Securities Regulators Provide Guidance to Improve Disclosure in Investor Presentations


This post was written prior to our January 2017 merger, under our previous firm name, MacPherson Leslie & Tyerman LLP.

The Canadian Securities Administrators (“CSA”), the collective body of securities regulators for Canada’s provinces and territories, recently published their findings in connection with a review of investor presentations on mining issuers’ websites where it was concluded that many of such presentations were not compliant with applicable disclosure requirements – specifically those found in National Instrument 43-101 Standards of Technical Disclosure for Mineral Projects (“NI 43-101”) and National Instrument 51-102 Continuous Disclosure Obligations, as it related to the presentation of forward looking information.

The findings, published in CSA Staff Notice 43-309 (the “Staff Notice”), came following the securities regulators’ review of 130 mining company investor presentations, which found that more than 80% of such presentations had major or minor non-compliance issues. The review was conducted on behalf of the CSA by the securities regulators of Ontario, Quebec, and British Columbia, as these regulators are responsible for regulating 94% of mining companies listed on the Toronto Stock Exchange, the TSX Venture Exchange and the Canadian Stock Exchange.

The Staff Notice listed key areas of concern, including the following:

  1. Qualified Person identification and related disclosure. Investor presentations fell short by not providing the name of the Qualified Person (“QP”), relationship to the issuer, or statements that the QP had verified the data. In addition, the CSA stressed that technical information disclosed by mining companies must be consistent with the information provided by the QP, and that having the QP review and approve the disclosure resulted in improved compliance with securities regulations.
  1. Cautionary statements. More than half of the reviewed investor presentations which included financial information at the Preliminary Economic Assessment (“PEA”) level failed to include the required cautionary statements required by NI 43-101, including cautionary statements that the economic viability of resources had not been demonstrated. The CSA stressed the importance of such cautionary statements in allowing the public to understand the limitations of the PEA, notably that inferred mineral resources are speculative in nature and may never be realized.
  1. Clarification of mineral resources vs. mineral reserves. Of the investor presentations reviewed, only half of those disclosing both mineral resources and mineral reserves distinguished appropriately between the two. The CSA emphasized that there must be a clear statement as to whether mineral resources include or exclude mineral reserves, noting that the CIM Estimation Best Practice Committee recommends that the two should be reported separately and exclusive of each other.
  1. Historical estimates. Where investor presentations included historical estimates, regulators found the disclosure to be non-complaint in 60% of the cases. The Staff Notice highlighted that simply stating a historical estimate is “not NI 43-101 complaint” does not meet the requirements under NI 43-101, which requires information about the source, date, reliability, key assumptions, and other factors as well as cautionary language concerning those estimates.
  1. Additional shortcomings. In addition to the above, the Staff Notice listed many other problem areas for mining company disclosure in investor presentations, including:
  • Insufficient or missing descriptions of QA/QC measures and programs, including the name and location of the testing laboratory;
  • Unstated assumptions about metals price information used to determine mineral estimates;
  • Inappropriate and incomplete disclosure of exploration targets and limitations;
  • Insufficient or missing information regarding the nature and context of drilling results;
  • Non-compliant disclosure of forward-looking information, although the review did find that this disclosure was present in the majority of investor presentations; and
  • Inappropriate use of overly promotional terms, including “world-class”, “production ready”, “ore”, and “spectacular and exceptional results”.

The Staff Notice concluded by emphasizing that their review of presentations would be ongoing and when deficiencies are identified the CSA will request that those deficiencies be corrected. Such corrective action may include the requirement to file a technical report to support economic disclosure. Issuers may also be placed on the defaulting reporting issuer list, have prospectus reviews delayed, or face a cease-trade order if these deficiencies are not addressed to the satisfaction of the relevant regulator.