The OSC yesterday published guidance intended to assist small mining issuers in complying with MD&A requirements. Specifically, the notice includes a review of MD&A by mining issuers with a market capitalization of less than $100 million and guidance in respect of MD&A disclosure.
In reviewing MD&A disclosure, the OSC ultimately found that many smaller mining issuers continue to struggle to provide complete and meaningful MD&A disclosure. The OSC specifically identified a number of areas needing improvement, namely in respect of (i) venture issuers without significant revenue from operations not providing a breakdown of material components of exploration and evaluation assets or expenditures; (ii) issuers with exploration projects not discussing and itemizing exploration expenditures; (iii) issuers with a working capital deficiency providing only general discussion of potential sources of financing and how they planned on continuing operations; (iv) issuers not appropriately disclosing the identity of the party involved in a related party transaction; (v) issuers providing either no discussion or a generic, unquantified discussion of liquidity risks. The report consequently provides guidance to address the above concerns, including examples of boilerplate disclosure contrasted with examples of more acceptable disclosure.
Specifically, the notice reminds issuers that: (i) venture issuers without significant revenues must disclose a breakdown of the material components of exploration and evaluation assets or expenditures, general and administrative expenses and other materials on a comparative basis, present E&E assets or expenditures on a property-by-property basis and include a qualitative discussion of those expenditure; (ii) issuers with significant projects that have yet to generate revenue must disclose useful information for each material property or project that is not at the development or production stage; (iii) issuers with producing mines or mines under development must include certain useful disclosure on a property-by-property basis; (iv) to be meaningful, the discussion of liquidity and capital resources must address in detail all future cash requirements of an operating and capital nature and how they will be funded; (v) investors need to understand who are the specific parties involved in related party transactions, the business purpose and economic substance of the transaction; and (vi) to be meaningful, risk disclosure needs to be entity-specific and updated regularly.
While the guidance provided is specific to the mining issuers reviewed, the report states that the content and disclosure examples would benefit all issuers. For more information, see OSC Staff Notice 51-722.