Mining News

Historic Exemption for Canadian Uranium Mining

Posted by Cheryl Rutledge on 7/9/2015 11:25:18 AM

By Alexander Collen, Taylor Jackson and Kenneth P. Green

Canada’s Department of Natural Resources has provided a degree of relief to its faltering uranium mining sector by granting a potentially precedent-setting exemption to Australian miner Paladin. The exemption allows Paladin to retain a majority ownership of its proposed Michelin uranium mine in Newfoundland and Labrador. Paladin is only the second firm to be given exemption since the non-resident ownership policy was first put in place in 1987.

Under current federal legislation, uranium mines must be at least 51 percent Canadian-owned, with exemptions granted where the foreign miner cannot find sufficient Canadian investors. The government was satisfied that Paladin was not able to find any Canadian partners for the venture and has since granted permission for the project, located 140 kilometers north-east of Happy Valley-Goose Bay. Paladin was therefore able to retain 100 percent ownership of the Michelin project, still in its development stage.

The decision may be particularly well received in Saskatchewan, one of the world’s largest producers of uranium. Raymond James analyst David Sadowski believes that the rule has acted as a deterrent to foreign investment in the past. If the exemption is a sign of things to come, Canada’s uranium mining sector may benefit further.

David Talbot, an analyst at Dundee Securities, believes that the decision could help draw more foreign capital into existing and new projects in the area. Paladin stated that mine’s construction could create up to 750 new jobs in the area and 350 new jobs during its operation.

This news illustrates the economic benefit of relaxing restrictions on uranium mining; most pressingly to those jurisdictions that have imposed a moratorium on their uranium sectors, including British Columbia and Quebec. The bans on uranium mining may be preventing beneficial capital inflows to these regions.

In The Fraser Institute’s reports on the performance of Quebecois and British Columbian policy, respondents’ comments highlighted concerns with the moratorium on uranium mining, suggesting that it has a deterring effect on investment. The surveys go on to recommend that regional policy improvements should include a revision of the ban on uranium mining.

The news also brings to attention an apparent misalignment between federal and regional interests. Saskatchewan’s seeming willingness to attract investment into its uranium deposits is at odds with the federal government’s decision to limit foreign ownership. Inconsistencies such as these not only potentially act as barriers to investment; they may also dissuade investors by creating uncertainty.

The Fraser Institute’s Annual Survey of Mining Companies in 2014 shows that in Saskatchewan, 19 percent of respondents were mildly deterred by regulatory duplication and inconsistencies whilst two percent were strongly deterred. In Newfoundland and Labrador, 24 percent were mildly deterred and two percent were strongly deterred. On average, regulatory duplications and inconsistencies across Canadian jurisdictions presented a mild deterrent for 30 percent of respondents and a strong deterrent for nine percent.

These results suggest that Canada’s overall investment attractiveness may be slightly hampered by a lack of coordination between legislating bodies. With regards to uranium mining, the Michelin project’s positive socio-economic impact illustrates why jurisdictions such as Quebec and British Columbia should perhaps reconsider moratoriums, as recommended by the Fraser Institute’s reports on their respective policy performances.

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