On June 27, 2013, the OSC issued Staff Notice 43-705 addressing OSC concerns with respect to disclosure in technical reports.
Out of the 50 reports reviewed, 40% had at least one major non-compliance concern, 40% had some concerns, and only 20% were in compliance with the requirements of Form 43-101F1.
59% of the issuers were at the mineral resources stage. 26% at the development or productions stage and 15% were at the exploration stage.
Most of the jurisdictions for the properties were in North America, South America, Africa, Russia or China and Australia and the principal mineral commodities were gold, copper and iron. 54% of the reports were prepared by regional firms and 20% from global firms. Independent sole proprietor qualified persons ("QPs") comprised 14% of the authors of technical reports and 12% were prepared by in-house QPs.
In 58% of the cases, reports were filed pursuant to a disclosure trigger which arose from a material change in relation of the issuer or a change in the mineral resources in the most recently filed report. The areas of significant deficiencies in the technical reports included mineral resource estimates, environmental studies, permitting and social or community impact, capital and operating costs, economical analysis and interpretation and conclusions. Other frequent disclosure deficiencies included the summary, history and certificate of the QP. The significant areas of concern included the following:
- Mineral Resource Estimate. Some 25% of the reports did not provide the required information in that the key assumptions parameters and methods used to estimate the resources are not provided and the requirement for "reasonable prospects for economical extraction" were not clearly disclosed.
- Environmental Studies Permitting and Social or Community Impact. These were not addressed in some 32% of the reports and often remediation and reclamation matters were not discussed, particularly in relation to advanced properties.
- Capital and Operating Costs. Some 26% of the reports did not adequately disclose information on these matters and that qualified persons are reminded to provide more context and justification for the capital and operating cost estimates for advanced properties.
- Economic Analysis. Thirty seven percent of the reports on advanced properties did not sufficiently disclose the economic analysis including the impact of taxes on the projects where an economic analysis has been carried out. It is not acceptable to only include pre tax cash flows in economic outcomes.
- Interpretations and Conclusions. The authors are reminding issuers that it is a new requirement to disclose significant risks and uncertainties and any related foreseeable impacts of risks and uncertainties on the project and some 36% of the reports did not disclose specific project risks on potential outcomes and mitigating factors.
In addition, QPs are reminded to briefly summarize the important information and key findings about the property including its description, ownership, data verification, site visits, resource and reserve estimates, if applicable, mining studies, economic analysis, if applicable, and the QPs conclusions and recommendations.
In some 28% of reports, the disclosure of the historical estimate did not state that it was not a current resource and was not being treated as a current resource.
In some 24% of the certificates, there were errors in the QPs certificate.
For more information, visit our Securities Mining Law blog at www.securitiesmininglaw.com
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