The Ontario Securities Commission (OSC) has issued a report based on a staff review of 50 selected NI 43-101 and Form 43-101F1 technical reports filed on SEDAR by Ontario mining securities issuers between June 30, 2011, and June 29, 2012. The selected reports are a sub-set of a total of 460 reports filed during that time period.
Canada’s NI 43-101 reporting requirements came into effect in February 2001 and were last updated in June 2011. Form 43-101F1 came into effect in April 2011.
In summary, the OSC review found that 40 (80%) of the technical reports reviewed had some form of non-compliance with the requirements of Form 43-101F1. Approximately 40% of these reports had at least one major non-compliance concern. Another 40% had minor non-compliance issues. Only 20% were found to be fully compliant.
The fact that 40% of the reports had at least one major non-compliance concern is “unacceptable,” the OCS report stated. “Although significant efforts have been made to comply with the disclosure requirements in NI 43-101, issuers and qualified persons need to further improve their disclosure. We will continue to review Technical Reports by Ontario mining issuers as part of our overall disclosure review program.”
The OSC review found reporting deficiencies to some extent in all sections of one or another of the technical reports. However, significant deficiencies were most often found in the sections on mineral resource estimates; environmental studies, permitting, and social or community impact; capital and operating costs; economic analysis; and interpretation and conclusions. Other sections of the report that had frequent disclosure deficiencies included the summaries, the project histories, and the certificates of the qualified persons.
Based on the results of the review, the OSC report offers guidance in the reporting of several areas of specific concern.
Regarding mineral resource estimates, the report reminds qualified persons that “mineral resources, by definition, must have reasonable prospects for economic extraction based on justifiable technical and economic factors. These factors are typically reflected in the cut-off grade and metal price assumptions and other constraints such as the geological model, conceptual pit shell, or mine model.”
The review also found that 32% of the technical reports on advanced properties did not adequately disclose information related to environmental permits or the social or community impacts of developing the mineral project. Also, some technical reports did not disclose how surface rights issues would be addressed or whether there was an exploration agreement in place or under negotiation with local First Nation communities.
Regarding costs, the OSC report reminded qualified persons that cost estimates should not be a single bottom-line number but should include the main components of estimated capital and operating costs and the basis for these estimates.
Regarding economic analysis, the report commented that “It is potentially misleading for a technical report on an advanced property to disclose only pre-tax cash flows and economic outcomes or to disclose only positive metal price changes or only up-side sensitivity analysis.”
Also, “Qualified persons should consider including in the technical report a table showing the significant project-specific risks, potential outcomes, and mitigating factors, along with supplementary discussions. Possible opportunities may also be included, if reasonable.”
The 17-page OSC report is available as a free download at: http://www.osc.gov.on.ca/documents/en/Securities-Category1/sn_20130627_43-705_rpt-tech-rpt-mining-issuers.pdf.
