2.29 Mining Act. Introduction

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1 Introduction Te Department of Mines and Energy is responsible for te promotion and facilitation of te sustainable development of te Province s mineral and energy resources. Tis includes monitoring and analysing all aspects of individual mining operations, new and proposed mineral developments and te collection of all statistics on te mining industry and individual mining and quarry operations. To commence a mining or quarry project in te Province, a lease as to be obtained from te Department. After obtaining a lease, te lessee must comply wit te requirements of te Mining Act in carrying out tese operations. Te Mining Act came into force on 30 June 2000 to improve te orderly development of te Province s mineral resources. Mining Regulations, Small Scale Operations Regulations and related Guidelines ave been issued under te autority of te Mining Act. Lessees wo eld a lease prior to 30 June 2000 were required to comply wit provisions of te Mining Act by 1 January Te Mining Act includes requirements for te submission of plans by te lessee to te Minister of te Department for project development, reabilitation and closure, and te submission of an operational plan for te upcoming year and an annual report on operations for te preceding year. As defined by te Mining Act, a project may consist of activities carried out under one or more leases. Te Mining Act also includes a requirement for te lessee to provide financial assurance wic would enable te Minister to reabilitate or close out a project if te lessee fails to do so. Te Department maintains a database of information on mining leases in te Province. Figure 1 provides information on te leases and lessees at 31 Marc Te Figure sows tat tere were 85 lessees olding 173 leases. Of tese 173 leases, 66 relate to active mining or quarry operations, 5 were still in te development stage, and 102 relate to inactive operations. Auditor General of Newfoundland and Labrador 459

2 Figure 1 Department of Mines and Energy Status of Leases 31 Marc 2003 Type of Lease Active Developing Inactive Total Mining Quarry Oter (Note 1) Total Leases Total Lessees Source: Department of Mines and Energy database Note 1 - Pre-confederation grants of mineral rigts Scope and Objectives We completed our review in Marc Our review covered te period from 30 June 2000, wen te Act and Regulations came into force, to 31 Marc Our objective was to determine weter lessees are complying wit te Mining Act and Mining Regulations and in particular, weter lessees ave: submitted a development plan; submitted a reabilitation and closure plan; provided te required financial assurance; and submitted reports on mining operations for bot te upcoming and te preceding years on an annual basis. 460 Auditor General of Newfoundland and Labrador

3 Conclusions Te Department of Mines and Energy is not obtaining all of te information required under te Mining Act and Mining Regulations necessary to monitor mineral development in te Province. At 31 Marc 2003, tere were 38 lessees olding 66 active leases. Twenty-one lessees olding 31 active mining and quarry leases ave applied for designation as a small scale operation wic would exempt tem from te requirements of te Mining Act. However, as at 31 Marc 2003, te Department ad not completed its evaluation for any of te 21 lessees relating to tese 31 active leases and terefore, it ad not determined weter te lessees were required to provide te information outlined in te Mining Act and Mining Regulations. Altoug te remaining 17 lessees olding 35 active leases were required to comply wit te Mining Act and Mining Regulations, all were in violation of te Act and Regulations in tat te Department as indicated tat not all of te required information ad been obtained. As a result, te Department as not determined te potential environmental impact for all 66 active leases eld by 38 lessees in te Province and te potential liability to te Province of any future remediation and reabilitation costs. Findings and Recommendations Te Mining Act and Mining Regulations came into force on 30 June Lessees wo eld a lease prior to 30 June 2000 were required to comply wit provisions of te Mining Act and Mining Regulations by 1 January Te Department issued a letter to existing lessees on 14 September 2000 outlining te reporting and financial requirements under te new mining legislation. Te Department issued a reminder letter to lessees on 1 Marc 2001 and issued a furter reminder letter in November and December 2001 to tose lessees wo ad not submitted te required information to te Department. In addition, as provided for under te Mining Act, on 7 Marc 2002, te Minister designated tree existing employees as inspectors to carry out various inspection activities at te mining and quarry sites in addition to teir regular duties. Tese inspectors ave made initial visits to te relevant properties and te inspections, to date, ave focussed on assisting te lessees wit becoming compliant wit te reporting requirements of te Act. As indicated in Figure 1, at 31 Marc 2003, tere were 38 lessees, olding 66 active leases, wo would be required to submit te required plans, reports and financial assurance to te Department. However, under te autority of te Small Scale Operations Regulations of te Mining Act, te Minister prescribed Guidelines to designate, upon application, an operation as a small scale operation wic exempts te operator from all of te requirements of te Mining Act. Auditor General of Newfoundland and Labrador 461

4 Figure 2 As outlined in Figure 2, at 31 Marc 2003, 21 lessees olding 31 of te 66 active leases ave applied to te Minister over te last two years for designation as a small scale operation wic would exempt te operator from te requirements of te Mining Act; owever, as of 31 Marc 2003, our review indicated tat te Department of Mines and Energy, in conjunction wit te Department of Justice, is still reviewing tis area and as not designated any of te 21 lessees as conducting small scale operations relating to te 31 leases. As te 21 lessees are still waiting on approval of teir applications, tese lessees ave not submitted any plans, reports or financial assurance tat would be required under te Mining Act. Tus, our review focussed on te remaining 35 leases, as outlined in Figure 2, for wic te 17 lessees ave not applied for an exemption under te Small Scale Operations Regulations and, terefore, are required to comply wit te Mining Act and Mining Regulations. Department of Mines and Energy Status of Leases 31 Marc 2003 Type of Lease Active Exemption Application Required to be in Compliance Lessees Leases Lessees Leases Lessees Leases Mining Quarry Oter (Note 1) Total Source: Department of Mines and Energy database Note 1 - Pre-confederation grants of mineral rigts Submission of Plans and Reports Under te Mining Act, Mining Regulations and Guidelines to te Mining Act, lessees are required to submit te following information: A Development Plan wic would include a description of te project, including te anticipated time lines for completion of and duration of all stages of te project (i.e. development, operation, reabilitation and closure); a surface plan; and a description of te mining process. Tis Plan must be approved by te Minister of Mines and Energy before a lessee can commence operations. 462 Auditor General of Newfoundland and Labrador

5 A Reabilitation and Closure Plan wic would include a description of work to be carried out as outlined in te Guidelines; te detailed sceduling of and cost of all reabilitation and closure activities; and a statement of a qualified person tat te estimate of te cost of completing te work set out in te reabilitation and closure plan is reasonable. Te reabilitation and closure plan must be acceptable to te Minister. Financial Assurance, as part of a reabilitation and closure plan, in a form acceptable to te Minister, including cas; a letter of credit from an approved bank; a bond; or an annual contribution to a financial assurance fund establised for te operation. Te financial assurance is based on te estimated cost of all reabilitation and closure activities. Te estimated costs are reviewed by a qualified person wo certifies tat te costs are reasonable. An Operational Plan for te coming year wic would include an ore reserve statement; a description of te surface and underground exploration work planned for te year; a description of te progressive reabilitation work planned for te year; te volume, tonnage, and location of tailings to be discarged; and a listing, wit cost estimates and timing, of all major capital expenditures for te year. Tis plan is required to be submitted to te Minister no later tan one mont before te commencement of te operating year of te lessee. An Annual Report for te preceding year of operations wic would include actual results for te same areas covered in te Operational Plan. Tis Report is required to be submitted to te Minister no later tan two monts after te end of te operating year of te lessee. Te Department maintains a database tat records information on all leases and lessees suc as lease number, lease type (i.e. mining, quarry), duration of lease, date te lease was issued, location of site, and weter te operation is active. Te Department does not, owever, maintain any system or listing tat provides information on wat eac lessee is required to provide to te Department, wat type of information te lessee actually provided and, terefore, weter or not te lessee is in compliance wit te mining legislation. As a result, in order to determine weter te 17 lessees olding te 35 leases were in compliance wit te Mining Act and Mining Regulations, we reviewed te individual files of eac lessee. Te results of our review are outlined in Figure 3. Auditor General of Newfoundland and Labrador 463

6 Figure 3 Audit Results Submission of Information by Lessees 31 Marc 2003 Type of Lease Total Development Plan Reabilitation& Closure Plan Financial Assurance Operational Plan Annual Report Mining Quarry (Note 2) 0 Oter (Note 1) Total Lessees Total Leases Source: Department of Mines and Energy Records Note 1 - Pre-confederation grants of mineral rigts Note 2 - One lessee commenced operations witin te year and, terefore, an annual report was not due to be submitted. As Figure 3 indicates, lessees are not complying wit te requirements of te Mining Act and Mining Regulations. Te appendix to tis report provides details of wat information, as required by te Mining Act and Regulations, as been provided by eac of te 17 lessees olding 35 leases. Our review disclosed tat none of te 17 lessees were in full compliance wit te Mining Act and Regulations, as follows: Development plans ave not been submitted by 3 of te 17 lessees. Of te 14 lessees wo submitted development plans, 8 were submitted after te required transitional deadline, i.e. 1 January Te Act requires te Minister to approve development plans before a lessee can commence operations; owever, none of te plans submitted ave been approved. Reabilitation and closure plans ave not been submitted by 5 of te 17 lessees. Of te 12 lessees wo submitted reabilitation and closure plans, 5 were submitted after te required transitional deadline, i.e. 1 January Altoug te reabilitation and closure plan must be acceptable to te Minister, tere is no documentation to indicate tat te plans submitted ave been accepted. 464 Auditor General of Newfoundland and Labrador

7 Financial assurance proposals ave not been received from 10 of te 17 lessees. Of te 7 proposals received, only 2 were determined by te Department to meet te requirements of te Mining Act and Regulations. Operational plans ave not been submitted by any of te 17 lessees. Witout tese plans, te Minister can not determine wat is planned for te year, for example, in te area of planned exploration work or planned reabilitation work. Tus, tere is no basis upon wic to evaluate te actual work completed during te year and weter, for example, completed reabilitation work was progressing according to plan and to te satisfaction of te Minister. None of te 16 lessees required to submit an annual report, ave submitted te required reports. As a result, te Department does not know wat work was carried out by tese lessees during te year compared to wat was planned. Te remaining lessee commenced operations for a lease during te current year and terefore, at te end of our review, no annual report was due to be submitted. As te above information sows, te Department as not obtained te information required under te Mining Act and Regulations relating to tese 35 active leases eld by 17 lessees in te Province. Furtermore, 21 lessees olding 31 active leases ave applied for exemption under te Small Scale Operations Regulations and are still waiting on approval of teir applications. Terefore, tese lessees ave not submitted any plans, reports or financial assurance tat would be required under te Mining Act. As a result, te Department as not determined te potential environmental impact for all 66 active leases eld by 38 lessees and te potential liability to te Province of any future remediation and reabilitation costs. Recommendations Te Department sould increase its efforts to enforce compliance wit te Mining Act and te Mining Regulations by lessees. Te Department sould increase its efforts to process applications from lessees for designation as a small scale operation under te autority of te Small Scale Operations Regulations of te Mining Act. Auditor General of Newfoundland and Labrador 465

8 To assist in monitoring compliance wit te Mining Act and Mining Regulations, te Department sould maintain an information system or listing tat provides information on wat eac lessee is required to provide to te Department and wat type of information te lessee actually provided. Department s Response Te passage of te Mining Act provided te Department of Mines and Energy wit an administrative tool wic would ensure tat new and existing mining operators would develop and operate teir mining and processing operations using te best resource management practices possible. Since its introduction, te Department as worked wit industry to assist companies to become compliant wit te requirements of te Act. Tis process as taken longer tan originally envisaged due to a number of factors: te loss of key staff bot witin te Department and several firms causing delays in preparation and review of required documents, oter pressures tat arose tat required industry s immediate attention, as well as te Department s under-estimation of te time tat would be required to provide assistance, review documents and for discussion and negotiation. Tese factors ave been overcome and we expect all companies to be in compliance wit te Act before April Te Department of Mines and Energy appreciates te Auditor General s review of its administration of te Mining Act and welcomes te recommendations tat ave been advanced. Te Department as implemented all of tese recommendations and work as progressed to te point tat all applications for small scale operation exemptions ave been processed. 466 Auditor General of Newfoundland and Labrador

9 Appendix Information Submitted By Lessee As at 31 Marc 2003 Lessee # of Active Leases Development Plan Reabilitation & Closure Plan Financial Assurance Operational Plan Annual Report Mining Atlantic Minerals Limited 4 Yes Yes Yes No No BBK Quarry Limited 1 Yes Yes No No No Galen GypsumMines Limited 2 Yes Yes Yes No No Iron Ore Company of Canada 4 Yes Yes Yes No No Lafarge Gypsum Canada Inc. 2 Yes Yes Yes No No Ricmont Mines Inc. 2 Yes Yes Yes No No SabogamoMining and Exploration Limited 2 No No No No No WabusMines 5 Yes No No No No Total Mining Quarry City Sand and Gravel 1 Yes Yes Yes No No Glen Corporation 1 Yes Yes No No No J. Tuac Geological Consultant 1 Yes Yes No No Not Yet Due Modern Holdings 2 Yes Yes No No No Ray Murrin Limited 1 Yes Yes Yes No No Torngait Ujagannaivingit Corp. 1 No No No No No Traverse, Ross 1 Yes Yes No No No Total Quarry Oter (Note 1) Westside Aspalt and Concrete Inc. 4 Yes No No No No Greenslades Construction 1 No No No No No Total Oter Total Note 1 - Pre-confederation grants of mineral rigts Auditor General of Newfoundland and Labrador 467

10 468 Auditor General of Newfoundland and Labrador