Continuous disclosure requirements in Canada create some common yet challenging hurdles for Canadian reporting issuers in the mining industry to manage. Mining issuers not only need to consider general disclosure requirements for reporting issuers, but must also navigate requirements specific to mining and mineral projects. National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101") is the instrument which provides general guidance to mining issuers on the disclosure of scientific and technical information relating to their projects. The main function of NI 43-101 is to ensure scientific and technical information is accurate, consistent and verified by experts.
Events that must be disclosed
Generally, information that is material information must be disclosed. The basic disclosure requirements are found in securities laws which requirements are then expanded upon by the policies and rules set by exchanges. Although definitions vary between Canadian exchanges on what meets the standard of material information requiring disclosure, the general notion is that material information is information that would be reasonably expected to significantly affect the market price of an issuer's shares. For example, material information is defined by the TSX Venture Exchange (the "TSX-V") policy as "any information relating to the business and affairs of an Issuer that results in or would reasonably be expected to result in a significant change in the market price or value of any of the Issuer's Listed Shares, and includes Material Facts and Material Changes".1 Requirements are also set by the TSX-V in appendix 3F - Mineral Standards Guidelines (the "Appendix"). The Appendix incorporates and expands upon the minimum standards prescribed by securities laws and applies to all oral statements and written disclosure made by an Issuer or on behalf of an Issuer involving mineral properties. The Appendix requires that an issuer must disclose material scientific and technical information, both positive and negative, on a timely basis, even if the results of exploration may not be at a stage where definitive conclusions can be drawn. Further, the Appendix requires that an Issuer must report and disclose exploration information and opinions on mineral properties in accordance with NI 43-101 and the Appendix.
In addition to the requirement to disclose material information, the TSX-V policy lists specific events that must be disclosed because they are deemed to be material in nature. Certain events deemed to be material in nature that are specific to mining issuers include:
- Exploration results & developments (positive or negative);
- Significant property acquisition, disposition or joint-venture agreements;
- Significant litigation;
- Significant labour/major contractor disputes; and
- Significant change in capital investment plans or corporate objectives.2
Although pre-filing disclosure with IIROC is advisable for any material announcement, it is mandated in a number of circumstances. The following are mining specific disclosure which require pre-filing with IIROC:
- First-time disclosure of new resource and reserve estimates;
- First-time disclosure of economic analysis including any operating projections, feasibility studies, or preliminary economic assessments etc.;
- Major property acquisitions and dispositions;
- Qualifying transactions; or
- Reviewable transactions.
It is important to wait for IIROC's response before disseminating news releases related to any of the above. It is advisable to pre-file material news releases, especially when a halt is required. If there is any doubt, it is advisable to contact IIROC.3
Disclosure of technical or scientific information
Mining issuers should take note of the requirements under NI 43-101 for the disclosure of technical or scientific information. It is also important to note that NI 43-101 governs disclosure made to the public by any issuer not just reporting issuers. This means NI 43-101 can apply to non-reporting issuers and foreign companies making disclosure in Canada. NI 43-101 requires all disclosure of scientific or technical information made by an issuer, including disclosure of a mineral resource or mineral reserve, concerning a mineral project on a property material to the issuer to be:
- Based upon information prepared by or under the supervision of a qualified person; or
- Approved by a qualified person.
Information disclosed which does not meet this standard set out in NI 43-101 may attract negative attention from regulators, legal liability, or fines and penalties. Pursuant to NI 43 101, "qualified person" means an individual who:
- Is an engineer or geoscientist with a university degree, or equivalent accreditation, in an area of geoscience, or engineering, relating to mineral exploration or mining;
- Has at least five years of experience in mineral exploration, mine development or operation or mineral project assessment, or any combination of these, that is relevant to his or her professional degree or area of practice;
- Has experience relevant to the subject matter of the mineral project and the technical report;
- Is in good standing with a professional association; and
- In the case of a professional association in a foreign jurisdiction, has a membership designation that
- Requires attainment of a position of responsibility in their profession that requires the exercise of independent judgment; and
- Favourable confidential peer evaluation of the individual's character, professional judgement, experience, and ethical fitness; or
- A recommendation for membership by at least two peers, and demonstrated prominence or expertise in the field of mineral exploration or mining.4
Qualified persons play a critical gatekeeping role in public protection and maintaining confidence in public markets and it is important that a qualified person that has approved technical information disclosure for a mining issuer understand their role in upholding that public interest. A qualified person "should be clearly satisfied that they could face their peers and demonstrate competence and relevant experience in the commodity, type of deposit, and situation under consideration"5. A mining issuer is responsible for its disclosure and choosing an appropriate qualified person for the specific task.
News releases are the primary way in which reporting issuers disclose information to investors, regulators and the general public. Mining issuers should exercise caution when drafting news releases as non-compliance can lead to being required to issue a new news release clarifying and/or retracting previous disclosure, being placed on a default list, being given a cease trade order or management cease trade order, having a class action lawsuit filed under civil liability provisions of the Securities Act, having a complaint forwarded to the Qualified Person's professional association, being required to file a technical report to back up the disclosure and other possible penalties.
Generally, news releases must:
- State specific facts
- Convey specific and accurate facts
- Avoid subjective terms and overly promotional language
- State all the facts
- State all relevant information about the matter being disclosed
- Failure to state information necessary to make a statement not misleading is just as serious as making a false statement
- Make balanced presentation of the facts
- Report positive and negative results
- Involve Qualified Person(s)
- Name the QP who reviewed & approved, and relationship to Company
The following is general guidance on what to avoid and what to look out for when drafting news releases containing technical disclosure for a mining issuer. The list is not exhaustive but provides a starting point for mining issuers to consider.
Overly promotional material
Mining issuers can attract negative attention from regulators by using statements that are overly promotional. As noted above, news releases should convey specific and accurate facts that avoid subjectivity. It is important to avoid superlative language that conveys an exaggerated or hyperbolic version of the facts. It is not advisable to rely on overly promotional language used in news releases of other issuers as these news releases may have already attracted warnings from regulators. Negative attention from regulators often comes from quotes of officers used in the news releases. Any quotes used in news releases should be properly vetted and considered for overly promotional language.
Exploration results should be disclosed with the relevant analytical method used. The name and location of the laboratory used along with the laboratory's certification or lack thereof should be disclosed. The mining issuer should note any non-standard sampling, preparation or procedures. Selective disclosure of results is prohibited by NI 43-101. Further, discussion of gross metal value is not acceptable when disclosing exploration results.
Analytical results should disclose both good and bad results. It is important to disclose the sources of all information disclosed. Analytical results disclosure should provide details on sampling including the type, number of samples and the location of the sampling. Disclosure relating to drilling should report results for all holes and not just the best holes. All geophysical and geochemical anomalies should be disclosed but an anomaly does not necessarily mean you have found a mineral deposit. Finally, the disclosure should clearly distinguish between new and previously disclosed results.
While visual observation disclosure is not generally advisable, mining issuers should be aware that certain disclosure is prohibited under NI 43-101. Visual estimates of grade, for example, a visual estimate of 1% gold, is prohibited. Further, visual estimates of mineralization are also prohibited. Factual observations and photos are not prohibited, however, it is strongly recommended that any disclosure of visual observations be pre-filed with IIROC.
Certain phrases are commonly used but problematic for compliance with NI 43-101. First, "The following information is not compliant with NI 43-101". This phrase is problematic because under NI 43-101, all disclosure must be compliant with NI 43-101. Second, "The following [drilling/sampling] is NI 43-101 compliant". This phrase is incorrect because NI 43-101 only regulates disclosure and not how the work is conducted. Finally, "This information should not be relied upon" is not an appropriate phrase because if information cannot be relied upon, it is not suitable for disclosure.
There are many variables and unique situations that require a tailored approach to disclosure. Mining disclosure also often involves information of a highly technical and scientific nature, creating further challenges. It is essential for mining issuers to obtain proper legal advice when dealing with disclosure requirements. If you require advice regarding mining disclosure
- Continuous disclosure requirements are both a challenging and necessary component of operating a mining issuer. Mining issuers not only need to consider general disclosure requirements for reporting issuers, but must also consider specific requirements that apply only to mineral projects.
- NI 43-101 requires a qualified person to review and approve the disclosure of scientific or technical information. Selecting a qualified person to review and approve the disclosure is critical as information disclosed which does not meet the standard set out in NI 43-101 may attract negative attention from regulators, legal liability, or fines and penalties.
- Pre-filing with IIROC is a key consideration in disclosure and can be a requirement in certain circumstances. It is advisable to pre-file material news releases, and wait for IIROC's response before disseminating news releases.
1 TSX-V Exchange Policy 3.3, Sec. 2.1.
2 TSX-V Exchange Policy 3.3, Sec. 3.8.
3 TSX-V Exchange Policy 3.2, Sec. 4.2.
4 National Instrument 43-101 Sec. 1.1 "Qualified Person"
5 CIM Definition Standards, adopted by CIM Council May 10, 2014
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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.