Breaking New Ground: Proposed Overhaul of Canadian Disclosure Requirements for Mining Issuers

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Introduction

Against the backdrop of evolving cross-border dynamics in the mining sector, a volatile market and increasing importance of environmental sustainability and community engagement, a “near final” draft of the British Columbia Securities Commission’s (the “BCSC”) proposed replacement to National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”), and the corresponding companion policies and form of technical report, have been released in draft to encourage discussion among stakeholders. The goal? Modernize disclosure requirements to not just keep up, but continue leading the way in regulating disclosure by mining issuers and, by doing so, preserve and move forward Canada’s position as a premier centre of mining activity globally.

Changes at a High Level

While the proposal is subject to change over the coming months, the BCSC’s aim is to enhance and modernize Canadian disclosure requirements in the mining sector by strategically refreshing the expectations placed on mining issuers specifically. At a high level, these changes focus on:

• removing or replacing certain definitions and requirements that have become outdated;
• modernizing and streamlining certain requirements to reflect current industry practice;
• providing clarification and guidance on certain definitions and requirements; and
• making other minor drafting changes to clarify disclosure requirements.

The objective for these changes is to ensure that investors in the sector have sufficient protections in place in order to make informed investment decisions while, at the same time, relieving mining issuers from certain disclosure requirements that add limited value.

Background

Canada plays a leading role internationally in the regulation of mining disclosure. However, Canada’s mining disclosure regime was last amended in 2011 and is due for an update. In April 2022, the Canadian Securities Association (“CSA”) published Consultation Paper – 43-401 Consultation on National Instrument 43-101 Standards of Disclosure for Mineral Projects to gather information that could guide potential amendments to Canada’s mining disclosure regime.^[1]

Certain Proposed Changes

The modernization of NI 43-101 put forth by the BCSC (collectively, the “Proposed Changes”) includes, among other updates, the following:

• Definition of Qualified Person (“QP”): The Proposed Changes remove the education requirement of a QP, as it is already covered by the requirements for professional licensing, and clarifies that relevant experience in the minerals industry must be gained after registration as a professional geologist or engineer. The Proposed Changes also ensure that experience of the QP is relevant to the subject matter of the mineral project. Lastly, all scientific or technical information disclosed for both material and non-material projects must be prepared or approved by a QP, ensuring that investors receive consistent and reliable information. These updates align with current industry practices, promoting greater transparency and investor protection.
• New CIM definitions: The Proposed Changes align definitions under NI 43-101 with the Canadian Institute of Mining, Metallurgy and Petroleum’s (“CIM”) definitions created together with the CSA. The Proposed Changes introduce new definitions to the CIM Definition Standards, including the term “scoping study,” which replaces the definition of “preliminary economic assessment” (“PEA”), address past non-compliance issues with PEAs and require cautionary statements to be included due to the conceptual nature of scoping studies. The new definition of “exploration target” replaces “target for further exploration,” aligning with global standards, while the definition of “life of mine plan” will now be used to describe the status of mineral projects in production, also in line with global standards.
• Foreign codes: The Proposed Changes remove the need for issuers to rely on foreign reporting codes, ensuring that all technical report disclosures align with CIM’s definitions.
• Royalty issuer technical reports: The Proposed Changes remove the requirement for a royalty-only issuer to file a technical report. This Proposed Change eases the burden on a royalty issuer’s QP, who may not have sufficient information and access to the technical data on a project required in order to produce its own report for the royalty-only issuer.
• Environmental and social issues: The Proposed Changes reflect updates to current terminology for disclosures relating to environmental and social issues. Given their milestone-driven nature, technical reports now need to include dates and sources for reported environmental disclosure, including disclosure relating to permits and ancillary social matters, so the currency of information can be accurately determined.
• Removal and update of certain other definitions: The Proposed Changes consolidate the terms “mineral project,” “project,” “mineral property” and “property” – which had been used interchangeably in the past – into the term “mineral project,” which is now used consistently throughout NI 43-101. Also removed are the separate categories of diamond, base metals, precious metals and industrial metals, as each are considered examples of and can fall under the categories of natural inorganic material or natural solid fossilized organic material. Additionally, the Proposed Changes remove the definitions “early stage exploration property” and “advanced property” to make the technical report suitable for projects that are at various stages.
• Indigenous Peoples, rightsholders and communities: The Proposed Changes require that disclosure specifically address permits, agreements and negotiations with Indigenous Peoples, rightsholders or communities regarding the mineral project in a technical report. This information is considered essential for investors to fully understand the risks and uncertainties associated with the project.
• Personal inspections: A new standalone item is added to the technical report for confirmation that a current personal inspection was done by a QP on a mining project. The Proposed Changes also remove the ability for a QP to defer a current personal inspection and reinforce that at least one QP must conduct a current personal inspection on the mineral project before a technical report is filed.
• Mineral resource disclosure: The Proposed Changes will reinforce industry practice by requiring: information about how reasonable prospects for eventual economic extraction were determined, enhanced disclosure about the classification of mineral resource estimates, the issuer’s attributable percentage of resources for fractional ownerships, and project-specific risk disclosure requirements for mineral resource estimates. These changes will enhance the way in which QPs articulate how mineral resource estimates are determined.
• Adjacent properties: The Proposed Changes clarify that while neighbouring properties’ mineralization may be discussed in technical reports or other documents, it cannot be focused on. In addition, cautionary statements must be included to advise readers that this information on adjacent properties is not necessarily indicative of mineralization on the issuer’s own mineral project.
• Data verification: Specific disclosure about the data verification performed by QPs at every development stage, not just for selected activities or stages, is now required by the Proposed Changes. This includes data verification for any technical data, such as metallurgy or mining methods, required for each item of a technical report.
• Disclaimers: The Proposed Changes confirm that an issuer’s disclosure (including a technical report) cannot include any disclaimer of scientific or technical information.
• Written disclosure and material mineral projects: The Proposed Changes clarify that the prescribed requirements for written disclosures apply to both material and non-material mineral projects of an issuer, and not just an issuer’s material mineral projects. This includes requirements regarding data verification, exploration information, mineral resources and mineral reserves.
• Relevant scientific and technical information: The Proposed Changes replace the phrase “material scientific and technical information” with “relevant scientific and technical information” related to the content of a technical report to clarify that a QP is not expected to determine materiality but is instead expected to determine what information is relevant to the mineral project for the purpose of the technical report.
• Guidance on technical reports: The Proposed Changes introduce Companion Policy guidance specific to disclosure in technical reports where there was no such guidance in earlier versions of NI 43-101.

For more information on the BCSC’s proposed changes to NI 43-101, please see the published drafts here.

Conclusion

The Proposed Changes bode well for the modernization of the mining regulatory framework in Canada, affirming that regulators are committed to ensuring the protection of investors and stakeholders while streamlining processes for issuers. Although not all of the Proposed Changes may ultimately be incorporated in NI 43-101, they nonetheless form a solid framework for discussion and consideration in light of the ongoing economic shifts and challenges that mining issuers face in exploring, developing, scaling operations, raising capital and remaining viable in this evolving sector.

The Capital Markets Group and Mines & Minerals Group at Aird & Berlis LLP deal with issues relating to mining disclosure requirements and regulations as they pertain to issuers, investors and stakeholders on a day-to-day basis. If you are an issuer interested in how these changes may impact your disclosure obligations or operations, or a potential investor or stakeholder with questions on how to best navigate or mitigate any associated risks, please contact the authors or a member of the groups.

[1] See the following article prepared by Aird & Berlis that discusses these consultations further: CSA Seeks Stakeholder Feedback on National Instrument 43-101 Standards of Disclosure for Mineral Projects.