Review of Technical Reports Finds "Unacceptable Level of
On June 27, 2013, the Ontario Securities Commission (the
"OSC") published OSC Staff Notice 43-705 – Report on
Staff's Review of Technical Reports by Ontario Mining
Issuers (the "Notice"), which sets out the
results of a recent compliance review of 50 sample technical
reports (Form 43-101F1 under National Instrument 43-101 –
Standards of Disclosure for Mineral Projects "NI 43-101")
filed by Ontario mining issuers. The Notice summarizes the results
of the review and provides useful guidance to mining issuers.
The OSC found "an unacceptable level of compliance"
and warned that "issuers and qualified persons need to further
improve their disclosure." For example, the Notice stated that
80% of the 50 sample technical reports had some form of
non-compliance and 40% had at least one major non-compliance
As a result of these findings, issuers may find themselves faced
with OSC Staff requests for re-filings and additional disclosure,
as well as potential delays when requesting a prospectus receipt.
To avoid these difficulties, issuers may be well-advised to
consider the findings of the Notice when preparing their next
technical report. Below, we provide a brief summary of five key
compliance issues raised in the report.
Top 5 Compliance Lessons
1. Mining resource estimates
25% of the technical reports analyzed did not provide the
necessary assumptions regarding "reasonable prospects for
economic extraction." In order to comply, an issuer must
include a sufficient discussion of the key assumptions, parameters,
and methods used to estimate the mineral resources in order for a
reasonably informed reader to understand the basis for the estimate
and how it was generated. The Canadian Institute of Mining,
Metallurgy and Petroleum's Best Practice Guidelines for
Estimation of Mineral Resource and Mineral Reserves provides
guidance on the constraints that should be considered in resource
estimation and disclosed as part of a statement of mineral
2. Environmental studies, permitting and social or community
32% of the technical reports on advanced properties1
did not adequately disclose information related to environmental
permits or the social or community impacts of developing the
mineral project. In order to comply, an issuer must disclose
reasonably available information on environmental permits and
social or community factors related to the mineral project,
including any exploration agreements in place or under negotiation
with local First Nation communities.
3. Capital and operating costs
26% of the technical reports for advanced properties did not
adequately disclose a summary of capital and operating cost
estimates. The Notice reminds issuers that they must explain and
justify the basis for cost estimates, with the major components set
out in tabular form, as opposed to simply providing a single
4. Economic analysis
37% of the technical reports for advanced properties did not
sufficiently disclose the economic analysis required. The economic
analysis must include a clear statement of and justification for
the principal assumptions and cash flow forecasts on an annual
basis using mineral reserves as well as a discussion of net present
value, internal rate of return, and payback period of capital with
imputed or actual interest. For example, it is potentially
misleading to disclose only pre-tax cash flows and economic
outcomes, positive metal price changes or up-side sensitivity
5. Interpretation and conclusions
36% of technical reports reviewed did not include a clear
overview of the main risks, uncertainties and their potential
impacts on the mineral project and its potential future
development. For example, uncertainties such as the availability of
water rights, use of a novel mineral processing technology or the
potential impact of a civil war in a region should be included. It
may be helpful to include a concise summary table that clearly
provides this information.
Do you have questions? The lawyers at WeirFoulds LLP would
be happy to help explain these important developments and are
experts in securities and mining law.
*Michael Gunsolus is a summer student with WeirFoulds,
currently attending the University of Ottawa.
1Defined in NI 43-101 as "a property that
has (a) mineral reserves, or (b) mineral resources the potential
economic viability of which is supported by a preliminary economic
assessment, a pre-feasibility study or a feasibility
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