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Notice of Proposed National Instrument, Companion Policy and Form: NI - 43-101 - Standards of Disclosure for Mineral Projects
Notice of Proposed National Instrument, Companion Policy and Form: NI - 43-101 - Standards of Disclosure for Mineral Projects
NOTICE OF PROPOSED
NATIONAL INSTRUMENT 43-101,
COMPANION POLICY 43-101CP AND FORM 43-101F1
STANDARDS OF DISCLOSURE FOR MINERAL PROJECTS
A. Substance and Purpose of Proposed Rule, Companion Policy and Form
1. Introduction
On July 3, 1998, the Canadian Securities Administrators (the"CSA") published the following two instruments (collectively, the "1998proposed Instruments) for comment:
(i) proposed National Instrument 43-101 Standards for Disclosure of Mineral Exploration and Development and MiningProperties (the "1998 proposed Instrument"); and
(ii) proposed Companion Policy 43-101CP (the "1998 proposed Policy").
The 1998 proposed Instruments were published at (1998), 21 OSCB 4213. The accompanying notice (the "1998 Notice") summarizedthe 1998 proposed Instruments and requested comments generally and with respect to the following four specific matters:
(i) the impact of the requirement for a qualified person;
(ii) the proposed extension of the time period for filing technical reports in certain circumstances;
(iii) the attributes and exemption available to a producing issuer; and
(iv) the requirements for filing an independent technical report.
The CSA received comments on the 1998 proposed Instruments from 36 commenters. The list of commenters is contained inAppendix A of this Notice and a summary of their comments, together with the CSA's responses to those comments, are containedin Appendix B of this Notice.
In addition to considering the comments received on the 1998 proposed Instruments, the CSA also considered the MineralResource/Reserve Classification: Categories, Definitions and Guidelines prepared by the Canadian Institute of Mining, Metallurgyand Petroleum Ad Hoc Committee on Reserve Definitions (the "CIM Ad Hoc Committee") and the draft Mineral Exploration "BestPractices" Guidelines (the "Best Practices Guidelines") prepared on the recommendation of the TSE-OSC Mining Standards TaskForce by a committee comprised of mining and exploration industry professionals and regulators. The Best Practices Guidelineswere published for comment by the Prospectors and Developers Association of Canada in October 1999 and are expected to befinalized early this year.
As a result of these considerations and further deliberations of the CSA, the Ontario Securities Commission (the "Commission") hasrevised the 1998 proposed Instruments and is republishing them for comment. One significant revision is to move the parts of the1998 proposed Instrument that dealt with the contents of a technical report into a new instrument, Form 43-101F1. Certain provisionsof the 1998 proposed Policy which provided guidance on the contents of the technical report have also been moved into proposedForm 43-101F1, as instructions.
Proposed Form 43-101F1 and the republished versions of the National Instrument and Companion Policy are referred to in this Noticecollectively as the "proposed Instruments" and separately as the "proposed Form", the "proposed National Instrument" and the"proposed Policy".
This Notice summarizes changes of a substantive nature that have been made to the 1998 proposed Instruments. Other changesthat may be of interest to readers are discussed in Appendix B Summary of Comments.
It is expected that the proposed Instruments will come into effect on or before December 31, 2000. Prior to that time the proposednew requirements will not be in force; however, issuers are encouraged to follow the standards set out in the proposed NationalInstrument in any oral statements or written disclosure of scientific or technical information made concerning a mining project.
2. Substance and Purpose of National Instrument
The proposed National Instrument originated with the reformulation of National Policy Statement No. 2-A "Guide For Engineers,Geologists and Prospectors Submitting Reports on Mining Properties to Canadian Provincial Securities Administrators" ("NP2-A")and National Policy Statement No. 22 "Use of Information and Opinion Re Mining and Oil Properties by Registrants and Others"("NP22"). NP2-A sets out requirements for the preparation of technical reports that must be filed by issuers with mineral projectsin connection with certain prospectus offerings. NP22 addresses the use of information and opinions regarding natural resourceproperties by registrants and issuers and sets standards for references to technical data in reports, letters or other publications useddirectly or indirectly to sell securities.
The proposed National Instrument consolidates and expands significantly on the current disclosure and reporting requirements. Thepurpose of the proposed National Instrument is to enhance the accuracy and integrity of public disclosure in the mining sector.
The proposed National Instrument establishes standards for all oral statements and written disclosure made by an issuer concerningmineral projects and reasonably likely to be made available to the public. All disclosure concerning mineral projects, including oralstatements and written disclosure in news releases, prospectuses and annual reports, is to be based on information prepared by orunder the supervision of a qualified person. Disclosure of mineral resources and mineral reserves is to be made in accordance withstandard definitions set out in the proposed National Instrument.
In certain circumstances, the disclosure must be supported by a written technical report prepared and certified by a qualified personin accordance with Form 43-101F and filed by the issuer with the securities regulatory authorities. In specified circumstances thetechnical report must be prepared and certified by a qualified person who is independent of the issuer.
The proposed National Instrument is consistent with the recommendations of the Final Report of the TSE-OSC Mining StandardsTask Force. The CSA are of the view that the proposed National Instrument will enhance investor protection and the fairness andefficiency of capital markets.
The proposed National Instrument is expected to be adopted as a rule in each of British Columbia, Alberta, Manitoba, Ontario, NovaScotia and Newfoundland, as a Commission regulation in Saskatchewan and as a policy in all other jurisdictions represented by theCSA. NP2-A will be repealed and NP22 will be repealed insofar as it relates to mineral projects.
3. Substance and Purpose of Form 43-101F1
The proposed Form is new. It sets out the contents required in a technical report. These requirements had been included as Parts6 and 7 of the 1998 proposed Instrument and parts 3 and 4 of the 1998 proposed Companion Policy. The change was made to makethe Instrument easier to understand and comply with.
4. Substance and Purpose of Companion Policy
The purpose of the proposed Policy is to set forth the views of the CSA as to the manner in which the proposed National Instrumentis to be interpreted and applied.
B. Summary of Changes to Proposed Instruments
Changes of a substantive nature that have been made to the proposed Instruments are summarized here. Certain of these changesand other changes that are less substantive are discussed in greater detail in Appendix B.
National Instrument 43-101
1. Definition of "disclosure"
In response to comments, the definition of "disclosure" has been revised to exclude written disclosure made available to the publiconly by reason of having been filed with a government or agency of government pursuant to a requirement of law other than securitieslegislation.
2. Definitions of Mineral Resources and Mineral Reserves
The CSA received a number of comments concerning the definitions of resource and reserve (including the categories within thosedefinitions). In response to those comments and discussions with the CIM Standing Committee on Reserve Definitions (the "CIMStanding Committee"), certain changes were made to the definitions. The CSA are of the view that the definitions included in theproposed National Instrument reflect industry practice and are as similar as possible to the definitions of the CIM Ad Hoc Committeetaking into account rule-making requirements. The principal changes made to these definitions are:
(i) the deletion of the category of possible reserves;
(ii) the definition of "proven mineral reserve" has been amended to the effect that only a deposit that is being mined or beingdeveloped may be classified as a proven mineral reserve. The revised definition is consistent with the definition of theCIM Ad Hoc Committee;
(iii) guidance concerning the interpretation of the defined terms has been moved from the 1998 proposed Policy into theproposed National Instrument to consolidate all provisions regarding these definitions in sections 1.3 and 1.4 of theproposed National Instrument; and
(iv) the definition of measured mineral resource now includes the requirement of a sufficient level of confidence that theestimate could be used as a basis for detailed mine planning.
(v) a foreign issuer may file a technical report using the mineral resource and mineral reserve classifications of theAustralasian Code for Reporting of Mineral and Ore Reserves, the mineral classification system and definitionsapproved by The Institution of Mining and Metallurgy in the United Kingdom or as set out in the circular published bythe United States Bureau of Mines/United States Geological Survey entitled "Principles of a Resource/ReserveClassification for Minerals", provided that the foreign issuer includes a reconciliation to the classifications in theproposed National Instrument.
3. Definition of "qualified person"
The CSA received several comments concerning the definition of "qualified person". In response to these comments and furtherdeliberations of the CSA, the definition has been amended. The principal changes are:
(i) under the revised definition the qualified person must be an individual;
(ii) the individual must have 5 years of experience relevant to the subject matter of the mineral project and the technicalreport; and
(iii) as a result of changes to the definition of "professional association", geoscientists in Ontario and Quebec and otherCanadian jurisdictions in which there is not at present a statutorily recognized self-regulatory organization, will bedeemed to have the membership in a professional association necessary to be qualified persons, for a two year periodcommencing on the date of publication of the National Instrument in final form.
4. Definition of "producing issuer"
The CSA specifically asked for comments on the definition of "senior resource issuer". The definition (now using the term "producingissuer") has been amended to reduce the level of gross annual revenue required to $30 million in the issuer's most recently completedfinancial year and to require a minimum aggregate gross revenue over the issuer's three most recently completed financial years of$90 million. The term "senior resource issuer" has been changed to "producing issuer" to better reflect the rationale for the exemptionfrom the requirement that a qualified person that prepares a technical report that discloses new or a 100 percent change in mineralresources or mineral reserves must be independent from the issuer.
5. Non-independence of qualified person
The CSA gave further consideration to the tests for determining whether a qualified person is independent of the issuer for purposesof providing an "independent" technical report under the proposed National Instrument. The CSA are of the view that in certaincircumstances a technical report prepared under the National Instrument must be prepared by a person who is free from real orapparent influence from the issuer. The tests for "non-independence" set out in section 1.5(4) of the proposed National Instrumenthave been chosen as indicators of situations in which the CSA have concerns that the impartial judgment of qualified person maybe affected by economic factors. Certain changes have been made to this section to better meet the concerns of the CSA. Theprincipal changes are that:
(i) a qualified person is not independent of the issuer if he or she, or an entity affiliated with the qualified person, receivedthe majority of his or her income from a particular issuer in the three years preceding the date of the technical report.This replaces the provision in the 1998 proposed Instrument which stated that a qualified person was not independentof the issuer if he or she received or expected to receive the majority of his or her income in the year preceding the dateof the report from the issuer; and
(ii) a new provision has been added that provides that a qualified person that is an employee of or retained by a producingissuer that has entered into or agreed to enter into a joint venture with another issuer will be considered independentof the other issuer for purposes of preparing technical reports concerning the property.
6. Disclosure Requirements
Part 2 of the 1998 proposed Instrument set out the requirements for disclosure concerning mineral projects. In order to clarify whichrequirements apply only to written disclosure and which are applicable to all disclosure, in whatever form, this Part has beenseparated into 2 Parts, the first setting out requirements applicable to all disclosure (Part 2) and the second setting out additionalrequirements for written disclosure (Part 3). The provisions and additional guidance in the proposed Policy have been revised tomake it clear that the disclosure is the responsibility of the issuer. The qualified person is responsible for performing his servicesin accordance with applicable professional standards and in accordance with generally accepted Canadian mining industry practice.
7. Obligation to File a Technical Report Upon Becoming a Reporting Issuer
A new subsection has been added which permits an issuer to satisfy the requirement to file a technical report upon becoming areporting issuer, by filing a technical report that it has previously filed in another Canadian jurisdiction in which it is a reporting issuer,updated to reflect material changes in the information.
8. Obligation to File a Technical Report With a Prospectus
In the 1998 proposed Instrument a technical report was required to be filed with each long form prospectus and with any short formprospectus that contained information not included in a technical report already filed. The obligation arose on filing of the prospectusin final form. This provision has been amended to require that the technical reports be filed with the preliminary prospectus and thatan updated report or an amendment be filed with the prospectus in final form if there has been a material change in the technicalreport or the information in the technical report.
9. Obligation to File a Technical Report With a Take-over Bid Circular or Directors' Circular
The requirements regarding the filing of a technical report with a take-over bid circular have been clarified in the proposed NationalInstrument. If a take-over bid circular discloses mineral resources or mineral reserves of the offeror and the offeror is offering itssecurities on the take-over, the offeror is required to file a technical report.
A new subsection has been included in the proposed National Instrument which requires an issuer to file a technical report inconnection with a directors' circular which includes new material information concerning a mineral resource or mineral reserve of theissuer. This technical report does not have to be filed at the time that the directors' circular is filed but must be filed not less than3 business days prior to the expiry of the take-over bid to which the directors' circular relates.
10. Obligation to Disclose Reconciliation of Differences Between Disclosure and Subsequently Filed Technical Report
The proposed National Instrument permits an issuer to file a technical report supporting disclosure of mineral resources or mineralreserves up to 30 days after the disclosure is made. The CSA are concerned that situations could arise where the information in thetechnical report is different from the disclosure. For that reason, a new clause has been added requiring the issuer to disclose areconciliation of any material differences between the technical report filed and the previously released disclosure.
11. Obligation to File Independent Technical Report in Connection with Disclosure for the First Time of 100% Change inMineral Resources or Mineral Reserves
The 1998 proposed Instrument required that an issuer, that is not a producing issuer, file an independent technical report in a numberof circumstances, including where the issuer disclosed in a news release mineral resources or mineral reserves for the first time ordisclosed a 100% or greater change in previously announced mineral resources or mineral reserves. This provision has beenexpanded so as to require that an independent technical report also be filed by an issuer if that disclosure is made in any short formprospectus, information or proxy circular, offering memorandum, rights offering circular, annual information form, annual report,directors' circular, take-over bid circular or other document. Producing issuers are required to provide technical reports in the samecircumstances but the qualified person preparing the technical report is not required to be independent.
12. Disclaimer
The CSA received a number of comments expressing concern about the increased exposure, responsibility and consequent liabilityof a qualified person involved in disclosure. A qualified person is responsible for preparing the technical report and providingscientific and technical advice in accordance with applicable professional standards. This is unchanged by the proposed NationalInstrument. The proper use of the technical report and other scientific and technical information provided by the qualified person isthe responsibility of the issuer and its directors and officers. The CSA recognize that the qualified person will need to rely oninformation prepared by legal and other experts concerning matters outside of the expertise of the qualified person. For that reason,the proposed National Instrument contains a new section with permits the author of the technical report to include a disclaimerregarding reports, opinions or statements of legal or other experts relied upon by the qualified person in preparing the technical report.
13. Publication of Name of Qualified Person
The 1998 proposed Instrument required all written disclosure to name the qualified person who prepared or supervised the preparationof the underlying information. The CSA received a number of comments expressing concern about the increased exposure of thequalified person. The proposed National Instrument has been revised so that it no longer requires the name of the qualified personto be published in news releases.
14. Site Inspection
The 1998 proposed Instrument included a requirement that each qualified person involved in the preparation of the technical reportinspect the property that is the subject of the technical report. The CSA have revised this requirement so that only one qualifiedperson is required to visit the site.
15. Certificate
The form of certificate required to be filed with the technical report has been revised to require that the qualified person disclose anyprior involvement with the property that is the subject of the technical report and disclose any factors that would make the qualifiedperson not independent for purposes of the proposed National Instrument. In addition, the qualified person must certify that thetechnical report has been prepared in conformity with generally accepted Canadian industry practice.
Companion Policy
1. Interpretation
The proposed Policy has been revised to move the sections providing guidance on the interpretation of the terms "mineral resource"and "mineral reserve" (including the categories of those definitions) into the Interpretation section of the proposed National Instrument.
2. Industrial Minerals
The guidelines for disclosure regarding industrial minerals have been amended to conform with the guidelines of the CIM StandingCommittee. The new guidelines do not include a requirement that sales contracts be in place in order for an industrial mineral depositto be classified as a mineral reserve.
3. Guidelines for Exploration and Mineral Resource and Mineral Reserve Estimates
The 1998 proposed Policy included guidelines for exploration and estimates of mineral resources and mineral reserves. The CSAhave determined that guidelines for exploration are appropriately established by industry and have accordingly deleted theseprovisions from the proposed Policy and have instead included an instruction in the proposed Form encouraging qualified personsto follow the Best Practices Guidelines.
Transition
The CSA anticipate that the proposed National Instrument will come into effect in December 2000. No transitional measures areproposed at this time.
The coming into force of the proposed National Instrument would not itself necessarily trigger an immediate obligation to file atechnical report prepared in accordance with the proposed National Instrument. For most issuers affected by the proposed NationalInstrument, the requirements concerning technical reports would first apply in connection with an annual report, annual informationform or preliminary prospectus filed after the National Instrument comes into effect. In some cases these requirements would applyearlier, for example, in connection with disclosure of new or materially changed estimates of mineral resources and mineral reserveson a property material to the issuer, after the coming into force of the proposed National Instrument.
Issuers are urged to begin taking into account the proposed requirements, particularly in connection with the preparation of technicalreports on which issuers may seek to rely after implementation of the National Instrument. Subject to any further notice to thecontrary, a technical report prepared after the date of publication of this Notice in accordance with the proposed National Instrument(including use of terminology set out in the proposed National Instrument) will be considered to comply with NP 2A.
Comments
Interested parties are invited to make written submissions with respect to the proposed National Instrument. Submissions receivedby May 24, 2000 will be considered.
Submissions should be sent in duplicate to:
British Columbia Securities CommissionAlberta Securities Commission
Saskatchewan Securities Commission
The Manitoba Securities Commission
Ontario Securities Commission
Office of the Administrator, New Brunswick
Registrar of Securities, Prince Edward Island
Nova Scotia Securities Commission
Securities Division, Newfoundland and Labrador
Registrar of Securities, Northwest Territories
Registrar of Securities, Yukon Territory
Registrar of Securities, Nunavut
c/o John Stevenson, Secretary
Ontario Securities Commission
20 Queen Street West
Suite 800, Box 55
Toronto, Ontario
M5H 3S8
E-mail: [email protected]
Submissions should also be addressed to the Commission des valeurs mobilieres du Quebec as follows:
Claude St Pierre, SecrétaireCommission des valeurs mobilières du Québec
800 Victoria Square
Stock Exchange Tower
P.O. Box 246, 17th Floor
Montreal, Quebec
H4Z 1G3
E-mail: [email protected]
A diskette containing the submissions (in DOS or Windows format, preferably Wordperfect) should also be submitted. As securitieslegislation in certain provinces requires that a summary of written comments received during the comment period be published,confidentiality of submissions cannot be maintained.
Questions may be referred to any of:
Adrianne Rubin HawesSenior Legal Counsel
British Columbia Securities Commission
Telephone: (604) 899-6645
E-mail: [email protected]
Wayne Redwick
Director, Corporate Finance
British Columbia Securities Commission
Telephone: (604) 899-6699
E-mail: [email protected]
Terry Macauley
Mining Consultant
British Columbia Securities Commission
Telephone: (604) 899-6723
E-mail: [email protected]
Agnes Lau
Deputy Director, Capital Markets
Alberta Securities Commission
Telephone: (780) 422-2191
E-mail: [email protected]
Stephen Murison
Legal Counsel
Alberta Securities Commission
Telephone: (403) 297-4233
E-mail: [email protected]
Kathy Soden
Director, Corporate Finance
Ontario Securities Commission
Telephone: (416) 593-8149
E-mail: [email protected]
Doug Welsh
Legal Counsel, Corporate Finance
Ontario Securities Commission
Telephone: (416) 593-8068
E-mail: [email protected]
Hugh Squair
Technical Consultant, Corporate Finance
Ontario Securities Commission
Telephone: (416) 593-8054
E-mail: [email protected]
Pierre Martin
Legal Counsel
Commission des valeurs mobilières du Québec
Telephone: (514) 940-2199 (ext. 4557)
E-mail: [email protected]
Proposed National Instrument
The texts of the proposed National Instrument, Companion Policy and Form follow, together with footnotes that are not part of theNational Instrument and Companion Policy but that have been included to provide background and explanation.
DATED March 24, 2000.
APPENDIX A
LIST OF COMMENTS RECEIVED ON 1998 PROPOSED RULE AND 1998 PROPOSED POLICY
1. | Association professionnelle des géologues et desgéophysiciens du Québec (APGGQ) by letterdated November 6, 1998 |
2. | Association of Professional Engineers &Geoscientists of Saskatchewan (APEGS) byletter dated October 27, 1998 |
3. | Association of Professional Engineers andGeoscientists of the Province of British Columbia(APEGBC) by letter dated October 29, 1998 |
4. | Avalon Ventures Ltd. by letter dated September10, 1998 |
5. | Miron Berezowsky M.Sc., P. Eng. by letter datedOctober 30, 1998 |
6. | Bottrill Geological Services by letter datedOctober 30, 1998 |
7. | British Columbia Ministry of Energy and Mines(BCMEM) by letter dated October 28, 1998 |
8. | Canadian Institute of Mining, Metallurgy andPetroleum (CIM) by letter dated November 13,1998 |
9. | Cominco Ltd. by letter dated October 30, 1998 |
10. | R. E. Gale PhD.Eng. by letter dated July 20,1998 |
11. | Neil N. Gow by letter dated October 28, 1998 |
12. | Halton Association of Geoscientists (HAG) byletter dated November 9, 1998 |
13. | David Harquail by letter dated December 8, 1998 |
14. | Inco Limited by letter dated October 30, 1998 |
15. | Jonpol Investments Ltd. by memorandum datedJuly 20,1998 |
16. | Pierre C. Labrèque by letter dated October 28,1998 |
17. | Lang Michener Lawrence and Shaw Barristers &Solicitors by letter dated October 29, 1998 |
18. | Lang Michener Lawrence and Shaw Barristers &Solicitors, on behalf of the British Columbia &Yukon Chamber of Mines (BC/Yukon) by letterdated October 30, 1998 |
19. | Mammoth Geological Ltd. by letter datedOctober 30, 1998 |
20. | MPH Consulting Limited by letter datedSeptember 16, 1998 |
21. | Natural Resources Canada, Minerals and MetalsSector by letter dated September 25, 1998 |
22. | Orinoco Gold Inc. by letter dated August 31,1998 |
23. | Osler Hoskin & Harcourt Barristers & Solicitorsby letter dated November 11, 1998 |
24. | Owen Owens Prof. Geosc., Retired (former V.P.Expl. Cominco Ltd.) by letter dated September 1,1998 |
25. | Pan American Silver Corp. (PanAm) by letterdated November 3, 1998 |
26. | John T. Postle by letter dated October 30, 1998 |
27. | Professional Engineers Ontario (PEO) by letterdated September 10, 1998 and by letter datedNovember 11, 1998 |
28. | Prospectors & Developers Association of Canada(PDAC) by letter dated November 12, 1998 |
29. | Quebec Prospector's Association (The) (QPA) byletter dated November 5, 1998 |
30. | Reid & Company, Barristers and Solicitors byletter dated October 30, 1998 |
31. | Toronto Stock Exchange (TSE) by letter datedNovember 2, 1998 |
32. | University of Nevada at Reno, Dr. PierreMousset-Jones, Professor of Mining Engineering(U of N) by letter dated November 30, 1998 |
33. | Vancouver Stock Exchange (VSE) by letter datedOctober 30, 1998 |
34. | Victor Erickson, P.Eng. V.F. EricksonConsultants Ltd. dated October 29, 1998 |
35. | Oliver Vagt, Minerals and Metals Sector,Minerals Division Natural Resources Canadadated October 30, 1998 |
36. | A. James McCann, Chairman, Industrial MineralsDivision of CIM dated November 2, 1998 |
APPENDIX B
SUMMARY OF COMMENTS RECEIVED ON 1998 PROPOSED NATIONAL INSTRUMENT AND 1998 PROPOSED POLICY RESPONSES OF THE CSA
The CSA received 36 submissions on the 1998 proposed Instruments.
The CSA considered the submissions received and thank all commenters for providing their comments.
The following is a summary of the comments received, together with the CSA's responses, organized by topic. The summary beginswith topics concerning which comment was specifically requested in the 1998 Notice and then addresses topics covered bysubmissions received in response to the general request for comment on the 1998 proposed Instruments.
A. Impact of Requirement for Qualified Person
The CSA specifically requested comment on whether:
(a) the requirement that disclosure concerning exploration, development and mining operations reflect the views of a"qualified person" would impose excessive costs on junior issuers and the extent of those costs;
(b) the requirement would negatively affect timely disclosure by issuers of all material changes; and
(c) there are alternative measures that should be considered to ensure equivalent investor protection.
The CSA received a number of comments specifically in response to the request for comments on this matter. Thecommenters were generally supportive of the requirement for the involvement of a "qualified person". With regard to (a)it was agreed by most commenters that the requirement would impose additional costs on those issuers that did not alreadyhave a qualified person assisting in these matters. One commenter expressed the view that this requirement would providea deterrent to unscrupulous operators and opportunists and accordingly the additional cost was warranted.
A concern was expressed regarding the requirement in the 1998 proposed Instruments that all qualified persons involvedin the report inspect the site. The commenter stated that this would lead to excessive expense. The CSA have amendedthe requirement for site inspection (now found in part 7 of the proposed National Instrument) to make it clear that one of thequalified persons involved in the preparation of the technical report is required to visit the site. In addition, section 5.2 ofthe Policy states the CSA's recognition that there may be circumstances in which it is not possible or beneficial to conducta site visit. In these cases application can be made for an exemption from the requirement.
A commenter suggested that a qualified person should not be required to be involved in disclosure of results frompreliminary exploration programs or assay results. The CSA considered this suggestion but determined that it would notbe appropriate to permit an exception for these situations as disclosure of this type of information often has an impact onmarket activity and should be based on a qualified person's work.
Most commenters felt that the improvement in the quality of the disclosure expected to result from the increased participationof qualified persons would be worth the additional costs.
With regard to (b) and the effect on timely disclosure, most commenters recognized that the new requirements might maketimely disclosure more difficult; however the commenters were supportive of the requirements. Many commenters notedthat the provisions permitting disclosure of material changes, in some instances, without the concurrent filing of a technicalreport, would help alleviate some of the timely disclosure concerns. In particular, most supported the 30 day extension forfiling technical reports in connection with disclosure of mineral resources and mineral reserves other than disclosure madein ordinary course continuous disclosure filings or offering documents.
A number of commenters were concerned that as a practical matter the qualified person might be out of contact in the fieldand unable to "support" the public disclosure before it was made. The CSA considered these comments and concluded thatsatisfactory steps could generally be taken by an issuer so that this would not be a practical problem.
Commenters agreed that the involvement of a qualified person was an appropriate manner in which to improve the qualityof disclosure and the CSA did not receive any suggestions on alternative measures to ensure equivalent investor protection.
B. Extension of Time Period for Filing Reports
The CSA specifically asked for comments on subsection 3.2(3) of the 1998 proposed Instrument (now subsection 4.2(4))which relaxes the general requirement that a technical report be filed not later than the filing of the document that it supportsand permits the technical report, in certain circumstances, to be filed up to 30 days after disclosure is made. The CSAreceived several comments on this matter. A number of commenters were concerned that this provision could beproblematic as there might be situations when the disclosure did not correspond to the information in the technical reportfiled later. The CSA have responded to this concern by adding a new provision to the proposed National Instrument(paragraph 4.2(4)(b)) requiring disclosure that reconciles any material differences between a subsequently filed technicalreport and the earlier disclosure.
Some commenters felt that provision should be made for extension of the 30 day period in certain circumstances. The CSAconsidered this and determined that no change would be made on the basis that in most instances, the 30 day period willbe sufficient.
A new provision has been added (subsection 4.2(5)) which provides an extension of the time period for filing of a technicalreport that supports disclosure in an annual report or annual information form concerning a new material property if theproperty first becomes material to the issuer less than 30 days before the filing of the annual report or annual informationform. The technical report must be filed within 30 days of the date that the property first becomes material to the issuer.In addition, as discussed under "D. Requirements for Filing an Independent Technical Report", a new provision has beenadded (subsection 4.2(6)) permitting the technical report required to be filed to support disclosure in a directors' circularrelating to a take-over bid, to be filed up to 3 business days prior to expiry of the take-over bid.
C. Attributes and Exemption of Senior Resource Issuer (now "producing issuer")
1. Definition
A number of comments were received on the definition of senior resource issuer (now "producing issuer"). Certain of thecomments dealt with the fact that the definition would cause a practical problem for issuers close to the threshold who wouldfall outside the definition if revenues were to dip below the cap due to a fall in metal prices. In response to this commentthe CSA have amended the definition so that instead of the test being based on annual revenue for each of the three mostrecent financial years, the test is to be met in the most recent financial year and in the aggregate over the three most recentlycompleted years.
While many commenters believe that gross annual revenues of $50 million is an appropriate measure of seniority othersargued that this threshold was too high and that gross revenues of $25 million would be an appropriate test. The CSAconsidered the suggestions made and performed their own review of statistical data and concluded that gross annualrevenues from mining operations of $30 million would be the appropriate test for a producing issuer. The definition has beenamended accordingly.
A number of commenters suggested that gross revenue was not a good indicator of seniority and that market capitalizationor net assets might be better. One commenter suggested that eligibility to use a short form prospectus would be anappropriate indicator of producing issuer status. The CSA considered these comments but determined not to include marketcapitalization, short form prospectus eligibility or gross assets as an indicator of seniority as these tests would allowspeculative pre-production companies to be producing issuers for purposes of the proposed National Instrument. The CSAare of the view that only those issuers that have revenue generated from mining operations should be exempted from theindependent reporting requirements under the proposed National Instrument. Those issuers meeting the mining revenuetest have a mining operation which is of a size where the issuer is likely to have qualified professional staff, appropriatestructures for reporting and review and would be producing information for operating purposes, all of which support thereliability of the information.
2. Exemption of Senior Resource Issuer (now "producing issuer")
The CSA asked for comments on the provisions which relieve producing issuers of the obligation to have an independentqualified person prepare the technical report that is required to be filed.
A number of commenters felt that the exception for producing issuers was philosophically unsound. In their view largeissuers are not necessarily technically more proficient than smaller issuers. Some commenters also misunderstood andthought that producing issuers were being relieved from the obligation to file any technical reports. The proposed NationalInstrument only relieves the producing issuer from the requirement to file an independent technical report in connection withthe filing of a document that discloses for the first time mineral resources or mineral reserves on a material property ordiscloses a 100% or greater change in mineral resources or mineral reserves from the most recently filed independenttechnical report. In these circumstances the producing issuer must still file a technical report but it can be prepared by anon-independent qualified person.
The CSA have considered the concerns expressed and determined that it is appropriate to provide this limited relief forproducing issuers. The rationale for this exemption is that an issuer with substantial revenue from mining operations willtypically have developed professional expertise and be exposed to continuing external monitoring, both viewed by the CSAas motivators for the maintenance of high standards for disclosure. In addition, the production activity substantiates, to acertain degree, the previously reported estimates of mineral resources and mineral reserves. The added protection ofindependent reporting is not therefore viewed by the CSA as necessary.
D. Requirements for Filing an Independent Technical Report
The CSA asked for comments on the requirement in the 1998 proposed Instrument that an independent technical report befiled with the regulators to support certain disclosure. A number of comments were received. This requirement was clearlycontroversial. Each of the commenters recognized that there were some situations in which the technical report should beprepared by an independent qualified person, such as for listings or public financings. However, a number of commentersexpressed the view that the independence requirement should not extend to disclosure documents such as offeringmemoranda and directors' circulars in connection with take-over bids. One commenter did not believe that independenttechnical reports should be required in connection with the reporting of mineral reserves.
The CSA recognize the difficulties that could be encountered in the production of an independent technical report toaccompany a directors' circular in a hostile take-over bid situation. The CSA consider, however, that if the directors' circularcontains new material information on mineral resources or mineral reserves, it should be supported by a technical report.The proposed National Instrument has been amended to add a provision (subsection 4.2(6)) permitting the technical reportin this situation to be filed up to 3 business days prior to the expiry of the take-over bid. Furthermore the technical reportfiled in this regard need not be independent unless the directors' circular discloses mineral resources or mineral reservesfor the first time on a material property or at least a 100% change in mineral resources or mineral reserves from the lastindependent report filed.
A commenter was concerned that the requirement to file independent technical reports to support mineral reserve disclosurewould encourage issuers to stay in the mineral resource category. The CSA do not agree with this comment. They expectthat issuers that have mineral reserves will be willing to get an independent technical report to disclose the mineral reserves.
It was suggested that the regulators could ask for independent reports when they felt that it was warranted. The CSA areof the view that this would lead to inconsistency and uncertainty. The CSA have determined that the proposed NationalInstrument will mandate the circumstances in which independent technical reports are to be filed and allow for exemptionsto be granted in appropriate circumstances.
A number of commenters were concerned about the requirements for independent technical reports to be filed by a juniorissuer that is involved in or has agreed to become involved in a joint venture on a property with a producing issuer. It wasreported that frequently in these circumstances a producing issuer would perform work on a property which would bematerial to the junior issuer but not to the producing issuer. In this situation the junior issuer would have a disclosureobligation and a further obligation to file a technical report. In many cases the only available technical report would be oneprepared by the staff of the producing issuer. That qualified person would not be independent for purposes of the proposedNational Instrument and the junior issuer would be forced to engage an independent qualified person to prepare a technicalreport. The CSA recognize the difficulty that this can cause. The CSA also recognize that there will be factors in the jointventure relationship which support the reliability of the information prepared by the producing issuer participant in the jointventure. Accordingly, the CSA have amended the proposed National Instrument to provide that employees of a producingissuer are independent vis a vis the junior issuer that is or has agreed to be in a joint venture on the property with theproducing issuer for purposes of preparing a technical report on the property under the proposed National Instrument. Thetechnical report filed must be prepared in accordance with Form 43-101F1.
PART II. OTHER COMMENTS ON THE NATIONAL INSTRUMENT
A. Scope of Qualified Person's Liability
A number of commenters asked for clarification of the scope of the qualified person's liability. The qualified person isresponsible for preparing the technical report and providing scientific and technical advice in accordance with applicableprofessional standards. This is unchanged by the proposed National Instrument. The proper use of the technical report andother scientific and technical information provided by the qualified person is the responsibility of the issuer and its directorsand officers. The onus is on the issuer and its directors and officers to ensure that published disclosure is consistent withthe contents of the related technical report or advice. The qualified person should not be liable for a misquote or misuseof the technical report or other scientific and technical information provided by the qualified person to the issuer, unless thequalified person has consented to the disclosure which contains the misquote or the misuse.
One of the causes of concern was the requirement that the technical report and certain written disclosure include adiscussion of the extent to which exploration rights and mineral resource and mineral reserve estimates could be affectedby environmental, legal, title and political issues. The responsibility of the qualified person does not extend to opining onlegal, environmental, political or other issues which are outside that person's area of expertise. In order to clarify this, theCSA have amended the proposed National Instrument to include a new section (6.3), which permits the author of thetechnical report to rely on the statements or opinions of others for information concerning legal, environmental, political andother non-technical matters and to include a disclaimer to this effect.
B. Mineral Projects and the Title of National Instrument 43-101
A commenter suggested that the term "mineral projects" should encompass mineral (i) exploration; (ii) development; and(iii) producing properties and that the title of the proposed National Instrument should be amended to be "Standards ofDisclosure for Mineral Projects". The proposed National Instrument has been amended to change the title and to includea definition of "mineral projects" to replace the definition of mining project.
C. Part 1 - Application, Definitions and Interpretation
1. Section 1.1- Application
A number of commenters expressed concern regarding the scope of the application of the proposed National Instrument.They requested that the section be amended to clearly state that the proposed National Instrument applies only to "scientificand technical" disclosure, not other disclosure. This section has been amended to state that the proposed NationalInstrument "applies to all oral statements and written disclosure of scientific or technical information including disclosureof a mineral resource or mineral reserve made by or on behalf of an issuer in respect of a mineral project of the issuer".
2. Definition of "adjacent property"
A commenter was concerned that the definition of "adjacent property", which sets a 2 kilometre limit, is inappropriate andthat the boundary should be left to the discretion of the qualified person. Another commenter suggested that the wordadjacent is commonly understood and did not need to be defined in the proposed National Instrument.
In response to the first comment, the CSA are not willing to leave the definition without a geographic guideline. Accordingly,no change has been made in this regard. In response to the second comment, the CSA disagree with the commenter andbelieve that, without a definition, "adjacent" might be interpreted as meaning "adjoining".
3. Definition of "disclosure"
A number of commenters expressed concern that the definition of "disclosure" is too broad as it includes oral statementsmade by or on behalf of an issuer. It was suggested that the proposed National Instrument should only apply to disclosureintended to be filed under securities legislation.
The CSA do not agree with these comments. The CSA intend that parts of the Instrument apply to all disclosure includingoral disclosure statements(see sections 2.1 and 2.2) because oral statements by the issuer concerning mineral projects maybe relied upon by market participants as a basis for investment decisions and must therefore be reliable and in conformitywith standards.
A commenter was concerned that the definition of disclosure would include assessment reports and other reports submittedto government agencies other than securities regulators. While the CSA are of the view that these reports would not becaught by the definition as they are not "intended to be, or reasonably likely to be, made available to the public", in orderto clarify this, the definition has been amended to specifically exclude these documents.
4. Definition of "document"
A commenter noted an inconsistency between the definition of "document' and the way in which that word is used in theproposed National Instrument. In response to this comment the proposed National Instrument has been revised to deletethe definition of "document" and include a definition of "written disclosure".
5. Definition of "exploration information"
A commenter suggested that the word "drilling" be added to this definition. This change has been made.
Another commenter suggested that the words "prospect" and "deposit" used in this definition be defined. The CSA believethat these terms are well understood in the mining industry and, accordingly, no change has been made in response to thiscomment.
6. Definition of "feasibility study"
Comments were received regarding the definition of "feasibility study". A commenter suggested that the definition be revisedto include a standard for the quality of the study, such as a study in a form sufficient to satisfy the assessment requirementsof international financial institutions. The CSA considered this comment but determined not to amend the definition in thisregard as it is the responsibility of the qualified person to ensure that he or she is satisfied that the feasibility study issufficiently comprehensive to serve as a basis for a decision on production.
It was suggested by a number of commenters that the definition should be amended to expand the factors considered toinclude socio-economic factors and legal and other matters. The CSA agree that there are many factors to be consideredand accordingly the definition has been amended to add "other relevant" factors.
7. Definition of "geoscientist"
Comments were received suggesting that the definition of "geoscientist" be amended to require a standard of qualificationor professionalism. A commenter recommended the inclusion of the words "qualified by a recognized university orequivalent academic institution in the field of earth sciences".
The CSA determined that no change should be made to the definition of "geoscientist". This definition has been includedto allow the collective reference to geologists, geochemists and geophysicists. The CSA are sensitive to the substance ofthese comments because at present, there are no self-regulatory associations for geoscientists in Ontario, Quebec, NewBrunswick or in Nova Scotia and certain foreign jurisdictions. This issue was addressed during the CSA's consideration ofthe definition of "professional association" (see 9 below).
8. Definition of "preliminary feasibility study"
Commenters found the definition of "preliminary feasibility study" unnecessarily complicated and confusing. All of thecomments received on this matter noted that the definition failed to define the critical role of these studies in the businessplan of an issuer which is to determine if all or part of the resources of a deposit may be classified as mineral reserves.
The CSA considered these comments but determined that no change would be made to the definition because it is theresponsibility of the qualified person to ensure that he or she is satisfied that the preliminary feasibility study is sufficientlycomprehensive to support an estimation of mineral reserves.
9. Definition of "professional association"
Comments were received concerning the definition of "professional association". Of greatest concern was the fact thatgeoscientists at present need not or cannot be members of a professional association, as defined, in Ontario, Quebec orcertain other provinces or in certain foreign jurisdictions. Accordingly, these people could not be "qualified persons" forpurposes of the Instrument. It was felt however by most commenters that only associations created by statute should berecognized as professional associations because these associations establish and maintain professional standards throughtheir powers of self regulation.
A number of changes have been made to the definition in response to the comments. Under the amended definition, onlyassociations that have been given authority or recognition by statute are professional associations. However for a periodof two years from the date of publication of the National Instrument in final form, geoscientists in a Canadian jurisdictionthat does not have a statutorily recognized self-regulatory association will be included in the definition of professionalassociation, enabling them to be "qualified persons" during this period.
10. Definition of "qualified person"
The CSA received a number of comments regarding the definition of "qualified person". Many commenters were concernedthat the definition went beyond the concept of "competent person" established under the Australasian Code for Reportingof Mineral Resources and Ore Reserves and included corporations and other legal entities who could not be disciplined bythe self-regulatory organizations whose members are individuals. The CSA agree with this comment and have amendedthe definition so that only individuals can be recognized as qualified persons.
Many commenters suggested that it would be appropriate to use the competent person concept used in other places in theworld. The CSA have resolved to use a concept which is different from the concept of "competent" used elsewhere in theworld.
A number of commenters questioned the experience requirement, some suggesting that 5 years of experience was notsufficient, others suggesting that 5 years of experience was sufficient provided that the experience was current and anothersuggesting the appropriate number of years of experience should be left to the professional associations governing qualifiedpersons. Most commenters felt that the experience should be relevant to the particular mineral project. The CSA havemaintained the 5 year requirement but have amended the definition to require that the experience be relevant to the subjectmatter of the mineral project. The CSA are not comfortable with leaving the determination of requisite experience to variousprofessional organizations. Issuers need to be able to look to the proposed National Instrument for the appropriate standard.
One commenter suggested that the qualified person requirement is unnecessary and burdensome for producing issuers andthat the requirement should only be imposed on issuers which do not have the required expertise within the company. TheCSA have retained the requirement of qualified person involvement for all issuers. The CSA are of the view that theinvolvement of qualified persons will enhance the integrity of the information provided to the investing public.
11. Definitions of "mineral resources" and "mineral reserves"
Comments were received concerning the definitions of "mineral resources" and "mineral reserves" (including the categorieswithin those definitions). Most of the comments suggested that the definitions should either conform exactly with thedefinitions of the CIM Ad Hoc Committee or with some other international code such as the JORC Code. Some commenterssuggested that the definitions adopted by the Canadian Institute of Mining, Metallurgy and Petroleum could be incorporatedby reference. Other comments made detailed suggestions for revisions to the definitions. As discussed in the Notice, theCSA spent a great deal of time considering the definitions of mineral resources and mineral reserves and met several timeswith representatives of the CIM Standing Committee and representatives from industry and other securities regulatoryauthorities. The definitions included in the proposed National Instrument reflect the definitions currently generally acceptedin the Canadian mining industry. The definitions are consistent with the definitions adopted by the CIM Ad Hoc Committeein 1996 and have been changed only to conform to legislative drafting standards or to reflect developments in the industrysince the adoption of the Ad Hoc Committee definitions. The CSA recognize that this is an evolving area and changes areexpected to be proposed by industry following a completion of work currently underway by the CIM and internationally bythe Council of Mining and Metallurgical Institutes.
Certain specific changes which have been made to the definitions are noted below.
(a) the deletion of the category of possible reserves;
(b) the definition of "measured mineral resource" includes a requirement that there be sufficient confidence in theestimate that it can be used as a basis for detailed mine planning;
(c) the definition of "proven mineral reserve" has been amended to the effect that only a deposit that is being mined orbeing developed may be classified as a proven mineral reserve. The revised definition is consistent with the definitionof the CIM Ad Hoc Committee,
(d) the guidance concerning the interpretation of the defined terms has been moved from the proposed Policy into theproposed National Instrument so that all of the provisions regarding interpretation of these terms can be found insections 1.3 and 1.4 of the proposed National Instrument;
(e) the word "mineral" has been added to each of the terms as many commenters felt that the words resource andreserve were too generic and needed the qualifier;
(f) the term quantity is used throughout the definitions and the proposed National Instrument rather than tonnage anda definition of quantity has been added to make it clear that this term refers to either tonnage or volume dependingon which term is standard in the mining industry for the type of mineral; and
(g) the Instrument has been amended to permit foreign issuers to file a report using the mineral resource and mineralreserve classifications of certain foreign codes as long as a reconciliation to the classifications and categories in theInstrument is included (section 6.4). A provision has also been added to the proposed Form (Instruction 3 of Item18 of Form 43-101F1) which permits issuers incorporated or organized in a foreign jurisdiction to file a technicalreport that utilizes the mineral resource and mineral reserve categories of the Australasian Code for Reporting ofMineral and Ore Reserves (the "JORC Code"), the mineral classification system and definitions approved by TheInstitution of Mining and Metallurgy in the United Kingdom (the "IMM System") or the circular published by the UnitedStates Bureau of Mines/United States Geological Survey entitled "Principles of a Resource/Reserve Classificationfor Minerals" ("USGS Circular 831"), provided that a reconciliation is filed with the technical report.
12. Definitions to be Added
A commenter suggested that a definition of junior resource issuer be added and that these issuers be exempt from certainobligations to obtain information or technical reports from qualified persons. The suggestion was to exempt issuers witha market capitalization of less than $10 million.
The CSA do not agree with the suggestion. Small issuers and their investors are often the most vulnerable and for thatreason the requirements of the proposed National Instrument are particularly important to them.
A commenter suggested that a definition of "non-destructive sampling" be added to the Instrument and used wheneversampling and analysis is used. The CSA are of the view that specific references to this term are not necessary.
A commenter suggested that the definition section be amended to include definitions of such terms as "must" and "should".These terms are interpreted in the local legislation and so will not be defined in the proposed National Instrument. Thissame commenter also suggested that verification guidelines should be set out in the proposed National Instrument. TheCSA believe that the appropriate forum for the development and publication of verification guidelines is an industryassociation.
13. Section 1.5- Interpretation (formerly section 1.3)
A number of commenters suggested that subsections (1),(2) and (3), which interpret the phrase "affiliated entity", shouldbe deleted. The CSA have retained these subsections as they contain a broader concept than is currently in securitieslegislation in that they extend to unincorporated entities. These subsections are identical to interpretation sections foundin other Instruments and Rules.
14. Subsection 1.5(4)- Non-Independence of Qualified Person (formerly subsection 1.3(4)
The CSA received a number of comments concerning the provisions stipulating when a qualified person is not independentfor purposes of the proposed National Instrument. A commenter asked why the fact that a qualified person at a mineralconsulting firm sits on the board of directors of an issuer should disqualify another qualified person at the same firm fromdelivering an independent report. The CSA are of the view that board membership may in fact affect the ability of othermembers of the same firm to render independent advice. The provisions of the proposed National Instrument were draftedto be consistent with the comparable provisions of the Ontario Securities Commission's Policy 9.1 which prohibit a firm frompreparing a valuation if a valuator at the firm sits on the board of the issuer.
The CSA received a number of comments regarding the provisions of paragraph (b) (now (d) which stated that a qualifiedperson who receives a substantial portion of his or her annual income in the prior year from one client is not independentof that issuer. It was suggested that it is not unusual for a particular consultant to work for an issuer for a substantial periodof time during which he or she becomes increasingly knowledgeable with respect to the issuer's properties. The CSAacknowledge that a qualified person who is a sole practitioner or involved in a small or medium sized firm and who isactively managing a work program may receive a substantial portion of his or her income from a particular issuer. Thissituation may continue if, for example, the issuer chooses to retain the same qualified person to continue work on furtherstages of the work program in light of the qualified person's experience and knowledge of the mineral property. The CSAare of the view, however, that the longer the situation prevails the less independent the relationship between the qualifiedperson and the issuer becomes. At some point the CSA consider that, where independence is required, another qualifiedperson must be retained. Accordingly, the CSA have amended this paragraph to provide that the qualified person is nolonger independent of a particular issuer if he or she receives the majority of his or her income from the issuer in the threeyears preceding the date of the technical report.
A commenter asked for a definition of the phrase "reasonable expectation of future employment". This phrase has beenremoved from the Instruments.
A commenter raised concerns with the provisions of paragraph 1.3(4)(d) (now section 1.5(4)(c)) which could be read toinclude any person involved in the preparation of the report including those who handle the assay samples, type themanuscript or draft the figures. The CSA have made a number of changes to this subsection to address the concernsraised.
The same commenter was also concerned that paragraph (d) would apply to a qualified person who accepted shares insettlement of debt. In this limited situation, if the issuance of shares does not affect the qualified person's ability to renderindependent advice, application can be made for an exemption. A related comment concerns the ownership of incentivestock options by the qualified person. The CSA view these options in the same way as they view shares. Accordingly, noamendment has been made in this regard and ownership or expected ownership of any securities of the issuer will resultin non-independence.
D. Part 2 - Disclosure
1. All Disclosure
It is apparent that there was a great deal of confusion over what was intended in Part 2 of the 1998 proposed Instrument.Some commenters mistakenly believed that this Part dealt with requirements for inclusion in the technical report. Othercommenters mistakenly believed that the qualified person was responsible for the disclosure referred to in this Part. Anothercommenter did not appreciate that the 1998 proposed Instrument was intended to apply to oral statements.
A number of changes have been made to this Part in an attempt to clear up the confusion. Firstly, Part 2 has been dividedinto two parts, the first dealing with all disclosure, both oral and written, and the second (now Part 3) including additionalprovisions applicable only to written disclosure.
An issuer making disclosure of a scientific or technical nature concerning mineral projects on properties material to theissuer, must base that disclosure on a technical report or other information prepared by or under the supervision of aqualified person. In addition, if the issuer wants to make written disclosure of mineral resources or mineral reserves, theproposed National Instrument stipulates what must be included in the written disclosure so that readers can expectconsistent disclosure and regulators will be assured that the written disclosure is complete and not misleading.
Part 3 of the proposed National Instrument requires that certain information be included in written disclosure concerning amineral project on a material property. A commenter requested that the term "material" be defined. The CSA does notbelieve this is appropriate. The securities legislation in each jurisdiction provides guidance on interpreting materiality andthe proposed Policy contains further guidance. Materiality is a relative term and can only be determined on the basis of theparticular facts and in the context of the particular issuer.
A commenter asked that the word "immediate" be added before the word supervision in the last line of what is now section2.1. The CSA do not agree with this comment as the addition of that word makes the provision too restrictive.
A commenter requested a number of specific changes to the mineral reserve and mineral resource disclosure requirementsthat are now part of section 2.2. As most of these comments were, in effect, comments concerning the definitions of mineralreserve and mineral resource or the manner of determining these, changes have not been made. This section has, however,been revised by deleting subparagraph 2.1(b)(ii), which required a statement that only reserves have demonstratedeconomic viability. The CSA had concerns that some readers might find this statement confusing. Instead, a newparagraph (e) has been added to section 3.4 (formerly 2.5) to the effect that mineral resources which are not mineralreserves do not have demonstrated economic viability.
A commenter wondered whether disclosure could be based on oral statements or information prepared by a qualified personor whether disclosure must always be supported by a technical report. The proposed National Instrument makes clear thatdisclosure does not need to be based on a technical report and can be based on oral statements of a qualified person unlessthe disclosure appears in one of the documents listed in section 4.2 (formerly section 3.2).
A commenter suggested that it was necessary to refer to the qualified person on whose information the disclosure wasbased. The CSA consider that the requirement for identification of the qualified person in major written disclosuredocuments is sufficient and have not extended the requirement to oral disclosure.
2. Section 3.1 (formerly section 2.2)- Written Disclosure to include the Name of Qualified Person
Concern was expressed over the requirement to name the qualified person in all written disclosure, including news releases.While the CSA believe that the terminology and background information contained in a news release should generally beconsistent with such disclosure required in other written disclosure, they agree that the added detail of the identity of thequalified person is less crucial in a news release. This requirement has been amended to state that qualified persons donot need to be named in news releases.
A commenter suggested that only those qualified persons who have prepared a technical report required to be filed shouldbe named in written disclosure. In fact all disclosure of a technical or scientific nature must be based on informationprepared by or under the supervision of a qualified person, not just the type of disclosure that triggers the requirement tofile a technical report.
A number of commenters noted that the 1998 proposed Instrument amended the provisions of the current NP22 whichrequire that technical facts and opinions be quoted from verbatim. The CSA are of the view that the accuracy of thereflection of the qualified person's work is still protected by the requirements of Part 2 and Part 3. The issuer is liable forthe disclosure made and has a responsibility to ensure that it is accurate. Prudent issuers will ensure that their qualifiedperson has approved the disclosure.
3. Section 3.2 (formerly section 2.3) - Data Verification
A commenter suggested that qualified persons should be obligated to collect check samples as part of the verification. Othercommenters recommended that the proposed Instrument stipulate what verification is required. The CSA are not preparedto specify what tasks must be performed by the qualified person in carrying out his or her duties. The focus of the proposedInstruments is on the quality of information disclosed to investors, not on geoscientific field practice.
The term "verification" has been changed to "corroboration" in the proposed Instrument as the CSA are of the view that thisterm more accurately describes the process of checking data.
A commenter asked whether it was necessary to require a junior mining company that participates or has agreed toparticipate in a joint venture with a producing issuer to have its own independent qualified person carry out data verification.As noted above, the producing issuer's personnel will be considered independent of that junior issuer for the purpose ofpreparing the technical report. This commenter also asked if the verification requirement is applicable to producingproperties. The CSA are of the view that the verification requirement should apply to all properties. The nature of the dataverification will depend on the particular circumstances applicable to a property, as determined by the qualified person, andis required to be included in all written disclosure.
A commenter suggested that the proposed Instrument should require the issuer to disclose whether any aspect of the samplepreparation was done in-house. The CSA agree with this comment and has added this to paragraph (a) of section 3.2.
A number of commenters mentioned a concern regarding the relevance of historical data and the limited ability tocorroborate this data. The CSA are sympathetic with this concern and have added a new paragraph, (c) requiring disclosureof the relevance of any historical data being disclosed. In addition, a new section has been added (section 2.4) whichpermits disclosure of an historical quantity and grade estimate which does not utilize the applicable mineral resource andmineral reserve categories set out in sections 1.3 and 1.4 provided that certain disclosure is made regarding the relevanceand reliability of the estimate.
4. Section 3.3 (formerly section 2.4)-Written Disclosure of Exploration Information
A commenter suggested that the proposed Instrument should not apply the same blanket requirements to all writtendisclosure. The commenter noted that a news release is a different document from an annual information form or offeringmemorandum and as a result the CSA should consider more liberal standards for news releases. The CSA do not agreewith this comment. While a press release is certainly a different document than an annual information form, the reliabilityof the content should be the same. The CSA are of the view that it would be inappropriate to apply less stringent reliabilitystandards to news releases.
A commenter requested that the words "containing technical information" be substituted for the words "any results ofgeological, geophysical or geochemical surveys". This clause has been amended to refer to disclosure containing scientificor technical exploration information.
A commenter asked that the word "all" be inserted before the word surveys in paragraph (1)(a). The CSA do not agree withthis suggestion. The same commenter asked that the words "with a critical review of the geological model used" be addedat the end of paragraph(1)(b). The CSA are of the view that this change should not be made as technical reports do notalways depend on models, but on deposit types. This commenter also requested that the words "and a description of thequality control measures used during the execution of the work" be added to the end of paragraph (1)(c). Paragraph (c) hasbeen amended in response to this comment.
A commenter suggested that more detail should be required in this section. The CSA have decided to leave this to thediscretion of the issuer.
A commenter suggested that in paragraph(1)(c) the disclosure should not be whether the issuer or a contractor did the workbut whether the work was supervised by a qualified person. The CSA did not think that this addition was necessary in lightof the requirements in the proposed Instrument for the involvement of a qualified person. The CSA have changed thisparagraph to require a statement as to quality control measures applied during execution of the work. Item 11 of Form 43-101F1 retains the requirement that a technical report include a statement as to whether the surveys and investigations havebeen carried out by the issuer or a contractor and requires the identity of the contractor.
5. Subsection 3.3(2) (formerly subsection 2.4(2)) - Sample or Analytical Results
(i) paragraph (a)
A commenter suggested that it was not adequate to require a summary description in this paragraph as a summarycan be used to disguise poor understanding of the fundamental controls on the geological continuity of themineralization. The CSA considered this comment but determined not to make the change suggested. The CSArequire an abbreviated but accurate presentation of results but do not want to require overly long disclosure.
(ii) paragraph (b)
A commenter suggested that the words "structural controls" should be changed to "interpreted geological control".The CSA agree with this comment and accordingly this change has been made.
(iii) paragraph (c)
A commenter asked whether the CSA intended to require a "summary" or "details" as he felt that the use of bothwords in this sentence was inconsistent. The CSA agree and have amended this paragraph.
(iv) paragraph (d)
A commenter suggested that the word "factors" should replace the word "problems". This change has been made.
(v) paragraph (e)
A number of commenters had drafting comments on this paragraph. One asked that the words "and the status ofeach regarding certification" be added after the word "used". The words "particulars of any known certificate" havebeen changed to "the certification of each laboratory".
A commenter suggested that the issuer should be required to disclose whether the laboratory has any relationshipwith the issuer. This change has been made.
(vi) paragraph (f)
A number of drafting changes have been made to this paragraph in response to comments received.
A commenter requested that a new subsection be included dealing with disclosure of the results on the ongoingdeposit appraisal work, on the basis that these activities are essential components of the eventual feasibility study.The CSA do not believe that it is necessary to include the new subsection requested.
6. Section 3.4 (formerly section 2.5)- Disclosure of Mineral Resources and Mineral Reserves
(i) paragraph (a)
A new paragraph (a) has been added in response to a comment requiring the effective date of the estimate of eachcategory of mineral resources and mineral reserves to be included.
(ii) paragraph (b)
A commenter requested that the word "quality" be added after the word "grade" and that the words, "including mineralprocessing and metallurgical characteristics" be added at the end of the paragraph. The word quality has been added.As to the second comment, the CSA are of the view that no change is necessary as the impact of metallurgicalfactors is taken into account and disclosed in connection with estimates of mineral reserves (see section 1.4(3)).
(iii) paragraph (c)
A number of commenters felt that the qualified person should determine what relevant data should be included in thedisclosure. A commenter asked that the following clause be added after the word "including": "The grid celldimensions characteristic of each resource/reserve category, the various types used and their location". The CSAhave not made this change as it is of the view that the relevance of these items can be determined by the qualifiedperson and the issuer.
(iv) paragraph (d)
As noted above a number of commenters expressed a concern that the requirements in this paragraph transferliability to the qualified person for disclosure of matters normally outside the qualified person's area of expertise. TheCSA hope that these concerns have been addressed above. A disclaimer clause has been added as section 6.3.
E. Part 4 (formerly Part 3)- Obligation to File Technical Report
1. Section 4.1 - Obligation to File a Technical Report upon Becoming a Reporting Issuer
Most commenters were supportive of the requirement to file a technical report upon a company becoming a reporting issuer.Some commenters expressed concern about the additional time and expense; however other commenters and the CSAagree that this obligation is essential to providing information to the investors and justifies the additional cost and time.
A commenter thought that it would be useful to state with whom the reports are to be filed and what the recipient would dowith the report. This provision has been amended to state the report will be filed with the securities regulatory authority.The CSA have not attempted to describe what will be done with the report by the regulators.
A new subsection has been added which provides that the issuer can satisfy the filing obligation by filing a technical reportthat it has previously filed in another jurisdiction, updated to reflect material changes in the information contained in thepreviously filed technical report.
2. Section 4.2 - Obligation to File a Technical Report in Connection with Certain Disclosure
(i) paragraph 2 (short form prospectus)
A commenter noted that it was not clear what was meant by the word "new information". This paragraph has beenamended to clarify that any new information that is material concerning mining projects on properties material to theissuer must be supported by a technical report.
A commenter expressed concern that the obligation to file a technical report with the filing of a preliminary short formprospectus would interfere with the ability of a short form prospectus issuer to raise funds in a timely manner throughthe system. The CSA are of the view that a short form prospectus issuer that includes disclosure in its short formprospectus concerning mining operations must base that disclosure on a technical report. An issuer would notinclude information in a short form prospectus that was not material and viewed by the issuer and the underwritersas necessary information for investors. For that reason it is important that this information be supported.
(ii) paragraph 3 (take-over bid circular)
The CSA received many comments concerning the requirement to file a technical report in connection with a take-over bid circular. A number of commenters misunderstood the paragraph and believed that it required the hostilebidder to prepare a report on the target's mineral properties. This paragraph was in fact intended to require a bidderthat is offering its securities in exchange for securities of a target to file a technical report to support statements madein the take-over bid circular concerning the bidder's mining projects. Paragraph 3 has been amended to remove thetake-over bid reference and a new paragraph 9 has been added to deal with the obligation of bidders in a take-overbid where the bidder's securities are being offered, to file a technical report to support disclosure of the bidder'smining projects included in take-over bid circulars. A further new paragraph 8 has been added which obligates atarget to file a technical report where it discloses for the first time mineral resources or mineral reserves, or disclosesa material change in mineral resources or mineral reserves, in a directors' circular prepared in response to a take-overbid. Pursuant to subsection (6) this technical report does not need to be filed at the time of filing the directors' circularbut must be filed not less than 3 business days prior to the expiry of the take-over bid.
(iii) paragraph 4 (offering memorandum) and paragraph 5 (rights offering circular)
A number of commenters suggested that the requirement for a technical report in connection with an offeringmemorandum or a rights offering circular was not justified. The CSA are of the view that any document preparedin connection with an offering of securities that contains information of a technical or scientific nature concerningmineral projects should be supported by a technical report. These documents are prepared to encourage investorsto buy securities. Information in these documents has been determined by the issuer and the agent or underwriterto be material to investors.
(iv) paragraph 6 (AIF or Annual Report)
A commenter suggested that this paragraph be amended so that only material new information would have to besupported by a technical report. This change has been made.
(v) paragraph 10 (First Time Disclosure of Mineral Resources or Mineral Reserves)
Some commenters asked for clarification of the meaning of material and what constitutes a material change. Asnoted above, materiality is a relative concept. It is one that issuers grapple with in connection with all disclosureobligations because the question of materiality must be considered in each instance on the basis of the circumstancesapplicable to that particular case. Local securities legislation and the proposed Policy provide guidance on"materiality".
3. Subsection 4.2(3) (formerly subsection 3.2(2)) - Time of Filing a Technical Report
The CSA received a number of comments concerning the problem of requiring the filing of technical reportscontemporaneously with the documents they support. This can be very difficult where the issuer has a filing obligation, suchas an obligation to file an annual information form, by a certain date and new material information becomes available onlyshortly before that time. After considering how to deal with this late-breaking information, the CSA have added a provisionto the proposed National Instrument in subsection (5) which provides that if property materiality first occurs within 30 daysof the filing deadline for an Annual Information Form or Annual Report, the issuer may file the technical report within 30 daysof the date on which the property first became material. The CSA expect that in all other situations, the issuer is in controlof the timing of the disclosure and with respect to other disclosure in an annual information form or annual report triggeringthe filing obligation, the issuer will have already have a technical report in place which may be updated.
4. Subsection 4.2(4)(formerly subsection 3.2(3) - Thirty Day Relief for Filing Independent Technical Report
A number of comments were received concerning the timing of filing an independent report. Commenters noted that whilea 30 day period might be adequate for producing issuers, it might not be sufficient for other issuers. A concern wasexpressed that, depending on the level of exploration activity in the mining industry generally, the majority of independentqualified persons might be engaged on other matters and not able to complete a technical report within the prescribed timeframe. The CSA have considered this concern and determined that it is not necessary to extend the time frame for thisreason. An issuer that has a practical problem such as this should apply for an exemption.
A number of commenters were concerned that there may be situations in which the initial disclosure would be different fromthe technical report filed some 30 days later. The CSA have considered this matter and have added a new provision to theproposed National Instrument requiring the issuer to make disclosure reconciling any material differences at the time of filingthe technical report.
F. Part 5(formerly Part 4)- Author of Report
1. Section 5.1 Technical Report Prepared by a Qualified Person
A number of comments were received asking who is required to sign a technical report and questioning the place andmanner of endorsement. This section has been revised to delete any reference to signing and dating. Section 5.2 dealswith execution of technical reports and requires that the technical report be dated, signed and, if the qualified person hasa seal, sealed, by the qualified person who prepared it or supervised its preparation. If the qualified person is an employee,director or associate of an engineering or consulting company or partnership, the technical report may be signed by thatcompany or partnership. Pursuant to section 8.1 of the proposed National Instrument, the technical report filed must beaccompanied by a certificate or certificates dated, signed and, if appropriate, sealed by the qualified persons who have beenprimarily responsible for the technical report.
A commenter suggested that it is unnecessary to have the technical report signed as the certificate will suffice. The CSAdisagree with this comment. The certificate and the signature on the technical report serve different purposes.
2. Section 5.2 Execution of Technical Report
A number of comments were received concerning the obligation to have the technical report sealed, which was included insection 4.2 of the 1998 proposed Instrument. The CSA recognize that the professional seal cannot be mandated by thesecurities regulatory authorities but rather is subject to the relevant legislation and the by-laws of the professional associationto which the qualified person belongs. This section has been revised to provide that the technical report need only be sealedif the person has a seal.
One commenter asked how a technical report that is filed electronically under SEDAR can be sealed. The common practiceis for the original to be sealed and the electronic version to indicate this with a note that says "original signed and sealedby [name]".
3. Section 5.3 Independent Technical Report
One commenter suggested that a non-independent report should be acceptable provided that it had been reviewed andendorsed by an independent qualified person. The CSA do not believe any change is required to the proposed NationalInstrument to accommodate this situation. If a non-independent qualified person has carried out work and has written atechnical report, and the issuer is required to submit a technical report prepared by an independent qualified person, the CSAexpects that an independent qualified person will review the work, carry out appropriate verification procedures, and takeall such other steps as he or she determines, in his or her professional opinion, are necessary to take in order for theindependent qualified person to take responsibility for the content and recommendations of the technical report. If thisprocedure is followed, the technical report will be considered a technical report prepared by or under the supervision of aqualified person who is independent of the issuer for purposes of the Instrument.
One commenter was concerned that the 100% change threshold could be circumvented by an issuer filing a series of in-house technical reports showing incremental increases of less than 100%. It was suggested that in order to avoid thissituation, the section could be amended to require the filing of an independent technical report if there was a substantialincrease in mineral resources or mineral reserves (less than 100% but perhaps greater than 25%) which is disclosed in arelatively short period of time after the last disclosure. The CSA have addressed this concern by revising the paragraph sothat the relevant test is the change from the most recently filed independent technical report.
G. Part 6 (formerly Part 5) - Nature of Technical Report
1. Engineering Document
A number of commenters suggested that the title of the section should not refer to "engineering" as that term is not accuratebecause most of the technical report may be geological. We have changed the references made in the 1998 Instrumentsto the "report" to read "technical report" in the proposed National Instrument and in this particular title.
A commenter suggested that a clear distinction needed to be made between the normal technical reports prepared forinternal use and the "reports" required under the proposed National Instrument. The CSA have added a definition of"technical report" as being a report prepared, filed and certified under the Instrument and Form 43-101F1.
2. Judgment of Author
A commenter suggested that when a qualified person expresses an opinion on the merits of a property, the qualified personshould provide a summary of his or her reasoning. The CSA are of the view that requiring a statement of the qualifiedperson that the property merits the recommended program is sufficient.
A commenter was concerned that this statement would expose the qualified person to liability. The CSA expect that thequalified person would only recommend programs which he or she believes, on the basis of the technical report, areworthwhile in view of the merits of the property. The CSA are of the view that it is appropriate for the qualified person tobe responsible for this recommendation.
H. Part 7 Personal Inspection (formerly Part 6)
1. Personal Inspection
Many comments were received concerning the requirement that all qualified persons inspect the property that is the subjectof the technical report. The concern was generally based on the view that this requirement would impose unreasonableexpense and delay. Certain commenters suggested that site visits were a waste of the issuer's money. A number ofcommenters noted situations in which a site visit would not be necessary, such as if the report is based on results of aregional airborne survey. It was also suggested that the CSA should recognize that there will be situations in whichexamination of the ground would be of little use or where the location and climate conditions make a site visit impractical.
The CSA considered each of the comments received and have determined that it is important to maintain the personalinspection requirement with exemptions only to be provided in exceptional circumstances upon application made pursuantto the proposed National Instrument. The requirement has been amended however to provide that only one of the qualifiedpersons involved in the preparation of the technical report needs to conduct a site visit.
One commenter urged that the qualified person be required to take samples during the property inspection for the purposeof corroborating sample data. Although the CSA consider data corroboration to be an important aspect of a site inspection,the focus of the proposed Instruments is on the quality of disclosure, not geoscientific practice which is the subject ofindustry guidelines. The CSA also recognize that circumstances may arise in which sampling is not feasible. For thesereasons, subsection 3.2(b) is limited to a requirement for disclosure of whether or not there has been sample corroboration.
2. Sources of Information
A number of commenters strongly suggested that subsection (2) be deleted. This subsection required an opinion on thequality of information prepared by another qualified person. The CSA agree that a qualified person should not be requiredto comment on the quality of another qualified person's work. This subsection has been deleted.
I. Form 43-101F1 (formerly Part 7)
1. General Comments
A number of comments were received concerning the content of the technical report. Some commenters were of the viewthat these provisions should be guidelines only. One commenter suggested that the Ontario Guidelines for ProfessionalEngineers Reporting on Mineral Properties should be incorporated in the proposed National Instrument.
The CSA considered all of the comments received in this regard. The purpose of setting out the requirements for the contentof the report is to make certain matters mandatory so that readers of the report can expect to receive a consistently preparedreport covering the same basic areas. The suggestion that these provisions be replaced with a cross reference to theGuidelines of the Professional Engineers is not acceptable to the CSA as it is the CSA's responsibility to mandate thecontent of disclosure. While the CSA regard these guidelines as helpful, they do not include all of the information that theCSA consider to be essential for the protection of investors and efficiency of the capital markets.
A commenter was concerned that Part 7 focuses on exploration properties and thought that other types of technical reportsshould be acknowledged. The CSA do not agree with this comment. The proposed Form includes a list of additional topicsto be covered in technical reports on development or producing properties. Other types of technical reports for specialpurposes are too varied in subject matter to justify adding a new section to the proposed Form.
As noted above, a number of commenters expressed a concern that the responsibilities of the qualified person have beenenlarged through requirements to discuss environmental, legal and other matters outside a qualified person's area ofexpertise. It was recommended that the author be permitted to include a disclaimer regarding these matters. A provisionto this effect has been added as section 6.3 of the proposed National Instrument.
A commenter was concerned that if fraud is committed, it can be difficult to detect at the mineral resource or mineral reserveestimation stage. It was suggested that at least two independent estimates by qualified persons should be made and thatthey should fall within at least 10% of each other. The CSA believe that the quality and reliability of mining industrydisclosure will be considerably enhanced by the requirements of the proposed Instruments governing terminology, disclosurecontent, technical reports and the involvement of experienced, qualified professionals. The CSA do not believe that a furtherrequirement for the involvement of two qualified persons is warranted.
A comment was received to the effect that the sections concerning content of the technical report need greater considerationof the various stages of a mineral project. The CSA do not agree with this comment.
2. Property Description and Location (Item 5 of Form 43-101F1)
A number of specific comments were received concerning the list of items to be covered. Many commenters felt that thelist was over inclusive and would not apply to all mineral projects. The CSA recognize this. The purpose of section 7.1 isto provide a comprehensive list of matters which, if relevant to the property and its stage of development, should becommented on. Therefore, in response to the comments raised, the matters which are relevant to an exploration propertymust be addressed. An introductory phrase has been added to this item and many other items of the proposed Form to theeffect that reporting is required only to the extent applicable or relevant.
A commenter suggested that, to the extent known, permits applied for should be noted. This change has been made.
A commenter asked that the word "area" be changed to the "size of the property in hectares or other appropriate units". Thischange has been made.
A number of commenters suggested that the reference to "patented and unpatented" should be changed to a more genericterm as claims are only described this way in certain jurisdictions. In response to this comment, the CSA have includeda reference to the applicable characterization in the jurisdiction.
It was suggested that the requirement to "comment on the sufficiency of rights for mining operations" is unduly onerousunless the report is a feasibility study. The CSA agree with this comment and have moved the requirement to Item 6paragraph (d).
J. Part 8 - Certificates of Qualified Persons
In response to comments received the CSA have amended section 8.1 of the proposed National Instrument to provide thatthe certificate need not be attached to the technical report but must be filed with it. In addition, a separate certificate of eachqualified person primarily responsible for a portion of the technical report will be filed by the issuer.
A commenter suggested that it was inappropriate to require that the certificate include disclosure concerning the othersources of information contained in the technical report and the limitations imposed on the qualified person's access to theproperty and other information. The CSA agree that these provisions are most appropriately included in the technical report,not the certificate, and no longer require that they be included in the certificate.
A number of commenters suggested that the statement "...the omission to disclose (any material fact) which makes thereport misleading..." is unnecessary. The CSA have not made any change to this provision. As drafted, it is consistent withthe definition of misrepresentation in securities legislation and provides a more narrow test of materiality.
K. Part 9 - Exemption
One commenter suggested that there should be a specific exemption from the requirements of "qualified person" status inaddition to the general exemptive provisions of Part 9.
The CSA do not believe a specific exemption from meeting the requirements of a qualified person is necessary orappropriate. Section 9.1 covers all situations in which an issuer may need to seek exemptive relief from a requirement ofthe proposed National Instrument, including the requirement that the issuer ensure that a technical report is prepared byan expert who meets the definition of "qualified person". As noted above, some interim relief is proposed for geoscientistsin jurisdictions which do not have professional associations (as that term is defined in the proposed National Instrument)at the present time.
PART III. ADDITIONAL COMMENTS ON COMPANION POLICY
A. General
A number of commenters were concerned that readers were confused by the concept of two documents, one an Instrumenthaving the force of law and the other a Policy representing guidelines and interpretation. It was suggested that any operativeprovisions should be moved into the proposed National Instrument and that the proposed Policy should be clearly identifiedas guidance only so that if there was any inconsistency it would be clear that the proposed National Instrument would bedeterminative.
Section 1.1 of the Policy attempts to describe the purpose of the proposed Policy. In addition, a number of the provisionsof the proposed Policy have been moved into an interpretation section of the proposed National Instrument or into theInstructions to the proposed Form. The CSA hope that these changes will reduce the confusion.
B. Part 1 - Purpose and Definitions
1. Application
A commenter suggested that the reference to Part 4 in the last sentence of this section should be changed to section 4.3(now 5.3). This change has been made. That same commenter also suggested that the last sentence of this section berevised to add the words "and the property" at the end of that sentence, on the basis that situations arise where the qualifiedperson is independent of the issuer but not the property as a result of work done for prior owners. This change has also beenmade.
A commenter suggested that defined terms were not used consistently in this section and that the word "mining" in thesecond sentence should be deleted. This word has been deleted.
2. Definitions
A number of comments were received by the CSA concerning the interpretation of the definitions of mineral resources andmineral reserves contained in the 1998 Proposed Policy. It was suggested again that the definitions should be identical tothe definitions of the CIM Ad Hoc Committee. There was also confusion created by having definitions in the proposedNational Instrument and the interpretation of those definitions in the 1998 Proposed Policy. The interpretation of these termshas been moved into the proposed National Instrument so that all provisions concerning the meaning and interpretation ofthese terms are in one place. In addition, the CSA have adopted definitions similar to and based upon the CIM Ad HocCommittee. The CSA will monitor any amendments to the definitions proposed by the CIM Standing Committee and willconsider further amendments to the definitions in the proposed National Instrument from time to time.
3. Professional Association
Several comments were received concerning the interpretation of the term "professional association" included in the 1998Proposed Policy. Some commenters noted that the interpretation was inconsistent with the 1998 Proposed NationalInstrument. In response to these comments the CSA have deleted this discussion of "professional association" in the 1998Proposed Policy.
4. Non-Metallic Mineral Deposits
The CSA received several comments concerning the interpretation of non-metallic mineral deposits. Many commentersexpressed the view that, as drafted, the guidelines could make it very difficult or impossible for a company to securefinancing as it would be impossible for most companies to have "reserves", as they would not have the necessary salescontract in place. The CSA have revised this section to adopt the approach of the CIM Standing Committee to classificationof industrial minerals.
A commenter suggested that there should be provision made for gemstones other than diamonds. The CSA do not agreewith this comment. There are no industry guidelines in place at this time for other gemstones. Accordingly, for the timebeing, these deposits will be dealt with on a case by case basis.
A concern was expressed regarding the acceptance and reference to the Northwest Territories' Guidelines for Reporting asthese are not recognized outside of Canada. The CSA have decided to keep the reference to the Northwest TerritoriesGuidelines as that is the only standard that they are aware of that has received acceptance in Canada.
C. Part 2 - Disclosure
1. Disclosure
Several commenters were concerned about the requirement for disclosure to be understandable and in an easy to readformat. The commenters stated that plain language translations done by non-technical people often result in logical orfactual errors in the simplified disclosure. This section has been significantly revised in response to these comments.Firstly, the disclosure being referred to is stipulated to be disclosure made by or on behalf of the issuer. Secondly, the issueris reminded that the qualified person should be consulted when the data and conclusions of the qualified persons report arebeing summarized.
2. Materiality
A commenter stated that the definition of "material" as discussed in the Policy does not take into account that a propertycould be very material as reflected in the issuer's share price but would not be material on the basis suggested in theproposed Policy. The CSA do not agree with this comment. If the property is material to the share price then it would bematerial, applying the test of significance to the investors and other users of the disclosure.
It was suggested that "material" should be defined in the proposed National Instrument. The securities legislation of eachProvince (other than Quebec) has a definition of material fact and material change and other guidance concerning theassessment of materiality which the CSA consider sufficient. It is not intended that the term when used in this proposedNational Instrument will have any different meaning than when it is used in other contexts in securities legislation. Issuersdetermine materiality for purposes of satisfying their continuous disclosure responsibilities in many contexts.
A commenter was confused about the meaning of subsection 2.2(4) which discusses the grouping together of multipleclaims. This subsection is intended to remind an issuer that it might be appropriate to group together claims for purposesof assessing materiality and determining whether a particular property should be subject to the standards in the proposedNational Instrument.
A number of comments were received concerning the attempt to quantify materiality using a book value approach,particularly for junior companies. Mature but inactive properties could be material applying a book value test even thoughthe issuer does not propose any development on the property. The CSA do not intend that the book value test be appliedin every instance. In fact the purpose of this subsection to advise issuers that a property with a book value of less than 10%of the book value of the total of the mineral issuer's property will generally not be considered material. This is not meantto imply that everything else is material. The determination of whether a property is material is a relative one based on theissuer's overall business and financial condition, taking into account all factors.
3. Material Information Not Yet Confirmed
A number of comments were received regarding this section; all related to timely disclosure and the involvement of aqualified person. There was general agreement that the requirements of the proposed National Instrument should not delaytimely disclosure of material information. No specific changes were requested and none have been made in response tothe comments.
D. Part 3 Guidelines for Exploration and Estimates of Resources and Reserves
The CSA received many comments concerning this Part of the Policy. In general, the commenters believed that theguidelines were too detailed. It was felt that the selection of appropriate techniques and methodology should be left to thequalified person. As drafted, the guidelines were perceived more as rigid rules than suggestions for best practices. Anumber of other more specific drafting comments were received with respect to certain clauses of this Part.
The CSA agree that "best practices" guidelines are most appropriately developed by the industry. A committee comprisedof representatives of the mining industry, the Toronto Stock Exchange and the Ontario Securities Commission has developedthe Best Practices Guideline which was published for comment in October 1999 by the Prospectors and DevelopersAssociation of Canada. Accordingly, the CSA have deleted Part 3 from the proposed Policy and in the Instructions to Item18 to From 43-101F1 "Mineral Resource and Mineral Reserve Estimates" urge issuers and qualified persons to follow theBest Practices Guidelines when estimating mineral resources and mineral reserves.
E. Part 4 Availability of Assay Certificates
A commenter suggested that all references to assays should be changed to analyses. The CSA have added a referenceto analysis or analytical certificates where there is a reference to assays in the proposed National Instrument, proposedPolicy or proposed Form. This particular Part has been moved to be an Instruction to Item 13 of the Form, "SamplingMethod and Approach".
A commenter suggested that it would be better to specify the circumstances in which the assays and other supportingdocumentation would have to be available for presentation. No change has been made in response to this comment. Theassays will be kept by the issuer and may be requested by the CSA.
F. Part 5 (now Part 3) Author of the Report
A commenter expressed his view that in order for the concept of qualified person to be effective this section of the proposedPolicy, concerning selection of the qualified person, is one of the most important sections. In his view obtaining theappropriate qualified person will not be a straightforward process and only management and the directors of an issuer areclose enough to the situation to make sufficient enquiries to select a person with the appropriate experience for the particulardeposit . He wanted these responsibilities of the board to be clearly articulated.
Another commenter expressed the view that the responsibility is not limited to the board but is a responsibility of the issuerand its officers as well. Furthermore this commenter felt that the language should refer to the qualified person having theexperience and competence appropriate not only for the type of deposit, but for the purpose of the report and disclosurebeing made.
The CSA agree with these comments. This section has been revised in response to these comments.
One commenter suggested that qualified persons should be appointed by a document that summarizes the scope ofresponsibility and duration of appointment of the qualified person. The CSA recognize the wisdom of documenting theissuer/qualified person relationship for the benefit of the parties but are not prepared to mandate such documentation in theproposed National Instrument.
A commenter suggested that there should only be limited grounds for exceptions to the requirements that qualified personsbe both experienced and subject to discipline. The CSA agree with this comment. Exceptions to the requirements thatqualified persons be members of a legislated professional association (and therefore subject to discipline) will be permittedfor two years for geoscientists who are members of associations in Canadian jurisdictions in which there are no legislatedprofessional associations. Otherwise exemptions from these requirements are available only by application under theproposed National Instrument. Some commenters suggested that geoscientists in jurisdictions without legislatedprofessional associations join legislated professional associations as extra-provincial members. However, a professionalassociation may not have disciplinary powers over extra-provincial residents and, as a matter of principle, the CSAdetermined that it would be inappropriate at this time to mandate geoscientists to belong to associations outside theirjurisdiction of practice without allowing them sufficient opportunity to arrange for a legislated professional association in theirown jurisdictions. For that reason, specific provision has been made in the definition of "professional association" in theproposed National Instrument to the effect that until March 31, 2002, an association of geoscientists in Canadian provincesthat do not have a statutorily created organization will constitute a "professional association" for purposes of the proposedNational Instrument.
G. Part 6 (now Part 4) Use of Information
A commenter suggested that analysts should be required, not just encouraged, to include the opinion from the technicalreport on the basis that many analysts have extremely limited practical experience in mining or exploration. The CSA sharethe commenter's concern. However, regulation of statements by analysts is beyond the scope of the National Instrument,which addresses disclosure by or on behalf of issuers.
A commenter noted that a qualified person should not be held responsible for misinterpretation, misuse or misquoting ofinformation generated and approved by the qualified person where he or she cannot reasonably be expected to be in aposition to control such nature, contents or circumstances. The CSA agree with the commenter. The qualified person shouldnot be liable in this circumstance.
H. Part 7 Personal Inspection
As discussed above, in connection with this requirement in the proposed National Instrument, a number of comments werereceived concerning the requirement for personal inspection of the property. It was suggested that no qualified person worthretaining would issue any report without a site visit if, in his or her professional judgment, a site visit was necessary ordesirable. Accordingly, it was suggested that this matter should be left to the discretion of the qualified person.
The CSA are not prepared to leave the matter of site visits to the discretion of the qualified person. The CSA are of the viewthat site inspections are crucial to the corroboration of information. Exemptions from this requirement will be considered,on application, if a property visit is impossible or would provide little benefit.
I. Part 8 (now Part 6) Regulatory Review
A number of commenters suggested that any review by the Canadian securities regulatory authorities must be done by aqualified person with excellent experience in geology/mining. They recommended that regulators recruit and buildpermanent staffs of qualified persons to perform the oversight function. The CSA appreciate the comments received in thisregard and will give the matter of appropriate staffing further consideration. No change is required to be made to theproposed Policy in response to these comments.
A commenter suggested that all information filed must be read and approved by the regulators for compliance to basicstandard practice. The CSA do not agree with this suggestion.
PART IV TRANSITIONAL MATTERS
One commenter asked a number of questions concerning the application of requirements in the proposed NationalInstrument. The commenter asked whether NP2-A reports submitted by the issuer before the proposed National Instrumentcame into effect would be acceptable or whether these reports would have to be restated to comply. In general old reportswould not have to be redone; however any technical report required to be filed after the proposed National Instrument comesinto effect would have to comply. An issuer would however be permitted to refer to NP2-A reports in the new technicalreport.
NATIONAL INSTRUMENT 43-101
STANDARDS OF DISCLOSURE FOR MINERAL PROJECTS
TABLE OF CONTENTS
PART TITLE
PART 1 APPLICATION, DEFINITIONS AND INTERPRETATION
1.1 Application
1.2 Definitions
1.3 Mineral Resource
1.4 Mineral Reserve
1.5 Interpretation
PART 2 REQUIREMENTS APPLICABLE TO ALL DISCLOSURE
2.1 Requirements Applicable to All Disclosure
2.2 All Disclosure of Mineral Resources or Mineral Reserves
2.3 Prohibited Disclosure
2.4 Exception for Disclosure of Historical Estimates
PART 3 ADDITIONAL REQUIREMENTS FOR WRITTEN DISCLOSURE
3.1 Written Disclosure to Include Name of Qualified Person
3.2 Written Disclosure to Include Data Corroboration and Other Information
3.3 Requirements Applicable to Written Disclosure of Exploration Information
3.4 Requirements Applicable to Written Disclosure of Mineral Resources and Mineral Reserves
3.5 Exception for Written Disclosure Already Filed
PART 4 OBLIGATION TO FILE A TECHNICAL REPORT
4.1 Obligation to File a Technical Report Upon Becoming a Reporting Issuer
4.2 Obligation to File a Technical Report in Connection with Certain Written Disclosure Concerning MineralProjects on Material Properties
4.3 Form 43-101F1
PART 5 AUTHOR OF TECHNICAL REPORT
5.1 Prepared by a Qualified Person
5.2 Execution of Technical Report
5.3 Independent Technical Report
PART 6 NATURE OF TECHNICAL REPORT
6.1 Basis for Technical Report
6.2 Judgment of Author
6.3 Disclaimer in Technical Report
6.4 Use of Foreign Code
PART 7 PERSONAL INSPECTION
7.1 Personal Inspection
PART 8 CERTIFICATES AND CONSENTS OF QUALIFIED PERSONS FOR TECHNICAL REPORTS
8.1 Certificates of Qualified Persons
8.2 Addressed to Issuer
8.3 Consents of Qualified Persons
PART 9 EXEMPTION
9.1 Exemption
NATIONAL INSTRUMENT 43-101
STANDARDS OF DISCLOSURE FOR MINERAL PROJECTS(1)
PART 1 APPLICATION, DEFINITIONS AND INTERPRETATION(2)
1.1 Application - This Instrument applies to all oral statements and written disclosure of scientific or technical information,including disclosure of a mineral resource or mineral reserve, made by or on behalf of an issuer in respect of a mineralproject of the issuer.
1.2 Definitions - In this Instrument
"adjacent property" means a property
(a) that has a boundary lying within two kilometres of the closest boundary of the property being reported on; and
(b) that has geological characteristics similar to those of the property being reported on;
"development property" means a property that is being prepared for mineral production and for which economic viability hasbeen demonstrated by a feasibility study;
"disclosure" means any oral statement or written disclosure made by or on behalf of an issuer and intended to be, orreasonably likely to be, made available to the public in the local jurisdiction, whether or not filed under securities legislation,but does not include written disclosure that is made available to the public only by reason of having been filed with agovernment or agency of government pursuant to a requirement of law other than securities legislation;(3)
"exploration information" means geological, geophysical, geochemical, sampling, drilling, analytical testing, assaying,metallurgical and other similar information concerning a particular property that is derived from activities undertaken tolocate, investigate, define or delineate a mineral prospect or mineral deposit or to expand or further develop an existingmineral resource or mineral reserve;
"feasibility study" means a comprehensive study of a deposit in which all geological, engineering, operating, economic andother relevant factors are considered in sufficient detail to serve as the basis for a qualified person experienced in mineralproduction activities, acting reasonably, to make a final decision on whether to proceed with development of the deposit formineral production;
"geoscientist" means a geologist, geochemist or geophysicist;
"IMM system" means the classification system and definitions for mineral resources and mineral reserves approved fromtime to time by The Institution of Mining and Metallurgy in the United Kingdom;
"JORC Code" means the Australasian Code for Reporting of Mineral Resources and Ore Reserves prepared by the JointOre Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists andMineral Council of Australia as amended or supplemented;
"mineral project" means any exploration, development or production activity in respect of natural, solid, inorganic orfossilized organic substances including base and precious metals, coal and industrial minerals;
"preliminary feasibility study" means a study that
(a) relates to a mineral project that has advanced to a stage where the mining method, in the case of undergroundmining, or the pit configuration, in the case of an open pit, has been established, and where an effective method ofore processing has been determined; and
(b) is based on reasonable assumptions of technical, engineering, operating, economic and other relevant factors whichare sufficient for a qualified person acting reasonably, to determine if all or part of the mineral resource may beclassified as a mineral reserve;
"producing issuer" means an issuer the annual audited financial statements of which disclose
(a) gross revenues, derived from mining operations, of at least $30 million for the issuer's most recently completedfinancial year; and
(b) gross revenues, derived from mining operations, of at least $90 million in the aggregate for the issuer's three mostrecently completed financial years;
"professional association" means a self-regulatory organization of engineers, geoscientists or both engineers andgeoscientists that
(a) has been given authority or recognition by statute;
(b) admits members primarily on the basis of their academic qualifications and experience and requires compliance withthe professional standards of competence and ethics established by the organization; and
(c) has disciplinary powers including the power to suspend or expel a member;
and until [March 31, 2002] includes an association of geoscientists in Canadian jurisdictions that do not have a statutorilyrecognized self-regulatory association;
"qualified person" means an individual who is
(a) an engineer or geoscientist with at least five years of experience in mineral exploration, mine development oroperation or mineral project assessment, or any combination of these, relevant to the subject matter of the mineralproject and the technical report; and
(b) a member in good standing of a professional association;
"quantity" means either tonnage or volume, depending on which term is the standard in the mining industry for the type ofmineral;
"technical report" means a report prepared, filed and certified in accordance with this Instrument and Form 43-101F1Technical Report;
"USGS Circular 831" means the circular published by the United States Bureau of Mines/United States Geological Surveyentitled "Principles of a Resource/Reserve Classification for Minerals", as amended or supplemented; and
"written disclosure" includes any writing, picture, map or other printed representation whether produced, stored ordisseminated on paper or electronically.
1.3 Mineral Resource
(1) In this Instrument the term "mineral resource" means a deposit of a natural, solid, inorganic or fossilized organic,substance in such quantity and at such grade or quality that extraction of the mineral at a profit is or may be possible.
(2) A mineral resource estimate shall be based on information on the geology of the deposit and the continuity ofmineralization, except that assumptions concerning economic and operating conditions including cut-off grades andeconomic mining widths, based on factors typical for the type of deposit, may be used if these factors have not beenspecifically established for the deposit at the time of the mineral resource estimate.
(3) A mineral resource shall be categorized on the basis of the degree of confidence in the estimate of quantity and gradeor quality of the deposit, as follows:
(a) "inferred mineral resource" means the estimated quantity and grade or quality of a deposit, or a part thereof,determined on the basis of limited sampling and for which there is sufficient geological information and asufficient understanding of the continuity and distribution of values to outline the deposit but not to categorizethe deposit as an indicated mineral resource;
(b) "indicated mineral resource" means the estimated quantity and grade or quality of that part of a deposit forwhich the size, configuration and grade or quality are so well established that a reliable estimate of quantityand grade or quality can be made at a confidence level which would serve as a basis for decisions on majorexpenditures;
(c) "measured mineral resource" means the estimated quantity and grade or quality of that part of a deposit forwhich the size, configuration and grade or quality have been so well established by observation and samplingof outcrops, drill holes, trenches and mine workings that
(i) it can be used as a basis for detailed mine planning; and
(ii) no reasonable doubt exists that any variation from the stated grade or quality and quantity would besufficient to materially affect an economic appraisal of the mineral resource.
1.4 Mineral Reserve
(1) In this Instrument the term "mineral reserve" means that part of a measured mineral resource or indicated mineralresource which can be extracted legally and at a profit under economic conditions that are specified and generallyaccepted as reasonable by the mining industry and which is demonstrated by a preliminary feasibility study orfeasibility study.
(2) A mineral reserve shall be categorized on the basis of the degree of confidence in the estimate of the quantity andgrade or quality of the deposit, as follows:
(a) "probable mineral reserve" means the estimated quantity and grade or quality of that part of an indicatedmineral resource for which economic viability has been demonstrated by adequate information on engineering,operating, economic and other relevant factors, at a confidence level which would serve as a basis fordecisions on major expenditures;
(b) "proven mineral reserve" means, for the part of a deposit which is being mined, or which is being developedand for which there is a detailed mining plan, the estimated quantity and grade or quality of that part of ameasured mineral resource for which the size, configuration and grade or quality and distribution of values areso well established, and for which economic viability has been demonstrated by adequate information onengineering, operating, economic and other relevant factors, so that there is the highest degree of confidencein the estimate.
(3) In addition to the geological factors necessary for an estimation of a mineral resource, an estimate of a mineralreserve shall take into account all factors relevant to the economic viability of a mineral project including mining,metallurgy, infrastructure, operating and capital costs, waste rock dilution, mining recovery, environmentalconsiderations, reclamation and closure costs and other economic, socio-political, legal and technical factors.
(4) For greater certainty, the category of a mineral reserve shall be determined on the basis of the mineral resourcecategory and the level of confidence in the other factors used in the mineral reserve estimate.
(5) For greater certainty, a measured mineral resource that is a mineral reserve shall be classified as a probable mineralreserve rather than as a proven mineral reserve if confidence in any of the relevant factors has not been establishedat the level required for a proven mineral reserve.
1.5 Interpretation
(1) In this Instrument a person or company is considered to be an affiliated entity of another person or company if
(a) one is a subsidiary of the other,
(b) both are subsidiaries of the same person or company, or
(c) each is controlled by the same person or company.
(2) In this Instrument a person or company is considered to be controlled by a second person or company if
(a) in the case of a company,
(i) voting securities of the company carrying 50 percent or more of the votes for the election of directorsare held, otherwise than by way of security only, by or for the benefit of the second person or company;and
(ii) the votes carried by such securities entitle the second person or company to elect a majority of thedirectors of the company;
(b) in the case of a partnership, other than a limited partnership, the second person or company holds an interestof 50 percent or more in the partnership; or
(c) in the case of a limited partnership, the general partner is the second person or company;
(3) In this Instrument a person or company is considered to be a subsidiary entity of a second person or company, if
(a) the person or company is controlled by
(i) the second person or company, or
(ii) the second person or company and one or more other persons or companies, each of which iscontrolled by the second person or company, or
(iii) one or more other persons or companies, each of which is controlled by the second person or company;or
(b) the person or company is a subsidiary entity of a person or company that is itself a subsidiary entity of thesecond person or company.
(4) In this Instrument a qualified person involved in the preparation of a technical report is not considered to beindependent of the issuer in respect of the technical report, if
(a) the qualified person, or any affiliated entity of the qualified person, is, or by reason of an agreement,arrangement or understanding expects to become, an insider, associate, affiliated entity or employee of theissuer, or of an insider or affiliated entity of the issuer;
(b) the qualified person, or any affiliated entity of the qualified person, is, or by reason of an agreement,arrangement or understanding expects to become, a partner of any person or company referred to inparagraph (a);
(c) the qualified person, or any affiliated entity of the qualified person, owns, or by reason of an agreement,arrangement or understanding expects to receive, any securities of the issuer or of an affiliated entity of theissuer or an interest in the property that is the subject of the technical report or in an adjacent property; or
(d) the qualified person, or any affiliated entity of the qualified person, has received the majority of his or herincome in the three years preceding the date of the technical report from one or more of the issuer and insidersand affiliated entities of the issuer.
PART 2 REQUIREMENTS APPLICABLE TO ALL DISCLOSURE
2.1 Requirements Applicable to All Disclosure - An issuer shall ensure that all disclosure of a scientific or technical nature,including disclosure of a mineral resource or mineral reserve, concerning mineral projects on a property material to theissuer is based upon a technical report or other information prepared by or under the supervision of a qualified person.
2.2 All Disclosure of Mineral Resources or Mineral Reserves - An issuer shall ensure that any disclosure of a mineralresource or mineral reserve
(a) utilizes only the applicable mineral resource and mineral reserve categories set out in sections 1.3 and 1.4 ofthis Instrument;
(b) reports each category of mineral resources and mineral reserves separately, and if both mineral resources andmineral reserves are disclosed, states the extent, if any, to which mineral reserves are included in total mineralresources; and
(c) does not add inferred mineral resources to the other categories of mineral resources.
2.3 Prohibited Disclosure - An issuer shall not make any disclosure of an estimate of quantity or grade of a deposit unlessa qualified person has estimated a mineral resource or mineral reserve.
2.4 Exception for Disclosure of Historical Estimates - Despite section 2.2, disclosure of quantity and grade estimates madebefore the coming into force of this Instrument may be made by the issuer provided that the disclosure:
(a) includes the source of the estimate;
(b) confirms the relevance of the disclosure;
(c) comments on the reliability of the estimate;
(d) states if a reporting system other than the one stipulated in sections 1.3 and 1.4 of this Instrument has been used,and includes an explanation of the differences; and
(e) includes any more recent estimates or data available to the issuer.
PART 3 ADDITIONAL REQUIREMENTS FOR WRITTEN DISCLOSURE
3.1 Written Disclosure to Include Name of Qualified Person - An issuer shall ensure that all written disclosure of a scientificor technical nature, other than a news release, concerning a mineral project on a property material to the issuer identifiesand discloses the relationship to the issuer of the qualified person who prepared or supervised the preparation of thetechnical report or other information that forms the basis for the written disclosure.
3.2 Written Disclosure to Include Data Corroboration and Other Information - An issuer shall ensure that all writtendisclosure of a scientific or technical nature concerning mineral projects on a property material to the issuer
(a) states whether any aspect of the sample preparation was conducted by the issuer or an employee, officer,director or associate of the issuer;
(b) states whether a qualified person has corroborated the data, including sampling, analytical and test dataunderlying the information or opinions contained in the written disclosure;
(c) describes the nature of and any limitations on the corroboration of data disclosed; and
(d) explains any failure to corroborate the data.
3.3 Requirements Applicable to Written Disclosure of Exploration Information
(1) An issuer shall ensure that all written disclosure containing scientific or technical exploration information concerninga property material to the issuer includes
(a) the results, or a summary of the results, of surveys and investigations regarding the property;
(b) a summary of the interpretation of the exploration information; and
(c) a statement as to the quality control measures applied during the execution of the work.
(2) An issuer shall ensure that all written disclosure containing sample or analytical or testing results on a propertymaterial to the issuer includes
(a) a summary description of the geology, mineral occurrences and nature of mineralization found;
(b) a summary description of rock types, structural controls, widths of mineralized zones and other parametersused to establish the sampling interval, and the identification of any significantly higher grade intervals withina lower grade intersection;
(c) the location, number, type, nature and spacing or density of the samples collected and the location anddimensions of the area sampled;
(d) identification of any drilling, sampling, recovery or other factors that could materially impact the accuracy orreliability of the data referred to in this section;
(e) a summary description of the type of analytical or testing procedures utilized, sample size, the name andlocation of each analytical or testing laboratory used, the certification of each laboratory and any relationshipof the laboratory to the issuer; and
(f) a listing of the true widths of individual samples or sample composites, to the extent known.
3.4 Requirements Applicable to Written Disclosure of Mineral Resources and Mineral Reserves - An issuer shall ensurethat all written disclosure of mineral resources or mineral reserves on a property material to the issuer includes
(a) the effective date of each estimate of mineral resources and mineral reserves;
(b) details of quantity and grade or quality of each category of mineral resources and mineral reserves;
(c) details of the key assumptions, parameters and methods used to estimate the mineral resources and mineralreserves;
(d) a general discussion of the extent to which the estimate of mineral resources and mineral reserves may bematerially affected by any known environmental, permitting, legal, title, taxation, socio-economic, marketing,political or other relevant issue; and
(e) a statement that mineral resources which are not mineral reserves do not have demonstrated economicviability.
3.5 Exception for Written Disclosure Already Filed - The requirements of sections 3.3 and 3.4 are satisfied by reference, inwritten disclosure, to a previously filed document that complies with those requirements.
PART 4 OBLIGATION TO FILE A TECHNICAL REPORT
4.1 Obligation to File a Technical Report Upon Becoming a Reporting Issuer
(1) Upon first becoming a reporting issuer in one or more jurisdictions in Canada, an issuer shall file with the regulatorin the local jurisdiction or local jurisdictions, a current technical report for each property material to the issuer.
(2) Upon becoming a reporting issuer in a new jurisdiction, an issuer that is already a reporting issuer in another localjurisdiction shall file with the regulator in the new jurisdiction a current technical report for each property material tothe issuer.
(3) An issuer satisfies the requirement of subsection (2) by filing a technical report that it has previously filed in anotherjurisdiction in which it is a reporting issuer, amended or supplemented, if necessary, to reflect material changes inthe information contained in the technical report since the date of filing in the other jurisdiction.
4.2 Obligation to File a Technical Report in Connection with Certain Written Disclosure Concerning Mineral Projectson Material Properties
(1) An issuer shall file a current technical report to support statements made or information included in the followingdocuments filed or made available to the public in the local jurisdiction describing mineral projects on each propertymaterial to the issuer:
1. A preliminary prospectus, other than a preliminary short form prospectus filed in accordance with NationalInstrument 44-101.
2. A preliminary short form prospectus filed in accordance with National Instrument 44-101 that includes materialinformation concerning mining projects on material properties not contained in a previously filed technicalreport.
3. An information or proxy circular concerning a direct or indirect acquisition of a mineral property, including anacquisition of control of a person or company with an interest in the property, that upon completion of theacquisition would be material to the issuer if the consideration includes securities of the issuer or the personor company which continues to hold an interest in the property upon completion of the acquisition.
4. An offering memorandum.
5. A rights offering circular.
6. An annual information form or annual report that includes material information concerning mining projects onmaterial properties not contained in a previously filed technical report.
7. A valuation required to be prepared and filed under securities legislation.
8. A directors' circular that discloses for the first time mineral resources or mineral reserves on a propertymaterial to the issuer that constitutes a material change in respect of the affairs of the issuer, or discloses anychange in mineral resources or mineral reserves, from the most recently filed technical report of the issuer,that constitutes a material change in respect of the affairs of the issuer.
9. A take-over bid circular that discloses mineral resources or mineral reserves on a property material to theofferor if securities of the offeror are being offered in exchange on the take-over bid.
10. Any written disclosure, made other than in a document referred to in paragraphs 1 to 9 above, which is either
(i) first time disclosure of mineral resources or mineral reserves on a property material to the issuer thatconstitutes a material change in respect of the affairs of the issuer; or
(ii) disclosure of any change in the mineral resources and mineral reserves from the most recently filedtechnical report, that constitutes a material change in respect of the affairs of the issuer.
(2) If there has been a material change to the information in the technical report filed under paragraph 1 or 2 ofsubsection (1) before the filing of the final version of a prospectus or short form prospectus, the issuer shall file anupdated technical report or an addendum to the technical report with the final version of the prospectus or short formprospectus.
(3) Subject to subsections (4), (5), and (6), the technical report required to be filed under subsection (1) shall be filed notlater than the time of the filing of the document listed in subsection (1) that it supports.
(4) Despite subsection (3), a technical report concerning mineral reserves and mineral resources that supports disclosuredescribed in paragraph 10 of subsection (1) shall
(a) be filed not later than 30 days after the disclosure; and
(b) if filed subsequent to the disclosure, be accompanied by a contemporaneous disclosure that reconciles anymaterial differences between the technical report filed and the previous disclosure in connection with whichthe technical report was prepared.
(5) Despite subsection (3), if a property referred to in a document listed in paragraph 6 of subsection (1) first becomesmaterial to the issuer less than 30 days before the filing deadline for the document, the issuer shall file the technicalreport required by subsection (1) within 30 days of the date that the property first became material to the issuer.
(6) Despite subsection (3), a technical report that supports a directors' circular shall be filed not less than 3 business daysprior to the expiry of the take-over bid.
4.3 Form 43-101F1 - A technical report that is required to be filed under this Part shall be in accordance with Form 43-101F1.
PART 5 AUTHOR OF TECHNICAL REPORT
5.1 Prepared by a Qualified Person - A technical report shall be prepared by or under the supervision of one or more qualifiedpersons.
5.2 Execution of Technical Report - A technical report shall be dated, signed and, if the qualified person has a seal, sealed,by the qualified person who prepared it or supervised its preparation, or if such an individual is an employee, officer, directoror associate of a person or company the principal business of which is the provision of engineering or geoscientific services,by that person or company.
5.3 Independent Technical Report
(1) Subject to subsection (2), a technical report required under any of the following provisions of this Instrument shallbe prepared by a qualified person that is, at the date of the technical report, independent of the issuer:
1. First-time Reporting Issuer - Subsection 4.1(1)
2. Long Form Prospectus or Valuation - Paragraphs 4.2(1)l and 7
3. Other - Paragraphs 4.2(1)2, 3, 4, 5, 6, 8, 9 and 10 if the document discloses mineral resources or mineralreserves on a property material to the issuer for the first time or discloses a 100 percent or greaterchange, from the most recently filed independent technical report, in mineral resources or mineralreserves on a property material to the issuer
4. Reporting Issuer in New Jurisdiction - Subsection 4.1(2)
(2) A technical report required to be filed by a producing issuer under paragraphs 3 and 4 of subsection (1) is not requiredto be prepared by an independent qualified person.
(3) A technical report required to be filed by an issuer that is or has contracted to become a joint venture participant,concerning a property which is or will be the subject of the joint venture's activities, is not required to be prepared byan independent qualified person if the qualified person preparing the report is an employee of, or retained by, anotherparticipant in the joint venture that is a producing issuer.
PART 6 NATURE OF TECHNICAL REPORT
6.1 Basis for Technical Report - A technical report shall be prepared on the basis of all available factual data that is relevantto the disclosure which it supports.
6.2 Judgment of Author - A technical report that contains recommendations for expenditures on exploration or developmentwork on a property shall include a statement by a qualified person that, in the qualified person's opinion, the character ofthe property is of sufficient merit to make the program recommended a worthwhile undertaking.
6.3 Disclaimer in Technical Report - If the author of the technical report has relied on a report, opinion or statement of legaland other non-technical experts for information concerning legal, environmental, political and other non-technical issues andfactors relevant to the technical report, the technical report shall include a disclaimer in which the author identifies the report,opinion or statement relied upon, the maker of the report, opinion or statement, the extent of reliance and the portions ofthe author's technical report to which the disclaimer applies.
6.4 Use of Foreign Code - An issuer that is incorporated or organized in a foreign jurisdiction may file a technical report thatutilizes the mineral resource and mineral reserve categories of the JORC Code, USGS Circular 831 or the IMM systemprovided that a reconciliation to the mineral resource and mineral reserve categories set out in sections 1.3 and 1.4 of thisInstrument is filed with the technical report and certified by the author which reconciliation addresses the confidence levelsrequired for the categorization in section 1.3 and 1.4 of this Instrument.
PART 7 PERSONAL INSPECTION
7.1 Personal Inspection - At least one author preparing or supervising the preparation of a technical report or a portion of atechnical report shall inspect the property that is the subject of the technical report.
PART 8 CERTIFICATES AND CONSENTS OF QUALIFIED PERSONS FOR TECHNICAL REPORTS
8.1 Certificates of Qualified Persons
(1) An issuer shall, when filing a technical report, also file a certificate of each of the individuals who are qualified personsand who have been primarily responsible for the technical report, or a portion of the technical report, dated, signedand, if the signatory has a seal, sealed, by the signatory.
(2) The certificate shall state for each signatory
(a) the name, address and occupation of the qualified person;
(b) the qualified person's qualifications, including relevant experience, the name of all professional associationsto which the qualified person belongs, and that the qualified person is a "qualified person" for purposes of thisInstrument;
(c) the date and duration of the qualified person's most recent visits to each applicable site;
(d) the section or sections of the technical report for which the qualified person is responsible;
(e) that as of the date of the certificate the qualified person is not aware of any material fact or material changewith respect to the subject matter of the technical report which is not reflected in the technical report, theomission to disclose which makes the technical report misleading;
(f) whether the qualified person or any affiliated entity of the qualified person
(i) is, or under an agreement, arrangement or understanding expects to become, an insider, associate ,affiliated entity or employee of the issuer or of an insider or affiliated entity of the issuer;
(ii) is, or under an agreement, arrangement or understanding expects to become, a partner of the issueror of an insider or affiliated entity of the issuer;
(iii) owns, or under an agreement, arrangement or understanding expects to acquire, any securities of theissuer or of an affiliated entity of the issuer or an interest in the property that is the subject of thetechnical report or in an adjacent property; or
(iv) has received a majority of his, her or its income during the three years preceding the date of thetechnical report from any one or more of the issuer and insiders and affiliated entities of the issuer;
(g) what prior involvement, if any, the qualified person has had with the property that is the subject of the technicalreport;
(h) that the qualified person has read this Instrument and Form 43-101F1, and the technical report has beenprepared in compliance with this Instrument and Form 43-101F1; and
(i) that the technical report has been prepared in conformity with generally accepted Canadian mining industrypractice.
8.2 Addressed to Issuer - All technical reports shall be addressed to the issuer.
8.3 Consents of Qualified Persons - All technical reports and addenda to technical reports that are required by this Instrumentto be filed shall
(a) be accompanied by the written consent of the qualified person, addressed to the securities regulatoryauthorities, consenting to the filing of the technical report and to the written disclosure of the technical reportand of extracts from or a summary of the technical report in the written disclosure being filed; and
(b) confirm that the qualified person has read the written disclosure being filed and does not have any reason tobelieve that there are any misrepresentations in the information derived from the technical report or that thewritten disclosure contains any misrepresentation of the information contained in the technical report.
PART 9 EXEMPTION
9.1 Exemption
(1) The regulator or the securities regulatory authority may, on application, grant an exemption from this Instrument, inwhole or in part, subject to such conditions or restrictions as may be imposed in the exemption in response to anapplication.
(2) Despite subsection (1), in Ontario, only the regulator may grant such an exemption.
(3) Despite subsection (1), in Alberta, only the regulator may grant such an exemption.
COMPANION POLICY 43-101CP
TO NATIONAL INSTRUMENT 43-101
STANDARDS OF DISCLOSURE FOR MINERAL PROJECTS
TABLE OF CONTENTS
PART TITLE
PART 1 PURPOSE AND DEFINITIONS
1.1 Purpose
1.2 Application of the Instrument
1.3 Definitions
1.4 Interpretation
1.5 Non-Metallic Mineral Deposits
1.6 Objective Standard of Reasonableness
PART 2 DISCLOSURE
2.1 Disclosure is the Responsibility of the Issuer
2.2 Use of Plain Language
2.3 Materiality
2.4 Material Information not yet Confirmed by a Qualified Person
2.5 Exception in Section 3.5 of the Instrument
PART 3 AUTHOR OF THE TECHNICAL REPORT
3.1 Selection of Qualified Person
3.2 Qualified Person
3.3 Independence of Qualified Person
PART 4 USE OF INFORMATION
4.1 Use of Information
PART 5 PERSONAL INSPECTION
5.1 Personal Inspection
5.2 Exemption from Personal Inspection Requirement
PART 6 REGULATORY REVIEW
6.1 Review
COMPANION POLICY 43-101CP
TO NATIONAL INSTRUMENT 43-101
STANDARDS OF DISCLOSURE FOR MINERAL PROJECTS
PART 1 PURPOSE AND DEFINITIONS
1.1 Purpose - This companion policy sets forth the views of the Canadian Securities Administrators (the "CSA") as to themanner in which certain provisions of National Instrument 43-101 (the "Instrument") are to be interpreted and applied.
1.2 Application of the Instrument - The Instrument does not apply to disclosure concerning petroleum, natural gas, bituminoussands or shales, groundwater or other substances that do not fall within the meaning of the term "mineral resource" insubsection 1.3(1) of the Instrument. The Instrument establishes standards for all oral statements and written disclosure ofa scientific or technical nature regarding mineral projects, including disclosure in press releases, prospectuses and annualreports, and requires that the disclosure be based on a technical report or other information prepared by or under thesupervision of a qualified person. The CSA expect that issuers will have one or more qualified persons prepare and updatea technical report that is in the form required by Form 43-101F1 in respect of each material property and, when requiredby Part 4 of the Instrument, will file that technical report. In the circumstances set out in section 5.3 of the Instrument, thetechnical report that is required to be filed must be prepared by a qualified person who is independent of the issuer and theproperty.
1.3 Definitions - The definitions of each category of mineral resources and mineral reserves in the Instrument and theinterpretation guidelines in this Policy have been based on the mineral resource and mineral reserve categories in the AdHoc Committee Report adopted by the Canadian Institute of Mining, Metallurgy and Petroleum, published in the bulletin ofthe Canadian Institute of Mining, Metallurgy and Petroleum in September, 1996. The Canadian securities regulatoryauthorities intend to monitor developments and changes in international and Canadian mining industry standards and willconsider modifications to the Instrument, from time to time, as these standards evolve.
1.4 Interpretation - In the Instrument the term "exploration information" is used to describe information reported during theexploration process and subsequent to the discovery of a mineralization but before sufficient data is available to justify amineral resource estimate as well as information reported as a result of further work done to expand or further develop anexisting mineral resource or mineral reserve. The term may be used to describe exploration work, including results oftechnical surveys, trenching, surface sampling, drilling, assaying and laboratory analysis and metallurgical testing and mayinclude a description of the property history, geology and mineralization.
1.5 Non-Metallic Mineral Deposits - Issuers making disclosure regarding the following commodities are encouraged to followthese additional guidelines:
(a) Industrial Minerals - For an industrial mineral deposit to be classified as a mineral resource, there should berecognition by the qualified person preparing the quantity and quality estimate that there is a viable market for theproduct or that a market can be reasonably developed. For an industrial mineral deposit to be classified as a mineralreserve, the qualified person preparing the estimate should be satisfied, following a thorough review of specific andidentifiable markets for the product, that there is, at the date of the technical report, a viable market for the productand that the product can be mined and sold at a profit.
(b) Coal - Technical reports on coal resources and reserves should conform to the definitions and guidelines of Paper88-21 of the Geological Survey of Canada: A Standardized Coal Resource/Reserve Reporting System for Canada,as amended, supplemented or replaced; and
(c) Diamonds - Technical reports on the resources and reserves of diamond deposits should conform to the Guidelinesfor Reporting of Diamond Exploration Results, Identified Mineral Resources and Ore Reserves, published by theAssociation of Professional Engineers, Geologists and Geophysicists of the Northwest Territories, as amended,supplemented or replaced.
1.6 Objective Standard of Reasonableness
(a) The Instrument requires the application of an objective standard of reasonableness in determining such things aswhether a statement constitutes "disclosure" and is thereby subject to the requirements of the Instrument. Where adetermination turns on reasonableness, the test is an objective, rather than subjective one in that it turns on what aperson acting reasonably would conclude. It is not sufficient for an officer of an issuer or a qualified person todetermine that he or she personally believes the matter under consideration. The person must form an opinion asto what a reasonable person would believe in the circumstances. Formulating the definitions using an objective testrather than a subjective test strengthens the basis upon which the regulator may object to a person's application ofthe definition in particular circumstances.
(b) The definitions of "feasibility study" and "pre-feasibility study" both require the application of an objective test. In orderfor a study to fall within either definition, the considerations or assumptions underlying the study must be sufficientfor a qualified person, acting reasonably, to make the type of recommendation specified in the definition. Thereferences to what would be sufficient for a qualified person, acting reasonably establish a yardstick against whicha study can be assessed. It is not intended, through these definitions, to imply that the author of the study must makethese determinations. For example, the references do not imply a requirement that an issuer's decision as to whetherto proceed with the development of a mineral project for mineral production, must be made by a qualified person.
PART 2 DISCLOSURE
2.1 Disclosure is the Responsibility of the Issuer - Primary responsibility for public disclosure remains in the hands of theissuer and its directors and officers. The qualified person is responsible for preparing the technical report and providingscientific and technical advice in accordance with applicable professional standards. The proper use, by or on behalf of theissuer, of the technical report and other scientific and technical information provided by the qualified person is theresponsibility of the issuer and its directors and officers. The onus is on the issuer and its directors and officers and, in thecase of a document filed with a regulator, each signatory of the document, to ensure that disclosure is consistent with thecontents of the related technical report or advice. The issuer is strongly urged to have the qualified person review disclosurethat summarizes or restates the technical report or the technical advice or opinion to ensure that it accurately reflects thequalified person's work.
2.2 Use of Plain Language - Disclosure made by or on behalf of the issuer regarding mineral projects on properties materialto the issuer should be understandable and, if written, be presented in an easy to read format using clear and unambiguouslanguage and wherever possible, be presented in table format. The CSA recognize that the technical report required by theInstrument is a document that does not lend itself well to a "plain language" format and therefore urge issuers to consultthe responsible qualified person when translating the data and conclusions from a technical report into plain language fordisclosure.
2.3 Materiality
(1) Materiality should be determined in the context of the particular issuer's overall business and financial condition takinginto account quantitative and qualitative factors. Materiality is a matter of judgment in the particular circumstancesand should be determined in relation to the significance of the information to investors, analysts and other users ofthe disclosure.
(2) In assessing materiality, issuers may refer to the definition of "material fact" in securities legislation, which in mostjurisdictions means a fact that significantly affects or would reasonably be expected to have a significant effect onthe market price or value of the securities of the issuer.
(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 a sizeable 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 propertyfor the purpose of the Instrument, issuers should be guided by the reasonable understanding and expectations ofinvestors.
(5) Subject to developments not reflected in the issuer's financial statements, for purposes of the Instrument a propertywill generally not be considered material to an issuer if the book value of the property, as reflected in the issuer's mostrecently filed financial statements or the value of the consideration paid or required to be paid for the property,including exploration expenditures required to be made during the next 12 months, is less than 10 percent of the bookvalue of the total of the issuer's mineral properties and related property, plant and equipment.
2.4 Material Information not yet Confirmed by a Qualified Person - Issuers are reminded that they have an obligation undersecurities legislation to disclose material facts and to make timely disclosure of material changes. The Canadian securitiesregulatory authorities recognize that there may be circumstances in which the issuer expects that certain informationconcerning a mineral project may be material notwithstanding the fact that a qualified person has not prepared or supervisedthe preparation of the information. In this situation the Canadian securities regulatory authorities suggest that issuers filea confidential material change report concerning this information while a qualified person reviews the situation. Once aqualified person has confirmed the information, a press release may be issued and the material change report will no longerbe confidential.
2.5 Exception in Section 3.5 of the Instrument - Section 3.5 of the Instrument provides that the disclosure requirement ofsections 3.3 and 3.4 of the Instrument may be satisfied by referring to a previously filed document that includes the requireddisclosure. Issuers relying on this exception are reminded that all disclosure should provide sufficient information to permitmarket participants to make informed investment decisions and should not present or omit information in a manner that ismisleading.
PART 3 AUTHOR OF THE TECHNICAL REPORT
3.1 Selection of Qualified Person - It is the responsibility of the issuer and its directors and officers to appoint a qualifiedperson with experience and competence appropriate for the subject matter of the technical report.
3.2 Qualified Person - Section 2.1 of the Instrument requires that all disclosure be based upon a technical report or otherinformation prepared by or under the supervision of a qualified person and section 5.1 of the Instrument provides that atechnical report must be prepared by or under the supervision of one or more qualified persons. The Canadian securitiesregulatory authorities recognize that certain individuals who currently provide technical expertise to issuers will not beconsidered qualified persons for purposes of the Instrument. These individuals may have the necessary experience andexpertise but may lack the professional accreditation because of differences in provincial registration requirements or forother reasons. Application can be made by an issuer under section 9.1 of the Instrument for an exemption from therequirement for involvement of a qualified person and the acceptance of another person. The application shoulddemonstrate the person's competence and qualification to prepare the technical report or other information in support of thedisclosure despite the fact that he or she is not a member of a professional association or otherwise does not meet therequirements set out in the definition in the Instrument of qualified person.
3.3 Independence of Qualified Person
(1) Paragraph 1.5(4)(c) of the Instrument provides that a qualified person is not considered to be independent of theissuer if the qualified person, or any affiliated entity of the qualified person, owns or by reason of an agreement,arrangement or undertaking expects to receive any securities of the issuer or an affiliated entity of the issuer or aninterest in the property that is the subject of the technical report or in an adjacent property. The Canadian securitiesregulatory authorities recognize that issuers undergoing restructuring may settle outstanding debt to a qualifiedperson with securities. In these circumstances, an issuer may apply for an exemption under section 9.1 of theInstrument to preserve the independence of the qualified person with respect to the issuer.
(2) There may be circumstances in which the staff at the securities regulatory authorities question the objectivity of theauthor of the technical report. The issuer may be asked to provide further information, additional disclosure or theopinion of another qualified person to address concerns about possible bias or partiality on the part of the originalauthor.
PART 4 USE OF INFORMATION
4.1 Use of Information - The Instrument requires that technical reports be prepared and filed with Canadian securitiesregulatory authorities to support certain disclosure of mineral exploration, development and production activities and resultsin order to permit the public and analysts to have access to information that will assist them in making investment decisionsand recommendations. Persons and companies, including registrants, who wish to make use of information concerningmineral exploration, development and production activities and results including mineral resource and mineral reserveestimates are encouraged to review the technical reports that will be on the public file for the issuer and if they aresummarizing or referring to this information they are strongly encouraged to use the applicable mineral resource and mineralreserve categories and terminology found in the technical report.
PART 5 PERSONAL INSPECTION
5.1 Personal Inspection- Canadian securities regulatory authorities consider personal inspection particularly important becauseit enables the qualified person to become familiar with conditions on the property, to observe the geology and mineralization,to corroborate the work done, and on that basis to design or review and recommend an appropriate exploration ordevelopment program. The technical report must describe the extent of the personal inspection.
5.2 Exemption from Personal Inspection Requirement - Part 7 of the Instrument requires that at least one qualified personpreparing or supervising the preparation of a technical report or a portion of a technical report undertake personal inspectionof the property. The Canadian securities regulatory authorities recognize that there may be circumstances in which it is notpossible or beneficial to inspect the property. In such instances the qualified person or the issuer should apply in writingto the securities regulatory authority for relief, stating the reasons why a personal inspection is considered impossible ornot beneficial. It would likely be a condition of any such relief that the technical report state that no inspection was carriedout and provide reasons.
PART 6 REGULATORY REVIEW
6.1 Review
(1) Disclosure and technical reports filed under the Instrument may be subject to review by Canadian securitiesregulatory authorities.
(2) An issuer that files a technical report that does not meet the requirements of the Instrument will be in breach ofsecurities legislation. The issuer may be required to issue or file corrected disclosure, file a revised technical reportor file revised consents, and may be subject to other sanctions.
FORM 43-101F1
TECHNICAL REPORTS
TABLE OF CONTENTS
TITLE
CONTENTS OF THE TECHNICAL REPORT
Item 1: Title Page
Item 2: Table of Contents
Item 3: Summary
Item 4: Introduction and Terms of Reference
Item 5: Property Description and Location
Item 6: Accessibility, Climate, Local Resources, Infrastructure and Physiography
Item 7: History
Item 8: Geological Setting
Item 9: Deposit Types
Item 10: Mineralization
Item 11: Exploration
Item 12: Drilling
Item 13: Sampling Method and Approach
Item 14: Sample Preparation and Security
Item 15: Data Corroboration
Item 16: Adjacent Properties
Item 17: Mineral Processing and Metallurgical Testing
Item 18: Mineral Resource and Mineral Reserve Estimates
Item 19: Other Relevant Data and Information
Item 20: Interpretation and Conclusions
Item 21: Recommendations
Item 22: References
Item 23: Date
Item 24: Additional Requirements for Technical Reports on Development Properties and Production Properties
Item 25: Illustrations
FORM 43-101F1
TECHNICAL REPORT
INSTRUCTIONS
(1) The objective of the technical report is to provide scientific and technical information concerning mineral exploration,development and production activities on a mineral property that is material to an issuer. This Form sets out specificrequirements for the preparation and contents of a technical report. Item 24 of this Form includes additionalrequirements for technical reports on development and production properties.
(2) Terms used and not defined in this Form that are defined or interpreted in National Instrument 43-101 Standardsof Disclosure for Mineral Projects (the "Instrument")shall bear that definition or interpretation. In particular, the terms"mineral resource" and "mineral reserve" and the categories of each are defined in the Instrument. In addition, ageneral definition instrument has been adopted as National Instrument 14-101 Definitions which contains definitionsof certain terms used in more than one national instrument. Readers of this Form should review both these nationalinstruments for defined terms.
(3) The author preparing the technical report should use the headings suggested in this Form. If technical terms arerequired, clear and concise explanations should be included.
(4) No disclosure need be given in respect of inapplicable items and, unless otherwise required in this Form, negativeanswers to items may be omitted. Disclosure included under one heading is not required to be repeated underanother heading.
(5) The technical report is not required to include the information in Items 5, 6, 7, 8, 9, 10 and 11 of this Form if a reporthas been previously filed containing the required information for the properties being reported on and that previousreport is referred to in the technical report.
(6) Issuers and authors are encouraged to follow the Guidelines for Technical Reports Disclosing Mineral Explorationand the Mineral Exploration "Best Practices" Guidelines prepared on the recommendation of the TSE-OSC MiningStandards Task Force by a committee comprised of mining and exploration industry professionals and regulators.Drafts of these Guidelines were published and circulated to the Prospectors and Developers Association of Canadafor comment in October 1999. It is expected that the Guidelines will be published in final form early in 2000.
CONTENTS OF THE TECHNICAL REPORT
Item 1: Title Page - Include a title page setting out the title of the technical report, the general location of the mineral project, thename of the author(s) and the author's professional designation(s) and the effective date of the technical report.
Item 2: Table of Contents - Provide a table of contents listing the contents of the technical report, including figures and tables.
Item 3: Summary - Provide a summary which briefly describes the property, location and ownership, the geology andmineralization, the exploration concept, and the status of exploration, development and/or operations. Discuss theauthor's conclusions and recommendations.
Item 4: Introduction and Terms of Reference - Include a description of
(a) the terms of reference;
(b) the purpose for which the technical report was prepared; and
(c) the sources of information and data contained in the technical report or used in its preparation, with citations ifapplicable.
INSTRUCTIONS
(1)A Canadian securities regulatory authority may request
(a) an authenticated copy of a document used as a basis for the technical report that is private, unpublished orotherwise not readily available to the public; and
(b) a translation into English, French or both, as specified by Canadian securities legislation, of a sourcedocument used as a basis for the technical report, identifying the translator and any relationship of thetranslator to the issuer.
(2) This item should include the identification of the issuer for whom the technical report was prepared, and the author'smandate as well as the purpose and scope of the technical report. The extent of the author's involvement includingfield and office time must be stated. A general description of sources and data should be included. Currency, unitsof measure and conversion factors should be specified.
Item 5: Property Description and Location - To the extent applicable, with respect to each property reported on, describe
(a) the dimensions of the property in hectares or other appropriate units;
(b) the location, reported by section, township, range and national topographic system designation whereverapplicable, or by latitude and longitude;
(c) the claim numbers or equivalent, whether they are patented or unpatented, or the applicable characterization inthe jurisdiction in which they are situated, and whether the claims are contiguous;
(d) the nature and extent of the issuer's title to, or interest in, the property including surface rights, the obligations thatmust be met to retain the property, and the expiration date of claims, licences or other property tenure rights;
(e) the outside boundaries of the property, if legally surveyed;
(f) the location of all known mineralized zones, mineral resources, mineral reserves and mine workings, existing tailingponds, waste deposits and important natural features and improvements, relative to the outside propertyboundaries shown on a map;
(g) to the extent known, the terms of any royalties, back-in rights, payments or other agreements and encumbrancesto which the property is subject;
(h) to the extent known, all environmental liabilities to which the property is subject; and
(i) to the extent known, the permits that must be acquired to conduct the work proposed for the property, and if thepermits have been obtained.
Item 6: Accessibility, Climate, Local Resources, Infrastructure and Physiography - To the extent applicable, with respectto each property reported on, describe
(a) topography, elevation and vegetation;
(b) the means of access to the property;
(c) the proximity of the property to a population centre, and the nature of transport;
(d) to the extent relevant to the mineral project, the climate and the length of the operating season; and
(e) to the extent relevant, the sufficiency of surface rights for mining operations, the availability and sources of power,water, mining personnel, potential tailings storage areas, potential waste disposal areas, heap leach pad areas andpotential processing plant sites.
Item 7: History - To the extent known, with respect to each property reported on, describe
(a) the prior ownership of the property and ownership changes;
(b) the type, amount, quantity and results of exploration and/or development work undertaken by the owners and anyprevious owners;
(c) historical mineral resource and mineral reserve estimates, including the reliability of the historical estimates andwhether the estimates are in accordance with the categories set out in sections 1.3 and 1.4 of the Instrument; and
(d) any production from the property.
INSTRUCTION: If a reporting system other than the one stipulated by the Instrument has been used, the author should include anexplanation of the differences and reliability.
Item 8: Geological Setting - Include a description of the regional, local and property geology.
Item 9: Deposit Types - Describe the mineral deposit type(s) being investigated or being explored for and the geological modelor concepts being applied in the investigation and on the basis of which the exploration program is planned.
Item 10: Mineralization - Describe the mineralized zones encountered on the property, the surrounding rock types and relevantgeological structures, detailing length, width, depth, continuity and the basis for the measurement, together with adescription of the type, character and distribution of the mineralization.
Item 11: Exploration - Describe the nature and extent of all relevant exploration work and metallurgical or other testing conductedby, or on behalf of, the issuer on each property being reported on, including
(a) results of surveys and investigations, and the procedures and parameters relating to the surveys and investigations;
(b) an interpretation of the exploration information;
(c) a statement as to whether the surveys and investigations have been carried out by the issuer or by a contractorand, if the latter, identifying the contractor; and
(d) a discussion of the reliability or uncertainty of the data obtained in the program.
Item 12: Drilling - Describe the type and extent of drilling including the procedures followed and a summary and interpretation ofall results. The relationship between the sample length and the true thickness of the mineralization must be stated, ifknown, and if the orientation of the mineralization is unknown, this must be stated.
Item 13: Sampling Method and Approach - Include
(a) details concerning sampling including location, number, type, nature and spacing or density of samples collected,and the size of the area covered;
(b) identification of any drilling, sampling or recovery factors that could materially impact the accuracy and reliabilityof the results;
(c) a discussion of the sample quality and of whether the samples are representative and of any factors that may haveresulted in sample biases;
(d) rock types, structural controls, widths of mineralized zones and other parameters used to establish the samplinginterval and identification of any significantly higher grade intervals within a lower grade intersection;and
(e) a summary of the true widths of individual samples or sample composites.
INSTRUCTIONS
(1)The issuer may be asked by the Canadian securities regulatory authorities to provide copies of assay and otheranalytical certificates, drill logs and other information referenced in the technical report or used as a basis for thetechnical report.
(2) This item refers to all types of sampling the results of which may be reported under any relevant item.
Item 14: Sample Preparation and Security - Describe sample preparation methods and quality control procedures employed priorto dispatch to an analytical or testing laboratory, and the method or process of sample splitting and reduction and thesecurity measures taken to ensure the validity and integrity of samples taken, including
(a) details regarding sample preparation, assaying and analytical procedures used, including the sub-sample size,the name and location of the analytical and testing laboratories and whether the laboratories are certified by anystandards association and the particulars of any certification;
(b) a summary of the nature and extent of all quality control procedures employed and check assay and other checkanalytical and testing procedures utilized, including the results and corrective actions taken; and
(c) a statement of the author's opinion on the adequacy of sampling, sample preparation, security and analyticalprocedures.
Item 15: Data Corroboration - Include a discussion of
(a) the quality control steps and data corroboration procedures which have been taken;
(b) whether the author has corroborated the data referred to or relied upon, specifically including sampling andanalytical data;
(c) the nature of and any limitations on such corroboration; and
(d) the reasons for any failure to corroborate the data.
Item 16: Adjacent Properties - A technical report that includes a comment on an adjacent property in which the issuer does nothave an interest shall clearly distinguish between mineralization on the adjacent property and mineralization that occurson the issuer's property. If the potential merit of the subject property is predicated entirely or in substantial part on resultsobtained from work carried out on an adjacent property in which the issuer does not have an interest the known historyof the adjacent property shall also be disclosed and the author shall confirm the relevance of such disclosure. The natureof the geology, mineralization and the reported quantity and grade or quality of the mineral resources and mineralreserves on the adjacent property in which the issuer does not have an interest may be disclosed, if
(a) the statement of geology, mineralization, exploration results, mineral resources, mineral reserves and mininghistory was publicly announced by the owner or operator of the adjacent property;
(b) the source of the information and any relationship of the author to the issuer is identified; and
(c) the technical report states that its author has been unable to corroborate the accuracy of the information and, inbold face type, that the information is not necessarily indicative of the mineralization on the property that is thesubject of the technical report.
Item 17: Mineral Processing and Metallurgical Testing - Where mineral processing and/or metallurgical testing analyses havebeen carried out, include the results of testing and details of sample selection representativity and testing and analyticalprocedures.
Item 18: Mineral Resource and Mineral Reserve Estimates - Each technical report on mineral resources and mineral reservesshall
(a) use only the applicable mineral resource and mineral reserve categories set out in sections 1.3 and 1.4 of theInstrument;
(b) report each category of mineral resources and mineral reserves separately and if both mineral resources andmineral reserves are disclosed, state the extent, if any, to which mineral reserves are included in total mineralresources;
(c) not add inferred mineral resources to the other categories of mineral resources;
(d) disclose the name, qualifications and relationship, if any, to the issuer of the qualified person who estimatedmineral resources and mineral reserves;
(e) include appropriate details of quantity and grade or quality for each category of mineral resources and mineralreserves;
(f) include details of the key assumptions, parameters and methods used to estimate the mineral resources andmineral reserves;
(g) include a general discussion on the extent to which the estimate of mineral resources and mineral reserves maybe materially affected by any known environmental, permitting, legal, title, taxation, socio-economic, marketing,political or other relevant issues;
(h) identify the extent to which the estimate of a mineral resource and mineral reserve may be materially affected bymining, metallurgical, infrastructure and other relevant factors;
(i) use only indicated and/or measured mineral resources or proven and/or probable mineral reserves in an economicevaluation, preliminary feasibility study or feasibility study of a mineral project;
(j) state the grade or quality, quantity and category of the mineral resources and mineral reserves if the quantity ofcontained metal is reported; and
(k) when the grade for a polymetallic mineral resource or mineral reserve is reported as metal equivalent, consider andreport the recoveries, refinery costs and all other relevant conversion factors in addition to metal prices and the dateand sources of such prices.
INSTRUCTIONS
(1) The methods and procedures to be used in estimating mineral resources and mineral reserves are the responsibilityof the authors preparing the estimate.
(2) A statement of tonnage or volume and grade or quality is an estimate and should be rounded as appropriate toreflect the fact that it is an approximation.
(3) An issuer that is incorporated or organized in a foreign jurisdiction may file a technical report that utilizes the mineralresource and mineral reserve categories of the JORC Code, USGS Circular 831 or IMM system provided that areconciliation to the mineral resource and mineral reserve categories set out in sections 1.3 and 1.4 of theInstrument is filed with the technical report and certified by the author. The reconciliation must also address theconfidence levels required for the categorizations in section 1.3 and 1.4 of the Instrument.
Item 19: Other Relevant Data and Information - Include any additional information or explanation necessary to make thetechnical report understandable and not misleading.
Item 20: Interpretation and Conclusions - Include the results and reasonable interpretations of all field surveys, analytical andtesting data and other relevant information. Discuss the adequacy of data density and the data reliability as well as anyareas of uncertainty. A technical report concerning exploration information shall include the conclusions of the author.The author must discuss whether the completed project met its original objectives.
Item 21: Recommendations - If successive phases of work are recommended, each phase must culminate in a decision point.The recommendations shall not apply to more than two phases of work. The recommendations shall state whetheradvancing to a subsequent phase is contingent on positive results in the previous phase. Provide particulars of therecommended programs and a breakdown of costs for each phase.
Item 22: References - Include a detailed list of all references cited in the technical report.
Item 23: Date - Include the effective date of the technical report on both the title page and the page of the technical report that issigned. The date of signing must also be included on the signature page.
Item 24: Additional Requirements for Technical Reports on Development Properties and Production Properties - Technicalreports concerning development properties and production properties shall also include
(a) Mining Operations - information and assumptions concerning the mining method, metallurgical processes andproduction forecast;
(b) Recoverability - information concerning results of all test and operating results relating to the recoverability of thevaluable component or commodity and amenability of the mineralization to the proposed processing methods;
(c) Markets - information concerning the markets for the issuer's production and the nature and material terms of anyagency relationships;
(d) Contracts - a discussion of whether the terms of mining, concentrating, smelting, refining, transportation, handling,sales and hedging and forward sales contracts or arrangements, rates or charges are within market parameters;
(e) Environmental Considerations - a discussion of bond posting, remediation and reclamation;
(f) Taxes - a description of the nature and rates of taxes, royalties and other government levies or interests applicableto the mineral project or production, revenues or income from the mineral project;
(g) Capital and Operating Cost Estimates - capital and operating cost estimates, with the major components beingset out in tabular form;
(h) Economic Analysis - an economic analysis with cash flow forecasts on an annual basis using proven mineralreserves and probable mineral reserves only, and sensitivity analyses with variants in metal prices, grade, capitaland operating costs;
(i) Payback - a discussion of the payback period of capital with imputed or actual interest;
(j) Mine Life - a discussion of the expected mine life and exploration potential.
Item 25: Illustrations -
(1) Technical reports shall be illustrated by legible maps, plans and sections. All technical reports shall beaccompanied by a location or index map and more detailed maps showing all important features described in thetext. In addition, technical reports shall include a compilation map outlining the general geology of the propertyand areas of historical exploration. The location of all known mineralization, anomalies, deposits, pit limits, plantsites, tailings storage areas, waste disposal areas and all other significant features shall be shown relative toproperty boundaries. All maps, drawings and diagrams that have been created by the author, in whole or in part,and that are based on the work that the author has done or supervised, must be signed and dated by the author.Where information from other sources, either government or private, is used in preparing these maps or diagrams,the source of the information must be named.
(2) If adjacent or nearby properties have an important bearing on the potential of the property under consideration, theirlocation and any mineralized structures common to two or more such properties shall be shown on the maps.
(3) If the potential merit of a property is predicated on geophysical or geochemical results, maps showing the resultsof surveys and their interpretations shall be included in the technical report.
(4) Maps shall include a scale in bar form and an arrow indicating North. Information taken from government mapsor from drawings of other engineers or geoscientists shall be acknowledged on the map.
1 This proposed National Instrument originated with a reformulation of National Policy Statement No. 2-A ("NP 2-A") and National PolicyStatement 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 a Commission regulation in Saskatchewan and as a policy in all other jurisdictions represented by theCSA. NP 2-A sets out the requirements for the preparation of reports that are required to be filed under securities legislation. Securitieslegislation in most jurisdictions represented by the CSA requires issuers with mining operations to file reports prepared in accordance with NP2-A, in connection with a prospectus offering for properties on which proceeds from the distribution are being expended and for any othermajor producing properties. Appendix A of National Policy Statement No. 47 ("NP 47") and Schedule IX of the Regulation to the Securities Act(Québec), each set out the requirements for a description of natural resource operations to be included in an Annual Information Form filedunder that policy or the Regulation in Quebec. NP 47 does not require that the description be based on estimates prepared by or reviewed byindependent engineers or that a report be filed. Paragraph 3(k) of Item 3 of NP 47 states that if reserves are represented as being based uponestimates prepared by independent engineers or other qualified persons the author must be identified and the Regulator may request a copy ofthe report as supplemental information. NP 47 and Schedule IX are being replaced by a new National Instrument 44-101, which will set outrequirements for disclosure in Annual Information Forms and Prospectuses and which refers to this Instrument. NP 22 concerns the use ofinformation and opinions regarding natural resource properties by registrants and issuers. The objective of that instrument is to ensure thatreferences to technical data in reports, letters or other publications used directly or indirectly to sell securities conform to some uniformstandards. NP 22 requires that the general disclosure standards and definitions of NP 2-A be complied with and used and that sources ofinformation and opinion be specifically named. In addition, technical facts and opinions, such as reserve estimates, must be quoted fromverbatim.
2 A national definition instrument has been adopted as National Instrument 14-101 Definitions. It contains definitions of certain terms used inmore than one national instrument. National Instrument 14-101 also provides that a term used in a national instrument and defined in thestatute relating to securities of the applicable jurisdiction, the definition of which is not restricted to a specific portion of the statute, will have themeaning given to it in that statute, unless the context otherwise requires. National Instrument 14-101 also provides that a provision or areference within a provision of a national instrument that specifically refers by name to a jurisdiction, other than the local jurisdiction, shall nothave any effect in the local jurisdiction, unless otherwise stated in the provision.
3 The term "local jurisdiction" is defined in National Instrument 14-101 Definitions as meaning "in a national instrument adopted or made by aCanadian securities regulatory authority, the jurisdiction in which the Canadian securities regulatory authority is situate". The term "securitieslegislation" is defined in National Instrument 14-101 Definitions to be, for the local jurisdiction, the statute and other instruments listed in anappendix to instrument, which generally include the statute, regulations and, in some cases, the rules, forms, rulings and orders relating tosecurities in the local jurisdiction.