On April 23, 2010, the Canadian Securities Administrators (CSA) published a notice and request for comment (the Notice) on proposed changes to National Instrument 43-101 – Standards of Disclosure for Mineral Projects (NI 43-101), and its companion policy (43-101CP) and Form 43-101F1 – Technical Report (collectively, the Proposed Rule), as well as consequential amendments to related instruments and forms. The following highlights certain of the proposed changes.
The Proposed Rule revises certain disclosure requirements for scientific or technical information, including the disclosure of historical estimates. The definition of “historical estimate” has been revised to mean an estimate of quantity, grade, or metal or mineral content of a deposit an issuer has not verified as a current mineral resource or mineral reserve and which was prepared before the issuer acquired, or entered into an agreement to acquire, an interest in the property containing the deposit. Currently, a historical estimate is an estimate of mineral resources or mineral reserves prepared prior to February 1, 2001. While the Proposed Rule allows for an issuer to disclose historical estimates prepared after February 1, 2001, it limits this disclosure to estimates prepared when the issuer did not hold an interest in the property. In addition, an issuer will be able to name the qualified person who approved the disclosure of the scientific or technical information as an alternative to naming the qualified person who prepared or supervised the preparation of the information, as is currently required when disclosing such information.
Under the Proposed Rule, the definitions of “qualified person” and “professional association” have been amended to replace the existing list of acceptable foreign associations with objective tests setting out the requirements for determining whether a foreign professional association is acceptable for the purposes of determining whether an individual is a qualified person.
Preliminary Economic Assessment
The definition of “preliminary assessment” will become “preliminary economic assessment”, and will include preliminary economic analyses after the completion of a pre-feasibility or feasibility study. Currently, a preliminary assessment is limited to a study that includes an economic analysis taken prior to the completion of a pre-feasibility or feasibility study. The current restriction which prevents an issuer from disclosing the results of a preliminary assessment which includes inferred mineral resources unless it is a material change or material fact for the issuer will be removed in the Proposed Rule, although other conditions for such disclosure have been added.
Obligation to File a Technical Report
The CSA is considering, and has specifically requested comments on, removing short form prospectuses from the enumerated list of documents that can trigger the filing of a technical report. Currently, if material scientific or technical information is included in a preliminary short form prospectus that is not in a previously filed technical report, the issuer is required to prepare and file a technical report supporting this information at the time the preliminary short form prospectus is filed. If the short form prospectus trigger is removed, an issuer would only be required to file a technical report if the prospectus discloses for the first time a preliminary economic assessment, mineral resources or mineral reserves, or a change to such information from the most recently filed technical report, that constitutes a material change in respect of the affairs of the issuer. An issuer would have 45 days from the date of filing of the preliminary short form prospectus to file the technical report supporting this disclosure.
Under the Proposed Rule, an issuer will have to file a news release disclosing the filing of a technical report where such report was not filed concurrently with the triggering document. The Proposed Rule will also allow an issuer to delay the filing of a technical report for up to six months following the first time disclosure of preliminary economic assessments, mineral resources or mineral reserves if, subject to certain conditions, (i) another issuer that holds or previously held an interest in the property disclosed the information and filed a technical report to support the disclosure; and (ii) the issuer believes that there is no new material scientific or technical information that would make the prior technical report misleading.
The Proposed Rule expands the current exemptions available to producing issuers from the requirement to file a technical report prepared by an independent qualified person (independent technical reports). The requirement for new reporting issuers in Canada to file independent technical reports will not apply to producing issuers whose securities trade on certain designated stock exchanges. In addition, producing issuers will no longer be required to file independent technical reports to support disclosure in a long form preliminary prospectus, or in a valuation required to be prepared and filed under securities legislation.
The Proposed Rule also provides a new exemption to royalty holders from the requirement to file a technical report if the operator of the mineral project has disclosed the technical information and is itself subject to the Proposed Rule, or is a producing issuer whose securities trade on a specified stock exchange and discloses mineral resources and reserves under an acceptable foreign code.
Consent and Certificate Requirements
Under the Proposed Rule, an issuer will no longer be required to obtain updated consents and certificates from the authors of previously filed technical reports which support scientific and technical information disclosed in the documents enumerated in NI 43-101. In addition, a consequential amendment to National Instrument 44-101 – Short Form Prospectus Distributions will allow an issuer to obtain a consent from the firm that employed the qualified person at the date of signing of the relevant technical report, rather than from the qualified person, consenting to the use of the technical report in the short form prospectus, subject to certain conditions. In proposing these amendments, the CSA has noted that it frequently can be difficult or impossible for issuers to obtain these consents and certificates, and that, in the context of a short form prospectus offering, such delays can result in the completion of the offering being jeopardized.
The Proposed Rule includes numerous changes to the form of technical report, which are intended to make the form less prescriptive and more adaptable for advanced stage and producing properties, and to allow the qualified person more discretion regarding the information and detail required based on his or her assessment of the relevance and significance of the information. For example, the amended form of technical report exempts producing issuers from the requirement to provide an “economic analysis” on producing properties unless the technical report includes a material expansion of current production.
The Proposed Rule emphasizes that technical reports should be simplified, summarized and written in plain language, while still including sufficient context and cautionary language to allow a reasonable investor to understand the nature, importance and limitations of the date, interpretations and conclusions summarized in the technical report. The CSA has noted that they do not think technical reports need to be a repository of all technical data and information about a property and need not include extensive geostatistical analysis, charts, data tables, assay certificate, drill logs, appendices or other supporting technical information.
The CSA has requested comments on the Proposed Rule by July 23, 2010. Please contact your Lang Michener advisor if you have any questions or if you would like to discuss sending comments to the CSA. The full text of the Notice is available here: CSA Notice and Request for Comment.
This is only a brief summary of the Proposed Rule and is not, nor should it be
construed as, legal advice.