Attracting investment into Canadian mining projects

With the globalization of investment dollars, the regulatory framework for a mineral exploration or mining project plays a key factor in the analysis both foreign and domestic investors make: Can a project get off the ground? Will permits be obtainable on a timely basis or at all? Who can object and what does that mean? And, perhaps most importantly, will the process be predictable? A regulatory system that functions as a patchwork as opposed to being harmonized lacks certainty and risks alienating capital.

“If you cannot grow it, you have to mine it” — the reality is simple, but the regulations are not.

Canada and its provinces acknowledge the importance of predictability in creating a well-functioning and regulated mining sector, including by publishing high-level strategies on critical mineral projects in their respective jurisdictions. The implementation of these government strategies requires significant action to achieve the desired results in a timely manner. This article considers the current regulatory and legal issues in Canada that may impact the ability of companies conducting mineral exploration, development, or production activities to attract investment.

Provincial mining laws

Provinces govern exploration and extraction of mineral resources — they have their own legislation relating to operating and permitting mines, staking claims, and conducting other mineral exploration and development activities, and are generally the jurisdictional level which regulates business. All provinces other than Prince Edward Island further have developed strategies related to critical minerals, though some are clearly more welcoming than others of projects.

Saskatchewan has rich deposits of potash and uranium, along with 27 of the 34 critical minerals identified by the government of Canada, as well as gold. The provincial government has strongly supported the increase in exploration, development, and production, and specifically has set a goal to account for 15% of Canadian mineral exploration spending and double the number of critical minerals being produced by 2030. A 2023 survey of mining companies by the Fraser Institute indicated that Saskatchewan, followed by Quebec and then Manitoba, are the top Canadian jurisdictions for investment. Similarly, when assessing policy factors alone, Saskatchewan came out on top. British Columbia, discussed below, scored among the lowest of any Canadian jurisdiction. Saskatchewan is a jurisdiction that has been vocal about its priorities in promoting mineral projects, and both the industry and the investment community have clearly listened.

While well-known as a leading oil and gas producer, Alberta, like the rest of Canada, has deposits of critical minerals, including those produced as byproducts rather than targeted minerals. At present, there are no critical minerals mines in Alberta; however, the province has established the Minerals Strategy and Action Plan to enhance its profile as a possible producer and supplier of critical minerals on the world stage. One of Alberta’s priorities has been the establishment of more publicly available geoscientific information to attract investments by providing pre-exploration information. Further, Alberta identified the need for clarity and predictability when it comes to regulation and is attempting to streamline laws in this space through the Mineral Resource Development Act, which, among other things, has given authority to the Alberta Energy Regulator over minerals just as it did over oil, gas, and coal.

Ontario and Quebec have standing policies related to development of minerals and specifically critical and strategic minerals, and have, as discussed below, enticed exploration activities through tax credits. Ontario and the federal government have attempted to unlock the opportunity that the Ring of Fire region holds, but advancing projects in this area is complex, and has so far proven elusive. Ontario has an existing geological dataset that is publicly available to assist with pre-exploration activities, and Quebec is not only enhancing its geoscientific data but has also noted that it plans to use technology to make the dataset more meaningful. Quebec has noted a priority on acquiring new geoscientific knowledge and information as key to supporting exploration and specifically outlines that its data indicates that every dollar invested in such knowledge generates an average of five dollars in exploration work, in addition to reducing the risks for mineral exploration companies. Quebec has signalled its willingness to prioritize investment in the natural resources sector by promoting exploration, development, and production activities, with visible success, and establishing provincial tax credits for Quebec taxpayers on critical minerals exploration in the province. For context, Ontario currently boasts 36 active mining operations, and B.C. has 25 operating mines or quarries, while Quebec’s government notes that there are approximately 200 active mines, quarries, and sandpits located in the province, which include 20 metal mines.

B.C. published its “Phase 1” critical minerals strategy in January 2024, highlighting key priority areas, including infrastructure development. Development projects like the North Coast Transmission Line and Northwest B.C. Highway Corridor Improvements Project are needed to support critical mineral development and to enable electrification of mining projects in line with the province’s CleanBC plan. The province has also been focused on ensuring that the administration of the Mineral Tenure Act (MTA) is in line with its duty to consult. In September 2023, the Supreme Court of British Columbia held that the province’s online staking system for mineral claims was contrary to the province’s duty to consult Indigenous groups when registering mineral claims under the MTA within their traditional territories, which has the potential to impact Indigenous rights prior to any consultation occurring. While the MTA was constitutional, the court found that the administration of the tenure system was not. As such, the court suspended its declaration for 18 months to allow the design of a system for the registration of claims. On January 7, 2025, the province announced its draft Mineral Claims Consultation Framework, designed to address the court order. Under the new framework, mineral claims will not be automatically registered on application but instead will be subject to a prior consultation process by the provincial government with potentially affected First Nations. Claim registrations may be subject to conditions or rejection based on the consultation process. The framework remains subject to several questions, including what protections there will be, if any, related to the intellectual property of explorers and miners, who will be obligated to disclose their claim areas prior to having any rights to the mineral claims or the land under which they exist. The province is also committed to modernising the MTA in line with the United Nations Declaration on the Rights of Indigenous People. The government has stated that it intends to engage with industry and First Nations regarding the modernization.

Federal laws impacting mining

While mining activities are regulated at the provincial level, the federal regulatory environment is complex and includes Canada’s import and export laws (both generally and specifically for certain mined materials, such as the Import of Rough Diamonds Act), transportation laws, the environmental protection regime, which goes beyond the impact assessment process and includes navigable waters legislation, fisheries, migratory birds, and other areas. Beyond navigating the litany of regulations that might apply to a mining project, a significant source of uncertainty introduced because of this regulatory approach is uncertainty of timing — in short, delays.

These delays are exacerbated when federal and provincial processes are not harmonized, including with respect to the environmental assessment processes. While Canada and the B.C. are party to the Impact Assessment Cooperation Agreement between Canada and B.C., not all provinces have thus far entered into such cooperation agreements. Addressing parallel permitting requirements with environmental assessments continues to be a challenge, with duplication and inefficiencies common issues.

The length of time it takes to move through the review process can take 12 to 15 years, and the Minister of Energy and Natural Resources has noted that he believes it can be reduced to five, through conducting reviews for various permits concurrently instead of consecutively, increasing staffing to reduce backlogs, and supporting the development of infrastructure. Should the political willpower to achieve this timeline continue to exist, investors can hope for more efficient returns as projects would be able to become revenue generating much faster.

Foreign investment review

Since 2009, with the adoption of a national security regime, the federal government has used its authority under the Investment Canada Act (ICA) to review, alter, or prevent transactions that it views as injurious (or potentially injurious) to Canada’s national security. In 2022, the federal government put miners who rely on investments from China on edge, with the forced divestiture of three minority investments in Canadian companies involved in lithium mineral projects, two of whom had no projects in Canada, which were held by Chinese investors. It appears that each investor may have been closely tied to, subject to influence from, or compellable to comply with extrajudicial direction from the People’s Republic of China (PRC). While the federal government never explicitly alleged publicly that these investors have any connections to the PRC, the government’s statement announcing these national security decisions included a direct electronic hyperlink to the government’s Critical Minerals Policy, which only applies to SOEs and investors that could be influenced or compelled by foreign governments.

Over the past several years, the federal government has refined its position on investment from China as well as increased its powers more generally through amendments to the ICA, which effectively allow the imposition of interim mitigation measures while a review is ongoing and will require pre-closing filings for investments in certain enumerated sectors, which we expect will include operations related to “critical minerals.” A pattern has emerged of lengthy reviews that can be well more than the 200-day period provided for in the ICA, and failures of deals either because of the length of time or possibly the requirements for approval being floated by government officials during their discussions with the applicants. This trend includes Solaris Resources Inc. abandoning its prospective $130 million minority investment by Zijin Mining Group, which a cynical observer might assume at least partially informed Solaris’ decision to exit Canada and relocate to Switzerland. A recent successful transaction, being Paladin Energy’s $1.14 billion takeover of Fission Uranium, demonstrates the circumstances in which overseas buyers with ties to China might be approved. Reuters reports that Paladin, an Australian company holding a Namibian project that was partially financed through an investment from a Chinese company, agreed not to use Chinese sourced finance to fund the project, or sell the uranium directly or indirectly to any Chinese customer other than China General Nuclear Power Group. Similarly, Canada’s approval of the sale of Pan American Silver’s La Arena project in Peru to a subsidiary of Zijin Mining Group was in part predicated on an agreement where the intention is to supply North American markets with the copper concentrate that will be produced.

Attracting Chinese or state sourced financing for Canadian companies will remain challenging for the foreseeable future. Investors will need to engage in a review process that may take seven to nine months, or potentially longer, and enter Western-friendly restrictions on future sales and operations, while maintaining a Canadian decision-making structure.

Flow-through share regime

Where Canada has been able to promote mining industry investments in an effective way, it has done so by promoting domestic capital through flow-through financing options, which allow tax deductions for certain exploration expenses incurred by mining companies to be transferred to investors, thereby reducing the real dollar cost of the investment. In addition to the flow-through deductions, the mineral exploration tax credit (METC) provides investors with an added 15% non-refundable tax credit for early exploration, which is deductible from taxes payable. Other measures include a critical mineral exploration tax credit (CMETC) which effectively increases the METC tax credit to 30% if the company in question is primarily exploring for designated critical minerals, including copper, lithium, and nickel, and a clean technology manufacturing investment tax credit, which applied to investments in eligible property used in critical mineral extraction and processing.

In addition, the provinces may offer additional tax credits which apply to provincial income tax, and Quebec notably allows investors to deduct up to 120% of the cost of certain exploration expenditures, and Ontario has an Ontario focused flow-through share tax credit for mineral exploration projects in Ontario which provides a 5% credit.

Importantly, the METC and CMETC are not permanent features — the METC is currently slated to expire on March 31, 2025, and the CMETC is currently slated to expire on March 31, 2027.

Conclusion

Canada and its provinces, as jurisdictions for investment, have identified the priority areas and laws that would make it more attractive for mining investors, specifically policies aimed at increasing data available to exploration companies, incentivizing investment through the tax system, and reducing regulatory delay in the regulatory process for development stage and production stage mineral projects. The actual implementation of those policies is mixed. At present, different provinces are at different stages in creating a predictable environment for mining capital, and the federal government has not committed to permanent tax incentives for domestic capital, or found a replacement for the China-based capital that it has rejected as forming part of the funding needed for domestic critical minerals projects. Companies seeking to attract investors need to be realistic about the risks involved on a jurisdictional level, which vary based on both the province or territory the project is based in and on what the anticipated funding sources are. For exploration level projects seeking domestic capital, Canada’s flow-through regime provides attractive options. For other projects, Saskatchewan’s objectives in aggressively increasing the number of projects, or Quebec’s history of shepherding projects from exploration through to production, might create attractive conditions for foreign investors (from the U.S. or the E.U.) wanting to take advantage of the stability of those jurisdictions in comparison to other international sources of minerals.

Mining is both Canada’s history and future. The competitiveness of our industry for investment will be tied to efficient regulation and a tax system that incentivizes exploration, and at present, there are some successes but many more opportunities to enhance mining activities in Canada.

Sasa Jarvis is a partner, mining, capital markets & securities; Cory Kent is an office management partner, based in Vancouver; and Sharon Singh is a partner and co-head of environment and Indigenous at McMillan LLP.