On July 22, 2011, the Ontario Securities Commission (the "OSC") released OSC Staff Notice 43-704 ("Notice 43-704"), providing guidance on the application of National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101") to mineral brine projects, which are projects in which minerals are mined from a liquid brine rather than from hard rock.
This notice arose as a result of divergent views in the mining community on whether NI 43-101 applies to lithium/potash brines and is based, in large part, upon submissions made by members of Gowlings' Mining Group to the OSC on this issue. Notice 43-704 reflects the views of staff of the Corporate Finance Branch of the OSC and does not necessarily reflect the views of the OSC, other jurisdictions or the Canadian Securities Administrators.
NI 43-101 Applies to Mineral Brine Projects
NI 43-101 provides the standards of disclosure for "mineral projects"1 and specifies the information which must be disclosed relating to "mineral reserves" and "mineral resources"2 comprising a mineral project.
Despite the references to solid materials within these definitions (specifically "natural solid inorganic material"), Notice 43-704 confirms that the disclosure standards in NI 43-101 apply to mineral projects involved in the activity of extracting minerals from a liquid brine. This is relevant to mineral projects that involve or contemplate the mining of lithium, potassium and other salts (i.e. "natural solid inorganic material") from bodies of water. It is the form of the mineral that is relevant to the analysis concerning the application of NI 43-101, not the type of host medium from which a mineral is extracted (e.g. hard rock or liquid brine).
Notice 43-704 confirms the position of the OSC's Corporate Finance Branch that NI 43-101 provides a "proper and rigorous disclosure framework for mineral projects hosted in a brine" and "it is in the public interest for mineral brine projects to be subject to the requirements of NI 43-101."
While the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM") has not provided an official position on whether mineral concentrations dissolved within a liquid are captured by the defined terms "mineral resource" and "mineral reserve", Notice 43-704 provides that in the view of the OSC's Corporate Finance Branch, a mineral brine project is a "mineral project" under NI 43-101 regardless of whether a resource or a reserve on the project falls within these CIM defined terms. The notice acknowledges the potential for uncertainty in the absence of an official position from the CIM and the potential for divergent views. The notice provides that issuers or qualified persons should disclose their view on whether a mineral brine project falls within or outside of the CIM definitions in any scientific or technical information and indicates that an issuer taking the view that a resource or reserve falls outside of the CIM definitions should disclose how it intends to comply with any requirements of NI 43-101 that rely on these definitions, including the technical report triggers in section 4.2 of NI 43-101. Therefore, despite the position taken by an issuer on the scope of the CIM definitions, compliance with the technical report requirements under NI 43-101 is still expected.
Technical Reports Prepared for Mineral Brine Projects Should Reflect Issues Specific to Brine Hosted Deposits
NI 43-101 requires that scientific and technical information about a mineral project be provided and supported by a technical report prepared in accordance with Form 43-101F1. Notice 43-704 provides that technical reports prepared in respect of a mineral brine project should reflect the issues that are specific to brine-hosted deposits and include cautionary language with any scientific or technical information regarding a mineral brine project to emphasize the differences between such projects and traditional hard rock projects. The notice provides a non-exhaustive list of considerations which issuers should reflect upon when satisfying the technical report form requirements including: mineral rights, climate, geology and mineralization, deposit types, sampling, mineral resource estimates and mining methods.
Footnotes
1. NI 43-101 defines a "mineral project" as "any exploration, development or production activity, including a royalty or similar interest in these activities, in respect of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal and industrial minerals." [emphasis added]
2. The definitions of "mineral resource" and "mineral reserve" developed by the CIM are incorporated by reference into NI 43-101. As of November 27, 2010, the CIM has adopted the following definitions.
"A mineral resource is a concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal and industrial minerals in or on the Earth's crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge." [emphasis added]
"A mineral reserve is the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined."
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