Understanding Mining Property Transactions
Mining property transactions can be complex. Several stakeholders are often involved in a transaction; you may be acquiring mineral rights, surface rights, a portion of a corporation, a whole company, or assets.
Many issues can arise during these transactions, including:
The complexities of these transactions are difficult to navigate without experience. Our expertise in mining law can help you understand mining property transactions.
Buying And Selling Mining Properties
Property Due Diligence Process
The due diligence process is key to any business acquisition. Companies use due diligence to find information that is not publicly available.
Royalty and stream agreements, pending lawsuits, fines, tax liabilities, operational issues, disputes with Indigenous communities, and other problems can all come to light during due diligence; all of these issues can hamstring the potential of a mining project.
Title Searches & Verification
Title searches and verification are a key part of the due diligence process; they establish who actually owns the land rights and mineral rights in an area, and whether or not those rights can be transferred.
Mineral Rights Transfers
Once title searches are complete, establishing how mineral rights (and in some cases, land rights and water rights) can be transferred is essential. Depending on the jurisdiction where the transaction would take place, governments may restrict or bar the transfer of rights; obstacles that could impede right transfers should be established as early as possible.
Mining Claim Staking And Registration
The process for staking a claim to mineral rights varies from jurisdiction to jurisdiction. In Ontario, a staged claiming process is involved; a company must first stake their claim to mineral rights for initial exploration, then a mining lease for more thorough exploration, and subsequent mine development.
In Ontario:
Having a claim or lease does not give you ownership of the land – only its mineral rights. You also do not have a permit to establish the mine; several other permits must be obtained, and regulations must be met before mining operations can begin in earnest.
When acquiring a mining company, it is important to understand what mineral rights or surface rights they hold, whether they have the permits required to mine in a given area, and whether or not the mining rights regime in the jurisdiction in question is staged or not.
Legal Considerations For Mining Property Transactions
Environmental Liabilities
In Canada, both provincial and federal regulators may mandate that mine operators take steps to limit their environmental impact. Environmental regulations differ from country to country; before purchasing shares in a mining operation, buyers must take steps to ensure that they are aware of the environmental requirements in the jurisdiction where the mine is operating.
These liabilities are another reason why the due diligence process is invaluable. Unpaid fines can lead to a significant downturn in profitability. Regulators may also mandate that mining operations cease until emission targets can be met or upgrades can be completed.
Tax Implications
The tax implications of property transactions can be complex even in the simplest of cases. M&A transactions in the mining industry are anything but simple.
Companies may be able to buy their way into unincorporated joint venture agreements or incorporated ventures; both carry their own tax implications. Depending on the purchase agreement, a purchaser may be able to start writing off depreciating assets gained in the sale. Tax implications can significantly alter how a deal should be structured.
Indigenous Rights & Consultation
Mining companies may be required to engage with Indigenous communities. These engagements may include sharing information with those communities, conducting studies on how mining activities may affect those communities, and taking steps to mitigate the negative impacts of mining activities on those communities.
In Canada, Impact Benefit Agreements (IBAs) are common. These are legally binding agreements that may involve profit-sharing, payments, education, training, careers, and development for an Indigenous community.
Before purchasing a mine, a buyer should be aware of any IBAs or similar agreements (for jurisdictions outside of Canada) with Indigenous communities. Legally binding agreements can restrict what mining activities can take place, but they also mitigate the risk of contentious legal battles with the communities in question.
Book An Appointment
At Licata Law, we offer support for companies interested in acquiring or divesting from mining properties. Our experience in both mining law in Ontario and corporate commercial law can help you understand the complex regulatory and financial frameworks governing mining M&A transactions. Schedule a consultation with us today.