Stewart McKelvey

Vol 3 Issue 1 Spring 2013

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considerations which include, among others, the cyclical fluctuations in commodity prices, development risks, length of project development and potential of capital overruns. At this stage, legal considerations regarding rights to extract commodities, terms of licences, applicable fiscal regimes (taxes, fees and royalties), environmental, health and safety considerations and first nation���s rights are paramount. While exploration financing is primarily through issuance of equity, development stage financing may be comprised of a mix of common equity, convertible debt and project finance. However, throughout both the exploration and development stages, entities may enter into strategic partnerships which can serve the purpose of financing and advancing projects, where the entity itself does not have the necessary funds or expertise. These strategic partnerships can take place at the project level or at the parent company level and can involve acquisition of a minority or majority ownership in a project at the outset or on achievement of certain milestones. As entities move into the late development stage and towards operations, project finance and corporate level debt become financing options. Project finance typically involves raising limited recourse debt at the project or asset level and this debt is generally serviced by the cash flows generated by the project. The security taken by a lender to secure the project finance debt is generally limited to the project���s assets, accounts and contracts. An entity���s ability to obtain corporate level debt will depend upon the assets and cash flows of the entire entity and will be driven by the parent company���s audited financials and overall cash flows and reserves. Unless the corporate debt is non-investment grade, it is usually unsecured and the parent company provides pledges and covenants with respect to its ongoing operations. As an entity���s primary projects move through the project lifecycle, its capital and debt structure will also evolve and it will gain a greater ability to manage its balance sheet to allow for the most advantageous capital funding. Throughout the project lifecycle and as entities take advantage of the available types of financing, the legal considerations, diligence and documentation put in place will vary substantially. Lydia Bugden, partner Halifax, N.S. 902.420.3372 lbugden@stewartmckelvey.com Colm St. Roch Seviour, partner St. John���s, N.L. 709.570.8847 cseviour@stewartmckelvey.com Tauna Staniland, associate St. John���s, N.L. 709.570.8842 tstaniland@stewartmckelvey.com Stewart McKelvey proudly celebrates over twenty years of innovative leadership as Atlantic Canada���s ���rst and largest regional law ���rm. With a distinguished heritage reaching back to Canada���s confederation, our law ���rm has established an international reputation for generating results. More than 220 lawyers and over 300 staff in our six locations have a single objective: the best results for our clients. Charlottetown, P.E.I. 65 Grafton St., P.O. Box 2140 Charlottetown, PE C1A 1K8 Phone: 902.892.2485 Fax: 902.566.5283 charlottetown@stewartmckelvey.com Moncton, N.B. Suite 601, Blue Cross Centre, 644 Main St. P.O. Box 28051, Moncton, NB E1C 1E2 Phone: 506.853.1970 Fax: 506.858.8454 moncton@stewartmckelvey.com Fredericton, N.B. Suite 600, Frederick Square, 77 Westmorland St. P.O. Box 730 Fredericton, NB E3B 6Z3 Phone: 506.458.1970 Fax: 506.444.8974 fredericton@stewartmckelvey.com Saint John, N.B. Suite 1000, Brunswick House, P.O. Box 7289, Postal Station A 44 Chipman Hill, Saint John, NB E2L 2A9 Phone: 506.632.1970 Fax: 506.652.1989 saint-john@stewartmckelvey.com Halifax, N.S. Suite 900, Purdy���s Wharf Tower One 1959 Upper Water St., P.O. Box 997, Halifax, NS B3J 3N2 Phone: 902.420.3200 Fax: 902.420.1417 halifax@stewartmckelvey.com St. John���s, N.L. Suite 1100, Cabot Place, 100 New Gower St. P.O. Box 5038, St. John���s, NL A1C 6K3 Phone: 709.722.4270 Fax: 709.722.4565 st-johns@stewartmckelvey.com

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