The search for cleaner energy has thrust uranium mining into the limelight in the last two years. In-house counsel working in this high-growth area say the business of uranium is fraught with regulation hurdles and increased scrutiny.
In Canada’s hot mining sector, nothing is hotter than uranium right now. Global warming and the quest for cleaner energy sources have ignited an explosion in demand for the nuclear fuel, which has increased 10-fold in value over the past three years.
This, in turn, has precipitated a chain-reaction of economic activity, with almost daily reports of new explorations, mine developments, acquisitions, and mergers.
And Canada — the world’s largest producer of uranium and a global leader in corporate financing for the mining sector — is at the epicentre of it all.
These are exciting times for in-house lawyers working in the industry. But they are also facing exceptional pressures and challenges, as small — often one-person — legal departments struggle to stay on top of the escalating demands of regulatory compliance, risk-management, and securities reporting associated with mining developments in far-flung communities all over the world.
“Managing growth and what comes with it is the principle challenge we face,” says John Sibley, executive vice president, general counsel and secretary at Toronto-based sxr Uranium One Inc.
Sibley is the only Canada-based in-house counsel for a company that has grown from $50 million in market capitalization two years ago to $8 billion today. The company, which has mining operations in several different countries, also has in-house counsel in South Africa and Kazakhstan.
Nevertheless, he says, the legal department has an overdue requirement for more staff to handle the organization’s rapid growth: “We reached that point quite some time ago, and we will be hiring more bodies.”
It’s a problem endemic in the mining sector as a whole and particularly acute in the burgeoning uranium industry, according to Mark Bennett, a partner with Cassels Brock & Blackwell LLP and co-chair of the Toronto law firm’s mining group.
He says in-house legal departments tend not to grow beyond one or two people, except in the largest mining companies, and, since they are not thought of as revenue-producing departments, their growth invariably lags behind the growth of other parts of company.
“It could mean that they have a very daunting workload to manage,” says Bennett, noting that the in-house lawyers must deal with all the growth-related issues associated with financing and mergers and acquisitions, while at the same time dealing with an increasingly onerous corporate governance regime and stick-handling regulatory compliance issues in connection with a growing number of mining and exploration operations.
“Uranium has a higher degree of regulation, scrutiny, and sensitivity,” says Sibley. “Mining everywhere is dealing with increased attention, but uranium is a special case.”
Sean Quinn, vice president law and general counsel at Saskatoon-based Cameco Corporation, the world’s largest uranium producer, says getting regulatory approval for new mines in a timely manner is currently the most important task and challenge for his legal department.
“We’re looking to shorten the cycle to win approval to get new mines into production. The regulatory process is not too friendly to that now. It’s been a long time since anybody brought a new mine into production,” he says, noting that the nuclear industry has been “in the doldrums” for much of the past 20 years, thus historically generating only a moderate demand for uranium.
Getting regulatory approval for new mining and exploration ventures is closely linked with the need to win the support of aboriginal communities and the regulators’ duty to consult with them, Quinn says.
“Making sure that we can keep the regulators happy and get the necessary environmental approval, in my mind,
requires having the support of the community across the board.”
Tammy Van Lambalgen, general counsel at the Saskatoon-based uranium mining and exploration company AREVA Resources Canada Inc., says she is grappling with similar issues.
The goal is to make the process for getting approvals more efficient, with more efficient processes within the company as well as in the regulatory process, she says, stressing that she is not seeking to minimize her company’s obligations.
“We want regulatory oversight. It gives us a part of our social license and it’s the law of the land,” she says. “I want full compliance, but I want efficiencies wherever possible, and sometimes that’s internal and sometimes at the regulatory level. And, with the tight resource constraints, it’s in everyone’s best interests.”
Quinn, who has several in-house lawyers in his department, says much of the legal work done at Cameco is best handled in-house, because it is highly specialized and industry-specific.
For example, the company’s customers are limited to about 200 nuclear facilities around the world and the uranium is sold under long-term, highly bargained agreements.
“The people in our legal department who work on these agreements are head and shoulders over anybody in the private sector. It’s a core competency,” he says.
Bennett notes that securities reporting requirements — a growing challenge for in-house lawyers in public companies everywhere in every sector — is particularly specialized and onerous for mining companies that have to make disclosures about their mineral reserves.
“There’s a whole subset of public company law in terms of what companies are allowed to say and how they are allowed to say it about their mineral projects,” he says. “Legal counsel in these companies need to be expert in this.”
And it gets even more complicated, according to Sibley, when you have international operations and your stock is listed on several different exchanges.
“The more you’re listed on foreign exchanges, the more there is a need for understanding how you harmonize and where the points of friction between the regulations are. Continual education is required the more complex and the more international your operations become.”