Canadian securities regulators issue warning to mining companies over investor presentations
Mining companies listed in Canada will be familiar with the need to comply with the requirements of National Instrument 43-101 "Standards of Disclosure for Mineral Projects" (NI 43-101). NI 43-101 sets out rules and guidelines for reporting information related to mineral properties owned, or explored, by companies reporting their results on Canadian stock exchanges. Such companies are used to ensuring that their feasibility studies and reporting of resources and reserves comply with the disclosure requirements and standards in NI 43-101. What it seems they are not so good at is applying those same standards to the preparation of their investor presentations.
The Canadian Securities Administrators have published a notice entitled "Review of Website Investor Presentations by Mining Issuers, CSA Staff Notice 43-209" (the "Notice") reminding companies of the need to ensure that their investor presentations and websites comply with NI 43-101 to the same extent as more formal technical disclosures. The Notice followed a review of 130 investor presentations for compliance with NI 43-101 and the requirements of NI 51-102 in relation to forward looking information.
According to the Notice, the results of the review highlight the need for mining companies to improve their disclosure in order to comply with the following requirements of NI 43-101:
Naming the qualified person (QP): the Notice states that the review by a QP of the technical information in an investor presentation directly improves compliance with the requirements of NI 43-101.
Preliminary economic assessments (PEA): providing the required cautionary statements in a presentation ensures a proper understanding of the limitations of the results in the PEA.
Mineral resources and mineral reserves: a clear statement whether mineral resources include or exclude mineral reserves is essential to avoid misleading disclosure.
Exploration targets: the Notice reminds companies that the potential quantity and grade must be expressed as a range and be accompanied by the required statements outlining the target limitations.
Historical estimates: disclosure must include source, date, reliability, key assumptions and should be accompanied by the required cautionary statements.
The CSA highlighted the use in presentations of terms such as "world-class", "spectacular", "production ready", or "ore". To the cheers of lawyers undertaking verification everywhere, the Notice states these phrases are often misused by exploration or mineral resources stage companies and could lead to misrepresentations.
Disclosure by companies at the mineral resource stage or earlier of anticipated economic outcomes for their project (such as production rate, capital and operating costs, or mine life) which suggest that their project is at a more advanced stage of development than is supported by their existing technical report, may trigger the filing of a new technical report to support those economic projections.
The CSA expects mining companies to use the Notice to strengthen their compliance with NI 43-101 in relation to their investor presentations and websites with a view to improving their disclosure to investors. It warns that a failure to do so may result, at the best, in a warning letter to correct the relevant disclosure and, at worst, the placement of the company on the reporting issuer default list and ultimately a suspension from trading until the deficiency is corrected.
At first sight, the need to comply with the detailed disclosure requirements of NI 43-101 may seem anathema to the primary purpose of an investor presentation and a website, namely as sales materials. However, by allowing enough time to prepare and review the presentation, using appropriate appendices (which can incorporate previously filed documents by reference) and including the necessary cautionary statements, it should be possible to reconcile the regulatory requirements with the commercial purpose of the presentation.