The British Columbia Securities Commission recently released its 2012 Mining Report that discusses the most common deficiencies in mining issuer disclosure. The report is the first of its kind for the BCSC, and provides an overview of the types of mining disclosure reviews undertaken by the BCSC, and summarizes their main findings over the past several years. Issuers should keep in mind that the securities commissions, including the BCSC, do not review all publicly filed documents available on SEDAR, and therefore issuers should not assume that examples of disclosure they find online are compliant with regulatory requirements or have been otherwise blessed by the regulators.
The report provides helpful guidance so that mining issuers can improve their disclosure and understand the BCSC's approach to interpretative issues.
Some of the most common deficiencies noted by the BCSC were:
- Failure to file a current technical report
- Failure to file technical reports that fully comply with the requirements of National Instrument 43-101 Standards of Disclosure for Mineral Projects, including:
- Missing or altered statements in certificates or consents of qualified persons and
- Prohibited disclaimers or statements of reliance on other experts
- Failure to include the required cautionary statements for preliminary economic assessments, historical estimates and exploration targets
- Disclosure of mineral resources and mineral reserves that do not fully comply with NI 43-101
- Misleading references to mining studies (preliminary economic assessments, pre-feasibility studies and feasibility studies)
- Failure to name the qualified person responsible for the scientific and technical disclosure
Another area of concern for the BCSC was its finding that disclosure was generally less NI 43-101 compliant on an issuer's website, investor relations materials and corporate presentations when compared with required filings such as news releases, technical reports, management's discussion and analyses and annual information forms. Reporting issuers are reminded that the requirements of NI 43-101 apply equally to all forms (oral and written) of scientific and technical disclosure, not just to disclosure contained in documentation required to be filed on SEDAR.
The report also provides guidance on some of the items that will cause the BCSC to look more closely at a reporting issuer's disclosure, including:
- Disclosure that is not based on industry best practices
- Canadian securities regulators have stated that they expect the qualified person (QP), acting in its professional capacity, to follow industry best practices adopted by CIM or similar organizations. Failure to follow best practices may cause the BCSC to question the objectivity of the QP.
- Anomalous metal or commodity pricing assumptions and sensitivity analyses
- The BCSC recognizes the lesser of the three-year moving average and current spot price as acceptable as per SEC practice.
- Issuers are also reminded that if they include positive metal price sensitivities in their economic analyses, they should also include negative sensitivities to avoid misleading disclosure.
- Technical reports that do not disclose the QP's assumptions regarding a project's reasonable prospects of economic extraction typically reflected by the cut-off grade
- Mineral resources, by definition, must have reasonable prospects of economic extraction.
- Mineral resource estimates that are not based on an appropriate geological model or do not apply reasonable constraints on mineralization
- The definition of "mineral resources" and industry best practices require the application of a geological model.
- Disclosure of ongoing mining studies prior to establishing mineral resources
- Mining studies (preliminary economic assessments, pre-feasibility studies and feasibility studies) apply economic analyses to mineral resources and therefore investors may be misled into inferring the presence of a resource that does not exist.
The report does not go into extensive detail regarding the requirements of NI 43-101, as an understanding of the NI 43-101 requirements by the reader is assumed by the BCSC.
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.