The Securities and Exchange Commission (SEC) this month unveiled
proposed rules intended to modernize the disclosure requirements
for SEC-registered companies engaged in mining activities. If
implemented, the proposed rules would align the SEC's
disclosure regime with current industry and global regulatory
practices, including Canada's National Instrument 43-101.
The SEC's Industry Guide 7, long considered to be outdated,
has become an outlier in a global industry. In addition to
harmonizing the U.S. disclosure requirements with the CRIRSCO-based
mining codes, the proposed rules would also codify mining
disclosure requirements in SEC rules and provide greater clarity to
market participants who have criticized the SEC's inconsistent
Highlights of the Proposed Rules
Requiring a registrant to provide mining disclosures if its
mining operations are material to its business or financial
condition, with the presumption that a registrant's mining
operations are material if its mining assets constitute 10% or more
of its total assets.
Requiring a registrant with more than one property to provide
summary disclosure concerning its combined mining activities, in
addition to disclosure for individual properties.
Ensuring that a company's public declaration of exploration
results and mineral resources and reserves are supported by the
findings of a "Qualified Person", being
a mineral industry professional having the relevant level of
expertise who would be deemed an "expert" for the
purposes of U.S. securities laws. The proposed rules do not mandate
that the Qualified Person be independent from the company, but if
the Qualified Person is affiliated with the registrant, the nature
of the relationship would have to be disclosed.
Permitted disclosure of exploration results and mineral
resources, in addition to mineral reserves, for each of the
company's material properties. This approach is consistent with
the CRIRSCO rules and places U.S. registrants on a level playing
field with Canadian and non-U.S. mining registrants, removing the
current restriction to disclosure of only proven and probable
Permitting disclosure of mineral reserves based on a
preliminary feasibility study or a feasibility study.
Requiring the Qualified Person to write a technical summary
report in "plain English" to supplement the disclosure of
mineral resources, mineral reserves, or material exploration
results for each material property.
The proposed rules would apply to SEC-registered mining
companies, both U.S. and foreign, but would expressly exempt
Canadian MJDS issuers from the new disclosure requirements.
Notably, Canadian issuers who are not MJDS-eligible would have to
comply with both the SEC's proposed rules as well as the rules
under the current Canadian regime.
The full text of the SEC's proposed rules and request for
comments can be found at https://www.sec.gov/rules/proposed/2016/33-10098.pdf.
Comments are due within 60 days of the rule proposal being
published in the Federal Register. Some commentators predict that
due to the complexity and novelty of the new rules it could take a
year or more before the SEC implements the proposed rules.
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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