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Disclosure Dos and Don'ts

by Virginia Heffernan on November 1, 2012 expertise

In my interactions with junior exploration companies, I find there remains some confusion around NI 43-101 compliant disclosure of exploration results. The confusion is unsurprising, given how the rules have evolved since their introduction more than decade ago (the last adjustment was in June 2011), but there are some errors that have repeatedly cropped up over the years. I asked staff at the Ontario Securities Commission(OSC) if they could help pinpoint the main infractions and, after reviewing one of their latest 43-101 presentations, came up with some pointers:

Neglect your web site at your peril

Often companies will have done their homework on news releases and filings, but forget the 43-101 rules on their presentations and web sites. In the worst case, promotional materials such as newsletter plugs are posted on the website without being vetted for compliance. Remember, if you disclose it, you own it.

Don’t think of your resources as compliant, they never are
Only securities filings or disclosure are ever "NI-43-101 compliant", not the exploration work or resources they are based upon. Companies often make the mistake of calling their results or resources compliant, implying that the OSC or the TSX has somehow vetted the numbers.

Rout out declarations of ounces, pounds and total metals
A resource estimate always has tonnage and grade, and if you don't disclose both, you’re breaking the rules. Stating that you have 1.7 million oz. gold or even 1.7 million oz. gold at 4.6 grams per tonne is a no-no. Likewise, “total rare earth elements” or “total PGEs” are not grades. You must disclose the individual metals or oxides that make up the whole.

Get your preliminaries straight
Companies often confuse preliminary economic analyses (PEAs) with preliminary feasibility studies, but only preliminary feasibility studies are rigorous enough to provide an estimate of reserves.

Avoid cash flow or revenue projections. They can be a trigger
If you announce expectations about revenue or cash flow from a mineral occurrence, the OSC interprets that as initial disclosure of a preliminary economic analysis, and that triggers a technical report. If you want everyone to know that you‘re aiming for $50 million in annual cash flow from an asset, expect to provide (1) a mineral resource and (2) an independent technical report within 45 days of making the disclosure.

Name the Qualified Person (QP)
It seems obvious, but the OSC says it’s surprising how many companies forget to name the QP - the geoscientist who supervised the work –in their disclosure given that the QP is ultimately responsible for what is said.