On June 30, 2011, up-dated versions of National Instrument 43-101 (NI 43-101), Form 43-101F1 for technical reports, and Companion Policy 43-101CP came into force. The new NI 43-101 rule:
- eliminates or reduces the scope of certain requirements of the old NI 43-101,
- provides more flexibility to mining issuers and qualified persons in certain areas,
- provides more flexibility to accept new foreign professional associations, professional designations, and reporting codes as they arise or evolve,
- reflects changes that have occurred in the mining industry in recent years, and
- clarifies or corrects areas where the old NI 43-101 was not having the intended effect.
NI 43-101 applies to all issuers in Canada, including all issuers listed on the Toronto Stock Exchange or the Toronto Venture Exchange.
A few of the changes resulting from the implementation of the new NI 43-101 are briefly described below.
Filing requirements for technical reports
Short form prospectus trigger
The old NI 43-101 required an issuer to file a technical report at the same time it filed any preliminary short form prospectus if such prospectus included any material scientific or technical information not included in a previously filed technical report or described for the first time a material property. Consequently, issuers were frequently required to file a new or up-dated technical report with any short form preliminary prospectus, a result which often hampered the ability of mining and exploration companies to access the capital markets on a timely basis.
Under the new NI 43-101, an issuer is required to file a technical report that relates to a mineral project on a property material to the issuer at the same time it files a preliminary short form prospectus only if such prospectus discloses for the first time:
- mineral resources, mineral reserves or the results of a preliminary economic assessment on the property that constitute a material change in relation to the issuer, or
- a change in mineral resources, mineral reserves or the results of a preliminary economic assessment from the most recently filed technical report if the change constitutes a material change in relation to the issuer.
A material change is, generally, a change that would reasonably be expected to have a significant effect on the market value of the securities of the issuer. The Canadian Securities Administrators (the CSA) indicate in the Companion Policy to the new NI 43-101 that they think first time disclosure of mineral resources, mineral reserves, or the results of a preliminary economic assessment on a property material to the issuer will, in most cases, constitute a material change in the affairs of the issuer.
Foreign producing issuers exemption
Under the old rule, a foreign producing issuer was required to file an independent technical report for each of its material mineral projects upon becoming a reporting issuer in Canada. The new NI 43-101 exempts producing issuers from the independence requirement if they are listed on a “specified exchange”. Producing issuers are those having gross revenues from mining operations of at least $30 million in the most recent financial year and aggregate revenues of $90 million over the three most recent financial years. Specified exchanges include the Australian Stock Exchange, the Johannesburg Stock Exchange, the London Stock Exchange Main Market, the Nasdaq Stock Market, the New York Stock Exchange and the Hong Kong Stock Exchange.
Royalty holders filing requirement and exemption
NI 43-101 defines mineral project to include any royalty or similar interest in a mineral project. The CSA considers a royalty or similar interest to include a gross overriding royalty, net smelter return, net profit interest, free carried interest, product tonnage royalty, or an interest in a revenue or commodity stream from a proposed or current mining operation, such as the right to purchase certain commodities produced from the operation. The new NI 43-101 adds an exemption for issuers whose only interest in a mineral project is a royalty or similar interest from the requirement to file a technical report to support disclosure in a document if: (1) the owner or operator of the relevant mineral project is a Canadian reporting issuer or a producing issuer listed on a specified exchange that discloses mineral resources and mineral reserves under an acceptable foreign code (see “Foreign Codes for Reporting Reserves and Resources” below), (2) such issuer identifies in its document the source of the relevant scientific and technical information, and (3) the owner or operator of the mineral project has disclosed the scientific and technical information that is material to the issuer.
Resulting issuer filing requirement
A technical report is required to be filed to support scientific or technical information included in an information circular concerning an acquisition of a mineral property where the issuer or an issuer resulting from a transaction issues securities as consideration in connection with the transaction. The Companion Policy to the new NI 43-101 clarifies that the issuer filing the information circular need not file a technical report on its SEDAR profile if: (1) the other party to the transaction has filed the technical report, (2) the information circular refers to the other party’s SEDAR profile, and (3) on completion of the transaction, technical reports for all material properties are filed on the resulting issuer’s SEDAR profile or the SEDAR profile of a wholly-owned subsidiary.
Extended time to file technical report in limited circumstances
If an issuer discloses for the first time in a document that does not otherwise require the immediate filing of a technical report (for example, in a press release) mineral reserves, mineral resources or a preliminary assessment that constitutes a material change, the issuer must file a technical report to support such disclosure within 45 days. The new NI 43-101 extends the 45 day time limit to 180 days if the disclosure is supported by a technical report previously filed by another issuer that holds or held an interest in the same property and certain other requirements are met. If the disclosure is subsequently included in a preliminary short-form prospectus, then the technical report supporting the disclosure must be filed by the earlier of the date of filing of the short form prospectus or 180 days after the written disclosure.
When an issuer files a technical report to support previous disclosure, it must issue a press release announcing the filing and reconciling any material differences in the mineral resources, mineral reserves or preliminary economic assessment results between the technical report and the initial disclosure.
Foreign codes for reporting reserves and resources
The new NI 43-101 identifies the foreign codes that can be used as an alternative to the Canadian Institute of Mining (CIM) code to disclose reserves and resources. In addition to codes previously accepted, the Chilean Certification Code for Exploration Prospects, Mineral Resources and Ore Reserves (the Certification Code) has been added and the Pan-European Code for Reporting Exploration Results, Mineral Resources and Reserves (the PERC Code) replaces the reference in the old mining rule to the classification system and definitions approved by The Institution of Materials, Minerals and Mining in the United Kingdom.
The use of any other code that is “generally accepted in a foreign jurisdiction” and that defines resources and reserves in a manner consistent with the CIM classification will also be accepted.
If an acceptable foreign code is used, the issuer must reconcile any material differences between the mineral resources and mineral reserve categories used and the CIM categories.
The new NI 43-101 includes expanded associations and designations for qualified persons (QPs) and adds certain substantive requirements intended to ensure that only those with a high level of professional experience and responsibility and subject to on-going professional evaluation are eligible.
The old rule required all disclosure of scientific or technical information to be prepared by or under the supervision of a QP. The new NI 43-101 now also permits such disclosure to be made if it has been approved by a QP.
The new NI 43-101 eliminates the requirement for updated QP certificates and consents for previously-filed but still current technical reports that continue to meet applicable independence requirements, and allows an issuer’s own QP to determine whether a technical report remains current.
As well, recognizing a common difficulty in contacting on short notice QPs who often work in remote locations or QPs who have changed employers, short form prospectus rules have been amended to permit the engineering or geoscientific services firm that employed the individual QP for a technical report to provide the required QP consent instead of the individual.
Changes to Form 43-101 F1 for technical reports
The CSA has changed the form prescribed for technical reports with the objective of making it less rigid and more adaptable for advanced stage and producing properties. Qualified persons have greater discretion regarding the amount of information and level of detail to include in the technical report.