In today’s economic climate, with many mining companies in survival mode and expenditures down, the last thing companies want to worry about is technical
reports on their material mineral properties, and whether those reports are still current. It is easy to think that, because exploration programs are
limited and there are no new material results to disclose on a property, the technical report on the property is still up to date. However, this is not
necessarily the case.
Mining companies are generally only legally required to file a technical report on a material property when they hit a trigger under National Instrument
43-101 Standards of Disclosure for Mineral Projects (NI 43-101). Technical report triggers can be events related to activities on the mineral property like
a first-time disclosure of, or material change to, a mineral resource, reserve or preliminary economic assessment (PEA). When a mining company does file a
technical report on the System for Electronic Document Analysis and Retrieval (SEDAR), the report must be complete, current and contain all material
information about the property.
But what happens when things change? Perhaps metal prices used in mineral resource estimates a few years ago are now considered too high, permits expire,
or there is a significant change in the project boundary? What about when obligations to maintain the project have changed? Or recommendations in the
technical report are no longer valid or plans for the property have changed for various reasons including a change to the jurisdiction’s tax or royalty
regime. Is the technical report still considered current?
Some of the triggers to file a technical report under NI 43-101 are events related to documents filed by the company, such as annual information form
(AIF), and do not necessarily apply at the project level. A company can rely on a previously filed technical report to satisfy the AIF trigger; however, it
can do so only if there is no new material scientific or technical information about the project. If the technical report is no longer current, and the AIF
has new scientific or technical information about the project, including information about potential economics, an updated technical report containing all
the new project information must be filed on SEDAR to support the information in the AIF.
How can a mining company determine if an existing technical report it has on file on SEDAR is complete and current? If there are no new exploration or
mining study results and the site visit is still current, a company should look at the scientific and technical information as presented in the existing
technical report, including the validity of economic assumptions used, and determine whether such information is still current and not misleading in
today’s economic conditions.
For instance, some assumptions used in mineral resource estimates or economic analyses in relation to metal prices and exchange rates may now be considered
out of date. If a table showing sensitivity of the mineral resource estimates to cut-off grade was included, the shelf life of the technical report can be
extended since it would support a wider range of long-term metal prices. For more advanced properties that include an economic analysis, the technical
report should contain the appropriate sensitivity analyses of key economic variables to show how changes, for example, to commodity prices, costs, exchange
rates and other factors can affect project economics.
We have often seen regulators ask companies to file updated technical reports when they consider the current ones misleading to investors. If a company is
relying on an existing technical report filed on SEDAR that is no longer current to form the basis of its continuous disclosure, the company should at the
very least provide an appropriate context for the information and cautionary language that clearly explains any possible risks to investors of relying on
that existing report so that the disclosure is not misleading.
Laurel Petryk is a partner in McMillan’s Vancouver
office in the mining and securities department.
She has extensive experience advising on NI 43-101
issues and reviewing technical reports and feasibility
studies for mining companies in all stages of development.
Greg Gosson is technical director, resource estimation
and compliance at AMEC. He is a recognized expert and
frequent speaker on NI 43-101 and other international mining
disclosure standards. He is currently a member of the Mining
Technical Advisory and Monitoring Committee for NI 43-101, an
industry advisory committee to the Canadian Securities Regulators.
Since market windows open and close quickly, a mining company could pay the price further down the line if it does not keep its technical reports up to date. When equity markets become available to raise finance again, non-current technical reports could deter an investment bank and hold up the filing of a prospectus, rights offering, or offering memorandum, causing a company to lose out on a valuable financial opportunity.
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