Canadian miners could face depressed stock prices and trouble accessing markets for fundraising if Parliament passes a private member's bill that would create a review system for miners working abroad.
The result could be some miners looking to move abroad, setting back Canada's status as one of the great global mining centres, according to analysts at CIBC World Markets.
With the bill, designated C-300, set for a final vote in the House of Commons Wednesday, analysts at CIBC delved into its implications and came up with conclusions that mirror those of many in the mining industry. The bill, sponsored by Liberal MP John McKay (Scarborough-Guildwood) is designed to allow Canadian ministers to regulate oil and gas and mining companies that are working abroad, to ensure that they are held to high standards for environmental practices and human rights protection.
"While the principles are noble, the mechanism for administration is flawed with multiple inadequacies that are not workable," the analysts said. "We believe that if passed, Bill C-300 will have damaging effects to all stakeholders in the resources industry and Canadians as a whole. The impacts will be primarily financial but reputational risk is also high."
As a result, companies will have to consider moving if the bill becomes law.
"We believe the remedies to Bill C-300 for companies in the extractive industries are simple - relocate to any other jurisdiction in the world."
The mining industry has fought the law, but been thus far unable to stop it.
The penalties are quite harsh. Companies found in violation of the law would lose access to Canadian government sponsorship, and government-backed funding through the Export Development Corp. The bill also seeks to bar the Canada Pension Plan Investment Board from investing in companies found in breach of the provision, but it's not clear that the government has the right to order that, given the way CPPIB is set up as an arm's length organization. (CPPIB has been working hard to make that point.)
CIBC said that the implications for mining companies could be much wider than just lost government backing "as companies receiving complaints from anywhere in the world are likely to be painted with a wide 'taint' brush regardless of the outcome from an investigation. Being named may be damaging enough to cause the company's project to suffer from capital markets funding difficulties, in which case even exonerated firms may see their project plans wither. For these reasons, and other deficiencies in Bill C-300, we believe the proposal should be withdrawn."
The analysts said one of the big flaws is the fact that there is a low bar for complaints, and there are no penalties to deter false complaints.
Such concerns are likely to hang over the shares of Canadian miners that work abroad -- which is most of them.
"Market uncertainty leading to escalated financial difficulties for all stakeholders. Indeed market uncertainty is almost always followed by lower public company valuations - perhaps an unintended consequence."Report Typo/Error