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:
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