Prior to the implementation of the amendments to National Instrument 43-101
Standards of Disclosure for Mineral
Projects (NI 43-101) last June (we discussed the amendments in an earlier blog
post), a "preliminary assessment" was
defined to be an assessment as to economic viability undertaken at
an early stage in a project, "prior to the completion of any
preliminary feasibility study". The principle was, as it has
always been, that an issuer would use a scoping study or PEA to
provide initial indications as to economic viability, but not to
tack on extra information that should be included within a
preliminary feasibility study (PFS) or feasibility study (FS). The
issue is that disclosure of PEA results is not meant to be a means
to provide extra economic information beyond the information
provided in the issuer's PFS or FS at some lesser standard of
detail or more relaxed level of analysis than required in a PFS or
The definition of PEA was changed with the NI 43-101 amendments
last year and is now simply defined as an economic analysis other
than a preliminary feasibility study or a feasibility study. The
change was meant to allow issuers some flexibility in certain
contexts, for example: to step back and reassess alternative
development options; to take a fresh look at a project where a PFS
or FS is no longer current or relevant; or to facilitate the
disclosure of material information about new zones or production
scenarios at operating mines (this last situation can become more
problematic in the context of a project that is already operating,
having a PFS or FS).
However, the underlying principle has not changed. Companion
Policy 43-101 (NI 43-101CP, as amended last June) is clear that
where an issuer discloses a PEA that follows a PFS or a FS, the
issuer will be required to disclose the impact on the PFS or FS,
and to disclose the impact on the issuer's stated mineral
reserves. Specifically, 43-101CP states that if the PEA
significantly modifies any of the key variables in a PFS or a FS,
including commodity prices, mine plan, or costs, the PFS/FS and
mineral reserves for the project may no longer be current.
Since the amendment of NI 43-101 last year, staff of various
securities commissions have been focusing on issuers that have made
any disclosure that indicates or implies mineral project economics
other than PFS or FS disclosure, because such disclosure (if not
supported by a PFS or FS) will constitute a PEA and can trigger a
technical report filing requirement under s. 4.2(1)(j) of in NI
43-101. For example, if an issuer discloses future production
estimates, future revenue estimates, IRR, expanded mine life or
capital and operating costs beyond those set out in a PFS/FS, such
disclosure will constitute a disclosure of a PEA.
Staff of the CSA are reportedly in
the process of formulating a new staff notice on PEAs which, we are
advised, will be issued relatively soon. Based upon both the
underlying principles and also recent public statements by CSA
Staff we believe the notice will provide guidance on PEAs and
avoiding misleading disclosure, and will likely clarify, among
other things, that a PEA cannot be (i) a study carried out
concurrently with or as part of a PFS or FS; (ii) used as a way to
include inferred resources in a PFS or FS; or (iii) used as a way
to modify a PFS or FS to include more optimistic assumptions than
those included in the PFS or FS.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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