In the wake of the Bre-X Minerals gold salting fraud of the late 1990s, Canada’s regulators introduced National Instrument 43-101 in 2001. The regulation, which spelled out standards of disclosure for mineral projects and put the onus on the “qualified person” — a professional responsible for the information in a technical report – earned back the trust of investors, prevented similar frauds, and even became a recognized “brand.”
But that doesn’t mean it’s perfect.
In the eyes of regulators, work still remains to address common issues it sees in company disclosures and to adapt to changes since NI 43-101’s last revision in 2011, such as growth in green energy commodities and increased investor interest around ESG and the social impacts of mining. To that end, the Canadian Securities Administrators (CSA) released a consultation paper last April seeking input on 38 different questions about NI 43-101.
The questions ranged from whether the standard should be more closely aligned with those in other “influential” mining jurisdictions, whether the CSA should reduce the 45-day delay between disclosure of aspects of a technical report and its filing; whether disclosure of a PEA should be prohibited on projects that already have a mineral reserve; and whether more information about Indigenous relationships and consultation should be disclosed.
The comment period ended in September 2022, with around 85 comments submitted. At this point, the CSA says it’s still reviewing those comments and no decision has been made about whether or when the consultation will result in proposed amendments to the regulation.
A review of the comments shows that many of the respondents believe the definition of a qualified professional (or QP) is unclear — or that CSA staff are reading into the definition something that isn’t there.
“Wood does not agree with the recent interpretation by the CSA staff that the five years of experience in the mining industry that is relevant to his or her professional degree or area of practice, only begins after the mining industry expert has obtained registration with a professional association and membership category recognized under NI 43-101,” said the engineering consulting firm in its posted comments.
“Wood is concerned that this latest interpretation of what is required to meet the definition of Qualified Person is a fabricated compliance issue. It is harmful to the credibility of the CSA staff being fair in their interpretation and application of the disclosure standards. It creates a new, unnecessary area of uncertainty regarding compliance with NI 43-101, and reduces the already insufficient pool of mining industry experts that are willing to accept the role of a Qualified Person.”
Industry comments also take issue with the requirement of independence for QPs in some cases (such as a first resource for a project), noting that Canada is the only jurisdiction in the world with that requirement.
On the whole, commenters also believe NI 43-101 is already too prescriptive, with not enough trust in QPs to use their own judgment — and that the CSA’s consultation questions reveal a preference for more of the same.
“Many of the questions in the consultation paper surround elements of professionalism and integrity of the Qualified Person (QP) and the ability of a QP to rely on their own professional judgment in fulfilling NI 43-101 requirements,” wrote the Prospectors & Developers Association of Canada (PDAC) in its submission. “We wish to emphasize that QPs in Canada are accredited professionals who belong to respected professional associations and must adhere to technical and ethical standards.”
The PDAC and others noted the need for better investor education could address some of the CSA’s concerns around protecting investors, rather than expecting technical reports to cover everything.
“Risk disclosures in various continuous disclosure documents (including the technical reports) have generally become excessively long, overly generic and, as a result, less effective for investors,” reads the submission. “Therefore, we recommend that CSA focus efforts on improving the capabilities of SEDAR as an analytical tool to allow investors to map and compare project risk and incorporate it into their investment decisions.” PDAC noted that “a wealth of comparative information already exists within the platform but access and data mining capabilities remain limited.”
(In fact, CSA has been working on modernizing SEDAR — the clunky, outdated system for issuer filings — to make it easier to use, search and update regularly. It is scheduled to launch the first of a three-phase update on June 13. SEDAR+ will eventually replace and integrate seven legacy systems, including SEDAR, the Disciplined List, and SEDI, which tracks trading by insiders).
One area that we expect to see as part of any proposed update will be additional disclosure requirements around environmental and social risk factors, in addition to those that already exist under the “Property Description and Location” and “Environmental Studies, Permitting and Social or Community Impact” sections in a technical report.
Many commenters believed these risks are outside the scope of a technical report and outside the expertise of the QPs that author and take responsibility for them. The Association for Mineral Exploration (AME) for example, noted that it would be helpful to investors for disclosures to include: projects located on Indigenous groups’ traditional territory; whether there are settled land claims; and whether or not engagement has begun with those groups.
“However, generally speaking, disclosure of risks and uncertainties related to Indigenous rights is beyond the scope of a technical QP at the mineral resource estimate stage,” reads AME’s submission, which said the same applied to opportunities related to Indigenous rights. “These risks and opportunities are difficult to understand and express definitively, especially at earlier stage projects. Accordingly, we do not believe specific disclosures should be mandatory.”
In addition, an expansion of who qualifies as a QP (currently only engineers and geoscientists) might be necessary to include more environmental and social information in a technical report.
However, considering that environmental risks and Indigenous community relations are more material than ever, it would be surprising if the CSA did not increase disclosure requirements in future.
As Australia’s JORC (Joint Ore Reserves Committee) said in its submission: “JORC considers these items inadequate and would recommend alignment with CIM ESG Guidelines,” which are currently under review. JORC also notes that these topics are being discussed by CRIRSCO (Committee for Mineral Reserves International Reporting Standards), adding “international alignment of this area would be advantageous.”
Read all the comments on the Ontario Security Commission’s website (www.osc.ca).
Why hasn’t the Northern Miner reached out to the regulators for comment?
Hi there, we did, but at this stage all they will say is they are reviewing comments and will share more when/if they decide to propose changes to NI 43-101.