The $722 million deal

Here’s the deal.

On Wednesday, May 14, an Australian gold mining company called St. Barbara Limited, with one gold mine in Australia and a second one in Papua New Guinea, agreed to pay $722 million for Atlantic Gold Corporation, which operates one open pit gold mine in Nova Scotia, has proposed three more along the Eastern Shore, and as of December 2018, held more than 13,200 claims in 200 active exploration licences in the province, a couple of them right up against the border with Kejimkujik National Park.

The Atlantic Gold board unanimously accepted the offer. Atlantic Gold’s major shareholder, Ryan Beedie, through Beedie Investments, which owns 27.7% of current issued and outstanding Common Shares, also agreed to the acquisition.

St. Barbara offered $2.90 a share, up 41.1%  from the Atlantic Gold share value before the announcement.

It is all supposed to be finalized in July 2019.

That’s the deal — in a nutshell.

But if we are to try to figure out what it means for Nova Scotia, and what — if anything — is in it for Nova Scotia, first we need to take a peek at what’s going on underneath the nutshell … or shells.

Under the nutshells

Merriam-Webster defines a shell game this way: “ …  a swindling trick in which a small ball or pea is quickly shifted from under one to another of three walnut shells or cups to fool the spectator guessing its location, is a version of one of the oldest and most widespread forms of sleight of hand.”

Don’t get me wrong; I am not suggesting there is any swindling going on. I am sure it is all completely legal and that the lawyers, shareholders, and regulators involved know exactly what is happening with the Atlantic Gold deal. It’s how the junior mining industry works: Find gold, boost share price, sell.

But honestly, trying to make head or tail of who’s who and what’s what when it comes to mining corporations, their operations, and their transactions is enough to make an ordinary tax-paying soul downright dizzy.

If it seems complicated and difficult to fathom, that’s because it is probably meant to be. Please bear with me for a bit.

First, there is the cast of characters.

Atlantic Gold by many names

Let’s start with Atlantic Gold Corporation, which is headquartered in Vancouver and trades as “AGB” on the Toronto Stock Exchange.

The company’s gold operations are limited to Nova Scotia, although one of its subsidiaries, 11193490 B.C. Ltd., has now taken out a chunk of shares in Velocity Minerals, a company exploring for gold in Bulgaria. Atlantic Gold holds these “interests” in Velocity in a company it calls SpinCo.

Since October 2017, Atlantic Gold has been operating the Touquoy open pit gold mine — the first ever in Nova Scotia’s long history of gold mining — in Moose River. It has planned three more mines at Beaver Dam, Fifteen Mile Stream, and Cochrane Hill.  (You can read about Atlantic Gold’s plans here or here.)

Atlantic Gold grew out of a company called Spur Ventures, which a 2016 technical report said “had been involved in the phosphate fertilizer business in China. Among Spur’s directors were Steven Dean (chair), Robert Atkinson (vice chair), and David Black. Dean, originally from Australia, is currently chair of the board and CEO of Atlantic Gold; Atkinson is vice chair; and Black is a lead director. The three have led or been board directors of more mining and/or investment companies than I can possibly list here, but feel free to take a look at their illustrious bios here.

In 2012, Spur turned its attention from phosphate to acquiring advanced mineral projects. In 2014, it changed its name to Atlantic Gold Corporation and did an “all share merger with Atlantic Gold NL,” which held the Touquoy gold project at Moose River, and the Cochrane Hill project near Sherbrooke. It also acquired Acadian Mining Corporation, which held the Beaver Dam project, “from LionGold Mining Canada Inc., a subsidiary of LionGold Corp Ltd, a diversified mining company of the Singapore Stock Exchange.”

But of course, people who fought tooth and nail back in 2007 to try to prevent the destruction of the village of Moose River and the government’s expropriation of their private land to make it happen, were struggling not with any of the above, but against an Australian company called DDV Gold. It was DDV Gold that applied for and was granted environmental approval for the Touquoy gold mine in 2008. And DDV was a “wholly-owned New Brunswick registered subsidiary of Atlantic Gold NL,” which was “an Australian resource company listed on the Australian Stock Exchange.” Before that, it had been called Diamond Ventures NL.

Got all that? No matter. Maybe you’re not supposed to.

The more smoke and mirrors and mergers in extractive industries, the more difficult it becomes to figure out who owns what, and who should be paying taxes where, or who should be held accountable should something go wrong.

According to Joan Kuyek, co-founder of MiningWatch Canada and the author of the forthcoming book, Unearthing justice: How to protect your community from the mining industry to be published in September this year, corporate structures and transactions in the mining industry are meant to be obfuscating, and even experienced lawyers may sometimes have to work very hard to understand them.

In the words of economic and public policy professor Paul Collier:

Corporate opacity is not inadvertent: it is the cumulative achievement of the sustained effort of some of the most brilliant professional minds on the planet. These people should hang their heads in shame. In advanced economies their actions undermine the tax base and the public spending essential for the maintenance of decent living standards.

So if all this corporate mutating makes your head hurt and your brain seize up, perhaps it’s because it’s meant to.

But back to DDV Gold. According to Atlantic Gold’s May 2019 technical report, DDV is no more; it has been replaced by Atlantic Mining NS Corp. (Although a search of the Nova Scotia Registry of Claims map shows that D.D.V. Gold still has its name on many exploration licences in the province).

Atlantic Gold Corporation (British Columbia) has now morphed into a corporate web with eight subsidiaries, two Australian and six Canadian.

BC real estate tycoon goes for Atlantic gold

Next, meet Atlantic Gold’s largest single shareholder, Ryan Beedie. Beedie has made his fortune in real estate and development in BC and Alberta. According to Press Progress, he was also a large donor to the campaign against electoral reform and proportional representation in last year’s referendum in BC.

A 2011 article in BCBusiness says Beedie — the “young gun” — is a great admirer of Ronald Reagan and Margaret Thatcher, and has a “passion for neoconservatism.” (The article also says Beedie sees a psychologist, but I’m sure his political passions are not related to that.)

In August 2018, Beedie’s subsidiary, Beedie Investments, “acquired” Atlantic Gold, buying 30,000 Common shares at $1.7337 (total $52,011), and then another 292,900 at $1.7104 (total $500,976.16).

Ten months later, in comes the next player, St. Barbara Limited, which acquires Atlantic Gold from Beedie and the other shareholders. The company’s directors and officers control 32% of the outstanding shares.

In its press release, Atlantic Gold’s chair and CEO Steven Dean said:

St Barbara’s C$2.90 cash per share offer delivers an immediate and attractive premium to our shareholders. It not only recognizes the value of our current plan for the MRC [Moose River Consolidated Project] Mine, but rewards shareholders for the future growth and exploration potential that defines MRC as a truly world class asset.

St. Barbara Limited of Melbourne, Australia, trades on the Australian Stock Exchange under SBM. The company’s website says it began in 1969 as Endeavour Oil. By the early 2000s, it was focussing on gold production in western Australia. In 2008, it opened the high-grade Gwalia gold mine in western Australia (which was originally established in 1897 by Herbert Hoover, who would one day become president of the United States).

It then acquired Allied Gold Mining Plc and its gold operations in Simberi, Papua New Guinea. (If you feel the need to know more of St. Barbara’s complex history of acquisitions and asset sales, they are outlined here.)

The Simberi mine is some 900 kilometres from Port Moresby, the capital of PNG, a country that has suffered enormously from human rights abuses and environmental damage caused by gold mining and other extractive industries, including by Canadian company Barrick Gold.

At St. Barbara’s annual general meeting in 2016, non-executive chair Tim Netscher told shareholders that the company had had an “excellent year.”

This led Papua New Guinea Mine Watch, which tracks the mining sector in PNG, to quip:

St Barbara can boast that its Simberi mine “is improving” — but what does that mean and who is reaping the benefits? Improved production levels and cash earnings are great for foreign shareholders and the Chairman’s fat annual bonus — but does that mean anything for local people, forced to look on as spectators on their own land without decent government services and a ruined environment?

To be fair, the company chair didn’t mention getting a “fat annual bonus,” but he was quite boastful in his address to shareholders:

After delivering a significant turnaround in your Company’s performance during 2015, 2016 has seen the consistent delivery of reliable and highly profitable production. We have generated record cash flow and profit, and particularly pleasingly, have achieved this with a record low number of injuries. We have applied our free cash flow to the repayment of debt, dramatically transforming the Company’s financial position in a very short time. 

In the subsequent three years, it seems St. Barbara has indeed delivered “profitable production”; in its first quarter report for 2019, the company said it was sitting on 382 million Australian dollars, or about $355 million Canadian. Just under half what it needed to buy Atlantic Gold and its gold mining properties in Canada’s ocean playground.

According to the Atlantic Gold press release, St. Barbara will find the rest of the money for the purchase by raising [if that’s what a “concurrent underwritten accelerated non-renounceable entitlement” means] or borrowing [if that’s what it means to have “secured” a new “three-year corporate facility with Westpac Banking Corporation”].

But, you may well ask, what brought St. Barbara all the way from the other side of the world to little old Nova Scotia?

St. Barbara chair Netscher offered a hint in his 2016 address to shareholders, saying:

The Company is also evaluating other sensible growth opportunities, although identifying value, particularly in Australia, is challenging. It’s a bit like looking for a sausage in a dog kennel.

It sounds like Australia may be something of a dog-eat-dog-eat-all-the-good-sausage-place for gold miners, overrun with people seeking “value” in the mining sector.

Although there is no shortage of companies searching for gold here in Nova Scotia, there is still only one operating gold mine.

 “Best-in-class” gold?

The Mining Association of Nova Scotia (MANS) — which I wrote about here and here — has declared that we are in “the middle of a gold rush” and the province’s first ever “gold show” will be held in October.

Among those slated to speak at the event is a representative from MegumaGold, which holds 11,205 claims of exploration leases covering 179,280 hectares of the province (an area about a third the size of HRM), and believes that the gold potential in the province is “an opportunity to advance Nova Scotia as a world-scale mining district.”

In addition to Atlantic Gold and MegumaGold, the gold show will feature speakers from Anaconda Mining that plans to mine in Goldboro, Northern Shield Resources that is exploring in Pictou and Antigonish counties and along the Parrsboro shore, Transition Metals working in the Cape Breton Highlands, and Osprey Gold with its focus on Goldenville on the Eastern Shore.

This onslaught of mining interests worries some Nova Scotians, and in recent years citizen groups have been forming to oppose the gold exploration and mining because of fears for the environment, and for the long-term costs to the province for the many adverse environmental effects of gold mining.

The St. Mary’s River Association has been waging its NOPE (No Open Pit Excavation) campaign to try to prevent the proposed Cochrane Hill mine near Sherbrooke, which I wrote about here.

Sustainable Northern Nova Scotia (SUNNS) is a citizens’ group that formed in 2018 to oppose gold exploration being promoted in the Cobequid highlands by the Department of Energy and Mines.

The Eastern Shore Forest Watch Association has been struggling to prevent open pit gold mining since the day DDV representatives showed up in Moose River nearly 15 years ago.

The provincial government, however, seems immune not just to the citizens’ concerns, but to anything that might tarnish its apparent love affair with gold mining.

In April, producers of the documentary film “The Shadow of Gold” sent an email to the Department of Energy and Mines (DEM), inviting the department to send someone to attend the Halifax screening of the film, “a global investigation of the gold mining industry looking at its impacts socially, environmentally, economically,” and to participate in a panel discussion afterwards.^[1]The producers invited me to moderate the panel, which I did, and in the end, panelists included Robert Lang, co-director/producer of the film; Stacey Gomez, Maritimes Coordinator of the … Continue reading

The reply from Jordan Nikoloyuk, DEM senior policy analyst, regulatory and strategic policy, began with the following talking points, which could just as easily have come from the mining industry’s main lobby group, MANS:

I’m sure you appreciate that the mining sector is important to Nova Scotia’s economy. It creates jobs in rural communities, opportunities for young people and revenue to deliver programs and services that are important to Nova Scotians. 

And:

The province and Nova Scotia’s gold miners work towards the best ethical and sustainable practices. There is a rigorous environmental assessment and permitting process before any mine can be approved here. Once up and running, companies operate under strict environmental, labour and safety regulations. Mining companies in Nova Scotia have established productive relationships with Indigenous people and communities, and the gold produced here is best-in-class. 

Leaving aside that curious description of Nova Scotia’s gold as “best-in-class,” what is remarkable in Nikoloyuk’s response is the distinct lack of interest in any issues the film might raise. And it is telling that the department was unwilling to participate in a public forum to discuss gold mining to defend its pro-mining stance, so clearly expressed in Nikoloyuk’s email. He wrote simply that the department was unable to take up the producers on their invitation.

I asked DEM spokesperson JoAnn Alberstat why the department did not provide someone to participate in the panel. She replied:

Government frequently receives invitations to participate in events, such as this.  All are considered. We respectfully declined this opportunity. 

Lately, the Department of Energy and Mines has been acting more like a cheerleader for the mining industry than it has regulator with a responsibility to protect the health of its citizens and the environment.

Atlantic Gold states that it works in “mining-friendly jurisdictions.” At the moment, the only place it is mining gold is Nova Scotia, so I think we can safely assume that gold mining companies quite like the red carpet and welcome mat that DEM and the Liberal government of Stephen McNeil have been rolling out for them.

As I wrote here and here, the government has been sending provincial bureaucrats and politicians to the world’s biggest mining shindig and schmooze-fest, the Prospectors and Developers Association of Canada (PDAC) convention held each year in Toronto. At the Nova Scotia booth, government officials and prospectors try to woo mining companies to the province, and hand out freebee Nova Scotia tartan scarfs.

DEM has also kowtowed to the mining industry by amending the Minerals Act to, in the words of former Minister of Natural Resources Lloyd Hines, “cut red tape for industry and government and make it easier and less expensive to manage exploration licences.”

So yes, the government of Nova Scotia has been very busy catering to the mining industry and spending Nova Scotians’ money to bring on the gold rush.

But what is in it for us, the citizens of this province and their descendants who will have to deal with all those toxic tailings facilities for many, many generations to come, and pay for clean-ups of any toxic spills and acid drainage from old mining sites long after the mining companies have closed up shop and moved on, with their profits?

It’s impossible to know. DEM refuses to release the reclamation plan for Atlantic Gold’s mine at Moose River, even after a freedom of information request.

What’s the acquisition deal mean for Nova Scotia?

I asked Joan Kuyek what the acquisition of Atlantic Gold means for Nova Scotia, and whether there is any benefit for the province.

“That’s a very good question,” she replied. “The Atlantic Gold guys will do very well out of this arrangement … in the junior mining game, they appear to have won.”

In an email, Jamie Kneen, communications and outreach coordinator at MiningWatch Canada, said that St. Barbara’s interest in venturing all the way to eastern Canada to mine may be:

… a testament to NS’s success in lowering the regulatory bar such that it’s as “attractive” a jurisdiction for mining investors (i.e. as lax and undemanding) as PNG [Papua New Guinea].

He added:

Obviously this is good news for Atlantic Gold shareholders, but it’s hard to see how it’s good news for Nova Scotia, or Nova Scotians. If the gold market is good, the new owners may be able to round up more money to push new mines into production, even in the face of community opposition. And if the markets are bad, they’re just as likely to fold and leave the province holding the bag for clean-up, and falling back on whatever security bond the company has posted.

So there is money to be made, but not by average Nova Scotians, who must assume the risks of environmental harm caused by leaking tailings facilities.

A handful of people in the province who held licences or mining rights in Atlantic Gold properties do stand to profit from the mines. According to Atlantic Gold’s 2019 technical report, Moose River Resources Inc. holds a 40% interest in the Touquoy mine (and Atlantic Gold holds a beneficial interest of 7.9% in Moose River Resources).

At least one Nova Scotian and a handful of extra-provincial companies are positioned — if the three new mines are approved and go into operation — to receive between 1 and 3% “net smelter royalties,” which means the royalties are based on the actual value of all gold produced in those mines.

The province, however, does not benefit from a net smelter royalty. Rather, as I wrote here:

In Nova Scotia, like most jurisdictions in Canada where the mining industry is so influential and so heavily influences policies, the government receives a 1% royalty of the “net value” received by the gold producer. This allows corporations to deduct the capital expenses of expanding mining operations and the operating costs of gold production, and pay no royalties until they declare a profit. 

In some developing countries, such as Burkina Faso in West Africa, where Nova Scotians have done a fair amount of gold mining, not only is the royalty rate considerably higher — with a sliding rate, depending on gold prices, of 3 to 5% of the value of the actual gold produced — but the government also benefits from 10% free-carried interest in the company.

Not with mining legislation made in Nova Scotia. Here the government gets no part of the action.

The acquisition comes at a time when Atlantic Gold’s so-called “string of pearls” — the four mines that make up its Moose River Consolidated Project along the Eastern Shore — has only one in operation and the other three under environmental review.

In an email, spokesperson for the Department of Environment Lisa Jarrett said that Cochrane Hill, Beaver Dam, and Fifteen Mile Stream are all undergoing joint federal-provincial environmental assessments:

Cochrane Hill has already begun the federal process with the Canadian Environmental Assessment Agency (CEAA), but that project has not yet registered for the provincial process. The same is true for the proposed open pit mine at Fifteen Mile Stream, which would overlap with the Liscomb Game Sanctuary.

The proposed gold mine at Beaver Dam is currently going through both federal and provincial environmental review processes.

Jarrett said that the Atlantic Gold will have to apply to the province to transfer the industrial approval to the new owners.

Atlantic Gold’s plans for the three additional mines involve trucking millions of tonnes of concentrated ore back to the Moose River facility for gold extraction. I asked Jarrett whether an additional environmental review would be required for the Moose River processing plant, which was approved for just the single Touquoy mine. She replied:

Any impacts or proposed changes to the Touquoy mine site will be evaluated through the environmental assessments of Fifteen Mile Stream, Beaver Dam, and Cochrane Hill. If those changes are approved through those EA [environmental assessment] processes, an amendment to the industrial approval at Touquoy may be required.

Unanswered questions

Citizens opposed to the Cochrane Hill mine project don’t know what to make of the Atlantic Gold deal. Scott Beaver, who heads the St. Mary’s River Association and the NOPE campaign, told me in an email that the deal caught him off guard, but that he wasn’t really surprised:

It’s quite clear that these companies only have deals and shareholders in mind. I can’t see there being much, if any, benefit to Nova Scotians from this acquisition. A lot of unknowns for us right now… Do investors know that there is growing opposition in Nova Scotia to the “String of Pearl” [gold mine] sites? What happens on the ground? Does the [Atlantic Gold] staff change, who we have been dealing with all along? Does the 1.5-km impact zone at the Cochrane Hill site, [from which] folks have been told they should consider moving for health risks, change now?  

…

As you can see there are a lot of unanswered questions here, and on top of all of this Atlantic Gold news, MegumaGold has added Cochrane Hill and many other sites in Nova Scotia to their list of potential gold mining sites. We are just not sure what is going on around us here in the St. Mary’s River Valley! The St. Mary’s has just received $1.2 million from the Federal Coastal Restoration Fund to help habitat and water chemistry on our river. Will a gold mine or two really work with our recovery efforts for Atlantic salmon? I guess we are just left once again scratching our heads …

Dr. Kevin Spencer, a community stakeholder and property owner on the St. Mary’s River, just downstream from the proposed mine at Cochrane Hill, sent me his questions and concerns about the acquisition deal:

I wonder how this valuation of Atlantic Gold captures projects like Cochrane Hill — projects that they have proposed, but that are not yet environmentally approved. Atlantic Gold also promotes the use of “mining friendly jurisdictions”; does St Barbara know there is significant controversy, with community stakeholders and community groups in passionate opposition to this operation?

Is the acquisition price based on the output from its current operations, or is it based on the prospect of expansion to other sites, such as Cochrane Hill?^[2]I sent this question, along with two others, to Dustin O’Leary, Atlantic Gold’s communications manager. He replied, “Thank you for your inquiry.  At this point, Atlantic Gold has elected not … Continue reading

If the valuation is based on the prospect of expansion, the community would like to understand what resources of ours are being “sold” to St. Barbara and what the extent of toxic waste is to be left behind, so that we can better understand what it is they have in mind for us. 

I can’t help but feel this profit-driven transaction by outsider big-businesses squanders our natural environment while we as community members are forced to sit on the sidelines of our own natural resources, uninformed and largely unaware of the boardroom-decided fate we will be forced to live with.

Spencer continued:

In addition to future EA [environmental assessment] concerns, there is already arsenic effluent in Moose River [Touquoy mine] wastewater that needs attention, and despite advertising operating in “mining-friendly jurisdictions,” there are many community members are completely opposed to this operation. 

Do the shareholders of St Barbara know what they are getting into here?  Does our community? 

To that, I would add, does our government?