The short form trigger
The Canadian Securities Administrators (CSA) has published a new version of National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101), which came into effect on June 30, 2011. One significant change relates to the requirement to file a technical report in support of disclosure made in a short form prospectus.
Since June 30, 2011, issuers are only required to file a technical report in connection with a preliminary short form prospectus when it contains first-time disclosure of: mineral resources, mineral reserves or the results of a preliminary economic assessment that constitute a material change in relation to the issuer; or a change in this information since the previously filed technical report, if the change constitutes a material change. This change clarifies the situations when a new technical report must be filed and reduces the uncertainty issuers had before.
As a result of this relaxed requirement, an issuer will be allowed to file a preliminary short form prospectus that contains scientific or technical information (other than the information described above) on a material property without having to file a technical report supporting that information. This can be done as long as the name of the qualified person who prepared or supervised the preparation of the information that forms the basis for the disclosure or who approved the disclosure, is indicated in the prospectus.
The CSA believes that the change made to NI 43-101 will allow quicker access to financing in the context of a short form prospectus. It also considers that this change will not adversely affect investors’ protection, for the following reasons:
- A technical report will always be required to support a prospectus that contains first-time disclosure of mineral resources, mineral reserves or the results of a preliminary economic assessment that constitute a material change in relation to the issuer.
- A qualified person will be responsible for all scientific and technical information presented in a prospectus.
- An issuer will continue to be required to file a technical report to support all scientific and technical information (not only information relating to mineral resources, mineral reserves or the results of a preliminary economic assessment) contained in the issuer’s annual information form (AIF).
French language requirements
It is not uncommon for issuers to experience timing issues with short form prospectus offerings due to a lack of understanding of certain requirements relating to the language in which documents must be filed in Quebec.
When issuers conduct an offering in Quebec under the short form prospectus regime, the short form prospectus and all documents incorporated by reference must be prepared in French, or in both official languages. This includes technical reports that may have been incorporated by reference into the AIF.
Item 5.4 of Form 51-102F2 Annual Information Form prescribes the information that must be included in an AIF or prospectus to describe material mineral properties in order to provide full, true and plain disclosure. There are two ways of complying with this requirement: one that will not require that the technical report be prepared in French and one that will.
An issuer may satisfy the requirements of Item 5.4 by providing all the information on its material properties directly in the AIF. In that case, there is no obligation to have the supporting technical report prepared in French, because it has not been incorporated by reference into the AIF.
Pursuant to instruction (ii) of Item 5.4, an issuer may also satisfy the requirements of Item 5.4 by reproducing the summary from the technical report in its AIF, if it also incorporates, by reference, its technical report into its AIF. In this case, the issuer will be required to have a technical report prepared in French and filed at the time it files its preliminary short form prospectus.
For more information, please consult the April 8, 2011, CSA Notice concerning the replacement of NI 43-101 and accompanying documents available at www.lautorite.qc.ca, as well as the websites of other CSA jurisdictions.
The opinions/statements expressed in this article are those of the authors and do not necessarily represent those of l’Autorité des marchés financiers.
Luc Arsenault is a geologist and Alexandra Lee is a senior policy advisor, both with the Autorité des marchés financiers. The authors participated in the drafting of the new National Instrument 43-101 Standards of Disclosure for Mineral Projects.