Mining companies often face a wide range of environmental risks and challenges throughout the mining cycle, especially in relation to water. Investors need to be provided with meaningful information about these types of risks, if they are material to a mining company.
Two publications by the Canadian Securities Administrators address what information regarding environmental matters, including water-related issues, must be reported to meet requirements. In October 2010, CSA Staff Notice 51-333 Environmental Reporting Guidance (the Notice) was published to assist companies in identifying what environmental matters need to be disclosed under existing securities legislation. In addition, a revised version of Form 43-101F1 Technical Report (the Form) was published in June 2011. Generally, the Form prescribes the contents of technical reports, which must be filed by mining companies at specified times, to support scientific or technical information that relates to a material mineral project.
Notice provides guidance on disclosure of environmental matters
Environmental matters can cover a broad range of issues, including the use, disposal and contamination of water during the mining process. The Notice mentions that, under existing securities law (Item 5.2 of Form 51-102F2 Annual Information Form), companies are required to disclose risk factors related to their business. Water-related issues can pose risks to a mining company and its business in a number of ways. For example:
Physical Risks: In many arid and semi-arid regions, such as parts of South America, Africa, Australia, China and India, the main risk relates to water availability issues. In some regions, seawater desalination plants are required to supply enough water for mining operations.
Regulatory and Legal Risks: These risks can arise from water availability or water quality concerns. Reduced water rights can have a serious impact on mining operations. Water quality problems can increase capital and operating costs due to the need to prevent or to treat contaminated water. Litigation from pollution or contamination of local community water sources can be severe.
Reputational Risks: Reputational damage for mining companies is likely to stem from water quality problems. Once a company has a poor reputation, it can lead to loss of investment and value destruction. In many cases, the reputational risk can extend beyond a single company and affect the entire industry.
Technical Report requirements for environmental disclosure
The updated Form contains additional requirements for information relating to environmental matters companies must disclose in their technical reports. In many cases, this information concerns water resource issues. The following are some examples:
Item 4: Property Description and Location
Environmental liabilities to which the property is subject
Items 5: Accessibility, Climate, Local Resources, Infrastructure and Physiography
Availability and sources of power, water, potential tailings storage areas, potential waste disposal areas, etc.
Item 14: Mineral Resource Estimates
Extent to which the mineral resource estimates could be materially affected by any known environmental factors.
Item 17: Recovery Methods
Current or projected requirements for energy, water, etc.
Item 18: Project Infrastructure
Infrastructure and logistic requirements, such as roads, rail, port facilities, dams, dumps, stockpiles, leach pads, tailings disposal, power, pipelines, etc.
Item 20: Environmental Studies, Permitting, and Social or Community Impact
Information on environmental, permitting, and social or community factors related to the project.
Item 25: Interpretation and Conclusions
Significant risks and uncertainties and the foreseeable impacts of these risks on the project's potential economic viability or continued viability.
The current demand for metals and minerals will continue to impact the natural resources that are required by the mining industry to meet production needs. Most notably, water will continue to play a vital role in mining operations due to a variety of factors. The scarcity of water resources in arid regions where new mines are being developed, the exploitation of lower-grade deposits that require more water for each tonne of refined product, and the long-term liability issues associated with mine closure and rehabilitation can all have a significant impact on a mining company’s business. Mining companies should be aware that these types of water-related issues may have to be disclosed under existing securities law requirements.
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 is a senior geologist with the Ontario Securities Commission, and is responsible for NI 43-101 compliance reviews of prospectuses, technical reports and other regulatory filings of Ontario-based mining companies.
Daphne Wong is a senior analyst in the Office of Domestic and International Affairs of the Ontario Securities Commission, and was involved in the development of CSA Staff Notice 51-333.