Canada: Canadian Securities Administrators Note Misuse Of ''Preliminary Economic Assessments'' In Mining Projects

In Staff Notice 43-307 (the Notice), the Canadian Securities Administrators (the CSA) identify a number of issues and deficiencies they have been seeing in relation to revised National Instrument 43-101 - Standards of Disclosure for Mineral Projects (NI 43-101), which came into force last year. In particular, the CSA has seen problems with the use of "preliminary economic assessment" reports (PEAs). The Notice discusses these issues, notes the CSA's stance on each issue and describes the consequences for issuers found to have these deficiencies.


The CSA identifies a number of issues they have observed since the revisions to NI 43-101 came into effect:

  • a PEA being used as a substitute for a pre-feasibility study (PFS);
  • a PEA being done as an add-on or in conjunction with a PFS or a feasibility study (FS);
  • PEAs containing content considered inappropriate by the CSA unless accompanied by further technical reports;
  • potentially misleading PEA results;
  • PEA disclosure that inappropriately includes cash flow projections for by-product commodities; and
  • individuals who are not properly qualified taking responsibility for technical reports that support PEA findings.

The CSA describes the consequences for having the above deficiencies or errors. These include requesting that the issuer correct the deficiency and re-state and re-file the documents, placing the issuer on the reporting issuer default list, seeking a commission order requiring the issuer to re-file the documents or issuing a cease trade order until the deficiencies are rectified.

The CSA's position

Issue: PEA as a substitute to a PFS

The CSA describes seeing issuers represent that their PEAs have been or will be done at or close to the level of a PFS. The CSA notes that a PEA cannot, by its very definition, be a PFS or an FS, as these studies analyze similar data but for very different purposes. The definition of a PEA permits the inclusion of inferred mineral resources and is intended to be accompanied by the appropriate cautionary language to indicate that the report speaks to potential viability of mineral resources. Characterizing a PEA as a PFS implies the study is more comprehensive than it is and may cause the market to give excessive weight to the results.

The CSA states that they look for the following indicators to determine that an issuer is inappropriately substituting a PEA for a PFS:

  • the issuer does not include the cautionary statement prescribed by NI 43-101 with equal prominence each time it discloses the economic analysis;
  • the issuer uses the PEA as justification to move directly to an FS or production decision;
  • the issuer discloses mining or mineable mineral resources or uses the term "ore"; or
  • the issuer implies that the economic viability of the mineral resources has been demonstrated.

Issue: PEA done too closely or in conjunction with a PFS or an FS

The revision to the PEA definition included industry consultation to accommodate the industry's expressed desire to be able to take a step back and re-evaluate the scope or objectives of a project. However, the CSA takes the position that a PEA done virtually in concurrence with a PFS or an FS is not sufficiently distinct to stand alone as a PEA. The CSA will not consider tandem reports to include a PEA in the following situations:

  • if the report has the net effect of incorporating inferred mineral resources into the PFS or FS, even as a sensitivity analysis;
  • if the report adds to or modifies a PFS or an FS to give a more optimistic outcome; or
  • if the report is a PFS or an FS in all respects except name.

Issue: PEAs containing content considered inappropriate by the CSA unless accompanied by further technical reports

The CSA notes that investors rely heavily on potential economic outcomes disclosed by an issuer about its material mineral properties in making investment decisions. In some cases, the CSA has seen issuers disclosing potential economic outcomes for their material mineral properties in a PEA that are not otherwise supported by a technical report. Because that information is significant, the CSA may require that issuers provide additional technical reports to back these claims if the issuer:

  • includes the information on potential economic outcomes in corporate presentations or other investor relations materials or the issuer's website; or
  • posts or links to third-party documents containing the potential economic outcomes.

Issue: potentially misleading PEA results

The CSA notes seeing PEAs it considers aggressive or overly optimistic or that diverge significantly from professional standards and industry best practices. A PEA includes forward-looking information and, as such, the issuer must have a reasonable basis for stating the forward-looking information, in accordance with other provisions of securities regulations. The CSA may now challenge issuers to justify the assumptions being made in a PEA or ask them to revise the PEA.

Issue: PEA disclosure that inappropriately includes cash flow projections for by-product commodities

The CSA takes the position that inclusion of cash flow from by-product commodities in a PEA is misleading and contrary to the definition of a PEA. Only commodities that have been categorized as measured, indicated or inferred should be included in PEAs.

Issue: individuals who are not properly qualified taking responsibility for technical reports that support PEA findings

The CSA describes seeing individuals who are not properly qualified taking responsibility for technical aspects of reports. Individuals the CSA does not believe are properly qualified will now be asked to explain their qualifications, or a revised technical report from additional qualified individuals will be requested.


The CSA lists the actions it will now pursue in response to any of the above-noted deficiencies. These include:

  • request the issuer to correct the deficiency by restating and re-filing the documents;
  • place the issuer on the reporting issuer default list;
  • seek a commission order requiring the issuer to re-file the documents;
  • issue a cease trade order until the issuer corrects the deficiency; and
  • other enforcement or regulatory action.

An issuer filing a prospectus may find that the issuance of a receipt is delayed by inclusion of any of the discussed deficiencies.

Norton Rose Group

Norton Rose Group is a leading international legal practice. We offer a full business law service to many of the world's pre-eminent financial institutions and corporations from offices in Europe, Asia, Australia, Canada, Africa, the Middle East, Latin America and Central Asia.

Knowing how our clients' businesses work and understanding what drives their industries is fundamental to us. Our lawyers share industry knowledge and sector expertise across borders, enabling us to support our clients anywhere in the world. We are strong in financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and pharmaceuticals and life sciences.

We have more than 2900 lawyers operating from 43 offices in Abu Dhabi, Almaty, Amsterdam, Athens, Bahrain, Bangkok, Beijing, Bogotá, Brisbane, Brussels, Calgary, Canberra, Cape Town, Caracas, Casablanca, Dubai, Durban, Frankfurt, Hamburg, Hong Kong, Johannesburg, London, Melbourne, Milan, Montréal, Moscow, Munich, Ottawa, Paris, Perth, Piraeus, Prague, Québec, Rome, Shanghai, Singapore, Sydney, Tokyo, Toronto and Warsaw; and from associate offices in Dar es Salaam, Ho Chi Minh City and Jakarta.

Norton Rose Group comprises Norton Rose LLP, Norton Rose Australia, Norton Rose Canada LLP, Norton Rose South Africa (incorporated as Deneys Reitz Inc), and their respective affiliates.

On January 1, 2012, Macleod Dixon joined Norton Rose Group adding strength and depth in Canada, Latin America and around the world. For more information please visit

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.