Most mining issuers pay attention to National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101") when it comes to mandatory filings, but when it comes to promotional materials like investor presentations they can fall short. Mining issuers can forget that investor presentations (as well as other content linked to a company's website like fact sheets, media articles, and links to third party websites) are "written disclosure" as defined in NI 43-101, and that this disclosure must be reviewed by a qualified person to ensure compliance with NI 43-101. Often investor presentations are not prepared by or reviewed by a qualified person, and can be overly promotional and contain information that is not compliant with NI 43-101 - prompting a much dreaded letter from the regulator.
The securities commissions of British Columbia ("BCSC"), Ontario ("OSC"), and Quebec ("AMF") (collectively, the "Regulators") recently conducted a review of investor presentations of pre-production stage mining issuers for compliance with NI 43-101, as well as forward looking information for compliance with part 4A of NI 51-102 Continuous Disclosure Obligations ("NI 51-102"). The results of the Regulator's review are set out in CSA Staff Notice 43-309 Review of Website Investor Presentations by Mining Issuers (the "Notice"). Mining issuers are expected to use the Notice to help them comply with securities legislation and improve their disclosure.
The Notice states that mining issuers need to improve their disclosure in the following areas in order to better comply with NI 43-101:
- Naming the qualified person: review of technical information by a qualified person directly improves compliance with requirements;
- Preliminary economic assessments ("PEA"): providing required cautionary statements ensures proper understanding of the PEA results' limitations;
- Mineral resources and mineral reserves: a clear statement whether mineral resources include or exclude mineral reserves is essential to avoid misleading disclosure;
- Exploration targets: potential quantity and grade must be expressed as a range and be accompanied by the required statements outlining the target limitations;
- Historical estimates: disclosure must include source, date, reliability, key assumptions and be accompanied by the required cautionary statements;
- Exploration information: include summary of quality assurance and quality control measures and name testing laboratory;
- Data verification: include statement that the qualified person has verified data in the investor presentation;
- Taxes in economic studies: include pre and post tax financial results in economic studies;
- Metal or commodity price assumptions used in resources and reserves: clearly state metal or commodity price and cut-off grade; and
- Drilling information: include information on true widths of mineralized zones and results of significantly higher grade intervals enclosed in a lower grade intersection. The Notice reminds mining issuers that they can rely on a previously filed document for required disclosure in some circumstances to satisfy these requirements.
The Notice reminds mining issuers that they can rely on a previously filed document for required disclosure in some circumstances to satisfy these requirements.
The Regulators found that exploration and resource stage issuers were using words like "world class", "spectacular", "production ready" and "ore" in investor presentations, and cautions mining issuers that these words can be interpreted as overly promotional and may be used inappropriately.
In addition, mining issuers at the resource stage or earlier must be careful about disclosing anticipated economic outcomes, because such disclosure may trigger a technical report to be filed to support such findings. Examples include production rate, capital costs, operating costs, and mine life - all which suggest the project is at a more advanced stage of development and can be misleading.
The Notice states that the majority of mining issuers did not provide information required by paragraph 4A.3(c) of NI 51-102 concerning the material factors and assumptions used to develop forward looking information. The Notice reminds mining issuers that forward looking information includes metal price assumptions used in resource and reserve estimates as well as other assumptions used in economic analysis and financial projections based on engineering studies.
The Notice warns that the Regulators will continue to review mining issuers’ website disclosure, and when they find material deficiencies they will ask mining issuers to correct such deficiencies by amending or removing the problematic disclosure and filing a clarifying or retracting news release. Even worse, mining issuers with disclosure that is not compliant with NI 43-101 may be placed on the defaulting issuer list or cease traded. And any prospectus offering would likely be delayed as well.
Recommendations on how to comply
It is tempting for a mining issuer to forget about NI 43-101 when putting together an investor presentation, because it is focused on selling the company and its project(s). And the goal of the mining issuer is to keep the investor presentation simple, eye catching, and uncluttered, rather than including all the information necessary under NI 43-101. However in our experience, it is still possible for a mining issuer to have an effective investor presentation and comply with NI 43-101. For example, by including the required information at the back of the presentation, or referencing previously filed documents containing the information when this is allowed. It is important to remember, however, that required cautionary language must be in close proximity to the relevant disclosure, and not buried at the back in small font.
Finally, the Notice reminds mining issuers it is important to take a step back, and take the time to make sure its investor presentations comply with NI 43-101 and to have a qualified person review and approve the disclosure.