URANIUM LEASES INSTRUMENTS VS. TYPICAL MINERAL LEASES: COMPARATIVE OVERVIEW OF SIMILARITIES AND KEY DIFFERENCES URANIUM LEASES, LICENSES AND PERMITTING IN CANADA

• Jurisdiction: United States

Uranium Exploration and Development
(Apr 2006)
CHAPTER 9B
URANIUM LEASES INSTRUMENTS VS. TYPICAL MINERAL LEASES: COMPARATIVE OVERVIEW OF SIMILARITIES AND KEY DIFFERENCES URANIUM LEASES, LICENSES AND PERMITTING IN CANADA
Michael J. Bourassa
Christopher A. Sullivan
Richard Butler
Fasken Martineau DuMoulin LLP
Toronto, Ontario, Canada

MICHAEL BOURASSA

Michael Bourassa is a Partner and coordinator of the Global Mining Group at the law firm of Fasken Martineau DuMoulin LLP in Toronto, Canada. He has expertise in mining commercial agreements (joint ventures, royalties, options) and extensive experience in Canadian and international mining due diligence issues concerning title, technical matters and environmental risk. Michael has been a guest speaker on topics such as mine closure, environmental remediation, mining legislation and mining standards. He served as Secretary of the Canadian Institute of Mines, Metallurgy and Petroleum's Mineral Valuation Committee and is a director of the Prospectors and Developers Association of Canada, the Chair of the Natural Resources and Energy Law section of the Ontario Bar Association and the President of the World Mines Ministries Forum. Michael was named in the 2005 and 2006 editions of the International Who's Who of Mining Lawyers which also named Faskens as the number one firm in the world for mining legal expertise. Michael was featured prominently in the January 2006 issue of Canadian Lawyer along with John Turner and Al Gourley in a cover story about mining.

CHRISTOPHER SULLIVAN

Christopher Sullivan is an associate in the Business Law section at the law firm of Fasken Martineau DuMoulin LLP in Toronto, Canada, and a member of the firm's Global Mining Group. Christopher practices in the areas of corporate/commercial, securities and mining law. Christopher is an active member of the Prospectors & Developers Association of Canada, Canadian Institute of Mining and Metallurgy, and the Natural Resources section of the Canadian Bar Association. He has authored or contributed to various mining-related articles in publications such as the CIM Bulletin and Lexpert.

RICHARD BUTLER

Richard Butler is a student-at-law at the law firm of Fasken Martineau DuMoulin LLP in Toronto, Canada. Prior to entering law, Richard obtained a B.Sc. in Environmental Science and a M.Sc. in Geomorphology from Queen's University, Ontario. Richard was a consultant in the Ontario and United Kingdom offices of Land Use Research Associates (LURA), a land-use and environmental consulting firm which specializes in public sector mediation and facilitation, communications and whose clients include all levels of Canadian government, trade associations, businesses and First Nations.

TABLE OF CONTENTS

1. Introduction

2. Canadian Constitution and Jurisdiction

2.1 Federal Jurisdiction Over Uranium

(a) Canadian Nuclear Safety Commission Act

(b) Mine Ownership Restriction

(c) Uranium Export Regulation

2.2 Provincial Jurisdiction Over Natural Resources

3. Canadian Mineral Tenure Rules for Exploration and Development

3.1 Crown Lands

3.2 Pre-Production Stage

4. Production Leases and Licences

4.1 Mineral Claims and Leases

4.2 Licences

4.3 Surface Use

5. Saskatchewan

5.1 Industry Overview

5.2 Land Tenure

5.3 Uranium Lease Instruments in Saskatchewan

6. Northwest Territories & Nunavut

6.1 Industry Overview

6.2 Land Tenure

(a) Crown Lands

(b) Inuit Owned Lands and IOL surface/subsurface lands

7. Canadian Securities Legislation - Relevant Regulatory Filings

8. Conclusions

Appendix A - Exploration and Deposit Appraisal Expenditures

Appendix B - Federal Licence Application Requirements for Site Preparation and Uranium Mine Construction

Appendix C - Guide to Acquiring Mineral Rights in Saskatchewan

Appendix D - Process to Obtain a Mineral Surface Lease in Saskatchewan

1. Introduction

Canada leads the World in uranium production, international investment and the raising of equity finance in the mining sector.

Canada is the world's largest uranium producer, responsible for approximately 30% of the world's total uranium production. In 2005, Canada produced approximately 12 600 tonnes of U₃O₈ at a value of $1.028 billion, up 65.4% from 2004.¹

With the depletion of secondary sources of uranium such as the drawdown of excess inventories and uranium from the decommissioning of nuclear weapons, re-enriched depleted uranium tails, and reprocessed reactor fuel, coupled with an expected increase in demand for uranium, primary production of uranium from countries such as Canada will supply an increased proportion of total worldwide uranium production.

Not only is Canada a leading site for uranium production, it is also a significant recipient of exploration investment.² For example, junior companies and prospectors recorded $10,727,000 in exploration expenditure on uranium alone in 2004. Senior companies topped that amount with $33,104,000 for a combined total of $43,831,000. There is a growth trend in this area, as the total uranium exploration expenditure in Canada has increased approximately 46% since 2002.³

Canada is also a major source of capital for this investment. In 2005 and the first two months of 2006, approximately $824 million of equity capital was raised by uranium companies

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on the Toronto Stock Exchange ("TSX") and the Toronto Venture Exchange ("TSX-V").⁴ Further, more capital was raised by mining companies overall on the TSX and TSX-V than any other exchange in the world.⁵

In Canada, uranium is highly regulated as compared with other minerals. Regulation of uranium exploration and mining occurs at both the federal and provincial levels. This division of powers will be explained further, as will the relationship between industry and these two levels of government with respect to regulation and reporting requirements, and surface and mineral leases.

Canada's uranium deposits are mainly situated around the Athabasca River Basin in the Province of Saskatchewan, with promising exploration also being conducted in the Northwest Territories and Nunavut Territory. As Saskatchewan is the dominant provincial jurisdiction in regards to uranium exploration and production, its legislation and lease requirements will be examined in the greatest detail. Formed in 1999 from the reorganization of the Northwest Territories, Nunavut Territory is a relatively new jurisdiction and is currently developing its natural resource regulatory legislation. The territorial government is expected to follow Saskatchewan as a model for the development of its regulatory framework for uranium.

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In Canada, surface rights and mineral rights previously came with the grant of land from the government (both Federal and Provincial Governments are referred to as the "Crown") until some time in the early 1900s, depending on the jurisdiction. Since then, mineral rights have been Crown-owned and cannot be purchased, but only leased, by individuals or companies. As a result, the mineral rights on more than 90% of Canada's land are currently owned by the Crown. Where mineral rights are privately owned, they can be sold independently of surface rights, so that surface and mineral rights on the same property can be held by different owners

2. The Canadian Constitution and Jurisdiction

Canada is a federation of ten provinces and three territories. This means that the authority to enact laws is divided between the Parliament of Canada ("Federal Government") and the Provincial Legislatures ("Provincial Governments"). The Federal Government can make laws for the whole of Canada in respect of matters assigned to it by the Canadian Constitution, such as foreign trade and national security.⁶ As well, the Federal Government has a legislative role for the three territories.⁷ Provincial Governments, likewise, can make laws relative to the subject matters over which they have been assigned jurisdiction.

2.1 Federal Jurisdiction Over the Uranium Industry

The Canadian Constitution provides the Federal Government with control over certain matters of a general or `national' interest to the country.⁸ Under this residual power, the Federal Government has been given regulatory control over all aspects of the nuclear industry in Canada, including the use of nuclear energy and materials.⁹

(a) Canadian Nuclear Safety and Control Act

The Federal Government regulates the Canadian uranium industry through a combination of legislation, regulations and policy announcements. The regulatory framework as it applies to

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uranium mining and milling facilities is established by the Nuclear Safety and Control Act¹⁰ ("NSCA") and its associated regulations (particularly the Uranium Mines and Mills Regulations¹¹ and the General Nuclear Safety and Control Regulations¹² ).

Through its stringent licensing processes, the Canadian Nuclear Safety Commission ("CNSC") regulates the use of nuclear energy and materials. The regulations and policy announcements apply to any uranium property or plant in Canada, which the CNSC may determine to be, or to have the capability of, producing or processing uranium for nuclear fuel application, including:¹³

• uranium mines, refineries, and conversion facilities;

• oil companies that use radioactive sources for exploration;

• nuclear power stations;

• radioactive waste management facilities; or

• hospitals and clinics that use radioisotopes in diagnosis or cancer treatment.

The NSCA grants the CNSC licensing authority for all nuclear activities in Canada, including the issuance of new licences to new mine operators, the renewal of existing mining licences, and amendments to existing licences.¹⁴ Failure to comply with licence conditions or applicable statutes and regulations may result in orders being issued which may cause operations to cease or be curtailed or may require installation of additional equipment, other remedial action...