Retention of Proceeds from Testing Activities on Leases and Patented Lands

Under the Mining Act, the definition of “mine production” and the resulting requirement for a mine production closure plan, is triggered whenever a proponent is mining with the intention to sell materials or stockpile them for future sale. Small-scale testing activities (sampling) are caught by that definition if the proponent’s intention is to sell the tested minerals (often done to offset the costs of the testing).

Currently, where mining claimholders have obtained ministerial permission under section 52 of the Mining Act, the ministry allows mining claimholders to sell materials extracted for the purposes of testing, and retain proceeds to the extent of eligible cost recovery, without first filing a mine production closure plan. Lessees, licensees and owners of mining lands, however, cannot sell any quantity of material without first filing a mine production closure plan.

The ministry is proposing to amend the Mining Act to allow lessees, licensees and owners of mining lands to sell and retain the proceeds from materials extracted for the purposes of testing without the requirement for a mine production closure plan being filed.

The activities (extracting materials for the purposes of testing) may be deemed to be either early exploration or advanced exploration, after consideration of the proponent’s application, based on how the proposed activities fit within existing regulatory thresholds. If permission is granted, proponents would then be required to comply with the regulatory requirements applicable to early exploration or advanced exploration activities but would not be subject to the requirement to file a mine production closure plan. This would allow proponents to also offset the costs of testing by retaining proceeds from any sales.

The proposed legislative amendments would provide holders of all forms of tenure to mining lands with the same opportunity to sell the end product of testing without first filing a mine production closure plan.

The proposal is anticipated to result in a cost savings for lessees, licensees and owners of mining lands selling materials extracted for the purposes of testing, if they are required to obtain an early exploration plan or permit instead of filing a mine production closure plan. The proposed changes will provide an opportunity for lessees, licensees and owners of mining lands to generate revenue when testing to offset the costs of proving their resource/market, helping to provide business certainty.

When materials are being extracted, an advanced exploration closure plan or exploration permit/plan is required. However, small-scale testing activities (sampling) fall under the definition of mine production if the intention is to later sell the tested minerals (which can be done in an effort to offset the costs of the testing).

The proposed amendments would allow the Director of Mine Rehabilitation, on application by a proponent, to deem the activities as early exploration or advanced exploration if he or she determines that the sale of the materials is the end product of extraction carried out for the purpose of testing mineral content. This would allow the proponent to put any proceeds towards the costs of testing before potentially undertaking a mine production closure plan. The ability to delay the need for a mine production closure plan could result in improved testing that would show whether or not going to mine production is viable. If it is not viable, and the project does not proceed, the mine production closure plan would not be required, resulting in the removal of the costly development of a closure plan.

The cost of a mine production closure plan varies, based on size, type of mine (underground vs open pit) and site-specific considerations.  The cost could vary from $250,000 to $500,000 per closure plan.

In reference to preparing the cost of a closure plan, the amount of revenue from the sale of the sample would also vary on the amount and type of material and market.  It is estimated that the sale amount would not be overly substantial or in some cases, non-existent.