Exploration and mining companies fortunate enough to have replenished their treasuries since the recent financial crisis are likely to be expending a portion of their funds exploring and developing their mineral properties. The new information generated from this exploration and development will eventually make technical reports prepared in connection with their mineral properties no longer current. Under National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"), an exploration or mining company does not have to update a technical report filed on SEDAR in connection with a material property on a real time basis. However, if the company triggers an obligation to file a technical report under NI 43-101 in connection with certain filings such as prospectuses, annual information forms, and press releases (all only in certain circumstances), that technical report must be complete and current.
Meaning of Current Technical Report
A technical report required to be filed under NI 43-101 is current if it does not omit any material scientific and technical information in respect of the subject property as of the date of the filing of the report. It must also be prepared on the basis of all available data relevant to the disclosure that it supports.
Further guidance on the currency requirement is provided for in the Companion Policy to NI 43-101 ("43-101CP") which states:
Anytime an issuer is required to file a technical report, that report must be complete and current. If an issuer has a technical report previously filed, and is required to file another technical report because it triggered one of the circumstances listed under Part 4 of [NI 43-101], the issuer must update the outdated sections of the previously filed report and file a new, complete, current technical report if the contents of the previously filed technical report are no longer current.
Section 4.2(8) of NI 43-101 provides that a company will not trigger the obligation to file a technical report to support disclosed scientific or technical information if (a) the company has a technical report filed to support the information and there has been no material change in the scientific or technical information concerning the property since the date of the filing of the technical report; and (b) updated certificates and consents of each qualified person who authored the technical report are filed.
Accordingly, a previously filed technical report is current for the purposes of NI 43-101 if there has been no material change to the scientific and technical information that is required to be disclosed in the technical report.
Section 4.2(8) is frequently misunderstood to include disclosure in annual information form ("AIF") filings where a company is relying on a previously filed technical report that is still current. Under section 4.2(1)(f)(ii) of NI 43-101, a technical report is only required to be filed in connection with an AIF if it includes material scientific or technical information about a mineral project on a property material to the issuer that is not contained in a previously filed technical report. Mining companies often unnecessarily request consents and/or updated certificates from qualified persons who prepared the previously filed technical report the company is relying on in connection with their AIF filing, when no new technical report, consents or certificates are required.
Material Change to Information in a Technical Report
Some examples of material changes in scientific and technical information on a property may be: new drill results (positive or negative), assay results or metallurgical test work. Other information on a property that may be relevant, and may constitute a material change, includes: 1) change in assumptions affecting an economic analysis, 2) change in property title, 3) change in property description, 4) change in resources/reserves, 5) change in stage of development, or 6) change in mineral title, permits or obligations under the property agreements. Recommendations in the technical report may no longer be current if they are significantly different from what the company is presently telling investors, or the recommendations have been completed.
NI 43-101CP provides guidance on materiality and how it should be assessed in respect of a mining company as a whole. Material facts are those which significantly affect or would reasonably be expected to have a significant effect on the market price or value of the company's securities. An assessment of materiality depends on the context. An item of information that is immaterial alone may be material if it is aggregated with other items. For example, when disclosing results of a drilling program the result from a single hole may not be material in itself. However, the results of several holes, in aggregate, could be material to the company.
Certifying a Technical Report as Current
Although management may be in the best position to assess what is material to the company, the qualified persons who authored the technical report are required to certify statements that require an assessment of materiality. NI 43-101 requires: "that the qualified person has read [NI 43-101] and the technical report has been prepared in compliance with [NI 43-101]". This means the technical report must be complete and current as discussed in this article, and the qualified person must certify that the technical report contains all scientific and technical information that is required to be disclosed to make the technical report not misleading.
If there has been a material change in the scientific or technical information since the last personal inspection of the property by the qualified person, the technical report is not current, and the qualified person cannot sign the required certificate. Similarly, if such information in a previously filed technical report has materially changed, the company would not be able to rely on section 4.2(8) of NI 43-101, outlined above, as the qualified person cannot sign the required updated certificate.
It is up to the company and the qualified person to communicate and work together to ensure that all material scientific and technical information is included in the technical report, when it is filed, or when it is being relied upon by the company for a new filing.
Proposed Revisions to NI 43-101
In January 2009, the Canadian Securities Administrators launched a project to revise NI 43-101 in response to a number of industry and regulatory concerns that have developed since NI 43-101 was implemented in 2001. Potential areas for revision include reducing the regulatory burden of consents of qualified persons, reassessing technical report triggers, addressing perceived disclosure irregularities and introducing a separate form of technical report for advanced mineral projects. The draft revisions to NI 43-101 are expected to be published for comment in April 2010.