On February 6, 2014, the Ontario Securities Commission (OSC)
published Staff Notice 51-722 – Report on a Review of
Mining Issuers' Management's Discussion and Analysis and
Guidance (the Staff Notice). In the Staff Notice, the OSC
summarizes the results of its recent review of the MD&A filed
by mining issuers with a market capitalization of less than $100
million and provides guidance to assist these issuers in complying
with their disclosure obligations. The following provides an
overview of the Staff Notice.
Areas of Improvement
The Staff Notice identifies four primary areas for
venture issuers without significant revenue from operations did
not provide the breakdown of material components of exploration and
evaluation (E&E) assets or expenditures
issuers with exploration projects did not discuss and itemize
their exploration expenditures
issuers with a working capital deficiency provided very general
discussion or no discussion about potential sources of financing
and how they plan on continuing operations
issuers did not appropriately disclose the identity of the
parties involved in related party transactions
Venture Issuer Disclosure
In its review, the OSC found that most exploration stage mining
issuers failed to provide adequate disclosure of E&E assets or
expenditures. As stated in the Staff Notice, providing a breakdown
of the material components of E&E, a presentation of E&E
assets or expenditures on a property-by-property basis, general and
administrative expenses and other material costs incurred helps
investors understand the nature of the work being performed, how
money is being spent and helps them evaluate the impact the
expenses have in moving the exploration or developments of
Discussion of Operations
The Staff Notice states that issuers without producing mines
should be disclosing essential information about their material
mineral projects, including work completed and expenses incurred
during the period, current (and future) project plans and
For issuers with producing mines, the OSC advises that MD&A
should include information on production figures, production
activities and milestones, operating and production costs, sales
and revenue, explanations of any substantial changes to production
and operation information, new developments and the impact each of
these have on mineral resources and reserves.
Liquidity and Capital Resources
The OSC found that a majority of the mining issuers selected for
review failed to provide adequate disclosure concerning their
working capital requirements. For those with a working capital
deficiency, a large majority provided no discussion or a very
general discussion about needing to access the capital markets in
Transactions Between Related Parties
As stated in the Staff Notice, the OSC is aware that many
smaller issuers leverage their business relationships to advance
their projects in a cost controlled fashion by entering into
related party contracts or transactions. However, the OSC found
that a large proportion of issuers failed to appropriately disclose
the identity of the related party involved in the transaction.
Guidance and Sample Disclosure
In recent years, the OSC has provided guidance in the form of
examples to assist issuers in understanding the type of
entity-specific disclosure required by regulators. In this Staff
Notice, the OSC provides a detailed guide setting out examples of
the inadequate disclosure often found in MD&A and comparing it
against the disclosure it expects issuers to provide. While the
examples provided are illustrative only and should not replace
entity-specific disclosure as mandated by an issuer's specific
set of circumstances, mining issuers should take note of the level
of detail provided in the examples.
How to Respond
When it comes to regulatory compliance, the best strategy is
usually a proactive one. Acting proactively to improve MD&A
disclosure, as described in the Staff Notice, can assist issuers in
communicating their results to investors and decrease the
likelihood of problems in connection with a continuous disclosure
review. For mining issuers contemplating a prospectus offering or
any other transaction contingent upon a disclosure review by
regulators, complying with the disclosure requirements as set out
in the Staff Notice should be considered essential in order to make
the review go as smoothly as possible.
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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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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