Retention of proceeds from the sale of samples taken for the purpose of testing on leases, licences, and other mining lands

Amendments to the Mining Act in Bill 13 enabled lessees, licencees and owners of mining lands to apply for the ability 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 process requires that the Director of Mine Rehabilitation determine, on application by the proponent, that the mineral being sold is the end product of mining, milling and refining carried for the purpose of testing mineral content.  Where the application is approved by the Director, the activity is deemed to be either of advanced exploration or early exploration, depending on the scale of the activity, and the applicant is required to report back to the Director on the sale. 

Ontario is proposing consequential regulatory amendments to prescribe the details of the application for such a deeming, as well as the details of the required report, allowing Ontario to bring the amendments from Bill 13 into force.

The current framework under the Mining Act provides mining claim holders with the ability to sell materials extracted for the purposes of testing, and retain proceeds (not profits), under prescribed conditions, without filing a mine production closure plan. In those circumstances, claim holders must submit an early exploration plan, obtain an exploration permit, or file an advanced exploration closure plan, depending on the amount of material being extracted for testing purposes. However, unlike mining claim holders, lessees, licencees and owners of mining lands currently cannot sell any quantity of material without first filing a mine production closure plan with the Ministry. This is true even if the material is only being extracted for testing purposes, long before the mine proceeds to development and commercial production

The Ministry wants to allow proponents to recover the costs of testing programs, regardless of the form of “tenure” they hold without requiring a mine production closure plan (although profiting  would still require a mine production closure plan) – this is what the legislative amendments in Bill 13 enabled.

In order for those provisions to come into force, Ontario must provide for the details of the application process, as well as the conditions required for that sale and retention of proceeds. Specifically, we are proposing:

• to provide for aspects of the application process, including the nature of the application form, and the information required to support the Director’s decision-making process; for example, details on the location and nature of the activities proposed or undertaken for the purpose of testing and subsequent sale.
• to have the Director provide written direction with respect to consultation with Aboriginal communities, after receiving an application from the proponent. The Director may prescribe specific procedural requirements for consultation on an application, such as requiring the proponent to prepare a proposed plan for consultation and consulting with communities as directed.  This process is similar to other consultation processes already enabled under the Mining Act.
• to prescribe aspects of the reporting process, including the nature of the reporting form, and the information required for the Director to ensure that the proponent pay to the Crown any amounts received by the proponent for the sale that exceed the eligible costs to the proponent; for example, receipts of costs and proceeds from the activity and sale.

These proposed regulatory amendments support previous enabling legislative amendments which were 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 or advanced exploration closure plan instead of filing a mine production closure plan. These 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 resources to market, helping to provide business certainty.

When materials are being extracted, in most circumstances, 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 enabling legislative amendments 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, but is generally between $250,000 and $500,000. Therefore, removing the need for a closure plan could potentially result in proponents saving between $250,000 and $500,000 in the event their project does not proceed.

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.