Appendix C NATIONAL INSTRUMENT 43-101 – STANDARDS OF DISCLOSURE FOR MINERAL PROJECTS, COMPANION POLICY 43-101CP AND FORM 43-101F1
SUMMARY OF COMMENTS # Theme Comments 1. General support for the initiative The majority of the commenters expressed general support for the initiative, although the support was qualified by the need to address matters raised in the comments.
2. Lack of support for the initiative Two commenters expressed disappointment about the changes. One commenter hoped that changes are not made again for many years. The problem is that they will have to re-learn the Instrument because the changes are so substantial. Both commenters said the changes will make the process more difficult, more time- consuming, and more expensive for the issuer without any added protection to investors.
Amended National Instrument 43-101 3. Former Section 1.1 Application One commenter stated that we should not remove the Application provision in the Instrument. Despite the lengthy guidance in s. 1.3 of the Companion Policy, a rule should have its goals and objectives presented at the beginning, not in an explanatory document.
4. Section 1.1 Definitions One commenter said this definition is too restrictive. For We disagree. We do not believe a reasonable person would
Responses We acknowledge the support of the commenters and thank them for their comments. We have carefully considered all of the comments, and amended the proposed Instrument, Companion Policy and Form where we believe it is appropriate.
We acknowledge that changing the Instrument requires learning new requirements. However, the CSA was very conscious of the need to ensure the changes would not disrupt the industry’s familiarity with the layout and substantive requirements of the Instrument. Although the number of small fixes, drafting simplifications, and revisions appear large, they do not substantially alter the original requirements in the Instrument. After the implementation of the amendments, the CSA will continue to hold regular, free educational seminars for companies and QPs to learn about the amendments and how to comply with the Instrument. Please check the BCSC or OSC websites regularly for announcements of such seminars.
The CSA has researched this point and concluded that not all rules need to have an application section at the beginning. The application section in the original version of the Instrument gave some companies a loop-hole from complying with other parts of the Instrument. We believe removing it makes it clearer that all mining issuers must comply with each part of the Instrument. To the extent clarification is needed, it is set out in s. 1.3 of the Companion Policy.
- 2 - # Theme Comments “adjacent property” example, a kimberlite property that is many kilometres away is caught by this definition, but should not be. 5. Section 1.1 Definitions Many commenters disagreed with adding legal to the relevant factors in these two definitions because it is “feasibility study” and “pre-feasibility outside the expertise of the QP. If it is included, then it study” should at least be qualified, as the (Canadian Institute of Mining, Metallurgy and Petroleum) CIM definition is, by adding “which are sufficient for a QP, acting reasonably”. One commenter said it is not appropriate for the definition of feasibility study to include the reference to “serve as the basis for a final decision by a financial institution to finance the development of the deposit for mineral production”. All the requirements for appropriate mine development plans and design that will support safe financial planning should be solely determined by the QP and the company’s directors.
One commenter suggested that the definition of pre- feasibility study should be revised. It does not follow the guidelines of the Professional Engineers of Ontario (1989) and causes professional problems for the QP that must meet the standard of its professional oversight body.
6. Section 1.1 Definitions Two commenters said this definition is too narrow to make the proposed new site visit exemption useful. It “grassroots exploration property” does not take into account that a property with some historical exploration work done could still be a preliminary property in terms of current exploration technologies. It also does not take into account a property that is newly acquired for diamond exploration but has been previously explored for other commodities. It also does not take into account properties that have
Responses think that a property that is “many” kilometres away would be a reasonably proximate property. We believe legal is an important factor that must be included in order to call a comprehensive study a feasibility study or a pre-feasibility study. Item 5 of the Form allows a QP to rely on other experts for opinions that are outside the QP’s area of expertise. We agree that the QP can qualify his/her discussion about legal factors by stating he/she is relying on another expert for that information. We disagree. Our requirement for the study to “serve as the basis for a final decision by a financial institution to finance the development of the deposit for mineral production” is a conceptual standard that we are setting for the contents of the report. We are not stating that a company must seek approval from a financial institution for the report, but it must at least be able to reasonably argue that a financial institution would accept the contents of the study as a sufficient basis to allow a decision to be made about financing the project.
We adopted the definition of pre-feasibility study from the CIM Definition Standards on Mineral Resources and Mineral Reserves dated November 14, 2004. We believe the source is widely used and understood in the Canadian mining industry. Therefore, we will consider changes to this definition in accordance with any changes the CIM may propose.
We agree with the commenters and amended the definition accordingly. The definition should not exclude a newly acquired early stage property that has had previous drilling and trenching for other commodities than those being sought. We agree that including “has had no trenching or drilling” posed a problem in that a company or the securities regulatory authorities may lack knowledge of previous drilling and trenching on a property. We also
- 3 - # Theme Comments Responses only limited surveying and sampling but no renamed this term early stage exploration property. comprehensive drilling program would also be early stage.
Many commenters said this definition is too arbitrary because it deems any drilling and trenching to be relevant. Even with some past trenching and drilling, the current program may not be able to rely on those results, so the property would still be grassroots. One of these commenters suggested revising it to include the words “no substantive drilling or trenching activity in the past”.
One commenter said that we should use a different term to prevent confusion with exactly the same term defined under the Income Tax Act. Or, we should use the same definition.
One commenter said the proposed definition of this term is too ambiguous as many properties are grassroots for diamond exploration but not other commodities and vice versa. Also, historical trenching techniques, primitive diamond drilling, and even exploration shaft sinking should not put a property outside consideration as grassroots. The commenters suggested that we use the term early stage exploration property and its definition should include airborne surveys, gridding, geological mapping, soil geochemistry for differing commodities, trenching and surface geophysical surveys as preliminary or historical exploration and no diamond drilling for the commodity being sought.
One commenter said this definition is not functional because it circles on itself. Many companies do not report the results of unsuccessful exploration activities. Therefore, the QP, the company, and the securities regulatory authority cannot know if any previous drilling and trenching was done on the property.
7. Section 1.1 Definitions One commenter suggested that this definition should be We acknowledge that the organization calls itself IOM3. It changed to IOM3 as that is how this organisation refers uses the term Reporting Code to refer to its code. Since the
- 4 - # Theme Comments Responses “IMMM system” to itself on its website. term reporting code is too generic, we prefer to use IMMM Reporting Code for ease of reference and understanding.
8. Section 1.1 Definitions In response to a specific request for comments, many commenters opposed amending the definition of mineral “mineral project”… “including a royalty, project to include “a royalty, net profit interest, or net profits interest, or similar interest in similar interest” and four commenters agreed with the these activities,….” change. The various reasons for opposing this change were: • A company with a royalty interest does not have access to the data from the operating company to complete and file a technical report.
• Contractual arrangements with the producer about access and sharing information are either already set or are too difficult for a royalty holder to negotiate, so it is not possible to arrange for access to the property or data.
• The reference to royalty interests should only catch companies that are engaged only in that type of activity and it is material. • A royalty holder should not have to file a technical report about a property in which it has a material royalty interest if the operating company already has a current technical report filed for that property.
• A royalty holder should not have to bear the cost of preparing a technical report if the operating company was not required to prepare one due to a grandfathering provision. Also, it is not appropriate for the royalty holder to incur the costs for a
We have considered all the commenters’ responses to our specific request for comment. We concluded that a company with a royalty interest in a mineral project must comply with all parts of the Instrument and file, as required, technical reports in accordance with the Form with an exception from certain Form requirements. We will not expect the royalty holder to complete those items of the Form relating to scientific and technical information that the royalty holder cannot complete if the royalty holder has requested access, but is not able to access, the data from the operating company and is not able to obtain the information from the public domain. We have created a new exemption
under s. 9.2 of the Instrument for royalty holders providing such relief. The royalty holder will have to state both of these reasons under Item 3 Summary in the technical report and describe each item under Form 43-101F1 that it did not complete. It will also have to include a cautionary statement with all technical disclosure made to the public
that explains the royalty holder has an exemption from completing certain items under Form 43-101F1 in the technical report required to be filed and states the title and date of that technical report. We disagree that a royalty holder should be able to rely on the technical report filed by the operating company by referring to the operating company’s public record. The civil liability provisions under securities laws would not protect the shareholders of a royalty holder for misrepresentations made by the operating company. Therefore, to make the civil liability provisions available for shareholders of a royalty holder, the royalty holder must file its own technical report and QP’s consent.
We disagree that a royalty holder should not have to file a technical report if the operating company did not file a technical report. An interest may not be material or a change in information may not be a material change, for an operating company, but it may be material or a material
- 5 - # Theme Comments technical report if it only holds a small percentage of the interest in the reserves, while the operating company does not have to prepare a report but it holds the largest percentage of interest in the reserves. • A royalty holder should only have to comply with the Instrument if the Instrument also mandates that an operating company is obligated to co-operate with the royalty or non-operating interest holder to provide the data and access necessary to complete a technical report.
• It makes public mining royalty companies subject to an unfair burden compared to other royalty companies and other investment companies and mutual funds that hold an interest in mining companies.
• Requiring royalty holders to comply with the technical report filing requirement will lead to less We believe the limited relief we have added under s. 9.2 of royalty companies operating in Canada. Canadian the Instrument should address this concern (see first junior companies and investors will suffer because paragraph above under this Item 8). the royalty companies have assisted junior companies to operate without complete reliance on equity or bank financing.
Of the four commenters that supported this change, their reasons were:
• A company whose only interest in a mineral project is a royalty interest should be subject to all of the Instrument, including the technical report filing requirements. The contractual arrangements with the producing issuer should not be a problem because they make the royalty holder privy to the same technical information as the owners/operators
Responses change for the royalty holder. We understand that this may mean the royalty holder will incur costs that the operating company may not. However, we believe the need to protect the interests of shareholders of a royalty holder outweighs those costs. We do not agree that we can obligate an operating company to co-operate with a royalty holder. That needs to be negotiated between the two parties and set out in the terms of the royalty agreement. However, we believe the limited relief we have added under s. 9.2 of the Instrument should address this issue (see first paragraph above under this Item 8).
We acknowledge the commenter’s concern. However, we do not agree with the commenter’s comparison. We believe that we are dealing with mining royalty holders in the same manner as other mining issuers whose shareholders are investing directly in a company whose primary business is related to the operation of a mineral project.
- 6 - # Theme Comments Responses of the mineral project. • A royalty holder should comply with the entire Instrument just like other mining companies provided that the property and the income derived from it is material to the company. However, it is the terms of the royalty agreement that are more important than a technical report from these types of companies.
• A royalty holder should have to file a complete technical report if its business is to only hold royalty interests in mining properties and it has several royalty interests with an aggregate amount of annual revenue that reaches a threshold percentage of the company’s total revenue.
• Reliable projections of future royalty income should be based on mineral reserves that are subject to the Instrument. We disagree with these two suggestions. Instead, we Four commenters suggested that if we decide royalty decided to limit the content under certain items in the Form interest holders must comply with all of the that a royalty holder must comply with, subject to requirements of the Instrument, then we should permit conditions. See our response in the first paragraph above such companies to rely on a current technical report that under this Item 8 and the new relief added under s. 9.2 of is filed by the operating company. Three of these the Instrument. commenters suggested adding the condition that the royalty interest holder or its QP files a form of certificate that provides full disclosure about not filing an NI 43-101 technical report, indicates it is relying on the disclosure in the technical report filed by the operating company that was prepared by its QP, and has no knowledge of any other information about the mineral project that is not contained in that disclosure.
9. Section 1.1 Definitions Five commenters opposed broadening the definition of preliminary assessment. Two said it will trigger a “preliminary assessment” independent technical report for disclosure of all resource categories, if the disclosure does not fall within the meaning of pre-feasibility study. If this is an attempt to catch those statements that a company uses to
We acknowledge the comments that opposed broadening this definition. However, the CSA believes that a broader definition is necessary. The original Instrument did not trigger a technical report under s. 4.2(1)(j) for a news release that disclosed an economic analysis based only on measured or indicated mineral resources. We believe that it
- 7 - # Theme Comments compare the potential of early stage projects, such as identified resources but have no engineering studies, then that should be clearer instead of creating this unnecessary expansion. Another commenter said that since many junior companies always do some kind of economic evaluation on a property, the change proposed to this definition will trigger more technical reports for junior companies.
Another of these commenters recommended a cut-off of 20-25% of inferred resources at which a study becomes downgraded to a preliminary assessment. Two commenters suggested this term should be changed to scoping study or define both terms the same way. Preliminary assessment is not a recognized term internationally and most refer to it as scoping study or use both terms anyway.
One commenter noted that this definition is missing the reference to mineral resources which was included in the summary about this change in the CSA Notice.
One commenter said we should not permit any economic evaluations that include inferred resources. Therefore, this definition and the guidance about preliminary assessments in s. 1.7 of the Companion Policy should be deleted. Rather, this commenter recommends the appropriate approach with inferred resources is an appraisal of the mineral potential based on the available geoscience and sampling information in order to justify additional, more elaborate work to either bring the inferred resources to the level of indicated or measured mineral resources, or fail to confirm their potential
Responses is in the public interest that an independent opinion be prepared for these types of economic analyses for first time disclosure (an independent QP is not required for subsequent disclosure of material changes in the preliminary assessment). Many of these studies have little engineering basis. Without an independent NI 43-101 technical report to support these economic analyses, it is not possible for public investors or the securities regulatory authorities to determine the credibility of the disclosure of the analysis.
We disagree with the suggestion to create a percentage threshold as a cut-off for triggering a preliminary assessment report. See our response above. We disagree with the suggestion to change the term preliminary assessment to scoping study. The CSA purposely created the term preliminary assessment at the time the Instrument was originally implemented. The reason was that we wanted to create a term for a study of this nature that was specific for certain requirements in the Instrument. We have included a reference to scoping study in s. 1.7 of the Companion Policy.
We agree. The summary in the CSA notice was what we intended. We have amended the definition to clarify this.
We acknowledge the comments. However, the CSA has had to respond to the reality that companies do create such economic evaluations (i.e. scoping studies that include inferred resources) for their own internal use and for assisting to attain financing for exploration projects. The CSA believes that the prohibition against such information would lead to it being available to only a select few, not to all market participants equally. Therefore, to ensure that all market participants have equal access to the same information (which is one of the mandates of the securities regulatory authorities), we decided that establishing conditions on how a company must disclose this type of
- 8 - # Theme Comments interest.
10. Section 1.1 Definitions One commenter suggested that we should publish the list of acceptable foreign professional associations in the Companion Policy. “professional association” One commenter said that this definition should be broadened to include foreign entities by adding to the phrase “that is given authority or recognition by statute” to permit other types of legal or governmental authority.
(a)(ii) accepted by the securities One commenter said that the addition of paragraph regulatory authority or regulator in a (a)(ii) seems to add a level of authority to the CSA to notice published for this purpose infringe on the jurisdictions of Canadian professional associations. This commenter recommends that this provision be limited to reports covering projects outside of Canada by non-Canadian QPs.
The same commenter also noted that a licensee in paragraph (c) of the definition of qualified person that is licensed by certain foreign professional associations may not meet the requirements under paragraphs (b), (c) and (d) of the definition of professional association. 11. Section 1.1 Definitions One commenter said that guidance is needed about “qualified person” whether paragraph (c) covers temporary permits to practice that may be granted to non-Canadian QPs by (c) is a member or licensee in good Canadian professional associations. standing of a professional association
Responses information and requiring an NI 43-101 technical report to support it in certain instances was the best approach for dealing with these types of studies.
Subsequent to our publication for comment, we learned that we must include this list in the Instrument. Therefore, it is attached as Appendix A to the Instrument. We disagree with the suggested language for dealing with foreign professional associations. As stated in the paragraph above, we created Appendix A to the Instrument, which lists the foreign professional associations and classifications they recognize that we consider acceptable. We do not have sufficient knowledge about authorization processes in foreign jurisdictions so we prefer to review them on a case by case basis. Any person may make an application for relief to CSA staff requesting acceptance of other foreign associations that are not on the list in Appendix A.
We acknowledge this commenter’s concern that paragraph (a)(ii) suggests the CSA may also accept other Canadian associations that have not been recognized by statute. To clarify, we amended this paragraph to restrict its application to foreign associations. We disagree with solving this concern by restricting foreign QPs to only work on foreign properties. This may give the appearance of the CSA being an overseer of the laws of the Canadian professional associations. That is not our role.
We have reviewed our list of foreign associations and made all necessary corrections to the reference to licensees that were set out in our previous list. We disagree. As long as a Canadian professional association allows an individual to practice, under a temporary permit or otherwise, in their jurisdiction, the requirement under (c) is met. We deleted the reference to member or licensee in (c) because many of the acceptable foreign professional associations listed in Appendix A use classifications other than just member or licensee.
- 9 - # Theme Comments 12. Section 1.1 Definitions – general One commenter suggested we need to include a definition of TSX Venture Exchange Short Form Offering Document.
Three commenters questioned our removal of the definition of technical report and indicated it may lead many to think the reference to technical report in the Instrument would not need to be an NI 43-101 technical report.
Three commenters suggested that since there are many references to material change and material property, those terms should be defined in the Instrument. The guidance about materiality in s. 2.4(2) of the Companion Policy is not precise.
One commenter noted that the term scientific and We disagree. We believe that the meaning of scientific and technical information is often used throughout the technical information in the context of a mineral project is Instrument but is not defined. It should be defined. self-explanatory. The CSA staff have not observed, in public disclosure, any problems with companies and QPs distinguishing what is scientific and technical information on a mineral project.
13. Section 1.4 Independence Many commenters recommended that we retain the present definition because the new definition contains terms that are subject to interpretation, such as adjacent property, reasonable person, and influence.
One of these commenters suggested we define non- independence as a person related to the issuer and then
Responses We acknowledge the commenter’s suggestion. However, we disagree with adding it to the definitions. Since the term is only used once in the Instrument, we decided to describe it in more detail under s. 4.2(1)(h) of the Instrument.
We have reconsidered our removal of this definition and have decided to retain and modify it. Although s. 4.3 requires a technical report filed under that part to be an NI 43-101 report, we agree with the commenter that having it defined would clarify what a technical report means under other parts of the Instrument.
We disagree. Material change is defined under provincial securities legislation. It is not possible to define materiality precisely because whether a property is material may fluctuate depending on many factors outlined in the Companion Policy. There is no bright-line test for materiality. Therefore, we believe we have dealt with this concept appropriately by the guidance in the Companion Policy.
We disagree with the commenters that suggested we retain the present definition. It did not adequately cover many situations of non-independence. Rather than a prescriptive definition, we believe the best solution for covering all possible situations of independence is by the proposed principle-based definition. This approach is consistent with the way independence is defined in other CSA rules.
We also disagree with this suggestion. We believe that this concept would not cover any interests in a property.
- 10 - # Theme Comments give examples of its meaning in the Companion Policy.
Eight commenters supported a change to this definition, with reservations. They all have reservations about its application because it is too vague and can be widely interpreted. Several suggested that we remove the vague words such as “expects to have” and “other relationship” as those phrases would likely catch every QP that plans to do more work for the same client after the conclusion of the current contract. Two commenters also suggested that the reference to adjacent property should only catch an ownership interest or be removed. It affects companies with properties in remote areas where there are only a few QPs available with knowledge of those areas. One commenter said the problem with this new definition is that “any agreement” can be interpreted to catch the contract the QP has with the company to get the work done. One commenter suggested adding “likely to influence” instead of “influence”.
Many commenters said that the new definition will increase compliance costs because legal advice will be necessary to interpret compliance. 14. Section 2.1 Requirements Applicable to One commenter suggested that we amend this section to All Disclosure be more specific, as follows: “An issuer shall ensure that: (1) all disclosure of scientific or technical information made by or behalf of an issuer concerning mineral projects on a property material to the issuer is based upon a technical report prepared by or under the direct supervision of a qualified person; (2) disclosure of a mineral resource must be based on a technical report by, or directly supervised by,
Responses Therefore, we prefer to remain with a principle-based definition, rather than a prescriptive one.
We acknowledge the concerns about the vagueness of the proposed definition. We believe we have dealt with this by the additional revisions we made to this definition. The revised version does not contain references to “expects to have”, “other relationship”, and “would consider an influence”. We decided to remove the list of specific references to agreement, arrangement, etc, and mineral project, property, and adjacent property because we do not think it was correct to limit the circumstances in which an assessment of a QP’s independence should be considered, based on the opinion of a reasonable person. We believe the examples we give under s. 3.5(1)(e) and (f) of the Companion Policy about the extent of a QP’s interest in an adjacent property are relevant and reasonable. We expect that a reasonable person would not include the QP’s contract for services with the company to work on the project that is the subject of the technical report as one of the circumstances that may interfere with the QP’s judgment.
We disagree that companies and QPs will have to seek legal advice to interpret their compliance with this definition because it is an objective test based on a reasonable person standard. Companies and QPs should be able to do this for themselves. We have also included some examples in s. 3.5(1) of the Companion Policy to assist with their interpretation. We disagree with amending this section as suggested. The suggested language regarding the number of QPs that must be involved in mineral resource and mineral reserve estimates is too specific. The CSA believes that it is not our responsibility to delineate the professional and ethical obligations of QPs. Also, s. 3.3 and s. 6.4 of the Companion Policy include guidance on our expectations about this.
- 11 - # Theme Comments Responses a qualified person; (3) disclosure of mineral reserves must be based on a report involving several QPs providing the specialised skills required.”
15. Section 2.2 All Disclosure of Mineral One commenter suggested that s. 2.2(b) needs We disagree. This section does not restrict a company from Resources or Mineral Reserves clarification whether indicated mineral resources and adding indicated mineral resources and measured mineral measured mineral resources may be added together as resources together. 2.2(b) reports mineral resources and long as both are also disclosed separately. mineral reserve separately
2.2(c) does not add inferred mineral Many commenters disagreed with the prohibition under resources to the other categories of s. 2.2(c) against adding inferred resources to other mineral resources resource categories. Two subtotals are complicated, because people just add them in their heads anyway. 2.2(d) states the grade or quality and the Three commenters agreed with the addition of s. 2.2(d). quantity for each category One also suggested we should include the parameters used (namely cut-off grade and the justification for such parameters). Also, one of these commenters recommended we only require the reporting of two of the following three: tonnes, grade, and contained metal, as that allows an estimation of the third.
One commenter said that the Instrument should prohibit adding resources and reserves together. Also, this commenter suggests adding the following subsections: (e) for mineral reserves based on an appropriate level of mineral processing sampling and testing, use the estimated metal recovered after mining and mineral processing losses; (f) if no tests or insufficient tests have been carried out, estimates of metal in place should only be reported within a warning that the actual proportions of the metal in place that could be recovered after mining and processing cannot yet be estimated accurately.
The CSA supports the prohibition against adding inferred mineral resources to other categories because of the principle that the confidence level of inferred resources is significantly lower than the other categories. We disagree with the commenter’s suggestion because the parameters are already covered under s. 3.4 of the Instrument and therefore, they will be contained in the company’s written disclosure. We believe that it is not onerous to expect a company to disclose all three.
We disagree with the suggestion to prohibit adding resources and reserves together because we believe the conditions required under s. 2.2(b) allow this to be done in a way that is not misleading to investors. We disagree with making these additions to s. 2.2. These are key assumptions and parameters. We believe they are sufficiently dealt with under the s. 3.4(c) of the Instrument and Items 18, 19(f), and 25(b) of Form 43-101F1.
- 12 - # Theme Comments One commenter said that the requirements of s. 2.2(d) should also be exempted under s. 3.5. That information should not have to be repeated in each news release if it is contained in a previously filed disclosure document.
One commenter said s. 2.2(d) should prohibit the disclosure of gross dollar value or net smelter return (NSR) even with the proximate cautionary language. 16. Section 2.3 Prohibited Disclosure One commenter made drafting suggestions about this section. The commenter suggested that s. 2.3 (1), (2) and (3) would be clearer if we re-wrote s. 2.3(1) in a positive statement, making it conditional upon complying with s. 2.3(2) and (3).
One commenter disagreed with permitting, under s. 2.3(2), the disclosure of “the potential quantity and grade expressed as ranges, of a possible mineral deposit that is the target of further exploration” as such disclosure for early stage projects is indefinite and will vary from company to company. The commenter recommended deleting the reference to “a possible mineral deposit” because, based on the CIM definition of inferred mineral resources and the AIMR principles, it is not appropriate to have a preliminary assessment of a possible mineral deposit. At most, for an early stage exploration project, appraisals of the mineral potential based on the various types of sampling information available may justify recommendations for follow up work on a possible mineral deposit.
Responses The s. 3.5 exemption can only be considered for the information required under Part 3 of the Instrument. We believe we have appropriately determined which information under Part 3 should be exempted under s. 3.5. We also note that s. 3.4(b) (which is a similar disclosure requirement as 2.2(d)) is not exempted. We believe this type of information should be disclosed each time.
We acknowledge the comment in regards to gross dollar value if it does not include qualifications. This type of disclosure has always been prohibited under general securities laws. It would be misleading disclosure. Therefore, it does not need to be specifically stated in the Instrument as we can enforce any improper disclosure of this under general securities laws. We have not included NSR in the prohibition because we believe NSR should factor in mine, metallurgical, and smelter recovery. We disagree. We believe that the positive statement makes it appear that we encourage this type of disclosure. We do not want to encourage it. It has been our experience that this type of disclosure can result in misleading disclosure. Therefore, we prefer to retain the format and the Prohibited Disclosure title for this section.
We disagree. This issue was the subject of extensive discussions during the original drafting of NI 43-101. At that time it was felt that the details of an exploration target could be material information for the shareholders of exploration stage companies. We believe it is better to allow this disclosure with appropriate cautionary language and a discussion of the basis of the target, rather than trying to prohibit it completely.
- 13 - # Theme Comments Responses One commenter disagreed with s. 2.3(3) which permits We do not agree with the commenter’s interpretation of s. disclosure of an economic evaluation (including 2.3(3). Section 2.3(3) is about requiring a proximate preliminary assessment, feasibility study, and pre- statement only when disclosing a preliminary assessment feasibility study) that includes inferred resources that includes inferred mineral resources. By definition, a provided the required proximate statement is made. The preliminary assessment can only be prepared prior to a precommenter said the inclusion of inferred resources in feasibility study. Section 2.3(3) does not apply in the case feasibility and pre-feasibility studies, even if of pre-feasibility and feasibility studies. The Instrument accompanied by a proximate statement, is completely prohibits the inclusion of inferred resources in feasibility unacceptable and such situations could be breaches of and pre-feasibility studies under s. 2.3(1)(b). professional ethics on several counts. The level of trustworthiness of inferred mineral resources does not warrant including them in any engineering plans and economic forecasts required for a feasibility study that will lead to major appraisal and/or production decisions. However, at the pre-feasibility study level only, the inclusion of inferred resources in designing a mining system should be done as an alternative estimation to establish the justification of spending funds to bring them to the indicated, and eventually the measured level.
17. Section 2.4 Disclosure of Historical One commenter suggested that we add language to this Estimates section to indicate when a company needs to file a technical report.
2.4(b) confirms the historical estimate is The same commenter suggested we remove s. 2.4(b) relevant because it is redundant. A company would not use the historical estimate if it were not relevant.
Two commenters suggested that this section should refer to the guidance in s. 2.9(2) of the Companion Policy to ensure better compliance. The present day disclosure of historical estimates involves more complex options than this section originally contemplated (as indicated by s.
The amendments to s. 2.9(4) of the Companion Policy gives new guidance about this. We do not agree with inserting it in the Instrument because the Instrument should only state the law, not guidance.
We acknowledge the commenter’s suggestion. We have clarified this section to say “comment on the relevance and reliablity”. We have also added new guidance under s. 2.9(3) of the Companion Policy about what we expect in the company’s comment of relevance and reliability.
We agree with the commenter’s suggestion. However, since the proposed s. 2.9(2) of the Companion Policy was mandating a disclosure requirement, it was not actually a policy. The proper place for it is in the Instrument. Therefore, we moved the proposed s. 2.9(2) of the
- 14 - # Theme Comments 2.9 of the Companion Policy). 18. Section 3.1 Written Disclosure to One commenter disagreed with this addition because it Include Name of QP will increase the costs for companies as they will have to pay a QP to review all documentation. 19. Section 3.2 Written Disclosure to One commenter suggested that s. 3.2 should be limited Include Data Verification to the verification of sampling, analytical, and test data because when preparing a technical report it is not possible to verify all geological, geophysical, and other data. This is even more the case when compiling and trying to verify prior work.
One commenter suggested that s. 3.2, 3.3, and 3.4 should not apply to news releases and material change reports because these requirements interfere with timely disclosure. Since a company will have to provide this disclosure in annual information forms, the information will still be available to investors. The content required by these sections clutters the critical information conveyed through the news release. 20. Section 3.3 Requirements Applicable to One commenter suggested that s. 3.3(1)(c) needs more Written Disclosure of Exploration specific details. It should state that quality assurance Information programs and quality control measures should apply to all information acquisition methods, such as geoscience work, drilling/sampling, sample reduction methods, environmental data tests and other types of test, not just to assaying.
One commenter suggested that we remove s. 3.3(2)(c) as a written disclosure requirement because more
Responses Companion Policy to the Instrument as a new s. 4.2(2). Since it is about relief from filing a technical report, we believe the proper place for it is under s. 4.2 (to follow the technical report triggers), rather than s. 2.4. We disagree. Under s. 3.1, the company already has to name the QP in all other written disclosure. Also, companies listed on the TSX and TSX Venture Exchange already have this requirement. Therefore, we believe that this is not a significant change. Also, we believe that adding the requirement to name the QP in the news release does not obligate a QP to review the disclosure. However, we have encouraged companies to establish that practice to ensure their technical disclosure is accurate and not misleading. We disagree. The circumstances described are allowed in s. 3.2(b) and (c).
We agree the disclosure of material information must be timely, however it must also not be misleading. The information required by these sections gives the necessary context to prevent the disclosure from being misleading. We believe that the changes we made to s. 3.5 deals with de-cluttering news releases by permitting reference to previously filed disclosure containing that information, provided it is still current. We disagree. This section is not limited to assaying. It applies to all exploration information.
We disagree. A company satisfies the requirements under s. 3.3(2)(c) if it uses figures. They are included under the
- 15 - # Theme Comments Responses companies provide information about sample spacing definition of written disclosure in the Instrument. and density of the samples in figures, not in a written discussion.
One commenter suggested that we remove “certification of each laboratory” from s. 3.3(2)(e). It is not included in most disclosure. Since a government certification process accredits all Canadian labs, this disclosure is not very useful.
One commenter suggested that s. 3.3(2)(f) should be amended to remove the requirement for “a listing of the lengths of individual samples or sample composites” because it is too onerous, such as when a company acquires a new property that has assay data for over 2,000 drill holes. An overall summary should be sufficient in such cases. 21. Section 3.4 Requirements Applicable to Two commenters said that the requirements of s. 3.4(b), Written Disclosure of Mineral Resources “details of quantity and grade or quality of each category and Mineral Reserves of mineral resources and mineral reserves” should also be exempted under s. 3.5. That information should not have to be repeated in each news release if it is contained in a previously filed disclosure document.
One commenter said that the request to state key assumptions, parameters, and methods in s. 3.4(c) is vague. Instead, it should be more specific, such as require disclosure of commodity price, relevant foreign exchange assumptions, and operating cost estimates. One commenter said the requirement under s. 3.4(d) to provide a general discussion of the points listed in that section only leads to boiler plate language by companies that ends up being of little use to investors. Instead, it
We agree with commenter’s suggestion. We have removed that requirement from s. 3.3(2)(e) of the Instrument. We believe the important information of precision and accuracy of the analytical results are covered under s. 3.2 (data verification), and s. 3.3(1)(c) (quality assurance/quality control). Further context is also provided under the remainder of s. 3.3(2)(e).
We agree with the commenter’s suggestion. We have amended s. 3.3(2)(f) accordingly. We disagree. We think that a company should repeat this type of information in a news release despite it being previously disclosed in a filed document. It provides useful information on the significance and potential economic viability of the resource or reserve. Investors should have these details at the same time they receive the material information disclosed in a news release.
We disagree. The key assumptions, parameters, and methods are specific to each mineral project. We believe investors will receive more meaningful disclosure if the company and QP have the flexibility to determine the key assumptions, parameters and methods of the project. We disagree for the reasons set out in our response above.
- 16 - # Theme Comments should require specific disclosure about those points and whether they are likely to have a material effect on the resource or reserve estimate. 22. Section 4.2(1) Obligation to File a Many commenters said the wording in s. 4.2(1)(c) Technical Report in Connection with deleted the reference to the need for a transaction to be Certain Written Disclosure Concerning material to the company. Mineral Projects on Material Properties 4.2(1)(c) – information circular trigger
One commenter noted that clarification is needed in s. We believe we covered this in the changes we made to s. 4.2(1)(c) to indicate that the determination of materiality 4.2(1). Please see our response above. of the acquiror’s own mineral projects should be made after giving effect to the subject acquisition.
4.2(1)(d) – offering memorandum trigger One commenter agreed with the principle of the change We disagree. We do not want to limit the trigger to only to this trigger (i.e. that an offering memorandum (OM) those OM’s filed under an exemption because certain delivered to an accredited investor does not trigger a jurisdictions may have a requirement to file an OM for technical report). However, that commenter suggested other purposes. re-writing it to say a technical report is required for an OM if it is filed in connection with an OM exemption under provincial and territorial securities laws.
4.2(1)(e) – rights offering circular trigger One commenter suggested that we should not require a We believe we dealt with this by the addition of s. 4.2(8). technical report with a rights offering circular unless the circular contains a material change in the technical information contained in a previously filed technical report. Since rights offerings are made to existing shareholders, they should already have full disclosure of all technical information about the company.
Responses The word material in the original s. 4.2(1)(c) was referring to the property of the issuer that exists after the transaction is completed. It did not refer to the transaction. To clarify the problems with interpretation of s. 4.2(1)(c), we moved the reference to material property of the resulting issuer into the lead-in paragraph, s. 4.2(1). Now, the end of that paragraph reads “on a property material to the issuer, or in the case of paragraph (c) below, the resulting issuer”. This means, in the case of s. 4.2(1)(c), a company is only required to file a technical report for a property that is material to the resulting company.
- 17 - # Theme Comments 4.2(1)(f) – annual report trigger One commenter suggested that we remove this trigger as an annual report is not a prescribed or required form of disclosure. The contents of annual reports would still be subject to the other disclosure requirements under Part 3.
4.2(1)(f) – annual MD&A trigger Many commenters disagreed with replacing the AIF We acknowledge the commenters’ concern. We have filing trigger for a technical report with the annual reconsidered this change and have decided not to include MD&A trigger because it increases the cost burden for MD&A as a trigger for a technical report. venture issuers who have elected not to file an AIF. The current regime of both annual technical report filings and intermittent technical report filings is too onerous and costly for companies and is not the most efficient way to ensure the public has current technical disclosure of mineral projects.
One of these commenters suggested that the removal of the MD&A trigger would not be a loss of technical information to investors as they will obtain a technical report from a company when it is necessary, such as when a news release announces first time disclosure of resources or reserves or a material change in resources or reserves. As an alternative, the MD&A trigger should only require a new technical report if a company has not filed one within the past three years. As another alternative, all of the triggers other than the MD&A and news release triggers should be deleted to create a regime of annual and material change reporting similar to NI 51-101.
Many commenters suggested that the completion of technical reports should not be tied to annual filing dates, but rather to a point in time when material information from a program has been received and interpreted. Another commenter had a similar suggestion to require a technical report on the earlier of (a) the completion of the program of exploration or development, or (b) 12 months after the filing of the most recent technical report on the property, if there has
Responses The annual report trigger referred to a document required to be filed under Quebec’s securities laws in certain instances. The filing of a technical report with an annual report is no longer required in Quebec. Therefore, we have removed annual report from this subsection.
- 18 - # Theme Comments Responses been a material change in the technical information provided by the previous technical report.
4.2(1)(g) – valuation trigger One commenter suggested that all valuations of mineral We disagree. The CSA prefers to not endorse one particular properties should be prepared in accordance with the standard for preparing valuations. CIMVal Standards and Guidelines.
4.2(1)(h) – TSX Venture Exchange Four commenters suggested that we remove this trigger offering document trigger because that type of offering document was designed by the exchange to be a quick and inexpensive means of raising a limited amount of funds. Requiring an NI 43- 101 report for such financings defeats its purpose. One of these commenters noted that this requirement would cause a double trigger because the TSX Venture offering document requires an issuer to have filed an AIF. Therefore, the company should already have a technical report filed for the AIF. 4.2(1)(j)(ii) – material change in a One commenter suggested that s. 4.2(1)(j)(ii) of the preliminary assessment or resources or Instrument should have a more definite measure that reserves from the most recently filed determines what would constitute a material change. The technical report commenter recommends a “change that exceeds 25% of previously estimated resources, provided the 25% exceeds 100,000 oz”. 23. 4.2(4)(a) 30 day delay permitted for Five commenters noted the timing requirements in s. filing technical report after news release 4.2(4) and (5) for completing a technical report are too announcing resources or reserves or a tight. Three of them suggested it should be extended to preliminary assessment or a 100% at least 60 days. One suggested 90 days. (The same change comments apply to s. 2.9 of the Companion Policy guidance about disclosure of an acquisition of a mineral 4.2(5) 30 delay permitted for filing project.) technical report for property that becomes material less than 30 days before filing AIF or MD&A
24. 4.2(7) permission to not repeat filing of Two commenters agreed with the addition of s. 4.2(7). We do not agree with either removing the requirement in s. same technical report previously filed However, one suggested that we should remove the 4.2(7) (now s. 4.2(8)) for an updated certificate or provided there is no material change in requirement for an updated certificate. Only an updated permitting the company to use its in-house QP (or any other information in report and a new QP consent should be relevant. Another commenter said it QP) to certify the original QP’s report is current. If this new certificate and consent is filed was unreasonable to have to track down the original QP section were not added, the company would be in the
We disagree. The TSX Venture Exchange also expects a company to file a technical report with their short form offering document if the technical disclosure in the technical report filed with the AIF is not current. However, we revisited this trigger and decided to limit it to a TSX Venture offering document that includes material information about a mineral project on a property material to the company not contained in a previously filed technical report. We have made this change by adding s. 4.2(8) in the Instrument. We disagree. See our discussion under Item 12 above regarding the meaning of materiality. We acknowledge this concern. We have reconsidered the time period allowed under s. 4.2(4) and (5) (now s. 4.2(5) and (6)) and decided to change it to 45 days instead of 30 days. We expect that the QP should have the technical report nearly completed by the time the issuer makes the disclosure. Therefore, we think that extending the time by 50% for the QP to complete the technical report is reasonable. We have amended the Instrument and the Companion Policy accordingly.
- 19 - # Theme Comments and secure their time to re-evaluate and decide if any new work constitutes a material change in the information in the original technical report. Instead, we should allow the company to use its in-house QP to certify the report is current. 25. Section 5.2 Execution of Technical One commenter suggested that we make s. 5.2(b) clearer Report to indicate the technical report must be signed by the QP.
26. Section 5.3 Independent Technical One commenter said the addition under s. 5.3(1) that We agree and have not retained the addition that was Report requires an independent QP for any disclosure captured proposed for this sentence in the version published for by the enumerated items under that section is a comment. significant departure from the current requirement. Disclosure may be captured by one of those items, and may be based on information prepared by an in-house QP, yet the requirement for an independent technical report may not be triggered.
Many commenters disagreed with requiring an independent technical report to support a TSX Venture offering document because it removes the whole We have reconsidered this proposed change and decided to purpose of that offering document which is to be a quick remove the requirement for an independent technical report and inexpensive means to raise a limited amount of for a TSX Venture offering document. funds.
Three commenters said we should not add any more requirements for independent technical reports as it will increase the current problem for junior issuers in that We disagree. We believe there is a benefit to the public in
Responses situation of having triggered another technical report and therefore, would have to re-file the whole technical report prepared by the original QP, and certificate and consent. Our reasoning behind the addition of s. 4.2(7) (now s. 4.2(8)) was to remove the problem of having multiple filings of the same report on SEDAR. It was purely for administrative ease. The company still must obtain the original QP’s consent to use the report for the new purpose. The consent requires the QP to review the new disclosure being made and determine that it accurately reflects the information in the technical report. Therefore, the original QP must still be involved in assessing the materiality of the results of any new work. As a result, we believe that the requirement for the QP to provide an updated certificate should be retained. We disagree that clarification is needed. Section 5.2 requires that the technical report must be signed by: (a) the QP, or (b) the engineering company that has an employee, director, or officer that is the QP who is responsible for the technical report.
- 20 - # Theme Comments many technical people who know most about the property are excluded from authoring a report. It adds a cost burden to junior companies, with little or no benefit to the investing public. Three commenters said that s. 5.3(1)(c) should be clarified. It is not clear whether the 100% or greater change is referring to the measured, indicated, or inferred or a 100% change in the total. Another commenter questioned whether it meant 100% change in tonnage, grade, or total combined metal. Also, the same commenter asked whether it was meant to catch a change in metal price that causes a 100% increase or decrease in the resources or reserves without any further work being completed. Another questioned whether it meant a 100% change in the size of the mineral resource or the size of the property.
One commenter suggested that we should permit an independent QP to audit an in-house QP’s reports and disclosure of the auditing process and conclusions, rather than requiring companies to incur the unnecessary cost for an independent QP to complete a full, separate technical report. Many independent QPs typically only audit the company’s work and require certain quality assurance work anyway. This approach would reduce a very large cost burden for junior companies imposed by the Instrument.
One commenter said s. 5.3(1) should not limit the independence requirement to the time of the disclosure. It should provide that the QP must have been We disagree. The commenter’s suggestion would create an independent two years prior to and continue to be additional burden on companies that we cannot justify. We
Responses the instances where an independent technical report is required. Although our change to the definition of preliminary assessment broadens the circumstances for triggering an independent technical report for preliminary assessments, we have eliminated other triggers for an independent QP (i.e. not retaining the requirement for independent technical report for the TSX Venture offering document and removing the requirement for a technical report if an issuer becomes a reporting issuer in any other Canadian jurisdiction after it is a reporting issuer in any one Canadian jurisdiction.) We agree with the commenters’ suggestion. We have added language to this subsection to make it clear that the 100% or greater change must be in total mineral resources or total mineral reserves.
We disagree with this suggestion. The existing rules do not prohibit an independent QP from having an in-house QP co-author an independent technical report. However, the independent QP must take responsibility for the entire technical report and provide the required certificate and consent.
- 21 - # Theme Comments independent for one year after preparing and completing the technical report. Another commenter said we should provide guidance about whether the previous technical report could still be used (assuming it is current) if the QP that filed the initial report is no longer independent (i.e. the QP becomes a director of the company) but the second filing still requires an independent QP. In this situation, we should allow the company to use its in-house QP to certify the report is current. 5.3(3) Exception from independence Many commenters said s. 5.3(3) should also permit a QP requirement for junior joint venture of a junior joint venture company to rely on data company provided by a QP that is a consultant or contractor of the producing issuer, not only a QP that is an employee. Four commenters suggested that we need to reconsider how difficult it is for a junior joint venture company to obtain the information necessary from a producing issuer, especially if the mineral project is not material to the producing issuer. The amendments to the Instrument need to address this problem. Two of these commenters recommended that we should not require a junior company to file a technical report if the producing issuer already has one filed. The junior company should be able to refer to the producing issuer’s technical report. Another recommended that the junior company should have relief from the technical report filing requirement if the producing issuer does not have a technical report filed.
Responses believe that past work would not interfere with a QP’s independence. Also, we believe that a QP that expects to have a relationship to the company one year in the future may not be independent if the test for independence under s. 1.4 of the Instrument is not met. We acknowledge the commenter’s concern. We have decided to retain the words “at the date of the technical report” in the current Instrument. Accordingly, the time for determining whether the QP is independent is the date of the completion of the technical report. Therefore, a previous independent technical report from a QP that is no longer independent at the time of the disclosure could be used provided the report is current and supports the scientific and technical disclosure in the disclosure captured by the enumerated items under s. 5.3(1). We agree. We have amended s. 5.3(3) of the Instrument accordingly. We disagree with these suggestions. In most cases, by the terms of the joint venture agreement, the junior company should be able to arrange access to the property and data with the producing issuer. Firstly, we believe that providing an exemption to a junior joint venture company where the producing issuer has filed a technical report will provide little benefit for junior companies since most producing issuers will not have a technical report filed because the property is not material to the producing issuer. Secondly, if the technical disclosure is not filed by the junior company and the consent to that disclosure is not filed by the junior company’s QP, there is no means by which the junior company’s shareholders and public investors will have a civil liability claim if the technical information filed by the producing issuer contains a misrepresentation. We understand that in some cases, the junior company may not be able to get access to the data or the property. Where a junior company is unable to get access to the data or the
- 22 - # Theme Comments One commenter noted that with the new civil liability laws proposed in certain jurisdictions, the benefit of s. 5.3(3) of the Instrument is lost. Since those laws would make an expert liable if it provides a company its consent, most QPs of a producing issuer would refuse to provide a consent to a junior joint venture company for relying on their data or technical report.
27. Section 6.2 Current Personal Inspection One commenter said that the site visit requirement for each report is excessive. There should be relief if the QP was just on the property during the same year. Many commenters suggested the site visit requirement should be left to the professional discretion of the QP as the mandatory requirement is too prescriptive. If the QP determines a site visit is not required or should be delayed, then the QP should disclose the reasons in the QP certificate. The new exemption proposed does not take into account numerous additional reasons a site visit may not be necessary besides extreme seasonal conditions.
One commenter said this section needs a definition of current inspection of the property.
One commenter suggested that this section should refer to the requirement that the site visit must be independent if an independent technical report is required under Part 5 of the Instrument.
(Also, see the comments and responses under Item 33 below relating to s. 9.2 Exemption from Personal Inspection).
Responses property, it should apply for exemptive relief from the requirements. We acknowledge the commenter’s concern. The proposed civil liability laws will only affect experts who provide a formal consent that must be filed by the junior company. The consent that the junior company must file under the Instrument would not come from the producing issuer’s QP. It must be provided by the junior company’s QP who prepares the technical report that must be filed. The producing issuer’s QP provides the junior company with the data, not the consent the junior company is required to file.
We disagree. The CSA views the prescribed site visit each time a technical report is prepared and filed as one of the cornerstones of the Instrument. We have consulted with the CSA Mining Technical Advisory and Monitoring Committee (MTAMC) (composed of a balanced range of professionals in the mining industry) about this frequency. We received confirmation that the need for a site visit with every technical report is sound and we should only consider otherwise on a case by case basis or if the site visit is impossible due to weather conditions. Accordingly, we limited the site visit relief as proposed, now under s. 6.2(2) and (3).
The proposed changes to the Companion Policy contain guidance on the meaning of current personal inspection. Please refer to s. 6.1 in the Companion Policy.
We disagree with the suggested addition. Section 6.2 (the site visit requirement) states the QP that prepares or supervises the preparation of the technical report must complete the site visit. If the QP must be independent (pursuant to s. 5.3), then s. 6.2 requires an independent QP
to complete the site visit requirement. It is not necessary to repeat the same requirement under Part 5.
- 23 - # Theme Comments Responses 28. Section 6.3 Maintenance of Records Two commenters said the requirement to retain records We acknowledge the commenters’ concerns. We for seven years is too onerous, especially for a junior understand that various legislations have different company. One of these commenters noted that this is requirements for document retention periods. However, we beyond the period of time expected by the Canada believe that seven years is reasonable. Revenue Agency.
One commenter said the seven year retention period is too short as the codes of ethics of certain professional associations require a 10 year retention period. Therefore, this section may place some QPs in breach of their professional ethics.
29. Section 7.1 Use of Foreign Code Three commenters suggested that we should remove the We disagree. Although these foreign codes are accepted requirement under Part 7 to reconcile the permitted and are largely comparable to CIM, they may evolve over foreign codes to the CIM definitions. It defeats the time. A reconciliation will address this. principle of accepting those foreign standards if we expect a reconciliation to the CIM standards.
One commenter suggested that when a company is We disagree. Section 7.1 relates only to the use of the reporting under the JORC Code or SAMREC Code, we mineral resource and mineral reserve categories of the should allow a company to combine measured, JORC and SAMREC codes. This does not mean we indicated, and inferred resources, provided that the endorse or agree with those aspects of these codes that are details of the separate categories are fully disclosed. not consistent with other parts of NI 43-101. That follows the manner of reporting that is permitted under each of those foreign codes. It is not reasonable to allow those foreign codes under the Instrument if a company cannot report in the manner permitted by those codes.
One commenter suggested that we should provide a mechanism for accepting other foreign codes in the future by adding to s. 7.1 and 7.2 the words “or such other reporting codes or systems as may be accepted by the securities regulatory authorities in a notice published for this purpose”.
One commenter suggested that we should not permit the reporting of foreign codes unless it is based on reconciliations to the CIM definitions. Reporting of the
If a QP’s code of ethics requires retention of documents longer than seven years, then QPs should be aware of those requirements. The seven year requirement is only a minimum and does not affect other longer retention periods.
We acknowledge the commenter’s suggestion. However, we are not able to make that change because some jurisdictions of Canada are precluded, under their rule-making procedures, from making future changes to a rule by publishing the changes in a notice.
We disagree with the commenter. We believe that the reconciliation of the foreign reporting code to CIM is sufficient.
- 24 - # Theme Comments Responses original figures in the foreign code should be optional but only secondary to the reconciliations to the CIM definition. That would ensure all technical disclosure is reported in a consistent and uniform manner for the benefit of Canadian investors.
30. Section 8.1 Certificates of Qualified One commenter suggested we provide guidance about We disagree. Please see the definition of professional Person whether the list of professional associations required association in the Instrument. under s. 8.1(2)(c) should include a list of professional licensees licensed by government agencies.
One commenter suggested it was excessive to require under s. 8.1(2)(c) a listing of all the QP’s professional associations. A listing of the relevant ones should be sufficient. One commenter said it was useless to require a summary of a QP’s relevant experience because some people will exaggerate or inflate their experience anyway.
One commenter suggested that s. 8.1(2)(d) should include an option for a co-authoring QP to state the name of the QP who completed the site visit for circumstances when another QP is primarily responsible for the report and that other QP completed the site visit.
Many commenters suggested the requirement under s. 8.1(2)(f) to give reasons why a QP is not independent is not relevant. A statement whether he/she is independent or not should be sufficient.
We disagree. We do not expect the list to include all professional organizations that the QP is a member of, only the professional associations as defined under the Instrument. We disagree. The definition of QP requires a QP to have relevant experience. Therefore, we expect the QP to certify this. Since it is a breach of most provincial and territorial securities laws for any person to file a misleading statement with the securities regulatory authorities, QPs should not exaggerate or inflate this information.
We disagree with the commenter’s suggestion. We decided that a QP should not have to certify whether another QP has completed the site visit or if the company obtained an exemption. The QP should not have to certify something that is the company’s obligation. We have removed the requirement to state that information from the certificate. Item 4(d) of the Form sufficiently covers disclosure of this type.
We acknowledge the commenters’ point. It prompted us to revisit this proposed change. We have removed the requirement from s. 8.1(2)(f) that the QP state why the QP may not be independent.
- 25 - # Theme Comments One commenter suggested that we should require a QP to make full disclosure of all potential conflicts of interest under s. 8.1(2)(f) rather than require a QP to make a simple statement whether he/she is independent or not. Investors can use that disclosure to make their own assessment about the degree of influence on the QP.
One commenter disagreed with the removal of s. 8.1(2)(e) because it takes away a statement of protection for the QP. 31. Section 8.3 Consents of Qualified One commenter disagreed with our change to s. 8.3(b) Persons because the revised words are broader than what a QP should have to state. It seems that the QP is being asked 8.3(b) – confirming that the QP has read to confirm that the disclosure is an accurate summary of the written disclosure being filed and the whole technical report. Rather, it is the company’s that it fairly and accurately represents the obligation to select what information is material and information in the technical report needs to be disclosed. The QP should only need to confirm that the written disclosure is a fair and accurate representation of the technical report “that is the subject of the disclosure”.
One commenter said that QPs are not given enough time to review the disclosure document to verify the accuracy of the technical disclosure. Also, the same commenter said this section is a problem in that a QP has to give the required consents to the company when he/she signs the technical report. Often, the QP has not even seen the written disclosure at that time. This places the QP in the position to potentially breach his/her code of ethics. The commenter recommends amending s. 8.3(b) to include a
Responses We disagree. The company and its QP should make the determination of whether a QP is independent. The purpose of the statement of independence is to provide assurance to investors that the determination has been properly made.
We disagree. We believe the proposed change is for the benefit of the QP because it removes the requirement for a QP to make an assessment about material facts and material changes that should be included in the technical report. Management of a company should make the assessment of material facts and material changes. Therefore, we replaced the former paragraph (e) with the new paragraph (i) and expect the QP to make a statement that to the best of the QP’s knowledge, information and belief, the technical report contains all scientific and technical information that is required to be disclosed to make the technical report not misleading. We agree with this comment but have modified the commenter’s suggested language. Section 8.3(b) now reads, “confirming that the QP has read the written disclosure being filed and that it fairly and accurately represents the information in the technical report that supports the disclosure.”
We do not agree with the commenter’s suggestions. We believe it is in the public interest to have a QP consent to extracts from, or a summary of, the technical report contained in the written disclosure. We believe that the commenter’s concern is an issue that needs to be resolved between a QP and the company. A QP is entitled to refuse to give his/her consent until he/she has had sufficient time to review the final version of the written disclosure. Also, s. 2.5 of the Companion Policy provides some guidance to
- 26 - # Theme Comments Responses requirement for the company to present the QP with the issuers dealing with disclosure of material information not written disclosure being filed in sufficient time for the yet confirmed by a QP. QP to review it before giving his/her consent. The same commenter suggests deleting the text in s. 8.3(a) that refers to consenting to “extracts from or a summary of the technical report in the written disclosure being filed” to resolve that problem.
32. Section 9.1 Authority to Grant One commenter suggested that we should add another Exemptions exemption that accepts foreign technical reports prepared in accordance with the standards and requirements of any of the foreign codes accepted under Part 7 of the Instrument. More emphasis should be placed on substance over form, such that those foreign technical reports are acceptable as technical reports required under the Instrument.
One commenter asked whether the cost of exemptions could be reduced by having a company file for and obtain relief in only one jurisdiction, but have that relief applicable in all jurisdictions the issuer reports.
One commenter said that the CSA resolves too many issues about the Instrument by making companies apply for exemptive relief. That causes companies to incur significant legal costs and transaction uncertainty during the relief application process. The Instrument should be amended to provide more discretion to the QP and less prescriptive disclosure requirements to minimize the need for companies to seek out exemption orders. In addition, this commenter suggested that the CSA should publish and organize all exemption orders granted in one central location for ease of reference by the public and to improve the transparency of the securities regulatory authorities.
We disagree. The accepted foreign codes do not provide specific guidance on the required contents or format for technical reports under those jurisdictions. We are not aware of any recognized foreign technical report format that companies could use in place of the Form. We believe they do not consistently meet the substance of the content required under the Form.
Currently, the CSA has a system for one jurisdiction to grant orders for relief on behalf of all the other jurisdictions, the Mutual Reliance Review System. However, a company must make an application and pay the applicable fee for the relief in each jurisdiction.
We do not agree with giving QPs full discretion under the Instrument. At this time, the purpose of these proposed amendments is limited. It does not include adding any changes that amount to rewriting the requirements to be less prescriptive. However, by the current proposed amendments, we have minimized a company’s need to apply for relief by adding the new proposed delay of site visit relief for an early stage property under s. 6.2(2) and (3) and the limited relief for holders of royalty interests and other similar interests under s. 9.2 of the Instrument. The CSA acknowledges the commenter’s request for a central database of exemptive relief orders. Although we cannot refer companies to a CSA database at this time, we suggest that you refer to the BCSC website for their e-services database. It is user-friendly and contains a complete source of all orders granted for relief from all or
- 27 - # Theme Comments 33. Section 9.2 Exemption from Personal In response to a specific request for comment about the Inspection scope of the new site visit exemption (proposed under Part 9 as s. 9.2 but now moved to Part 6 under s. 6.2(2) and (3)), we received the following responses: Four commenters agreed with limiting this exemption to the case of extreme weather conditions and agreed with keeping a tight (six month) time limitation on the exemption. Five commenters suggested we broaden the exemption. Two of these commenters suggested it should be expanded to include more advanced projects, not only grassroots properties (suggesting the proposed definition of grassroots property needs revising). They also suggested those properties that have had no exploratory work done for over ten years, or those properties on which only limited surveying and sampling has occurred, but which do not have a comprehensive drilling program should also be early stage. Another commenter suggested the relief should not be limited to newly acquired properties. Two of these commenters suggested that rather than tying the time limit to six months from a newly acquired property, it should be six months from the time a property became material to the company.
Six commenters agreed with a limited time period for relief from a current site visit, but not all agreed with six months. Two suggested it should not be less than nine months. Three suggested it should be 12 months because the thaw in the very northern regions would not make a six-month limit useful.
Two commenters noted this section was not an We acknowledge this comment. We have moved the exemption, but was actually only a delay of the site visit. requirements under previously proposed s. 9.2 to s. 6.2(2)
Responses parts of the Instrument for BC reporting issuers. It lists all the orders under NI 43-101 and sets out the key elements that existed in the company’s fact situation for each particular type of relief granted. We have considered all of the commenters’ suggestions. We have reconsidered this relief and decided not to include a time limit for ownership of the property. We also broadened some of the other aspects. First, we have broadened the definition of grassroots exploration property, and changed that defined term to early stage exploration property. Second, we decided not to limit this relief to newly acquired properties or newly material properties. We decided not to include advanced stage projects in the relief because we believe those situations should be considered on a case by case basis through the exemptive relief application process.
- 28 - # Theme Comments Many commenters disagreed with the limited scope of the proposed relief from a site visit. One of these said the relief should not be only in the case of seasonal conditions, but also other natural disasters or political/civil unrest. Many commenters said the QP should have more discretion about whether the site visit is safe or beneficial and the past work is relevant (i.e. not all drilling and trenching is relevant). One of these commenters suggested the following language: “any conditions which, in the view of the QP, make it unsafe, or otherwise inadvisable to access the property or obtain any beneficial information from it”. There are some instances where a QP can provide a professional opinion as to a recommended program without a visit to the property. One of the commenters suggested, as a means of ensuring greater accountability by the QP in exercising his/her discretion, we should add a requirement to the QP certificate obligating the QP to disclose the reasons why he/she did not conduct a site visit.
Many commenters said there are numerous additional reasons a site visit may not be necessary besides extreme seasonal conditions. One example is when a company’s technical report discloses negative results and a property is being downgraded to less than material status, the recent site visit should be sufficient.
Another example is exploration projects that have had
Responses and (3). Even though a company’s obligation is to complete a current personal inspection before it files a technical report, this new provision provides relief by permitting a company to conduct the personal inspection at a later time when the property is accessible. We disagree with including natural disasters and civil unrest because those circumstances are exceptional in nature and timing. We expect a company to apply for relief in such circumstances that we may review the specific factors of the situation. We disagree with the suggestions to give the QP full discretion to determine whether a personal inspection is necessary. See our comments under Item 27 above.
We disagree. For an early stage exploration property, NI 43-101 does not trigger a technical report if the results are negative and a property is being downgraded to less than material status. Since no technical report is triggered, no site visit is required.
We believe that satellite imagery or airborne geophysics
- 29 - # Theme Comments Responses satellite imagery or airborne geophysics conducted. being conducted does not remove the necessity for a site These circumstances should be exempted from the site visit. A QP should inspect the property to check the visit requirement or only require a site visit at the QP’s anomaly. discretion. 34. Section 9.3 Exemption for Certain Two commenters agreed with the addition of this We decided not to add this exemption into the amended Foreign Issuers exemption. One of them suggested that s. 9.3(1)(b) Instrument. Since the CSA has not received any requests should also include the American Stock Exchange and for relief from this type of issuer for several years, we the London Alternative Investment Market. decided to deal with this relief on a case by case basis through the exemptive relief application process. One commenter suggested that we should allow foreign issuers who are listed on the TSX an exemption from the Instrument provided they meet the threshold that is consistent with the requirements for designated foreign issuers in NI 71-102 Continuous Disclosure and Other Exemptions relating to Foreign Issuers.
One commenter disagreed with this exemption because it creates an uneven playing field in terms of the reporting standards Canadian companies must follow compared to foreign companies. They should follow our rules if they want to come into our market. Amended Companion Policy 43-101
35. General – provincial and territorial Three commenters recommended that we refer to the The CSA believes it is not our role to remind QPs of their licensing requirements provincial/territorial registration/licensing requirements professional obligations. That would give the CSA the for QPs. They said that international and local QPs need appearance of being an overseer of the requirements of the to be aware that when they undertake work on a Canadian professional associations. We refrain from doing property, they must be registered or licensed by the that for any other professions, for example the legal and professional association that governs QPs in the accounting professions. province or territory where the property is located. Also, QPs need to be aware that certain provincial/territorial professional associations will have jurisdiction over a QP that is registered/licensed with them, even though they work on a property outside their jurisdiction.
36. General – the terms “valuation” and Two commenters suggested that we make a distinction “economic evaluation” between these two terms in accordance with their meaning as defined by CIMVal. Valuation refers to the value or worth of a mineral property. Economic evaluation refers to an economic assessment or determination of the economic merit of a mineral
We agree that there is a distinction between valuation and economic evaluation. We believe valuation is used correctly in the Instrument. To prevent confusion, we have changed all references of economic evaluation to economic analysis in the Instrument, Companion Policy, and Form.
- 30 - # Theme Comments Responses property. One of these commenters said it was not clear whether the terms economic analysis and economic evaluation are the same thing.
One commenter suggested we should give clarification about the valuation trigger for a technical report under s. 4.2(1)(g) of the Instrument. Guidance is needed about whether it would apply to an information circular prepared in accordance with the JSE Securities Exchange requirements, which must include cash flow information and net present value calculations that are not required disclosure under Canadian securities laws.
37. General – guidance about best practices One commenter noted that the CSA deferred adopting for assaying and analytical laboratories the recommendations made under Part 4 Setting New Standards, Mining Standards Task Force Final Report until laboratories were more prepared. This commenter thinks sufficient time has elapsed to warrant the CSA establishing best practice guidelines for assaying and analytical laboratories. 38. Section 1.3 Application of the One commenter suggested that we include more Instrument guidance in this section about what includes oral disclosure, such as presentations, webcasts, and speeches at annual general meetings. In addition, we should include more guidance about what is written disclosure such as websites, posters, redistributing analyst reports, and president messages/letters to shareholders. Another commenter also suggested that we add website disclosure to this guidance.
One commenter said that we should give guidance that We have added guidance to s. 1.3 of the Companion Policy the Instrument does not apply to coal bed methane that the Instrument does not apply to coal bed methane. deposits as they are governed by NI 51-101 Standards of Disclosure for Oil and Gas Activities.
39. Section 1.5 Best Practices Guidelines for One commenter said this guidance makes coal reporting Mineral Resources and Mineral Reserves very difficult because s. 2.2(a) of the Instrument – coal reporting mandates the use of the CIM Definition Standards for reporting resources and reserves. The coal reserves estimation is prepared using one classification system
We do not believe the suggested guidance is needed. The valuation trigger under s. 4.2(1)(g) is only meant to apply to valuations that are required to be prepared and filed under Canadian provincial and territorial securities laws. We believe we made this clear by the changes we made to that section.
We acknowledge the comment. We support the establishment of industry best practice guidelines. The CIM has already established guidelines for mineral resources and reserves, exploration, and disclosure specific to reporting diamond exploration results. We have referred to those guidelines in s. 1.5 and 1.6 of the Companion Policy. These guidelines contain recommendations for quality assurance and quality control, and laboratories. Under s. 1.1 Definitions of the Instrument, the term written disclosure is defined. We have added websites to this definition. Oral disclosure is self-defining. Therefore, we do not believe we need to specifically define it under this Instrument or provide guidance as to its meaning.
We acknowledge this comment. We have provided more clarification to this guidance for coal reporting. We understand from our consultation with QPs that are experts in the estimation of mineral resources and mineral reserves for coal that it is a straightforward process to use Paper 88-
- 31 - # Theme Comments Responses (Paper 88-21) while the reporting must use another 21 to estimate the mineral resources and reserves, and then system (CIM Definition Standards). The terms required to report in the equivalent reporting categories under CIM by each system do not match. The commenter Definition Standards. recommends that in the case of coal, we allow the reporting with the defined terms in Paper 88-21 instead of with the CIM Definition Standards. If not, then provide guidance as to how to convert the coal estimate made using Paper 88-21 to report them in the CIM Definition Standards.
The same commenter said there are quantification differences between the CIM Definition Standards and the Paper 88-21 system.
One commenter expressed reservations about endorsing These guidelines were developed through industry’s input the use of the CIM Estimation of Mineral Resources and to CIM. We are endorsing them because we believe Mineral Reserves Best Practice Guidelines (CIM industry has accepted CIM as the appropriate organization Resource and Reserve Guidelines) because they are not to develop these standards. presented in an object-oriented and principle-based perspective. That prevents the QP from exercising professional discretion, as needed from project to project, to contribute more fully to improved industry efficiency and better return for investors.
40. Section 1.6 Best Practices Guidelines for One commenter noted that although the Mineral We acknowledge the commenter’s concern. In general, we Mineral Exploration Exploration Best Practices Guidelines have more of an prefer the Mineral Exploration Best Practice Guidelines objective-oriented and principle-based approach than the because they were established by the mining industry CIM Resource and Reserve Guidelines, they are too across Canada, which represents a broader consensus of brief to offer more than a generic perspective. The people in the industry. commenter suggests we refer to the more detailed text in the Draft Standards for Exploration and Resource/Reserve Estimation, a report that was sponsored by the ministère des Ressources naturelles du Québec.
We believe s. 3.4 of the Instrument addresses this by requiring the company to state the key assumptions, parameters and methods used to estimate the mineral resources or mineral reserves for coal.
- 32 - # Theme Comments 41. Section 1.7 Preliminary Assessments One commenter suggested we add guidance to this section explaining that disclosure of a scoping study should include a statement of the basis on which the parameters for the economic evaluation were developed.
This commenter also did not agree that a scoping study We acknowledge the commenter’s concern. However, we provided important information to the market because believe that prohibiting the disclosure of a preliminary they are not as trustworthy as a feasibility study. assessment could put a company in the position where it may not be able to comply with the principles of timely disclosure of what it believes is material information. We believe it is better to allow the disclosure of preliminary assessments with appropriate detail and cautionary language than to try to suppress this information.
42. Section 1.8 Objective Standard of Two commenters said we need to provide more We believe the reasonable person concept is a concept that Reasonableness clarification as to whether the reasonable person would evolves through decisions of the court. Therefore, we do be a person with some technical knowledge or with no not think it is appropriate for us to give prescriptive ability at all to interpret technical data. guidance about the meaning of this concept. 43. Section 1.9 Improper Use of Terms in One commenter disagreed with this guidance about the We disagree. These terms are distinct and understood by French Language use of gisement advising it is not restricted to economic most French speaking geologists. All industry participants deposits that can be considered as ore/mineral reserves. should use the terms appropriately in accordance with our The commenter also advised gisement or gisement guidance. mineral is more equivalent to mineral resources than to mineral reserves. Therefore, it is inappropriate to ascribe to the term gisement a meaning similar to that of mineral reserve or ore reserve. The commenter recommends this proposed section should be removed or it will create more confusion and will more likely debase, rather than improve, the French disclosure of mineral exploration
Responses We do not believe it is appropriate to insert this type of guidance in the Companion Policy. The purpose of the Companion Policy is to give guidance about specific requirements of the Instrument. The commenter’s suggestion relates to a specific disclosure practice. Also, this disclosure is required in the technical report. However, the commenter’s point prompted us to realize this section is missing guidance about s. 3.4(e) of the Instrument. An issuer must include a cautionary statement when mineral resources are used in an economic analysis, including a preliminary assessment. We have added this guidance to the Companion Policy.
- 33 - # Theme Comments information. 44. Section 2.1 Disclosure is the One commenter said the final sentence of s. 2.1 should Responsibility of the Issuer be revised to remedy the problem that most companies do not give a QP sufficient time to review the written disclosure being filed for the QP to give his/her consent to its filing and the extracts. This commenter recommends removing the reference to strongly urging the company to have the QP review the disclosure and replace it with guidance that obligates the company to have the QP review the disclosure. Also, it should obligate the company to give the QP sufficient time to review it and make any necessary amendments and revisions before the QP gives his/her consent.
45. Section 2.4 Materiality One commenter said the guidance on materiality was made less concise and is now too general. This will increase the compliance costs as issuers will have to seek legal advice.
One commenter suggested we should inform companies We disagree. We do not believe that we can set this type of that if they have many properties that individually, are bright-line guidance for assessing the materiality of a not material, they must disclose at least one of them (i.e. company’s properties. If a company is not active on any of the most active) as material. its properties, it may be possible that it has no material properties. However, we believe that most active companies will have at least one property to keep its shareholders and the public market interested. We expect that property would be material.
One commenter said guidance is needed about who is responsible for determining when the addition of a mineral property is a material change to the company. 46. Section 2.5 Material Information not yet One commenter suggested that we should add guidance Confirmed by a Qualified Person that all confirmations from a QP about the company’s
Responses We disagree with these suggestions. Please refer to our reasons as stated under the last paragraph of Item 31 above. In addition, our reference to strongly urging relates to urging companies to have their QP review all scientific and technical disclosure a company makes, regardless of whether it triggers a technical report and requires a QP’s consent. For example, a company may file a news release that does not trigger a technical report but it contains an update on the company’s mineral project. We urge companies to have their QPs review such disclosure to ensure it is accurate, complete, and updated.
The former guidance tried to set a bright-line test for materiality relating to more than 10% of book value of the total of the company’s mineral properties. This guidance was removed because it led many companies to incorrectly apply a bright-line test for assessing materiality. As we stated under Item 12 above, whether a property is material may fluctuate depending on many factors outlined in the Companion Policy. There is no bright-line test for materiality. Therefore, we believe we have dealt with this concept appropriately in the Companion Policy.
We agree. The assessment of materiality must be made by the company’s management. We have added this guidance to the Companion Policy under s. 2.4. We disagree. We believe this is a matter that should be negotiated between a company and its QP. However, we
- 34 - # Theme Comments material technical disclosure should be in writing. 47. Section 2.7 Meaning of Current One commenter suggested that we clarify this guidance Technical Report by explaining a technical report would remain current so long as the only change in the reserve estimate in the technical report is through depletion in the ordinary course of mining.
48. Section 2.9 Use of Historical Estimates Many commenters said the 30-day time limit for filing a We acknowledge the commenters’ concern. We have report is too short. It should be extended to 60 or 90 days to prevent non-compliance or the avoidance of timely disclosure. One commenter suggested adding more guidance in this section regarding: acceptable sources for a historic estimate, points to consider when confirming the relevance of a historic estimate, and points to consider when commenting on the reliability of an historic estimate.
49. Section 2.10 Use of Other Foreign Codes One commenter suggested that the first paragraph of s. 2.10 should state that relief to permit disclosure of foreign estimates would likely include the conditions set out in s. 2.9(2) of the Companion Policy, not those in s. 2.4(a) to (e) of the Instrument. This would make the conditions for relief consistent with the guidance given for disclosure of historical estimates under s. 2.9(2) of the Companion Policy.
50. Section 3.1 Selection of Qualified Person One commenter suggested we should have consistency of terms with other continuous disclosure rules. For example, certain sections of the forms under NI 51-102 Continuous Disclosure Obligations refer to report and expert. We should give clarification whether those terms include NI 43-101 technical report and qualified person. 51. Section 3.2 Assistance of non-Qualified One commenter suggested that the reference to other Persons persons should be limited to other professional geoscientists and engineers who do not yet have the
Responses agree that companies and QPs should carefully consider the commenter’s suggestion, especially in light of the proposed civil liability laws in certain jurisdictions. We agree with the commenter that normal mining depletion does not, by itself, result in a material change to previously reported mineral reserves. We have amended this section of the Companion Policy to clarify this point.
reconsidered the time period allowed under this section and decided to change it to 45 days instead of 30 days. See our response to Item 23 above. We agree with the commenter that the Companion Policy should provide some guidance on the source of the estimates. We have added s. 2.9(2) and (3) to the Companion Policy to provide further guidance on the disclosure of historical estimates.
We acknowledge the comment. We have deleted the reference in the guidance to s. 2.4 of the Instrument. However, we do not agree that the guidance under s. 2.10 of the Companion Policy should refer to the conditions set out in s. 2.9(2) of the Companion Policy (now moved to the Instrument as s. 4.2(2)(b)).
We disagree that this type of clarification is needed. We believe that since the terms expert and report are general terms, there should be little confusion that they include a QP and an NI 43-101 technical report. We also believe that the Companion Policy is not the appropriate place for such guidance. We disagree. Not all persons involved in collecting or processing data need to be geoscientists or engineers. Exploration programs frequently use technicians, field
- 35 - # Theme Comments required experience of QPs. Other people not so qualified should not carry out work that is in the scope of professional laws regulating the practice of the geosciences and engineering in Canada or other countries with such laws.
52. Section 3.3 More than One Qualified Five commenters said it was unreasonable to expect a QP Person preparing a technical report to take responsibility for a resource or reserve estimate made by another QP in a previous report on the same property. There would not be enough documentation to review as the QP is unlikely to have obtained all the work sheets, plans, and sections of the earlier estimate. It would only be reasonable to expect the QP to investigate and resolve any major concerns he/she may have with an estimate. A company and its QP should be able to use previously published resource estimates, otherwise a large amount of unnecessary re- work is being required. A QP is able to rely on the work of other engineers and geologists for work in other areas. The same should apply to the work done by another QP in the field of mineral resources and mineral reserves. Some QPs will use this guidance to refuse a company an initial NI 43-101 report for an acquisition (delaying the implementation of the previously recommended work program) unless the company contracts with them for a complete work program and a full update of resources and reserves.
One commenter recommended we amend the last We acknowledge the suggestion. However, we do not sentence of this guidance to read “should make whatever agree with adding such prescriptive guidance. investigations and verifications are necessary to validate that information”. This is more appropriate given the recent emphasis on greater data quality based on quality assurance and the need for objective-oriented and principle-based methods.
53. Section 3.4 Exemption from the One commenter pointed out that it would not be Qualified Person Requirement appropriate for the CSA to give an exemption from the QP requirement if it would result in a breach of the laws that govern the work of geoscientists and engineers in a province or territory. This guidance should specify that. It
Responses assistants, and other non-professional staff working under the supervision of a QP. The purpose of this section is to clarify and confirm that the QP must take responsibility for the information collected or provided by these non-QPs.
A cornerstone of the Instrument is for the issuer to involve a QP when making disclosure of mineral resources or reserve estimates. If a technical report is required, the QP or QPs who prepare that technical report must take responsibility for the report as a whole. It is in the public interest to have a QP take responsibility for the former estimates of mineral resources or reserves contained in a new technical report that the issuer must file. Although there is a cost to having a QP take responsibility for the former QP’s estimate, we believe it is justifiable. Otherwise, companies will continue to rely on the former estimate year after year without any QP confirming that it is still reasonable to do so.
We acknowledge the commenter’s concern. Similar to our comments under Item 10 above, we do not believe it is our role to be an overseer of the legal requirements QPs have under non-securities legislation and the professional associations that govern them. Each QP should ensure that
- 36 - # Theme Comments should also explain foreign persons can apply for a temporary work permit from a professional association in Canada.
The same commenter noted that the final paragraph of s. 3.4(2) should be clarified so that it does not sound like a waiver from the independence requirement will exist for a company that has a QP in its management positions.
54. Section 3.5 Independence of Qualified One commenter said the new guidance about the We appreciate the comment. Person application of the new definition of independence is straightforward and reasonable.
One commenter said s. 3.5(1)(h) is not restrictive enough We believe that the example under s. 3.5(1)(h) (now s. as a QP’s independence is a problem even if only a small 3.5(1)(g)) is appropriate. A QP that has a majority of percentage of his/her total income is from one source over his/her income from one source over three years is no three years. longer independent. Three commenters said s. 3.5(1)(h) is too onerous. In times of industry downturns it is common for a QP to receive all or a majority of his/her income from one client or a related party to the client.
Many commenters said that all references to expects to hold or have in s. 3.5(1)(d), (e), (f) and (g) of the guidance about a QP’s independence is too difficult to assess because it requires a QP’s speculation.
One commenter noted the language in the guidance about the test to apply to determine independence confuses the independence definition under s. 1.4 of the Instrument.
Three commenters said that the language “holds a very small number” in reference to an issuer’s total securities is too vague. One suggested it should be referred to in
Responses they are complying with all applicable legal, professional, and ethical requirements. However, we have changed the guidance under the second sentence of s. 3.4(2) to more accurately reflect that the criteria we consider for relief would not include a QP who must register with a professional association in his/her jurisdiction.
We have considered the commenter’s concern and agree this part is confusing. We have deleted it because we believe the sentence above it covers the same point.
We disagree. The reference to expects to have refers to current understandings that exist between the QP and the company.
We agree with the commenter’s concern. We have removed that sentence from the Companion Policy.
We agree with changing this paragraph but not as the commenter suggested. We are not prepared to not include any bright-line tests in the guidance. We have amended
- 37 - # Theme Comments Responses percentage terms such as “holds securities of the issuer the paragraph to remind companies that a QP may hold an representing less than XX% of the issuers total issued and interest in their securities, but they need to apply the test outstanding securities”. in s. 1.4 of the Instrument. One commenter suggested the following revision to the We have deleted s. 3.5(3) because it repeats the guidance text in s. 3.5(3): in s. 3.2. We do not agree with prescribing guidance that suggests a QP could limit their responsibility. “ … provided that the independent qualified person has, in his/her professional judgement, taken whatever investigation and verification steps are required or mandated to ensure that the information he/she relies on is sound and allows him/her to take responsibility, within limits to be specified, for that information and the conclusions and recommendations derived from it…..”
55. Section 4.1 Addendums not Permitted Three commenters disagreed with the prohibition against the use of addendums. Addendums should be allowed to update a report and to correct errors. One commenter said companies incur a significant cost to reproduce a complete report for a minor update. The TSX and TSX Venture Exchange permit addendums and only require a complete, new technical report when the property has been materially advanced to the next stage.
One commenter suggested adding more guidance to this We agree. We have amended s. 4.1 of the Companion section that explains a new QP can update a previously Policy accordingly. filed technical report prepared by a former QP. The new QP needs to take responsibility for the whole, new report and sign it off as his/her report.
56. Section 4.2 Filing on SEDAR Many commenters suggested additional clarification is needed about how to file maps and drawings which are not easily converted to electronic form and may not be easily viewed on SEDAR.
Two commenters said their experience is that SEDAR
We acknowledge the comment. We believe that there is little to no difference in the time and cost for a QP to go into the electronic copy of the outdated technical report, replace the outdated parts with updated information compared to creating an addendum that must state that sections of the report that are deleted and the text that replaces the deleted text. Investors need to be assured that when they review a company’s most recently filed technical report on SEDAR, it contains all the updated information about the company’s mineral projects. Also, investors may not easily find the addendum among all the documents filed in the company’s disclosure record.
We acknowledge the commenter’s concern. We do not believe the Companion Policy is the appropriate place for this type of guidance. It is a SEDAR filing issue, not an NI 43-101 issue. Please refer to the SEDAR Filing Manual for guidance on this issue.
We disagree. The inclusion of the maps and figures
- 38 - # Theme Comments cannot take very large filings. The inclusion of figures and drawings make the file too large. One commenter said this guidance is contrary to advice given by staff at certain securities commissions cautioning against making filings that are too large for SEDAR. 57. Section 5.2 Disclaimers in Technical Five commenters agreed with the added clarification Reports about the limitation on the use of disclaimers. One noted that this addition was a welcome clarification.
One commenter said that we should accept the use of We acknowledge the commenter’s concern. We believe other disclaimers when there are multiple authors of a the QP does not need to disclaim responsibility for parts of report and each wants to disclaim responsibility for the the report prepared by other QPs because the QP is part of the report that he/she did not prepare. required to state the parts of the report he/she is responsible for in his/her certificate. This means each QP would only be responsible for the parts they certify. We also believe that our prohibition from disclaimers was too broad (now moved to s. 6.4 of the Instrument and retained as Instruction 7 in the Form). We have revised it.
Three commenters said that the prohibition against all other disclaimers is too broad. Two of these commenters said that this change causes an increased cost burden to QPs that they will pass on to companies because QPs will have to pay more for liability insurance. Another of these commenters suggested that we should permit a general disclaimer on a technical report provided it contains a statement that the disclaimer is “subject to applicable securities laws providing otherwise”. If this relaxation of the disclaimer is not made, then many of the QPs who prepared NI 43-101 technical reports will cease doing so because of the increasing risk of liability. The loss of quality QPs will be an increased cost and time burden to the companies trying to seek a QP to complete a report.
Responses required by Form 43-101F1 does not need to result in huge file sizes that cannot be easily filed on SEDAR. We encourage QPs to limit their use of photographs, high density maps and graphics, and scanned supporting documents, such as drill logs and assay sheets. These are not specifically required under the Form and are often responsible for much of the excessive file size. There are numerous examples of technical reports with figures that are less than 3 megabytes filed on SEDAR. We thank the commenters for this feedback.
See our response above. We have made this prohibition less broad. However, we disagree with removing it. We do not believe that this prohibition should add to the costs for a QP or a company because the QP’s and the company’s potential liability is the same with or without the type of disclaimer we are prohibiting. As we stated in our CSA Notice announcing this proposed change, the civil liability provisions of provincial and territorial securities legislation set out the circumstances when a QP and a company will be liable for a misrepresentation contained in certain disclosure. A QP and a company cannot contract out of such liability. Therefore, we believe it is misleading for a QP to insert a disclaimer that informs third parties that they cannot rely on the contents of the technical report. Since this liability is the same for QPs now as it was before the implementation of the Instrument, we do not expect this prohibition to be the cause of possible insurance increases QPs may experience in the future.
- 39 - # Theme Comments One commenter also suggested that if we retain the prohibition against disclaimers, then it should not be set out in Instruction 7 of the Form, but should be included in the Instrument instead.
One commenter suggested we need to add clarification for a QP that inserts a disclaimer of responsibility for the opinions of other experts. The commenter said that the name of, and consent from, the expert was not required. 58. Section 6.1 Meaning of Current Personal Two commenters said the guidance about what is a Inspection current personal inspection is not clear. One of the commenters suggested it should simply state that an inspection is current if there has been no material change in the property since the most recent site inspection. The other commenter suggested it should clarify that the obligation to conduct a new personal inspection arises only if there has been a material change to material scientific and technical information about a mineral project.
Many commenters said guidance is needed about whether we expect a current personal inspection if the material change in the scientific and technical information results in a decision not to further develop and explore the property. 59. Section 6.3 Exemption from Personal Many commenters disagree with the removal of the Inspection Requirement reference to “or not beneficial” from the guidance about the acceptable criteria the regulators would consider for relief from the site visit requirement. The QP’s professional discretion should be accepted. 60. Section 6.4 More then One Qualified Many commenters noted that not all QPs who author a Person report are relevant for a proper site visit.
Responses We agree. Although the Form is part of the Instrument and is therefore law, we have included this prohibition as a new section (s. 6.4) in the Instrument because it is a critical requirement that issuers may miss if it is only an instruction in the Form. Since we believe the instruction should also be proximate to Item 5 of the Form, we have retained it as Instruction 7 in the Form.
We disagree in part. Item 5 of the Form is clear about identifying the “maker of the report, opinion, or statement” that is being relied on. However, there is no requirement to obtain consent from the expert. That is up to the QP and the arrangements he/she makes with the expert. We agree. We have simplified the wording and have amended the meaning to reflect that the material change relates to the scientific and technical information on the mineral project.
We disagree. This is related to our response in the second last paragraph of Item 33 above. NI 43-101 does not trigger a technical report for disclosure of results that are negative and the property is being downgraded to less than material status. Since no technical report is triggered, no site visit is required. We disagree. The CSA considered this carefully prior to creating the proposed amendments. We never intended the phrase “or not beneficial”, that was in the former Companion Policy, to mean that a QP could make the decision about whether a site visit was beneficial or not and the company only had to apply for relief on that basis. We removed the phrase to prevent further confusion. We acknowledge the comment. We believe the guidance in s. 6.4 of the Companion Policy covers this.
- 40 - # Theme Comments One commenter said we should caution against ghost writing of reports to ensure that the QP writes the report. Form 43-101
61. Table of Contents Three commenters said the format should only serve as a guide and allow the report author to report the required information in the most practical manner.
One commenter said the format unnecessarily departs We disagree. The Form requires the same information that from the established format of reports required before NI was required before, but has additional sections, as 43-101. suggested by the Mining Standards Task Force, requiring the disclosure of the integrity of the data, such as data verification, quality assurance/quality control, and sample security.
One commenter said the CSA should allow technical reports that may be accepted by recognized foreign jurisdictions. The concern expressed was that foreign issuers wanting to list in Canada were incurring unnecessary expense by having to re-format existing reports.
Two commenters suggested the certificates of QPs be required contents of the report and be included in the table of contents. 62. Instruction 1 One commenter suggested including an instruction that the technical report need only be a summary of the technical information. 63. Instructions 3 and 4 One commenter was concerned that it is not clear whether
Responses We acknowledge the comment but disagree with adding the suggested caution. The QP who signs the technical report and certificate is taking responsibility for the technical report and its contents whether or not the QP actually wrote the words.
We acknowledge the comment. However, we believe it is important to retain a standard reporting format. It makes it easier for investors and regulators to find the required disclosure under each item instead of having to search for it.
We disagree. We are not aware of technical report form requirements being specified in the foreign jurisdictions recognized by the CSA. Our experience has been that geological or engineering reports prepared in foreign jurisdictions have frequently lacked essential content required under the Form and are not compliant with the Instrument. For example, the required disclosure regarding data verification and sample security is frequently absent and the required disclosure for historical resources or exploration targets is frequently missing.
We disagree. The QPs’ certificates are separate documents and although many are filed with the report, the Instrument contemplates situations where the certificates are filed separately from the report. We agree. We expect the QP to review all of the available technical information but need only summarize the relevant information in the technical report. We have inserted the phrase “a summary of” into Instruction 1. We agree and have modified Instruction 3 to make it clear
- 41 - # Theme Comments Responses certain item headings can be deleted if there is nothing that all of the headings of the items must be included. relevant to report.
64. Instruction 6 One commenter was concerned that the format of the technical report is suited more towards early to mid-stage exploration properties and is not suitable for properties at the feasibility stage or operating mines. The commenter felt that the allowance for summarizing in Instruction 6 did not go far enough and that a second report format should be prepared for feasibility studies or an operating mine.
65. Instruction 7 Two commenters stated strong support for the prohibition We thank you for these comments. on the use of blanket disclaimers and one commenter thanked us for the clarification on Item 5.
One commenter pointed out that disclaimers of professional responsibility are forbidden by Quebec professional laws and codes of ethics and that similar laws are in place in most Canadian jurisdictions.
One commenter expressed concern that the prohibition on blanket disclaimers will increase the difficulty in obtaining QPs or engineering firms to undertake technical reports because of the perceived increase in liability.
One commenter suggested allowing a blanket disclaimer We disagree. We do not believe investors will understand as long as it includes the statement “subject to applicable the limits that suggested phrase would put on a blanket securities law providing otherwise”. disclaimer. Also, the suggested phrase would not deal with the problem that many QPs are disclaiming their professional responsibility and codes of ethics. However, we also decided that our prohibition from disclaimers as proposed was too broad. We have revised it. See our response under Item 57 above regarding s. 5.2 of the Companion Policy.
We disagree. It has been our experience that many report authors have already recognized the practicality of summarizing the contents under certain items of the Form for developed or producing mining properties. We believe the new Instruction 6 will encourage this and will obviate the need for two technical report forms.
We agree. The QP concept relies on the individual preparing the technical report being bound by the requirement to meet the professional standards and code of ethics of their professional association. To disclaim this responsibility goes against one of the essential principles of the QP involvement in public disclosure.
We disagree. The liability is not new. It has always existed in law. Blanket disclaimers ignore the purpose of technical reports and they provide the misleading impression that QPs, or the engineering firm they work for, can disclaim all personal, professional, and statutory liability.
- 42 - # Theme Comments One commenter suggested the prohibition on blanket disclaimers should be included in the Instrument, not just as an instruction to the Form. 66. Item 1 Title Page Two commenters pointed out that we have not been consistent in the use of author and qualified person throughout the report. 67. Item 4 Introduction Many commenters expressed concern that the deletion of “terms of reference” from this item would cause report authors to not address the scope of the report and additional information.
68. Item 5 Reliance on Other Experts One commenter thought it should be made clear that the Item 5 makes it clear that if a QP is relying on another QP should not opine on matters that are not within his/her expert’s opinion, the QP is not required to provide their expertise. own opinion on matters that are outside their area of expertise. 69. Item 6 Property Description and Two commenters suggested replacing the narrow term We agree with this suggestion. We have amended Item Location – (c) claim with a more general term mineral tenure. 6(c) accordingly. 70. Item 6 Property Description and One commenter suggested including the requirement to We disagree any additions are needed. We believe this is Location – (d) specify the minerals or commodity that the claim or required disclosure under Item 6(d). mineral tenure may be restricted to.
71. Item 6 Property Description and Many commenters expressed concern regarding the We agree this was confusing. We changed the wording to Location – (e) required disclosure of the survey system used to locate “how the property boundaries were located”. the property boundaries because it implies a requirement to survey the property boundaries.
72. Item 6 Property Description and One commenter pointed out that Item 6(f) is a repetition We agree it was redundant. We have deleted the words “by Location – (f) of the requirements under Item 26(a). showing the same on a map” from Item 6(f). 73. Item 8 History - (b) Two commenters suggested the requirement to describe We disagree with the extent of the change the commenter the results of exploration under Item 8(b) would be more suggested. However, we have amended results to read appropriate under Item 12 or 13. general results under Item 8(b).
Responses We agree. Although the Form is part of Instrument, and therefore is law, we have included this prohibition as new section 6.4 in the Instrument because it is a critical requirement that issuers may miss if it is only an instruction in the Form. Since we believe it should also be proximate to Item 5 of the Form, we have retained it as Instruction 7 in the Form. We acknowledge the commenters’ point. However, the terms author and QP are not always interchangeable. There may be co-authors of a technical report that are not QPs, but a QP must be responsible for each part of the report. Where appropriate, we have made changes to refer to both QP and author. We disagree. We believe the disclosure under Items 3 and 4 should adequately describe the scope of the report.
- 43 - # Theme Comments Responses One commenter expressed the concern that the phrase We agree. We have changed “owners and any previous “the owners and any previous owners” was confusing owners” to “any previous owners or operators”. because it did not distinguish between owners of the property and operators that may have performed work on the property in the past or at present.
One commenter suggested that if the historical data is not We disagree. This is already covered by the required verifiable, then a warning to that effect be required. disclosure under Item 16 Data Verification, which is meant to provide investors with specific disclosure on how the data was verified and any limits on the verification.
74. Item 11 Mineralization One commenter suggested that it was not logical to discuss the relevant geological controls, width and especially depth of mineralization prior to first discussing Items 12 and 13. 75. Item 12 Exploration One commenter suggested that the QP should be allowed the discretion of reporting the relevant exploration results of past operators on the property along with that of the issuer.
Three commenters suggested including a general We agree. See our response above. We have made the instruction to authors to clearly distinguish between work change suggested. conducted by or on behalf of the issuer from work that was conducted by previous operators.
One commenter requested that drilling be excluded from this item.
Item 12(a) One commenter suggested replacing parameters with specifications under Item 12(a). Item 12(b) One commenter believed the requirement for interpretation under Item 12(b) is redundant to the requirement for interpretation under Item 13.
We disagree. We believe report authors can make general statements on geological controls and the dimensions of mineralization with the details being provided under later items. We do not believe this is prevented by Item 12. However, we expect the disclosure for this item to clearly identify the exploration work done by, or on behalf of, the issuer. We have added an instruction under this item to clarify this.
We disagree. Item 12 allows a summary of the quantities and location of drilling performed by the issuer. The results of all drilling are to be reported under Item 13.
We disagree. QPs may report the specifications to the extent they feel necessary. We disagree. Exploration results can cover geophysics, geology, geochemistry, etc. Drilling generally represents a relatively high proportion of exploration costs and investors place significant weight on the outcome. Therefore, we believe drilling and interpretation specific to
- 44 - # Theme Comments Item 12 (d) One commenter disagreed with the deletion of this sub- section and suggested it should be enhanced to cover different interpretations of geology between successive exploration campaigns and correlation of data between campaigns, and to describe the level of reliability or uncertainty.
76. Item 14 Sampling Method and Approach One commenter suggested that clarification be provided that the requirement for location, spacing or density of samples under Item 14(a) can be met by showing the same on a map. One commenter suggested that there should be a requirement to describe the results of a quality assurance program on the sampling method used.
77. Item 15 Sample Preparation, Analyses One commenter disagreed with the deletion of the and Security – (b) requirement for describing the sub-sample size.
One commenter suggested strengthening the requirement We disagree. We believe the requirement to report this “to report whether the analytical lab has been certified by information is clear. any standards association” since this requirement is frequently ignored.
78. Item 15 Sample Preparation, Analyses One commenter suggested removing the required and Security – (d) statement of the author’s opinion on adequacy of sampling, sample preparation, security and analytical procedures. The commenter believes that this should be addressed in the recommendation section of the report. 79. Item 16 Data Verification One commenter suggested that quality assurance should be applied to interpretation of data.
One commenter felt there should be a requirement that
Responses drilling warrants its own item in the Form. We disagree. We expect the QP to review all of the information that is the subject of the technical report and to comment where appropriate under Item 16 Data Verification.
We disagree. Although Item 26(a) Illustrations requires the technical report contain detailed maps that show all important features described in the text, the requirement in Item 14(a) can only be met by a brief written description. We disagree. It is already covered in the requirements for a discussion of the sample quality. The need for a quality assurance program on the sampling method should be left to the discretion of the QP.
We disagree with the comment. Sub-sample size can still be described under Item 15 Sample Preparation, Analyses and Security. Also, Item 14(c) can include sub-sample size with a discussion of sample quality, whether the samples are representative, and factors that may have caused sample biases.
We disagree with moving this whole subsection into the recommendation section. However, we agree with removing the reference to sampling in this section because the adequacy of the sampling is already covered under Item 14(c). We believe this should be left up to the QP and reported as appropriate under the data verification procedures applied under Item 16(a).
We agree that a QP should report on any data verification
- 45 - # Theme Comments data verification include a reconciliation of the grades forecast from mineral reserves with actual production grades. 80. Item 17 Adjacent Properties One commenter suggested replacing the term Adjacent Property with Nearby Property.
One commenter suggested removing the requirement for We agree. We have removed this requirement. placing the required statements under Item 17(c) in bold face type. This is the only requirement for bold face type in the Instrument and it is an unusual item to be emphasized.
81. Item 18 Mineral Processing and One commenter objected to striking out the words “of Metallurgical Testing sample selection representativity and”.
One commenter suggested the words “and discuss the We disagree with using the term representitivity. representitivity of the samples”.
82. Item 19 Mineral Resource and Mineral One commenter was concerned that Item 19(j) allowed We disagree. We believe Item 19(i) of the Form, and s. Reserve Estimates – (j) inferred mineral resources to be included in the economic 2.3(1)(b) of the Instrument make this prohibition clear. analysis of a preliminary feasibility or feasibility study.
83. Item 20 Other Relevant Data and One commenter felt the inclusion of the phrase “and not Information misleading” is insulting and goes against the QP concept. The commenter suggests the alternative “Include any additional information or explanation necessary to make the technical report understandable”. 84. Item 21 Interpretation and Conclusions One commenter suggested changing the title of this item to Discussion and Interpretation. 85. Item 22 Recommendations Two commenters questioned whether it was necessary to include the required statement on the merit of the property.
Responses that he/she feels is necessary. Accordingly, we have amended Item 16(b) so that it is not specific to sampling and analytical data. We disagree. The term adjacent property is a defined term under the Instrument. This term is more in line with the requirement that the adjacent property have a boundary that is reasonably proximate to the closest boundary of the property being reported on.
We did not remove this required disclosure. We simply reworded the statement since representativity is not a word. The required disclosure remains the same.
We disagree. Item 20 was included in the Form to provide a catch-all to allow a QP to provide additional information or an explanation that would prevent the report from being misleading but may not have a logical place under other items in the Form. We believe the commenter’s suggestion does not convey the importance that an omission of material information would be misleading. We disagree. Most report authors have adapted to the reporting format that has been established. Therefore, we prefer to leave it as is. We agree and believe the merit of the property will be self- evident in the contents of the report, including the recommended work program. Therefore, we deleted this requirement.
- 46 - # Theme Comments One commenter suggested changing the title of this item to Conclusions and Recommendations.
86. Item 25 Additional Requirements for One commenter felt that it was inappropriate to require Technical Reports on Development economic analysis with cash flow forecasts on an annual Properties and Production Properties – basis for producing properties. (h)
87. Item 26 Illustrations One commenter recommended clarifying that illustrations We agree. We have added the phrase “and be included in need not only be at the back of the report, but can be the appropriate part of the report.” presented throughout the report.
88. Item 26 Illustrations – Instruction Many commenters expressed concern over the technical challenge and cost to simplifying many maps to allow for SEDAR filing and that a summarized map could result in a misleading summary.
Responses We disagree. Most report authors have adapted to the reporting format that has been established. Therefore, we prefer to leave it as is.
We disagree. We believe this information is important because it is requested by investors to assist them in their investment decisions regarding the issuer. As well, the cash-flow is provided as a forecast, with sensitivity analyses to show the affect of specific variables.
We disagree. It is feasible to follow this instruction and comply with the technical requirements. We have observed a significant number of technical reports that meet the requirements for illustrations under the Form and the limited electronic file size required by the SEDAR Filer Manual. The QP must decide what to include in the summary to ensure it is not misleading.