The British Columbia Securities Commission (“BCSC”) has published its 2012 Mining Report (the “BCSC Report”) which highlights common disclosure deficiencies by mining issuers and provides guidance on topical issues that materialized during 2012.

The following is a summary of the most common deficiencies identified by the BCSC, as well as guidance provided by the BCSC relating to topical issues. The complete BCSC Report can be accessed at http://www.bcsc.bc.ca/release.aspx?id=16410

MINING DISCLOSURE REVIEWS

Disclosure Deficiencies

In 2012, the BCSC conducted continuous disclosure reviews, annual compliance reviews, targeted reviews and prospectus reviews to assess compliance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) and other required disclosures by mining issuers.1 The BCSC noted that issuers were more likely to have deficient disclosure in voluntary disclosure, such as on their websites, than in required filings, such as AIFs or press releases. Based on these reviews, which are briefly described below, the BCSC identified the following as the most common disclosure deficiencies:

  • failure to file a current or fully compliant technical report
  • failure to include the required cautionary statements for preliminary economic assessments (“PEA”), historical estimates, and exploration targets
  • failure to express exploration targets in ranges or to include appropriate cautionary language
  • disclosure of mineral resources and mineral reserves (“MRMR”) that do not fully comply with NI 43–101
  • restricted or misleading references to mining studies
  • disclosure that is not timely, factual or balanced
  • not disclosing the appropriate mineral resource category, including adding inferred mineral resources with other categories
  • failure to name the qualified person (“QP”) responsible for applicable disclosure

Some of the common issues identified in technical reports were:

  • missing or altered statements in certificates and consents of QPs
  • reports not dated, signed or addressed to issuers
  • prohibited disclaimers or statements of reliance on other experts
  • not all material technical information being summarized
  • non-compliant disclosure of MRMR, historical estimates, and exploration targets
  • inadequate or unclear information on key assumptions, parameters and methodologies used in resource estimates  

Types of Reviews

The following is a brief summary of the types of disclosure reviews conducted by the BCSC.  

(i) Continuous disclosure reviews

  • range from very limited review to a complete examination of required and voluntary disclosure as well as third party documents such as analyst reports
  • consequences for disclosure issues depend on the severity of the deficiency and can range from a request to correct the disclosure to the issuance of a cease trade order until the disclosure is corrected  

(ii) Annual compliance reviews

  • high level review of disclosure requirements, primarily from parts 2 and 3 of NI 43-101, in required and voluntary disclosure of randomly selected active mining companies
  • typically does not result in any action taken by the BCSC  

(iii) Targeted reviews

  • targeted review of disclosure generally found to be problematic when conducting continuous disclosure and annual reviews
  • issuers selected based on poor disclosure in email blasts, news releases and paid promotions
  • Of the 82 issuers selected for targeted reviews since February 2011, 34 have been placed on the defaulting issuers list and 13 were sent letters identifying issues  

(iv) Prospectus reviews

  • BCSC examines prospectuses for compliance with NI 43-101
  • most deficiencies relate to the supporting technical report  

TOPICAL ISSUES AND RELATED GUIDANCE

The BCSC Report provides guidance based on the BCSC’s examination of topical issues including the use of industry standards and best practices, metal pricing assumptions, mineral resource estimates and the use of mining studies. Although this guidance does not change continuous disclosure requirements, it does elaborate on the expectations of the BCSC and/or the interpretation of the requirements. The following is a summary of the guidance provided by the BCSC:

  • Industry Standards and Best Practices: BCSC may ask issuers to retain a different QP or have another QP verify a QPs work where disclosure is not based on industry best practices as identified in General Guidance (6) to the Companion Policy of NI 43-101
  • Metal Pricing Assumptions: where a QP uses anomalous metal or commodity pricing assumptions, the BCSC may ask the QP to explain the basis for such assumptions and provide examples of other technical reports that have used similar pricing assumptions
  • Mineral Resource Estimation: technical reports must (i) disclose a QP’s assumptions regarding reasonable prospects of economic extraction, and (ii) include mineral resource estimates based on an appropriate geological model (such as one consistent with the deposit type) and apply reasonable constraints on mineralization
  • Mining Studies: ongoing mining studies should not be disclosed prior to establishing mineral resources Please contact the author of this Alert or your usual lawyer in BLG’s Securities & Capital Markets Group if you would like further information regarding the BCSC Report.