By Paul Ténière, M.Sc., P.Geo.
This is Part 2 of an article 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.
The Peer Review Process
A technical peer review should always be a part of your Company’s risk assessment processes and corporate governance policies. As an industry, we should be testing our risk management processes on a regular basis and while Health, Safety and Environment (HSE) are top of mind for any mining company, disclosure matters and compliance with NI 43-101 should also be important factors to consider when assessing risk related to corporate governance.
“Performing a high-level peer review of a mining company’s current technical reports, news releases, website, social media posts, and corporate presentations to identify non-compliant technical disclosure is a great place to start”
Under a Technical Disclosure Review scenario, there are many items to consider within a typical risk management process. Being fully aware of these risk factors and the importance they play in the disclosure process can save a company time, reputation, and money. Performing a 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 great place to start.
Risk Management – Technical Disclosure
The Risk Management Process can be broken down into the following steps:
Step 1: Identify the Risk
- Does the Company have any non-compliant news releases, documentation, or public disclosures with misleading technical information or language that could inadvertently trigger a technical disclosure review or NI 43-101 report?
Step 2: Analyze the Risk
- Technical disclosure review from the securities commission could result in a clarifying news release or full retraction of non-compliant news releases, corporate presentations, and website content (see Part 1).
- The requirement for a NI 43-101 technical report to be filed within 10 days.
- The Company is placed on securities commission’s Issuers in Default List.
- Severe non-compliance resulting in Company being issued a management or full cease trade order (rare but possible).
- Potential compliance review by the stock exchange if the Company is publicly listed.
- What is the cost to the Company in time, reputation, and money?
Step 3: Evaluate the Risk
- Consequence #1: The reputation of the Company and management are immediately affected, including loss of confidence from current and potential shareholders & investors, and potentially a drop in share price (Likelihood – High).
- Consequence #2: Unexpected and significant cost to address non-compliant disclosure, including legal and consulting fees, filing fees, etc. (Likelihood – Very High).
- Consequence #3: Difficulty closing financings due to the Company being on the Commission’s Default List or subject to CTO (Likelihood – Medium to High).
- Consequence #4: Loss of listing on stock exchange due to multiple compliance issues or repeatedly breaching listing agreement (Likelihood – Low to Medium).
- Consequence 5: 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 (Likelihood – Medium).
Step 4: Treat the Risk
- Complete peer reviews of all news releases using a Qualified Person (QP) very experienced with NI 43-101 prior to dissemination to the public.
- Company management must work with the QP to remedy any non-compliant technical disclosure in news release and always avoid over-promotional and misleading content.
- Independent peer reviews by a QP can provide an added layer of protection to provide an unbiased third-party evaluating your disclosure documents.
- Complete peer reviews of all public disclosure (oral and written) including corporate presentations, websites, social media posts (i.e. Twitter, LinkedIn, etc.), and continuous disclosure documents to ensure compliance with NI 43-101 and Exchange rules.
- Always use an experienced QP and/or reputable consulting firm to complete your NI 43-101 technical reports.
- Ensure a QP has reviewed all scientific and technical information stated in any Company disclosure document and has signed off on the information in a QP statement included within the disclosure document.
Step 5: Monitor the Risk
- On a monthly to quarterly basis, ask your QP to perform a technical disclosure review of the Company’s continuous disclosure documents, resource/reserve tables (audit), website, and any updated corporate presentations.
- Identify any red-flag disclosure items and rectify any non-compliant disclosure as quickly as possible.
- Implement a “Disclosure Committee” comprised of independent board members (P.Geo. or P.Eng.), executives (CEO, COO, or VP Exploration), and an outside independent QP that is experienced with NI 43-101. This group should review all Company disclosure documents on a quarterly basis and prior to filings.
- Only a QP that is very experienced with NI 43-101 should complete these peer reviews, and ideally it should be completed by a third-party independent QP to reduce any bias as an insider.
“The main point of these peer reviews is to spot red-flag items in a Company’s technical disclosure that could possibly trigger a disclosure review by the securities commissions, and to remedy these issues in a timely manner”
In summary, a typical peer review process involves reviewing a Company’s recent news releases, corporate presentations, public disclosure (oral and written), and continuous disclosure documents such as MD&A and AIF (if applicable). Detailed peer reviews include a full review of a Company’s current technical reports to ensure compliance with NI 43-101 and can take several hours or days to complete. The main point of these peer reviews is to spot red-flag items in a Company’s technical disclosure that could possibly trigger a disclosure review by the securities commissions, and to remedy these issues in a timely manner. Peer reviews can help avoid a “reactive scenario” resulting from a formal letter from the securities commissions regarding a technical disclosure review (see Part 1).
I always recommend that a Company take a proactive approach to review their disclosure documents prior to dissemination to prevent triggering a disclosure review in the first place. Following a proactive approach will result in compliant technical disclosure that not only saves time and money, but also maintains a Company’s good reputation with regulators, shareholders, and potential investors.