One of the cornerstones of NI43-101 Standards of Disclosure for Mineral Projects is the technical report. The purpose of the report is to provide a summary of the scientific and technical information concerning mineral exploration, development, and production activities on a mineral property that is material to an issuer. The reports must be prepared in accordance with NI43-101 and Form 43-101F1 Technical Report and the information must be current as of the date of the filing of the technical report. As these reports provide important information to the investing public, qualified persons preparing these reports should, as much as possible, write in plain, simple language that can be easily read and understood by people who are not geoscientists or engineers.
So let’s review some of the common deficiencies with technical reports.
Non-current technical report
Some of the factors you should consider when determining if your previously filed technical report is still current are as follows:
- Is there new technical information on the property, such as drilling, assays, metallurgical testwork?
- Have you made changes to key assumptions, parameters relating to mineral resources or mineral reserves, or economic analysis?
- If you have completed the previously recommended work, are your recommendations still current? Similarly, are your report recommendations consistent with what you are telling your shareholders or disclosing in the use of proceeds in your offering documents? For example, if the recommendations in the report consist of further exploration and metallurgical testwork prior to completing a preliminary feasibility study and you have completed the proposed work and are now raising money for a final feasibility study, the report is probably not current.
Non-current technical reports can cause huge delays and major headaches during the sometimes very short window for financing. In most cases, this is avoidable with some planning and due diligence reviews. It is the responsibility of the company to ensure its reports are current and compliant.
Disclaimers are specifically prohibited by NI43-101, except in the very limited circumstance permitted by Item 5 of the Form, Reliance on Other Experts. At least one qualified person must take responsibility for each section of the report. It is up to the qualified person to review the previous information and determine the level of due diligence required to enable the qualified person to take responsibility for the information and provide a certificate and consent. If your consent includes a disclaimer, we will likely ask you to refile it.
Proximate cautionary language
The disclosure of historical estimates, exploration targets, and preliminary assessments is permitted under NI43-101, provided it is accompanied by proximate cautionary language. We often find that the cautionary language is included the first time that historical estimates, exploration targets, and preliminary assessments are disclosed. However, the technical report disclosing this information must also include the proximate cautionary language.
Insufficient information on key assumptions, parameters, and methodologies
Often, an issuer will disclose the mineral resources and mineral reserves in an appropriate manner; however, the key assumptions, parameters, and methodologies are not disclosed. The technical report should include enough information for a reasonably informed person to understand how the estimates were prepared and the basis for the estimate.
Development and production properties - cash flows and budgets
All companies with development and producing projects should include the cash flow tables that are required under item 25 of the Form. Also, we are increasingly finding that while a qualified person discloses recommendations for further work, a budget is not provided. A budget is required for properties at all stages of exploration, development, or production.
Personal inspections or site visits by independent qualified persons
If an issuer triggers the filing of a technical report by an independent qualified person, the independent qualified person must carry out the site visit. An in-house qualified person can assist the independent qualified person with the preparation of the report; however, the independent qualified person must visit the site and take responsibility for the complete report when an independent report is required.
Compliance with Form 43-101F1
We strongly recommend that qualified persons preparing technical reports follow the Form. If an item of the Form is not included in the technical report, we consider it to be noncompliant. For example, if there is no disclosure about sampling method, it is unclear whether any sampling has been carried out in the past, whether the qualified person did any independent sampling, etc.
A qualified person may refer to a previously filed technical report for items 6 through 11 of the Form, provided they state the name, date, and author of the previously filed technical report and that information has not changed.
Deborah A. McCombe is the chief mining consultant for the Ontario Securities Commission.