Canada: National Instrument 43-101: Part 2 - What Issuers Need To Know About Terminology

Last Updated: July 15 2014
Article by Gregory Hogan and Alexander Pizale

This is the second instalment in our periodic series on National Instrument 43-101.

Terms and phrases used in mining disclosures are technical, and industry jargon can be used inconsistently. However, when used correctly, specialized terms can encapsulate the complexity and specificity of technical and geological concepts. Applied with lack of care or worse, abused, that same language will obscure meaning and possibly mislead, which could result in undesirable scrutiny from the regulators.

NI 43-101 mandates the use of some terms, restricts the use of other terms and uses terms that will determine the disclosure that is necessary. In addition, regulators have recently focused on some terms that are not explicitly dealt with in NI 43-101, but that in their view are being used incorrectly. Finally, there are some terms used in NI 43-101 that can be the source of confusion, the use of which should be with caution. Certain of these terms are described below.

Issuers continue to use resource categories that are not set out in the CIM Definition Standards, most typically in documents such as investor presentations and fact sheets. To that end, NI 43-101 attempts to provide a framework within which investors are provided with information that is produced or vetted by qualified industry experts, is disclosed in a consistent, comparable manner and with the relevant context and background.

Mineral Reserve and Resource Categories

Under NI 43-101, disclosure of mineral reserve and resource estimates may only be made if the estimates use the categories developed by the Canadian Institute of Mining, Metallurgy and Petroleum and published in the CIM Definition Standards for Mineral Resources and Mineral Reserves, being:
 

Mineral Reserves
Probable mineral reserve
Proven mineral reserve



Mineral Resources
Inferred mineral resource
Indicated mineral resource
Measured mineral resource



The current version of the CIM Definition Standards was adopted in May 2014 and is available here.

Slight variations on these terms are sometimes made and may be acceptable. However, other variations, even if used widely for the mineral in question, are not acceptable. Examples include disclosing an estimate that uses a category such as "recoverable coal reserves", "potential reserves," "potential resource," "mineable reserve" and "economically mineable resource". Issuers must remember that each category of mineral reserve and resource estimate must be reported separately and the category for each estimate must be indicated. While probable and proven reserves and indicated and measured resources may be added together, inferred mineral resources may not be added to other categories. It is important to remember this when preparing charts or graphs as it is easy to inadvertently add inferred mineral resource to the other categories.

Technical Study Terms

An issuer is prohibited from using the terms "preliminary feasibility study," "pre-feasibility study" or "feasibility study" when referring to a study unless the study satisfies the criteria set out in NI 43-101.

A feasibility study is a comprehensive technical and economic study of the selected development option for a mineral project that includes appropriately detailed assessments of "modifying factors," together with any other relevant operational factors and detailed financial analysis, that are necessary to demonstrate at the time of reporting that extraction is reasonably justified (economically mineable). The results of the study may reasonably serve as the basis for a final decision by a proponent or financial institution to proceed with, or finance, the development of the project. The confidence level of the study will be higher than that of a pre-feasibility study. Typically the accuracy of a feasibility study is in the range of -5% to +15% with a contingency of 10% to 15%.

Modifying factors are considerations used to convert mineral resources to mineral reserves. These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors.

A preliminary feasibility study (or "pre-feasibility study") is a comprehensive study of a range of options for the technical and economic viability of a mineral project that has advanced to a stage where a preferred mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, is established and an effective method of mineral processing is determined. It includes a financial analysis based on reasonable assumptions on the modifying factors and the evaluation of any other relevant factors which are sufficient for a qualified person, acting reasonably, to determine if all or part of the mineral resource may be classified as a mineral reserve. The confidence level of a pre-feasibility study is at a lower confidence level than a feasibility study. Typically the accuracy of a pre-feasibility study is in the range of -15% to +30% with a contingency of 15% to 25%.

Feasibility and pre-feasibility studies should delineate a mineral reserve if the project is not being abandoned. The work that is done should have been to a level to permit the qualified person to make such estimates. If the project is still being progressed, the concern about not disclosing reserves is that the report may be treating resources as reserves or that the report may be a PEA (described below) in disguise. If no reserves are delineated, the report should set out the reasons that a reserve could not be estimated. A valid reason for not delineating a reserve in a feasibility and pre-feasibility study might be an unresolved permitting or tenure issue, negative economics or issues with the geologic modelling. It is not acceptable to fail to delineate a reserve because further exploration is needed.

A preliminary economic assessment (or "PEA") means a study, other than a pre-feasibility study or feasibility study, that includes an economic analysis of the potential viability of mineral resources. Typically the accuracy of a PEA is in the range of -30% to +50% with a contingency of 25% to 50%. The confidence level of a PEA is low, below that of either an feasibility or preliminary feasibility study. Unlike the other two types of study, a PEA may contain result of an economic analysis that includes, or is based upon, inferred mineral resources. However, where that occurs, disclosure based on the study must contain prescribed cautionary language.

In addition, it is important to note that a PEA should not act as a proxy for a pre-feasibility study or feasibility study. A PEA cannot demonstrate economic viably. A PEA is not meant to be a way to include a inferred resource in a pre-feasibility study or feasibility study or to alter such studies to include more positive assumptions. Just because a report is labeled a PEA does not mean that regulators will accept it as a PEA if it is done to the levels of a pre-feasibility study or feasibility study.

Property Terms

NI 43-101 defines two different types of properties - advanced property and early stage exploration property. "Advanced property" means: 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 study. Advanced properties have additional technical report form items to address that other properties would not need to, including additional illustrations. Advanced properties are permitted to disclose less detail regarding drilling in their technical reports. "Early stage exploration property" means: a property for which the technical report being filed has (a) no current mineral resources or mineral reserves defined; and (b) no drilling or trenching proposed. No site visit is required for a technical report for an early state exploration property.

Producing Issuer

Under NI 43-101, producing issuers have reduced disclosure obligations. "Producing issuer" means: an issuer with annual audited financial statements that disclose (a) gross revenue, derived from mining operations, of at least $30 million Canadian for the issuer's most recently completed financial year; and (b) gross revenue, derived from mining operations, of at least $90 million Canadian in the aggregate for the issuer's three most recently completed financial years. These issuers are exempt from including economic analysis in technical reports on properties currently in production, unless the technical report includes information on a material expansion of current production. This provides relief to producing issuers who often do not want to provide this sensitive information in publically available technical reports. In addition, producing issuers are generally exempt from the requirement that their technical reports be produced by an independent qualified person.

Ore

Regulators consider the use of the word "ore" to be potentially misleading if used because it implies technical feasibility and economic viability. In this view, the implied feasibility and viability of ore is that of mineral reserves and so the term (and related usages such as "ore body") should only be used when talking about mineral reserves.

Regulators have also indicated that modifiers such as "minable," "geologic," "drill indicated" and "possible" should also be avoided in the context of the discussion of mineral resources and reserves.

Scientific and Technical Information

"Scientific or technical information" includes project economics, and financial valuations and models. Regulators have indicated that they find issuers and qualified persons will sometimes take the view that this information is not scientific or technical. This view should not be taken.

Material

Many of the requirements of NI 43-101 apply to mineral projects on properties that are "material." These include the requirement for review of disclosure by a qualified person, disclosure of parameters and assumption for estimates, disclosure of data verification procedures, disclosure of QA/QC procedures for exploration information, and triggers for technical reports. Material is not defined in NI 43-101. Issuers will generally need to assess it in the same way they assess materiality in their disclosure generally.

Compliant

Regulators have advise against the use of the term "compliant" when an issuer is referring to its technical report. They consider the use of the word "compliant" to be potentially misleading as they have not reviewed the report and deemed it to be complaint under NI 43-101. Regulators will not review reports and provide issuers with this determination.  Regulators do not feel that an issuer is in a position to determine that the report in NI 43-101 compliant so the use of this term should be avoided.

Further, issuers should not call their estimates "NI 43-101 compliant" or something similar. These statements may be misleading as NI 43-101 establishes rules on how issuers disclose mineral resources and reserves and other such technical information, but it does not directly provide the rules for the collection and use of exploration information or the estimation of mineral resources or reserves, which are instead established by industry organizations such as CIM. Issuers should instead characterize their report as being "prepared in accordance with NI 43-101."

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
Gregory Hogan
Similar Articles
Relevancy Powered by MondaqAI
Borden Ladner Gervais LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Borden Ladner Gervais LLP
Related Articles
 
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