March/April 2012

Standards

Mineral disclosure in brine recovery projects

By Craig Waldie and James Whyte

Several years ago, with expectations of a high demand for lithium, exploration companies began to invest in lithium projects. Some were hard-rock pegmatites with lithium mineralization, but others were a geological type not foreseen by securities rules – the mineral-brine resources of sedimentary basins in arid areas, commonly called salars, which are often found in the “lithium triangle” region of South America that straddles the borders of Argentina, Bolivia and Chile.

National Instrument 43-101 (NI 43-101), which stipulates standards of disclosure for mineral projects, and the CIM Definition Standards on Mineral Resources and Mineral Reserves were both originally drafted with hard-rock mineral deposits in mind. Nevertheless, NI 43-101 also provides a proper and rigorous disclosure framework for mineral projects hosted in brine, and it is the form of the mineral that is relevant to the analysis concerning the application of the instrument, not the type of host medium from which a mineral is extracted (e.g. hard rock or mineral brine). In addition, many market participants, including investors, see mineral brines as a mineral project and expect similar disclosure rules and definitions to apply.

On July 22, 2011, the Ontario Securities Commission published Staff Notice 43-704 Mineral Brine Projects and National Instrument 43-101, which provides companies and their Qualified Persons guidance on our interpretation of  both NI 43-101 and CIM definitions, and how those rules and guidelines apply to mineral brine projects. It should be noted that the Notice reflects the views of OSC staff and does not necessarily reflect the views of OSC, other jurisdictions, or the Canadian Securities Administrators.

OSC staff believe mineral brine projects fall within NI 43-101’s definition of mineral projects, and that the public interest is served by having mineral brine projects subject to the Instrument. The Notice also expresses the view that companies and Qualified Persons should disclose their opinion on whether or not a mineral brine project falls within or outside of the CIM Definitions of Mineral Resource and Mineral Reserve. Should it fall outside, we believe that companies should disclose how they intend to comply with the requirements of NI 43-101 that rely on these definitions, including the technical report triggers. Therefore, regardless of a company’s position on the scope of the CIM definitions, compliance with the requirements under NI 43-101 is still expected.

Disclosure of mineral-brine resources and reserves should still conform to Parts 2 and 3 of NI 43-101, including the requirement to express resource and reserve figures as a quantity and grade, and to disclose key assumptions and parameters that define the resource or reserve.

Technical reports on mineral-brine projects need to discuss aspects of those projects that apply particularly to mineral brines. The Notice provides a non-exhaustive list of considerations, which companies and Qualified Persons should reflect upon when satisfying the technical report form requirements. These include hydrogeological information, such as porosity, permeability and the geometry of the aquifer; however, the report should also discuss matters like climate and surface-water balance, and the kind of mineral tenure that can be exerted on a brine resource. For advanced properties, the technical report’s section on mining methods is the place to detail proposed well field designs, expected pumping rates and predicted production over time.

The evaluation of mineral brines is complex, and Qualified Persons should either be hydrogeologists or engineers with adequate experience in salar geology and brine processing. In many cases, a multidisciplinary team approach may be necessary when preparing technical reports.

For an informative overview of some of the important challenges and technical issues on mineral brine projects, you may consider having a look at the paper by John Houston et al.: “The evaluation of brine prospects and the requirement for modifications to filing standards,” published in the November 2011 edition of Economic Geology.

To view the OSC Staff Notice 43-704, visit: http://www.osc.gov.on. The views expressed in this article are those of the authors and do not necessarily represent the views of the Ontario Securities Commission.


Craig Waldie and Jim WhyteCraig Waldie (left) and Jim Whyte are both senior geologists with the Ontario Securities Commission, and are responsible for NI 43-101 compliance reviews of prospectuses, technical reports and other regulatory filings of Ontario-based mining companies.
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