NI 43-101 sets out the requirements of the Canadian Securities Administrators (CSA) for disclosure of information about mining projects, including the requirement that the disclosure of scientific and technical information about a material mineral property be approved by a qualified person and, where necessary, supported by a technical report. Since its adoption in 2001, members of the CSA have conducted a number of reviews of disclosure by mining issuers for compliance with NI 43-101, including reviews by the British Columbia Securities Commission in 2012 and by the Ontario Securities Commission in 2013. The CSA has now turned its focus to investor presentations.
Accordingly, staff of three of the regulators (BC, Ontario and Quebec) undertook a review of some 130 investor presentations of pre-production mining companies. They found that only 18% of the investor presentations were in "substantial compliance" with the requirements of NI 43-101. In the CSA's somewhat understated words, there was "room for improvement" for mining issuers to comply with disclosure requirements.
Major Areas of Non Compliance
The major areas of non-compliance were:
- Failure to identify a qualified person (QP) who has reviewed the information. (58% non-compliance)
- Lack of required cautionary statements regarding preliminary economic assessments. (56%)
- Not stating in respect of a preliminary economic assessment, that the economic viability of the mineral resources has not been demonstrated by the economic analysis. (50%)
- Not stating whether mineral resources include or exclude mineral reserves. (50%)
- Failure to express potential quantity and grade of exploration targets as a range and to include the required statements outlining the target limitations. (79%)
- Disclosure of historical estimates which fails to include source, date, reliability, key assumptions and be accompanied by the required cautionary statements. (60%)
- Failure to disclose a summary of the quality assurance program and quality control measures. (67%)
- Failure to provide the name and location of the testing laboratory used. (71%).
- No statement regarding verification of the data by the QP in the document containing the written disclosure. (64%)
- Reporting only pre-tax financial results or providing no information about the tax and royalty rates for the mineral project. (63%)
- No information about the assumed metal price used for determining the mineral estimates. (30%)
- Not including drilling information on true widths of mineralized zones or providing results of significantly higher grade intervals enclosed in a lower grade intersection. (42%)
In addition, the review indicated that 54% of presentations did not comply with the requirements for forward looking information (FLI) set out in NI 51-102 and the Companion Policy to NI 43-101.
Commendably, staff resolved most areas of non-compliance with the companies by having them amended their presentations and undertake to comply in the future. However, twenty of the companies were required to issue corrective press releases and/or refile technical reports.
Investor presentations are now forefront on the regulators agenda when assessing compliance with NI 43-101. Somewhat ominously, the CSA state: "We expect mining issuers to use this notice to strengthen their compliance with securities legislation and improve their disclosure to investors". These presentations should be reviewed by counsel and QPs for compliance with NI 43-101. Failure to do so could result in adverse consequences including:
- Placing the issuer on the reporting issuer default list;
- Issuing a cease trade order until the issuer corrects the deficiency; and
- Deferral of the review of a prospectus filing until the disclosure issues are resolved.