Canada: OSC Finds Unacceptable Level Of Compliance With Technical Reports Filed

Staff of the Ontario Securities Commission recently conducted a review of Technical Reports filed in Ontario by mining issuers under National Instrument 43-101 Standards of Disclosure for Mineral Projects and Form 43-101F1 Technical Reports. OSC Staff Notice 43-705 Report on Staff's Review of Technical Reports by Ontario Mining Issuers was published on June 27, 2013 to summarize the results of the review, highlight common compliance issues and provide guidance to mining issuers on how to better comply with the rules regarding Technical Reports.

Out of the 50 Technical Reports reviewed, 40 (or 80%) were found to be non-compliant with the requirements in some way. Based on their review, OSC Staff concluded that "Although significant efforts have been made to comply with the requirements of Form 43-101F1, issuers and qualified persons need to further improve their disclosure."

In particular, OSC Staff highlighted the following areas of concern:

Mineral Resource Estimates

When disclosing mineral resources, issuers must provide, among other things, sufficient discussion of the key assumptions, parameters and methods used to estimate the mineral resources so that a reasonably informed reader can understand the basis for the estimate and how it was generated. Notable mistakes which OSC Staff identified include (a) failing to disclose how reasonable prospects for economic extraction were established or what cut-off grade was used to estimate the mineral resource; (b) failing to clearly disclose the assumed metal price or factors related to the mining scenario or mineral processing recovery; and (c) failing to include the required statement about the extent, if any, to which mineral reserves are included in total mineral resources.

Environmental Studies, Permitting and Social or Community Impact

A Technical Report for an "advanced property" must discuss reasonably available information on environmental permits and social or community factors related to the mineral project, and OSC Staff identified significant deficiencies in this regard. Proper disclosure would include any potential social or community related requirements and plans for the project, as well as the status of any negotiations or agreements with local communities (e.g., impact benefit agreements with First Nations), remediation and reclamation requirements and costs.

Capital and Operating Costs

The summary of capital and operating cost estimates for an advanced property "should not be a single bottom-line number". Context and justification for capital and operating cost estimates must be included.

Economic Analysis

The Technical Report for an advanced property must include an economic analysis for the mineral project. There are various specific requirements in Item 22 of Form 43-101F1 which must be followed with regard to this requirement. In addition, OSC Staff noted that disclosing only (a) pre-tax cash flows and economic outcomes; (b) positive metal price changes; or (c) up-side sensitivity analysis is potentially misleading.

Interpretations and Conclusions

In the "interpretations and conclusions" section of a Technical Report, the issuer is required to include a discussion on any significant risks and uncertainties that could reasonably be expected to affect the reliability or confidence in the exploration information, mineral resource or reserve estimates or projected economic outcomes, and any related reasonably foreseeable impacts of these risks and uncertainties. OSC Staff suggested that qualified persons should consider including a table that sets out significant project specific risks, potential outcomes and mitigating factors, along with a supplementary discussion.

Other Common Deficiencies

OSC Staff also noted areas of concern in the summary section (Item 1 of Form 43-101F1) and the history section (Item 6 of Form 43-101F1) of Technical Reports. A Technical Report needs to include a summary of important information and "key findings". As well, specific cautionary language is required to be used every time a historical resource or reserve estimate is disclosed.

Also noted were various problems with the qualified person's certificate of qualifications (for example, certain required items or statements were missing from the certificate). OSC Staff commented that the qualified person's certificate is one of the first things that is checked by regulators when reviewing a Technical Report.

Implications for Corporate Governance – Board and Management Oversight

OSC Staff points out that although a qualified person is responsible for preparing and supervising the Technical Report as well as providing the appropriate technical and scientific advice, the ultimate responsibility under securities law belongs to the issuer and its directors and officers. OSC Staff notes that while there is no statutory requirement that directors review the Technical Report in full, each issuer should consider how it meets expectations and requirements related to Technical Reports. As part of fulfilling their oversight function, a board of directors should consider the composition and technical skill set of the board of directors, its committees, officers and managers.

Conclusion

OSC Staff stated in their report that they will continue to actively review Technical Reports filed in Ontario by mining issuers. Furthermore, when an issuer has not met the requirements of Form 43-101F1, the issuer should anticipate requests for refilings, additional disclosure or other staff action.

There is no question that a number of the deficiencies noted by OSC Staff could have been detected in advance, if issuers (either directly or through their professional advisors) had carried out a more rigorous review of the Technical Report prior to it being filed on SEDAR. The additional time and expense involved in any such internal review also have to be weighed against the far greater time, expense and other adverse consequences arising from an issuer being noted in default, being cease-traded or having a financing delayed or cancelled, all because of Technical Report deficiencies being discovered by OSC Staff or staff of other Canadian securities regulators.

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 Mondaq.com.

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

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions