Mining transparency

Canada adopts disclosure standards for its mining companies.  But implementation and enforcement will be the key to transparency.

Last June Stephen Harper pledged that Canada would adopt a G8 initiative requiring oil, gas and mining companies in the extracting sector to disclose payments to foreign governments. It’s about time the country that counts half of the world’s mining companies adopt transparency standards. Catherine Wade, Securities and Mergers & Acquisitions Partner at Dentons in Vancouver provides insight on the intent, benefits and implementation of pending regulations.

National: Will mandatory disclosure regulations be intended for Canadian mining companies operating at home, abroad or both?

Catherine Wade: The mandatory disclosure proposals are intended to be directed at Canadian mining companies wherever they operate, both in Canada and abroad.

N: How will the Canadian extractive sector and other stakeholders benefit from new regulations to increase transparency?

CW: The intention behind the proposals is to have transparency in payments to Governments, wherever located, to provide information to the citizens and bring pressure to use the financial contributions in a way that benefits the society. However, it has the additional value of transparency on the actual economic costing of projects (a term that is subject to debate at this point in time).  

The proposals can also serve companies as a tool for communicating their contribution to the particular domestic economies in which they operate. It should also provide a more stable business climate for the sector which should lead to improved operating environments. 

In part, it is a bridge-building proposal between what the local government knows and what the civil society within the country knows about the financial contributions of companies operating in the resource sector within the country. The proposal should also provide an enhanced ability for investors to more fully analyze the company’s financial contributions to the country and costs associated with particular projects.

In short, mandatory disclosure should act as an accountability tool for the world outside the particular enterprise to assess the contribution of extraction companies by virtue of their payments to the governments overseeing the regulatory framework in which the operations are conducted, as well as for civil society to hold their governments accountable with regard to the use of those funds.  

N: What measures can Canada take to ensure a seamless and effective implementation of a disclosure framework?

CW: At present, the Canadian regime is expected to be implemented through securities regulation.  However, it is important to differentiate between the provincial regime and the federal initiative coming in part out of Prime Minister Harper’s remarks in 2007 and his statement in 2013 that such a regime would be forthcoming. Since the securities regulators operate at the provincial level, the regime is subject to the Provincial Government’s agreement. In addition, the regulations will likely only cover public companies, as the securities regulators have very little authority in the private company space. It is unclear how large private companies will be regulated.

N: How will greater accountability affect the future of Canadian mining companies?

CW: It is early days, and, without actual regulations or a full implementation plan, it is difficult to predict the impact on the future of Canadian mining companies. However, if the goals are met, new rules should bring a sense of public understanding of the side of the business that provides resources to assist in economic development and social services to remote locations and, potentially, to poor countries. At least, that is the hope. There will also clearly be compliance costs and additional diligence around payment and records of payment, so there will also be an economic cost.

N: How will the proposed regulation affect Canada’s business relations with foreign companies and governments?

CW: The relationship with foreign companies and governments is really a matter of foreign relations experts, and I am not able to provide comment.

Mandatory disclosure, if not implemented on a global basis and adhered to and enforced consistently, could allow for a further de-leveling effect on the playing field for companies, stakeholder and countries.  This would be the opposite of the leveling of the playing field intended.