The topic of common deficiencies in technical reports raised in a previous article (CIM Magazine, March/April 2007) warrants further discussion. To potentially avoid NI 43-101 compliance issues with technical reports, there are several key principles that should be kept in mind by qualified persons when preparing technical reports. These should also be considered by resource companies when retaining a qualified person, because disclosure is ultimately the responsibility of the resource company.
Compliance with NI 43-101 and Form 43-101F1
A technical report is defined as a report prepared and filed in accordance with NI 43-101 and Form 43-101F1 that does not omit any material scientific and technical information in respect of the subject property as of the date of filing. We continue to find several common oversights in technical reports, which include adding inferred mineral resources to other categories and a lack of proximal cautionary language for such disclosure as exploration targets, historical estimates and preliminary assessments. It is important to remember that technical reports are disclosure documents and must comply with NI 43-101 securities law.
Section 4.3 of NI 43-101 requires that the technical report be prepared according to Form 43-101F1, which provides the specific prescribed format, headings and content, although subheadings may be used. Occasionally, technical reports omit a budget to support the recommendations. Technical reports on development and production properties sometimes neglect to include Item 25, which covers such topics as mining operations, capital and operating costs and an economic analysis, including cash flow forecasts.
Technical reports must be based on all relevant information on the property as of the date of the report — addendums are not permitted. We find that some so-called technical reports are simply updated mineral resource or reserve estimates that do not include the other sections required by Form 43-101F1, such as data verification, or a description of mining method or economic analysis if this information was included in a previously filed technical report.
Another key principle to remember is that the obligation to file a technical report is tied to the information describing mineral projects on material properties — the technical report must be prepared on a property basis not a project basis. If a company discovers a satellite deposit on a property that has an existing technical report on the main deposit, the earlier report must be updated to include both deposits to reflect the potential shared infrastructure and synergies.
Responsibilities of the qualified person and the resource company
A common area of misunderstanding involves the responsibility of the qualified person versus the responsibility of the resource company. It is the company’s responsibility to retain an individual who meets the definition of qualified person including belonging to a recognized professional association and having the relevant experience and competence for the subject matter. Under certain circumstances, as defined in Section 5.3 of NI 43-101, the qualified person must be independent of the company and the property. The company is also responsible for arranging its affairs so that a current site visit can be carried out by a qualified person. The most common misconception is that a site visit is not required for early-stage exploration properties. The site visit is still mandatory, although it may be delayed under very limited circumstances.
It is also important for companies to be aware that the primary responsibility for public disclosure remains with the company and its directors and officers. The company must ensure that their disclosure is consistent with the information provided to them by the qualified person.
The qualified person is responsible for preparing the technical report, conducting a site visit and providing scientific and technical advice in accordance with professional practice and industry standards, as well as providing a signed certificate and consent as per sections 8.1 and 8.3 of NI 43-101.
Technical report addressed to the resource company
Section 8.2 of NI 43-101 requires that all technical reports must be addressed to the company, which means the company’s name must appear on the title page, in the introduction and on the qualified person’s certificate and consent. If several companies have a joint venture on a property that is material to both, the technical report can be addressed to both companies. If a company triggers a technical report, they cannot rely on another company’s report on the same property because each company must have their own, complete public disclosure record. The most common error companies make is to file a technical report from a previous owner on a property they recently acquired.
Deborah McCombe is the executive vice president of Scott Wilson Roscoe Postle Associates Inc., and Craig Waldie is a senior geologist of the Ontario Securities Commission.