By Paul Ténière, M.Sc., P.Geo.
This is Part 1 of a series of articles on National Instrument 43-101 (NI 43-101) compliance and disclosure matters including the importance of completing an independent peer review of your NI 43-101 technical reports, news releases, continuous disclosure documents (AIF, MD&A), websites, and corporate presentations.
Part 1: Technical Disclosure Reviews
Many companies working in the Canadian mining industry have experienced that sudden feeling of anxiety after receiving a formal letter from the BCSC, OSC, or AMF (the three dominant securities commissions monitoring Canadian mining issuers). These letters may advise that your Company is subject to a “Technical Disclosure Review” that may require issuing a clarifying news release, with a formal response due within days of receipt. Under a worst-case scenario, your company may be required to file a NI 43-101 technical report within 10 days due to an unforeseen disclosure trigger.
Depending on the types of deficiencies identified in the technical disclosure review you may be placed on the Commission’s “Issuers in Default List”, with a potential cease trade order (CTO) on the horizon if the disclosure issues are not resolved in a timely fashion. Your first call is likely to your Company’s Qualified Person (QP), who is either a Professional Geologist or Engineer (P.Geo. or P.Eng.), and a person who may or may not be fully comfortable or properly informed on all of the latest standards and policies of NI 43-101.
Being on the Commission’s Issuers in Default List can make it more difficult to raise money or complete certain corporate transactions, and may result in payment of significant sums to cover legal fees to deal with a formal response and potential consultant costs if there is a requirement to file a technical report due to past non-compliant disclosure. This is not a position any exploration and mining company wants to be in, and it often happens at the most inopportune times, such as when the company is trying to complete a private placement or prospectus filing, prior to an annual general meeting (AGM), or after announcing a significant company milestone – inevitably resulting in a share price decline.
As a professional in this area of our consulting practice, I am often asked about what triggers these technical disclosure reviews by the Commissions in the first place and how a mining company is selected for a review. While the selection for these types of reviews may be random, there are measures a company can take to reduce the likelihood of a review occurring. Performing a quick high-level review of a mining company’s public disclosure such as technical reports, news releases, company website, and corporate presentations to identify obvious review triggers is a good place to start. Items such as improper disclosure of a historical mineral resource estimate or over-promotional and misleading statements are often key triggers, but sometimes issues are more subtle and require a deeper review.
There are generally two main reasons the securities commissions will complete these technical disclosure reviews, though this list is by no means exhaustive:
(1) Continuous Disclosure Review: As part of the Commission’s routine continuous disclosure review programs, mining companies are randomly selected for technical disclosure reviews to ensure their public disclosure is compliant with NI 43-101. The Commission may have also received a complaint from a member of the public (i.e. shareholder, investor, whistleblower), or other regulators and securities commissions (i.e. TSX, TSXV, CSE and IIROC).
(2) Prospectus Review: Your Company files a Preliminary Prospectus for review.
Both cases will trigger a full review by the securities commission of a Company’s Annual Information Form (AIF) (if applicable), recent news releases, Management Discussion and Analysis (MD&A), technical reports (current ones), corporate presentations, and website. This could also include a Company’s social media posts and blogs, and any third-party content linked to the Company’s website.
Important Facts to Remember:
- Securities commissions do review your corporate presentations, websites, social media posts and blogs for compliance with NI 43-101. Regulatory deficiencies could trigger a new technical report, or the Company could face a technical disclosure review based on these posts.
- NI 43-101 applies to all oral and written disclosure of scientific and technical information made by or on behalf of an issuer and made available to the public in Canada. While the majority of exploration and mining issuers are publicly-traded, “private issuers” are also subject to the same regulations under NI 43-101.
- Information posted on or linked to an issuer’s website is considered to be “endorsed” by the issuer and therefore part of its disclosure under NI 43-101. For example, links to third-party content such as analysts’ reports, media articles, newsletters, etc. qualify on this point. These types of disclosure could inadvertently trigger a technical report if linked to your website.
- A NI 43-101 technical report is not a guarantee of good work and should be considered a disclosure document only. Your QP may not be sufficiently familiar with NI 43-101 or aware of the requirements it includes, and you should always hire a consultant who has a good track record with the regulators in filing technical reports.
- Both the issuer and QP reviewing and approving the scientific and technical information being publicly disclosed are responsible for complying with NI 43-101 disclosure rules. In addition to company sanctions, a QP may be subject to disciplinary action by their professional association for consistently poor work practices and non-compliance with NI 43-101. The securities commissions are known to send formal complaints to a QP’s professional association if they question their experience, judgement, or work ethic, which could initiate an investigation and disciplinary action by their professional association.
- Finally, the biggest triggers for technical disclosure reviews by the securities commissions are over-promotional and misleading statements in technical news releases and non-compliant disclosure of scientific and technical information subject to NI 43-101. Make sure the QP you hire is well-versed in NI 43-101 and proper disclosure or you may face the consequences.
Special thanks to the geological staff at the British Columbia Securities Commission (BCSC) and the Ontario Securities Commission (OSC) for providing useful content on NI 43-101 and disclosure matters and crucial advice over the years. The OSC and TSX also published their 2018 presentation on “Mining Disclosure Essentials”, which can be found at the following link. Highly recommended reading for all mining executives, Qualified Persons (geologists and engineers) and others within the mining industry who routinely deal with NI 43-101 and disclosure matters.
Paul Ténière, M.Sc., P.Geo. is our in-house NI 43-101 and capital markets expert, and a former mining expert at the Toronto Stock Exchange (TSX), TSX Venture Exchange, Investment Industry Regulatory Organization of Canada (IIROC) and a member of the “NI 43-101 Committee” with the Canadian Securities Commissions. Email Paul at: [email protected]. For more information on our Regulatory and Compliance Services Click here.