While investor presentations and other forms of investor relations materials provided on company websites are an effective tool for communication, mining issuers should remain alert that such materials are captured by the definition of "written disclosure" and the associated disclosure rules in National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"). A review of such investor presentations and other website disclosure was the subject of the recent Canadian Securities Administrators ("CSA") Staff Notice 43-309 – Review of Website Investor Presentations by Mining Issuers (the "Staff Notice") issued on April 9, 2015.
Overall, the CSA found that there is substantial room for improvement for mining issuers to comply with disclosure requirements. Of the 130 investor presentations reviewed, only 18% were found to be substantially compliant with NI 43-101, while 57% had issues of minor non-compliance and 25% suffered from major non-compliance concerns. The CSA sent letters to 49 mining issuers requiring them to take remedial action, including providing undertakings regarding future compliance, issuing a corrective news release and, in the most severe cases, filing or refiling a technical report.
The Staff Notice highlights the need for mining issuers to improve their disclosure in order to effectively comply with the requirements of NI 43-101. The most significant areas of non-compliance identified by the CSA review include:
- Naming the qualified person ("QP"): Of the 130 investor presentations reviewed, only 54 provided the QP's name and relationship to the issuer. The Staff Notice states that the foundation of NI 43-101 is that scientific and technical information must be prepared or approved by a QP and that compliant disclosure must state the name of the QP and their relationship to the issuer. The CSA noted that overall compliance was significantly higher among presentations that were reviewed by a QP.
- Preliminary economic assessments ("PEA"): The Staff Notice advises issuers to ensure that disclosure of the results of a PEA provides appropriate cautionary statements for the public to understand the limitations of the results of the PEA and to highlight the viability of mineral reserves vis-à-vis mineral resources.
- Inclusion or exclusion of mineral reserves in mineral resources: The Staff Notice states that when reporting both mineral resources and mineral reserves, a clear statement as to whether the mineral resources include or exclude mineral reserves is required.
- Exploration targets: The Staff Notice states that both the potential quantity and grade of an exploration target must be expressed as ranges. In addition, accompanying statements outlining the target limitations must be provided.
- Historical estimates: The Staff Notice states that disclosure of historical estimates must include reference to the source, date, reliability and key assumptions of such estimates, and must be accompanied by the required cautionary statements.
- Overly promotional terms and potentially misleading information: The Staff Notice cautions against the use of statements that are overly promotional or misleading, which could potentially result in a misrepresentation under securities legislation. Terms such as "world class", "spectacular and exceptional results", "production ready", "ore" in relation to mineral resources, and "management estimates" are specifically identified as examples of statements that could be misleading, particularly when used by exploration stage or mineral resource stage issuers.
Other notable areas mentioned for additional improvement include: (i) reporting only pre-tax financial results or providing no information about the applicable tax rate in PEAs or other economic reports; (ii) a lack of disclosure regarding assumed metal prices used for determining mineral resource estimates; and (iii) disclosure of drilling results that failed to include information on the true width of mineralized zones or failed to provide results of significantly higher grade intervals enclosed in a lower grade intersection, which were cited by the CSA as being particularly important for early stage projects.
The Staff Notice also reminds issuers that first time written disclosure of mineral resources, mineral reserves or the results of a PEA (or a change to any of these that constitutes a material change for the issuer) triggers an obligation to file a supporting technical report. The CSA cautions that they have significant concerns about PEA disclosure on mining issuers' websites, including in investor presentations, fact sheets, and posted or linked third party reports, that is not supported by an existing technical report.
The Staff Notice should be used as a "self-assessment tool" and provides mining issuers with practical information to strengthen their compliance and improve the quality of their disclosure to investors. The Staff Notice recommends that the QP responsible for particular technical information review all investor presentations and other website disclosure prior to the posting of such materials.
The CSA has indicated that they will continue to review mining issuers' website disclosure as part of their overall continuous disclosure review program. Issuers identified as having material disclosure deficiencies will be required to correct the deficiencies and may be subject to further sanctions depending on the severity of the non-compliance and the issuer's response. The Staff Notice further cautions that if non-compliant disclosure is discovered in the context of a prospectus offering, the offering will likely be delayed while the deficient disclosure is corrected.
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