On June 30, 2011 a number of amendments to National Instrument 43-101 - Standards of disclosure for Mineral Projects were made. One change which has generated some controversy is the definition of "preliminary economic assessment" (formerly "preliminary assessment"). The new definition deletes the requirement that such a study be taken "at an early stage of the project prior to the completion of a preliminary feasibility study". The new definition reads:
"Preliminary economic assessment" means a study, other than a pre-feasibility or feasibility study that includes an economic analysis of the potential viability of mineral resources".
Some confusion exists in the marketplace about when a PEA can be used. For example, see the Extorre Gold Mines Limited's new release (PDF) of February 24, 2012 where Extorre was forced to withdraw a bought deal prospectus and correct their public disclosure because of an issue with their PEA.
At a presentation to the Mineral Exploration Roundup in Vancouver in late January, the British Columbia Securities Commission and the Ontario Securities Commission outlined their views on this subject. In their view, a PEA is permitted for advanced properties – the intention is to "allow issuers to step backward to assess alternative development options" and to "take a fresh look if a PFS or FS [is] no longer current or relevant".
However, the Commissions do not believe that a PEA can be:
"A study done concurrently with or as part of a PFS or FS" or
"A way to include inferred resources in a PFS or FS" or
"A way to modify a PFS or FS to include more optimistic assumptions".
Issuers should be aware of the Securities Commission's position, as using a PEA in a manner not favoured by the Commissions can delay or disrupt financings, and give rise to concerns in continuous disclosure reviews.
We understand that there may be work under way to clarify this issue further by the issuance of a Staff Notice. A Staff Notice is intended to provide guidance to issuers on how the Commissions interpret various issues. (For example, see the CSA Staff Notice (PDF) issued October 27, 2010 with respect to disclosure of environmental issues.)