TORONTO (miningweekly.com) – Canadian Prime Minister Stephen Harper on Wednesday announced that the federal government would establish new mandatory reporting standards for Canadian companies in the extractive sector to enhance transparency on the payments they make to governments.

On the eve of the yearly Lough Erne summit of the Group of Eight (G8) – the world's wealthiest countries – held in London this year, Harper said the new reporting regime would be established with a view to improve transparency; ensure Canada’s framework is consistent with existing international standards and aligned with that of other G8 countries; ensure a level playing field for companies operating domestically and abroad; enhance investment certainty; help reinforce the integrity of Canadian extractive companies; and help to ensure that citizens in resource-rich countries around the world are better informed and benefit from the natural resources in their country.

Over the coming months, the Canadian government would consult closely with provincial and territorial counterparts, First Nations and Aboriginal groups, industry and civil society organisations on how to establish the most effective regime.

Harper said it was expected that the new reporting regime would seek to enhance transparency and accountability regarding material payments by extractive companies, including taxes, licence fees and other receipts, to all levels of governments domestically and internationally.

The mandatory reporting initiative was in keeping with the UK’s priority of transparency put forward at the G8 Lough Erne summit.

Both the Mining Association of Canada (MAC) and the Prospectors and Developers Association of Canada (PDAC) were optimistic about the announcements, saying they applauded the initiative and looked forward to working with government to work out the finer details.

The private sector had indeed already started developing a draft framework in this regard, when the MAC, the PDAC and two nongovernmental organisations – Publish What You Pay-Canada and the Revenue Watch Institute – last year signed a memorandum of understanding to develop a framework for reporting payments to governments by the mining sector.

The Resource Revenue Transparency Working Group, comprised of the four organisations, had developed a draft framework, to be published “in the coming days”, which could assist the government in its efforts to implement a reporting system in Canada.

"Canada's mining industry is fully committed to the principles of transparency, with several MAC members already reporting payments to governments on a voluntary basis, or will do so to meet new US reporting requirements. We are committed to working with the government of Canada to develop a similar framework for Canada," MAC president and CEO Pierre Gratton said.

US-listed oil, gas and mining companies would be required to reveal payments they make to foreign governments, including those for drilling or exploration licences, under rules adopted by US regulators in August 2012, that would try to reduce bribery and corruption risks. Companies would be required to report the resource payments information for fiscal years that end after September 30, 2013.

"Canada has a unique opportunity to help contribute to a consistent, effective and nonduplicative international reporting standard that will help resource-rich countries optimise benefits from mining and avoid government corruption and misuse of resource revenues. Canada's mining industry is happy to contribute to these efforts," Gratton added.

The PDAC said Harper’s announcement confirmed government’s support for a “made-in-Canada” framework.

"We believe our efforts on transparency provided the groundwork for the Prime Minister’s announcement today. PDAC now looks forward to building on the success of its activities through collaboration with the government of Canada to establish new mandatory reporting standards,” PDAC executive director Ross Gallinger said.

“Transparency is a necessary tool for fostering greater accountability and helping to ensure that the benefits of natural resource development reach the more than one-billion people living in resource-rich countries. Mandatory reporting rules aim to provide citizens with the information they need to hold their governments to account for the use of natural resource revenues, which are often a critical source of income for developing countries.

“Crucial for the Canadian mining industry, detailed reporting also highlights the financial contributions of companies engaged in mineral resource development, improving trust between companies, governments and citizens, and aids fuller investor analysis of project risks,” Gallinger said.

Canada is a key market and hub for mining industry investments and the international reach of Canadian companies is significant.

About 60% of the world’s mining companies were registered in Canada and more than 1 000 Canadian exploration companies were active in 100 countries – most of which had their only public listing in Canada. Canadian stock exchanges, the TSX and the TSX-V, in particular, hosted the lion’s share of the total global value of mining sector market capitalisation and mining equity capital raised,” the PDAC said.

The next steps would require aligning the mandatory reporting regime in Canada with other jurisdictions to avoid creating additional reporting burdens on the sector. About 100 major Canadian companies were already covered by mandatory disclosure requirements in the US, Europe and other jurisdictions, while other companies participated in voluntary reporting initiatives, such as the Extractive Industries Transparency Initiative.