Ontario, Quebec committees urge tighter disclosure standards

Two separate committees, one advising the Toronto Stock Exchange and the Ontario Securities Commission, and another advising the Commission des Valeurs Mobilieres du Quebec (CVMQ), have both recommended a set of tighter standards for reporting mineral exploration results.

The recommendations are expected to be included in a new securities rule, National Instrument 43-101, which is being adopted by securities commissions across the country.

The TSE-OSC Mining Standards Task Force, set up in 1997 following the Bre-X Minerals fraud, issued its final report recommending that all mineral exploration information released by listed companies be approved by a “Qualified Person,” who will be responsible for its accuracy.

Under the task force’s recommendations, the QP will be responsible for ensuring that exploration programs follow standard industry practices (for example, splitting drill core) and for vetting the press releases and documents a company issues to the market.

At the same time, the CVMQ’s Study Committee on the Financing of the Quebec Mining Industry, which was also appointed in 1997 to investigate exploration disclosure standards, brought down a report with similar recommendations, including the requirement for a QP.

The committee report also advises the development of best practices in exploration, and recommends that listed companies be obliged to follow a guide to writing press releases that the Montreal Exchange issued last May. That guide significantly tightened the ME’s reporting guidelines, blacklisting a number of poor practices, including: reporting gross-ounce resource figures, presenting figures in “gold equivalents,” and disclosing visual grade estimates.

The adoption of the QP rule in the country’s two largest provinces may also force the hand of both provincial governments in licensing geologists. Currently, both Ontario and Quebec have acts that license professional engineers (including mining and geological engineers) but do not license geoscientists. In most other provinces, the licensing body for professional engineers has taken on the responsibility for regulating geologists as well.

Ontario’s Ministry of Northern Development and Mines released a statement affirming it would work toward a registration system for geologists, though it did not present a timetable to bring a bill to the legislature. An earlier licensing agreement between the Association of Geoscientists of Ontario (AGO) and the province’s Professional Engineers body received the government’s blessing but fell through when a referendum among registered engineers turned the proposal down.

The AGO was pleased by the committee’s unequivocal stand on licensure, with William Pearson, the association’s president, saying “we couldn’t have asked for more if we’d written it ourselves.”

The Quebec committee’s report also came out strongly in favor of licensure, recommending that “a professional corporation of geologists and geophysicists be established in Quebec as soon as possible.”

Both committee reports developed a guideline for exploration practices and reporting exploration results, and both advocated the adoption of a uniform code for reporting mineral resources and reserves. Those recommendations require only administrative approval by the provincial securities commissions, and are virtually certain to be incorporated in the new National Instrument, which will be a rule made under the authority of provincial securities acts.

Enforcement of the new rules will be left to provincial securities agencies, some of which have already started recruiting more enforcement staff. Other recommendations that fall outside the scope of the rules will be adopted as policies by the stock exchanges.

The Ontario task force, which had issued an interim report in June, used the final report to clarify the role of the QP and to modify some of the guidelines for exploration practice. Laboratories offering analytical services will have to be accredited under International Standards Organization criteria, and analytical methods will have to be identified in technical reports.

The task force’s final report also made much stronger recommendations on the role of investment analysts, who have taken much of the public heat over the Bre-X fraud. Mining analysts who visited the company’s Busang property in Indonesia came back with almost uniformly good impressions of the project, which subsequently was revealed to be a sample-tampering scam (T.N.M., April 7/97 and May 12/97).

The task force recommended that the TSE require its member firms to enforce ethical and professional standards on the analysts they employ, regardless of whether the analysts are members of industry organizations or not. The report also said that an analyst’s report should state the analyst’s qualifications and whether the analyst or anyone in the company’s research group holds shares in the company. This recommendation follows a case where disciplinary action was taken against First Marathon Securities and several of its employees for their conduct in the Cartaway Resources affair.