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The Conversation Begins

Updated: Mar 9, 2020



Welcome:

I have seen salmon swimming upstream to spawn even with their eyes pecked out.  I have seen salmon fighting to protect their nests. I have seen them push up creeks so small that they rammed themselves across the gravel. I have seen them swim upstream with huge chunks bitten out of their bodies by bears. Salmon are incredibly driven to spawn. They will not give up. This gives me hope.


Kathleen Moore


Bond- Reclamation Security?

We thought that we would initiate our first blog post with the questions surrounding the bond that must be posted by the proponent with the Department of Energy and Mines (DME) formerly the Department of Natural Resources.  Atlantic Mining NS Corp., (AMNSC) the Proponent and applicant in the case of Cochrane Hill, is a wholly owned subsidiary of Atlantic Gold Corporation (“Atlantic Gold”). Atlantic Gold was formerly Spur Ventures Inc.  At the public meetings held by the Municipality of the District of St. Mary’s there were several questions about bonds.


Given the risks associated with a tailings pond leakage, daily operations of the tailings pond, acid rock drainage, arsenic behaviour and dam failure, the question of the size, nature, duration and use of the bond is a critical concern for the St. Mary’s River Association and community.


An excerpt from the Cochrane Hill Project Description Cochrane Hill Project Description  provides an insight into what the company perceives as “Best Available Technology” to deal with mine tailings. “Wet” disposal is recognized internationally as an accepted method of permanent tailings ARD management as opposed to “dry” storage.”  If this is truly the best available technology,  the question of bond or available fiscal resources to mitigate or clean-up potential spills or breaches is of utmost importance to the community.  The parent company Atlantic Gold, prides itself as the Lowest Cost Producer.  For further information on alternatives see, National Resource Council’s (NRCan) research efforts on alternative methods for tailings management, NRCan Tailings Management.


In order to engage in a discussion about bonds we need to place the requirement for a bond in context of provincial legislation. Mineral exploration and mining activities in the province are governed by the newly minted  Mineral Resource Act Mineral Resources Regulations, Section 156 of the  Act Mineral Resources Regulations.  The Mineral Resources Regulations were amended as recently as November 2018. For the purpose of the act, the commodity of gold is considered a mineral.


There is a requirement for ANSMC to obtain a mineral lease prior to mining.   Prerequisites to the issuance of a mineral lease section 86 (1) of  the Mineral Resources Act states “An application for a mineral lease or non-mineral registration must include a reclamation plan that contains the prescribed information and is acceptable to the Minister.” include a requirement to post reclamation security in accordance with section 88(1)(b) of the Mineral Resource Act. “Security for reclamation; A person shall post security in an amount determined in accordance with the regulations to provide for the reclamation of the area that may be disturbed by the activities of a licensee, lessee, registrant or holder of a letter of authorization or excavation registration, or an agent or assignee of such person, as follows: (a) a licensee shall post security prior to commencing activities that involve disturbing the ground.


What is the Amount of Bond?: Under the Mineral Resource Regulations an application for a mineral lease must be accompanied by a reclamation security;  section 60 (2) “The amount of reclamation security required by clause 88(l)(b) of the Act at the time of application for a mineral lease applicant to be posted with the Registrar towards the total security required for a mineral lease is the lesser of the following: (a) 5% of the estimated total cost of the reclamation plan for the area subject to the lease; (b) $100 000.00.


The Department of Energy and Mines was contacted to obtain further clarification on the amount of the bond because the regulations read as if the maximum amount of bond required would have been the $100,000 figure.  If at the time of application for a mining lease, the applicant is years off from a final production decision and/or does not exactly know what the design of the project may be, a nominal placeholder value (bond) is required to accompany the mineral lease application.  In this case it is $100,000.


The final value of the bond will be based upon the estimate of Atlantic Mining NS Corp. costs to reclaim the site to a state that satisfies the Department of the Environment and the Minister.  Often the proponent will low ball this estimate.  The Department of Energy and Mines in consultation with the Department of the Environment will review the proposed reclamation plan and assess the estimated costs of the plan.  They will make recommendations to accept the plan and costs as submitted or make recommendations to changes to the plan.  As a contingency, the DME calculates additional overhead and project management costs. Lastly a recommendation for a final bond value is sent to the minister of DME for consideration.   The current Minister of Energy and Mines is  Derek Mombourquette.


What happens if the Company’s reclamation is not complete and/or is not finalized by the initially agreed upon time frame:


Bond Forfeiture Ensues: The security posted under subsection (1) is forfeited to the Crown (a) if reclamation has not been completed to the satisfaction of the Minister within the period required by the regulations or otherwise applicable under the licence, lease, registration, letter of authorization or reclamation plan; or (b) where the security is subject to an expiry date, if it is not renewed at least 30 days before its expiry date and reclamation is not then completed. Subject to Section 131, where security is forfeited under subsection (2), (3) or (4), (a) the resulting funds may be employed, in whole or in part, under the direction of the Minister, to reclaim the area disturbed by the activities of the lessee, registrant or holder of the letter of authorization or excavation registration, or an agent or assignee of such person; and (b) any balance of the funds that is not expended under clause (a) must be returned to the person who posted the security.


Timeline for completing reclamation: Subsection 88 (2) The security posted under subsection (1) is forfeited to the Crown (a) if reclamation has not been completed to the satisfaction of the Minister within the period required by the regulations or otherwise applicable under the licence, lease, registration, letter of authorization or reclamation plan.


What happens if a Company Goes Bankrupt?: Subsection 88 (4) Where a lessee, registrant or holder of a letter of authorization or excavation registration carries out any act of bankruptcy, makes a general assignment for the benefit of the person’s creditors or other acknowledgment of insolvency or makes any application under the Bankruptcy and Insolvency Act (Canada) or the Companies Winding Up Act or any similar legislation, the security posted under subsection (1) is forfeited to the Crown without regard to the period otherwise applicable under subsection (2).


Will the Mine be reclaimed under a bankruptcy scenario? subsection 88 (5) Subject to Section 131, where security is forfeited under subsection (2), (3) or (4), (a) the resulting funds may be employed, in whole or in part, under the direction of the Minister, to reclaim the area disturbed by the activities of the lessee, registrant or holder of the letter of authorization or excavation registration, or an agent or assignee of such person; and

(b) any balance of the funds that is not expended under clause (a) must be returned to the person who posted the security.


What is to be Considered in Bond Costs Calculations?: Section 72 of the Mineral Resource Regulations subsection (2) “The total amount of the reclamation security required for a mineral lease … is determined based on the sum of all of the following: (a) the total of third-party costs estimated for labour, equipment, supplies and services for the purposes of reclaiming the property at a level to represent peak reclamation liability acceptable to the Registrar; (b) the cost of post-reclamation monitoring; (c) a contingency amount equal to 20% of the total amounts of clauses (a) and (b); (d) an additional contingency amount equal to 10% of the total amounts of clauses (a) and (b) for the cost of project procurement, engineering and management”.


What happens with a delayed reclamation?: Post-production monitoring period : Section 77 of regulations. “A lessee or registrant must continue post-production monitoring until reclamation is completed to the satisfaction of the Minister”.


Can the bond be used for other costs by the province or proponent?:

The bond is not to be used for expenses by the proponent and sits in trust with the government not to be used for any other purpose.  The government itself can not use it for any other purpose than reclamation of the mine site under the mining lease.


What are the types of Bonds Accepted?: There are several types of what the department call “reclamation security”   These include: letter of credit, cash and surety bond.  Some bonds are good for as little as a year while others like cash do not expire, surety bonds and letters of credit expire.    These last two instruments are provided by third parties. The DME has the ability to call a bond under the circumstances noted above.  Cash does not expire while letters of credit and surety bonds do.  The bonds have various expiry lengths and are at an apparent minimum of 1-year.   Notification is given DMR should the third party no longer guarantee the instrument.  In the case of pending bankruptcy DME calls the bond prior to bankruptcy.


Reclamation securities must be renewed on time, section 88(2) The security posted under subsection (1) is forfeited to the Crown (b) where the security is subject to an expiry date, if it is not renewed at least 30 days before its expiry date and reclamation is not then completed.

A Company must renew their reclamation instrument prior to termination of the term of letter of credit or surety bond, failure to do so in time results in a forfeiture of the bond.

In conclusion, reading through the legislation and regulations it appears to indicate that once the Minister signs off on the reclamation, the bond is returned.  Does that mean a wet tailings pond in left in the area?  This will be apparent when the reclamation and closure plan is submitted to the minister.   These plans do not appear to be part of the Guidelines for the Preparation of an Environmental Impact Statement and apparently due to Business reasons are confidential.   In addition to the mining lease environmental permit, the mining company must apply for an Industrial Permit.  It was suggested that we follow the Industrial Permit process and this application could shed greater light on the extent and nature of the reclamation, search for Atlantic NS Mining Corp.  I have linked this discussion to the provincial Industrial Permits online database.  It shows that Atlantic Mining NS Corp., not Atlantic Gold, has 70 industrial permits for the Touquoy Mine.  Note to self -peruse the permits for information.


An update to the last statement. The industrial permits are useful sources of information and I have linked an example of an existing permit for the Touquoy Mine on the Cochrane Hill Project Description section.  Interesting, you search using Atlantic Gold but the permit holder is Atlantic Mining NS Corp. although if you search using that name, search results return zero permits.


The bond conversation continues…….

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