The Canadian Securities Administrators yesterday released a staff review of investor presentations on mining issuers' websites, providing valuable insights on how the regulators interpret and apply NI 43-101 and other disclosure requirements and ultimately finding that “there is room for improvement” in order to comply with applicable regulatory standards.
The review, which assessed compliance with NI 43-101 Standards of Disclosure for Mineral Projects and the forward-looking information (FLI) requirements of NI 51-102 Continuous Disclosure Obligations, found a number of deficiencies with disclosure in investor presentations posted on mining issuers' websites. Of the 130 investor presentations reviewed, only 18% were found to be in substantial compliance with disclosure requirements, while 57% suffered from minor non-compliance and 25% had major non-compliance issues.
High levels of non-compliance identified by the review included:
- the failure to provide the name of the qualified person and their relationship with the issuer, with the review finding that overall compliance increased significantly among presentations reviewed by a qualified person;
- disclosure of preliminary economic assessments (PEA) lacking the required cautionary statements for the public to understand the limitations of the results of the PEA;
- when reporting both mineral resources and mineral reserves, a lack of a clear statement whether mineral resources included or excluded mineral reserves;
- exploration targets that were not expressed as ranges or not accompanied by the required cautionary statements outlining the target’s limitations; and
- historical estimates that did not include the source, date, reliability, key assumptions and required cautionary statements.
Other areas cited for additional improvement included: reporting only pre-tax financial results (or providing no information regarding the tax rate for the mineral project); a lack of information provided regarding the assumed metal price for determining mineral estimates; and presentations with drilling results failing to include information on true widths of mineralized zones and not providing results of significantly higher grade intervals enclosed in a lower grade intersection, such information being identified by the CSA as particularly important for early stage projects.
The review also reminds issuers that the first time written disclosure of mineral resources, mineral reserves or the results of a PEA (or a change to any of these that constitutes a material change) triggers the requirement to file a technical report, and cautions that staff has significant concerns about PEA disclosure on issuer websites in contravention of this requirement. This includes economic projections in presentations, fact sheets and statements as well as third party reports posted to or linked from an issuer’s website.
According to the notice, 38% of investor presentations reviewed also included statements that may be overly promotional or misleading, potentially resulting in a misrepresentation under applicable securities legislation. Terms which are noted as inappropriate in certain circumstances included "world-class", "production ready" and "spectacular and exceptional results".
The majority of investor presentations reviewed also included FLI disclosure. Of those presentations, 54% did not provide information required by NI 51-102 concerning the material factors and assumptions used to develop the FLI (which, in addition to compliance with NI 51-102, comprise important elements of the secondary market civil liability defence to misrepresentations contained in FLI). Issuers were reminded that FLI includes metal price assumptions used in mineral resource and mineral reserve estimates as well as other assumptions used in an economic analysis and financial projections based on engineering studies.
Ultimately, the CSA state that they expect mining issuers to strengthen their compliance and improve disclosure to investors, and that they intend to continue to review mining issuers' website disclosure as part of their overall continuous disclosure program. Issuers identified as having disclosure deficiencies may be requested to correct the deficiency (by amending or removing the website disclosure or filing a clarifying or retracting news release) and could ultimately suffer further sanction until the issuer corrects the deficiency. The CSA further cautioned that, if an issuer is considering a prospectus offering, the review of the prospectus filing will likely be deferred if issues such as those noted above are present.
For further information, see CSA Staff Notice 43-309.