To the Mining Industry – Now is your chance to help shape Canadian mining project disclosure requirements and modernize NI 43-101 | Stikeman Elliott LLP

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Disclosure requirements for mining projects are being reviewed by the Canadian Securities Administrators (CSA) with the goal of providing investors with more relevant information and continuing to foster fair and efficient capital markets within an improved framework and modernized.

  • In the CSA 43-401 consultation document Consultation on National Instrument 43-101 Mining Project Disclosure Standards (the Consultation Paper), the CSA invites comments on the effectiveness of several key provisions of National Instrument 43-101 Mineral Project Disclosure (NI 43-101) and has highlighted several disclosure deficiencies that mining issuers may wish to consider in their current scientific and technical disclosure.
  • Consultation paper invites stakeholder feedback on a variety of topics, including improving and modernizing NI 43-101, qualifications and independence of qualified persons, rights of Indigenous peoples and disclosure of data verification , historical estimates and mineral resource/reserve estimates. , among others.
  • Comments are accepted until July 13, 2022.

Disclosure gaps

While the consultation paper invites input from industry stakeholders on issues facing the mining industry, it also reveals instances of material non-compliance with NI 43-101. Consistent shortcomings identified by the CSA include:

  • qualified persons failing to properly assess their independence, competence, expertise, or relevant experience with respect to the commodity, type of deposit, or items for which they are responsible in the technical reports;
  • poor quality of scientific and technical disclosure in technical reports for early-stage exploration properties for new listings;
  • inadequate disclosure of the mineral resource estimate, including disclosure related to reasonable prospects for eventual economic extraction;
  • misuse of preliminary economic assessments; and
  • inadequate disclosure of all business risks related to mining projects.

Due to the identified gaps, the consultation document sets out a total of 38 consultation questions, falling into various categories. Each category identified in the consultation document presents a more detailed account of deficiencies and/or observations of non-compliance by the CSA, with the aim of helping stakeholders understand the current issues facing mining issuers.

Improvement and modernization of NI 43-101

Form 43-101F1 – Technical report (the form) has generally remained unchanged since its adoption in 2001 and, therefore, the CSA asks stakeholders to comment on a number of important requirements of the form, including whether:

  • current disclosure requirements protect investors;
  • there are other ways to present relevant technical information;
  • NI 43-101 should be revised to align with the disclosure requirements of other influential mining jurisdictions and, if so, which ones; and
  • the use of remote technologies, such as drones, to perform personal inspections of projects should be considered.

The consultation paper also asks if there are any amendments, 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 protect the integrity of mining capital markets in Canada. . This is a rare opportunity for interested stakeholders to participate in the identification of industry-specific issues for formal consideration by the CSA.

Qualified persons

The consultation paper seeks guidance on a number of issues relating to qualified persons, including the definition of a “qualified person”, independence requirements and whether directors and officers should be disqualified from drafting technical reports, even in circumstances where personal independence is not required.

Rights of indigenous peoples

The ASC noted that the rights of indigenous peoples often overlap with issues of legal tenure, property rights and governance of mining projects. The consultation document invites comments on whether specific disclosure should be mandatory (in technical reports) to address both (i) the risks and uncertainties that arise from the rights of indigenous peoples; and (ii) the risks and uncertainties associated with the issuer’s relationship with any Indigenous Peoples on whose traditional territory the mining project is located. The question of whether a qualified person should be required to validate the issuer’s disclosure relating to Indigenous peoples also arises.

Data Verification and Disclosure Requirements for Historical Estimates

Inadequate disclosure of data verification, at each stage of the project, has been identified by CSA. The consultation paper seeks comments on how to improve the disclosure of data verification procedures and whether the personal inspection requirement should be incorporated into the form.

Deficiencies in disclosing historical estimates have led the CSA to seek comment on whether the current definition of “historical estimate” is sufficiently clear and how it could be amended to be clearer.

Mineral Resource/Mineral Reserve Estimate

Inadequate disclosure of reasonable prospects for eventual economic extraction, verification of data and risk factors related to Mineral Resources and Mineral Reserves are driving ASC consultation issues related to Mineral Resource and Mineral Reserve estimates. As such, CSA is considering whether a qualified person should be required to perform data verification and accept responsibility for the information used to support the mineral estimate, including whether it would be appropriate for this responsibility to include historical data used to support the estimate.

With respect to risk factors, the CSA have recognized that boilerplate disclosure is very common, but failure to disclose known risks specific to a mining project can render mineral resource and mineral reserve estimates misleading. The consultation document asks for ideas on how to improve the disclosure of project-specific risks.

Other areas of concern

Environmental and Social Disclosure

Existing disclosure requirements relating to environmental and social matters have not been updated since the initial adoption of NI 43-101 in 2001. In light of this and given the attention investors have paid to environmental and social issues, the CSA is interested in knowing whether stakeholders believe that investors can make informed investment decisions based on current environmental and social disclosure requirements. A disclosure requirement for community consultations is also being considered.

Preliminary economic assessments

The definition of preliminary economic assessment is under review and the CSA is seeking comments on whether it should be modified to improve accuracy and whether additional disclosure requirements should be introduced, such as cost estimation parameters . A ban on including by-products (which have not been classified as measured, indicated or inferred mineral resources) in cash flow models used in economic analysis is also being considered, as CSA considers the inclusion of such by-products in the preliminary economic assessment as misleading. The exclusion from preliminary economic assessments of a mining project whose current mineral reserves have already been established is also under discussion.

Ongoing personal inspections

The current personal inspection requirement is highlighted in the consultation paper as being a fundamental part of the qualified person’s role as gatekeeper for investors. The CSA are seeking comments on, among other things, whether NI 43-101 should include a definition of “routine personal inspection” and what elements would be important to include.

Exploration Information

The main question posed by the CSA regarding exploration disclosures is whether stakeholders consider that the requirements of NI 43-101 (relating to written disclosure of exploration information) are sufficiently clear and how these requirements could be improved.

Investment and operating costs, economic analysis

Due to the significant discrepancy between cost estimates disclosed in technical reports and actual costs as projects are developed, the CSA is interested in knowing if stakeholders feel that the current disclosure requirements for to capital and operating costs are adequate and whether these requirements should be amended to be more prescriptive with respect to the disclosure of cost estimates. Opinions on the adequacy of disclosure requirements relating to risks specific to investment and operating costs are also sought.

Comment period

The CSA are accepting comments on the consultation paper until July 13, 2022. For more information, please see CSA Consultation Paper 43-401 – Consultation on National Instrument 43-101 Mining Project Disclosure Standards (April 14, 2022).

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