CSA Reinforces Disclosure Requirements For Mineral Resource Estimates


On June 4, 2020, the Canadian Securities Administrators (“CSA”) published CSA Staff Notice 43-311 (the “Notice”) and presented the results of a review of mineral resource estimate (“MRE”) disclosure in technical reports of mining issuers. The CSA reviewed disclosure (the “Review”) in a total of 86 technical reports filed by mining issuers that supported MREs. The Notice provides mining issuers and qualified persons (“QPs”) with substantial guidance to ensure adequate disclosure.

MREs are of significant importance to mining issuers in several respects. Disclosure of an MRE can significantly influence both an issuer’s share price and market capitalization. In addition, MREs are often the basis for subsequent mining studies and may quantify the mineral project as an investment opportunity.

The Review assessed technical reports for quality, clarity and compliance of the disclosure, in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects. In addition, the Review considered whether disclosure was transparent in its adherence to best estimation practices by QPs, as required by CIM Best Practices Guidelines, including Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines. Results of the Review identified inadequate disclosure in the following areas which provides significant guidance for disclosure requirements:

  1. Reasonable Prospects. Technical reports should not characterize a mineral deposit as a mineral resource unless the resource has demonstrated reasonable prospects of economic extraction (“Reasonable Prospects”). This includes adequate disclosure on metal recoveries, assumed mining and processing methods, costs and constraints applied to the MRE. Disclosure should adequately demonstrate that mineralized material has the potential to be mined and processed economically.
  2. Data Verification. Data presented in technical reports which are used to support a MRE must be adequately verified and determined to be suitable by the QP for specific use in the MRE. This is particularly important given that mineral projects often pass through various owners/operators, each generating their own independent exploration and drilling data. While the use of legacy data from former operators is legitimate, such data requires careful verification which should be fully documented in the technical report.
  3. Risk Factors. Technical reports must set forth meaningful risk factors specific to the mineral project; failure to do so may make MRE disclosure misleading. The use of boilerplate disclosure about potential risks and uncertainties which are general to the mining industry is insufficient.
  4. Sensitivity to Cut-off Grade. All estimates resulting from each of the cut-off grade scenarios which are set forth in a technical report must meet the test of Reasonable Prospects. The base case or preferred scenario for such estimates must be highlighted in the report. Variations to the cut-off grade which indicate robustness of the estimate are useful but insufficient without additional and specific information.

The Notice also sets out the following additional MRE disclosure which should be provided in technical reports:

  1. QP’s Relevant Experience and Purpose of the Technical Report. The QP responsible for the MRE must be suitably qualified to complete a MRA for the specific property and its deposit model. The technical report must state its terms of reference.
  2. Mineralization Controls and Geological model. Defining a proper geological mineralization model for the geological settings and mineralization controls is the foundation of a representative MRE. Poorly defined geological models may result in erroneous estimates that require future restatement.
  3. Mineral resource estimation and classification. The criteria used for classification of the MRE should be described in enough detail for a reasonably informed reader to understand them. Disclosure of the block model validation methods and results allows a reasonable reader to gauge the robustness of results of the MRE.

Regulatory authorities continue to review technical reports as part of the ongoing continuous disclosure review process. Based on the outcome of the Review and the criteria set forth in the Notice, special attention will be directed to MRE disclosure. Issuers that are deficient in material disclosure requirements with respect to MREs will be required to amend and re-file technical reports and file clarifying or retracting news releases.