Mineral project disclosure requirements are being reviewed by the Canadian Securities Administrators (CSA) with an eye to providing investors with more relevant disclosure, and to continue to foster fair and efficient capital markets within an improved and modernized framework.
- In CSA Consultation Paper 43-401 Consultation on National Instrument 43-101 Standards of Disclosure for Mineral Projects (the Consultation Paper), the CSA is soliciting feedback on the efficacy of several key provisions of National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101) and has highlighted several disclosure deficiencies that mining issuers may want to consider in their current scientific and technical disclosure.
- The Consultation Paper seeks input from stakeholders on various topics including, improvement and modernization of NI 43-101, the qualifications and independence of qualified persons, the rights of Indigenous Peoples, and disclosure of data verification, historical estimates, and mineral resource/reserve estimations, among others.
- Comments are being accepted until July 13, 2022.
Disclosure Deficiencies
While the Consultation Paper seeks input from industry stakeholders on issues facing the mining industry, it is also reveals instances of material non-compliance with NI 43-101.The consistent deficiencies noted by the CSA include:
- qualified persons failing to properly assess their independence, competence, expertise or relevant experience related to the commodity, type of deposit or the items for which they take responsibility in technical reports;
- poor quality of scientific and technical disclosure in technical reports for early stage exploration properties for new stock exchange listings;
- inadequate mineral resource estimation disclosure, including disclosure related to reasonable prospects for eventual economic extraction;
- misuse of preliminary economic assessments; and
- inadequate disclosure of all business risks related to mineral projects.
As a result of the identified deficiencies, the Consultation Paper sets forth a total of 38 consultation questions, falling within various categories. Each category identified in the Consultation Paper outlines a more detailed account of deficiencies and/or non-compliance observations by the CSA, with the goal of assisting stakeholders in understanding the current issues being faced by mining issuers.
Improvement and modernization of NI 43-101
Form 43-101F1 – Technical Report (the Form) has generally remained unchanged since it was adopted in 2001, and as a result, the CSA is asking stakeholders to comment on a number of important requirements in the Form, including whether:
- the current disclosure requirements protect investors;
- there are any alternate ways to present the relevant technical information;
- NI 43-101 should be revised to align with the disclosure requirements of other influential mining jurisdictions, and if so, which jurisdictions; and
- the use of remote technologies, such as drones, to conduct personal inspections of projects should be considered.
The Consultation Paper also asks whether there are any modifications, deletions or additions to the current NI 43-101 and Form that should be considered in order to assist investors in making investment decisions or to serve to protect the integrity of the mining capital markets in Canada. This is a rare opportunity for interested stakeholders to participate in identifying industry specific issues, to be considered on a formal basis by the CSA.
Qualified persons
The Consultation Paper seeks guidance on a number of issues surrounding qualified persons, including the definition of a “qualified person”, the independence requirements and whether directors and officers should be disqualified from authoring technical reports, even in circumstances where personal independence is not required.
Rights of Indigenous Peoples
The CSA has noted that the rights of Indigenous Peoples often overlap with the legal tenure, property rights and governance issues of mineral projects. The Consultation Paper seeks input on whether any specific disclosure should be mandatory (in technical reports) to address both (i) the risks and uncertainties that arise as a result of the rights of Indigenous Peoples; and (ii) the risks and uncertainties related to the relationship the issuer has with any Indigenous Peoples on whose traditional territory the mineral project lies. The question of whether a qualified person should be required to validate the issuer’s disclosure relating to Indigenous Peoples is also being posed.
Data verification and historical estimate disclosure requirements
Inadequate data verification disclosure, at every project stage, has been identified by the CSA. The Consultation Paper seeks input on how to improve the disclosure of data verification procedures and whether the personal inspection requirement should be built into the Form.
The deficiencies related to the disclosure of historical estimates has led the CSA to seek input on whether the current definition of “historical estimate” is sufficiently clear and how it could be modified to be clearer.
Mineral resource/mineral reserve estimation
Inadequate disclosure relating to the reasonable prospects for eventual economic extraction, data verification, and risk factors with mineral resources and reserves, are the driving force behind the CSA’s consultation questions related to mineral resource and mineral reserve estimations. As such, the CSA is considering whether a qualified person should be required to conduct data verification and accept responsibility for the information used to support the mineral estimate, including whether it would be appropriate for such responsibility to include historical data used to support the estimate.
With respect to risk factors, the CSA has acknowledged that boilerplate disclosure is very common but that failure to disclose known risks specific to a mineral project may make the mineral resource and reserve estimates misleading. The Consultation Paper is asking for ideas on how to enhance project specific risk disclosure.
Additional areas of concern
Environmental and social disclosure
The existing disclosure requirements relating to environmental and social issues have not been updated since NI 43-101 was first adopted in 2001. In light of this and given investors’ focus on environmental and social issues, the CSA seeks input on whether stakeholders believe that investors can make informed investment decisions based on the current environmental and social disclosure requirements. A disclosure requirement for community consultations is also being contemplated.
Preliminary economic assessments
The definition of preliminary economic assessment is being considered and the CSA seeks input on whether it should be modified to enhance precision and whether additional disclosure requirements should be introduced, such as cost estimation parameters. The prohibition of including by-products (that have not been classified as measured, indicated, or inferred mineral resources) in cash flow models used in the economic analysis, is also being contemplated, as the CSA considers the inclusion of such by-product commodities in the preliminary economic assessment as misleading. Preclusion of preliminary economic assessments on a mineral project that current mineral reserves have already been established, is also being deliberated.
Current personal inspections
The current personal inspection requirement is highlighted in the Consultation Paper as being a foundational element of the qualified person’s role as a gatekeeper for investors. The CSA is seeking input on, among other things, whether NI 43-101 should include a definition of “current personal inspection” and what elements would be important to include.
Exploration information
The key question posed by the CSA in respect to exploration information is whether stakeholders view the NI 43-101 requirements (relating to the written disclosure of exploration information) to be sufficiently clear and how such requirements could be improved.
Capital and operating costs, economic analysis
Due to the significant variance between disclosed cost estimates in technical reports and actual costs as projects are developed, the CSA is seeking input on whether stakeholders believe the current disclosure requirements relating to capital and operating costs are adequate and whether such requirements should be modified to be more prescriptive with respect to the disclosure of cost estimates. Opinions on the adequacy of the disclosure requirements relating to the risks specific to capital and operating costs is also being sought.
Comment Period
The CSA is accepting comments on the Consultation Paper until July 13, 2022. For further information, please see CSA Consultation Paper 43-401 – Consultation on National Instrument 43-101 Standards of Disclosure for Mineral Projects (April 14, 2022).
