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Blockchain in the Mining Industry

September 20 and 21 saw the latest edition of Smart Mining 2.0 held in Toronto. The presentations covered a broad range of topics related to technology in the mining industry, including artificial intelligence, cybersecurity and data management. Included in the proceedings was a panel featuring Dentons partner Adam Allouba and Ryan Darbyson of Blockchain Guru, speaking on the benefits for the mining industry of integrating blockchain into their operations.

Although blockchain is suitable for any situation involving data storage, a few applications in particular were highlighted during the discussion. This includes traceability of resources along the value chain to build confidence that they are not conflict minerals (as required by regulations in the United States and, as of 2021, the European Union). Blockchain can also be used to store information generated by Internet of Things (IoT) sensors, which can then predict outcomes through the use of AI algorithms (a topic Dentons has covered extensively at events earlier this year held in our Montreal and Toronto offices). In addition, smart contracts can be used to ensure an automatic link between, for example, shipments of resources by a producer and payments by the customer. Those transactions are written to the blockchain and can be viewed by the appropriate stakeholders in real time. Such a mechanism can contribute to the efficiency of various arrangements, such as joint ventures or option agreements.

 On the practical side, the panelists emphasized that it is essential to have enthusiastic cooperation from the staff on the ground who will be working with the technology. As one of the panelists during the conference said, “Culture eats strategy for breakfast.” As a result, if personnel dismiss blockchain as just another passing fad or, worse, something that threatens their position, it will be impossible to get the full-throttled buy-in necessary for the success of any major project. To that end, it is crucial for management to communicate clearly with staff the benefits to the company and to themselves of the new technology. In addition, to avoid friction and encourage personnel to feel ownership of the technology, the external consultants integrating blockchain must work hand-in-hand to educate employees who will be using it.

As with any novel tool or technology, blockchain comes with its own legal challenges. Among these is jurisdiction over the data, and smart contracts in particular. Since information on a blockchain can be stored anywhere in the world, it is not obvious before which court a dispute would be heard. In the case of smart contracts, which consist of lines of code, embedding choice of jurisdiction and forum language in the comments to the code can help avoid lengthy and expensive disputes about where litigation should take place.

Another challenge in litigating a smart contract is the difficulty of debating source code before a court, since neither the lawyers involved and the judge hearing the case are likely to be expert programmers. As a result, expert testimony may be required to translate the programming language into plain English. To mitigate the costs and delays such testimony can entail, just as a programmer would document their code with embedded comments to help colleagues understand how it works, the parties should document their agreement in the same way.

Finally, it is important to consider confidentiality issues. As a distributed ledger technology, blockchain entails storing data across multiple nodes controlled by multiple actors. That decentralized approach ensures blockchain’s robustness and immutability, but also makes it essential to identify mechanisms that prevent anyone with access to the blockchain from reading all the data it has recorded. Encryption is a must, while layered permissions enable finely-tuned control of who has access to what and “need to know” access, rather than a binary approach where whoever has the encryption key can see the entirety of the data.

As with any new technology, it is important in evaluating blockchain to separate fact from fiction. While it has faded somewhat from the public eye, blockchain’s adoption is proceeding apace among businesses that see the benefits of a robust, immutable mechanism for data storage and sharing. The potential uses are vast, and while the legal issues must be addressed properly and early on, the right advice will help your implementation succeed and create value.

Blockchain in the Mining Industry

BC/Federal Environmental Assessment Process Update

The “British Columbia Environmental Assessment Office” (EAO) has entered into a Memorandum of Understanding (MOA) on the Substitution of Environmental Assessments with the Canadian Environmental Assessment Agency.

Under the memorandum, the EAO will conduct the environmental assessment for specific projects, including the procedural aspects of Aboriginal consultation. Federal departments will contribute their expertise. At the conclusion of the substituted environmental assessment, the respective federal and provincial ministers will reach separate decisions on the significance of the project’s environmental effects and the adequacy of Aboriginal consultation, based on the environmental assessment report prepared by the EAO.

The EAO has submitted requests to the Canadian Environmental Assessment Agency, CEAA to conduct substituted environmental assessments on behalf of the federal government for two proposed coal projects. The provincial environmental assessments will meet all federal and provincial requirements.

The MOU sets out an administrative framework for the use of the substitution provisions in the Canadian Environmental Assessment Act, 2012 (CEAA 2012).

The MOU outlines how information exchange will occur, describes the roles and responsibilities of the British Columbia Environmental Assessment Office EAO establishes the conduct of a substituted process leading to the respective environmental assessment decisions of federal and provincial ministers.

The CEAA commits to timelines in considering substitution requests from British Columbia.

A copy of the MOU can be found at here.

BC/Federal Environmental Assessment Process Update

Additions to the List of Foreign Associations and Membership Designations

The additional organizations listed below meet the definition of a “professional association” in NI 43‑101, and the membership designations listed meet the criteria in paragraph (e) of the definition of “qualified person” in NI 43‑101.

Foreign Association Membership Designation Date of Determination
 The Institution of Engineers Australia (Engineers Australia)  Chartered Professional Engineer (CPEng)     May 29, 2012
 The Institution of Professional Engineers New Zealand (Engineers New Zealand, IPENZ)  Chartered Professional Engineer (CPEng)     November 5, 2012

These associations and membership designations should be considered additions to the list of accepted foreign associations and membership designations in Appendix A of the Companion Policy.

Additions to the List of Foreign Associations and Membership Designations

2012 Mining Report British Columbia Securities Commission

On January 24, 2013, the BC Securities Commission issued a report (the “2012 Mining Report”) with respect to disclosure and interpretive issues under National Instrument 43 101, which is referenced as “the Mining Rule” in the report. Any questions or comments on the 2012 Mining Report can be submitted to Robert Holland or Ian McCartney of the B.C.S.C.

The report identifies a number of weaknesses in the disclosure of mining companies and provides a useful checklist for compliance measures in Appendix “A” which you can download by clicking ”Download PDF”, and a summary of the mining technical reviews disclosing the common compliance elves on the different disclosures which is also attached to this memo.

The report identifies the following common deficiencies encountered in reviewing technical reports including:

  • Missing or altered statements in certificates and consents of the Qualified Persons;
  • Not dated, signed, or addressed to the company;
  • Non compliant disclaimers of responsibility or statements of reliance;
  • Does not provide a summary of all material technical and scientific information for the entire property;
  • Non compliant disclosure of historical estimates, exploration targets, or MRMR;
  • Does not provide adequate or sufficiently transparent information on the key assumptions, parameters, and methodologies used in mineral resource estimates.

In addition, the report also references the CIM December 15, 2009 publication “Additional Guidance – Reasonable Prospects for Economic Extraction”.

The CIM statement emphasizes that the use of the words “reasonable prospects for economic extraction” in addressing mineral resources are:

  • the responsibility of the Qualified Person;
  • judgment based on the Qualified Person’s experience; and
  • the methods used and assumptions made to determine if the project has “reasonable prospects” which must be presented explicitly in both public and technical reports.

Note that this clarification applies not only to measured and indicated resources, but also inferred reso 2012 Mining Report British Columbia Securities Commission urces and a copy is attached to this memo for reference.

To read Appendix A, click here.

2012 Mining Report British Columbia Securities Commission

B.C. Court Rules Telephone Voting Requires Transparency and Verification

In a recent decision¹ the Supreme Court of British Columbia set aside and declared invalid an annual general meeting of shareholders and the resolutions passed at the meeting following a proxy fight between management and dissident shareholders. The Court found that management’s proxy solicitation firm had improperly executed proxies on behalf of shareholders based on instructions given by telephone to representatives of the proxy solicitation firm (the “TeleVote System”). The Court concluded that the TeleVote System failed to provide a contemporaneous, reliable and verifiable record of proxies and voting instructions with the result that the use of such a system was oppressive to shareholders.


The Court’s decision arose in the context of a proxy fight between the incumbent slate of directors of Mosquito Consolidated Gold Mines Limited (“Mosquito”) and a dissident slate lead by two former directors of Mosquito. While in many cases the process goes sideways through illegal solicitation allegations, in this instance each side delivered information circulars to shareholders and engaged proxy solicitation firms to solicit proxies from shareholders.

Management’s proxy solicitation firms offered telephone and internet voting using a unique control number found on a shareholder’s proxy or voting information form. In addition, management’s firm used the TeleVote System. Under this system, a call centre was established in which representatives of management’s solicitation firm telephoned registered shareholders and non-objecting beneficial owners of shares to solicit their votes for the management slate. The call centre operators were permitted to accept verbal instructions from individuals and to execute proxies on their behalf.

At Mosquito’s shareholder meeting, the validity of the proxies obtained through the use of the TeleVote System was challenged by the dissident slate but the Chair of meeting ruled that the proxies were valid. The shareholder vote was in favour of the management slate, albeit by a narrow margin. Had the proxies obtained through the TeleVote System been excluded, the dissident slate would have been elected.

Oral Instructions by Telephone Not Standard Practice

A company controlled by one of the members of the dissident slate filed an application seeking a declaration that Mosquito’s annual general meeting was conducted in a manner that was oppressive to it as a shareholder of Mosquito, and orders nullifying the resolutions passed at the meeting and requiring a new shareholder meeting to be held.

In granting the application, the Court held that while Mosquito shareholders had a reasonable expectation that their proxies would be solicited by telephone, they did not reasonably expect that their proxies would be sought and votes cast at the same time. This process departed from the standard commercial practice of voting methods for shareholder meetings under securities instruments and the Securities Transfer Association of Canada Protocol. Moreover, the use of the TeleVote System was not disclosed in management’s information circular together with the other specified voting methods, including delivering a proxy by mail, hand or fax or appointing a different proxy holder by mail or through the internet.

Lack of Verification and Safeguards

While the Court noted that the use of telephone solicitation systems are a legitimate attempt to streamline shareholder proxy solicitations and the absence of guidelines does not automatically disqualify the use of such systems, it identified several problems with the use of the TeleVote System in the context of the battle for control of the board of directors of Mosquito. In particular, the Court criticized, amongst other deficiencies:

  • the acceptance of oral instructions without an immediate link to a verifiable, written confirmation;
  • the absence of a unique identifier to ensure the identity of the individual giving instructions;
  • the failure by management to make prior disclosure of the use of the TeleVote System;
  • the lack of sufficient safeguards to ensure that votes were taken in a manner that allows the shareholder to make his or her choices privately, on a fully informed basis and without undue pressure from a proxy solicitor; and
  • the imbalance between the use of the TeleVote System by the management slate where the dissident slate used the traditional proxy solicitation process.

Ultimately, the Court concluded that the use of the TeleVote System constituted oppressive and unfairly prejudicial conduct and impaired the right of shareholders to a fair and transparent voting process


In the event an incumbent slate of directors finds itself in a proxy contest, the management slate must ensure that the proxy solicitation tactics used by its proxy solicitors are fully disclosed in management’s information circular and that such tactics will produce verifiable and reliable results. The failure to ensure that sufficient safeguards exist risks invalidating the election of directors and other shareholder business at an otherwise valid shareholder meeting.

¹International Energy and Mineral Resources Investment (Hong Kong) Company Limited v. Mosquito Consolidated Gold Mines Limited, 2012 BCSC 1191

B.C. Court Rules Telephone Voting Requires Transparency and Verification

FMC Partner Ralph Shay speaks to Business News Network about policy of securities commissions in response to Jean Charest’s controversial proposal

With Quebec’s economic protectionism on the rise, leader Jean Charest has advised voters that, if re-elected, he would establish a $1-billion fund to assist Quebec companies to make foreign takeovers and would table a law allowing a board of directors to block a foreign takeover, even if shareholders support it.

According to Ralph Shay, partner and head of the Toronto Securities Group at Fraser Milner Casgrain LLP (FMC), allowing directors to evade the desire of shareholders does not align with the policy of securities commissions across Canada, as a board of directors is generally compelled to allow any takeover bid to be presented to shareholders, even if the board does not believe it is in the best interest of the company. “The securities commissions have a policy statement that says directors should not interfere with the right of shareholders to decide on a takeover bid,” he tells BNN. “The securities commissions don’t see it that way [that directors have the final say]…they feel that shareholders should have the right to decide when there is a takeover bid.”

Mr. Shay also said that this law, if it should become a reality, could negatively impact the share price of Quebec-based companies, because it would be less likely for shareholders to obtain a premium over the market price that normally comes with a takeover bid.

For more information, please read Business News Network’s article, Quebec election proposals felt across the country (August 14, 2012) or watch the broadcast interview on BNN’s Business Day (August 14, 2012).

FMC Partner Ralph Shay speaks to Business News Network about policy of securities commissions in response to Jean Charest’s controversial proposal

TSX and TMX to implement “Cancel on Disconnect” functionality

Further to its Notice of Proposed Changes of October 14, 2011, the TSX and the TMX have proposed the implementation of a “Cancel on Disconnect” functionality to allow for the automated cancellation of orders in the event of involuntary loss of connectivity between the TMX and the client site. According to the TSX and TMX, this functionality, which will be available for all gateway sessions connecting to TSX, TSXV and TMX Select, will assist traders in mitigating risks associated with having open orders exposed in their books that cannot be managed when there is an involuntary loss of connectivity.

The TSX and TMX received no comments on its October 14, 2011 proposal and have announced that they are expected to publish a notice indicating the intended implementation date of the proposed functionality.

TSX and TMX to implement “Cancel on Disconnect” functionality

OSC Approves Recognition of Alpha Trading Systems LP and Alpha Exchange Inc. as an Exchange

On December 8, 2011, the Ontario Securities Commission (the “Commission”) issued a Notice of Approval (the “Notice”) recognizing each of Alpha Trading Systems Limited Partnership (“Alpha LP”) and Alpha Exchange Inc. (“Alpha Exchange”, and together with Alpha LP, “Alpha”) as an exchange. Alpha currently operates as an alternative trading system, facilitating the trading of equity securities listed on the Toronto Stock Exchange and the TSX Venture Exchange through a transparent, continuous matching platform.

The Notice references an application by the Maple Group Acquisition Corporation (“Maple”) for recognition as an exchange in connection with its proposal to acquire TMX Group Inc. and create an integrated group of businesses that provide trading, clearing, settlement and depository services (which proposal is summarized in an earlier post). Following the proposed acquisition of TMX Group Inc., Maple intends to acquire Alpha LP and Alpha Trading Systems Inc. and maintain multiple trading platforms.

The recognition of each of Alpha LP and Alpha Exchange as an exchange is effective as at the later of February 1, 2012 and the date on which the operations of Alpha ATS Limited Partnership have been legally transferred to Alpha Exchange. The Commission will publish a notice confirming the effective date.

OSC Approves Recognition of Alpha Trading Systems LP and Alpha Exchange Inc. as an Exchange

First Nations Seek Consent for Work in James Bay Treaty Lands

Mushkegowuk Grand Council Chief Stan Louttit stated, at a Mining Ready Conference on October 26, 2011, that mining companies must go beyond consultation and obtain consent before work can proceed on the James Bay Treaty lands.

The James Bay Treaty – Treaty Number 9 was negotiated in 1905 and 1906. The Adhesions were negotiated in 1929 and 1930. The Treaty and the Adhesions were notable because they were negotiated and signed by the Province of Ontario and the Federal Government . The Treaty and the Adhesions cover those lands from the height of land – north of Thunder Bay to the Artic and from James Bay to the Manitoba border. Historically the Province of Ontario has absolutely controlled and regulated mining and forestry in this area. Subject to recent Supreme Court decisions both the federal and provincial governments are required to consult with First Nations before issuing any permits e.g. under the Mining Act for exploration and advanced activities. There have been numerous altercations and Court appearances of these matters – usually driven by the duty to consult. Another set of concerns will emerge driven by Nishnawbe Aski Nation and the Tribal Councils. Essentially the First Nations have begun to assert that the Treaty Number 9 and the Adhesions were not properly signed.

It should be expected that the First Nations will seek to ” re negotiate ” the Treaty and assert that there should be limited if any government regulation in the James Bay Treaty area and that there must be prior approval from the First Nations before provincial approvals, if any.



First Nations Seek Consent for Work in James Bay Treaty Lands

TSX Leads the World in New Listings (For Third Consecutive Year)

Yesterday the TMX Group confirmed that, as of September 30, TSX and TSXV together had more new listings in 2011 than any other exchange group in the world. To September 30, 2011, the TSX and TSXV saw 318 new listings, including 32 graduates from TSXV to TSX. This makes a “three-peat” for the TMX as they have led the world in new listings for three consecutive years.

The TMX Group ranked ahead of second place Shenzhen Stock Exchange, with 201 new listings, and Deutsche Börse at third, with 176 new listings.

We are pleased to pass along our congratulations to the TSX and TSXV and to our newly listed clients!

For the full story please see http://exchange.tmx.com/2011/11/08/leading-the-world-in-new-listings/

TSX Leads the World in New Listings (For Third Consecutive Year)