Canada's mining industry is developing a plan for mandatory reporting of all resource company payments to government – both foreign and domestic – arguing that greater transparency is both a boon to investors and critical in gaining broader social acceptance for global resource industries.
The country's two largest mining groups – the Mining Association of Canada and the Prospectors and Developers Association of Canada – have signed an agreement with two advocacy groups to develop a proposal for mandatory reporting rules that they hope will either be legislated or adopted by securities commissions across the country.
Junior miners, in particular, could find it challenging to comply with the new regulations, PDAC executive director Ross Gallinger said Wednesday. But the industry contends that the benefits of being transparent in their operations outweigh potential risks, he said.
The joint effort comes as the U.S. Securities and Exchange Commission is implementing regulations – mandated under Dodd-Frank Act – to require all resource companies listed on American stock exchanges to annually report all payments to governments on a project-by-project basis.
U.S.-based oil companies staunchly opposed the SEC rules, and the Canadian oil industry has taken a wait-and-see attitude toward the miners' effort to fashion domestic regulations that would complement the U.S. move.
"The goal of the framework is to provide citizens of resource-rich countries with the tools they need to achieve accountable, responsible, and sound management of their natural resources," Pierre Gratton, chief executive officer of the mining association, said in an interview. It would also provide investors with a more complete picture of companies' operations and investment plans.
Mr. Gratton said mandatory reporting rules would build on voluntary efforts that the industry has undertaken in the Extractive Industries Transparency Initiative, and reflects a global trend toward a regulated approach. He said it is particularly important that Canada adopt such regulations, since the Toronto Stock Exchange and TSX Venture exchanges are home to so many the world's publicly listed mining companies. In the past five years, 83 per cent of the 11,000 public financings in the global mining industries were done on the TSX exchanges.
The regulations would cover not only major producing companies but also junior miners listed in Canada that often have exploration properties in places like Africa, South America and Southeast Asia.
"We want to demonstrate that the money being spent is being spent in the area or in the country," Mr. Gallinger said. "This is one step to help the junior sector demonstrate that kind of payment aspect, project by project or country by country."
He said the industry will attempt to forge rules that don't impede Canadian-listed companies that may be competing against rivals who aren't covered by similar regulations.
The associations are working with Publish What You Pay Canada and Revenue Watch Institute to develop the proposed rules, and say they have had quiet encouragement from federal government officials.
"Our hope is that we will mimic or exceed the type of regulations we see under Dodd-Frank," said Claire Woodside, director of Publish What You Pay Canada.
The resource industry has faced criticism around the world, accused of fuelling corruption, despoiling the environment and undermining human rights, especially with indigenous populations. But Ms. Woodside said she is confident the transparency initiative amounts to more than a public relations exercise.