COURT FILE NO.: CV-21-00663900-00CL DATE: 20230707

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

KINROSS GOLD CORPORATION, ROUND MOUNTAIN GOLD CORPORATION, and KG MINING (BALD MOUNTAIN) INC. Plaintiffs – and – CYANCO COMPANY, LLC Defendant

Counsel: James D.G. Douglas, R. Bevan Brooksbank and Mani Kakkar, for the Plaintiffs Daniel S. Murdoch, Sam Dukesz and Gavin Inkster, for the Defendant

HEARD: December 5, 6, 7, 8, 9, 12, 13, 14, 2022 and January 27, 2023.

CAVANAGH J.

REASONS FOR JUDGMENT

INTRODUCTION

[1] Kinross Gold Corporation (“Kinross”) is a publicly traded global gold mining corporation with its head office in Toronto, Ontario. Round Mountain Gold Corporation (“Round Mountain”) and KG Mining (Bald Mountain) Inc. (“Bald Mountain”) are Delaware companies and subsidiaries of Kinross. They are the Kinross operating companies for the Round Mountain Gold Mine and Bald Mountain Gold Mine, respectively, each located in Nevada USA (the “Mines”). For convenience, I sometimes refer to Kinross and the Buyers, together, as “Kinross”.

[2] Cyanco Company, LLC (“Cyanco”) is a producer and supplier of sodium cyanide to the gold and silver mining industries. Cyanco is a subsidiary of Cyanco Corporation which owns a group of companies that are North American producers and suppliers of cyanide and mineral extraction products for mining operations.

[3] Kinross (as Contract Administrator) and Round Mountain and Bald Mountain (as Buyers) entered into a written agreement dated June 13, 2017 with Cyanco (as Seller) for the sale by Cyanco to the Buyers of “Products” to be supplied for use at the Mines (liquid sodium cyanide meeting certain stated specifications). The contract term was for the “Life of Mine” of the applicable mine operated by each Buyer. The agreement is titled “Contract for Purchase and Sale of Sodium Cyanide (Liquid)” (the “Agreement”).

[4] Sodium cyanide is a product used in gold mining to extract gold from the ore. It is sold in the form of liquid sodium cyanide and in the form of solid sodium cyanide.

[5] In 2020, Kinross issued a Request for Proposals whereby it requested proposals from suppliers of sodium cyanide for the supply of solid sodium cyanide for the Mines and other mines operated by Kinross. Cyanco takes that position that Kinross would be breaching the Agreement if they purchase solid sodium cyanide from another supplier for use in the Mines’ operations.

[6] Given Cyanco’s position, Kinross commenced this proceeding. Kinross seeks a declaration that the terms of the Agreement are confined to the supply of liquid sodium cyanide and do not preclude Kinross from independently sourcing solid sodium cyanide for its operations at the Mines.

[7] For the following reasons, I conclude (i) Kinross is not precluded from seeking declaratory relief in this action, and (ii) Kinross’ claim for declaratory relief should be dismissed.

FACTUAL BACKGROUND

[8] I am satisfied that the following background facts are established by the evidence.

Use of sodium cyanide in gold mining

[9] Sodium cyanide is a reagent used in the gold and silver mining industries for mining processes that dissolves and separates gold or silver deposits from the ore in which they are found.

[10] Sodium cyanide is used at the Mines (and in gold mining generally) to extract gold from the ore. At a very high level, the ore containing gold deposits is crushed and mixed with a diluted solution of sodium cyanide, typically containing between 0.01% to 0.05% sodium cyanide. When the sodium cyanide in liquid form at that concentration combines with oxygen, it selectively dissolves the gold in the ore (referred to as pregnant solution). The gold is then stripped from the pregnant solution.

Manufacture and sale of sodium cyanide

[11] Sodium cyanide is produced by reacting hydrogen cyanide with sodium hydroxide (also known as caustic soda). Hydrogen cyanide is a chemical compound produced by reacting ammonia with natural gas.

[12] Cyanco is the owner and operator of a plant at Winnemucca, Nevada (the “Winnemucca Plant”) that manufactures sodium cyanide.

[13] The initial production state of sodium cyanide is always liquid. At the Winnemucca Plant, sodium cyanide is produced by first reacting natural gas or methane with ammonia to form hydrogen cyanide, and then reacting the hydrogen cyanide with caustic soda to form sodium cyanide. Cyanco has a second manufacturing plant in Alvin, Texas (the “Alvin Plant”). At the Alvin Plant, hydrogen cyanide is a co-product from the acrylonitrile plant operated by Ascend Performance Chemicals (“Ascend”). The hydrogen cyanide the Alvin Plant receives as a co-product from Ascend is reacted with caustic soda to form sodium cyanide.

[14] At the Winnemucca Plant, sodium cyanide is held as a 30% solution in storage tanks pending shipment. The 30% solution of sodium cyanide is very stable. At higher concentrations, sodium cyanide solutions tend towards crystallization, which is undesirable for transportation or for use. As a result, both sodium cyanide producers and mine operators transport and store sodium cyanide in a solution of approximately 30%.

[15] Suppliers, including Cyanco, manufacture, market and sell sodium cyanide in liquid (or solution) form and in solid form. Liquid sodium cyanide is delivered at a 30% concentration in specialized tanker trucks driven by drivers trained to transfer liquid sodium cyanide directly from the tanker truck to the mine’s storage tanks. Solid sodium cyanide does not require specialized drivers for delivery and can be delivered to customers in bag boxes or an ISO container.

[16] Whether sodium cyanide is delivered in liquid form or in solid form, it is stored in a 30% solution in a storage tank. Neither liquid sodium cyanide nor solid sodium cyanide (after dissolved into liquid form) is ready to use as a 30% solution. Sodium cyanide stored in a 30% solution requires further dissolution and/or dilution to a 0.05% to 0.01% solution of sodium cyanide to water for end use in the leaching process.

[17] Following production as a solution, sodium cyanide can be dried into solid briquettes of approximately 98% sodium cyanide. Solid sodium cyanide weighs approximately 2/3rds less than liquid sodium cyanide held as a 30% solution and therefore is more economical for long-distance shipping.

[18] Liquid sodium cyanide is more expensive, in part because of the higher freight cost, given that a buyer is paying for the transportation of 70% water and 30% sodium cyanide. Solid sodium cyanide is cheaper, in part because of the reduced freight costs.

[19] Liquid sodium cyanide is not stored on site in large volumes. It is stored in smaller day tanks and delivered multiple times daily. Solid sodium cyanide can be stored in much larger volumes depending on the storage facility at the mine. A mine can store months of supply and mix the product as and when needed.

Infrastructure requirements at the site

[20] A mine that buys liquid sodium cyanide receives deliveries via specialized tanker trucks and the product is pumped directly into a storage tank by connecting the hose on the truck to the tank inlet.

[21] Solid sodium cyanide is delivered to the mine either in bag boxes or in ISO containers. If delivered in bag boxes, the bags are placed in a bag breaker chamber which punctures the bag in order to deliver the solid sodium cyanide into the mix tank. Once in the mix tank, the solid sodium cyanide is dissolved with water and is stored on site is a 30% solution.

Use of sodium cyanide by mines

[22] Regardless of the delivery method, sodium cyanide will be pumped into a mine’s storage tanks in the form of a nominal 30% solution where it is held prior to use in the leaching process. Liquid sodium cyanide is used by gold mines to leach gold deposits from ore. This is typically accomplished through either a “mill leach” or a “heap leach”.

[23] In a mill leach, ore is ground into a fine powder and mixed with water and lime. This ore mixture (or slurry) is pumped into a series of tanks, where liquid sodium cyanide from the mine’s storage tanks is directly added to the slurry to leach the gold. The gold is then removed from the tanks and processed.

[24] In a heap leach, heaps of crushed ore are spread on top of plastic collection pans. Liquid sodium cyanide directly from the storage tank is transported into a pipe with pH adjusted water and sprayed on top of the heaps. The liquid sodium cyanide percolates through the heaps and dissolves away the gold deposits from the ore. The liquid sodium cyanide flows through the entire heap from top to bottom, extracting the gold from the ore and carrying it to the plastic pad, where it is removed and processed.

[25] In a mill leach, the 30% solution is ready to use and added directly to the slurry - it is only within the slurry that the concentration of sodium cyanide becomes a very small percentage. In a heap leach, the 30 present solution is similarly ready to use, but is piped into pH adjusted water (at which point the further dilution happens) immediately prior to being sprayed on the heaps.

[26] Where a mine receives briquettes, it must always dissolve them into liquid sodium cyanide before using it in the leaching process. This is because the chemical component of sodium cyanide that triggers the leaching of the gold is only activated when the sodium cyanide is in liquid form.

The Winnemucca Plant

[27] Cyanco first established a presence in Nevada in 1990, when its corporate predecessor opened the Winnemucca Plant. Whereas sodium cyanide plants were conventionally located close to raw material sources, such as the Gulf Coast, the Winnemucca Plant was located at a facility in Nevada (where most US gold mines are located) to minimize the distance that the sodium cyanide was required to be transported and allow mines to receive liquid sodium cyanide.

[28] The Winnemucca Plant has an annual capacity of approximately 85,000 tonnes. Until recently, it only shipped liquid sodium cyanide. In 2020, the Winnemucca Plant completed the installation of a dryer system, which allows it to convert approximately 20,000 tonnes per year of its liquid sodium cyanide production into solid briquettes for long-distance shipping.

[29] The Winnemucca Plant’s sale of liquid sodium cyanide is limited to Nevada area mines or mines that are easily accessible by truck or rail. While there is a “spot” market for sodium cyanide, it is limited to sales of solid sodium cyanide, which can be shipped globally. The Winnemucca Plant cannot sell its liquid sodium cyanide on the spot market.

Historical relationship between Cyanco and Kinross

[30] For the years that Kinross has had an ownership interest in the Mines, the Mines have used only liquid sodium cyanide supplied under contract with Cyanco. Neither of the Mines currently has the infrastructure necessary to take supply of and receive solid sodium cyanide.

[31] From 2011 to 2018, Cyanco supplied the Mines with liquid sodium cyanide, and other mines owned by Kinross with solid sodium cyanide, under an omnibus agreement (the “2011 Agreement”). The 2011 Agreement consisted of a set of general conditions and specific purchase conditions (or “SPCs”) for each mine site. Each SPC specified whether the mine in question was to receive liquid or solid sodium cyanide from Cyanco, which was defined as “Product”. Each SPC had a number of specifications related to, for example, the pricing, packaging and transportation of the specific Product in question.

[32] As the 2011 Agreement was coming to an and at the end of 2017, Kinross issued a request for proposal for the supply of sodium cyanide at all of its mine sites in November 2016 (the “2016 RFP”). The 2016 RFP called for the Mines to be supplied with liquid sodium cyanide, and the rest of the Kinross mine sites to be supplied with solid sodium cyanide. Kinross received responses from multiple suppliers, including Cyanco.

[33] At the time of the 2016 RFP, Cyanco was the only significant supplier of liquid sodium cyanide in Nevada. A competitor, Chemours, had the ability to supply liquid sodium cyanide to the Mines from its Memphis solid sodium cyanide plant utilizing its Nevada dissolution facility.

[34] Cyanco responded to the 2016 RFP on December 8, 2016, with two proposals for the supply of liquid sodium cyanide to the Mines in Nevada, and a proposal for the supply of solid sodium cyanide for other specified global sites. One of Cyanco’s proposals for the supply of liquid sodium cyanide to the Mines was for a five-year term at a price consistent with what Cyanco was charging to other regional mines. Cyanco offered a second proposal for supply of liquid sodium cyanide to the Mines on the basis of discounted pricing in exchange for supplying the Mines for their remaining “life of mine”. Kinross and Cyanco had not previously entered into a contract with a “life of mine” term.

Negotiations between January and June 2017

[35] Cyanco was represented in the negotiation of the supply agreements by Paul Rostek, the President and General Manager at Cyanco International at the material times. Mr. Rostek was assisted by Cyanco’s external legal counsel, Greg Phillips. Kinross was represented in the negotiations by Alexander Gransden, Kinross’ Director of Procurement, and by Kinross’ internal legal counsel, Aaron Hunter.

[36] Kinross shortlisted Cyanco and arranged a meeting to discuss the proposal in Las Vegas on January 24, 2017. Mr. Gransden and Mr. Rostek, among others, were in attendance.

[37] As a result of the discussions at the January 24, 2017 meeting, the parties reached an agreement in principle for Cyanco to supply: (i) the Mines with liquid sodium cyanide under a life of mine requirements contract; and (ii) Kinross’ mines at Tasiast, Chirano, and Fort Knox with solid sodium cyanide under a five-year requirements contract. Cyanco made concessions on liquid pricing in Nevada in consideration for the solids business at Kinross’ Tasiast, Chirano and Fort Knox mines.

[38] After the Las Vegas meeting, Kinross and Cyanco began to draft a template general agreement and template SPCs. Kinross proposed that the template agreement serve as the basis for developing two separate liquid and solid agreements and SPCs. The liquid agreement was for the supply of liquid sodium cyanide to the Mines from the Winnemucca Plant. The solid agreement was for the supply of solid sodium cyanide to the Tasiast, Chirano, and Fort Knox mines from the Alvin Plant.

[39] Mr. Gransden, Mr. Rostek, and other members of their teams (including counsel) exchanged drafts of the contractual terms for the template generic agreements until March 30, 2017. The parties then continued to negotiate the specific liquid and solid agreements, including the general agreement applicable to all mines buying the same Product and SPCs for each mine. These negotiations took place from April 2017 until the agreements were executed on June 13, 2017.

[40] By June 7, 2017, the liquid and solid agreements had nearly been finalized. Mr. Gransden and Mr. Rostek had a phone call that day. On the call, Mr. Gransden requested insertion of the qualifiers “liquid” and “solid” before the words “sodium cyanide” as they appeared in many places throughout the draft Liquid and Solid Agreements, respectively. Mr. Rostek agreed.

[41] Cyanco and Kinross agreed to the Agreement dated June 13, 2017. Executed copies of the Agreement were exchanged on June 22, 2017.

Disagreement in respect of caustic soda index

[42] The Agreement (unlike the 2011 Agreement) did not operate on a cost-pass-through basis for raw materials. The Agreement (and the “Solid Agreement”) used index-based pricing. The index-based price involves calculating a difference between the current index price and the reference price (a specific index price as of the reference period in the Agreement). This difference is used in the pricing formula and a surcharge table is used to determine the final price. The larger the difference, the higher the price of the Product. The Agreement included a provision that allowed either party to request a review and substitution of the new index being used if it ceased to represent the transactions between the parties.

[43] After the Agreements were signed (but before they came into effect), Mr. Gransden raised concerns with Mr. Rostek that the caustic soda raw material price was increasing beyond what Kinross had expected based on information provided by Cyanco in March 2017. Mr. Rostek advised Mr. Gransden that Cyanco would not reopen the agreements.

[44] In January 2018, Hugh Handyside joined Kinross as its Senior Director of Global Supply Chain in which he was responsible for, among other things, the procurement of sodium cyanide at each of Kinross’ mine sites globally. Mr. Gransden reported to Mr. Handyside.

[45] By the late summer of 2018, Mr. Handyside had concluded that Kinross was paying artificially inflated prices for caustic soda because of the new index. He initiated discussions with Cyanco and advised that he had issues with the index and the starting point of the benchmark price for caustic soda. Cyanco agreed to meet with Mr. Handyside. Discussions on the caustic soda issue took place over more than ten months. Cyanco did not agree to substitute a different index for the index being used under the Agreement.

Kinross issues RFP for supply of solid sodium cyanide including at the Mines

[46] By letter dated April 30, 2020, Mr. Gransden initiated a sodium cyanide review with all of Kinross’ suppliers that, among other things, sought review of transportation, storage, handling and supply chain practices. The letter concluded with notice that Kinross would be issuing an RFP for solid sodium cyanide for the Mines and other sites globally.

[47] On May 11, 2020, Kinross issued a request for proposals seeking proposals for the supply of solid sodium cyanide to all active mine sites except for Paracatu in Brazil, and two “projects” which were not yet operational.

[48] On May 11, 2020, a representative of Cyanco emailed Mr. Gransden and asked whether the inclusion of the Mines in the 2020 RFP was a mistake and why Kinross did not come to Cyanco directly for a price for solid sodium cyanide. In response, Mr. Gransden advised that Cyanco was the sole supplier of liquid sodium cyanide only to the Mines.

[49] On May 29, 2020, Cyanco submitted its response to the 2020 RFP for mines other than the Mines. On the same day, external US counsel to Cyanco sent an email to Kinross’ counsel at the time asserting that Kinross would be in breach of the Agreement if it continued with the 2020 RFP for the Mines.

[50] Kinross received a number of responses to the 2020 RFP. Given Cyanco’s objection, Kinross did not proceed to negotiate with potential suppliers and award business to one of them. Kinross decided to proceed to seek an adjudication in advance of taking steps to execute an agreement for the purchase and supply of sold sodium cyanide. Kinross’ evidence (from Mr. Handyside) is that, pending the outcome of this litigation, Kinross intends to enter into such an agreement.

ANALYSIS

[51] The issues in this action are:

a. Whether this is an appropriate case for the court to grant declaratory relief. b. Whether the Agreement is confined to the purchase and sale of liquid sodium cyanide and does not preclude Kinross from purchasing solid sodium cyanide for the Mines from a supplier other than Kinross; and

[52] The first issue is whether this is or is not a proper case for declaratory relief.

[53] In SA v. Metro Vancouver Housing Corp., 2019 SCC 4, at para. 60, the Supreme Court of Canada held that declaratory relief is granted by the courts on a discretionary basis and may be appropriate where (a) the court has jurisdiction to hear the issue, (b) the dispute is real and not theoretical, (c) the party raising the issue has a genuine interest in its resolution, and (d) the responding party has an interest in opposing the declaration being sought.

[54] I am satisfied that this Court has jurisdiction to hear the issue raised by Kinross’s action. Section 12.11 of the Agreement expressly requires that the Agreement be governed and construed in accordance with Ontario law and the laws of Canada applicable therein. The Agreement gives exclusive subject matter jurisdiction to the Ontario courts to “entertain any action brought to enforce or interpret” the Agreement.

[55] A declaration can only be granted if it will have practical utility, that is, if it will settle a “live controversy” between the parties: Daniels v. Canada (Indian Affairs and Northern Development), 2016 SCC 12, at para. 11. In Solosky v. The Queen, , Dickson J. quoted the description by Lord Denning in Pyx Granite Co. Ltd. v. Ministry of Housing, [1958] 1 Q.B. 554 of the circumstances where a court may exercise its discretion to grant declaratory relief: “[I]f a substantial question exists which one person has a real interest to raise, and the other to oppose, then the court has the discretion to resolve it by declaration, which it will exercise if there is good reason for so doing”.

[56] I am satisfied that the dispute is real and not theoretical. Kinross issued an RFP on May 12, 2020, seeking proposals to supply the Mines, among others, with solid sodium cyanide. Cyanco’s external U.S. counsel responded that Kinross will be in breach of the Agreement if it moves forward with solid supply at the Mines. Kinross provided evidence that it has taken steps to pursue infrastructure changes since the 2020 RFP to enable it to use solid sodium cyanide in the Mines’ operations. Kinross’ proposed course of action - purchasing solid sodium cyanide for the Mines for use in their operations - is one that Cyanco contends would constitute a breach of the Agreement.

[57] I am satisfied that by interpreting the Agreement, my decision will settle a live controversy. Kinross has a genuine issue in the resolution of this issue and Cyanco has an interest in opposing the declaration being sought.

[58] I conclude that this is an appropriate case for declaratory relief. I do not dismiss Kinross’ claim on the basis that the case is not appropriate for declaratory relief.

[59] I now turn to the second issue.

Principles of Contractual Interpretation

[60] The primary objective of contractual interpretation is to determine the objective intent of the parties at the time the contract was made.

[61] In Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53, at para. 47, Rothstein J., writing for the Court, held:

… the interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine “the intent of the parties and the scope of their understanding” [citations omitted]. To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning:

No contracts are made in a vacuum: there is always a setting in which they have to be placed. … In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.

(Reardon Smith Line, at p. 574, per Lord Wilberforce)

[62] In Sattva, Rothstein J., at paras. 57-58, addressed the role of surrounding circumstances in contractual interpretation and the nature of the evidence that can be considered:

While the surrounding circumstances will be considered in interpreting the terms of the contract, they must never be allowed to overwhelm the words of that agreement [citations omitted]. The goal of examining such evidence is to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract [citation omitted]. While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement [citation omitted].

The nature of the evidence that can be relied upon under the rubric of “surrounding circumstances” will necessarily vary from case to case. It does, however, have its limits. It should consist only of objective evidence of the background facts at the time of the execution of the contract [citation omitted], that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting. Subject to these requirements and the parol evidence rule discussed below, this includes, in the words of Lord Hoffmann, “absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man” [citation omitted]. Whether something was or reasonably ought to have been within the common knowledge of the parties at the time of execution of the contract is a question of fact.

[63] In Sattva, at para. 58, Rothstein J. made it clear that the evidence of surrounding circumstances that can be relied upon in the interpretative process should consist only of objective evidence of the background facts at the time of execution of the contract.

[64] In Prism Resources Inc. v. Detour Gold Corporation, 2022 ONCA 326, the Court of Appeal summarized the relevant principles of contractual interpretation from Sattva and other decisions of the Court of Appeal, including the decision of Brown J.A. in Weyerhauser Co. v. Ontario (Attorney General), 2017 ONCA 1007:

[16] These principles were conveniently summarized by Brown J.A. in Weyerhauser, at para. 65. A judge interpreting a contract should:

i) determine the intention of the parties in accordance with the language they have used in the written document, based upon the “cardinal presumption” that they have intended what they have said;

ii) read the text of the written agreement as a whole, giving the words used their ordinary and grammatical meaning, in a matter that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;

iii) read the contract in the context of the surrounding circumstances known to the parties at the time of the formation of the contract. The surrounding circumstances, or factual matrix, includes facts that were known or reasonably capable of being known by the parties when they entered into the written agreement, such as facts concerning the genesis of the agreement, its purpose, and the commercial context in which the agreement was made. However, the factual matrix cannot include evidence about the subjective intention of the parties; and

iv) read the text in a fashion that accords with sound commercial principles and good business sense, avoiding a commercially absurd result, objectively assessed.

Language of the Agreement

[65] The parties’ purchase and supply obligations are found in both the terms and conditions of the Agreement and in the SPCs.

[66] Section 4.1 of the Agreement provides that Cyanco shall sell and deliver, in accordance with the Terms, all Products ordered by the Buyers (Round Mountain and Bald Mountain) during the Contract Term.

[67] In the Agreement, the word “Terms” means the terms and conditions of the Agreement, including the SPCs.

[68] In the Agreement, the word “Products” [^1] means the goods described in the SPCs, to be supplied for use at the Sites listed in the SPCs”. The word “Site” means each mine site at which Kinross conducts operations.

[69] In the SPCs for the Mines, the word “Product” means “liquid sodium cyanide as described in Section 4 of this SPC”. Section 4 of each SPC states that “the Products shall meet or exceed the product specifications set out in (i) the table below and (ii) Attachment 2 to this SPC”. The table describes the “Product Specification” as “NaCN 30% (nominal) aqueous solution”. Attachment 2 to the SPC also describes the Product as “Sodium Cyanide 30% (nominal) Aqueous Solution” and includes other specifications including Composition (Wt. %) for NaCN of 28-32%.

[70] In the Agreement, the “Contract Term” in respect of any Buyer means the period beginning on January 1, 2018 and expiring at the end of Life of Mine of the applicable Site. The term “Life of Mine” in respect of any Site has the meaning given to that term in the applicable SPC. Each SPC states that “Life of Mine” means the period beginning on January 1, 2018 and ending on the date that Buyer ceases consuming Products at the Site in connection with the planned or expected closure of the Site”.

[71] Section 4.1 of the Agreement requires Kinross to deliver annually (during the fourth quarter of each calendar year during the Contract Term) its “Consumption Forecast” of the Products for each of the Mines for the following calendar year. Kinross is required to prepare its Consumption Forecasts in good faith and ensure that any Consumption Forecast is as accurate as reasonably possible based on information available to it at the date of such Consumption Forecast. The parties acknowledge and agree that Kinross may order and purchase greater or lesser volumes of product in any calendar year than are set out in any Consumption Forecast and, provided Kinross purchases its entire requirement for Products in any calendar year from Cyanco, there is no minimum purchase obligation for Kinross in such calendar year.

[72] Section 4.1 of the Agreement provides for the consequence if Kinross purchases less than the volumes of Product set out in a Consumption Forecast. There is no consequence if Kinross does not purchase less than 80% of its Consumption Forecast. If Kinross purchases less than 80% of its Consumption Forecast, its rights under section 20.2 of the relevant SPC (Purchases for Test Purposes) shall be suspended for the subsequent calendar year. [^2]

[73] Section 4.1 of the Agreement states that Cyanco “shall not fail to supply the volume of Products ordered by Kinross so long as … the volume of Products ordered by such Buyer does not exceed 120% by volume of the Products set out in such Buyer’s Consumption Forecast for such calendar year (… the “Maximum Volume Obligation”)”.

[74] Section 4.2 of the Agreement states that Cyanco “shall maintain the minimum amount of inventory needed to satisfy its obligations to deliver Products ordered by each Buyer that do not exceed the Maximum Volume Obligation, in accordance with Section 4.1 above.”

[75] In section 15 of each SPC, Cyanco agrees that in each calendar year, it shall allocate to Kinross from its production of Products an amount of Products that is equal to the Consumption Forecast for such calendar year. If Cyanco is unable to supply the amount of Products ordered by the Buyer (provided that the ordered volume does not exceed the Maximum Volume Obligation), Cyanco “shall find an alternative source of supply for Products … and compensate the Buyer for any difference in costs between the price payable under this contract and the price paid by the Buyer for products from a different source for a period …”.

[76] The Buyer’s purchase commitment is set out in the second paragraph of section 20.1 of the SPCs which reads:

This Contract is a requirements contract based upon the annual Consumption Forecast, but is not a “take or pay” contract. Notwithstanding anything to the contrary in this Contract, the Buyer shall be under no obligation to purchase any minimum volume of Products or any Products at all from the Seller if the Site is not operating or if the Site does not for any other reason require liquid sodium cyanide. Seller shall be Buyer’s sole supplier of liquid sodium cyanide throughout the term of the Contract, and Buyer shall not separately contract supply which would be in conflict with this concept without prior written agreement from Seller; provided, however, that if the Buyer wishes to purchase from the Seller a volume of Products that exceeds the Maximum Volume Obligation (as discussed in Section 15 above), but the Seller is unwilling or unable to supply the excess amount of Products (the “Excess”) to the Buyer under this Contract, then the Buyer may purchase the Excess or any portion of the Excess from a different supplier, and no such purchase shall require the Seller’s consent or be considered a breach of the Buyer’s obligations set out in this paragraph.

Cyanco’s supply obligations and Kinross’ purchase obligations under the Agreement

[77] Kinross submits that the plain language of the Agreement demonstrates that (i) Cyanco’s supply obligations to the Mines are only in respect of the “Product”, that is, liquid sodium cyanide; (ii) Kinross is not required to purchase or use any minimum amount of liquid sodium cyanide at the Mines; and (iii) Kinross is not prohibited from sourcing solid sodium cyanide from another seller, nor from using solid sodium cyanide at the Mines. Kinross submits that, therefore, the Agreement permits Kinross to shift any amount of its liquid sodium cyanide consumption from Cyanco to solid sodium cyanide consumption from any other seller.

[78] Cyanco agrees that it is required to supply only liquid sodium cyanide under the Agreement. Cyanco agrees that the Agreement does not require Kinross to purchase or use any minimum amount of liquid sodium cyanide at the Mines, provided that Kinross purchases Products from Cyanco to meet the Mines’ requirements for liquid sodium cyanide.

[79] The question in dispute is whether the Agreement permits Kinross to purchase solid sodium cyanide from a supplier other than Cyanco and dissolve the solid sodium cyanide into liquid sodium cyanide for use in the Mines’ operations.

Meaning of “Product” and “liquid sodium cyanide”

[80] In its submissions, Kinross gives the defined term “Product” the same meaning as the term “liquid sodium cyanide” when they are used in the Agreement. I disagree that these words should be given the same meaning. The Product ordered by Kinross and to be sold and delivered by Cyanco to Kinross is not liquid sodium cyanide generically, in any concentration. The Product is specified to be liquid sodium cyanide in a “30% (nominal) Aqueous Solution”. Attachment 2 allows a composition for the Product (by weight sodium cyanide) of 28-32%. Liquid sodium cyanide, although transported and stored at a stable 30% concentration, is used in the leaching process at much lower concentrations, and it is still liquid sodium cyanide.

[81] When I give the words “liquid sodium cyanide” their ordinary and grammatical meaning, these words mean sodium cyanide in solution (as opposed to solid form) that would include liquid sodium cyanide sold and delivered as the “Product” (in a 30% concentration by weight) as well as, more broadly, sodium cyanide in solution at other concentrations.

[82] In addition, the parties chose to use the words “liquid sodium cyanide” in some contexts in section 20.1 of the SPCs instead of the defined term “Product” which is used in other contexts in the same sentences of the same section. By doing so, the parties must be taken to have intended to give different meanings to these terms as they are so used.

Consumption Forecast

[83] Kinross submits that a Consumption Forecast that accurately reflects the Products Kinross intends to purchase from Cyanco in a given year reflects the Mines’ entire requirements for Products in that year. Kinross explains that if it does not purchase any Products in a given year and the Mines continue to operate, it follows that the Mines did not require any Products that year. Kinross submits that if it does not intend to purchase any liquid sodium cyanide from any sellers in a given year, the Agreement permits Kinross to submit a Consumption Forecast of zero and continue its operations at the Mines.

[84] I have explained why the word “Product” does not have the same meaning as the broader term “liquid sodium cyanide”. In the Agreement, the words “Buyer” and “Site” are also separate terms and have different meanings. The Buyer orders the Products and receives delivery of the Products. Title to the Products passes to each Buyer upon delivery of the Products to such Buyer and acceptance by such Buyer at the delivery location specified in the applicable SPC (section 4.3 of the SPCs).

[85] The word “Site” means each mine site at which a Buyer conducts operations.

[86] Kinross submits that the Agreement provides that Kinross is only required to purchase from Cyanco the Products it actually uses, and it may purchase no Products at all in the event that the Mines cease requiring Products (because they meet their operational requirements for sodium cyanide by purchasing solid sodium cyanide). This is not what section 20.1 of the SPCs says. The second sentence of the second paragraph of section 20.1 specifies the circumstances where the “Buyer” is not obligated to purchase any Products at all from Cyanco: “if the Site is not operating or if the Site does not for any other reason require liquid sodium cyanide”. Through this submission, Kinross, incorrectly in my view, shifts the focus of the analysis to its requirement as Buyer for Product at the point of sale [^3] as opposed to the contractual requirement for Kinross to purchase Products from Cyanco unless the Sites (the places where the Buyer conducts operations) do not require liquid sodium cyanide.

[87] The use in this sentence of the terms “Buyer” and “Site”, and the terms “Products” and “liquid sodium cyanide”, shows that the parties intended to differentiate between Kinross acting as buyer of Products at the point of sale, and Kinross conducting operations at the Sites where the Mines require liquid sodium cyanide for their operations, both at a concentrated 30% solution in storage tanks and, during the leaching process, at more diluted concentrations. Under section 20.1 of the SPCs, the Buyer shall have no obligation to purchase any Products at all if the Site (not the Buyer) does not require liquid sodium cyanide.

[88] The Products ordered and purchased by Kinross and supplied to it are consumed through the Mines’ operations. The Consumption Forecast required by section 4.1 of the Agreement is just that. A good faith forecast of the consumption of the Products for the following calendar year through Kinross’ operations of the Mines.

[89] When I give the words used by the parties their ordinary and grammatical meaning, I conclude that Kinross is not obligated to purchase any Products (liquid sodium cyanide in a nominal 30% concentration and meeting other contractual specifications) if the Site is not operating or if the Site does not for any other reason require liquid sodium cyanide for its operations. Otherwise, Kinross has an obligation to purchase Products from Cyanco.

[90] Section 20.1 of the SPCs includes other language that reinforces this obligation: “Seller shall be Buyer’s sole supplier of liquid sodium cyanide throughout the term of the Contract, and Buyer shall not separately contract supply which would be in conflict with this concept without prior written agreement from Seller …”.

[91] Kinross submits that the absence of specific language in the Agreement referencing solid sodium cyanide means that there is no textual basis to interpret “this concept” as being undermined by the supply of solid sodium cyanide. Kinross contends that its election to use solid sodium cyanide purchased from a different supplier does not conflict with the concept of Cyanco being the exclusive supplier of liquid sodium cyanide throughout the term of the Agreement. I disagree.

[92] The Agreement requires Kinross to purchase liquid sodium cyanide (in accordance with the specifications in the Agreement to describe the “Product”) solely from Cyanco, and not from another supplier. Kinross is required to satisfy this obligation unless the Mines do not require liquid sodium cyanide for their operations. The words “this concept” describe Kinross’ purchase obligation for Products which continues through the term of the Agreement unless the Mines do not require liquid sodium cyanide. There is no need for the Agreement to refer to solid sodium cyanide to understand what these words mean, and the fact that the Agreement does not expressly refer to solid sodium cyanide or contain words precluding Kinross from purchasing solid sodium cyanide from another supplier for use at the Mines is of no consequence.

[93] Kinross submits that to give meaning to “this concept” requires reading the entire sentence, including the reference to section 15 which, it submits, shows that the reference is to Cyanco as being the exclusive supplier of liquid sodium cyanide, not sodium cyanide generally. I agree that the language of the Agreement must be read and understood in the context of the Agreement as a whole, and that the words “this concept” must be read in context. This does not affect the interpretation of the Agreement that Cyanco advances because Cyanco does not contend that it has a contractual right to supply solid sodium cyanide to Kinross under the Agreement.

[94] The Mines are operating. The Mines require liquid sodium cyanide for their operations at the Sites. The Mines require liquid sodium cyanide to be held in storage tanks at a 30% concentration before use in the leaching process. During the leaching process, the Mines require liquid sodium cyanide at lower concentrations to leach gold deposits from ore. Under these conditions, Kinross is contractually precluded from purchasing solid sodium cyanide from other suppliers and then dissolving this product to form liquid sodium cyanide where it would be used by the Mines in their operations. To interpret the Agreement in such a way that would allow Kinross to do so would conflict with “the concept” that Cyanco is to be the sole supplier of liquid sodium cyanide required by the Mines.

[95] I disagree with Kinross’ submission that to interpret the words “require liquid sodium cyanide” to refer to sodium cyanide as used in the leaching process would improperly read out the word “liquid” from section 20.1 of the SPCs. Kinross requires liquid sodium cyanide for its operations and, by the terms of the Agreement, it is required to have Cyanco as its sole supplier of the liquid sodium cyanide required. This interpretation does not read out the word “liquid” in “liquid sodium cyanide”. It gives meaning to this word because it recognizes that the Mines require and use “liquid sodium cyanide” in their operations.

[96] The second paragraph of section 20.1 of the SPCs aligns with the language of section 4.1 of the Agreement that requires Kinross, as buyer, “to purchase its entire requirement for Products in any calendar year from [Cyanco]”. This is so because Kinross is required to satisfy the Mines operational requirements for liquid sodium cyanide by purchasing Products from Cyanco.

[97] The interpretation of the Agreement must consider it as a whole. This requires me to consider other provisions of the Agreement that may affect Kinross’ purchasing obligations under the Agreement.

Testing provision in section 20.2 of the SPCs

[98] Section 20.2 of the SPCs provides:

Notwithstanding anything to the contrary in this Contract, the Buyer shall have the right, in its sole discretion, to purchase from any other supplier of sodium cyanide during the Contract Term up to five (5%) percent of the Consumption Forecast in any calendar year, for the purpose of testing products purported to represent new technologies or developments in the field of sodium cyanide, that are not a like for like equivalent for Product sold and purchased under this Contract.

[99] This provision in s. 20.2 of the SPCs, read and understood as plainly written, limits Kinross’ right to purchase sodium cyanide (in any form) from another supplier in any calendar year. Kinross’ position with respect to interpretation of section 20.1 of the SPCs would allow it to purchase an unlimited amount of sodium cyanide that is not a like for like equivalent for the “Product”, including solid sodium cyanide, whether for testing or for any other purpose. Cyanco submits that Kinross’ position would effectively eliminate the contractual limitation on purchases of sodium cyanide from another supplier (5% of the Consumption Forecast for testing purposes). Cyanco submits that, for this reason, Kinross’ interpretation of section 20.1 should not be accepted.

[100] Kinross submits that the differentiation of the language used between section 20.1 (where the term “liquid sodium cyanide” is used) and section 20.2 (where the term “sodium cyanide” is used) shows that the parties intended the exclusivity of supply provisions to be confined to liquid sodium cyanide. Kinross notes that the testing provision at section 20.2 of the SPCs is the only section of the Agreement that references “sodium cyanide” generally, without the “liquid” qualifier. Kinross submits that it is never required to engage section 20.2 for the purpose of purchasing solid sodium cyanide because its purchase obligations are confined to liquid sodium cyanide. Kinross submits that the section 20.2 of the SPCs uses broader and unqualified words for sodium cyanide because the parties were dealing with uncertainty and not yet developed technologies and the broader formulation of sodium cyanide in this section corresponds to an objective intention to ensure the testing provision was as broad as possible and could not lead to future disputes over whether, for example, a novel form of sodium cyanide delivered in a semi-evaporated slurry form would qualify as liquid sodium cyanide.

[101] I am required to determine the intention of the parties in accordance with the language they have used in the written document and give effect to the cardinal presumption that the parties have intended what they have said.

[102] The parties chose to use the term “sodium cyanide” and not “liquid sodium cyanide” in this provision. There is nothing in the text of section 20.2 that shows that the use of the term “sodium cyanide” should be given a special meaning (in the context of possible undeveloped and novel forms of sodium cyanide) that differs from the ordinary and grammatical meaning of the words used. When I read section 20.2 of the SPCs in the context of the Agreement as a whole and give the words used in this section their ordinary and grammatical meaning, I interpret this section to mean that the parties agreed that Kinross has the limited right to purchase from another supplier sodium cyanide (in any form) in amounts up to 5% of the Consumption Forecast in any calendar year for testing purposes, provided that the sodium cyanide so purchased is not a like for like equivalent for the Product sold by Cyanco.

[103] Kinross does not have a right to purchase an unlimited amount of sodium cyanide from another supplier in any form, including solid form. I do not accept Kinross’ submission that it is not required to engage section 20.2 for the purpose of purchasing solid sodium sulphate. This contractual provision, as written, engages Kinross as a party to the Agreement.

[104] It was open to the parties to have made such an agreement and for them to have done so does not conflict with an interpretation of the Agreement that requires Kinross to purchase from Cyanco all the liquid sodium cyanide that it requires for use in its operations at the Mines. The interpretation of section 20.1 of the SPCs advanced by Kinross, if accepted, would eliminate the restriction in section 20.2 on purchases of sodium sulphate. The interpretation of section 20.1 advanced by Cyanco would not have this effect and is not inconsistent with section 20.2.

[105] Section 20.2 of the SPCs supports the interpretation of the Agreement advanced by Cyanco. Under the interpretation advanced by Kinross, section 20.2 of the SPCs would be rendered ineffective and, for this reason, this interpretation should be avoided.

“Life of Mine” term of the Agreement

[106] As I have noted, the term of the Agreement expires at the end of the “Life of Mine” of the applicable Site, that is, when the Buyer ceases consuming Products at the Site in connection with the planned or expected closure of the site. Section 7.1 of the Agreement requires Kinross to, among other things, advise Cyanco in writing at least 12 months in advance of the anticipated end of Life of Mine for the Mines (or as far in advance as reasonably possible), provide updates on that timeline at Cyanco’s request, and act “reasonably and in good faith” in determining when the Life of Mine has ended.

[107] Under the interpretation of the Agreement that Kinross advances, it is contractually entitled to decide (without prior notice to Cyanco) to begin purchasing solid sodium cyanide from another supplier and to convert this product to liquid sodium cyanide to meet the Mines’ ongoing operational requirements, thereby reducing its purchases of Products from Cyanco to zero. Kinross maintains that it is contractually entitled to do so for as long as it chooses while the Mines continue to operate. Kinross contends that under the proper interpretation of the Agreement, during this time, the Agreement remains in force and Kinross is entitled to resume ordering Products from Cyanco, and Cyanco is contractually obligated to supply the Products so ordered. Kinross maintains that it is contractually entitled to change its Consumption Forecast from year to year to correspond with the amount of Product (liquid sodium cyanide at a 30% concentration) that it intends to purchase from Cyanco (ranging from 0% to 100% of its estimated consumption for operations at the Mines), regardless of the amount of liquid sodium cyanide the Mines actually require for their operations.

[108] Kinross submits that it does not follow from the fact that the Agreement is for a “Life of Mine” term that the Mines are required to use any minimum volume of products until the Mines cease operations. Kinross notes that “Life of Mine” addresses only the term of the Agreement and does not include any purchasing obligations.

[109] Kinross argues that although it is contractually entitled to cease purchasing and consuming Products from Cyanco while the Mines continue to operate (and to meet the Mines’ operational requirements for liquid sodium cyanide by purchasing solid sodium cyanide from another supplier), the “Life of Mine” term of the Agreement operates for Cyanco’s benefit because if Kinross chooses in the future to meet its operational requirements for liquid sodium cyanide by resuming purchases of liquid sodium cyanide, it must do so exclusively from Cyanco.

[110] I disagree with Kinross’ submission. If Kinross were allowed to stop purchasing Products from Cyanco by delivering at the end of a given calendar year a Consumption Forecast of zero for the next calendar year (because of its intention to meet the Mines’ operational requirements for liquid sodium cyanide by purchasing solid sodium cyanide from another supplier), the effect would be that the 12 month notice period provided for in section 7 of the Agreement for the anticipated end of Life of Mine (and the end of Cyanco’s right to supply Product) would be undermined. It could hardly be said that Cyanco would benefit in such circumstances by being contractually obliged to stand by indefinitely, with unknown and unknowable possible future supply obligations to Kinross (and a corresponding need to resume purchases of inputs from its own suppliers and allocate capacity to Kinross’ orders, regardless of commitments to other customers) that could be reactivated in the last quarter of any calendar year, without prior notice to Cyanco, while the Mines continue to operate.

[111] When I read section 20.1 of the SPCs in the context of the Agreement as a whole, including section 7.1 providing that the term of the Agreement is until the end of the Life of Mine, I reject the interpretation of the Agreement advanced by Kinross that it is contractually entitled to stop purchases of Products without prior notice to Cyanco, while the Mines continue to operate, and while Cyanco is contractually obligated to organize its business to ensure that it is able to resume supply of Products to Kinross whenever Kinross chooses to place future orders, if ever.

[112] Commercial reasonableness must not be evaluated through an after-the-fact analysis of whether the agreement turns out to be economically advantageous to one party or the other. It is not the court’s role to save a contracting party from a bargain that proves improvident with hindsight. See Conseil Scolaire Catholique Franco-Ford v. Nipissing Ouest, 2021 ONCA 544, at para. 70.

[113] I take this caution into account when I conclude that the interpretation advanced by Kinross does not accord with sound commercial principles and good business sense, viewed objectively from the perspectives of Cyanco and Kinross when the Agreement was made. Section 4 of the Agreement and section 15 of the SPCs require Cyanco to allocated production capacity to the Mines that is equal to 120% of the Mines projected consumption requirements for the Products as expressed in their Consumption Forecasts. If Kinross orders Products that are within 120% of its Consumption Forecast for a given Mine, and Cyanco is unable to supply those Products, Cyanco is required to find an alternative supplier and compensate Kinross for any difference in costs between the price payable under the Agreement and the price to be paid to the alternative supplier.

[114] From the perspectives of Cyanco and Kinross when the Agreement was made, these obligations would make it essential for Cyanco to have long-term predictability in Kinross’ demand for Products. Cyanco must enter into supply contracts with its own suppliers, and allocate its production capacity to its customers, over a predictable time horizon. If Cyanco were to be put into the position where Kinross is able to suspend purchases of the Product without prior notice, for an unknown time period that could extend to the end of the term of the Agreement, and compel Cyanco to resume supply of some or all of Kinross’ requirements for liquid sodium cyanide at Kinross’ discretion, this would put Cyanco into the untenable position maintaining purchase agreements with suppliers and allocation of production capacity to meet the needs of Kinross without any contractual commitment on the part of Kinross to ever purchase Product from Cyanco. The words of the Agreement do not support such an interpretation that, if accepted, would lead to a commercially absurd result.

[115] On the other hand, the interpretation of the term of the Agreement as continuing until the Mines cease consuming Products in connection with the planned or expected closure of the Site, during which Kinross is contractually required to purchase Products from Cyanco to meet Kinross’ operational requirements for liquid sodium cyanide, accords with sound commercial principles and good business sense. Kinross has the security of a reliable source of supply of liquid sodium cyanide needed by the Mines for their remaining lives (at discounted prices) and Cyanco has the security of reliable customers for the sale of the Products for the remaining lives of the Mines, where the discounted pricing reflects the security of the Life of Mine term.

Early termination of the Agreement

[116] Sections 7.2, 7.3 and 7.4 of the Agreement provide for early termination of the Agreement prior to the end of Life of Mine for any Site through termination by mutual agreement or termination for cause. These provisions are consistent with the interpretation advanced by Cyanco because they show that the parties intended, absent mutual agreement or cause, that their contractual purchase and supply obligations would continue until the end of the Life of Mine for each of the Mines. The interpretation of the Agreement advanced by Kinross would allow it to eliminate any purchase obligations without notice or cause, while holding Cyanco to an obligation to maintain capacity to resume supply, at a level ranging from 1% to 100% of the Mines’ operational requirements for liquid sodium cyanide, and with no assurance of any future orders. Such an interpretation is not supported by the words of the Agreement and should be avoided for this reason and because it does not accord with sound commercial principles or good business sense.

Temporary suspension of the Agreement

[117] Section 7.5 of the Agreement provides that any Buyer may, from time to time, temporarily suspend its consumption of Products at the applicable Site for business reasons under certain conditions including advance notice as soon as practicable and with updates on the duration of the suspension and related matters. Section 7.5.3 provides that at the request of either Kinross or Cyanco during the suspension, Kinross and Cyanco, each acting reasonably and in good faith, shall discuss and agree on equitable measures for mitigating the adverse effects of the suspension on Cyanco and ensuring that Cyanco can resume supply of all required Products after the lifting of such suspension. Section 7.5.4 provides that in the event that a suspension has a duration of more than six months, Cyanco shall have the right to allocate and sell inventory of Products originally allocated to the Buyer to one or more other customers.

[118] Kinross contends that these provisions do not imply that the Agreement only permits Kinross to temporarily cease purchasing Products. Kinross submits that unlike the annual Consumption Forecasts, suspensions are unpredictable and can occur at any time, and that the provisions addressing temporary suspensions have no bearing on the situation where Kinross submits a zero Consumption forecast and has no Product allocated to it, or Kinross’ right to consume no Products whatsoever from Cyanco in any given year.

[119] These provisions regarding suspensions of Kinross’ purchase obligations show that any such suspensions during the term of the Agreement were intended to be temporary. They also show that the parties were aware of and addressed the potentially significant effects that such temporary suspensions could have on Cyanco’s business through notice, updates, equitable mitigating measures and, after a suspension of six months, a right to sell Products to other customers.

[120] Under the interpretation of the Agreement that Kinross advances, it would have the contractual right to shift to and from purchases of solid sodium cyanide by issuing varying Consumption Forecasts in the last quarter of each calendar year, thereby eliminating (or resuming), at its discretion, purchases of liquid sodium cyanide from Cyanco throughout the term of the Agreement. Under Kinross’ interpretation of its purchase obligations under the Agreement, it could issue a Consumption Forecast for all of the Mines’ requirements for a given calendar year and then purchase no liquid sodium cyanide during this year without Cyanco having any meaningful contractual recourse. [^4] From the perspective of Cyanco, Kinross’ purchasing decisions would be just as unpredictable as temporary suspensions for Kinross’ other business reasons, if not more so, yet Cyanco would have no contractual protection to mitigate their impact as it would for suspensions of purchases by Kinross for the business reasons identified in section 7.5 (technical, economic, regulatory, environmental or safety concerns, or other business reasons).

[121] When I consider the competing interpretations of the words used in section 4.1 of the Agreement and section 20.1 of the SPCs Agreement that relate to Kinross’ purchase obligations, having regard to the suspension provision in section 7.5, the interpretation that Cyanco advances aligns with the objective of the suspension provision as shown by the words used in that provision. In contrast, the interpretation that Kinross advances would result in an outcome that, objectively viewed, conflicts with the suspension provision because it would allow Kinross, temporarily or permanently, to suspend purchases of liquid sodium cyanide from Cyanco for business reasons, without Cyanco having the contractual protections afforded by section 7.5 during a temporary suspension and, indeed, without Cyanco having any contractual recourse whatsoever.

[122] The interpretation advanced by Kinross would render ineffective the suspension provision in section 7.5 of the SPCs and, for this reason, it should be avoided.

Whether Cyanco is effectively asking for terms to be implied

[123] Kinross submits that Cyanco, through the interpretation of the Agreement that it advances, is seeking, effectively, to have terms implied to the Agreement to ensure that it is profitable, in the absence of the express language needed for it to achieve this outcome. I disagree. Cyanco does not seek to have any terms implied in the Agreement. Cyanco relies on the ordinary and grammatical meaning of the words used in the Agreement, having regard to the surrounding circumstances known to the parties when the Agreement was made.

Surrounding circumstances

[124] As explained by Rothstein J. in Sattva, the goal of examining surrounding circumstances is to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract.

[125] The surrounding circumstances should consist only of objective evidence of the background facts at the time of execution of the contract. The nature of the evidence will vary from case to case but includes anything which would have affected the way in which the language of the document would have been understood by a reasonable person.

[126] I have set out earlier in my reasons some of the background facts that were known to the parties at the time the Agreement was executed including facts about the differences between liquid sodium cyanide and solid sodium cyanide and how each form is transported, stored, and used by mines in their operations.

Liquid and solid sodium cyanide are distinct products

[127] Kinross submits that in the commercial context, the customs and practices of the particular market or industry in which the parties operate are part of the surrounding circumstances that inform the interpretation of a written contract. Kinross submits that the evidence shows that solid sodium cyanide and liquid sodium cyanide are distinct products with different physical, manufacturing, pricing, packaging, transportation, safety, and mine infrastructure characteristics and requirements.

[128] Kinross submits that Cyanco’s interpretation of the term “liquid sodium cyanide” as it is used in the second paragraph of section 20.1 of the SPCs conflates a requirement to purchase liquid sodium cyanide with the fact that sodium cyanide is ultimately used in a highly diluted and liquid form in the leaching process. Kinross submits that Cyanco’s interpretation is flawed because (i) it fails to distinguish between liquid and solid sodium cyanide, and (ii) the words “require liquid sodium cyanide” refer to the required consumption of liquid sodium cyanide purchased from a supplier and not the highly diluted liquid form used in the ultimate leaching operation.

[129] With respect to Kinross’ first point, I accept that solid sodium cyanide and liquid sodium cyanide are distinct products which have materially different characteristics and requirements for transportation, storage and handling. Kinross and Cyanco agreed in the Agreement that Cyanco does not have any contractual right to supply solid sodium cyanide.

[130] With respect to Kinross’ second point, the evidence shows that the Mines store liquid sodium cyanide in a stable 30% solution before the solution is further diluted in the leaching process. In their operations, the Mines require liquid sodium cyanide in a 30% solution, and they require liquid sodium cyanide in a more diluted solution. For reasons I have given, I disagree that the words “require liquid sodium cyanide” in section 20.1 of the SPCs necessarily refer to liquid sodium cyanide at the concentration purchased from a supplier, but even if those words are given this meaning, the Mines still require liquid sodium cyanide at this concentration for their operations.

[131] The fact that it was known to Kinross and to Cyanco when they made the Agreement that solid sodium cyanide and liquid sodium cyanide are distinct products is not a circumstance that calls into question the interpretation of the Agreement advanced by Cyanco.

Supply capabilities at the Winnemucca Plant

[132] Kinross submits that the evidence that the Winnemucca Plant could not produce solid sodium cyanide in 2017 and 2018 and the fact that the Agreement requires that all Product is manufactured at the Winnemucca Plant supports its contention that the scope of the Agreement is confined to the purchase and sale of liquid sodium cyanide.

[133] The Agreement does not confer any right to Cyanco to sell anything other than the Product (liquid sodium cyanide meeting stated specifications) to Kinross. This known circumstance does not deepen my understanding of the objective intentions of the parties when they made the Agreement because Cyanco does not assert that it has such a right under the Agreement. This circumstance does not affect the interpretative exercise one way or the other.

Solid Sodium Cyanide Agreement

[134] Kinross points to the Solid Agreement made at the same time as the Agreement as a relevant surrounding circumstance. Where more than one contract is made as part of an overall transaction, the contracts must be read in light of each other to achieve interpretative accuracy and to give effect to the parties’ intentions: Ottawa (City) v. ClubLink Corporation ULC, 2021 ONCA 847, at para. 54.

[135] Kinross submits that the existence of the Agreement and the Solid Agreement confirms that the scope of each agreement is confined to their respective “Products”.

[136] There is no question that the scope of each of the Agreement and the Solid Agreement is determined by the written terms of each agreement and that each deals with a different “Product” as expressly provided for in each agreement. This known circumstance is not inconsistent with the interpretation of the Agreement advanced by Cyanco and does not deepen my understanding of the objective intentions of the parties when they made the Agreement.

[137] Kinross points to particular provisions of the Solid Agreement. The “Product” in the Solid Agreement means “solid sodium cyanide as described in Section 4 of this SPC”. Section 4 includes specifications for the Products. The Solid Agreement includes in the second paragraph of section 20.1 of the SPCs a similar provision to the second paragraph of section 20.1 of the SPCs for the Agreement. This provision in the Solid Agreement states that Kinross is under no obligation to purchase any Products from Cyanco “if the site is not operating or if the Site does not for any reason require solid sodium cyanide”.

[138] Kinross submits that the language of the Solid Agreement when viewed alongside the language of the contemporaneous Agreement clarifies that section 20.1 of the SPCs only concerns purchasing requirements, not operational requirements. Kinross submits that applying Cyanco’s interpretation of the Agreement, if all mines require liquid sodium cyanide in their operations, even those that can only take supply of solid sodium cyanide, this provision of the Solid Agreement makes no sense. Kinross submits that to give effect to the similar wording in both agreements, the language in question must be interpreted to refer to required consumption of the Product from suppliers, not the operational end-use of the Product.

[139] The mines that Kinross operates that receive solid sodium cyanide under the Solid Agreement are in locations where they are unable to satisfy their operational requirements for liquid sodium cyanide by purchasing liquid sodium cyanide from a supplier such as Cyanco because the plants are too far away from the supplier to make supply of liquid sodium cyanide economical.

[140] Under the Solid Agreement, Kinross is relieved of any purchase obligation for Products (solid sodium cyanide meeting expressed specifications) if the mines in question do not require solid sodium cyanide. This provision makes sense for the mines that are subject to the Solid Agreement because those mines, given their locations, require solid sodium cyanide for their operations. They are unable to operate without purchasing solid sodium cyanide and need to convert solid sodium cyanide to liquid sodium cyanide for use in the leaching process. The fact that the mines also operationally require liquid sodium cyanide does not detract from the efficacy of section 20.1 of the SPCs for the Solid Agreement.

Pre-contractual negotiations

[141] There was considerable evidence at trial from witnesses who were asked about communications between Kinross and Cyanco in the period of time after Kinross’ 2016 RFP until execution of the Agreement. This evidence included the language of Kinross’ RFP, the interests and objectives of the parties during the negotiations, their negotiating strategies and tactics, changes to the draft agreements, the January 24, 2017 meeting in Las Vegas when an “agreement in principle” was reached, and the June 9, 2017 telephone call between Mr. Rostek and Mr. Gransden when Mr. Gransden told Mr. Rostek that Kinross wanted to add the words “liquid” and “solid” as qualifying descriptors to the words “sodium cyanide” in drafts of the Agreement and the Solid Agreement, respectively, and Mr. Rostek agreed.

[142] This evidence including, especially, evidence in relation to the June 9, 2017 telephone call, featured prominently at the trial. This is not surprising because when this proceeding was commenced, it was an application and the evidence concerning this telephone call was contentious. After the application was converted to an action, Kinross delivered a statement of claim that includes many paragraphs with factual assertions concerning the negotiations, including statements directed to the Las Vegas meeting, contents of drafts of the agreements, and the June 7, 2017 telephone call. Cyanco’s statement of defence includes statements directed to the negotiations including the RFP, Cyanco’s bid in response, the January 24, 2017 Las Vegas meeting, the contents of drafts of the agreements, and the June 7, 2017 telephone call.

[143] Notwithstanding its pleaded reliance on pre-contractual negotiations, Kinross submits that evidence of pre-contractual negotiations and prior drafts is not admissible when considering evidence of surrounding circumstances that is relevant and admissible to interpret a written contract. Kinross submits that where, as here, the Agreement is unambiguous and neither party seeks rectification, consideration of evidence of pre-contractual negotiations risks obscuring the clear wording of the Agreement and supplanting the parties’ agreement as shown by the Agreement with an ex post facto narrative.

[144] Cyanco submits that evidence of pre-contractual negotiations is admissible to show the genesis of the transaction, its background, the context, and the market in which the parties are operating provided that the evidence is evidence tendered to deepen the court’s understanding of the objective intentions of the parties when the agreement was made. Cyanco relies on objective evidence of communications during the negotiations as relevant and admissible, but it does not rely on evidence of the June 7, 2017 telephone call as a surrounding circumstance that should be considered to interpret the Agreement. Cyanco submits that objective intention of the parties to the Agreement can be determined from the words used in the Agreement when they are given their ordinary and grammatical meaning.

[145] In Corner Brook (City) v. Bailey, 2021 SCC 29 the Supreme Court of Canada observed, at para. 56, that the traditional rule that evidence of negotiations is inadmissible when interpreting a contract has been held Resolute FP Canada Inc. v. Ontario (Attorney General), 2019 SCC 60 to be one that “sits uneasily” next to the approach from Sattva that directs courts to consider the surrounding circumstances in interpreting a contract. In Corner Brook, the Supreme Court of Canada left for another day the question of whether, and if so, in what circumstances, negotiations will be admissible in interpreting a contract.

[146] I do not regard evidence of the pre-contractual negotiations, including emails sent received and statements made in meetings or telephone calls, including the June 7, 2017 telephone call, to be evidence that will deepen my understanding of the mutual and objective intentions of the parties as expressed in the words of the Agreement. The negotiations included positioning communications made to advance the strategic interests of the respective parties, and involved give and take, as one would expect in a commercial negotiation. I am unable to understand the meaning and purpose of some of these communications without considering internal communications from each side that do not qualify as surrounding circumstances. For me to consider some aspects of the negotiations and not others would result in an incomplete and, possibly, unfair assessment of the negotiations. For these reasons, I do not consider evidence of the pre-contractual negotiations to assist me to interpret the Agreement.

[147] When I read the Agreement as a whole and give the words used their ordinary and grammatical meaning consistent with the surrounding circumstances known to the parties at the time the Agreement was made, I conclude that Kinross is contractually precluded from continuing to operate the Mines while ceasing purchases of the Product for use in the Mines’ operations (and instead purchasing solid sodium cyanide and converting it to liquid sodium cyanide for use in the Mines’ operations).

DISPOSITION

[148] For these reasons, Kinross’ action for declaratory relief is dismissed.

[149] If the parties are unable to resolve costs after diligently attempting to do so, they may make written submissions according to a timetable (and with page limits) to be agreed upon by counsel and approved by me.

Cavanagh J.

Released: July 7, 2023

Footnotes

[^1]: The Agreement states that in it, the singular includes the plural and vice versa. [^2]: Section 20.2 of the SPCs allows Kinross to purchase from any other supplier of sodium cyanide during the term of the Agreement up to 5% of the Consumption Forecast in any calendar year for the purpose of testing products purported to represent new technologies or developments in the field of sodium cyanide that are not a like for like equivalent of the Products sold and purchased under the Agreement. [^3]: In paragraph 6 of its Amended Reply, Kinross pleads: “The ‘life of mine’ language accordingly provides that Kinross shall not be obligated to purchase Product from Cyanco if the Mines no longer require liquid sodium cyanide at the point of sale”. [^4]: The only protection to Cyanco if Kinross purchases less than 80% of the Consumption Forecast is under section 4.1 of the Agreement by which Kinross’ rights under the testing provision of the Agreement (section 20.2 of the SPC) are suspended for the subsequent calendar year.