On April 23, 2010, the Canadian Securities Administrators (CSA) published a Notice and Request for Comment in respect of a proposed amended National Instrument 43-101 – Standards of Disclosure for Mineral Projects (NI 43-101), which governs the disclosure of scientific or technical information by securities issuers in Canada. There is a 90-day period in which comments are being sought by the CSA.

NI 43-101 is a codified set of rules and guidelines for disclosing information related to mineral properties held by issuers whose securities are publicly traded or issued to the public in Canada.  NI 43-101 was implemented by the CSA subsequent to the Bre-X fraud in order to protect the investing public from unsubstantiated and fraudulent claims on mineral resources.

The proposed amendments would be the first major change since the instrument was introduced in December 2001.  The stated purpose of the amendments is to make NI 43-101 more efficient and effective without compromising investor protection. 

A complete text of the proposed changes is available at:

http://www.osc.gov.on.ca/en/NewsEvents_nr_20100423_csa-mining-rule.htm

Following is a summary of the proposed changes.

Definitions and Interpretation

  • Add a definition of "acceptable foreign code", and amend the definitions of "professional association" and "qualified person", to replace prescriptive lists with objective tests that will accommodate changes without formal amendment
  • Amend the definition of "historical estimate" to permit disclosure of third party estimates made after 2001
  • Expand the definition of "preliminary economic assessment" to include preliminary economic analyses after the completion of a pre-feasibility or feasibility study

Requirements Applicable to All  Disclosure

  • Prohibit the disclosure of the gross contained metal or mineral value of a deposit
  • Require the disclosure of the impact of a preliminary economic assessment completed after a pre-feasibility or feasibility study
  • Require comment on the work needed to verify the historical estimates

Additional Requirements for Written Disclosure

  • Allow an issuer to name the qualified person who approved the disclosure of the scientific and technical information, as an alternative to naming the qualified person who prepared or supervised the preparation of the information

Obligation to File Technical Reports

  • Expand the technical report trigger to include any first time written disclosure of mineral resources, mineral reserves, or preliminary economic assessments
  • Require the issuance of a news release disclosing the filing of the technical report in all circumstances where the filing delay applies, to alert the market that the technical report has been filed
  • Add a new exemption that allows a conditional 6-month filing delay for a technical report supporting mineral resources, mineral reserves, or a preliminary economic assessment, if these estimates are supported by a current technical report filed by another issuer
  • Remove the requirement to file updated certificates and consents of qualified persons, and clarify that the previously filed technical report must meet any independence requirements for the subsequent trigger

Author of Technical Report

  • Provide a new exemption for producing issuers whose securities trade on a specified exchange, from the independence requirement in relation to a technical report filed only as a result of the producing issuer becoming a reporting issuer in Canada
  • Expand the current exemption for producing issuers from the independence requirement

Preparation of Technical Report

  • Expand Permitted Disclaimers in Item 3 of the Amended Form (Form 43-101F1 – Technical Report)

Use of Foreign Code

  • Remove the prescriptive list of acceptable foreign codes and the requirement for issuers to reconcile foreign resource and reserve categories to current categories as defined by the Canadian Institute of Mining, Metallurgy and Petroleum

Qualified Persons and Technical Reports

  • Provide a new exemption from including certain statements in the consents of qualified persons for technical reports filed only as a result of the issuer becoming a reporting issuer in Canada
  • Exempt a foreign producing issuer listed on a specified exchange from the requirement to have an independent qualified person prepare its technical report when it first becomes a reporting issuer

Royalty Holders

  • Provide a new exemption to royalty holders from the requirement to file a technical report, if the operator of the mineral project is subject to the NI 43-101 or its securities trade on a specified exchange and certain other conditions are met

Short Form Prospectus Trigger

  • The CSA is still considering whether to keep or eliminate the technical report filing obligation for a short form prospectus

Amended Form 43-101F1

  • Broaden Item 25 of the current Form 43-101F1 which deals with advanced stage properties with eight new items that reflect the major components or topics of a preliminary economic assessment, pre-feasibility study, or feasibility study 
  • Amend Reliance on Other Experts to allow the qualified person to rely on and disclaim responsibility for certain information provided by the issuer and certain pricing and valuation information provided by experts who are not qualified persons
  • Amend Instruction (5) to allow qualified persons to refer to any information in previously filed technical reports, to the extent that it is still current, but require them to summarize or quote this information in the current technical report so the reader does not have to find and read multiple reports
  • Add a requirement under Data Verification for the qualified person to comment on the adequacy of the data
  • Amend Mineral Processing and Metallurgical Testing to be more specific about the information required and to add a requirement to discuss any potential processing factors or deleterious elements
  • Exempt Producing Issuers from the requirement to include information under Economic Analysis for their producing properties

Amended Companion Policy

  • Under General Guidance, add guidance on forward-looking information, and on a property material to the issuer
  • Add guidance on certain definitions in NI 43-101, including the new definition of "acceptable foreign code", the revised definitions of "professional association" and "qualified person", and the interpretation of "property"
  • Incorporate and update Appendix A as guidance on recognized acceptable foreign associations
  • Expand the guidance on the use of cautionary language, including the  interpretation of  the new concept of "equal prominence"
  • Add guidance on amended technical report triggers and on related issues including property acquisitions, production decisions, shelf life of technical reports, preliminary economic assessments, and the filing of technical reports not required
  • Add proposed guidance on the impact of removing the short form prospectus trigger for a technical report (this will only be adopted if the obligation to file a technical report with a Short Form Prospectus is eliminated)
  • Clarify certain issues in Part 5 regarding qualified persons, including relevant experience requirements for supervising qualified persons, the involvement of non-independent qualified persons in preparing independent technical reports, and taking responsibility for information incorporated from other reports
  • Add guidance in section 5.3, on the independent requirement and what constitutes a 100 percent or greater change to a mineral resource or mineral reserve
  • Add guidance in Part 8 on certificates and consents, including consents for technical reports no longer required

Consequential Amendments

  • Amendments to NI 44-101 – Short Form Prospectus Distributions
    • Permit an issuer that is required to obtain an expert consent from a qualified person, in connection with a previously filed technical report, to obtain the expert consent from the firm that employed the qualified person at the date of signing the technical report, rather than from the qualified person
      • The purpose is to ease the situation faced by an issuer filing a short form prospectus when the qualified person who authored the technical report is no longer available or able to provide the required consent
      • Two conditions apply: 
        • The firm's principal business must be providing engineering or geoscientific services
        • The person signing the consent on behalf of the firm must be both an authorized signatory of the firm and a person who satisfies the conditions in paragraphs (a) and (c) of the definition of qualified person
  • Amendments to Form 51-102F1 – Management's Discussion and Analysis
    • Require a resource issuer to disclose in its MD&A whether a significant milestone such as a production decision is based on a technical report filed under NI 43-101

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