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Mining 2014

virtual round table

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ROUND TABLE: MINING 2014

asper Herler heads Attorneys at law Borenius’ Environment & Infrastructure practice. He advises clients on a wide range of issues related to environmental law, natural resources and

infrastructure projects. He is regularly involved in assessing environmental liabilities in transactions and financing arrangements. Clients also recognize him as the leading Finnish mining lawyer. Trade associations and industrial clients frequently rely on his experience when safeguarding their interests in legislative reforms.

A selection of Casper’s clients include exploration and mining companies, industry and retail firms, renewable and bioenergy projects, financial institutions, chemical companies and traders, trade associations and cleantech investors.

aiwo’s primary areas of practice are natural resources, power and project finance. She acts as transactional solicitor to several multinational and national clientele on concession acquisitions,

title rights, divestitures and farm-in transactions and also advises on oil and gas, power and the mining legal and regulatory regime in Nigeria. She advises on financing and security structures and is actively involved in negotiating business structures and drafting transaction agreements and the conduct of due diligence exercises.

MEET THE

Taiwo Afonja - Adepetun Caxton-Martins Agbor & SegunT: +234 1 4622094E: [email protected]

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Casper Herler - ATTORNEYS AT LAW BORENIUS LTDT: +358 9 6153 3288E: [email protected]

EXPERTS

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ohn Mollard is Global Head of Mining at Baker & McKenzie based in Melbourne, Australia. He is an experienced corporate lawyer who worked in China and South East Asia for more than

10 years, based out of Beijing, Hong Kong, Jakarta, HCMC and Singapore.

John regularly advises clients on significant acquisitions and joint ventures in the resource industry, with a strong track record on advising on foreign direct investment. He has participated in many of the recent coal, copper and gold M&A opportunities in Australia acting for financiers, or on the buyer or seller side. He advises on project development, infrastructure access and mineral offtake arrangements.

As the leader of the global mining group, John is assisting multinational mining corporates, trading companies and juniors enter new markets in Africa, Central and South East Asia and South America. John travels regularly to these jurisdictions working with Baker & McKenzie’s local offices providing clients with the requisite local knowledge and international best practices.

John Mollard - Baker & McKenzieT: +61 3 9614 2103E: [email protected]

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lexander is a Partner and Head of Mining in Berwin Leighton Paisner’s corporate finance group and he has considerable experience in corporate finance including advising on mergers

and acquisitions, joint ventures and takeovers, including reverse takeovers. He also specialises in IPOs and secondary issues on both the Main Market and AIM, acting for a range of investment banks and companies.

Alexander is frequently involved in international transactions, particularly in Africa. Chambers UK 2014 has rated Alexander in Band 3 for its Energy & Natural Resources: Mining category and Legal 500 UK 2013 has ranked Alexander as a Leading Individual.

Alexander Keepin - Berwin Leighton Paisner LLPT: +44 (0) 20 3400 4273E: [email protected]

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rik Goldsilver is a partner in the top-ranked Mining Group at Cassels Brock. He regularly acts for Canadian and international mining companies on acquisitions and dispositions of mines, mining

projects and mining companies; project development; and mine operations in Canada and throughout the world. Erik has extensive experience in the negotiation and structuring of

onzalo joined Cariola in 1999 and became a partner in 2008.He is one of the partners that heads the Natural Resources and Mining Group that deals with matters involving Mining,

Corporate and Commercial Law, M&A, Project Development, Foreign Investment and Contracts. He serves as legal counsel to a number of local and foreign companies, assisting in different processes of acquisition and divestment of companies or assets, private and public bids, cross-border transactions, project finance, due diligence, preliminary agreements and negotiation and drafting of contracts, including development of strategy and corporate structures and regulatory issues.

He also teaches Corporate and Commercial Law at Pontificia Universidad Católica de Chile.

Gonzalo studied at the Law School of Pontificia Universidad Católica de Chile, graduating in 1994 with honors and was admitted to the bar in 1995. In 1998 he obtained a LL.M. from Northwestern University, School of Law, Chicago, US. He is member of the Chilean Bar Association and of the Rocky Mountain Mineral Law Foundation.

He is mentioned in the mining field by Chambers & Partners.Languages: Spanish and English.

MEET THE

Gonzalo Grez - Cariola Diez Perez-Cotapos & Cia. LtdaT: +56223683591E: [email protected]

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Erik Goldsilver - Cassels BrockT: +1 416 860 2901E: [email protected]

EXPERTS

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ert is a shareholder in the firm’s Water, Energy, Resources and Environment practice group. He focuses on environmental permitting and compliance, siting of utility infrastructure

projects, and environmental due diligence. His clients include leaders in aggregate mining, hard rock mining, construction, energy, and manufacturing. He is also an appointed member on the Arizona Mining Advisory Council, which advises state agencies on proposed rules, policies and budget allocations affecting the mining industry.

Environmental Policymaking, Permitting and Compliance

Bert helps his clients acquire, maintain and defend federal, state, and local environmental permits involving air quality, water quality and hazardous waste. His experience includes preparing and reviewing permit applications; negotiating permit terms with regulators; advocating on behalf of clients in permitting and enforcement proceedings; providing policy and compliance advice with respect to the National Environmental Policy Act (NEPA), air quality, water quality, Resource Conservation and Recovery Act (RCRA), Toxic Substances Control Act (TSCA), and Emergency Planning and Community Right-to-Know Act (EPCRA) regulatory regimes; and advising on legislative and regulatory processes affecting environmental regulatory developments in the Southwest.

Albert H. “Bert” Acken - Ryley Carlock & ApplewhiteT: +1 (602) 440 4874E: [email protected]

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complex agreements as well as with all legal aspects of the development, construction and operation of mining projects in Canada and internationally. Erik is recognized as a leader in his field by The Canadian Legal Lexpert Directory, Latinvex and Chambers Global.

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Jorge Jiménez heads the mining practice at Lopez Velarde, Heftye y Soria, a leader in the energy and natural resources sector in Mexico. He is an attorney admitted in Mexico and New York, and has been

featured as a leader in Mexico by international rankings such as Chambers Latin America and the Guide to the World’s Leading Energy and Natural Resources Lawyers consistently for over 12 years. He advises international natural resources companies in all areas of their operation, from regulatory, concession, compliance and contractual aspects, to joint ventures, mergers and acquisitions, project implementation, administrative litigation and project financing.

arah leads international law firm Pinsent Masons’ mining practice and is recognised by legal directories as a leading Projects lawyer and mining specialist. Sarah has acted for

mining companies such as Anglo American, Randgold and African Minerals on a range of mineral ore projects (ranging from iron ore, coal, copper, platinum, gold through to diamonds) - including related rail, water and ports infrastructure - in various countries in Africa, South America and is also advising on a potential Potash mine in the UK. As such, Sarah is familiar with the typical forms of agreement used for all aspects of the Mining Lifecycle – from mining development agreements, to feasibility study, to construction & erection, EPC, E&P and EPCM forms used for procurement of mining infrastructure, as well as equipment supply agreements.

MEET THE

Sarah Thomas - Pinsent Masons LLPT: +44 (0) 20 7490 6273E: [email protected]

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Jorge Jimenez - Lopez Velarde, Heftye y Soria, SC+52 (55) 3685-3302E: [email protected]

EXPERTS

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ekka Holopainen has been with Kalliolaw since 2010. Before joining the firm he worked for almost 15 years as general counsel and other in-house legal positions in various international

companies in Finland as well as abroad. In addition to his Finnish LL.M. he holds an M.iur.comp. degree from the University of Bonn, Germany as well as an MBA from London Business School.

Holopainen is currently heading the mining law practice at Kalliolaw and he has considerable experience from international and domestic agreements as well as from corporate governance.

He holds positions of trust in several Boards of Directors of companies, associations and foundations.

Pekka Holopainen - Kallio LawT: +358 9 681 293 21E: [email protected]

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1. Can you identify the key challeng-es and opportunities currently facing the Mining industry?

Acken: Other than market forces, Fed-eral permitting processes continue to be a primary cause of delay for new mines and the expansion of existing mines throughout the United States. The fed-eral government manages a significant percentage of available mining lands in the southwestern United States and the federal approval processes are slow and cumbersome. Even on private lands, federal statutory regimes, in particular the Clean Water Act and the Endan-gered Species Act, create a real barrier to mine development. Unless and until federal agencies are required or incen-tivised to act more quickly, the regula-tory environment will not improve in the near term. The costs of regulatory delays and uncertainty may often be hidden, but they are certainly real.

Thomas: There are certainly a good number of challenges currently facing the Mining industry, for example, de-mand growth from China slowing (al-beit still predicted to continue), proj-ect costs rising, Governments applying

increasing regulation and demanding more revenue share from the exploi-tation of their national resources and commodity price fluctuations. Anoth-er challenge is fear of over-supply in the near term, together with significant project cost overruns, which has result-ed in several of the larger mining com-panies cancelling or postponing mine projects and expansions. In addition, exploration has dried up significantly as larger companies have focused their spending on projects closer to produc-tion and the junior minors have strug-gled to raise funds in difficult financial markets. This in turn has had a signif-icant impact on the labour, mine ser-vices and supply markets, particularly in countries such as Australia where a booming project demand five years ago has resulted in a glut of skilled work-ers, services and suppliers with no new projects to resource. Over recent years, other challenges that we have seen in-clude: greater Government interven-tion and increasing steps towards ‘re-source nationalism’ in countries as far spread as Chile, South Africa, Austra-lia and, most recently, Indonesia. This has impacted mining companies’ appe-tite and capacity for investment and, in

certain emerging markets such as Mon-golia, has to some extent turned off the investment tap until greater stability prevails.

However, where challenges exist for some, there are opportunities for oth-ers. For example, flattening prices and the need for mining companies to fo-cus on core assets has presented oppor-tunities for others to acquire projects at what is seen by many as a relative bargain. Certainly amongst Asian in-vestors who appear to have a stronger nerve for political risk we have seen a significant increase in acquisition ac-tivity over the past 2-3 years, mostly focussed within Asia and in Africa. Moreover where acquisition has taken place, expansion of existing sites and exploration of adjacent mining areas are opportunities that naturally follow on and, in the latter case, can be part of the deal with local Government. Also part of the deal might be improvement of local infrastructure, such as road, rail and port facilities. With improved infrastructure comes decreased capital cost for other new entrants to the area. Therefore there may be an opportunity for increased exploration and expan-

Mining 2014

sion activity in Asia and Africa over the coming years and certainly MDB’s such as the Works Bank, the African De-velopment Bank and others are focus-sing attention on integrated transport and power generating solutions (e.g. in West Africa) that particularly assist the mining sector in terms of accessibility and financial viability of mine site. We also hope to see the lifting of the ex-ploration moratorium in Mongolia this year, which should help pave the way to open up the country’s vast resources to exploitation.

Jiménez: The mining industry world-wide is facing challenging times. As the importance of industrial ferrous and non-ferrous minerals continues to evolve in all industries, from technol-ogy and telecommunications, to nano-technology, to oil and gas, the increased awareness of sustainable exploitation of natural resources is also a top agenda item not only for NGO’s and govern-ments, but for industry players in seek-ing long-term feasibility for their in-vestments. In these crossroads, Mexico is at a fundamental place in develop-ment of sustainable projects, whether at areas that have historically being ex-

In this roundtable we spoke with 10 experts from around the world about the latest changes and developments in Mining. Our chosen experts discuss impending difficulties facing the industry such as tackling low commodity prices and a tough financing market, consider the impact of the new royalties scheme in Mexico and analyse the regulatory reforms proposed by Michelle Bachelet Jeria, the newly elected President of Chile. Other focus points include USA, Canada, Nigeria, Finland and the United Kingdom.

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es retreat operations are left with high operating costs which are less flexible downwards. This has particularly af-fected the thermal coal market in Aus-tralia, but other minerals are also af-fected.

The high cost of infrastructure devel-opment has also had an impact on new projects. While certain infrastructure bottle necks and capacity restraints have eased, especially in the Bowen Ba-sin of Queensland, the mid-west iron ore projects in Western Australia are still looking for an infrastructure solu-tion for the Oakajee port and railway, and the timing of the development of the coal resources of the Galilee Basin is unclear.

Herler: The lack of a well-functioning domestic source for junior financing in Finland has made it particularly difficult to develop junior projects especially in a downturn of global mining financing. Due to the previous dominance of state enterprises in the exploration and min-ing business the domestic junior and also mining financing sector is not yet as developed as in more mature mining jurisdictions.

The key opportunities lie within stable society, good infrastructure and strong technical know-how. Moreover, recent

plored and exploited, as well as in new frontiers, where projects developed in hand with the community may prove to be very profitable structures of mutual benefit for the companies and the local constituencies.

Holopainen: Obviously, low prices in metals are affecting both exploration and mining projects in a negative way.

On the other hand we are experienc-ing a constant interest in investing into mining in Finland. It is a buyer’s mar-ket for those that want to invest now. After all, mining is an industry where a long-term view is necessary.

Goldsilver: Broadly speaking, key chal-lenges currently facing the mining in-dustry include low commodity prices and a tough financing market, especial-ly for junior mining companies. There is also the risk of resource nationalism and increased political interference.

In Canada, another key challenge is the duty to consult with First Nations com-munities in connection with the devel-opment and operation of a mining proj-ect. At any phase of the mining process, there will likely be impacts on Aborigi-nal and Treaty rights of local First Na-tions communities. Canadian law re-quires that the Crown, as represented

by the relevant government ministry, has a duty to consult with First Nations communities in order to identify and mitigate such impacts. Where appro-priate, the government must accom-modate the First Nation communities.

Grez: Some of the key challenges in Chile for the mining industry are in the areas of energy, water, and community relations.

There is an energy shortage, for which is yet to be decided how to increase the energy supply, although it is necessary to increase the regular power generation it is being promoted the generation of energy by unconventional means. The obtainment of water is always an issue in the mining areas due to their loca-tion in desert ranges, companies have been searching for alternatives to fresh water, as the use of sea water for some procedures, and the treatment of the same in desalination plants when the last one may not be used in its natural state. Finally, the relations with the local communities, in particular the relation with indigenous communities is being a challenge as the consultation process provided for under Convention Nº 169 it is being implemented by a very recent regulation.

Keepin: Access to finance is still one of

the biggest challenges facing the min-ing industry. This is particularly acute for companies with projects at the de-velopment stage.

Equity markets, for resources at least, continue to prove difficult and so min-ing companies are turning to alternative sources of finance. Debt, convertible and corporate bonds, lease and export finance, offtakes, streams and royalties and are all being examined and mining companies are now frequently turning to a combination of these to raise the funding they need.

Very early stage mining companies are looking at farm-ins and those compa-nies looking to bridge working capital shortfalls are also looking at structured equity products and convertible debt.

Mollard: Recently there has been a per-ceived increase in political risk in Aus-tralia from a changing tax regime. The introduction of the mining tax and carbon tax in 2012 affected the indus-try economically, and also affected the international investment appetite for Australia generally.

In addition to the new taxes, during the mining boom labour and other costs increased in Australia and put pressure on profitability. As commodity pric-

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sistent approach to offences is taken by the courts. The guideline covers sen-tencing for the unauthorised deposit of waste (fly-tipping) and illegal discharg-es to air, land and water. It also provides general guidance for sentencing other relevant and analogous environmental offences.

In the Tax Law sphere, the mining in-dustry operating in the UK should note that a number of exemptions for ag-gregates levy (for clay, slate, shale and a number of other materials) are being suspended from 1 April 2014, while the European Commission reviews wheth-er they are lawful. This will cause pric-ing and contract issues for suppliers and contractors (and consequently the whole supply chain for mining projects in the UK). So mining entities which have previously relied on these exemp-tions should now be making contin-gency plans to deal with the possible outcomes of the Commission’s inves-tigation and preparing to pay the levy from 1 April. Some parties are seeking to avoid the changes by agreeing ad-vance contracts to supply the aggregate now but using this method to avoid the levy may not work for all companies.

More generally, we are also coming across a number of other aggregates levy issues for clients as UK HMRC

discoveries such as the Sakatti project by Anglo American has increased con-fidence that there is still undiscovered mineral potential in Finland.

Afonja: The key challenges facing the Nigerian mining industry include ac-cess to funding, high cost of capital, power shortage, a deficit in infrastruc-ture including access roads to sites, il-legal mining, the dangers of small-scale unsupervised mining and host com-munity risks.

The opportunities in the Nigerian min-ing industry include coal, bitumen, limestone, iron ore, barytes, gold and lead/zinc being seven strategic miner-als prioritised by the Government for development due to the identified suf-ficient quantities available to sustain mining operations. Estimates include bitumen and heavy oil’s at 42 billion barrels1, barytes at 21.1 million met-ric tonnes2, Iron ore is over 882 mil-lion tonnes3, coal is over 1,487 million tonnes4 and Gold is 800,000 ounces in a state in Nigeria5.

2. Are there any regulatory reforms or litigation trends which need to be monitored carefully in 2014?

Acken: The establishment of new Na-tional Monuments is a significant con-cern. Under the Antiquities Act, the President has the authority to establish National Monuments by Executive Or-der. President Obama and the current Secretary of the Interior, Sally Jewell, have made clear in recent months that this power will be used to set aside fed-eral lands if Congress does not act itself, which is an unlikely prospect in the near term. There is recent precedent for ex-pansive use of this presidential power as President Clinton set aside millions of acres in the southwestern U.S. Ad-ditionally, the withdrawal of over one million acres of public lands in 2012 demonstrates that the current admin-istration will act unilaterally to prevent multiple uses of public property, includ-ing mining, in certain areas.

Thomas: In respect of the regulatory re-forms and litigation trends that we are

currently seeing in England and Wales we outline here several recent develop-ments worth monitoring in 2014. These all relate to a potential increase in the risks that legal entities, including min-ing entities, may face.

The recent judgment in R v Sellafield Ltd; R v Network Rail Infrastructure Ltd [2014] EWCA Crim 49 will be of gen-eral interest to mining entities because the case, which involved breaches of en-vironmental and health and safety leg-islation, indicated the Courts’ increas-ing willingness to take into account the financial circumstances of a corporate offender, in addition to the seriousness of the offence. Further, in our view, larger mining entities (with an estimat-ed £1bn or more annual turnover) can generally expect to receive fines in ex-cess of £1m.

Additionally in relation to the environ-mental arena, those in the mining in-dustry should be aware that a new en-vironmental sentencing guideline was published by the Sentencing Council in February 2014. The guideline comes into effect on 1 July 2014. This new guideline is of particular relevance to the mining industry because it aims to introduce higher sentences for serious offenders, particularly corporate of-fenders, whilst also ensuring that a con-

1 - Tarsands & Bitumen Exploration Opportunities in Nigeria - Publication of the Ministry of Mines and Steel Development (“Ministry”).2 - Barytes Exploration Opportunities in Nigeria - Publication of the Ministry.3 - Iron Ore Exploration Opportunities in Nigeria - Publication of the Ministry.4 - Coal Exploration and Power Generating Opportunities in Nigeria - Publication of the Ministry.5 - Investment Opportunities in Nigeria Gold - publication of the Ministry.

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removal of the Construction Design Management (CDM) co-ordinator role and the placing of Design Phase health and safety co-ordination with a ‘Prin-cipal Designer’. Consultations are im-minent and presently the expected date for implementation is April 2015.

In the Employment Law sphere, a po-tentially huge liability for mining em-ployers with employees in the UK may arise as a result of a recent Tribunal rul-ing. In this case, it was held that the holiday pay of an employee should re-flect the employee’s overtime, as well as basic pay. At the moment this Tribu-nal decision is being appealed which means that the decision is not binding at the moment, but if the appeal is not successful this decision may become binding in the near future. The out-come of this appeal is therefore some-thing worth monitoring in 2014.

Jiménez: As part of an overall tax reform introduced in Mexico by the Federal Government and passed by Congress, a historical change was introduced for the mining industry with the introduc-tion of a federal royalty for the produc-tion of minerals (special tax on min-ing). Historically, Mexico has been a non-royalty based system, relying pri-marily on income tax derived from the creation of wealth by the mining com-

continue the trend of raising tax rev-enues by taking an aggressive line on the application of the legislation. This is an interesting development as it often catches out contractors who have made assumptions about the aggregates levy in their contract pricing. Turning to Corporate Manslaughter developments in the UK, to date there have been six convictions, the most recent having been sentenced in February 2014. A trend we have noticed in this area of law is that, for the same fatality, there are usually other charges brought against a corporate organisation (and/or individ-uals), for example, that charges relate to health and safety at work regulations or gross negligence manslaughter. In light of this trend, we note that four of the six convictions secured so far have been guilty pleas as a trade-off for dropping the other charges.

In relation to fraud, there is also a groundswell of opinion that UK fraud laws should be amended to bring in a ‘failure to prevent fraud’ offence, along with other procedural changes, in or-der to make convictions easier. Our sources tell us that where there used to be political resistance there no longer is. So this is another issue that would be worth monitoring as we expect to see movement in this area either in this Parliament or the next.

One other major development in the Corporate Crime arena is the introduc-tion of new rules in relation to corpo-rate plea bargains (otherwise known as Deferred Prosecution Agreements).

These agreements have been widely used in the US over the last decade. We envisage corporate plea bargains being increasingly used by corporates to avoid prosecution for bribery and corruption offences over the coming years. At the same time, sentencing guidelines have been published in relation to convic-tions for corporate fraud, money laun-dering and bribery which allow for the possibility of large (US style) fines to be imposed. It is worth mining compa-nies monitoring developments in this sphere because we’re braced to see im-pressive numbers.

Still with the corporate hat on, in re-lation to regulation reforms that have been happening in the financial sphere, the Financial Conduct Authority is pro-posing new rules for premium listed companies, where a shareholder has a stake of 30% or more (there are at least 50 such companies listed in London, many of which are miners). The regu-lator has opted to introduce minority protection measures in the following three areas:

I. A “relationship agreement”, contain-ing certain “independence provisions”, will be required. Many “controlled” companies will already have such a doc-ument in place, but if the agreement is breached (itself a fruitful area for dis-pute), all transactions with the control-ling shareholder, regardless of size, will require a vote of the independent share-holders.

II. Independent non-executives will be subject to a two-stage vote, first by all shareholders and then by the indepen-dent shareholders, giving the latter an effective veto. But that veto can be over-ridden after 90 days by a third vote of all shareholders (the FCA was keen not to allow minority protection to morph into minority control).

III. To cancel the company’s premium listing and thereby escape these safe-guards a resolution will need to be passed by the independent sharehold-ers.

Now to Health & Safety. For those mining companies considering con-struction projects in the UK within the coming years, a major review of the Construction Design and Manage-ment Regulations has been scheduled for 2014, which will be worth monitor-ing. The key changes expected are the

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In regards to tax law she has announces a gradual raise of taxes for companies though this amendment is also yet to be defined.

As well, the implementation process of the Convention Nº 169 of the ILO which deals with the protection of in-digenous communities must be moni-tored as mining sites are in many cases close to communities’ settlements, and therefore, the convention and related regulations are applicable.

Keepin: For mining companies, devel-opments in international arbitration are often key as this tends to be the pre-ferred dispute resolution mechanism. In part due to the lack of capital, things are very busy on the international arbi-tration side. One consequence of this is that there are a limited number of high-profile, experienced arbitrators to appoint to tribunals; so parties will be faced with the choice of appointing other arbitrators, or suffering delays to their arbitration due to arbitrator lack of availability.

The other trend is that the ICC has in-troduced an emergency arbitration procedure allowing parties to get ur-gent relief prior to the appointment of an arbitral tribunal, without having to go to national courts. This could be

panies. Following a trend from other jurisdictions in the area, Mexico intro-duced a royalty of 7.5% over revenues from production, payable periodically at the time of production and with lim-ited deductions on capital expenditures made during the exploration and pro-duction stages. Additional disincen-tives are also introduced for areas sub-ject to concession where no exploration or production work is being undertak-en for a long-term. The reform is yet to be tested, and some companies have already challenged the constitutionality of the royalty introduction (with oth-ers likely to come in April), which will ultimately be reviewed by the Supreme Court.

On another topic, Mexico has taken a major step in implementing new legisla-tion on environmental liability, the new Federal Law of Environmental Liability which increases not only the duty of care for developing a project, but the degree of accountability of parties involved in an environmental damage. The law in-troduces the concept of environmental liability as requiring remediation and habitat restoration as opposed to sole-ly economic compensation. In princi-ple, economic compensation will only be available when habitat restoration proves to be not feasible. Liability can be properly limited and risk shielded

with a proper environmental program and proper compliance with permitting requirements. The reform calls for the creation of Environmental Courts, and the local constituencies and NGO’s will be given in certain instances standing to file environmental claims. This will prove to be a major area of work and development for the mining projects in Mexico.

Holopainen: There are no extremely big reforms or major litigation going on at the moment. Having said that, on the environmental side the authorities are going to be looking at projects more diligently, which means that any appli-cations for environmental permits will need to be filed as complete as possi-ble to avoid delays in projects. There will also be some changes following the implementation of the EU waste legis-lation in Finland, which legislation will affect also mining industry.

On the exploration side the mining authority is gradually getting the huge backlog of applications processed. These are a consequence of the new Mining Act entering into force in 2011 as companies rushed to submit their exploration and also mining license ap-plications before the act came into force on 1 July 2011.

Goldsilver: In Canada, an important regulatory issue is the planned imple-mentation of mandatory revenue re-porting requirements for mining com-panies. The proposed regime, which was recommended by industry groups, will require all publicly traded mining companies in Canada to disclose how much they pay all levels of government in all jurisdictions around the globe. Since Canada is home to almost 60% of the world’s mining companies and 75% of all public mine financings, this will have a notable impact on the industry’s disclosure practices. The Government of Canada recently announced that if the provincial and territorial securities regulators have not enacted revenue re-porting rules by 1 April 2015, the fed-eral government will legislate in their place.

Grez: On 11 March 2014, Michelle Bachelet was sworn in as President of Chile, and in her quality she has an-nounced several reforms that could po-tentially modify the current scenario for mining companies in Chile. Spe-cifically she has announced a review to the Environmental Impact Evaluation System, establishing that the mining activity has to adjust itself to the new requirements of sustainability, though the amendments themselves are yet to be defined.

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investment for the extraction of shale gas by fracking. To do so it has pro-posed that it will not charge the Supple-mentary Charge for shale gas fracking.

Finally, for the mining of coal, oil and gas there is usually an exemption to Ag-gregates Levy (AGL), which taxes the rock, gravel and sand extracted from the soil at £2/tonne. However, whilst the exemption still applies for drill cut-tings derived from the mining of oil and gas, from 1 April 2014 the exemption is being suspended for coal and the by-products from coal excavation pending the outcome of the European Commis-sion’s investigation into whether it con-stitutes an illegal state aid.

Jiménez: It is to note that even with the introduction of the new royalty scheme, the Mexican mining tax regime contin-ues to be one of the most favourable in the region. Yet, in addition to the roy-alties on production, concession hold-ers are required to pay to the federal government bi-annual concession fees, which are determined through a flat rate, irrespective of production, based on a combination of years of effective-ness of the concession and number of surface hectares covered by the conces-sion. Mining companies are also sub-ject to regular corporate income tax, as well as certain limited state taxes such as

problematic where the Respondent is a state and it will be interesting to see how popular this will be.

Mollard: The Coalition Government elected in 2013 is pushing ahead with reforms to abolish the mining tax and carbon tax, with both taxes likely to be repealed with the first sitting of Parlia-ment after 1 July 2014. This will be wel-come news for the industry.

On the other side of the equation, there continues to be a lot of conservative policy concerning competing land uses, including agriculture versus mining, as well as growing activism concerning national environment offset regulations and protection of water quality.

Herler: There have been certain in-compliance issues with environmental permit stipulations within the Finnish mining sector during the last two years. This has led to an intensive discussion concerning the supervision of permit compliance. The Finnish Ministry of the Environment amended its environ-mental permit supervision guidance document in late 2013 and has estab-lished new positions within the state en-vironmental administration in order to support environmental permit supervi-sion. Moreover, an environmental pro-tection legislation reform is currently

being processed by the Finnish Parlia-ment. The reform implements the EU industrial emissions directive and will have an impact on environmental per-mitting of mining projects.

3. How does the tax regime work for mining projects in your jurisdiction?

Acken: The mining industry is gener-ally subject to three kinds of state and county taxes: property taxes, sales and use taxes (or the transaction privilege tax in Arizona), and the net proceeds of minerals tax (or the severance tax in Arizona). These taxes are fairly well-es-tablished and understood. Changes may be coming to Nevada’s tax regime. Cur-rently, the net proceeds of minerals tax (the “NPOM”) impose a 5% maximum tax on the value of the mine. The maxi-mum 5% rate was added to the Nevada Constitution in 1989. N.R.S. Const., Art. 10, § 5. Essentially, the NPOM di-rects the taxpayer to report the value of the mineral sold and identify the costs of extraction, reducing, and refining the mineral into a commercially reasonable form. This calculation provides the tax-able value of the mineral, to which the maximum 5% rate is applied. In No-vember 2014, Nevada voters will decide whether to repeal the maximum 5% rate. If the voters decide to repeal, the rate of tax on mines will default to one

that is “uniform and equal” to all prop-erty in Nevada; however, repealing the “cap” makes it possible to raise taxes on the mining industry.

Thomas: Presently there is no all-en-compassing mining tax regime under English or Scottish law.

Therefore, the normal tax regime is supplemented to effect a specific tax re-gime of sorts for those working on min-ing projects.

For oil and gas companies, the Ring Fenced Corporation Tax (RFCT) ap-plies. It protects the profits derived from oil and gas mining so that tax li-abilities cannot be reduced by the losses of unrelated activities. At 30% it is also higher than the normal rate of Corpo-ration Tax.

In addition to this, there is a ‘Supple-mentary Charge’ of 32% due on top of RFCT making the effective rate of tax for these entities 62%. The effective rate is even higher for those operating out of certain oil fields which pre-date the abolition of the Petroleum Revenue Tax (PRT). PRT is a ‘super-tax’ at 50% of profit from the taxable fields, but is deductable when calculating the RFCT.

The UK Government is trying to obtain

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porate income tax. Dividend payments between non-listed Finnish entities are generally tax exempt and dividends to foreign shareholders are subject to divi-dend withholding tax (exceptions may apply in case of a tax treaty). Transfer-ring certain assets are subject to trans-fer tax (4 % for real estate and 1.6 % or 2 % for shares) and owning real estate is subject to a real estate tax the rate of which varies between municipalities (0.6 -1.35 %). Value added tax is paid for products (goods or services) in ac-cordance with EU VAT Directives. The VAT is deductible if the goods or ser-vices are acquired in business purposes. Moreover, there are several excise taxes which may be relevant for mining ac-tivities (e.g. energy and fuel taxes).

Afonja: Companies engaged in mining activities are liable to companies in-come tax at the rate of 30% of charge-able profits, and education tax at the rate of 2% on assessable profits. A value added tax of 5% is to be imposed on the gross value of vatable goods and servic-es. Royalty, annual fees and rentals are also payable.

Incentives on mining activities include: a three to five years tax holiday for new mining companies and a system of de-ferred royalty payment determined by the investment level and nature of the

payroll. Mexico, though, does not have state or municipal taxes on mining. To counter the effect that all taxes are col-lected at the federal level, local commu-nities are now to benefit from a Federal Fund to be created from the collection of royalties, to be distributed among local communities in areas where the mining projects are developed.

Holopainen: Mining companies are sub-ject to same taxes as other companies in comparable businesses. There are no special mining related taxes. However, the owners of surface rights have to be paid annually an excavation fee of €50 per hectare. In addition, 0.15% of the calculated value of mining minerals in-cluded in the metal ores that are exca-vated and exploited in the course of the year must be paid as an excavation fee.

With regard to exploration, the annual exploration fee to be paid to the land owner per property is:1) 20 euros per hectare for each of the first four years of validity of the explo-ration permit;2) 30 euros per hectare per year for the fifth, sixth, and seventh year of va-lidity of the exploration permit;3) 40 euros per hectare per year for the eighth, ninth, and tenth year of va-lidity of the exploration permit;4) 50 euros per hectare for the elev-

enth and for further years of validity of the exploration permit.

The corporate tax rate is currently 20% for all companies.

Grez: Generally speaking, companies in Chile must pay a First Category Income Tax (20%) and if profits are withdrawn from Chile by non-domicile or non-resident shareholders or equity owners, an Additional Withholding Income Tax should be paid (35%) and the First Cat-egory Income Tax paid is used as a tax credit against the Additional Withhold-ing Income Tax. According to Michelle Bachelet Government Programme, she will endorse the project where the First Category Income Tax will be increased gradually through her term, thought this is yet to be defined.

We also have a royalty tax on mining activities. If the sales of the company are below the equivalent value of 50.000 metric tons of fine copper, the rates de-pend on the annual sales and go from 0.5% to 4.5%. When the sales exceed 50.000 metric tons of fine copper, the rates will be determined by the profit margin of the company and go from 5% to 14%. The exception is for those com-panies which produce less than 12.000 metric tons of fine copper.

Mollard: Australia has various taxation regimes which are imposed at either Federal or State level. Federal taxes include income tax (corporate rate of 30%), withholding tax (various rates depending on nature of the payment -dividend, interest or other payments, and depending the terms of bi-lateral trade agreements), goods and services tax (10%) and capital gains tax. The most important State based tax is stamp duty, generally payable on the transfer of interests in land (which may include mining tenements).

Each State government has authority over the minerals located in their juris-diction. On the grant of a mining li-cence, the licence holder is entitled to mine the minerals and retain the eco-nomic benefit of the minerals mined, subject to payment of a royalty to the State. The amount of the royalty gener-ally varies from 3% to 10% depending on the State and the type of mineral.

Herler: There is no special mining tax re-gime in Finland, nor is there any resource tax applicable to mining. For simplic-ity’s sake, mining in Finland is typically carried out by a Finnish limited liability company which is the subsidiary of an international mining company. There-fore, normal Finnish company taxation regimes apply. There is a flat 20 % cor-

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panies are attracted by the low political risk in the Nordic countries and use this to diversify the risk in their exploration portfolios.

Afonja: South Africa is currently lead-ing the list. However, Ghana which re-ceived $20bn in mining investment in 2011-12 and Botswana, the largest dia-mond producer, are all set to rival South Africa in the future.

5. What health, safety & environmen-tal procedures and assessments cur-rently exist as part of the permitting process in your jurisdiction?

Acken: Projects that require any federal approval – and virtually all mining proj-ects in the Western U.S. require some federal approvals - must be evaluated under the National Environmental Pol-icy Act. Depending on the scope of the federal action, there are three levels of NEPA analysis: categorical exclusions, environmental assessments, and envi-ronmental impact statements. Arizona and Nevada (other than Lake Tahoe) do not have state-equivalent NEPA processes, but many state permitting processes do involve an evaluation of health, safety and the environment. An example of a state-specific program is Arizona’s Aquifer Protection Program, which requires mining projects to eval-

project; a 95% capital allowance on qualifying capital expenditure incurred on exploration, development and pro-cessing; an annual indexation of un-claimed balance of capital expenditure by 5% (only applicable to mines that commence production within five years of enactment of the Act); the carrying forward of losses; exemption from cus-toms and import duties on approved plants and machinery, equipment and accessories – imported specifically and exclusively for mining operations; and lastly, interest income tax relief.

4. Which jurisdictions appear to be performing the strongest in terms of securing investment and backing for new projects?

Jiménez: In addition to countries with a great tradition on mining, such as Chile or Peru, investments in the region of Latin America are increasingly flow-ing to new frontiers in Mexico, where we see they can benefit from stability at the macro-economic level and the pro-tection of a wide network of free trade agreements and investment protection agreements that provide long-term se-curity, as well as double taxation treaties that may allow the investors to reduce the tax exposure for their investments.

Holopainen: The Nordic countries,

Finland, Sweden and Norway are doing quite well at the moment. In the Fra-ser Institute’s survey on the most min-ing friendly destinations Finland and Sweden emerged as the top worldwide mining destinations for the second con-secutive year.This is in line with the amount of activ-ity we see with both junior and mining companies.

Goldsilver: From my perspective, West Africa has increasing interest from miners and investors. I also see a rise in interest in Colombia, which has had minimal resource exploration in the past few decades due to the country’s internal struggles. The potential for significant untapped resources presents some exciting opportunities for the mining industry, however investors are somewhat deterred by Colombia’s cur-rent mining legislation.

I am also seeing increasing interest in mining in Canada, which is an attrac-tive jurisdiction for mining companies looking to reduce their political and operational risk.

Keepin: We are still seeing a lot of in-terest in the emerging markets as the mining assets with the biggest potential are often located in these jurisdictions. The African continent continues to see

the most attention from the London market.

However, we find that rather than say-ing investments in particular countries are the most interesting, that popular-ity of jurisdictions is driven by interest in particular commodities e.g. gold or iron ore. For gold, West and East Af-rica are still seeing the most activity. For Iron Ore West Africa continues to be important given the number of de-velopment projects in the Congo ba-sin which spans Cameroon republic of Congo and DRC.

Mollard: The State governments in Western Australia and South Australia continue to be more pro-mining than the eastern states. There has been a lot of activism in relation to coal seam gas and the potential effects of fracking for non-conventional oil and gas on the east coast which has had knock-on ef-fects for the regulatory environment for the resource industry in Victoria, New South Wales and Queensland.

Herler: During the past years the Fen-noscandian region of the Nordic coun-tries (Finland, Sweden and Norway) have been ranked high in the Fraser Institute Annual Survey of Mining companies with respect to the policy perception index. Many mining com-

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N º123 of 2044, and Supplementary Ex-ecutive Decree N º 549 of 2000, which regulate some particular obligations for mining companies in regards to min-ing works machinery, equipment, tools, as well as sanitary conditions in every workplace.

In regards to environmental matters, any project that could eventually affect negatively the environment must pass by the evaluation system for environ-mental impact assessment. The envi-ronmental law provides a list of proj-ects categories that shall be subjected to the evaluation system, distinguishing between those which would have a sig-nificant impact and those which would not. The first will be subject to a pro-cedure called Environmental Impact Study and the last will be subject to a procedure called Environmental Im-pact Declaration.

Herler: In addition to the mining per-mitting process, operating a mine in Finland is subject to several other per-mitting processes, such as the environ-mental permitting. The aforementioned permits are preceded by an environmen-tal impact assessment procedure and often simultaneous land use planning. In addition, mining operations need to obtain a mining safety permit and building structures requires a building

uate and protect groundwater quality.

Thomas: In the UK an environmental permit is required from the Environ-ment Agency for all waste management activities and water discharges from a mine in England. (N.B. environmental protection is a devolved matter and this means that there are different require-ments that apply to mines in Scotland and Wales). An Environmental Impact Assessment will also be required to sup-port an application for planning per-mission for a mine and will also likely include a requirement for a habitat as-sessment. A further environmental im-pact assessment may also (but not al-ways) be required for an environmental permit for a mining waste activity.

When establishing a mine there will in-evitably be construction work involved, and therefore the Construction (Design and Management) Regulations 2007 will apply. These regulations regulate the design, construction, maintenance (and dismantling and demolition) of a structure, and seek to ensure that all those involved in a project have suitable management structures and/or docu-mentation in place to ensure health and safety. During the operational phase, the

Management and Administration of

Safety and Health at Mines Regulations 1993 apply. These regulations set out the duties of mine owners and notifi-cation of mine operations to enforcing authorities, as well as the appointment and duties of individuals running the mine, e.g. the mine manager and sur-veyors. These regulations also specify the approval and certification of quali-fications and the records that are to be kept.

Finally, in addition to being compliant with all of the permitting processes and environmental procedures governed by the regulations mentioned above, it is important that mining entities located in England ensure that they are compli-ant with their duties under the Health & Safety at Work Act 1974.

Jiménez: Mexico has a fine-developed environmental legislation that requires all mining projects to undergo, at the federal level, a process of environmen-tal impact assessment and authorisa-tion, approved by the Ministry of the Environment and Natural Resources, which generally includes performance conditions and remediation measures as a pre-condition for the development of the projects. Project implementation is then scrutinised during development by the Federal Environmental Protec-tion Agency, which can impose fines

for non-compliance with environmen-tal laws and even order suspension or closure of a mine. Environmental leg-islation also covers items such as dis-posal of hazardous and non-hazardous waste, compliance with zoning laws, among others. The environmental permits typically cover HSE concerns. Likewise, the labour authorities issue Official Technical Norms of mandatory compliance which set forth HSE rules and conditions for employment in min-ing works.

Holopainen: Before the application for an environmental permit for a mining project, an environmental impact as-sessment has to be carried out. These include drafting of an environmental assessment report, and hearings with stakeholders. The project will then need a separate environmental permit.

For mining, a mine safety permit is also needed. There are a number of other permits that are needed. Local work safety authorities will also assess the operations.

Grez: Today mining projects in Chile are required to fulfil with certain stan-dards in this matter, and are subject to audit by the relevant state bodies. In regards to health and safety the most important norms are Executive Decree

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bly but perhaps more significantly, af-fords favour to international investors seen to be ‘playing by the rules’. Where local partners have the right assets and skills, and those international partners who are savvy enough to give the local partner a proper role, projects can be moved forward at a greater pace than the market average. A large part of this faster progress is often down to better navigation of the local legal and regula-tory system, to ensure permits and ap-provals are secured to enable projects to be developed.

We often work with local law firms in the more developing mining jurisdic-tions to guide our clients and their project partners through these often complex legal processes. The need for proper advice during the early stages of a mining investment cannot be over-emphasised. It will ensure that legal rights are protected vis a vis Govern-ment authorities as well as local com-mercial partners, particularly in coun-tries where the rule of law may suffer from a lack of independence and prop-er enforcement. More often than we expect, we see mining investments end up in dispute and, even where that dis-pute might be settled in a proper inter-national forum, the investor may not in practice be able to enforce a successful international Court or arbitrator’s deci-

permit for each respective structure. If the company does not own the contem-plated mining area, an expropriation permit is needed. The drainage of the mining area and the right to take water from bodies of water are subject to per-mitting procedures in the Water Act. Building all relevant road connections, as well as intersections, require specif-ic permits from the transportation au-thorities. Chemicals usage requires its own permits from the Chemicals and Safety Agency. With regard to mining uranium or thorium, permits from the Council of State (Cabinet) and the Radi-ation and Nuclear Safety Authority are needed. If the contemplated operations may cause detriment to nature conser-vation values, also exception permits to conservation may be needed.

Afonja: Pursuant to the Nigerian Min-erals and Mining Act 2007, an Environ-mental Impact Assessment (EIA) state-ment and an Environmental Protection and Rehabilitation Program is required to be submitted prior to the commence-ment of mining operations or upon an application for an extension of the term of the relevant lease or permit or upon application for the conversion of a Min-eral title.

Furthermore, general safety standards including but not limited to surface and

underground mine workings, ventila-tion, pollution, handling of machinery as provided in the Mining Regulations are expected to be complied with.

The Environmental Impact Assessment Act1 lists mining as one of projects in respect of which a mandatory study of the Agency must be received prior to the carrying out of the project. Specifically, this covers mining of minerals in new areas where the mining lease covers a total area in excess of 250 hectares, ore processing including concentrating for aluminium, copper, gold or tantalum and sand dredging involving an area of 50 hectares or more.

6. To what extent does political in-terference affect mining activity in emerging markets and how can legal system risks be minimalised?

Thomas: Political interference has had an increasing presence in the mining industry over recent years, particularly in relation to Governments securing a greater share of revenue from miners given the impact and aftermath of the global financial crisis (“GFC”) on econ-omies worldwide and perceived ‘super profits” realised by mining companies during the pre-GFC mining boom. This

intervention has taken many forms, from increased mining taxes and roy-alties in Australia, Chile, several Afri-can nations and Indonesia; to morato-riums on exploration in Mongolia and new mining licenses in the Philippines whilst Governments decide how the next generation of mining investment should benefit their country and people. We have also seen a trend towards local supply and labour requirements and, more recently, processing of ore before export in countries including South Af-rica, Zimbabwe and Indonesia to help the host country profit more from the industry before the mined output leaves its shores. However, often the impact of such policies on the miners themselves is not well thought through and can render their operations financially un-feasible. For example, the export ban introduced in Indonesia early this year has seen large parts of the industry all but grind to a halt.

Whilst the picture obviously varies country to country, this show of in-creasing control from local govern-ments has created a more uncertain investment environment for interna-tional investors, and the need to team up with a local partner is now more ap-parent than ever. This can help protect investors from tripping over local and national requirements and, less tangi-1 - Chapter E12 Laws of the Federation of Nigeria 2004.

28 29


a Foreign Investment Statute (DL 600) and the regulations of the Central Bank, in particular Chapter XIV of the Central Bank Foreign Exchange Regulations.

Keepin: All companies have to operate on accordance with the legal system in the countries in which they are oper-ating. The political issues for mining companies often arise from their assets often being located in developing coun-tries and so the potential impact of their operations can be of great economic and consequently political importance in that country. On a commercial level, legal system risk is often managed by engaging with the relevant people at a country level.

One step which helps to mitigate legal system risk is through proper group structuring. Having an appropriate group structure can not only be tax ef-ficient but can bring the benefit of bi-lateral or multi-lateral investment trea-ties. This treaty protection can also help protect against unfair treatment or nationalisation.

Mollard: In addition to South Ameri-ca, as a firm Baker & McKenzie is see-ing significant deal flow in Africa. But the development of mining projects in many African states is being hindered by regulatory uncertainty, in relation to

sion in the country where the mine is located notwithstanding the interna-tional treaties that are designed to avoid such outcomes. Thinking through all of the potential risks and putting in place proper legal protections from the out-set can save huge financial and reputa-tional cost down the line.

Jiménez: Mexico’s economy has histori-cally been a beneficiary and continues to benefit greatly from the mining ac-tivity. Still, a negative position of a state or local government can be very detri-mental to the successful development of a project. Involvement of the local gov-ernment in social, surface land hold-ing and labour aspects of the projects is very important. We expect that the in-creased benefits that the state and local governments will have from the min-ing activities through the new dedicat-ed Federal Fund for Mining Commu-nities, along with the indirect benefits to the communities, will increasingly align interests of the project developers with the local governments to see the long-term success of the projects.

Holopainen: As a Finnish law firm we have limited information on activities in emerging markets but mining com-panies do appreciate Finland as a busi-ness environment where there is very little corruption and where there is lit-

tle political interference in mining ac-tivities. There is very little legal system risk.

There are, of course, some permits that are granted by the government, such as the mining of uranium. Also, in such cases granting of the permit is based on the economic viability of the process, what are the consequences for the envi-ronment and other objective facts and there is a limited scope of discretion there.

Goldsilver: Over the past few years, governments of emerging market coun-tries have shown an increased willing-ness to implement resource nationali-sation schemes. This trend poses the greatest risk to mining activity in those markets; the extent of the risk depends on the degree of nationalisation.

A recent example of this is Indonesia’s total ban on exports of nickel, tin and bauxite. This measure was taken with the goal of promoting smelting and refining in the country. However it is having a significant impact on produc-ers in Indonesia who are now unable to export their products and recover costs. If other countries follow suit, it may significantly increase the cost of doing business in emerging markets.

The very nature of resource nationali-sation makes political interference dif-ficult to address from the perspective of risk management. For example, it may happen very suddenly in the context of a resource project with a long production timeframe. Mining companies gener-ally have a good sense of which juris-dictions pose the most risk, and tend to make decisions accordingly.

Grez: Political stability is essential for the development of any project, espe-cially of mining projects which involve great capital contributions, and where its progress is planned long term and the relation with governmental bodies is constant due to the several adminis-trative permission that are required to install and develop a mining project.

The Chilean Constitution protects the right to exercise any economic activity, with specific limitations, the right to acquire property, and the right of own-ership itself over all kind of tangible on intangible goods, establishing, as well, the Appeal for Protection Recourse as a judicial procedure to guard the afore-mentioned rights.

Also, in order to lessen the risks in-volved in the foreign investment, and to encourage it from a financial point of view, the Chilean Government has

30 31


the tenure of mining rights, changing taxation regimes and the potential for local government buy-in rights. When moving from exploration to develop-ment, appropriate mining agreements or concession arrangements need to be agreed with local governments or state owned mining companies, with fiscal stability and agreed buy-in rights docu-mented. The challenge is to ensure the agreed terms are not revisited during the term of the project and to review possible enforcement mechanisms or leverage, such as those available under bi-lateral trade agreements.

7. Can you outline the current global investment trends in exploration and mine expansion?

Holopainen: Due to a number of things such as low metal prices investments are low at the moment. What we see is that in this buyers’ market the inves-tors are looking particularly for near-production projects.

Goldsilver: It is still difficult for mining companies to raise money in the capital market, or otherwise. Commodity pric-es remain low after continuing to drop in 2013 and this has forced producers to maintain their focus on cost-cutting measures rather than expansion. With most commodity markets currently

in surplus, a possible slowdown of the Chinese economy and more large-scale mine projects expected to come online in the short-term, it is possible that a rebound in overall commodity prices will not occur in the near future. As in-vestors continue to be risk-averse, min-ing companies will need to focus on risk management strategies rather than growth opportunities.

Grez: From year 2010 to year 2013, there has been a decrease in explora-tion projects in the region, of lower in-tensity but consistent with the global trend, junior mining companies have decreased their investments. The bud-get for exploration, according to the Copper Chilean Comisión, on the year 2013 (USD$14.427 millions) decreased in a 30% in regards to the budget of year 2012 (USD$20.500 millions) and a 16% in regards to the budget of year 2011 (USD$17.245 millions). Today it could be possible to see more activity in the M&A with respect to companies with good projects or prospect but with some financial needs. We are also continuing viewing private funds getting involved in mining companies with operations by means of increasing the capital of the companies and getting minority stake in the same. Likewise, Japanese companies are entering into companies via capital contributions and executing

projects in Africa now, more than from any other bourse.

We are also seeing greater interest in South American copper in Peru and Chile, as well as a re-ignited interest in gold projects in the rim of fire, in PNG, the Philippines and Indonesia.

Baker & McKenzie was one of the first law firms to open an office in Myanmar earlier this year and we are optimistic about the market reforms and the fu-ture of the mining industry there as one of the newest frontiers.

Afonja: Current global investment trends include the development of new technology to reduce operational costs and increase efficiency; effective cor-porate social responsibility of mining companies through provision of lo-cal employment opportunities, train-ing and education to foster a conducive co-existence between the company and host community and a more deter-mined approach to safety standards on the mining sites.

8. Are there any incentives for organ-isations which meet compliance with environmental legislation?

Acken: Avoiding an enforcement action is always a strong incentive to comply

off-take agreements in regards to the minerals.

Keepin: A recent trend we are seeing at the exploration stage is the resurgence of interest in early stage gold explora-tion. There seems to be much more in-terest in these projects now - something which we have seen very little interest in during 2013.

The other key trend is that 2013 saw a number of new funds created which are focussed on the mining industry. Many of these are led by former senior execu-tives in the industry and are focussed on producing or near term producing as-sets. QKR’s acquisition of the Navach-ab mine in Namibia marked one of the first of the acquisitions by these funds and we expect that the second half of 2014 will start to see mine development and expansion funded by these private equity funds.

Mollard: Given the higher operating costs and capital costs for infrastruc-ture development in Australia, Austra-lian exploration and mining companies continue to be frontiersman, pushing new projects in developing and tran-sitioning jurisdictions in Africa, South America and Central and South East Asia. According to the ASX figures, over 200 ASX listed companies have

32 33


ized. TEKES (the Finnish Funding Agency for Innovation) has a green mining programme, which includes subsidies for projects which employ and develop green mining concepts.

Furthermore, over the last five years the concept of social licence to operate has emerged in Finnish public discussion in respect of mining and other indus-trial projects. Those mining companies which exceed mere compliance with environmental legislation have enjoyed better publicity and smoother authority and other stakeholder relations.

9. Can you provide an example of an effective mining model?

Holopainen: A good way to do it is to start with a smaller scale operation and then work on expanding the reserves over a longer period of time rather than just start very big. Also, in a Finnish context it is important that the top man-agement of the project live where the mine is and not just fly in and fly out. It seems that Agnico-Eagle, who have a gold mine in Kittilä, Lapland, has done many things right.

with environmental requirements. Ad-ditionally, many states have developed tools such as pollution prevention pro-grams and environmental audit privi-leges to encourage regulated entities to be proactive with respect to environ-mental compliance and protection. For example, Arizona’s environmental au-dit privilege, adopted in 2012, provides some enforcement liability protection for any regulated entity that voluntarily conducts an environmental compliance audit and then undertakes appropriate efforts to remedy any identified non-compliance. Nevada’s environmental audit program provides a presumption against penalties for violations discov-ered during an environmental audit undertaken pursuant to an agreement with a regulatory agency.

Thomas: UK: Currently, organisations are only indirectly incentivised to en-sure they are compliant with environ-mental legislation. Compliance with environmental legislation is mandatory and therefore companies simply cannot be complacent. Failure to do so may re-sult in companies in the mining indus-try facing any or all of the following:-

• Prosecution and fines and potential personal liability for directors and offi-cers;• Potential for termination or suspen-

sion of environmental permits;

• The annual subsistence payments for high risk environmental permits are cal-culated using an Operational Risk Ap-praisal (“OPRA”) scoring system. This system assesses the risk to the environ-ment by an individual facility and takes into account the complexity, emissions, location of the facility, the ability of the operator to manage the operations and the compliance rating associated with the permit. The Environment Agency’s charges will therefore increase if there is a non-compliance history;

• Reporting – many companies are le-gally obliged to report on environmen-tal issues relating to their business. They could be required to report in general terms on their overall impact on the en-vironment as a whole, or they could be subject to specific requirements to re-port on discrete environmental matters which could include material non com-pliances;

• Impact on insurance premiums;

• Breaches could potentially allow a landlord to forfeit a lease (depending on the lease terms) and depending on circumstance could also be a breach of a bank facility agreement; and• Reputational and Corporate Social

Responsibility implications.

Jiménez: The International Labour Organization Convention No. 169, to which Mexico is a party, has interna-tionally pushed (perhaps on occasion to an extreme where some projects may be held hostage to local constituencies), mining companies to increase their lev-el of involvement with local communi-ties in addressing their concerns in the development of their projects. While this and other tools under which the projects are developed in line with the local communities can increase the cost and difficulty of the projects moving forward, it also allows the developers to facilitate a sustainable development with due care to the particular concerns of the local constituencies and special attention to the particular characteris-tics of the project area.

Holopainen: Not directly but the so-called social license to operate is largely dependent on how the environmental regulations are met. Although we have strict environmental laws, companies should strive to do even better than just meet the minimum requirements of the law.

Herler: There are no legal incentives for compliance as incompliance with environmental legislation is penal-

34 35


ing resources in environmental permit compliance supervision is likely to fur-ther increase focus on compliance and may also cause delays in permit proce-dures as permit applications are scru-tinised even more careful than before. Faster processing times and clarifica-tion of a number of certain details in the new mining legislation would im-prove project timelines in Finland.

Afonja: In an ideal world, a much en-hanced regulation of the health and safety procedures in the mining indus-try as regulatory deficiencies and the dangers of small-scale, unsupervised mining still plague the Nigerian mining sector.

Additionally, increased corporate social responsibility by mining companies as the maintenance of good relationships between host communities and mining companies is crucial for any successful project.

10. What key trends do you expect to see over the coming year? In an ideal world what would you like to see im-plemented or changed?

Acken: Market forces will continue to dictate the pace and intensity of new mine developments and existing mine operations and expansions. In an ideal world, to promote mining in the south-western U.S., we would like to see sig-nificant and meaningful federal regula-tory reforms, particularly to NEPA and the Endangered Species Act, to encour-age and require timely analysis and de-cision-making. Licensing time-frames, which set specific time-frames for per-mitting processes, are not the sole or perfect solution but would be a great start, particularly for NEPA review. Longer term, federal agencies need in-centives, resources, and requirements to make timely decisions. At the federal level, paralysis through over-analysis is the norm. However, states such as Ari-zona have demonstrated that regulato-ry processes can be made more efficient while still protecting public health and the environment.

Holopainen: I can see the authorities cooperating better so that the whole licensing process runs smoother and maybe with less hearings. This way the mining companies will have more vis-

ibility on the process which may help them to plan financing transactions better.

Goldsilver: From a Canadian perspec-tive, the trend is the industry-led re-source revenue transparency initiative. Additionally, I expect to see a continuing trend to streamline mining regulations. The federal and provincial governments of Canada are working to make their respective resource sectors more com-petitive by streamlining mining and environmental approval processes. The Province of Quebec adopted legislation to this effect in December. Likewise, the Province of Ontario is moving forward with the modernisation of its mining legislation. The next major milestone in this process is the implementation of online staking and modernisation of its mining lands administration, which aims to (i) reduce disputes over claim staking, (ii) require mining claim de-scriptions to be more precise, (iii) elim-inate the impact of ground staking, (iv) lower the cost of acquiring claims and (v) improve compliance and reduce the administrative burden.

Keepin: 2013 was a poor year for merg-ers and acquisitions in the mining sec-tor although we expect to see this trend start to reverse over the coming year.

Divestments from majors seeking to re-turn capital to shareholders; opportu-nistic acquisitions which make strategic sense, rather than transformational ac-quisitions; and, the initial investments by the mining funds which raised sig-nificant sums in 2013; are all likely to lead the way to increased merger and acquisition activity and provide us with hope that over the coming year will see improved merger and acquisition activ-ity albeit from a very low base.

Herler: After being number one last year the latest Fraser Institute study ranked Finland second in the policy perception index. Finland and the Nordic coun-tries are getting more known as suitable low-risk mining countries with still large unexplored areas, which is likely to continue the trend of new companies entering the Nordic market. The Finn-ish government lowered the corporate income tax rate with 4.5 % units this year to attract new inbound investments. In connection with the enactment of the Mining Act 2011, there were voices raised on the need of a mining tax in Finland. No legislation was passed and this government has not prepared any proposals in relation to mining taxa-tion. It still remains to be seen whether this issue is highlighted in connection with the 2015 Parliamentary elections. Moreover, the recent trend of increas-

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