spending, scaling back unnecessary exploration and postponing expansion plans. While the global economic outlook remains uncertain and commodity prices volatile, identifying a source of financing to strengthen operations and progress expansion plans will be key.

Project financing is being used to the extensive capital requirements of some mining companies with sustainable long-term projects. This financing involves the long-term funding of a single-purpose project company. The repayment obligations are secured by the project's assets and cash flow.

Project financing is ideal for a capital-intensive major infrastructure, such as a mining project. Given the lenders' exposure to project risk, the due diligence of the mining project and its associated risks is extensive and thorough.

The following are critical elements in mining project financing.

Strong sponsorship and committed equity

Lenders will need to be confident the project is backed by strong and competent sponsorship and sufficient and available equity. Junior mining companies will likely be required to fully commit their equity or ensure it is fully accessible to the lenders before any lenders' funds are disbursed. Deferred equity return instalments (pro-rated to disbursements) may be permitted for the more robust companies, particularly those offering strong corporate completion guarantees during construction.

Aboriginal rights and the duty to consult

Aboriginal and treaty rights are entrenched in the Canadian Constitution, which makes them a key consideration in due diligence. Mining exploration, at all stages, from the issuance of the initial regulatory permits to mine closure and remediation, has the potential to adversely affect these rights.

While the duty to consult with Aboriginal communities rests with the Crown, mining companies are strongly advised to get involved early, engage with Aboriginal communities and take the lead on consultation and any necessary accommodation of Aboriginal concerns.

Such accommodation could be through mitigating risks, creating jobs or profit sharing. Lenders will expect to be informed of the effect of Aboriginal and treaty rights on the project, and will seek assurances that suitable accommodations and risk mitigants are in place.

Environmental concerns

In an effort to promote sustainable development, the World Bank and its financing arm, the International Finance Corporation (IFC), developed the IFC Performance Standards on Environmental & Social Sustainability, most recently updated in 2012.

They are incorporated by reference in the Equator Principles, a credit risk management framework used to determine, assess and manage the environmental and social risks associated with certain project based financing. There are currently 79 signatory financial institutions committed to complying with the principles. As a 'Designated Country' under the Equator Principles, Canada is considered to have sufficiently robust environmental and social laws and compliance regimes designed to protect people and the environment.


Lenders typically expect to be granted security over both land rights and personal property rights. Not all lenders will be familiar with Canadian laws and practices. As part of the due diligence process, lenders may need to be given comfort that their security interests will be valid, perfected and can be effectively enforced. Canadian law is relatively flexible in respect of granting security and sharing security through a collateral agent or trustee.

There are, however, detailed rules that must be followed in relation to the perfection, registration and enforcement of collateral security. Effective security may be taken over most assets, including shares, moveable and immoveable property, contractual rights and receivables, intellectual property and future assets.

The priority of security depends on the time of creation and any relevant registration, publication or notice requirements, subject to certain statutory priorities and super-priorities. Security can, in most cases, be enforced without court approval through a receiver or other officer appointed to collect and sell assets for the satisfaction of the debt.

Ethics and anti-corruption

As a member of the Organisation for Economic Co-operation and Development (OECD) and signatory to the OECD Anti- Corruption Convention, Canada has statutory anti-corruption safeguards. Although anti-corruption legislation has existed for decades, recent high-profile cases in Canada have renewed discussions and focus on this area.

Broad new amendments to Canada's Corruption of Foreign Public Officials Act also came into force in June 2013. In January 2014, the Resource Revenue Transparency Working Group – comprising the Mining Association of Canada, the Prospectors and Developers Association of Canada, Publish What You Pay Canada and the Revenue Watch Institute – released its final recommendations on creating mandatory transparency standards.

These would require mining companies that are publicly traded on Canadian stock exchanges to publicly disclose payments to governments. Contractual anti-corruption provisions are not uncommon. All lenders will likely require anti-corruption and bribery covenants as a condition to disbursement.

International financing

Practices in the international project-finance market may not always mirror the Canadian approach on every aspect of the transaction. International lenders may require additional diligence or documentary deliverables at closing. Mining companies should be prepared for these requests and, as necessary, be flexible in their approach.

Norton Rose Fulbright Canada LLP

Norton Rose Fulbright is a global legal practice. We provide the world's pre-eminent corporations and financial institutions with a full business law service. We have more than 3800 lawyers based in over 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.

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.

Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP, Norton Rose Fulbright South Africa (incorporated as Deneys Reitz Inc) and Fulbright & Jaworski LLP, each of which is a separate legal entity, are members ('the Norton Rose Fulbright members') of Norton Rose Fulbright Verein, a Swiss Verein. Norton Rose Fulbright Verein helps coordinate the activities of the Norton Rose Fulbright members but does not itself provide legal services to clients.

First published on February 2013.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions