The Indian Mining Sector: Poised For Rapid Development

Tuesday, May 1, 2007 - 01:00

Editor: Would each of you gentlemen tell our readers something about your professional experience?

Rooney: I have been practicing mining and securities law since 1990. I came to Heenan Blaikie in 2004, having been attracted by its national platform, the way its various offices work together seamlessly and the international scope of its practice. The personal and professional qualities of the people already at the firm was also a major factor.

Bhattacharjee: I have been practicing competition and foreign investment law since 1995. I joined Heenan Blaikie in 1998, and, like Kevin, I was drawn to the firm by the quality of the people here.

Mehta: I joined the Indian Foreign Service in 1983 and have served in our missions in Paris, Abidjan, Rome, New York, Tel Aviv and now Toronto. I also served the United Nations in its peacekeeping operations in Haiti. Over the course of my career I have handled a variety of tasks, including economic and commercial work as well as political and disarmament work.

Toronto is Canada's business and financial center. Accordingly, my responsibilities include the promotion of trade and of the economic and investment relationship between India and Canada.

Editor: Mr. Mehta, would you tell us something about those responsibilities as they relate to India's mining sector?

Mehta: The Indian economy has grown at over six percent per year during the past 15 years, and during the past four years that growth has exceeded eight percent annually. India's rapidly growing economy and domestic market, including its manufacturing sector, require considerable natural resources. It is, therefore, imperative that India's mining sector grows speedily to support the country's industrialization. With this in view, the government is engaged in making India's mining sector attractive to investors. Canada has a very dynamic mining industry, and Toronto is the most important global center for raising resources for the mining sector. In this sense, there is a natural fit - India needs financial and technological resources and expertise to take its mining industry to the next level, and Canada possesses these things in abundance. It is among my responsibilities to bring the mining sectors of India and Canada closer for the mutual benefit of our countries.

Editor: Would you give us an overview of Heenan Blaikie's mining practice?

Rooney: The mining group has been an important focus for the firm over the last several years and it has grown from just three lawyers in 2004 to twelve currently in our offices in Toronto, Montreal, Calgary and Vancouver. Our clients include numerous Canadian companies with operations both here and abroad and a variety of foreign enterprises with listings on one of Canada's two principal exchanges, the Toronto Stock Exchange and the TSX Venture Exchange.

Editor: What types of services does the firm offer clients in this sector?

Rooney: Heenan Blaikie provides a wide range of services to its mining clients, almost all of which are public companies requiring advice on compliance with their disclosure and other securities law obligations. Corporate governance issues are also a key element in this practice. Mining companies require financing on an ongoing basis, and we are regularly engaged in debt financings, private placements and public offerings for these clients. We also have a great deal of familiarity in assisting these clients with their property acquisitions and dispositions, joint ventures, project development, licensing and permit obligations, hedging transactions, and so on.

Editor: Canadian mining industry expertise is sought across the world. How has Heenan Blaikie's experience helped it to provide advice to those looking for this expertise?

Rooney: We have been able to assist in a variety of ways. There is a general recognition that Canada, and specifically Toronto, is a leading center for the financing of mining ventures. We have been able to assist our Canadian and foreign mining clients to access the Canadian capital markets. We have also helped them with their mergers and acquisitions, both here and abroad. In serving them we are able to draw upon a wide range of disciplines across the firm, including Canadian and international tax law, competition law, governmental and native relations, mining law, corporate and securities law, litigation, intellectual property, and labor and employment law.

Bhattacharjee: In addition to what Kevin has mentioned, a particular strength of the firm is its high level experience in assisting foreign buyers of Canadian assets in dealing with Canadian foreign investment regulation. Under the Investment Canada Act, the federal government has the ability to subject acquisitions of control by non-Canadians of Canadian businesses to review, which requires a foreign investor in such circumstances to satisfy the minister responsible for administration of the legislation that the investment would be of net benefit to Canada. There are also other federal government policies and statutes which impose restrictions on foreign investment in certain sectors. These rules are of importance to Indian buyers considering the purchase of mining (or other assets) in Canada.

Editor: Speaking of foreign investment, Mr. Mehta, would you tell us about India's national mineral policy?

Mehta: India's mining policy focuses on responsible development of the mining sector by addressing the interests of all stakeholders and supporting the country's desire for rapid economic development. As an important conservation measure, the recycling of metallic scrap, including steel, copper, aluminum, zinc, lead, and so on are encouraged and facilitated. Mining operations are not ordinarily taken up in areas that have been identified as biologically rich or as ecologically fragile. No mining lease is granted to any party, private or public, without a proper mining plan - including an environmental management plan to provide for controlling the environmental damage, restoration, the planting of trees, and so on - which must be approved by the proper authorities.

Editor: I understand that Heenan Blaikie has been involved in various activities in India. Please tell us about this work as it relates to the mining sector.

Rooney: To date, most of the activity underway in the Indian mining sector has been by domestic Indian enterprises. However, the government has laid the groundwork for foreign companies to conduct mining activities in the country. There are certain limitations with respect to direct foreign ownership of enterprises involved with diamonds and other precious stones, although 100 percent foreign ownership is permitted for other mineral projects.

India recognizes three basic types of mineral tenure: reconnaisance permits are granted for the purpose of preliminary surveying and mapping; prospecting licenses are granted to explore for, locate and prove out a mineral deposit; and a mining license, which relates to the extraction and processing of specific minerals. This type of regime is common in developing countries all over the world.

Having engaged in a wide range of projects in a variety of jurisdictions all over the world, we have developed the expertise to analyze individual projects on the basis of a variety of criteria. While each project and country is different, we are able to apply this expertise and analysis for our clients wherever their projects take them.

Bhattacharjee: We were one of the first Canadian law firms to target India as an area of potential growth. Over the past three years we have assisted Indian clients to conduct business in Canada, and we have helped Canadian clients pursue opportunities in India. We have been very closely involved with a number of high-level mining delegations sponsored by the Indian government and are able to assist Canadian clients looking to invest in the Indian mining sector.

Editor: Would you share with us some of the issues that have arisen in connection with the firm's work in India?

Bhattacharjee: A common law legal system, sophisticated management capabilities and the widespread use of English in business are clearly positive factors for the foreign investor in India. Nevertheless, as in many emerging economies there are issues that can be challenging, including legislative and political risks. These are realities that face not just foreign companies doing business in India, but also Indian businesses - and so our clients must address these risks in the same way as Indian businesses do, where feasible.

Editor: Major mining projects call for a rather sophisticated legal structure. Are the right laws on the books in India?

Bhattacharjee: That is a difficult question for a non-Indian lawyer to answer. It is fair to say that the overall structure of the court system and the legal profession are of a high standard in comparison to many other emerging markets that Canadian and North American clients might be considering. I think the proper question is not whether the right laws are on the books so much as whether the system, as a practical matter, is able to deal with the kinds of commercial disputes that arise in day-to-day operations. For example, many foreign investors continue to rely on arbitration under the laws of England or the U.S. for this purpose.

Editor: Mr. Mehta, in early March the Consulate sponsored a series of presentations at the 2007 convention of the Canadian Prospectors and Developers Association. What is the strategy here?

Mehta: In our quest to modernize the Indian mining sector through the infusion of new technologies, managerial expertise and capital, Indian companies engaged in mining, as well as the ministry concerned with the sector, had participated at the PDAC in 2006. This was followed by a visit in November 2006 to engage with the Canadian mining sector and to do preparatory work for our participation at the 2007 PDAC. At the latter, for the first time, we hosted a one-day session called 'India Day' at which presentations were made on various aspects of the mining sector in India, including business opportunities. This event also provided a platform for the 40-member Indian delegation, which included prominent private and public sector mining companies and senior government representatives, to interact with their Canadian peers on a variety of subjects, including mining technologies, financing, prospecting, and so on. It was a very successful undertaking.

As to the strategy, geologists suggest that India has immense mineral resources. Their full potential has not been explored, however. The Indian government is committed to developing the country's mining sector, through foreign partnerships and the participation of foreign investors, and to realizing that potential. Canada is among the most important countries in the world in the mining sector, and its expertise in prospecting, developing, extracting, transforming and financing are without parallel. We seek to learn from the Canadian experience.

Editor: What about the future?

Bhattacharjee: India has enormous potential, and we very much hope that as liberalization continues, it will facilitate the participation of Canadian and international mining companies in the Indian mining sector. We are also very hopeful that the interest of Indian enterprises in targeting Canadian and North American mining properties for investment will continue to grow. Our goal is to be a party of this exciting story as it develops further.

Please email the interviewees at sbhattach@heenan.ca, krooney@heenan.ca or congen@cgitoronto.ca with questions about this interview.