Source: https://www.osc.gov.on.ca/en/SecuritiesLaw_rule_19980703_43-101.jsp
Timestamp: 2019-03-22 07:18:15
Document Index: 513405211

Matched Legal Cases: ['art 1', 'art 2', 'art 2', 'art 3', 'art 5', 'art 4', 'art 5', 'art 6', 'art 7', 'art 8', 'art 9', 'art 1', 'art 2', 'art 3', 'art 4', 'art 5', 'art 6', 'art 7', 'art 2', 'ART 3', 'ART 4', 'ART 5', 'ART 6', 'ART 7', 'ART 8', 'ART 1', 'ART 3', 'ART 7', 'arts 5', 'ART 3', 'ART 4', 'ART 5', 'ART 6', 'ART 7', 'ART 8', 'art 3', 'art 4', 'art 2']

Notice of Proposed National Instrument and Companion Policy: NI - 43-101 - Standards of Disclosure for Mineral Projects -
Notice of Proposed National Instrument and Companion Policy: NI - 43-101 - Standards of Disclosure for Mineral Projects
NOTICE OF PROPOSED NATIONAL INSTRUMENT 43-101
STANDARDS OF DISCLOSURE FOR MINERAL EXPLORATION AND DEVELOPMENT
AND MINING PROPERTIES AND RESCISSION OF NATIONAL POLICYSTATEMENT NO. 2-A
This Notice is accompanied by a proposed National Instrument and a Companion Policy, each of which is being published forreview and comment.
The proposed National Instrument originated with reformulation of National Policy Statement No. 2-A "Guide For Engineers, Geologists and ProspectorsSubmitting Reports on Mining Properties to Canadian Provincial Securities Administrators" ("NP2-A") and National Policy Statement No. 22 "Use ofInformation and Opinion Re Mining and Oil Properties by Registrants and Others" ("NP22"). The proposed National Instrument is expected to be adopted as arule in each of British Columbia, Alberta, Manitoba, Nova Scotia and Ontario, as a Commission regulation in Saskatchewan and as a policy in all otherjurisdictions represented by the Canadian Securities Administrators (the "CSA"). NP2-A sets out requirements for the preparation of reports that must be filedunder securities legislation. Securities legislation in most jurisdictions represented by the CSA requires issuers with mineral exploration, development orproduction activities to file reports prepared in accordance with NP2-A in connection with certain prospectus offerings. NP22 addresses the use of informationand opinions regarding natural resource properties by registrants and issuers and sets standards for references to technical data in reports, letters or otherpublications used directly or indirectly to sell securities.
The proposed National Instrument consolidates and expands significantly on the current disclosure and reporting requirements. The objective of the CSA is toensure that the public receives reliable information, reflecting professional opinions, presented using standard terms. More specifically, the purpose of theproposed National Instrument is to enhance the accuracy and integrity of public disclosure in the mining sector. The proposed National Instrument establishesstandards for all oral and written disclosure concerning mineral exploration and development and mining properties made by or on behalf of an issuer andreasonably likely to be made available to the public. All disclosure, including disclosure in press releases, prospectuses and annual reports, concerning mineralexploration, development and production activities is to be based on information prepared by a qualified person.In certain circumstances, the disclosure must besupported by a written report prepared in accordance with the proposed National Instrument and filed with the securities regulatory authorities. In specifiedcircumstances the filed report must be prepared by a qualified person independent of the issuer. The proposed National Instrument is consistent with therecommendations of the June 8, 1998 Interim Report of the TSE/OSC Mining Standards Task Force. The CSA are of the view that the proposed NationalInstrument will enhance both investor protection and fair and efficient capital markets.
The purpose of the proposed Companion Policy is to set forth the views of the CSA as to the manner in which the proposed National Instrument is to beinterpreted and applied and discuss such matters as materiality.
The proposed National Instrument is divided into nine parts.
Part 1 of the proposed National Instrument contains an application section which briefly describes the proposed National Instrument and a definition section. Thedefinitions of "resource" and "reserve" and subcategories of each, replacing the definitions in NP2-A, are derived from the September 1996 Ad Hoc CommitteeReport (the "CIM Report") of the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM"). CIM has developed a standardized set of definitions ofresources and reserves and guidelines which would be acceptable to Canadian mining engineers and geoscientists preparing reports on mining properties andreflects similar guidelines and standards in place elsewhere in the world. The CSA propose these definitions after reviewing the comparable terms contained inthe Australasian Code for Reporting of Identified Mineral Resources and Ore Reserves released in July 1996 by a Joint Committee of the Australasian Institute ofMining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia. Other definitions are based on existing requirements of securitieslegislation in one or more of the jurisdictions and on recommendations of the CIM.
An interpretation section has been included to assist in interpreting the terms "affiliated entity" and "independent" which are used in the proposed NationalInstrument. The interpretation of "affiliated entity" is based on subsections 1(2), (3) and (4) of the Securities Act (Ontario) but is broader as it extends tounincorporated entities. Subsection 1.3(4) of the proposed National Instrument provides criteria for assessing independence. The provisions concerningindependence differ from those included in NP2-A to more closely parallel other Canadian securities legislation.
One of the most significant proposed new requirements is included in Part 2 of the proposed National Instrument, which provides that all disclosure concerningexploration, development and mining operations shall be based upon information prepared by a qualified person. A qualified person is an engineer, geologist,geophysicist or other geoscientist (or a firm or company employing such engineers or geoscientists) who has at least five years of appropriate experience inmineral exploration, mine development, operations or assessment and who is a member in good standing of a professional association. The CSA believe thatrequiring all disclosure to be based on information prepared by a qualified person will enhance the quality and reliability of the disclosure and the confidence thatinvestors place in the disclosure. This new requirement expands upon the existing requirements of NP22 with the result that all oral, electronic or writtendisclosure made by or on behalf of an issuer and intended to be or reasonably likely to be made available to the public must be based on information prepared bya qualified person. This part also contains some specific requirements with respect to written disclosure concerning exploration information and reserves andresources and requires that only the applicable resource and reserve categories set out in the proposed National Instrument be used. All written disclosure mustinclude the name of the qualified person who prepared or supervised the preparation of the information and must state whether the data base used in any analysishas been independently verified.
While NP22 included a requirement that all technical facts and opinion be quoted from verbatim in any disclosure, this requirement has been replaced with thestatement in the Companion Policy suggesting that technical facts and opinion be restated using plain language in an easy to read format.
The specific requirements in Part 2 concerning written disclosure of exploration information and resources and reserves are based on the Vancouver StockExchange mining standards guidelines which came into effect in November 1997.
Part 3 of the proposed National Instrument requires that a report, prepared in accordance with the provisions of Part 5, 6 and 7 of the proposed NationalInstrument be filed with the Canadian securities regulatory authorities in certain circumstances or in connection with certain disclosure. Section 3.1 requires thatan issuer file a report prepared in accordance with the provisions of the proposed National Instrument upon the issuer becoming a reporting issuer. The reportmust cover each material property of the issuer.
Section 3.2 of the proposed National Instrument requires that a report prepared in accordance with the proposed National Instrument be filed with the Canadiansecurities regulatory authorities to support statements made or included in prospectuses, information circulars concerning material mining property acquisitions,take-over bid circulars, offering memorandum, rights offering circulars, annual reports or annual information forms that include new information or a valuationprepared under securities legislation. In addition, a report must be filed to support any statements in a document that discloses estimates of resources or reservesthat have not been supported by a report that has already been filed or that discloses a material change in estimates. In general, this report must be filed at thetime of filing the document that it supports; however, the CSA recognize that in connection with certain press releases, this may not be feasible and accordingly,the issuer is permitted to file the report within 30 days.
Part 4 of the proposed National Instrument sets out certain requirements as to the author of the report. Section 4.1 requires that a report must be prepared by orunder the direction of one or more qualified persons who must date, sign and seal the report. Section 4.3 of the proposed National Instrument requires that thereport be prepared by a qualified person who is independent of the issuer where the report is filed on the issuer becoming a reporting issuer, in connection with aprospectus other than a prospectus filed under the POP system, certain information or take-over bid circulars or a valuation and in connection with certain pressreleases. The National Instrument offers relief from the requirement for an independent qualified person in certain circumstances including for an issuer eligible touse the POP system and for a "senior resource issuer". A senior resource issuer is defined as an issuer with gross revenues from mining operations of an averageof at least $50 million per year in each of the three most recently completed fiscal years.
The Commission des valeurs mobilières du Québec proposes to require that an independent report be filed with an offering memorandum for a resource issuer.
Part 5 of the proposed National Instrument describes the nature of the report and requires that reports required under the National Instrument must beengineering or scientific documents. This provision is essentially the same as the provision in the first paragraph of NP2-A.
Part 6 of the proposed National Instrument sets out the requirements for the preparation of the report and stipulates that the qualified person preparing the reportmust inspect the property being reported on and that all sources of information must be cited.
Part 7 of the proposed National Instrument contains the requirements for the report. These provisions have been revised from the current requirements of NP2-Ato provide more detail as to what is expected to be discussed under each heading. The detail corresponds to the requirements for prospectus disclosureconcerning resource properties. Subsection 7.1(2) states that certain information can be omitted from a report to the extent that it has been included in a reportalready on the public file.
Part 8 of the proposed National Instrument requires that all reports must have a certificate of the qualified person attached and sets out the requirements for theform of certificate. The proposed National Instrument does not include a consent to use of name in the prospectus section similar to the one included in NP2-Aas this matter has been covered by the local prospectus requirements.
Part 9 of the proposed National Instrument contains the exemption clause.
The CSA anticipate that the proposed National Instrument will come into effect in 1999. The CSA are considering whether transitional measures forimplementation of the National Instrument would be appropriate but, with the exception discussed below, no specific transitional measures are proposed at thistime.
The coming into force of the proposed National Instrument would not itself necessarily trigger an immediate obligation to file a report prepared in accordancewith the proposed National Instrument. For most issuers affected by the proposed National Instrument, the requirements concerning formal engineering reportswould first apply in connection with an annual report, annual information form or preliminary prospectus filed after the National Instrument comes into effect. Insome cases these requirements would apply earlier, for example, in connection with disclosure, after the coming into force of the National Instrument, of new ormaterially changed resources or reserves. Issuers are urged to begin taking into account the proposed requirements, particularly in connection with thepreparation of engineering reports on which issuers may seek to rely after implementation of the National Instrument. Subject to any further notice to thecontrary, an engineering report prepared after the date of publication of this Notice in accordance with the proposed National Instrument (including use ofterminology set out in the proposed National Instrument) will be considered to comply with NP 2A.
The proposed Companion Policy has been derived principally from NP2-A, NP22, the CIM Report and the March 1998 report concerning mining industrystandards provided by MICON International Limited to the TSE/OSC Mining Standards Task Force (the "MICON Report").
Part 1 of the Companion Policy includes some guidance as the interpretation of certain terms defined in the Instrument. Most of this guidance is based on theCIM Report. The Companion Policy also provides guidance as to the CSA's view as to qualification as a "professional association", notably that an associationwithout industry recognition and created primarily to enable members to serve as "qualified persons" would not satisfy objectives of the definition.
Part 2 of the Companion Policy suggests that written disclosure be presented in an easy to read format using clear and unambiguous language. As noted above,the disclosure requirements arise with respect to disclosure concerning material properties of an issuer. Section 2.2 of the Companion Policy makes it clear thatmateriality is to be determined in the context of the issuer's overall business and financial condition and will be a matter of judgment in the particularcircumstances. The CSA indicates in section 2.2 of the Companion Policy that a property will generally not be considered to be material to an issuer if the bookvalue of the property as reflected on the issuer's most recently filed financial statements or the value of the consideration paid is less than 10% of the book valueof the total issuer's mineral properties.
Part 3 of the Companion Policy includes some additional guidelines and key technical factors to be considered when making tonnage and grade estimates. Theseare based on the CIM Report and the MICON Report. In section 3.4 the CSA recognizes that certain issuers currently estimate and report resources and reservesin accordance with foreign standards that may be different from those required under the proposed National Instrument and suggests that they will considerapplications for exemptions where the applicant can demonstrate that the categories used are substantially the same as those set out in the proposed NationalInstrument and a reconciliation is provided.
Part 4 of the Companion Policy advises that the Canadian securities regulatory authorities may ask the issuer or qualified person to provide them with copies ofassay certificates.
Part 5 of the Companion Policy discusses the author of the report and the selection of the qualified person, and reminds issuers that it is their responsibility toensure that the person preparing or supervising the preparation of the report has the requisite experience and competence. The CSA recognize that certainindividuals who currently provide technical expertise to mining issuers will not meet the definition of qualified person in the proposed National Instrumentbecause they lack the professional accreditation as a result of a lack of provincial registration requirements or for other reasons. The CSA advise in section 5.2 ofthe Companion Policy that they will accept applications for exemptions from this requirement where the applicant can demonstrate that the individual iscompetent and qualified to prepare the report or support the disclosure despite the fact that he or she is not a member of a professional association.
Part 6 of the Companion Policy discusses the use of information concerning mineral exploration activities and results by analysts and others and encourages thosepersons wanting to make use of the information to review the reports that will be on the public file and to base any disclosure that they make on these reportsusing exact quotes to the extent possible.
Part 7 of the Companion Policy discusses the provisions concerning the basis for the report and acknowledges that in certain circumstances it may not be possiblefor the qualified person to base a report on a personal inspection because of weather problems, topographical issues or political insurrection. In these situationsissuers may make application for an exemption.
In those jurisdictions in which the National Instrument is to be adopted or made as a rule or regulation, the securities legislation in each of those jurisdictionsprovides the securities regulatory authority with rule making or regulation making authority in respect of the subject matter of the proposed National Instrument.
In Ontario, the following sections of the Securities Act (Ontario) (the "Ontario Act") provide the Ontario Securities Commission (the "Ontario Commission")with authority to make the proposed National Instrument. Paragraph 143(1)13 authorizes the Ontario Commission to make rules, regulating trading or advisingin securities to prevent trading or advising that is fraudulent, manipulative, deceptive or unfairly detrimental to investors. Paragraph 143(1)18 authorizes theOntario Commission to make rules designating activities, including the use of documents or advertising, in which registrants or issuers are permitted to engage orare prohibited from engaging in connection with distributions. Paragraph 143(1)22 authorizes the Ontario Commission to make rules prescribing requirements inrespect of the preparation and dissemination and other use by reporting issuers of documents providing for continuous disclosure that are in addition to therequirements under the Ontario Act including requirements in respect of, (i) an annual report, (ii) an annual information form, and (iii) supplemental analysis offinancial statements. Paragraph 143(1)24 authorizes the Ontario Commission to make rules requiring issuers and other persons or companies to comply, in wholeor in part, with Part XVIII (continuous disclosure) or rules made under paragraph 22. Paragraph 143(1)39 authorizes the Ontario Commission to make rulesrequiring or respecting the media, format, preparation, form, content, execution, certification, dissemination and other use, filing and review of all documentsrequired under or governed by the Ontario Act, the regulations or the rules and all documents determined by the regulations or the rules to be ancillary to thedocuments.
The Canadian securities regulatory authorities realized that substantial updates had to be made to the existing requirements for disclosure of mining projects. Inaddition, the categories of resources and reserves currently set out in NP2-A and securities legislation were not in step with international requirements andneeded to be revised. No other alternatives were considered.
In proposing the National Instrument and Companion Policy, the CSA have not relied on any significant unpublished study, report or other material. The CSAmaintained contact with the Mining Standards Task Force in the preparation of these instruments.
The proposed National Instrument would require that public disclosure of mineral exploration or mining data be supported by conclusions and in certaincircumstances technical reports of qualified persons. The CSA are aware that these requirements will impose burdens of time, cost and personnel. Theseincremental costs are likely to be most significant for issuers that do not currently employ professional engineers or geologists. Issuers will also incur incrementalcosts in complying with expanded requirements for independent engineering reports.
The CSA believe that incremental costs of compliance with the proposed National Instrument will be outweighed by the very significant benefits provided toinvestors, namely more reliable and, with the use of standard terminology, more understandable and comparable public information. A further benefit should begreater confidence in the integrity of Canadian capital markets, itself of significant benefit to issuers.
The Commission proposes to revoke sections 36 and 37 of the Regulation.
In addition to welcoming submissions on any provision in the proposed National Instrument and Companion Policy, the CSA seek comment on the specificmatters referred to below.
Impact of Requirement for Qualified Person
Part 2 of the proposed National Instrument provides that all disclosure concerning exploration, development and mining operations must reflect the views of aqualified person. The CSA believe that this new requirement will enhance the quality and reliability of the disclosure. This should improve public confidence inthe disclosure. The CSA recognize however that this new requirement may place a burden on certain issuers and for that reason specifically seek comment onwhether: the requirement would impose excessive costs on junior resource issuers and, if so, the anticipated extent of those costs;
the requirement would negatively affect timely disclosure by issuers of all material changes; and
if excessive costs or delay in disclosure compliance are considered likely, there are alternative measures which would ensure equivalent investor protection.
Extension of Time Period for Filing Reports in Certain Circumstances
Subsection 3.2(3) of the proposed National Instrument relaxes the general requirement that a report be filed not later than the filing of the document that itsupports. This provision permits a delay of up to 30 days in the filing of an engineering report to support a news release disclosing new or materially increasedresources or reserves. This provision is intended to balance the goals of (i) sound disclosure, supported by professional work and filed reports, with (ii) promptdisclosure of material changes. The provision does not relieve the issuer of the requirement that its disclosure reflect the views of a qualified person, butrecognizes that the preparation of a formal report may be impractical within the time required for disclosure of a material change.
The CSA seek comment on this provision, including the appropriateness of the proposed length of the permitted report filing delay.
Attributes and Exemption of Senior Resource Issuer
The proposed National Instrument would relieve senior resource issuers of the obligation to file a report prepared by an independent qualified person inconnection with disclosure in an information circular or take-over bid circular and in connection with press releases and other disclosure of reserves andresources on material properties. A senior resource issuer is defined as an issuer with gross revenues derived directly or indirectly from mining operations of anaverage of at least $50 million per year in each of the issuer's three most recently completed financial years. The CSA consider that an issuer with substantialrevenues from mining operations will typically have developed its own professional expertise and be exposed to continuing external monitoring (for example, bymarket analysts), both enabling and motivating them to maintain high standards of disclosure to such an extent that the added check of independent reportingwould be unnecessary. The CSA seek comment on whether senior resource issuers should be exempted from specified independent report requirements, and onthe appropriateness of the proposed attributes of a senior resource issuer (notably, the $50 million average mining operating revenue threshold).
Requirements for Filing an Independent Report
The proposed National Instrument would require an issuer to file a report, prepared by a qualified person who is independent of the issuer, when the issuerbecomes a reporting issuer and in connection with non-POP prospectus offerings and certain other disclosure. The circumstances in which the proposed NationalInstrument would require an independent report reflect the assessment of the CSA as to when an independent report would be of benefit to the public.
The CSA seek comment on the appropriateness of the circumstances in which the proposed National Instrument would require an independent report, and onwhether an independent report should be required, as proposed in Quebec, to support an offering memorandum.
Interested parties are invited to make written submissions with respect to the proposed National Instrument. Submissions received by October 30, 1998 will beconsidered.
Submissions should be sent to all the Canadian securities regulatory authorities listed below in care of the Ontario Commission, in duplicate, as indicated below:
Office of the Administrator, Government of New Brunswick
c/o Daniel B. Iggers, Secretary
Submissions should also be addressed to:
Technical Consultant, Market Operations
Telephone: (416) 593-8054
The texts of the proposed National Instrument and Companion Policy follow, together with footnotes that are not part of the National Instrument andCompanion Policy but have been included to provide background and explanation.
Rescission of National Policy No. 2-A
NP2-A would be replaced by the proposed National Instrument. The text of the proposed rescission is:
"National Policy No. 2-A Guide for Mining Engineers, Geologists and Prospectors submitting reports on mining properties to Canadian provincial securitiesadministrators is rescinded."
NP22, in its application to mineral exploration, development and production activities would also be replaced by the proposed National Instrument.
DATED July 3, 1998.
EXPLORATION AND DEVELOPMENT AND MINING PROPERTIES
2.2 Written Disclosure to Include Name of Qualified Person
2.3 Written Disclosure to Include the Nature of Data Verification
2.4 Requirements Applicable to Written Disclosure of Exploration Information
2.5 Requirements for Written Disclosure of Resources and Reserves
2.6 Exception for Disclosure Already Filed
PART 3 OBLIGATION TO FILE A REPORT
3.1 Obligation to File a Report Upon Becoming a Reporting Issuer
3.2 Obligation to File a Report in Connection with Certain Disclosure Concerning Mining Projects on Material Properties
PART 4 AUTHOR OF THE REPORT
4.1 Prepared by A Qualified Person
4.2 Professional Seal
4.3 Independent Report
PART 5 NATURE OF REPORT
5.1 Engineering Document
5.2 Judgment of Author
PART 6 BASIS FOR REPORT
PART 7 CONTENTS OF THE REPORT
7.1 Text of the Report
7.2 Additional Requirements for Reports on Development Properties and Production Properties
PART 8 CERTIFICATE OF QUALIFIED PERSON
8.1 Certificate of Qualified Person
EXPLORATION AND DEVELOPMENT AND MINING PROPERTIES(1)
PART 1 APPLICATION AND DEFINITIONS(2)
1.1 Application - This Instrument applies to all disclosure made by or on behalf of an issuer regarding mineral exploration and development and mining propertiesof the issuer, including disclosure in the form of press releases, prospectuses and annual reports.
"adjacent property" means a property which has a boundary lying within two kilometres of the boundary of the property being reported upon and the geologicalcharacteristics of which are similar to those of the property being reported on;(3)
"development property" means a property that is being prepared for mineral production and for which economic viability has been demonstrated by a feasibilitystudy;
"disclosure(4)" means any document or oral statement made by or on behalf of an issuer and intended to be or reasonably likely to be made available to the publicin the local jurisdiction, whether or not filed under securities legislation;(5)
"document" includes electronic forms of storing and disseminating information;
"exploration information" means geological, geophysical, geochemical, sampling, assaying, metallurgical and other related information respecting a particularproperty that is derived from activities undertaken to locate, investigate, define or delineate a prospect or deposit;
"feasibility study" means a comprehensive study of a deposit in which all geological, engineering and economic factors are considered in sufficient detail to serveas the basis for a final decision on whether to proceed with development of the deposit for production;
"geoscientist" means a geologist, geochemist or geophysicist;
"mining project" means any mineral exploration, development or production activities;
"POP system" has the meaning ascribed to that term in National Instrument 44-101 Prompt Offering Qualification System;
"preliminary feasibility study" means, for a mining project that has advanced to a stage where the mining method, in the case of underground mining, or the pitconfiguration, in the case of an open pit, has been established, and where an effective method of ore processing has been determined, a study, based onreasonable assumptions of technical and economic factors, to determine if all or part of the resources of a deposit may be classified as reserves;
"professional association" means an association of engineers, geoscientists that
(a) admits members based primarily on their academic qualifications, experience and compliance with the professional standards of competence and ethicsestablished by the association; and
(b) has disciplinary powers including the power to suspend or expel a member;
(a) an individual who is an engineer or geoscientist with at least five(6) years of experience in mineral exploration, development or production activities andassessment, or any combination of these, including experience and technical responsibility appropriate to the particular mining project and who is a member ingood standing of a professional association; and
(b) if such an individual is an employee, officer, director, associate or partner of a person or company the principal business of which is the provision ofengineering or geoscientific services, that person or company;
"resource"(7) means a deposit or concentration of a natural, solid, inorganic or fossilized organic substance, other than natural ground water, petroleum, naturalgas, bitumen or related hydrocarbons, in such quantity and at such a grade or quality that extraction of the material at a profit is currently or potentially possible.Resources are categorized as follows on the basis of the degree of confidence in the estimate of quantity and grade of the deposit:
"inferred resource" means the estimated quantity and grade of a deposit, or a part thereof, that is determined on the basis of limited sampling, but for which thereis sufficient geological information and a reasonable understanding of the continuity and distribution of metal values to outline a deposit of potential economicmerit;
"indicated resource" means the estimated quantity and grade of that part of a deposit for which the continuity of grade, together with the extent and shape, areso established that a reliable estimate of grade and tonnage can be made;
"measured resource" means the estimated quantity and grade of that part of a deposit for which the size, configuration and grade have been well established byobservation and sampling of outcrops, drill holes, trenches and mine workings;
"reserve" means that part of a resource which can be legally mined at a profit under specified economic conditions that are generally accepted by the miningindustry as reasonable under current economic conditions, demonstrated by at least a preliminary feasibility study based on measured resources and indicatedresources only. Reserves are categorized as follows on the basis of the degree of confidence in the estimate of the quantity and grade of the deposit:
"possible reserve" means, where proven and probable reserves have been estimated, the estimated quantity and grade of that part of a measured, indicated orinferred resource that is determined from limited sample data and for which geology, grade continuity and operating parameters are principally based onreasonable extrapolations, assumptions and interpretations;(8)
"probable reserve" means the estimated quantity and grade of that part of a measured or indicated resource for which the economic viability has beendemonstrated by adequate information on engineering, operating and economic factors, with sufficient accuracy to be used as a basis for decisions on furtherdevelopment and significant capital expenditures;
"proven reserve" means, for the part of a deposit which is being mined or developed or which is the subject of a mining plan, the estimated quantity and grade ofthat part of a measured resource for which the size, grade and distribution of values, together with technical and economic factors, are so well established thatthere is the highest degree of confidence in the estimate; and
"senior resource issuer" means an issuer with gross revenues, derived directly or indirectly from mining operations, of an average of at least $50 million per yearfor each of the issuer's three most recently completed financial years.
(1) In this Instrument a person or company is considered to be an affiliated entity(9) of another person or company if
(a) one is a subsidiary entity of the other,
(b) both are subsidiary entities of the same person or company, or
(c) each of them is controlled by the same person or company.
(2) In this Instrument a person or company is considered to be controlled by another person or company if
(i) voting securities of the company carrying 49 percent or more of the votes for the election of directors are held, otherwise than by way of security only, by orfor the benefit of the second-mentioned person or company; and
(ii) the votes carried by such securities entitle the second-mentioned person or company to elect a majority of the directors of the company;
(b) in the case of a partnership that does not have directors, other than a lilmited partnership, the second-mentioned person or company holds 49 percent or morein the partnership; or
(3) In this Instrument a person or company is considered to be a subsidiary entity of another person or company, if
(a) the first-mentioned person or company is controlled by
(i) the second-mentioned person or company, or
(ii) the second-mentioned person or company and one or more other persons or companies, each of which is controlled by the second-mentioned person orcompany; or
(b) the first-mentioned person or company is a subsidiary entity of a person or company that is itself a subsidiary entity of the second-mentioned person orcompany.
(4) In this Instrument a qualified person is not independent of the issuer if
(a) the qualified person, or any other person or company involved in the preparation of the report, is, or under an agreement, arrangement or understandingexpects to become, an insider, associate, affiliated entity or employee of the issuer or of an insider or affiliated entity of the issuer;
(b) the qualified person, or any other person or company involved in the preparation of the report, has received or reasonably expects to receive the majority ofhis, her or its income in or with respect to the year preceding the date of the report from any one or more of the issuer and insiders or affiliated entities of theissuer;
(c) the qualified person, or any other person or company involved in the preparation of the report, is or reasonably expects to become a partner, employer oremployee of any person or company referred to in paragraph (a) or (b); or
(d) the qualified person, or any other person or company involved in the preparation of the report, or any associate or employee of any of those persons orcompanies owns or expects to receive any equity securities of the issuer or an affiliated entity of the issuer or an interest in the property that is the subject of thereport or a property that is an adjacent property.
2.1 Requirements Applicable to All Disclosure - All disclosure concerning mining projects on a property material(10) to the issuer shall
(a) be based upon information prepared by or under the supervision of a qualified person;
(b) if a resource or reserve is disclosed,
(i) utilize only the applicable resource and reserve categories set out in section 1.2 of this Instrument;
(ii) state that only reserves have demonstrated economic viability;
(iii) disclose each category of resources and reserves separately and state the extent to which reserves are included in total resources; and
(iv) not add inferred resources or possible reserves to the other respective categories of resources and reserves.
2.2 Written Disclosure to Include Name of Qualified Person - The qualified person who prepared or supervised the preparation of the information that forms thebasis for any written disclosure concerning mining projects on a property material to the issuer shall be named in the written disclosure, together with a statementof his or her relationship to the issuer.(11)
2.3 Written Disclosure to Include the Nature of Data Verification - All written disclosure concerning mining projects on a property material to the issuer shall
(a) state whether the qualified person has independently verified the data, including sampling and assaying data underlying the information or opinions containedin the written disclosure;
(b) describe the nature of and any limitations on such verification; and
(c) explain any failure to independently verify the data.
(1) Written disclosure containing any results of geological, geophysical or geochemical surveys on a property material to the issuer shall include
(a) results of surveys and investigations regarding that property;
(b) a summary of the interpretation of exploration information; and
(c) a statement as to whether the surveys and investigations have been carried out by the issuer or by a contractor.
(2) Written disclosure containing sample or assay results on a property material to the issuer shall include(12)
(b) a summary description of mineral distributions, rock types, structural controls, and other parameters used to establish the sampling interval and theidentification of any significantly higher grade sections within a lower grade interval;
(c) a summary description of the details concerning the location, number, type, nature, spacing or density of samples collected and the area covered;
(d) identification of any drilling, sampling or recovery problems that could materially impact the accuracy or reliability of the data referred to in this section;
(e) a summary description of the type of assaying or analytical procedures utilized, sample size, the name and location of each assay or analytical laboratory usedand the particulars of any known certification of the laboratory; and
(f) a summary description of the true widths of individual samples or sample composites, to the extent known.
2.5 Requirements for Written Disclosure of Resources and Reserves - Written disclosure of resources or reserves on a property material to the issuer shall
(a) include details of quantity and grade of each category of resource and reserve;
(b) include details of the key assumptions, parameters and methods used to estimate the resource and reserve, including the location of sample points or drillholes; and
(c) discuss the extent to which the estimate of resources and reserves may be affected by metallurgical, environmental, permitting, infrastructure, mining, legal,title, political or other issues.
2.6 Exception for Disclosure Already Filed - The requirements of sections 2.4 and 2.5 may be satisfied by reference, in written disclosure, to a previously fileddocument that complies with these requirements.
PART 3 OBLIGATION TO FILE A REPORT(13)
3.1 Obligation to File a Report Upon Becoming a Reporting Issuer - Upon an issuer becoming a reporting issuer in the local jurisdiction, the issuer shall cause areport to be prepared, in accordance with this Instrument, and filed for each property material to the issuer.
(1) An issuer shall cause a report to be prepared, in accordance with this Instrument, and filed to support statements made or information included in thefollowing documents filed or made public in the local jurisdiction describing mining projects on a property material to the issuer:
1. A prospectus, other than a prospectus filed under the POP system.
2. A prospectus filed under the POP system that contains new information not contained in a previously filed report.
3. An information circular or take-over bid circular concerning a direct or indirect acquisition of a property, including an acquisition of control of a person orcompany with an interest in the property, that upon completion of the acquisition would be material to the issuer and for which the consideration would includesecurities of the issuer.
6. An annual information form or annual report that includes new information not contained in a previously filed report.
8. Any other document that discloses for the first time resources or reserves on a property material to the issuer or discloses any material change, from the mostrecently filed report, in resources or reserves on a property material to the issuer.
(2) The report required to be filed under subsection (1) shall be filed not later than the time of the filing of the document that it supports.
(3) Despite subsection (2), a report prepared by or under the supervision of a qualified person who is independent of the issuer that supports a documentdescribed in paragraph 8 of subsection (1) shall be filed within 30 days of the release of that document.
4.1 Prepared by A Qualified Person - A report required by this Instrument shall be prepared by or under the supervision of one or more qualified persons whoshall date and sign the last page of the report.
4.2 Professional Seal - A report required by this Instrument shall be endorsed with the qualified person's professional seals.
4.3 Independent Report(14)
(1) Subject to subsection (2), a report required under any of the following provisions of this Instrument shall be prepared by a qualified person that is, at the dateof the report, independent of the issuer:
1. Section 3.1.
2. Paragraphs 3.2(1)l and 7.
3. Paragraph 3.2(1)8, if the document referred to in that paragraph discloses for the first time resources or reserves on a property material to the issuer ordiscloses a 100 percent or greater change, from the most recently filed report, in resources or reserves on a property material to the issuer.
4. Paragraph 3.2(1)3, if the issuer of the securities is not a senior resource issuer or an issuer eligible to use the POP system.
(2) An independent report is not required to be filed by senior resource issuers under paragraph 3 of subsection (1).
5.1 Engineering Document(15) - Reports required by this Instrument shall be engineering or scientific documents prepared on the basis of all factual data available.
5.2 Judgment of Author - A report that contains recommendations for expenditures on exploration or development work on a property shall include a statementby the qualified person that, in the qualified person's opinion, the character of the property is of sufficient merit to make the program recommended a worthwhileundertaking.
6.1 Personal Inspection - A qualified person preparing or supervising the preparation of a report or a portion of a report required by this Instrument shall inspectthe property that is the subject of the report.
(1) A report required by this Instrument shall
(a) identify, with citations if applicable, the sources of all data contained in the report or used in its preparation; and
(b) state if the source of any of the data is the issuer.
(2) A report must contain the opinion of each qualified person, by whom or under whose supervision the report or a portion of the report is prepared, as to thequality of the data or information contained in the report or portion of the report or used in its preparation and must state the basis for that opinion.
PART 7 CONTENTS OF THE REPORT(16)
(1) All reports required by this Instrument shall include the following:
2. Summary - Give a brief description near the beginning of the report of the conclusions and recommendations of the qualified person.
3. Introduction - State the terms of reference, if the report was prepared specifically for submission to a Canadian securities regulatory authority or for someother purpose, the extent of the qualified person's investigations and the sources of all information and data.
4. Property Description and Location - State with respect to each of the properties being reported on,
(i) the area;
(ii) the location reported by section, township, range and national topographic series designation wherever applicable, or by latitude and longitude and distanceand direction from the nearest population centre;
(iii) the claim numbers or equivalent and if they are patented or unpatented, and if the claims are contiguous;
(iv) a description of the nature and extent of the issuer's title to or interest in the property including accompanying surface rights, a comment on the sufficiency ofthe rights for mining operations, obligations that must be met to retain the property, and the expiration date of claims, licences or other property tenure rights;
(v) if the outside boundaries of a property have been legally surveyed;
(vi) the location of all known mineralization, all resources, reserves, mine workings, potential tailings and other important features, relative to the outsideproperty boundaries or shown on a map;
(vii) to the extent known, the terms of any royalties, overrides, back-in rights, payments or other agreements and encumbrances to which the property is subject;and
(viii) to the extent known, all environmental liabilities to which the property is subject.
5. Accessibility, Climate, Local Resources, Infrastructure and Physiography - Describe
(i) the means of access to the property;
(ii) the proximity of the property to a population centre, and the nature of transport;
(iii) to the extent relevant to the mining project, the climate and the length of the operating season;
(iv) the availability and source of power, water and mining personnel, potential tailings areas, potential disposal areas and heap leach pond areas; and
(v) topography, elevation and vegetation.
6. History - Provide a comprehensive description of prior ownership of the property and ownership changes, the type, amount, quantity and results of explorationwork undertaken by previous owners and a summary of any previous production on the property to the extent known.
7. Geology - Include a brief description of the regional, local and property geology.
8. Exploration Information - Describe the nature and extent of all exploration work and metallurgical or other testing conducted by, or on behalf of, the issuer onthe property including
(a) results of all surveys and investigations, and the procedures and parameters relating to the surveys;
9. Mineralization - Give a description of mineralization encountered on the property, detailing length, width, depth, continuity and the basis of the measurement,together with a description of the type, character and distribution of the mineralization.
10. Sampling and Analysis - Reports on exploration, resources and reserves shall include
(a) details concerning the sampling and assaying, including location, number, type, nature and spacing or density of samples collected, and the size of the areacovered;
(b) identification of any drilling, sampling or recovery problems that could materially impact the accuracy and reliability of the results;
(c) details regarding the type of assaying or analytical procedures used, including the sample size, and name and location of the assay or analytical laboratoriesand if the laboratories are certified by any standards association and the particulars of any certification;
(d) a summary of the true widths of individual samples or sample composites, to the extent known;
(e) rock types, structural controls, and other parameters, as appropriate, used to establish the sampling interval and identification of any significantly higher gradeintervals within a lower grade intersection; and
(f) a summary of the nature and extent of all quality control employed and check assay procedures utilized including the results and corrective actions taken.
11. Security of Samples - Describe all measures taken to ensure the validity and security of samples taken, including the manner of storage, handling,transportation and preparation of samples, sampling and analytical techniques used and the reporting procedures.
12. Resources and Reserves(17) - Each report on resources and reserves shall
(a) utilize only the applicable resource and reserve categories set out in section 1.2 of this Instrument;
(b) state that only reserves have demonstrated economic viability;
(c) disclose each category of resources and reserves separately and not add resources and reserves together;
(d) be prepared by a qualified person whose name, qualifications and relationship, if any, to the issuer are disclosed;
(e) include appropriate details of quantity and grade for each category of resources and reserves;
(f) include details as to the key assumptions, parameters and methods, including a description of the cutting, dilution and methods used to estimate the resourcesand reserves; and
(g) discuss the nature and extent of any known metallurgical, environmental, permitting, infrastructure, mining, legal, title, marketing or political or other issuesthat might affect any resource or reserve estimates.
Inferred resources or possible reserves shall not be added to other categories of resources or reserves. Only proven and probable reserves shall be used in aneconomic evaluation or feasibility study of a project. The grade, tonnage and category of the resources and reserves shall be stated if the quantity of containedmetal is reported. When the grade for a polymetallic resource or reserve is reported as metal equivalent, the recoveries, refinery costs and all other relevantconversion factors in addition to metal prices and the date and sources of such prices, shall be considered and reported.
13. Independent Verification(18) - State whether the qualified person has independently verified the data, specifically including sampling and assaying data, anddescribe the nature of and any limitations on such verification. Failure to independently verify shall be explained.
14. Adjacent Properties - A report that includes a comment on an adjacent property in which the issuer does not have interest, shall clearly distinguish betweenmineralization that occurs on the two properties. If the potential merit of a property is predicated entirely or in substantial part on results obtained from workcarried out on an adjacent property, the known history of the adjacent property shall also be disclosed and the author shall confirm the relevance of suchdisclosure. The nature of the mineralization and the reported tonnage and grade of the resources and reserves on an adjacent property may be disclosed,(19) evenif the source of the resource and reserve estimate was not independent of the property or of the person or company that has an interest in the property, if
(i) the statement of exploration results, mineralization, resources and reserves was publicly announced by the owner or operator of the adjacent property;
(ii) the source of the information is identified; and
(iii) the report states that the author has been unable to independently verify the accuracy of the information and, in bold face type, that the information is notnecessarily indicative of the mineralization on the property that is the subject of the report.
15. Conclusion and Recommendations - A report concerning exploration information shall include the conclusions of the qualified person and, if successivephases of work are recommended, each phase should be constructed so that it reaches a decision point. The recommendations shall not apply to more than twophases of work. The recommendations shall state whether advancing to a subsequent phase is contingent on positive results in the previous phase. If drilling isrecommended, state the type of drilling and the total nature and extent. For underground work, state the total length of each type of opening.
16. Cost Estimate - Provide a breakdown of costs of the principal components of the recommended program.
17. Date - The effective date of the report shall be included on both the title page and the last page of the report.
(2) Despite subsection (1) the report is not required to include the information in paragraphs 4, 5, 6, 7, 8 and 9, if a report has been previously filed containingthis information for the properties being reported on.
7.2 Additional Requirements for Reports on Development Properties and Production Properties - Reports concerning development properties and productionproperties shall also discuss, identifying any assumptions:
(1) Mining Operations - the mining method, metallurgical process and production forecast;
(2) Recoverability - the results of all test work relating to the recoverability of the valuable component or commodity and amenability of the mineralization toproposed processing methods;
(3) Markets - the markets for the issuer's production and the nature and material terms of any agency relationships;
(4) Contracts - the terms and status of all concentrating, refining arrangements, smelter, hedging and forward sales contracts, tolling and transportationagreements and rates or charges;
(5) Environmental Considerations - bond posting, remediation and reclamation;
(6) Taxes - the types and rates of taxes exigible against the mining project including royalties and levies;
(7) Capital and Operating Cost Estimates - the capital and operating cost estimates, with the major components being set out in tabular form;
(8) Economic Analysis - an economic analysis with cash flow forecasts on an annual basis based on proven and probable reserves only, and a sensitivity analysisusing 10 percent and 20 percent variants in metal prices, grade and costs;
(9) Payback - the payback period of capital with interest; and
(10) Mine Life - the expected mine life and exploration potential.
7.3 Illustrations -
(1) Reports shall be illustrated by legible maps, plans and sections. All reports shall be accompanied by a location or index map and more detailed maps showingall important features described in the text. In addition, include a compilation map outlining the general geology of the property and areas of historicalexploration. The location of all known mineralization, anomalies, deposits, pit limits, plant size, tailings, waste disposal areas and all other significant featuresshall be shown relative to property boundaries.
(2) If adjacent or nearby properties have an important bearing on the potential of the property under consideration, their location shall be shown on the maps. Ifthe mineralized structures are expected to pass from one property to the other that shall be shown on the map.
(3) If the potential merit of a property is predicated on geophysical or geochemical results, maps showing the results of surveys and their interpretations shall beincluded in the report.
(4) All maps shall include a scale in bar form and a North arrow. Geological features or other geoscientific information taken from government maps or fromdrawings of other engineers or geoscientists shall be properly acknowledged on the map.(20)
(1) A report that is required by this Instrument to be filed shall have attached a certificate dated, signed and sealed by the individuals who are qualified personsand who have been primarily responsible for the report as a whole or a portion of the report.
(2) The certificate shall state for each signatory
(b) the qualified person's qualifications, including relevant experience, the name of all professional associations to which the qualified person belongs, and that thequalified person is a "qualified person" for purposes of this Instrument;
(d) other sources of information contained in the report;
(e) the nature and scope of any limitations imposed upon the qualified person's access to the property or to persons, information, data or documents that thequalified person considered relevant to the subject matter of the report;
(f) the identities of the persons or companies that the qualified person considers responsible for imposing the limitations referred to in paragraph (e) above;
(g) that as of the date of the certificate the qualified person is not aware of any material fact or material change not reflected in the report, the omission todisclose which makes the report misleading;
(h) if the qualified person has, or expects to receive directly or indirectly, any direct or indirect interest in the property that is the subject of the report or in theissuer or any affiliate of the issuer, and whether such interest is by way of securities or otherwise; and
(i) that the qualified person has read this Instrument, and the report has been prepared in compliance with Parts 5, 6 and 7 of this Instrument.
8.2 Consents - All reports that are required by this Instrument shall
(a) be addressed to the securities regulatory authority;
(b) be accompanied by the written consent of the qualified person to the disclosure of extracts or a summary of the report; and
(c) identify the disclosure document and confirm that the qualified person has read the document and does not have any reason to believe that there are anymisrepresentations in the information derived from the report or that the disclosure contains any misrepresentation of the information contained in the report.
9.1 Exemption -
(1) The regulator or the securities regulatory authority may grant an exemption from this Instrument, in whole or in part, subject to such conditions orrestrictions as may be imposed in the exemption.
(4) An application made to the securities regulatory authority or regulator for an exemption from the Instrument shall include a letter or memorandum describingthe matters relating to the exemption and indicating why consideration should be given to the granting of the exemption.
1.1 Application of the Instrument
2.3 Material Information Not Yet Confirmed by a Qualified Person
2.4 Exception in Section 2.6
PART 3 GUIDELINES FOR EXPLORATION AND ESTIMATES OF RESOURCES AND RESERVES
3.2 Deviation from Guidelines
3.4 Compliance with Foreign Standards
PART 4 AVAILABILITY OF ASSAY CERTIFICATES
4.1 Availability of Assay Certificates
PART 5 AUTHOR OF THE REPORT
5.1 Selection of Qualified Person
5.2 Qualified Person
PART 6 USE OF INFORMATION
6.1 Use of Information
PART 7 BASIS FOR REPORT
7.1 Personal Inspection
7.2 Source Documents
PART 8 REGULATORY REVIEW
1.1 Application of the Instrument - The Instrument establishes standards for all oral and written disclosure of exploration, development and mining properties,including disclosure in press releases, prospectuses and annual reports, and requires that the disclosure be based on information prepared by or under thedirection of a qualified person. The CSA expects that mining issuers will prepare and update a report that is in the form required by the Instrument in respect ofeach material property and, when required by Part 3 of the Instrument, file that report. In the circumstances set out in Part 4 of the Instrument, the report that isrequired to be filed must be prepared by a qualified person who is independent of the issuer.
1.2 Purpose - This policy statement sets forth the views of the Canadian securities regulatory authorities as to the manner in which certain provisions of theInstrument are to be interpreted and applied.
1.3 Definitions - The definitions of each category of resources and reserves in the Instrument and the interpretation guidelines in this Policy have been based onthe six Exploration Information Categories in the Ad Hoc Committee Report adopted by the Canadian Institute of Mining, Metallurgy and Petroleum, publishedin the bulletin of the Canadian Institute of Mining, Metallurgy and Petroleum in September 1996. The Canadian securities regulatory authorities intend tomonitor developments and changes in international and Canadian mining industry standards and will from time to time consider modifications to the Instrumentto remain consistent with these standards as they may evolve.
1.4 Interpretation - The following offers guidance as to the interpretation of certain terms defined in the Instrument
"exploration information" is reported subsequent to the discovery of mineralization but before sufficient data is available to justify an estimate of tonnage andgrade. The term may be used to describe exploration work, including results of technical surveys, trenching, surface sampling, drilling and laboratory analysis andtests and may include a description of the property history, geology and mineralization. Before any tonnage and grade estimates are made, there must besufficient data to permit a qualified person to estimate an inferred resource.
"professional association" describes a professional governing organization recognized as such by the mining industry in its jurisdiction. The CSA would notregard as a professional association, for purposes of the Instrument, an organization without such recognition that is formed primarily with a view to enablingmembers to qualify as "qualified persons" for purposes of the Instrument.
"resource" includes deposits of base and precious metals, coal and industrial minerals but not oil, natural gas or ground water. Bitumen (oil sands) is treated as anoil deposit and is not considered under the Instrument. A mineral resource estimate is based on the geology of a deposit and the continuity of mineralization. Thelevel of confidence in the information and the degree of understanding is indicated by the category to which an estimate is assigned. A number of factors whichare assumed in estimating a resource are related to economic and operating conditions, particularly cut-off grades and minimum widths. In most cases, factorswhich are typical for the type of deposit may be used in place of those which have been specifically established for the estimated resource.
"inferred resource" may be used to report estimated tonnage and grade if the sampling data and geologic understanding are only sufficient to outline a deposit ofpotential economic merit.
"indicated resource" can serve as a base for decisions on major expenditures. It is fundamental to the indicated resource class that there is well establishedgeological information on the continuity of the mineralized zones.
"measured resource" is a well established resource if the qualified person responsible for estimating the measured resource has no reasonable doubt that anyvariation from the stated grade and tonnage would be sufficient to materially affect an economic appraisal of the resources.
"reserve" is that portion of the resource that can be mined at a profit. In addition to the geologic factors necessary to estimate a reserve, reserve estimates requireadequate information on mining, metallurgy, infrastructure, operating and capital costs, environmental considerations, and economic, legal and technical factorsthat affect the economic viability of a project. Waste rock dilution, and percent extraction should be considered in tonnage and grade estimates. The categoryassigned to a reserve depends not only on the resource category but also on the level of confidence in all associated costs, mining conditions, and other factorsused in the estimate. The estimate of tonnage and grade of a mineralized body that has not had an adequate economic study, or where a feasibility study hasshown it to be uneconomic, should not be called a reserve.
"probable reserve" is a deposit for which the level of geological understanding is the same as for indicated resource. If all or part of an indicated resourceappears economic, further work will lead to studies of mining methods, metallurgical factors, transportation alternatives, economics and other mine developmentconsiderations. If these studies indicate that the mining of a deposit or a part of a deposit is economically feasible, the estimated tonnage and grade would qualifyas a probable reserve.
"proven reserve" which meets the general criteria of the proven category should not be classified as proven if it is isolated and must be mined in conjunction withprobable reserves, eg., if it is surrounded by probable reserves. A proven reserve is a the same level of geological understanding as a measured resource.
1.5 Non-Metallic Mineral Deposits - Qualified persons reporting on the following other commodities may want to follow these additional guidelines:
(a) Industrial Minerals - For an industrial mineral deposit to be classified as a resource there should be a credible market and a feasible transportation systemavailable for the deposit. For an industrial mineral deposit to be classified as a reserve there should be a sales contract in place that assures a market for a portionof the production or there should have been profitable commercial production during one of the most recent three years.
(b) Coal - Comprehensive reports on coal resources and reserves should conform to the definitions and guidelines of Paper 88-21 of the Geological Survey ofCanada - A Standardized Coal Resource/Reserve Reporting System for Canada; and
(c) Diamonds - When preparing reports on the resources/reserves of diamond deposits the author should conform to the Guidelines for Reporting of DiamondExploration Results, Identified Mineral Resources and Reserves, published by the Association of Professional Engineers, Geologists and Geophysicists of theNorthwest Territories.
2.1 Disclosure - Disclosure regarding mining projects on material properties should be understandable and, if written, be presented in an easy to read formatusing clear and unambiguous language and should be in table format, wherever possible.
(1) Materiality should be determined in the context of the issuer's overall business and financial condition taking into account quantitative and qualitative factors.Materiality is a matter of judgment in the particular circumstances and should be determined in relation to the significance of the information to investors,analysts and other users of the disclosure.
(2) Information will generally be considered by the Canadian securities regulatory authorities to be material to an issuer if it is probable that the disclosure oromission to disclose would influence or change an investment decision of a reasonable investor.
(3) Materiality of a property should be assessed in light of the extent of the interest in the property held, or to be acquired, by the issuer. A small interest in asizeable property may, in the circumstances, not be material to the issuer.
(4) In assessing whether interests represented by multiple claims or other documents of title constitute a single property for the purpose of the Instrument, issuersshould be guided by the reasonable understanding and expectations of reasonable investors.
(5) Subject to developments not reflected in the issuer's financial statements, a property will generally not be considered material to an issuer if the book value ofthe property, as reflected in the issuer's most recently filed financial statements or the value of the consideration paid including exploration obligations or requiredto be paid for the property during the next 12 months, is less than 10 percent of the book value of the total of the issuer's mineral properties and related propertyplant and equipment.
2.3 Material Information Not Yet Confirmed by a Qualified Person - Issuers are reminded that they have an obligation to disclose material facts and to maketimely disclosure of material changes. The Canadian securities regulatory authorities recognize that there may be circumstances in which the issuer expects thatcertain information concerning a mining project may be material notwithstanding the fact that a qualified person has not prepared or supervised the preparationof the information. In this situation the Canadian securities regulatory authorities suggest that issuers file a confidential material change report concerning thisinformation while a qualified person reviews the situation. Once a qualified person has confirmed the information, a press release may be issued and the materialchange report will no longer be confidential.
2.4 Exception in Section 2.6 - Section 2.6 of the Instrument provides that the disclosure requirement of sections 2.4 and 2.5 of the Instrument may be satisfied byreferring to a previously filed document that includes the required disclosure. Issuers relying on this exception are reminded that all disclosure should providesufficient information to permit market participants to make informed investment decisions and should not present or omit information in a manner that ismisleading.
3.1 Guidelines - The methods and procedures to be used in estimating resources and reserves are the responsibility of qualified persons preparing the estimate.There are a number of key technical factors that should be considered when making a tonnage and grade estimate including the following:
(1) Exploration - For exploration work consider
(a) Geological Concept - The geological premise on which the exploration work is conducted or the geological model used should be scientifically valid andsupported by reasoned argument.
(b) Sampling - Sampling should be carried out in a careful and diligent manner and follow standard practices.
(i) Trench, pit, rock chips - These and other types of samples from readily accessible sites are usually collected in bags with the whole sample being shipped forassaying/testing; check sampling, if required, is normally done by resampling the site.
(ii) Drilling - Whether core, reverse circulation, or other type, drilling provides samples from inaccessible sites, a representative fraction of the sample materialneeds to be retained for further checking, if this becomes necessary. In the case of core drilling sampled for assaying, at least 1/4 core should be retained as arecord for an appropriate period of time; for drill cuttings, as produced by reverse circulation, rotary and other drilling methods, a physical record of the cuttingsshould be made using one of several ways such as gluing representative samples to canvas, boards, etc. The drilling method will be selected by a qualified personand will be subject to such constraints as cost, time, location and other factors, but should be appropriate to the material being investigated. Wherever possible,the hole size selected should be such as to provide sufficient sample material for assaying/testing for the sought after valuable constituents.
(c) Drill Logging - Drill logs specifically suited to the type of drilling and the particular geological situation should be used for detailed geological logging ofcore and cuttings. A colour photographic log of core is a useful additional logging record.
(d) Sample Security - The security of samples from sampling site to delivery at a laboratory or other testing facility is a vital component of the sampling process.This includes having a secure core logging/sampling/preparation facility.
(e) Sample Preparation - This may be done by the exploring entity or by the assay laboratory/testing facility. If by the exploring group, sample preparationshould be subject to the same security measures as stated above; if samples are reduced or split in some manner, this should be done in a way that ensures thatthe fraction shipped for assaying/testing is representative of the whole sample. If done by the laboratory/testing facility, clear instructions should be given ifspecial sample preparation measures are required, such as pulverization of the whole sample. Wherever practical, representative fractions of the material to beassayed or tested should be retained.
(f) Assaying and Testing - Selection of a laboratory or testing facility will be the responsibility of a qualified person. As an additional control, the explorationentity should utilize such measures as blank samples, standard samples and duplicate assaying at other facilities.
(g) Records - The exploration process, from planning to mapping to sampling, sample preparation and assaying/testing to resource estimation, should beaccompanied by detailed record keeping setting out procedures followed, the reasons therefor, and the results of the activities.
(2) Resource - For a resource estimate consider
(a) Data Density - whether sample density is sufficient to ensure continuity as well as provide an adequate database for the estimating procedure used and thecategories assigned;
(b) Accuracy of Sample Point Locations
(c) Drilling Technique - core, rotary, percussion, or reverse circulation;
(d) Percentage of Core Recovered in Mineralized Zone
(e) Sampling Technique (drill-hole samples) - if core, whether cut or chisel-broken, and whether quarter, half, or all core taken; if non-core, whether riffled,section cut, tube sampled and whether sampled dry or wet; if wet, what precautions have been taken to maximize recovery and minimize fines loss;
(f) Cut-off Grades - the basis for selecting cut-off points;
(g) Other Samples - whether grab, chip or channel. Disclose width across which the sample was taken, and material sampled (the mineralization or enclosingrocks). If underground chip samples, whether channel cut or chipped linearly, or whether randomly taken from a face. If linear, whether horizontal or vertical;
(h) Tonnage Factor or Specific Gravity - whether assumed or determined, and if determined, by what method. If assumed, basis and reliability of theassumptions;
(i) Quality of Assay Data - type of assay procedure used and whether it leads to reproductibility of results and whether representative. Substantial quality controland umpire assaying are necessary to identify any deficiencies in the assay process;
(j) Quality of Data Description - whether core logged in detail; whether all significant lithologic, structural, mineralogical alteration, and other geological andgeotechnical characteristics and properties have been competently and consistently recorded;
(k) Geological Interpretation - whether based on sufficient data or on assumptions; whether constrained by one model, or whether consideration has been givento alternative possible interpretations.
(3) Reserve - For a reserve estimate also consider
(a) Mining Methods - the mining method that has been selected and the effect it might have on mineable tonnage and grade;
(b) Metallurgical Factors - metallurgical tests that have been done, the adequacy of tests carried out, and to what extent the samples tested are representative ofthe reserve;
(c) Minimum Widths - the minimum widths used in reserve estimates, and the factors considered in determining these widths;
(d) Dilution - whether the factors used have been assumed or determined by test mining;
(e) Cutting of High Assays - describe whether assays have been cut and the system of cutting and its justification. In the case of precious metal deposits, list allmethods used;
(f) Capital and Operating Costs
(g) Environmental Factors and Permitting - base-line environmental studies that have been undertaken, any environmental factors that are of concern,restoration provisions, and the status of permitting;
(h) Markets - saleability of the product, any contracts, extent of market studies where such information is pertinent to the project;
(i) Infrastructure - infrastructure requirements and the current status of such services;
(j) Sensitivity Studies - the effect on profitability of potential variations in the more important factors particularly grades and commodity prices.
3.2 Deviation from Guidelines - The Canadian securities regulatory authorities have set out the guidelines in section 3.1 and adopted the standards set out in theInstrument in order to move towards consistent reporting by mining issuers so that market participants and investors would be in a better position to comparemining companies. For that reason the Canadian securities regulatory authorities suggest that a discussion of any deviation from the guidelines set out above maybe helpful to an understanding of the disclosure.
3.3 Accuracy - A statement of tonnage or volume and grade or quality is an estimate and should be rounded as appropriate to reflect the fact that it is anapproximation.
3.4 Compliance with Foreign Standards - The securities regulatory authorities recognize that certain issuers currently estimate and report resources and reservesin accordance with standards that differ from those required under the proposed Instrument. Issuers that are subject to the reporting requirements of theSecurities and Exchange Commission may use the term "other mineralized material" to refer to measured, indicated and inferred resources in a footnotereconciling the resources and reserves reported under the different standards. In the absence of harmonized international standards, the Canadian securitiesregulatory authorities will consider applications made under section 9.1 of the Instrument for exemption from the requirement of the Instrument for disclosureusing the resource and reserve categories set out in the Instrument. The applicant will be expected to demonstrate that the categories used are substantially thesame as those set out in the Instrument and, if the application is granted, provide a reconciliation.
4.1 Availability of Assay Certificates - The issuer or the qualified person, may be asked by the Canadian securities regulatory authorities to provide copies ofassay certificates.
5.1 Selection of Qualified Person - It is the responsibility of the board of directors of an issuer to ensure that the person preparing or supervising the preparationof a report required by the Instrument is a qualified person with the experience and competence appropriate for the type of mineral deposit.
5.2 Qualified Person - Section 2.1 of the Instrument requires that all disclosure be based upon information prepared by or under the direction of a qualifiedperson and section 4.1 of the Instrument provides that a report required by the Instrument must be prepared by or under the direction of a qualified person. TheCanadian securities regulatory authorities recognize that certain individuals who currently provide technical expertise to mining issuers will not meet thedefinition of qualified person in the Instrument. These individuals may have the necessary experience and expertise but lack the professional accreditation becauseof differences in provincial registration requirements or for other reasons. Applications can be made under section 9.1 of the Instrument for an exemption fromthe requirement for involvement of a qualified person and the acceptance of some other person. The applicant must demonstrate that the person is competent andqualified to prepare the report or support the disclosure despite the fact that he or she is not a member of a professional association or otherwise does not meetthe requirements set out in the definition of qualified person.
6.1 Use of Information - The Instrument requires that reports be prepared and filed with Canadian securities regulatory authorities to support certain disclosureof mineral exploration activities and results in order to permit the public and analysts to have access to information that will assist them in making investmentdecisions and recommendations. Persons and companies, including registrants, who wish to make use of information concerning mineral exploration activitiesand results including resource and reserve estimates are encouraged to review the reports that will be on the public file for the issuer and to base any disclosurewhich they make on these reports, using, to the extent possible, exact quotes from these reports.
7.1 Personal Inspection - Section 6.1 of the Instrument requires that the qualified person base the report on a personal inspection. The Canadian securitiesregulatory authorities recognize that there may be circumstances in which it is not possible for a site visit to be conducted because of weather problems,topographical issues or political insurrection. Application can be made in these and other extenuating circumstances under section 9.1 of the Instrument for anexemption from this requirement. The applicant will be expected to justify, in the application, why a site visit is not possible and, if the application is granted, todisclose to the public the fact that a site visit was not conducted and why it was not.
7.2 Source Documents - A Canadian securities regulatory authority may request
(a) a copy of a document used as a basis for the report that is private, unpublished or otherwise not readily available to the public; and
(b) a translation into English, French or both as specified by Canadian securities legislation of a source document used as a basis for the report, identifying thetranslator and any relationship of the translator to the issuer.
(1) Disclosure and reports filed under Instrument 43-101 may be subject to review by Canadian securities regulatory authorities.
(2) An issuer that files a report that does not meet the requirements of this Instrument will be in breach of securities legislation and may be required to revise thedisclosure or report.
1. This proposed National Instrument originated with a reformulation of National Policy Statement No. 2-A ("NP 2-A") and National Policy Statement No. 22("NP 22"). The proposed National Instrument is expected to be adopted as a rule in each of British Columbia, Alberta, Manitoba, Nova Scotia and Ontario, as aCommission regulation in Saskatchewan and as a policy in all other jurisdictions represented by the CSA. NP 2-A sets out the requirements for the preparation ofreports that are required to be filed under securities legislation. Securities legislation in most jurisdictions represented by the CSA requires issuers with miningoperations to file reports prepared in accordance with NP 2-A, in connection with a prospectus offering for properties on which proceeds from the distributionare being expended and for any other major producing properties. Appendix A of National Policy Statement No. 47 ("NP 47") and Form 44-101F1 whichreplaces that Appendix and Schedule 9 of the Regulation to the Securities Act (Québec), each set out the requirements for a description of natural resourceoperations to be included in an Annual Information Form filed under that policy or the Regulation in Quebec. NP 47 does not require that the description bebased on estimates prepared by or reviewed by independent engineers or that a report be filed. Paragraph (k) of Item 3 of NP 47 states that if reserves arerepresented as being based upon estimates prepared by independent engineers or other qualified persons the author must be identified and the Regulator mayrequest a copy of the report as supplemental information. NP 22 concerns the use of information and opinions regarding natural resource properties byregistrants and issuers. The objective of that instrument is to ensure that references to technical data in reports, letters or other publications used directly orindirectly to sell securities conform to some uniform standards. NP 22 requires that the general disclosure standards and definitions of NP 2-A be complied withand used and that sources of information and opinion be specifically named. In addition, technical facts and opinions, such as reserve estimates, must be quotedfrom verbatim.
2. A national definition instrument has been adopted as National Instrument 14-101 Definitions. It contains definitions of certain terms used in more than onenational instrument. National Instrument 14-101 also provides that a term used in a national instrument and defined in the statute relating to securities of theapplicable jurisdiction, the definition of which is not restricted to a specific portion of the statute, will have the meaning given to it in that statute, unless thecontext otherwise requires. National Instrument 14-101 also provides that a provision or a reference within a provision of a national instrument that specificallyrefers by name to a jurisdiction, other than the local jurisdiction, shall not have any effect in the local jurisdiction, unless otherwise stated in the provision.
3. This definition is based on the discussion of contiguous and adjacent properties in Ontario Securities Commission Policy 5.2 Junior Natural Resource Issuers.
4. This is a new definition which is the basis for the new requirement in Part 2 that all disclosure made by or on behalf of an issuer concerning exploration resultsand resources and reserves comply with this Instrument.
5. The term "local jurisdiction" is defined in National Instrument 14-101 Definitions as meaning "in a national instrument adopted or made by a Canadiansecurities regulatory authority, the jurisdiction in which the Canadian securities regulatory authority is situate". The term "securities legislation" is defined inNational Instrument 14-101 Definitions as meaning "for the local jurisdiction the statute and other instruments set out in an appendix to that instrument" and willgenerally include the statute, regulations and, in some cases, the rules, forms, rulings and orders relating to securities in the local jurisdiction.
6. The requirement for technical experience has been increased from three years to five years and otherwise revised to conform to the concept of "CompetentPerson" in the Australasian Code for Reporting of Identified Mineral Reserves and Ore Reserves released in July 1996 by a Joint Committee of the AustralasianInstitute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (the "Australasian Code").
7. The definitions of resource and reserve replace the definitions in NP 2-A and have been based on the Ad Hoc Committee Report published by the CanadianInstitute of Mining, Metallurgy and Petroleum in September 1996 (the "Ad Hoc Report").
8. The Australasian Code does not have a comparable term.
9. Subsections 1.3(1), (2) and (3) contain provisions to assist in interpreting the term "affiliated entity" which is used in this Instrument. These provisions arebased on subsections 1(2), (3) and (4) of the Securities Act (Ontario) but are broader as they extend to unincorporated entities.
10. The Companion Policy offers some guidelines in the interpretation of the term "material" for this purpose and suggests that generally the CSA will notconsider a property to be material if the book value of the property on the most recent financial statement is less than 10% of the total book value of the issuer orif planned expenditures on the property over the next year are less than 10% of total book value.
11. This is a new requirement which expands upon the existing requirements in NP 22. It also amends the existing requirements by removing the requirementthat all technical facts and opinion be quoted from verbatim and replaces that with a recommendation to the Companion Policy that the technical facts andopinion be restated using plain language.
12. Sections 2.4 and 2.5 are based on the Vancouver Stock Exchange Mining Standards Guidelines which came into effect in November 1997.
13. NP 2-A does not require that reports be prepared and filed. It merely sets out the guidelines for preparation of reports that are otherwise required to be filed.This new provision requires that technical reports be prepared and filed upon an issuer becoming a reporting issuer and in respect of certain disclosure of miningprojects.
14. The provisions concerning independence have been amended to more closely parallel the independence concepts of the Ontario Securities Commissionproposed Rule 61-101 Insider Bids, Issuer Bids, Going Private Transactions and Related Party Transactions.
15. This provision is essentially the same as the provision in the first paragraph of National Policy Statement No. 2-A although some changes have been made toclarify what is intended.
16. This has been revised from the current requirements of National Policy Statement No. 2-A to provide more detail as to what is expected to be discussedunder each heading. The detail corresponds to the requirements for prospectus disclosure concerning resource properties.
17. This is a new section.
18. This is a new disclosure requirement.
19. The express permission to report on the estimated resources on a neighbouring property is new.
20. National Policy Statement No. 2-A includes a section "Consent to Use of Name in Prospectus" which has not been included in this Instrument as it is amatter covered by local prospectus requirements.