Environmental due diligence for exploration managers

"Due diligence reviews are an essential part of mineral property acquisitions. One of the primary reasons to complete an environmental review prior to exploration property acquisition is to assess the potential environmental liability. It is critical to identify the potential reclamation costs or existing environmental liability associated with the exploration property. A review of the existing condition of the property and its history can allow prioritization of exploration targets and ease future expenditures for historic damages. IntroductionIn Canada and some other jurisdictions, the purchaser of a property is assumed to know, and is (in the absence of deceit or fraud) financially responsible for, what is purchased. A plea of ignorance, at least from the perspective of environmental liability, is not an acceptable excuse to avoid responsibility (Nelson, 1994). Therefore, if an exploration company (for the purposes of this paper, any organization conducting exploration work) purchases a property that has environmental contamination, the new owner is liable for the cost to reclaim the site to an acceptable level. The cost to reclaim the site is the environmental liability. The new owner is responsible for existing environmental liability of the property, even if the exploration company’s personnel were not aware of the problem. In simplest terms, buyers beware. Therefore, in order to protect the exploration company’s interests, the exploration manager should determine the characteristics of the property of interest prior to purchase or other involvement, and exercise due diligence.The term “due diligence” is often used in the mining industry. To ensure clarity, in this paper’s context, the author has chosen to use the following meaning: “… due diligence is used to describe a detailed data review, generally in connection with the purchase or sale of a mineral property, the approval of a large capital expenditure, or the borrowing of a large sum of money” (Smith, 1997).Directors of the exploration company are held liable for the decisions made, unless they have relied in good faith on,“…a written report of the auditor, or a report of a lawyer, accountant, engineer, appraiser, or other person whose profession lends credibility to a statement made by any such person” (OBCA, 1994)."