On June 4, 2020, the Canadian Securities Administrators (the “CSA”) published Staff Notice 43-311 summarizing results of a review on mineral resource estimates (“MREs”) disclosed in technical reports of mining issuers (the “Notice”).
The key takeaway from the Notice is that mining issuers must include sufficiently descriptive language surrounding MREs and the processes used to generate such estimates in technical reports.
The disclosure of MREs is regulated by the CSA’s National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) and such estimates play an important role in investor decision making. Specifically, MREs are a fundamental early decision point for an issuer in considering the design and economic feasibility of a mining project, and can have a direct impact on the share price of an issuer. By sharing the results of their review, the CSA hopes the Notice allows mining issuers to better understand what is required of them under NI 43-101 in terms of content regarding disclosure of MREs and to highlight common deficiencies.
In terms of data underlying the Notice, the CSA analyzed 86 technical reports. Overall, the CSA found most MREs disclosure was satisfactory, with the mechanics of the estimation process and quality control measures taken for sampling and analysis particularly done well. That said, the CSA found that certain areas of disclosure require more transparency and verification. In terms of specific areas of concern, the CSA noted the following common deficiencies:
- explanations of reasonable prospects for eventual economic extraction within technical reports required more detail, especially surrounding the methodologies used;
- technical reports relying on data gained from previous property holders (or “legacy data”) were lacking explanations of how such data was verified;
- boilerplate language regarding the risk factors of a project which may affect MREs may be insufficient if it does not detail meaningful known risks specific to the project;
- where variations of cut-off grade scenarios were used, reports did not adequately highlight MREs at the base cut-off grade scenario; and
- certain sensitivity analyses using alternative cut-off scenarios were reported despite not rising to the level of “reasonable prospects.”
MLT Aikins has significant experience advising clients in the mining and natural resource industry. Our lawyers in this practice area would be pleased to further discuss the disclosure requirements surrounding MREs in technical reports or any other questions or concerns of mining issuers.