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SME

Mineral Disclosure Best Practices

Craig Waldie, P.Geo., Senior Geologist, Corporate Finance

Jim Whyte, P.Geo., Senior Geologist, Corporate Finance

September 25, 2012November 6, 2012

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SMEDisclaimer

“The views expressed in this presentation are the personal views of thepresenting staff and do not necessarily represent the views of theCommission or other Commission staff.

The presentation is provided for general information purposes only anddoes not constitute legal or accounting advice.

Information has been summarized and paraphrased for presentationpurposes and the examples have been provided for illustration purposesonly. Responsibility for making sufficient and appropriate disclosure andcomplying with applicable securities legislation remains with the company.

Information in this presentation reflects securities legislation and otherrelevant standards that are in effect as of the date of the presentation.

The contents of this presentation should not be modified without theexpress written permission of the presenters.”

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SME Presentation Outline

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Time Topic Page

9:00 – 9:10 Opening Remarks and Presentation Outline 1

9:10 – 9:15 Objectives of the OSC SME Institute 4

9:15 – 9:40 Disclosure Concepts

Case Study – Selective Disclosure

Lessons from Commission Decisions

Regulatory Landscape in Canada

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9:40 – 10:40 NI 43-101 Basics

Written Disclosure

Exploration Information

Exploration Targets, Historical Estimates, Prohibited Disclosure

Mineral Resources and Mineral Reserves

Economic Studies

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10:40 – 11:00 News Release Exercise

Take a Chance Mining Ltd.

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11:00 – 11:20 Technical Report Basics

Common Problems with Technical Reports

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11:20 – 11:45 How to Avoid a Call From the Regulator

Dealing with Securities Regulators

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11:45 – 12:00 Questions and Answers 109

OSC SME Institute

Objectives of the OSC SME Institute

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SMEOSC SME Institute - Objectives

Our goal is to:

Help SMEs navigate the regulatory waters

Demystify disclosure requirements so companies can focus onbuilding their business

Reduce SMEs’ cost of compliance so that this money can bebetter spent on strategic initiatives

Provide an opportunity for informal dialogue with OSC staff

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Disclosure requirements, including those for financialreporting, are a cornerstone of investor confidence

OSC SME Institute

Disclosure Concepts

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SMEMateriality and timely disclosure

Basic underpinning of securities legislation

• Protects investors from unfair and fraudulent practices

• Provides confidence in the markets

• Provides a level playing field for all companies

• Risk of insider trading and tipping increases withoutcompliance

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SMEGuiding principles for materiality

No bright line test

• Company specific determination

Context specific

• Materiality may be related to certain facts andcircumstances

Probability/magnitude test

• Consider the likelihood of the event and its impact

Err on the side of materiality

• If in doubt, it is better to disclose

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It is the responsibility of the company to determine what informationis material

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SMENP 51-201 Disclosure Standards

1. You must make timely disclosure of materialinformation

2. You must keep material information confidentialuntil it is disclosed

3. You must not trade or tip when materialinformation has not been disclosed

1, 2, 3: Applies to companies and management

2, 3: Applies to QPs

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Companies also need to comply with the requirements of an exchange onwhich they are listed

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SMEStock exchange requirements

TSX Company Manual• Timely Disclosure

• Appendix B: Disclosure Standards for CompaniesEngaged in Mineral Exploration, Development &Production

• Electronic Communications Disclosure Guidelines

TSX Venture Exchange Corporate Finance Manual• Policy 3.3 Timely Disclosure

• Appendix 3F Mining Standards Guidelines

• Appendix 3E News Release Guidelines

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OSC SME Institute

Case StudySelective Disclosure

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SMESelective disclosure

Problems• Not disclosing material information/material changes to

everyone at the same time

• Unfair to investors and can give rise to insider trading

• Undermines confidence in the market

Sign• Share price change not explained by disclosure events

Risky Situations• Unscripted private meetings with analysts, investors

• Poor internal controls and disclosure policies

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SMECase study – Selective disclosure

2010 Australian study (ASX)

Market response to resource announcements bymining companies from 2005-2008

• 603 news releases by 313 companies

• Study period - 30 days before and 60 days after theresource announcement

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Findings give cause for concern to regulators regarding breaches ofsecurities laws and company’s internal controls and policies

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SMEMarket response to resource disclosure

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SelectiveDisclosure?

ResourceAnnouncement

ExplorationCompanies

All Companies

ProducingCompanies

ASX Data 2005-2008 (630 news releases)

OSC SME Institute

Lessons from Commission Decisions

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SMECase study – Pezim, 1994

Timeline of events from 1989 - Calpine Resources Ltd.

Jul 11 New gold zone intersected at Eskay Creek

Jul 26 Realizes significance of hole 109

Jul 31 Grants stock options

Aug 16 Receives final assay results from hole 109 whichreturned 27g/t gold over 208 metres

Aug 17 Grants more stock options

Aug 22 Publically discloses results of hole 109

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SMEMateriality – Principles from Pezim

Pivotal case in Canada for materiality

Quote from Supreme Court of Canada appeal decision:

• “In the mining industry, mineral properties are constantly beingassessed to determine whether there is a change in thecharacterization of the property. Thus, from the point of view ofinvestors, new information relating to a mining property bearssignificantly on the question of that properties value.Accordingly, I agree with the approach taken by theCommission, namely that a change in assay and drilling resultscan amount to a material change depending on thecircumstances.”

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A material fact, although not a change in the business, operations, orcapital of a company, may still be considered a material change if it is

significant to investors regarding the value of the mining property

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SMECase study – Rex Diamonds, 2008

When should a mining company disclose it is havingdifficulties with the government regarding its miningleases?

Decision

OSC stated there was likely a material change when RexDiamonds received letters in January and April 2003 fromthe Sierra Leone Government warning that two miningleases may be cancelled. Rex did not disclose those letters.

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SMEMaterial change – Principles from Rex

No “bright-line test” for materiality - fact specific

Err on the side of disclosure if there is any doubtsabout materiality

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The value of mining assets is highly relevant in a material changedetermination by mining companies. A material change report should be

issued if it learns that it risks losing leases that have a high potential value

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SMECase study – Canaco Resources – 2012/13?

Timeline of events from 2010 – Canaco Resources

Nov 22-29 Receives assay results from 8 in-fill drillholes on a pre-resource estimate project

Dec 3 Grants stock options

Dec 6, 9, 22 Publically discloses results of the 8 holes instages and describes the results as “justbeautiful”, “spectacular”, “fantastic news”and “big results”

Note: allegations unproven (Notice sent April 2012)

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SMEDisclosure practices – Principles from Canaco

Consider timing of disclosing drilling results

Before a resource estimate is determined, assayresults from drilling may be material information

Avoid granting stock options when in possession ofundisclosed assays

Don’t overlook obligation to file a material changereport, if required

Note: allegations unproven (Notice sent April 2012)

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OSC SME Institute

Regulatory Landscape in Canada

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SMERegulatory players

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OSC SME Institute

NI 43-101 Basics

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SMENI 43-101 - what’s with the numbering??

National Numbering System (CSA Staff Notice 11-312)

Each rule assigned a hyphenated five-digit number

• 1st - main topic

• 2nd - sub-topic

• 3rd - document type

• 4th & 5th - document number (starting at 01)

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4 - Distribution requirements

3 - Prospectus filing matters

1 - National rule

01 - First document

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SMENI 43-101 - an industry-specific rule

Mix of legal and mining concepts that requiresan understanding of both

Does not make a rule for every possiblescenario

Just because something is not prohibiteddoesn’t mean it is appropriate, acceptable, ornot misleading

We expect companies and QPs to conducttheir affairs using industry standards and bestpractices

Look at the rule’s intent, not just the legalwording

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SME3 Parts to NI 43-101 – aka the “mining rule”

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CompanionPolicy

43-101CP

NationalInstrument

43-101

Form43-101F1Technical

Report

CIMBest Practice

Guidelines

CIM DefinitionStandards

Law Policy

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SMEWhat are the core principles of NI 43-101?

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Standards&

Best Practices

QualifiedPerson

TechnicalReport

NI 43-101Technical

Report

Objective is to ensure that disclosure is based on reliable information,reflecting professional opinions, based on industry best practices and using

standardized terms.

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SME 3 E’s of a qualified person

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Education

ExperienceEthics

QP

Geoscientist orengineer with auniversity degree ingeoscience orengineering related toexploration or mining

Professionalassociationrecognized by lawin Canada or aforeign associationand membershipdesignation listedin NI 43-101

At least five years ofexperience inexploration, mining,or projectassessment andexperience relevant tosubject matter beingreporting on

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SMEMining technical standards and guidelines

CIM Definition Standards for Mineral Resources andMineral Reserves (2010)

CIM Estimation of Mineral Resources and MineralReserves Best Practice Guidelines (2003)

CIM Best Practice Guidelines for Mineral Processing(2011)

CIM Exploration Best Practice Guidelines (2000)

CIMVAL Standards and Guidelines for Valuation ofMineral (2003)

GSC Paper 88-21: A Standardized CoalResource/Reserve Reporting System for Canada (1988)

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SMETechnical report

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Supports a miningcompany’s most important

assets---

its material mineralproperties and the

resources and reservesthey contain

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SMEWhy do we need all these rules?

Investor confidence• Critical for exploration and mining to

access large amounts of risk capital overa long period of time

Control disclosure• Need to deal with potentially misleading

information to protect investors

Perception of the mining industry• “A gold mine is a hole in the ground with

a liar at the top”

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“Rules alone cannot prevent fraud and scandal– but –

they create markets in which all those involved understand that the playingfield is level”

Former SEC Chairman

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Written Disclosure

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SMEWhat does “written disclosure” include?

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SME

QP involvement in written disclosure

S. 3.1

All “written disclosure” of scientific and technicalinformation requires a QP to:

• Prepare or approve the information

• Be named and include the relationship to the company

“The technical information in this corporate presentation hasbeen reviewed and approved by John Smith, P.Geo., VPExploration, a QP as defined by NI 43-101.”

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Exploration Information

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SMEWritten disclosure of exploration information

S. 3.3(1)

When disclosing exploration information include asummary of:

• Material results

• Interpretation of the results

• QA/QC procedures used

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SMEWritten disclosure of exploration information

S. 3.3(2)

When disclosing sample or assay results include:

• Location and type of samples

• Location, azimuth, and dip of the drill holes

• Sample depth, width (true width if known) and values

• Higher grade intervals within lower grade intersection

• Factors that could affect the reliability of results

• Name and location of the laboratory and anyrelationship to the company

• Summary of analytical procedures

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SMEWorth repeating – disclosing drilling results

Location, azimuth, and dip of drill holes

Remember to include• True widths, if known

• Any higher grade intervals within a lowergrade intersection

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Drilled ~ True Gold

Hole ID Easting Northing Elevation Azimuth Dip From (m) To (m) Width (m) Width (m) (g/t)

RS11-05 378180 9357810 495 190 -65 120.00 124.55 4.55 3.40 7.55

RS11-06 378350 9357800 510 170 -60 65.20 71.30 6.10 4.50 9.35

includes 378350 9357800 510 170 -60 68.20 69.10 0.90 0.70 18.40

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SMEData verification of written disclosure

S. 3.2

When disclosing technical information include:• Statement whether a QP has verified the data

• Description of how the data was verified

• Explanation of any limitations or failure to verify the data

“Data verification” - the process of confirming data:• has been generated with proper procedures• has been accurately transcribed from the original source• is suitable to be used

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SMEExemption - written disclosure already filed

S. 3.5 Applies to

• Data verification• Exploration information and QA/QC• Effective date of resource and reserve estimate• Key assumptions, parameters, methods for resource

and reserve estimate• Risks that may affect resource and reserve estimate

Requirement• Reference the title and date of the previously filed

document which includes the information

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OSC SME Institute

Exploration TargetsHistorical Estimates

Restricted Disclosure

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SMEExploration target

S. 2.3(2) May disclose the potential quantity and grade,

expressed as ranges, of a target for furtherexploration only if the disclosure states with equalprominence:• Potential quantity and grade is conceptual in nature• Insufficient exploration to define a mineral resource• Uncertain if a mineral resource estimate will be delineated• Basis on which exploration target has been determined

Exploration target disclosure checklist: Range of tonnes & grade Cautionary statement – next to the disclosed target ranges Reasonable basis for target ranges

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SMEExample - Exploration target

“Based on previous work, the Company has estimated anexploration target of 550,000 to 650,000 oz Au containedwithin 1.2 to 1.6 Mt grading 0.4 to 0.5 oz/t Au. The potentialtonnages and grades are conceptual in nature and are basedon previous drill results that defined the approximate length,thickness, depth and grade of the target area. There has beeninsufficient exploration to define a current resource and theCompany cautions that there is a risk further exploration willnot result in the delineation of a current resource.”

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SMEExploration target - don’t misuse the privilege!

“Barkerville Announces a NI 43-101 CompliantGeological Potential of 65 - 90 Million oz's Gold inan Area Encompassing Approximately 10% of itsCariboo Gold Project”

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SMEHistorical estimate

S. 2.4Unverified estimate prepared prior to the companyacquiring an interest in the property

May disclose an historical estimate, using the originalterminology, if the disclosure states:• Source and date, including any existing technical report

• Relevance and reliability of the estimate

• Key assumptions, parameters, and methods – if known

• Differences between estimate and CIM definitions

• Work needed to upgrade or verify the estimate as current

• State with equal prominence the following:

• QP has not done sufficient work to classify the historicalestimate as current

• Company is not treating the historical estimate as current

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Simply saying the estimate is “not NI 43-101 compliant” is not acceptable

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SMEWatch how you disclose the historical

estimate – could trigger a technical report

You may trigger a technical report if you disclosethe historical estimate like a current estimate

We will consider you are treating the historicalestimate as a current estimate if the disclosure:• Uses the historical estimate in an economic analysis or

as the basis for a production decision

• States it will be adding on or building on the historicalestimate

• Adds the historical estimate to current resource orreserve estimates

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SMEExample – Disclosure of historical estimate

not triggering a technical report

“The historical resource estimate of 10Mt at 6.8g/t Au isbased on data and reports prepared by ABC Mining in 1983.

The Company has not completed the work necessary to havethe historical estimate verified by a QP.

The Company is not treating the estimate as a current NI 43-101 defined resource and the historical estimate should notbe relied upon.

The property will require considerable future explorationwhich the Company and its consultants intend to carry out inthe next year.”

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SMERestricted disclosure

S. 2.3(1)Clarifies what is considered to be misleading disclosure

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NO ECONOMICS ON EXPLORATION TARGETS

OR HISTORICAL ESTIMATES

NO GROSS METAL VALUES OR IN-SITU

VALUES

NO METAL EQUIVALENTS WITHOUT

INDIVIDUAL GRADES

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SME Example – Current value of historicalproduction?!

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SMEExample – In-situ value - a misleading number!

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$7Billion vs.$1Billion

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SMEExample – Drill hole metal equivalent

S. 2.3(1)(d)

Must not disclose a metal equivalent grade unless youalso disclose the grade of each metal used to establishthe equivalent grade

Drill hole D-002 returned the following results:Primary Sulphide Zone (91.5m to 386.6 m) 295.1m interval0.78 % Cu0.10 g/t Au2.82 g/t Agor0.83 % Cu equivalent* over 295.1m

* Cu equivalent calculated using US$3/lb Cu, US$25/oz Ag, US$1200/oz Au

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SMEExample – Mineral resource metal equivalent

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Big Ben Inferred Mineral Resource – February 28, 2012

Cut-off

(% Cu)

Tonnes

(million)Cu (%) Mo (%)

lb Cu

(billion)

lb Mo

(billion)

CuEq*

(%)

0.2 1,115 0.33 0.007 8.04 0.16 0.35

0.25 904 0.35 0.007 6.98 0.13 0.38

0.3 640 0.38 0.007 5.38 0.10 0.41

0.35 391 0.42 0.007 3.60 0.06 0.45

0.4 201 0.46 0.008 2.04 0.03 0.49

Copper equivalent ("CuEq") calculated using assumed metal prices of:- copper US$2.50/lb- molybdenum US$15.00/lb

Assumed metallurgical recoveries for copper and molybdenum of 70%

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Mineral Resources&

Mineral Reserves

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SMERelationship between exploration results,mineral resources and mineral reserves

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SMECIM Best Practice Guidelines

Exploration Best Practice Guidelines (2000)

Guidelines for Reporting Diamond Exploration Results (2003)

Best Practice for Mineral Processing (2011)

Estimation of Mineral Resources and Mineral Reserves (2003)

• Variety of commodities including:• Potash• Industrial minerals• Coal• Uranium• Laterites• Placers• Rock-hosted diamonds• Mineral brines???

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SMEReasonable prospects for economic extraction

Assessing “reasonable prospects”

• Responsibility of the QP

• Requires judgment based on the QP’s relevantexperience with the technical and economic aspectsof the deposit

• Must explicitly state the methods used andassumptions made to determine if the project has“reasonable prospects”

• Such as mining cost, processing cost, G&A cost,metallurgical recovery, metal prices, etc.

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Mineral resource = “reasonable prospect foreconomic extraction”

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SME“Must nots” regarding disclosure of estimates

S. 2.2

Must not disclose any information about a mineralresource or mineral reserve unless the disclosure

• Uses only the five CIM categories (inferred, indicated, etc.)

• Reports each category separately

• Does not add inferred resources to other categories

• If the quantity of contained metal is disclosed, state thetonnes and grade for each category

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SMEWritten disclosure of resources and reserves

S. 3.4

When disclosing mineral resources or mineralreserves include:• Effective date of each estimate

• Quantity and grade of each category

• Key assumptions, parameters, and methods used

• Any known risks that could materially affect potentialdevelopment

• Statement that “mineral resources that are not mineralreserves and do not have demonstrated economicviability” if results of an economic analysis of resourcesis disclosed (such as in a PEA)

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SMEExample - Resource estimate

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MINERAL RESOURCES - GOLDFIELD PROJECT, JUNE 1, 2011

6. There are no known risks that could materially affect potential development.

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SMEKey assumptions, parameters & methods

Key assumptions• Cut-off grade and basis; cutting factors; specific gravity

• Conceptual mining method

• Conceptual metallurgical recoveries

• Costs and metal prices

Parameters• Search distances and minimum samples per block

• Interpolation distances and directions

• Economic parameters

Methods• Polygonal, cross-sectional, block-model

• Geostatistical methods

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These should be in any news release, technical report, AIF, website, etc.

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SMEDisclosure of estimates - a helpful hint

Prepare disclosure required for properly reporting resourceand reserve estimates

Make a summary table of estimates that can accompanyyour corporate presentations, your annual report, evenyour MD&A

Make sure to include information about assumptions andparameters, usually as footnotes

Post the table on your website and link to it through allyour project pages

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Economic Studies

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SMEMining Studies

S. 1.4

New term – relates to PFS and FS

CIM Definition Standards now the source for thedefinitions of a pre-feasibility study andfeasibility study

Allows for future changes to harmonize withinternational definitions through the assistanceof CRIRSCO

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PEA is defined only in NI 43-101, not CIM – allows regulators to restrictthe use of inferred resources in economic analyses

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SMEGeneral types of economic studies

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CRITERIA TECHNICAL & ECONOMIC STUDIES

STUDYPreliminaryEconomicAssessment (PEA)

Prefeasibility Study(PFS)

Feasibility Study(FS)

OBJECTIVE

Early stage conceptualassessment of thepotential economicviability of mineralresources

Realistic economic andengineering studiessufficient todemonstrate economicviability & establishmineral reserves

Detailed study of howthe mine will be built,used as the basis for aproduction decision

ACCURACY +/- 50 % +/- 25 % +/- 10 %

MINERALESTIMATEINPUTS

Inferred/Indicated/Measured Resources

Indicated & Measured Resources

MINERALESTIMATEOUTPUTS

Inferred/Indicated/Measured Resources

Proven and Probable Reserves

Caution: Generalized for presentation purposes

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SMEPreliminary economic assessment - PEA

Defined as an economic analysis other than aprefeasibility (PFS) or feasibility study (FS)

• Conceptual economic analysis of the potential viability ofmineral resources

• Commonly referred to as a scoping study

• Might be based on measured, indicated, or inferredmineral resources, or a combination of any of these

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PEA does not demonstrate economic viability, only a PFS or FS can dothat through qualifying a mineral reserve

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SMECSA Staff Notice 43-307 – August 16, 2012

Provides PEA guidance in seven areas:• Misuse of a PEA as a proxy for a PFS

• PEAs done in conjunction with a PFS or a FS

• PEA disclosure and technical report triggers

• Potentially misleading PEA results

• PEA disclosure that includes by-products

• Relevant experience of QPs

• Consequences of disclosure deficiencies or errors

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SMEPEA – don’t misuse the concept!

Allows companies to take a step backwards orconsider a significant re-scoping of the projectbased on a fundamental change in mineralization,mining, processing, etc.

PEA It is NOT

• A study done as part of, or a modification to, a PFS or FS

• A way to include inferred resources into a PFS or FS

• A study which blurs the important distinction between aPEA and PFS (potential viability vs. demonstrated viability)

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SMEDisclosing results of an economic analysis has

consequences

“We will likely produce 100,000 oz silver/month in 2012”

“Expect to generate $10 - $12 million in gross revenue”

“Capital costs will be in the range of $100 – $150 million”

“$12 cost per ounce of silver production”

“IRR between 35% - 40%”

“Mine life will be 6 – 7 years”

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Examples of possible triggers for a technical report which supports thedisclosed economic outcomes

OSC SME Institute

News Release ExerciseTake a Chance Mining Ltd.

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SMENews release guidelines

State specific facts• Provide specific and accurate facts and avoid subjective

terms and promotional language

Provide adequate context• State all material information about the facts being

disclosed to make the information not misleading

Make balanced disclosure• Report positive and negative results

Timing of disclosure• As soon as practical or possible

QP involvement• Required to approve all technical disclosure

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SME Take a Chance Mining Ltd.

Take 5-10 minutes toreview the news releaseand identify any specificdisclosure concerns

Hint – there are > 20possible concerns

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Technical Report Basics

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SME Five Ws (and one H) of technical reports

Prepared by QPs, often independent of thecompany and property

Current summary of material technicalinformation on material property

Triggered by milestone events and filed within aspecific timeframe

Filed publically on SEDAR

Supports company’s technical disclosure andassists investors

Must follow prescribed Form 43-101F1 andrequirements of NI 43-101

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SMETechnical report

S. 6.1

“A technical report must be based on all availabledata relevant to the disclosure that it supports”

Sounds straightforward, but it can be a significantissue when preparing a technical report

• No limiting the scope of the technical report

• No splitting of a property into separate projects withtheir own technical report

• No separate mineral resource technical report and PEAtechnical report on the same property

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Newly filed technical report replaces the old one, it doesn’t supplement it

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SME Project ≠ Property

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Block A

Block B North

Block B South

2 km

Zone 1

Zone 2

Zone 3

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SMEIndependent technical reports

S. 5.3

Cases where ALL QPs must be independent

First-time reporting issuer in Canada

Preliminary long form prospectus

1st time disclosure of a mineral resource, mineralreserve, or preliminary economic assessment

>100% change to an existing mineral resource ormineral reserve

Exemption from independence for “producing issuers”

• Gross revenue > $30 million in recent fiscal year; and• Gross revenue > $90 million in last three fiscal years

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SME “Milestones” trigger technical reports

Property Milestones

1st time disclosure of:Mineral resourcesMineral reserves Preliminary economic

assessment (PEA)

Material change of the above

SuccessDriven

Company Milestones

1st time reporting in Canada

Filing of: Preliminary (long form) prospectus Preliminary short form prospectus Information or proxy circularOffering memorandum Rights offering circular Annual information form Valuation TSX Venture offering document Take-over bid circular

EventsDriven

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SMEShort form prospectus trigger

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S. 4.2(b)

Narrower and clearer trigger – reduces uncertaintyfor companies doing a short form prospectus offering

New technical report required to support a material changein relation to the company that is not in an existing technicalreport concerning

• 1st time disclosure of a mineral resource, mineral reserve or a PEA

• Change in mineral resource, mineral reserve or a PEA

Regulatory may still challenge the existing technical report

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SMEAnnual Information Form tigger

S. 4.2(f)

11 years of grandfathering considered enough

Removed “grandfathering” exemption• Company’s disclosure should not still be relying on a

pre-2001 AIF, prospectus or material change report

Impacts larger companies that have never filed atechnical report on their material properties• Technical report required to be filed at the same time

as the AIF

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SMEAny “written disclosure” trigger

S. 4.2(j)Closed a loop-hole in the “news release” trigger

Any 1st time written disclosure that is a materialchange in relation to the company regarding:• Mineral resource, mineral reserve or a PEA

• Change in mineral resource, mineral reserve or a PEA

Must issue a news release when technical reportis filed• Alerts investors that a technical report has been filed

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Remember: written disclosure includes websites, corporate presentations,investor relations material, social media, etc.

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SMENew property acquisitions

S. 4.2(7)

Very limited scope for this 180-day filing delay

To use this provision the acquiring company must:

• Identify title and date of previous technical report andthe name of the other company that filed it

• Name the acquiring company’s QP who reviewed theprevious technical report

• State there is no new material technical informationthat would make the disclosure inaccurate ormisleading

• File the new technical report within 180 days

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SMERoyalty holder exemption

S. 9.2(1)

Fewer technical reports filed by royalty holders

Not required to file a technical report if:

• Company only has a royalty or similar interest

• Owner/operator is reporting in Canada or a “producingissuer” on a “specified exchange” reporting under an“acceptable foreign code”

• Owner/operator has disclosed the material information

• Company discloses source of the material information

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SMECurrent technical report + a new trigger …

Now what?

S. 4.2(8)

No need to refresh QP consents and certificates

Issue: New trigger, but existing report is still current

Reality: Only need to file QP consents and certificatesonce, when the report is filed on SEDAR

Outcome: No need to refresh QP consents and certificatesif the report is still current

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Note: the prospectus “consent of expert” is a different form of consent filedwith the final prospectus under NI 41-101

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SMEQP certificate – hot button areas

S. 8.1

Summary of the QP’s “relevant experience”• Provide some context of your previous relevant

experience in the commodity, type of deposit, andsituation under consideration

• The regulator may challenge the QP to explain orjustify their relevant experience

Make sure your QP still meets the QP definition• Foreign professional association and designation has

changed – see Appendix A

• CSA Staff Notice 43-308 has added CPEng fromEngineers Australia

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SMEQP consent – template in Appendix B

[QP’s Letterhead]

CONSENT of QUALIFIED PERSON

I, [name of QP], consent to the public filing of the technical report titled [inserttitle of report] and dated [insert date of report] (the “Technical Report”) by [insertname of issuer filing the report].

I also consent to any extracts from or a summary of the Technical Report in the[insert date and type of disclosure document (i.e. news release, prospectus, AIF,etc.)] of [insert name of issuer making disclosure].

I certify that I have read [date and type of document (i.e. news release,prospectus, AIF, etc.) that the report supports] being filed by [insert name ofissuer] and that it fairly and accurately represents the information in the sectionsof the technical report for which I am responsible.

Dated this [insert date].

________________________ [Seal or Stamp][Signature of QP]________________________[Print name of QP]

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Common Problems withTechnical Reports

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SMECommon technical report deficiencies

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Technical report - practical tips

QP selection is important

Know the intended purpose of the technical report

Use a checklist based on the requirements

Setup a basic template for the technical report

Write a concise summary – key section of the report

Previous technical reports may be helpful (verify!)

See examples on SEDAR (not necessarily compliant!)

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How to Avoid a Call From the Regulator

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SMETechnical reviews by the regulator

Continuous disclosure (CD) reviews

Typical documents examined

• Website (all of it)

• News releases (past year)

• MD&A (past year)

• AIF (if filed)

• Technical reports (most recent ones)

• Social media sites (linked to the company)

• Bullboards and chat rooms (investor reaction)

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SMETechnical reviews by the regulator

Prospectus reviews

Typical documents examined

• Prospectus• Technical information

• Use of proceeds

• Documents incorporated by reference into theprospectus

• AIF, news releases, MD&A, etc.

• Technical reports (most recent ones)

• Website (all of it)

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SMEDisclosure red flags

No QP named (3.1)

• Required for all written disclosure

Overly promotional language (NP 51-201)

• ex. World class, spectacular, bonanza, super deposit

Location, azimuth, dip of drill holes (3.3(2)(b))

• Provides context for drilling information

Lack of information about true widths (3.3(2)(c))

• Provide approximate true widths, or state unknown

Wide zones without reporting high-grade intervals (3.3(2)(d))

• ex. 1.0 g/t Au over 100 m – is this really representative of the zone?

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SMEDisclosure red flags

Non-compliant resource/reserve modifiers (2.2a)

• ex. Mineable, geologic, global, drill indicated, possible

Adding inferred resources to other categories (2.2c)

• Never!

Reporting estimates as contained metal only (2.2d)

• Ex. 1.2 Moz Au, 750 Mlbs Cu, 28 Mlbs U3O8

• Provide category, tonnage, and grade with numbers rounded-off

Lack of assumption, parameters, and methods (3.4c)

• Date of estimate, cut-off grade, metal price, recovery, etc.

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SMEDisclosure red flags

Lack of required cautionary language (2.3(2), 2.3(3), 2.4)

• Exploration targets, inferred resources used in a PEA, and historicalestimates

Combined grades (2.3(1)(d))

• ex. 5.0 g/t TPM, 2.0% TREO

• Show grade of each element that makes up the combined grade

Metal equivalent grades (2.3(1)(d))

• 2.2% Cueq, 10.0 g/t Aueq

• Provide information on how these were calculated, and showgrades element by element

• Report equivalent using the most valuable metal (generally)

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SMEDisclosure red flags

Reporting gross metal value or in-situ value (2.3c)

• Very misleading and meaningless value

• Ignores development, mining, and processing costs

Use of the term “ore” (2.3(2) in CP)

• Implies technical feasibility and economic viability

• Use only in the context or mineral reserves

Report resources used in a PEA as “minable resources” (1.2)

• Mineable implies mineral reserves, which they are not

• Instead, use the concept of “mineral resources within conceptualmine plan” or “mineral resources within PEA design plan”

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SMEDisclosure red flags

Disclosing economic outcomes without a supportingtechnical report (4.2(1)(j))

• Outcomes include cash costs, production rates, mine life, NPV, IRR

• Disclosure of an economic analysis may trigger a technical report

• Remember - your website is part of your disclosure record

Don’t misuse the PEA-level study (CSA Staff Notice 43-307)

• Don’t call the study a PFS or FS if it’s not

• Don’t veil a PFS as a PEA to include inferred resources

• Don’t blur the fundamental boundary between a PEA and PFS

• If the company can qualify reserves or make a production decisionbased on the study, it may be misleading to call it a PEA

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SMEUseful reference documents

NI 43-101 Standards of Disclosure for Mineral Projects

NI 51-102 Continuous Disclosure Obligations

NP 51-201 Disclosure Standards

TSX and TSXV Exchange (www.tsx.com)• Appendix B - Disclosure Standards• Policy 3.3 - Timely Disclosure

• Appendix 3E - News Release Guidelines• Appendix 3F - Mining Standards Guidelines

CIM Best Practices (www.cim.org)• Mineral Resource and Reserve Estimation• Mineral Processing• Reporting of Diamond Exploration Results

• CIMVal Valuation Standard

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Dealing with Securities Regulators

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SMESo what if I don’t comply?

NI 43-101 is enforceable under the Securities Act

Some of the possible outcomes:• News release clarifying and/or retracting the disclosure

• Company placed on Refilings and Errors list

• Company placed on Default list (can’t raise new money)

• Cease Trade Order (trading stops)

• Enforcement order under the Act

• Class action lawsuit under civil liability provisions of the Act

• Professional liability and disciplinary action (QPs)

• Securities Act charges (5 years/ $5 million fine)

• Criminal Code charges (up to 14 years)

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SMEBest defense is not always a strong offence

Address the issue that concerns the regulator

• Remove the disclosure from the company website

• Add clarification statements

• Include cautionary language

• Publically clarify and correcting the disclosure

Cooperation is not necessarily capitulation

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SMEWe disclosed it - but don’t hold us to it

Presenting information - but then denying anyresponsibility for it

• Responsibility for public disclosure remains with thecompany, directors and officers

• QP required to prepare or approve technicalinformation for public disclosure

• QP must ensure information relied upon is sound

• Proper use of information provided by QP is theresponsibility of the company and its directors andofficers

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SMENI 43-101 only applies to SEDAR filings - right ???

NI 43-101 applies to all written disclosure, not just formalfilings or a technical report

Things like these must comply:• Information on your website such as a corporate presentation,

investor fact sheet, project information page, etc.

• Posts or links of media coverage, analysts' reports, etc. on yourwebsite (or distribute at investor forums)

• External presentations you make to investors

Remember, technical reports are triggered by “writtendisclosure”

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If you disclose it – physically or electronically – you must ensure itcomplies with NI 43-101

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SMEAren't all technical reports on SEDAR compliant

Misconception• All technical reports filed on SEDAR has been reviewed and

approved by a securities regulator

Facts• Company is responsible for filing a compliant technical report

• Company is responsible for hiring QP to prepare thetechnical report

• QP is responsible for preparing a technical report incompliance with NI 43-101 and certifying that it is compliant

• Securities regulators do not pre-approve or certify technicalreports as being compliant

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Reality: 90% of technical reports on file have not had any form ofcompliance review by securities regulators

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SMEDon’t defend non-compliant technical reports

Technical reports must be current and complete

• Any time a company is required to file a technicalreport, it must be complete and current

• There should only be one current technical report on aproperty at any point in time

Required form of technical report

• Filed technical reports filed may be subject to review bythe regulator

• A company that files a technical report that does notmeet the requirements has not complied withsecurities legislation

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SMECosts and NPV don’t only belong to

accountants

Don’t take the position that capital and operatingcosts and economic analysis is not scientific ortechnical information covered by the rules• QP must approve all disclosure of scientific or technical

information

• Technical reports must include all scientific or technicalinformation about the property

• Technical reports for advanced properties must includeitems related to capital and operating costs andeconomic analysis

• QP(s) must be signed-off on all items in technical report

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SMEJust because someone else is doing it doesn’t

make it okay

Why are you picking on us?

• Companies and their management are expected tomeet all their filing obligations

• We expect them to comply with all of disclosure rules

• When a securities regulator is looking at you, they arelooking at your disclosure, not someone else's

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SME

Thank You!

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Graphic after IKEA

Craig Waldie 416-593-8308Senior Geologist cwaldie@osc.gov.on.ca

Jim Whyte 416-593-2168Senior Geologist jwhyte@osc.gov.on.ca

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