To most people March 31 is not a significant date. However, the same cannot be said for securities lawyers, auditors and their publicly traded clients. March 31 is the deadline for issuers with December 31 year-ends (other than TSX Venture listed issuers) to prepare and file their annual disclosure documents.
These filings include an Annual Information Form (“AIF“) and financial statements, and related certifications and MD&A for the completed 2016 year. Lawyers and issuers in the mining space have the extra requirement of ensuring that scientific and technical information in the issuer’s AIF is supported by a compliant National Instrument 43-101 technical report.
Given the approaching deadline, here are a few common deficiencies that regulators have identified as problematic in their review of technical reports and related disclosure – so that such issuers can work with their internal and external teams to ensure they have addressed these items appropriately before filing their AIF.
In 2013 the British Columbia Securities Commission released a report (the “BCSC Report”) that, among other items, listed the following items as the most common issues with technical reports:
- Missing or altered statements in the certificate and consent of the responsible Qualified Person(s)
- Not dated, signed or addressed to the issuer
- Does not provide a summary of all material technical and scientific information for the entire property
- Prohibited disclaimers or statements of reliance on other experts
- Non-compliant disclosure of mineral resources and mineral reserves, historical estimates and exploration targets
The BCSC further identified the following sensitive areas that issuers should be prepared to defend/substantiate:
- Disclosure that is not based on industry best practices
- Anomalous metal or commodity pricing assumptions and sensitivity analyses
- Technical reports that do not disclose the Qualified Person’s (QP) assumptions regarding reasonable prospects of economic extraction
- Mineral resource estimates that are not based on an appropriate geological model or do not apply reasonable constraints on mineralization
- Disclosure of ongoing mining studies prior to establishing mineral resources
Regulators subsequently reinforced the BCSC Report’s observations in 2015 when, in the context of reviews of investor presentations on issuers’ websites, they highlighted many of the same items described in the BCSC Report as primary sources of non-compliance by issuers.
Other areas of common technical non-compliance addressed by the regulators in connection with mining-related disclosure include preliminary economic assessments (“PEA”) and presenting a PEA as something more (i.e. either a preliminary feasibility study (“PFS”) or a feasibility study (“FS”)) or stating that certain elements of the PEA have been prepared to the standard of a PFS or FS.
Issuers are reminded that PEA disclosure, in an AIF or otherwise, must be presented as a preliminary view of the potential economic viability of a project and not as anything more advanced or substantive.