- Securities regulation in Canada is a matter of provincial jurisdiction. All securities commissions and similar regulatory authorities of the provinces and territories of Canada are members of the Canadian Securities Administrators (CSA), an umbrella organisation which seeks to ensure uniformity in securities regulatory matters of national interest.
- Toronto Stock Exchange and Ontario Securities Commission, Setting New Standards: Proposed Standards for Public Mineral Exploration and Mining Companies—Mining Standards Task Force Final Report (January 1999).
- See Canadian Institute of Mining, Metallurgy and Petroleum, CIM Standards on Mineral Resources and Reserves—Definitions and Guidelines, prepared by the CIM Standing Committee on Reserve Definitions and approved by CIM Council on 20 August 2000 (hereinafter, the ‘CIM Standards’). The resource and reserve definitions included within the CIM Standards are appended to NI 43–101, below n 5. The CIM Standards do not apply to disclosure concerning petroleum, natural gas, bituminous sands or shales, groundwater or other substances which do not fall within the meaning of the term ‘mineral resource’ as defined. Standards for disclosure of oil and gas activities are to be the subject of a separate national instrument: see below n 59.
- Australasian Code for Reporting of Mineral Resources and Ore Reserves, prepared by the Joint Ore Reserves Committee of the Australian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia, September 1999; Guide for Reporting Exploration Information, Mineral Resources and Mineral Reserves of the Society for Mining, Metallurgy and Exploration, Inc (1 March 1999).
- (2000) 23 OSCB 7758. NI 43–101 and Form 43–101 F1 were made as rules in British Columbia, Alberta, Manitoba, Ontario, Nova Scotia and Newfoundland, as regulations in Saskatchewan and as policies in the other CSA jurisdictions. CP 43–101 was implemented as a policy in all CSA jurisdictions. On the effective date of NI 43–101, the CSA's National Policy No 2-A, Guide for Engineers, Geologists and Prospectors Submitting Reports on Mining Properties to Canada Provincial Securities Administrators (‘National Policy 2-A’), was rescinded.
- CP 43–101, above n 5, s 2.1.
- NI 43–101, above n 5, s 1.2. Also excluded are unintended information ‘leaks’ (see Appendix B to the Notice of Rule (the ‘Notice of Rule’) accompanying the release of NI 43–101 at (2000) 23 OSCB 7815).
- Private placement offering memoranda are considered to be a form of ‘public’ disclosure if they are required to be filed under applicable Canadian securities legislation even though, in contrast to prospectuses, offering memoranda are not generally available to the public after filing with a Canadian regulator.
- CP 43–101, above n 5, s 2.4.
- NI 43–101, above n 5, s 1.2. Note that, in contrast to the ‘competent person’ concept in the JORC Code and the SME Guide, the requisite five years’ experience does not have to be in the subject matter of the particular project or report.
- Ibid.
- NI 43–101, above n 5, s 2.2. The exceptions do not make any provision for terms such as ‘in situ resources’ or ‘geological reserves’. Such terms should not be used in NI 43–101 disclosure.
- CIM Standards, above n 3.
- Above n 4.
- CIM Standards, above n 3.
- Ibid.
- JORC Code and SME Guide, above n 4. The JORC uses the term ‘ore’ in order to distinguish more clearly ore reserves from mineral resources.
- CIM Standards, above n 3. The CIM Standards require that the study include financial analysis, based on reasonable assumptions of technical, engineering, operating, economic and other relevant factors, sufficient for a qualified person to determine if all or part of a mineral resource may be classified as a mineral reserve.
- Ibid.
- For example, under the JORC Code, the standard that the requisite ‘demonstration’ must meet is the same, both for probable and proved ore reserves: the required demonstration is that extraction could reasonably be justified; under the CIM Standards, however, the demonstration required, in the case of probable mineral reserves, is that economic extraction can be justified and, in the case of proven mineral reserves, that economic extraction is justified [emphasis added].
- See Newmont Mining Corporation and Delta Acquisition LLC (2002) 25 OSCB 326 (10 January 2002), where the CSA ‘decision maker’ (in this case, the OSC) appears to find as a fact that ‘the disclosure regime promulgated by the SME Guidelines, including the methods of calculating reserves and resources, are in all material respects similar to those of both NI 43–101 and the Australasian Code for Reporting of Mineral Resources and Ore Reserves’.
- NI 43–101, above n 5, s 2.4. In either case, the disclosure must identify the source of the historical estimate, confirm its relevance, comment on its reliability and explain any differences between the standards used in that estimate and the CIM Standards.
- NI 43–101, above n 5, s 7.1(1). Interestingly, unlike the JORC Code or the SME Guide, neither the UK IMM system nor USGS Circular 831 conforms with the CIM definitions. The inclusion of USGS Circular 831 (and the omission of the SME Guide) is curious: as was noted by the SME's Reserves and Resources Committee in its 9 September 1998 submission to the OSC/TSE mining standards task force, USGS Circular 831 is ‘obsolete’ with respect to modern corporate reporting standards and requirements and does not contain the standards recommended by the SME and followed by most US mining companies.
- Ibid, s 7.1(2). This change was introduced only in the final version of NI 43–101 and was a distinct improvement from the earlier drafts of NI 43–101, which prohibited Canadian issuers from using any system other than the CIM Standards regardless of where their material properties were located.
- CP 43–101, above n 5, s 1.5.
- NI 43–101, above n 5, ss 3.1 and 3.2. Note that under additional disclosure standards introduced by the TSE in 1999 (Disclosure Standards for Companies Engaged in Mineral Exploration, Development and Production, TSE Company Manual, Appendix B (hereinafter, the ‘TSE Disclosure Standards’)), TSE-listed issuers are required to identify the qualified person in all disclosure concerning mineral properties, including news releases.
- NI 43–101, above n 5, s 3.4.
- Under NI 43–101, ‘exploration information’ is defined as geological, geophysical, geochemical, sampling, drilling, analytical testing, assaying, mineralogical, metallurgical and other similar information concerning a particular property that is derived from activities undertaken to locate, investigate, define or delineate a mineral prospect or mineral deposit (NI 43–101, above n 5, s 1.2).
- Ibid, s 3.3. The disclosure must also identify any drilling, sampling, recovery or other factors that could materially affect the accuracy or reliability of the reported data and describe the analytical or testing procedures utilised, sample size and the name and location of each analytical or testing laboratory used, its certification and its relationship, if any, to the issuer.
- TSE Disclosure Standards, above n 26. The TSE Disclosure Standards also require an issuer which has discontinued work on a property about which previous disclosure has been made to disclose the reasons for ceasing work and any information as to undisclosed results, even if the property is no longer material. In addition, all news releases containing information on a company's material exploration properties which are posted on its website must continue to be posted until the company has disclosed that it has discontinued work on, or no longer has an interest in, the property or the information has been superseded by new disclosure.
- NI 43–101, above n 5, s 2.3(2). Note, however, that the TSE Disclosure Standards prohibit disclosure by TSE-listed issuers of ‘estimations of tonnage and average grade of mineralization’ until a resource calculation has been performed.
- Ibid, s 2.3(3). Ontario reporting issuers are required to pre-clear with the OSC any such proposed disclosure, technical report and preliminary assessment.
- NI 43–101, above n 5, s 1.2.
- NI 43–101, above n 5, s 4.2. This requirement may be satisfied by filing a report prepared in accordance with the CSA's former National Policy 2-A and filed before 1 February 2001 in a CSA jurisdiction in which it is a reporting issuer (amended, as necessary, to reflect material changes since that filing).
- Ibid.
- Ibid, s 5.3. Section 1.5(4) of NI 43–101 provides that a qualified person is not independent of an issuer if, among other things, the qualified person (1) is an officer, director, employee or other insider of the issuer or a partner of any of the foregoing, (2) owns or expects to receive any securities of the issuer or an affiliate thereof or an ownership or royalty interest in the property that is the subject of the technical report, (3) has received the majority of his or her income in the three years preceding the date of the technical report from the issuer and its insiders and affiliates, or (4) is or expects to become an insider, affiliate or partner of a person with an ownership or royalty interest in a property within two kilometres of the property being reported on or has or expects to obtain such an ownership or royalty interest.
- Section 4.2 of NI 43–101 permits the subsequent filing of the required technical report in the case of a directors’ circular responding to a takeover bid (which may be filed after the bid expires) or where a technical report is required to support first-time disclosure of a preliminary assessment or resources or reserves on a material property (which may be filed within 30 days of the disclosure). In addition, if a property becomes material to an issuer within 30 days of the filing deadline for an annual report or annual information form, the required report may be filed within 30 days of the date the property became material.
- CP 43–101, above n 6, s 2.7.
- Form 43–101 F1, items 15, 16 and 18, above n 5.
- Form 43–101 Fl, item 19, above n 5. Note that the TSE Disclosure Standards state that ‘it is inappropriate’ for TSE-listed issuers to refer to the gross value or in situ value of resources and reserves.
- Ibid, item 25. Some of this information, particularly capital and operating cost estimates, cash flow forecasts and sensitivity analyses, will be competitively sensitive and may not otherwise be subject to disclosure. This requirement may accordingly operate to give issuers not subject to Canadian regulation an unfair advantage relative to their Canadian competitors.
- NI 43–101, s 6.2, and CP 43–101, s 6.2, above n 5.
- Form 43–101 F1, item 5, above n 5.
- Ibid, item 22.
- Under most Canadian securities legislation, ‘material fact’ and ‘material change’ are defined as follows: ‘material fact’, where used in relation to securities issued or proposed to be issued, means a fact that significantly affects, or would reasonably be expected to have a significant effect on, the market price or value of such securities; ‘material change’, where used in relation to the affairs of an issuer, means a change in the business, operations or capital of the issuer that would reasonably be expected to have a significant effect on the market price or value of any of the securities of the issuer. (See, for example, the Ontario Securities Act, RSO 1990, c S. 5, as amended (the ‘Ontario Act’), s 1(1)).
- The Ontario Act defines a ‘misrepresentation’ as ‘an untrue statement of a material fact or the omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in the light of the circumstances in which it was made’ (Ontario Act, s 1(1))-
- NI 43–101, above n 5, ss 8.1 and 8.3.
- CP 43–101, above n 6, s 7.1.
- Ontario Act, s 122. A fine of up to $1 million and a jail term of up to two years are the maximum penalties which may be imposed on conviction.
- Ibid, ss 130 and 131. A qualified person will not be liable for a misrepresentation made on his authority as an expert in a prospectus or circular unless he failed to conduct an investigation sufficient to provide reasonable grounds for a belief that there had been no misrepresentation. Note that CSA jurisdictions have recently proposed legislative amendments under which, subject to certain due diligence defences, issuers and their qualified persons would be exposed to limited civil liability for misrepresentations made in secondary market disclosure, both orally and in a wide range of disclosure documents, including those which NI 43–101 requires be supported by a technical report. No CSA jurisdiction has so far moved to enact the amendments. See CSA Notice 53–301, Proposal for a Statutory Civil Remedy for Investors in the Secondary Market and Response to the Proposed Change in the Definitions of ‘Material Fact ‘and ‘Material Change’ (2000) 23 OSCB 7383.
- CSA Staff Notice 43–302, Frequently Asked Questions, National Instrument 43–101 (2001) 24 OSCB 6250 (19 October 2001); updated at (2002) 25 OSCB 811 (8 February 2002).
- Decisions in which relief from membership qualifications has been granted include Re Dayton Mining Corporation (26 June 2001), Re Consolidated Jaba Inc (6 September 2001) and Re Easton Minerals Ltd (30 November 2001) (three decisions of the British Columbia Securities Commission (BCSC), reported on the BCSC website at www.bcsc.bc.ca).
- Re Fording Inc (2001) 24 OSCB 5502 (28 August 2001), Re Greater Lenora Resources Corp and 3851419 Canada Inc (2001) 24 OSCB 4547 (23 July 2001).
- Re Riphean Platinum Corporation (2001) 24 OSCB 2167 (3 April 2001)—seasonal weather conditions prevented inspection; Re Petra Resource Corp (BCSC website, 16 July 2001)—property covered by snow; Re Vaaldiam Resources Ltd (2001) 24 OSCB 5500 (29 August 2001)—early stage property where inspection would not be beneficial; and Re Augusta Resource Corporation (2002) 25 OSCB 1073 (11 February 2002)—access not possible due to seasonal lack of daylight.
- Re Minegem Inc (2001) 24 OSCB 5142 (17 August 2001).
- Re Polymet Mining Corp(2001) 24 OSCB 4546 (19 July 2001).
- Re AngloGold Limited (2001) 24 OSCB 6422 (12 October 2001); Re Newmont Mining Corporation, above n 21. The Newmont order is interesting inasmuch as Newmont, unlike AngloGold, was a Canadian reporting issuer (in five CSA jurisdictions).
- See above nn 21 and 55.
- The CSA has recently circulated for public comment proposed national standards for public disclosure of reserves data by reporting issuers in the oil and gas sector (Proposed National Instrument 51–101—Standards of Disclosure for Oil and Gas Activities (2002) 25 OSCB 505) (25 January 2002). Interestingly, while this instrument would also mandate so-called ‘made in Canada’ standards, the standards mandated appear to be very similar to existing US standards and relevant US Financial Accounting Standards Board terminology and standards are expressly incorporated. In another notable contrast to NI 43–101, draft National Instrument 51–101 expressly states in section 1.1 that it applies only to reporting issuers, ie to issuers subject to public reporting and disclosure obligations in a CSA jurisdiction.
- This can be expected notwithstanding the admonition in CP 43–101 to use so-called ‘plain language’ (see CP 43–101, above n 6, s 2.2). This tendency will only become more pronounced if the draft legislation referred to in n 50 above is enacted.
- Preventing Enron North: Improving Financial Reporting and Corporate Governance in Canada, Remarks by David A Brown QC to the Conference Board Outlook Conference, 7 March 2002; see also the recent CSA proposal for revamping Canadian mutual fund regulation, which recommends ‘a more flexible regulatory approach, one that represents a movement away from detailed and prescriptive regulation’ (Striking a New Balance: A Framework for the Regulating Mutual Funds and their Managers, Concept Proposal of the Canadian Securities Administrators, 1 March 2002). Both publications are available on the OSC website at www.osc.gov.on.ca.
Journal of Energy & Natural Resources Law
Volume 20, 2002 - Issue 4