2023 Trends and What to Watch Out For in 2024

2023 was another tough year for financing junior companies, and also very quiet on the IPO front at all levels.  And critical minerals, excluding copper, saw significant price declines during the year.

But business goes on and the companies that have survived are positioned to benefit in 2024.  Here are some of the trends we saw:

International 

When establishing international operations, local laws will often require resident shareholders, directors and officers,  or agents operating through Powers of Attorney.  Due to pandemic travel restrictions, it became more difficult to monitor local partners, which reinforced the importance of taking proactive steps to undo any structures which are required to be put in place to operate in foreign jurisdictions.   Examples include:

  • transfers back of shares
  • undated resignations and releases of local directors and officers,
  • acknowledgments of cancellation of Powers of Attorney

 

Special Committees 

We acted for a number of Special Committees which were put in place to review transactions where there was  a potential conflict of interest.  To withstand scrutiny, three best practices are: 

  • Establish the committee as soon as possible after a potential conflict emerges.
  • Give committee an adequate budget (including compensation of Committee members) to hire independent counsel and other advisors if needed.
  • Ensure mandate includes looking at other alternate transactions, not just the one being evaluated.

 

Listed Issuer Financing Exemption (LIFE) Transactions 

The first full year of  LIFE  financings reveals the following insights (for details on LIFE financings, please see our previous article here.

  • A major benefit of LIFE financing is that the securities issued will have no hold period imposed by Securities Acts.  But always check Stock Exchange requirements to ensure no additional hold periods will be imposed.
  • Contrary to the typical market practice, the LIFE exemption strictly prohibits any solicitation to purchasers prior to the issuance and filing of the news release and filing of the offering document  This means that the terms and structure of the offering must be fully organized prior to any public announcement and the commencement of any marketing efforts.
  • LIFE financings may not be as useful for cross border financings. US. investors are more familiar with shelf prospectus as LIFE has no US equivalent. See our articles on shelf prospectuses here and here.

 

43-101 Issues

For our mining clients,  we have seen the regulators focus on the following:

  • Material vs. non- material properties.  Even if no cash is spent or budgeted, a property may still be considered material if given prominence in marketing materials, websites etc. Material Properties require current 43-101 reports.
  • Make sure your QP is a QP for their area of expertise – e.g. don’t ask a metallurgist to cover geology.
  • PEAs done in conjunction with a  PFS or FS.  This is generally not permitted, but may be acceptable in limited circumstances if  the PEA lands can be characterized as a separate and distinct deposit. Also if there are new mining methods, processing, or infrastructure to be applied to the PEA lands. And don’t add the PEA numbers to the  PFS or FS.

 

An Interesting End To 2023

Our client McFarlane Lake Mining Ltd. was able to break a 20-year impasse with affected First Nations and renew exploration work on its High Lake property just off the Trans- Canada highway on the Ontario Manitoba border.   Encouraging results led to an oversubscribed financing attracting a number of highly sophisticated investors.  To celebrate the Company rented the El Mocambo nightclub where we were entertained Rolling Stones tribute band.  (The Rolling Stones played a legendary concert at the El Mocambo in 1977).

 

Looking Ahead To 2024

Bill S – 21 (the Fighting Against Forced Labour and Child Labour in Supply Chains Act)

Bill S- 21 requires Canadian businesses to report on forced labour and child labour in their supply chains. It outlines the steps organizations must take to prevent and reduce the risk that operations, including those of third parties within the supply chain, make use of forced and/or child labour.  The Bill took effect on January 1, 2024, with first reports required to be filed on or before May 31, 2024.  The Bill   requires all public companies, and private entities above certain monetary and employment thresholds, to file a detailed annual report which outlines a substantial number of items.  There are severe penalties for non-compliance  (and personal liability for an entities’ directors and officers).    This will, no doubt represent a substantial regulatory burden, particularly for smaller companies. 

 

New Regulations For Mining Tailings 

The Ontario Government expects to implement a new regulatory framework to facilitate exploration, testing and reprocessing tailings and other waste materials resulting from mining.  The plan is to issue “Recovery Permits”  which will be less stringent than for greenfield sites and encourage the recovery  of minerals from tailings and accelerate site remediation on closed mine sites. 

 Public  consultation on the new regulations ended in November 2023 – it expected that the new regulations will be proclaimed  in the first half of 2024.

 

Mining On The Moon – Not As Far Fetched As You Might Think!

It turns out there is water on the moon in the form of ice.  Our client Interstellar Mining Inc. has been working with Space Exploration Technologies Corp. (Space X)  to develop technologies to mine that ice and separate it into hydrogen (to power rockets) and water (to sustain human habitation).  Expect big news on that front in 2024!

To discuss how your company could be impacted by any of these trends, call us or send an email.

 

 

Chuck Higgins Chuck Higgins
Pilot Law LLP
M: 416 616 8064 | O: 416 521 7200
E: chiggins@pilotlaw.ca
Connect with me on LinkedIn
Evan Strong
Associate
Pilot Law LLP
E: estrong@pilotlaw.ca
Connect with me on LinkedIn

 

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