"The big guys are back in Québec for exploration and have signed agreements to spend tens of millions of dollars on exploration projects."

René Branchaud (RB) and Josianne Beaudry (JB)

PARTNERS, LAVERY

June 21, 2024

Can you highlight some recent mining deals in which Lavery was involved? 

RB: Lavery was involved in one of the largest deals of the year in 2023: The transaction between Osisko Mining and Gold Fields for the Windfall project. We also acted as counsel in the acquisition by Abcourt of Pershimex Resources. We have helped Australian companies establish a presence in Québec and acquire mining claims for the exploration of lithium. We did option agreements between Midland Exploration and Barrick for the exploration of gold, and with BHP for the exploration of nickel. The big guys are back in Québec for exploration and have signed agreements to spend tens of millions of dollars on exploration projects.

JB: We see more and more work coming from royalties companies and have been involved in deals where we must review portfolios of royalties or help companies review or sell the latter. We are acting on behalf of different mining companies that are interested in being more present in Québec. They are purchasing portfolios from institutional investors or developers like SOQUEM. 

How will recent mineral tax credits and regulations impact exploration work? 

JB: All these mineral tax credits are helping to finance exploration activities, so those tax credits are key to helping firms attract the necessary funding to carry on their exploration work. 

On the other hand, the new regulation on impact-causing-work came into force at the beginning of May. If companies did not have their authorization in May, they had to stop their exploration activities if their work qualified as “impact-causing work”. It takes 35-50 days to get such an authorization, so this is not incentivizing exploration work in Québec. However, if we want to develop a new mine in Québec, we need to take into consideration social and environmental acceptability.

Which commodities represent the strongest opportunities according to Lavery? 

RB: In the gold segment, the record prices seen in the past months will likely be sustained. Abcourt will reopen the Sleeping Giant mine, Osisko continues the development of the Windfall project with Gold Fields, and Midland and Barrick are spending millions near Rouyn-Noranda to find gold, so we believe it should be a good year for those involved in this sector. The price of lithium is lower, but there seems to be a consolidation wave going on. Midland signed a significant agreement with BHP for nickel-copper-cobalt in Nunavik, and they will spend millions there to continue exploration work.

How do you anticipate the M&A scene to shape up in the coming months? 

RB: We are starting to see consolidation in the lithium sector, we have conversations with several players looking to acquire properties or companies. Several M&A deals are in discussion in the gold space, particularly for firms looking to also do the treatment of minerals.

JB: We are seeing an increase in partnerships among different companies. Winsome announced that they intended to purchase the Stornoway installation, where they could develop their own project and treat the minerals of other companies in the area. Those alliances will help develop the industry in Québec. 

What are the challenges and opportunities ahead for the mining industry? 

JB: The 2023 Fraser Institute report was just published, and Québec is back in force, ranking 5th. What will be challenging will be the availability of the workforce, the social and environmental acceptability of projects, and the financing environment. 

RB: The share price of certain exploration companies also presents a challenge. It is difficult to finance them, because of the dilution suffered. Several stocks are trending below CA$0.10, so companies may have to consolidate to help with financing. 

How are Australian firms received by the local investment community? 

RB: Australians are welcome in Québec. We need additional investment and capabilities in the province. 

What are Lavery’s key priorities to keep growing in the mining space? 

JB: We have close relationships with institutional investors who are involved in the mining industry in Québec, such as Investissement Québec, SOQUEM, and the CDQP. We are closely involved in the different consulting committees of the exchange and the regulators in Québec, as well as the AEMQ, so we believe that through this involvement we can better assist our clients with their legal requirements. 

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