Insights

• Specifies the information to which it lacks access;
• Explains that it does not have access to the required information because:
  • Obtaining the information would result in an unreasonable burden or expense, or
  • It requested the information from a person possessing knowledge of the information, who is not affiliated with the royalty company or similar registrant, and who denied the request; and
• Provides all required information that it does possess or which it can acquire without incurring an unreasonable burden or expense.

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In its SEC annual report and in applicable registration statements, a registrant engaged in mining operations would be required to disclose certain property-specific information for each property that is material to the registrant’s business or financial condition.  While the new rules do not specify how a registrant should determine what is an individual “property”, versus multiple properties, the SEC  noted in the proposing release that properties sharing the same processing plant or other facilities prior to the first point of material external sale could be treated as one mining property.  This suggests that such determinations should not be made on a strictly legal basis but should instead be based on how such properties are situated or operated.

The new rules acknowledge that some registrants have material mining operations but do not have any single property that is material to the registrant’s business or financial condition; for example, a registrant may have 50 distinct properties, none of which is individually material.  A registrant with no individually material properties need not comply with the disclosure requirements described in this section.

In addition to information similar to current Guide 7 requirements, the new rules require, with respect to each material property:

• Tabular disclosure of mineral resources and mineral reserves;
• Additional narrative disclosures; and
• As previously described, filing as an exhibit a technical report summary prepared by one or more qualified persons in support of any estimate of material resources, any estimate of material reserves, any material change in the foregoing or any material change in a voluntarily-filed technical report summary relating to exploration results.

The new rules require that a registrant engaged in mining operations include in its annual reports and applicable registration statements the following information with respect to each property that is material to the registrant’s business or financial condition:

• A brief description of the property including:
  • The location, accurate to within one mile, using an easily recognizable coordinate system. The registrant must provide appropriate maps, with proper engineering detail (such as scale, orientation, and titles). Such maps must be legible on the page when printed;
  • Existing infrastructure including roads, railroads, airports, towns, ports, sources of water, electricity, and personnel; and
  • A brief description, including the name or number and size (acreage), of the titles, claims, concessions, mineral rights, leases or options under which the registrant and its subsidiaries have or will have the right to hold or operate the property, and how such rights are obtained at this location, indicating any conditions that the registrant must meet in order to obtain or retain the property. If held by leases or options or if the mineral rights otherwise have termination provisions, the registrant must provide the expiration dates of such leases, options or mineral rights and associated payments.
• If the registrant’s interest in the property is through a royalty, streaming or other similar right, a brief description of the agreement under which the registrant and its subsidiaries have or will have the right to a royalty or similar interest in the property, indicating any conditions that the registrant must meet in order to obtain or retain the royalty or similar interest, and indicating the expiration date.
• The following information, as relevant to the particular property:
  • A brief description of the present condition of the property, the work completed by the registrant on the property, the registrant’s proposed program of exploration or development, the current stage of the property as exploration, development or production, the current state of exploration or development of the property, and the current production activities. Mines should be identified as either surface or underground, with a brief description of the mining method and processing operations. If the property is without known reserves and the proposed program is exploratory in nature or the registrant has started extraction without determining mineral reserves, the registrant must provide a statement to that effect;
  • The age, details as to modernization and physical condition of the equipment, facilities, infrastructure, and underground development; and
  • The total cost for or book value of the property and its associated plant and equipment;
• A brief history of previous operations, including the names of previous operators, insofar as known;
• A brief description of any significant encumbrances to the property, including current and future permitting requirements and associated timelines, permit conditions, and violations and fines;
• If mineral resources or reserves have been determined, a tabular summary of all mineral resources or reserves as of the end of the most recently completed fiscal year, presented for each class of mineral resources (measured, indicated and inferred), together with total measured and indicated mineral resources, the estimated tonnages and grades (or quality, where appropriate), and in a separate table, for each class of mineral reserves (proven and probable), together with total mineral reserves, the estimated tonnages, grades (or quality, where appropriate), cut-off grades and metallurgical recovery, based on a specific point of reference selected by the qualified person.
• A comparison of the property’s mineral resources and reserves as of the end of the last fiscal year with the mineral resources and reserves as of the end of the preceding fiscal year, with an explanation of any material change between the two.  The comparison must disclose information concerning:
  • The mineral resources or reserves at the end of the last two fiscal years;
  • The net difference between the mineral resources or reserves at the end of the last completed fiscal year and the preceding fiscal year, as a percentage of the resources or reserves at the end of the fiscal year preceding the last completed one;
  • An explanation of the causes of any discrepancy in mineral resources including depletion or production, changes in commodity prices, additional resources discovered through exploration, and changes due to the methods employed; and
  • An explanation of the causes of any discrepancy in mineral reserves including depletion or production, changes in the resource model, changes in commodity prices and operating costs, changes due to the methods employed, and changes due to acquisition or disposal of properties;
• If the registrant has not previously disclosed mineral reserve or resource estimates in a filing with the SEC or is disclosing material changes to its previously disclosed mineral reserve or resource estimates, a brief discussion of the material assumptions and criteria in the disclosure and cite to corresponding sections of the technical report summary, which must be filed as an exhibit.
• To the extent material to investors, a discussion of exploration activity and exploration results, including:
  • If disclosing exploration activity for any material property for the most recently completed fiscal year, a summary that describes the sampling methods used, and, for each sampling method used, the number of samples, the total size or length of the samples, and the total number of assays; and
  • If disclosing exploration results for any material property for the most recently completed fiscal year, a summary that, for each property, identifies the hole, trench or other sample that generated the exploration results, describes the length, lithology, and key geologic properties of the exploration results, and includes a brief discussion of the exploration results’ context and relevance.  If the summary only includes results from selected samples and intersections, it should be accompanied with a discussion of the context and justification for excluding other results. 
• If the registrant is disclosing exploration results not previously disclosed in a filing with the SEC, or material changes to previously disclosed exploration results, provide sufficient information to allow for an accurate understanding of the significance of the exploration results. This must include information such as exploration context, type and method of sampling, sampling intervals and methods, relevant sample locations, distribution, dimensions, and relative location of all relevant assay and physical data, data aggregation methods, land tenure status, and any additional material information that may be necessary to make the required disclosure concerning the registrant’s exploration results not misleading. If filing a technical report summary, the registrant must cite to corresponding sections of the summary technical report, which must be filed as an exhibit.  A change in exploration results that significantly alters the potential of the subject deposit is considered material.
• If the registrant includes disclosure of an exploration target, such disclosure must appear in a separate section of the filing that is clearly captioned as a discussion of an exploration target.  This section must include:
  • A clear and prominent statement that:
    • The ranges of potential tonnage and grade (or quality) of the exploration target are conceptual in nature;
    • There has been insufficient exploration of the relevant property or properties to estimate a mineral resource;
    • It is uncertain if further exploration will result in the estimation of a mineral resource; and
    • The exploration target therefore does not represent, and should not be construed to be, an estimate of a mineral resource or mineral reserve.
  • A detailed explanation of the basis for the exploration target, such as the conceptual geological model used to develop the target;
  • An explanation of the process used to determine the ranges of tonnage and grade, which must be expressed as approximations;
  • A statement clarifying whether the exploration target is based on actual exploration results or on one or more proposed exploration programs, which should include a description of the level of exploration activity already completed, the proposed exploration activities designed to test the validity of the exploration target, and the time frame in which those activities are expected to be completed; and
  • A statement that the ranges of tonnage and grade (or quality) of the exploration target could change as the proposed exploration activities are completed.

Registrants that hold only royalties, streaming or other similar rights are subject to the foregoing disclosure requirements; however, if such a registrant lacks access to any of the required information, such registrant may omit such information, provided that the registrant:

• Specifies the information to which it lacks access;
• Explains that it does not have access to the required information because:
  • Obtaining the information would result in an unreasonable burden or expense, or
  • It requested the information from a person possessing knowledge of the information, who is not affiliated with the royalty company or similar registrant, and who denied the request; and
• Provides all required information that it does possess or which it can acquire without incurring an unreasonable burden or expense.

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Under the new rules, every registrant with mining operations that are material to its business or financial condition must describe in its SEC annual report and applicable registration statements the internal controls that the registrant uses in its exploration and mineral resource and reserve estimation efforts.  This disclosure should include quality control and quality assurance (QC/QA) programs, verification of analytical procedures and a discussion of comprehensive risk inherent in the estimation.

In addition, if a registrant has filed a technical report summary with respect to any property, the registrant must identify the qualified person who prepared the technical report summary and state whether the qualified person is an employee of the registrant.  If the qualified person is not an employee of the registrant, the registrant must name the qualified person’s employer, disclose whether the qualified person or the qualified person’s employer is affiliated with the registrant or another entity that has an ownership, royalty or other interest in the property that is the subject of the technical report summary, and if affiliated, describe the nature of the affiliation.

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May a registrant disclose mineral resources, mineral reserves or material exploration results that the registrant has been unable to ?

Only in limited circumstances.  If a report containing a mineral resource, mineral reserve or other estimate relating to a property was prepared before the registrant acquired, or entered into an agreement to acquire, an interest in the property, and the registrant has not verified the information as a current estimate of mineral resources, mineral reserves, or exploration results, then such information is not considered current and cannot be filed in support of disclosure.  Notwithstanding this prohibition, a registrant may include such an estimate in an SEC filing that pertains to a merger, acquisition or business combination if the registrant is unable to update the estimate prior to the completion of the relevant transaction.  In that event, when referring to the estimate, the registrant must disclose the source and date of the estimate, and state that a qualified person has not done sufficient work to classify the estimate as a current estimate of mineral resources, mineral reserves, or exploration results, and that the registrant is not treating the estimate as a current estimate of mineral resources, mineral reserves, or exploration results.

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May a registrant include in its SEC filings disclosures that do not comply with the SEC’s new rules, but comply with a foreign mining code such as Canada’s NI 43-101?

Not in its core “filed” SEC reports, such as Form 10-Ks, 10-Qs and 20-Fs, and certain Form 8-Ks.  Nor can such information be incorporated by reference into a non-MJDS SEC registration statement.  

However, the SEC’s new rules will not prohibit a registrant from including supplemental disclosures that are inconsistent with the SEC’s rules in disclosures that are not subject to the rules, such as disclosures on an issuer’s website, in press releases or in certain SEC submitted documents such as a Form 8-K furnished under Regulation FD, or for foreign private issuers a Form 6-K that is not incorporated by reference into an applicable registration statement.  This is consistent with the existing reporting regime for U.S. issuers, under which many U.S. issuers voluntarily prepare technical reports and other disclosures that comply with NI 43-101 or other foreign standards and make such reports available to the public outside their core “filed” SEC reports.  As under existing Guide 7, a registrant seeking to make such supplemental disclosures should assure itself that neither such disclosures nor its SEC filings are misleading.

The new rules will change the existing practice of Canadian issuers that file on non-MJDS forms including Forms 20-F, F-1, F-3 and F-4.  Existing Guide 7 includes an exception that permits the disclosure of information that would otherwise be prohibited by Guide 7, if such information is required by foreign or state law.  The SEC has taken the view that only Canada requires by law compliance with a particular mining disclosure code (NI 43-101).  In addition, the SEC has not permitted U.S. issuers that are subject to Canadian disclosure requirements to take advantage of the exemption.  Accordingly, the prevailing SEC guidance is that Canadian issuers filing with the SEC on non-MJDS forms are permitted to disclose NI 43-101 compliant information (which would otherwise violate Guide 7) in their SEC filings, as long as the filings are not misleading and the registrant also includes the information that would be required by Guide 7.  U.S. issuers and registrants from other countries are not permitted to vary from Guide 7.  As initially proposed by the SEC, the final new rules eliminate this exception on the basis that, because the new rules permit the disclosure of mineral resources and are generally consistent with other CRIRSCO-based reporting regimes, such an exception is no longer be necessary.

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Could a qualified person be if information contained in the technical report summary is incorrect or ?

Yes.  U.S. securities laws allow the purchaser in a public offering of securities to sue the registrant, its directors, and any officer that signed the SEC registration statement for the offering, if the registration statement pursuant to which the securities were sold “contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading . . . ”, and the purchaser suffered damages.  A purchaser may also sue any accountant, engineer, or other expert who has, with his or her consent, been named in the registration statement, with respect to the statements attributed to him.  This would include any qualified person named as the author of a technical report summary.

Notwithstanding the foregoing, a person (other than the registrant) generally will not be liable if after reasonable investigation, the person had reasonable grounds to believe and did believe that the statements were true and that there was no material omission.  This is known as the due diligence defense.  A qualified person may therefore avoid liability, even in the case of a materially misleading statement or omission, if the qualified person conducted appropriate due diligence and had reasonable grounds to believe and did believe in the accuracy of the disclosure. 

Liability for misleading disclosures is not limited to public offerings. Rule 10b-5 under the Securities Exchange Act of 1934 makes it unlawful to “make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading . . . in connection with the purchase or sale of any security.”  Under this rule, claims for damages may be made in respect of securities purchased in private placements.  In addition, lawsuits may be brought against a registrant or other persons alleged to have “made” untrue or misleading statements to the market generally, seeking damages on behalf of persons that purchased or sold securities in the market in reliance upon such information. The applicable standards for such claims are complex and beyond the scope of this discussion. 

The filing of such lawsuits as class actions is common in the United States. Defendants may agree to settle such actions as an otherwise costly nuisance.  Because plaintiffs’ attorneys may be entitled to receive fees in such settlements, even ones with little benefit to the purported class of affected shareholders, it is common for plaintiffs’ attorneys to bring class action lawsuits against companies that have experienced a significant drop in stock price as a result of an unfavorable disclosure, or that are engaged in a sale of the company.

Many qualified persons are already subject to these potential liabilities, because they act for registrants that are Canadian companies, and that pursuant to Canada’s NI 43-101 have been identified in such registrants’ SEC registration statements and reports.

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1.   Including in Canada, Australia, South Africa, the European Union, Chile, Hong Kong, and Russia.

2.   Unless otherwise indicated, “applicable registration statement” and similar references shall mean a registration statement on Form S-1, S-3, S-4, F-1, F-3, F-4, 10 or 20-F, or an offering statement on Form 1-A.

Primary Differences Between SEC Industry Guide 7 and the New Rules

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Summary of Requirements for Technical Report Summaries

Required Content for All Technical Report Summaries:

• Executive Summary.  Briefly summarize the most significant information in the technical report summary, including property description (including mineral rights) and ownership, geology and mineralization, the status of exploration, development and operations, mineral resource and mineral reserve estimates, summary capital and operating cost estimates, permitting requirements, and the qualified person’s conclusions and recommendations.  The executive summary must be brief and should not contain all of the detailed information in the technical support summary;
• Introduction.  Disclose:
  • The registrant for whom the technical report summary was prepared;
  • The terms of reference and purpose for which the technical report summary was prepared;
  • The sources of information and data contained in the technical report summary or used in its preparation, with citations if applicable;
  • The details of the personal inspection on the property by each qualified person or, if applicable, the reason why a personal inspection has not been completed;
  • Whether the technical report summary’s purpose was to report mineral resources, mineral reserves or material exploration results;
  • If applicable, that the technical report summary updates a previously filed technical report summary; and
  • When filing an update, the name and date of the previous technical report summary.
• Property Description.  Describe:
  • The location of the property, accurate to within one mile, using an easily recognizable coordinate system.  The qualified person must provide appropriate maps, with proper engineering detail (such as scale, orientation, and titles) to portray the location of the property.  Such maps must be legible on the page when printed;
  • The area of the property;
  • The name or number of each title, claim, mineral right, lease or option under which the registrant and its subsidiaries have or will have the right to hold or operate the property.  If held by leases or options, the registrant must provide the expiration dates of such leases or options and associated payments;
  • The mineral rights, and how such rights have been obtained at this location, indicating any conditions that the registrant must meet in order to obtain or retain the property;
  • Any significant encumbrances to the property, including current and future permitting requirements and associated timelines, permit conditions, and violations and fines; and
  • Any other significant factors and risks that may affect access, title, or the right or ability to perform work on the property.

  If the registrant holds a royalty or similar interest in the property, the above information must be provided for the property that is owned or operated by a party other than the registrant.  In this event, for example, the report must address the documents under which the owner or operator holds or operates the property, the mineral rights held by the owner or operator, conditions required to be met by the owner or operator, significant encumbrances and significant factors and risks relating to the property or work on the property.

• Accessibility, Climate, Local Resources, Infrastructure and Physiography.  Describe:
  • The topography, elevation, and vegetation;
  • The means of access to the property, including highways, towns, rivers, railroads, and airports;
  • The climate and the length of the operating season, as applicable; and
  • The availability of and required infrastructure, including sources of water, electricity, personnel, and supplies.
• History.  Describe:
  • Previous operations, including the names of previous operators, insofar as known; and
  • The type, amount, quantity, and general results of exploration and development work undertaken by any previous owners or operators.
• Geological Setting, Mineralization and Deposit.  Describe briefly:
  • The regional, local, and property geology;
  • The significant mineralized zones encountered on the property, including a summary of the surrounding rock types, relevant geological controls, and the length, width, depth, and continuity of the mineralization, together with a description of the type, character, and distribution of the mineralization; and
  • Each mineral deposit type that is the subject of investigation or exploration together with the geological model or concepts being applied in the investigation or forming the basis of exploration program.

  The qualified person must include at least one stratigraphic column and one cross-section of the local geology to meet the requirements of this paragraph.

• Exploration.  Describe the nature and extent of all relevant exploration work, conducted by or on behalf of, the registrant.
  • For all exploration work other than drilling, describe:
    • The procedures and parameters relating to the surveys and investigations;
    • The sampling methods and sample quality, including whether the samples are representative, and any factors that may have resulted in sample biases;
    • The location, number, type, nature, and spacing or density of samples collected, and the size of the area covered; and
    • The significant results of and the qualified person’s interpretation of the exploration information.
  • For drilling, to the extent such information is relevant and available, describe:
    • The type and extent of drilling including the procedures followed;
    • Any drilling, sampling, or recovery factors that could materially impact the accuracy and reliability of the results; and
    • The material results and interpretation of the drilling results.
  • For characterization of hydrogeology, to the extent such information is relevant and available, describe:
    • The nature and quality of the sampling methods used to acquire data on surface and groundwater parameters;
    • The type and appropriateness of laboratory techniques used to test for groundwater flow parameters such as permeability, and include discussions of the quality control and quality assurance procedures;
    • Results of laboratory testing and the qualified person’s interpretation, including any material assumptions, which must include descriptions of permeable zones or aquifers, flow rates, in-situ saturation, recharge rates and water balance; and
    • The groundwater models used to characterize aquifers, including material assumptions used in the modeling.
  • For geotechnical data, testing and analysis, to the extent such information is relevant and available, describe:
    • The nature and quality of the sampling methods used to acquire geotechnical data;
    • The type and appropriateness of laboratory techniques used to test for soil and rock strength parameters, including discussions of the quality control and quality assurance procedures; and
    • Results of laboratory testing and the qualified person’s interpretation, including any material assumptions.
  • For a technical report summary to support disclosure of exploration results, the qualified person must provide information on all samples or drill holes.  If some information is excluded, the qualified person must identify the omitted information and explain why that information is not material.
  • For a technical report summary to support disclosure of mineral resources or mineral reserves, the qualified person can meet the requirements of this section by providing sampling (including drilling) plans, representative plans and cross-sections of results.
  • Include a plan view of the property showing locations of all drill holes and other samples.
  • If disclosing an exploration target for which a mineral resource has yet to be disclosed, the above information must be provided in a subsection of the “Exploration” section that is clearly captioned as a discussion of an exploration target, together with:
    • A clear and prominent statement that:
      • The ranges of potential tonnage and grade (or quality) of the exploration target are conceptual in nature;
      • There has been insufficient exploration of the relevant property or properties to estimate a mineral resource;
      • It is uncertain if further exploration will result in the estimation of a mineral resource; and
      • The exploration target therefore does not represent, and should not be construed to be, an estimate of a mineral resource or mineral reserve.
    • A detailed explanation of the basis for the exploration target, such as the conceptual geological model used to develop the target;
    • An explanation of the process used to determine the ranges of tonnage and grade, which must be expressed as approximations;
    • A statement clarifying whether the exploration target is based on actual exploration results or on one or more proposed exploration programs, which should include a description of the level of exploration activity already completed, the proposed exploration activities designed to test the validity of the exploration target, and the time frame in which those activities are expected to be completed; and
    • A statement that the ranges of tonnage and grade (or quality) of the exploration target could change as the proposed exploration activities are completed.
• Sample Preparation, Analyses, and Security.  Describe:
  • Sample preparation methods and quality control measures employed prior to sending samples to an analytical or testing laboratory, sample splitting and reduction methods, and the security measures taken to ensure the validity and integrity of samples;
  • Sample preparation, assaying and analytical procedures used, the name and location of the analytical or testing laboratories, the relationship of the laboratory to the registrant, and whether the laboratories are certified by any standards association and the particulars of such certification;
  • The nature, extent, and results of quality control procedures and quality assurance actions taken or recommended to provide adequate confidence in the data collection and estimation process; and
  • The author's opinion on the adequacy of sample preparation, security, and analytical procedures.  If the analytical procedures used in the analysis are not part of conventional industry practice, the qualified person must state so and provide a justification for why he or she believes the procedure is appropriate in this instance.
• Data Verification.  Describe the steps taken by the qualified person to verify the data being reported on or which is the basis of this technical report summary, including:
  • Data verification procedures applied by the qualified person;
  • Any limitations on or failure to conduct such verification, and the reasons for any such limitations or failure; and
  • The qualified person’s opinion on the adequacy of the data for the purposes used in the technical report summary.
• Adjacent Properties.  Where applicable, a qualified person may include relevant information concerning an adjacent property if:
  • Such information was publicly disclosed by the owner or operator of the adjacent property;
  • The source of the information is identified;
  • The qualified person states that he or she has been unable to verify the information and that the information is not necessarily indicative of the mineralization on the property that is the subject of the technical report summary; and
  • The technical report summary clearly distinguishes between the information from the adjacent property and the information from the property that is the subject of the technical report summary.
• Other Relevant Data and Information.  Include any additional information or explanation necessary to provide a complete and balanced presentation of the value of the property to the registrant.
• Interpretation and Conclusions.  The qualified person must summarize the interpretations of and conclusions based on the data and analysis in the technical report summary.  He or she must also discuss any significant risks and uncertainties that could reasonably be expected to affect the reliability or confidence in the exploration results, mineral resource or mineral reserve estimates, or projected economic outcomes.
• Recommendations.  If applicable, the qualified person must describe the recommendations for additional work with associated costs.  If the additional work program is divided into phases, the costs for each phase must be provided along with decision points at the end of each phase.
• References.  Include a list of all references cited in the technical report summary in sufficient detail so that a reader can locate each reference.
• Reliance on Information Provided by the Registrant.  If the qualified person is relying on information provided by the registrant, as permitted by the SEC’s rules, for any matters discussed in the technical report summary:
  • Identify the categories of information provided by the registrant;
  • Identify the particular portions of the technical report summary that were prepared in reliance on information provided by the registrant and the extent of that reliance; and
  • Disclose why the qualified person considers it reasonable to rely upon the registrant for any of such information.

Required Additions for an Initial Assessment:

• Mineral Processing and Metallurgical Testing.  Describe:
  • The nature and extent of the mineral processing or metallurgical testing and analytical procedures;
  • The degree to which the test samples are representative of the various types and styles of mineralization and the mineral deposit as a whole;
  • The name and location of the analytical or testing laboratories, the relationship of the laboratory to the registrant, whether the laboratories are certified by any standards association and the particulars of such certification;
  • The relevant results including the basis for any assumptions or predictions about recovery estimates.  Discuss any processing factors or deleterious elements that could have a significant effect on potential economic extraction; and
  • The qualified person’s opinion on the adequacy of the data for the purposes used in the technical report summary.  If the analytical procedures used in the analysis are not part of conventional industry practice, the qualified person must state so and provide a justification for why he or she believes the procedure is appropriate, in this instance.
• Mineral Resource Estimates.  If this item is included, the technical report summary must:
  • Describe the key assumptions, parameters, and methods used to estimate the mineral resources, in sufficient detail for a reasonably informed person to understand the basis for and how the qualified person estimated the mineral resources;
  • Provide the qualified person’s estimates of mineral resources for all commodities, including estimates of quantities, grade or quality, cut-off grades, and metallurgical or processing recoveries.  The qualified person must classify mineral resources into inferred, indicated, and measured mineral resources, disclose the criteria used to classify a resource as inferred, indicated or measured, and justify the classification.  The technical report summary must include mineral resource estimates at a specific point of reference selected by the qualified person and disclosed in the technical report summary.  The qualified person must round off, to appropriate significant figures chosen to reflect order of accuracy, any estimates of quantity and grade or quality.  The qualified person must estimate cut-off grades based on assumed costs for surface or underground operations and commodity prices that provide a reasonable basis for establishing prospects of economic extraction for resources.  The qualified person must disclose the price used for each commodity, and explain, with particularity, his or her reasons for using the selected price, including the material assumptions underlying the selection.  This explanation must include disclosure of the time frame used to estimate the commodity price and unit costs for cut-off grade estimation and the reasons justifying the selection of that time frame.  The qualified person may use a price set by contractual arrangement, provided that such price is reasonable, and the qualified person discloses that he or she is using a contractual price.
  • When the qualified person reports the grade or quality for a multiple commodity mineral resource as metal or mineral equivalent, he or she also must report the individual grade of each metal or mineral and the commodity prices, recoveries, and any other relevant conversion factors used to estimate the metal or mineral equivalent grade;
  • Discuss the uncertainty in the estimates of inferred, indicated, and measured mineral resources and explain the sources of uncertainty and how they were considered in the uncertainty estimates.  The qualified person must support the disclosure of uncertainty associated with each class of mineral resources with a list of all factors considered and explain how those factors contributed to the final conclusion about the level of uncertainty underlying the resource; and
  • The qualified person must provide a qualitative assessment of all relevant technical and economic factors likely to influence the prospect of economic extraction to establish economic potential and justify why he or she believes that all issues can be resolved with further exploration and analysis.  These factors include, but are not limited to, to the extent material:
    • Site infrastructure (e.g. whether access to power and site is possible);
    • Mine design and planning (e.g. what is the broadly defined mining method);
    • Processing plant (e.g. whether all products used in assessing prospects of economic extraction can be processed with methods consistent with each other);
    • Environmental compliance and permitting (e.g. what are the required permits and corresponding agencies and whether significant obstacles exist to obtaining those permits); and
    • Any other reasonably assumed technical and economic factors, including plans, negotiations, or agreements with local individuals or groups, which are necessary to demonstrate reasonable prospects for economic extraction.
• In complying with the above requirements, the qualified person must take into account the following instructions:
  • The qualified person must consider all sources of uncertainty when reporting the uncertainty associated with each class of mineral resources.  Sources of uncertainty that affect such reporting of uncertainty include sampling or drilling methods, data processing and handling, geologic modeling and estimation.  The qualified person is not required to use estimates of confidence limits derived from geostatistics or other numerical methods to support the disclosure of uncertainty surrounding mineral resource classification.  If the qualified person chooses to use confidence limit estimates from geostatistics or other numerical methods, he or she should consider the limitations of these methods and adjust the estimates appropriately to reflect sources of uncertainty that are not accounted for by these methods.
  • Mineral resources must generally be reported exclusive of mineral reserves; however, in the technical report summary mineral resource estimates may be inclusive of mineral reserves so long as this is clearly stated with equal prominence to the rest of the item.  If the qualified person chooses to disclose resources inclusive of mineral reserves, he or she must also clearly state the mineral resources exclusive of mineral reserves in the technical report summary.
  • Unless otherwise stated, cut-off grades also refer to net smelter returns, pay limits and other similar terms.

A qualified person may, but is not required to, also include the following information in the initial assessment:

• Economic Analysis.  Describe:
  • The key assumptions, parameters, and methods used to demonstrate economic viability.  The qualified person must provide all material assumptions including discount rates, exchange rates, commodity prices, and taxes, royalties, and other government levies or interests applicable to the mineral project or to production, and to revenues or income from the mineral project;
  • Results of the economic analysis, including annual cash flow forecasts based on an annual production schedule for the life of project, and measures of economic viability such as net present value (NPV), internal rate of return (IRR), and payback period of capital; and
  • Sensitivity analysis results using variants in commodity price, grade, capital and operating costs, or other significant input parameters, as appropriate, and discuss the impact on the results of the economic analysis.

  When this information is included in an initial assessment:

  • The qualified person must include a statement, of equal prominence to the rest of this section, that, unlike mineral reserves, mineral resources do not have demonstrated economic viability; and
  • If the qualified person includes inferred mineral resources in any economic analysis, the report must:
    • State with equal prominence to the disclosure of mineral resource estimates that the assessment is preliminary in nature, it includes inferred mineral resources that are considered too speculative geologically to have modifying factors applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that this economic assessment will be realized;
    • Disclose the percentage of the mineral resources used in the cash flow analysis that was classified as inferred mineral resources; and
    • Disclose, with equal prominence, the results of the economic analysis excluding inferred mineral resources in addition to the results that include inferred mineral resources.
  • Operating and capital cost estimates must have an accuracy level of at least approximately ±50% and a contingency level of no greater than 25%.  The qualified person must state the accuracy and contingency levels in the initial assessment.

Further Required Additions for a Preliminary Feasibility Study or a Final Feasibility Study:

• Mineral Reserves Estimates.  If this item is included, the technical report summary must:
  • Describe the key assumptions, parameters, and methods used to estimate the mineral reserves, in sufficient detail for a reasonably informed person to understand the basis for converting, and how the qualified person converted, indicated and measured mineral resources into the mineral reserves;
  • Provide the qualified person’s estimates of mineral reserves for all commodities, including estimates of quantities, grade or quality, cut-off grades, and metallurgical or processing recoveries.  The qualified person must classify mineral reserves into probable and proven mineral reserves.  The qualified person must round off, to appropriate significant figures chosen to reflect order of accuracy, any estimates of quantity and grade or quality.  The technical report summary must include mineral reserve estimates at a specific point of reference selected by the qualified person and disclosed in the technical report summary.  The qualified person must estimate cut-off grades based on detailed cut-off grade analysis that includes a long term price that provides a reasonable basis for establishing that the project is economically viable. The qualified person must disclose the price used for each commodity, which must provide a reasonable basis for establishing that the project is economically viable, and explain, with particularity, his or her reasons for using the selected price, including the material assumptions underlying the selection. This explanation must include disclosure of the time frame used to estimate the price and costs and the reasons justifying the selection of that time frame. The qualified person may use a price set by contractual arrangement, provided that such price is reasonable, and the qualified person discloses that he or she is using a contractual price when disclosing the price used; 
  • When the qualified person reports the grade or quality for a multiple commodity mineral reserve as metal or mineral equivalent, he or she must also report the individual grade of each metal or mineral and the commodity prices, recoveries, and any other relevant conversion factors used to estimate the metal or mineral equivalent grade.
  • Provide the qualified person’s opinion on how the mineral reserve estimates could be materially affected by risk factors associated with or changes to any aspect of the modifying factors.
• Mining Methods.  Describe the current or proposed mining methods and the reasons for selecting these methods as the most suitable for the mineral reserves under consideration. Include:
  • Geotechnical and hydrological models, and other parameters relevant to mine designs and plans;
  • Production rates, expected mine life, mining unit dimensions, and mining dilution and recovery factors;
  • Requirements for stripping, underground development, and backfilling;
  • Required mining equipment fleet and machinery, and personnel; and
  • At least one map of the final mine outline.
• Processing and Recovery Methods.  Describe the current or proposed mineral processing methods and the reasons for selecting these methods as the most suitable for extracting the valuable products from the mineralization under consideration.  Include:
  • A description or flow sheet of any current or proposed process plant;
  • Plant throughput and design, equipment characteristics and specifications;
  • Current or projected requirements for energy, water, process materials, and personnel; and
  • If the processing method, plant design or other parameters have never been used to successfully extract the valuable product from such mineralization, the qualified person must so state and provide a justification for why he or she believes the approach will be successful in this instance.

  If the processing method, plant design or other parameter has never been used to commercially extract the valuable product from such mineralization and is still under development, then no mineral resources or reserves can be disclosed on the basis of that method, design, or other parameter.

• Infrastructure.  Describe the required infrastructure for the project, including roads, rail, port facilities, dams, dumps and leach pads, tailings disposal, power, water and pipelines, as applicable.  The qualified person must include at least one map showing the layout of the infrastructure.
• Market Studies.  Describe the market for the products of the mine, including justification for demand or sales over the life of the mine (or length of cash flow projections).  Include:
  • Information concerning markets for the property’s production, including the nature and material terms of any agency relationships and the results of any relevant market studies, commodity price projections, product valuation, market entry strategies, and product specification requirements;
  • Descriptions of all material contracts required for the issuer to develop the property, including mining, concentrating, smelting, refining, transportation, handling, hedging arrangements, and forward sales contracts.  State which contracts have been executed and which are still under negotiation.  For all contracts with affiliated parties, discuss whether the registrant obtained the same terms, rates or charges as could be obtained had the contract been negotiated at arm’s length with an unaffiliated third party; and
  • If the mine’s product cannot be traded on an exchange, there is no other established market for the product, and no sales contract exists:
    • In the case of a pre-feasibility study, a preliminary market study, meaning a study that is sufficiently rigorous and comprehensive to determine and support the existence of a readily accessible market for the mineral.  It must, at a minimum, include product specifications based on preliminary geologic and metallurgical testing, supply and demand forecasts, historical prices for the preceding five or more years, estimated long term prices, evaluation of competitors (including products and estimates of production volumes, sales, and prices), customer evaluation of product specifications, and market entry strategies.  The study must provide justification for all assumptions.  It can, however, be less rigorous and comprehensive than a final market study, which is required for a full feasibility study; and
    • In the case of a feasibility study, a final market study, meaning a comprehensive study to determine and support the existence of a readily accessible market for the mineral.  It must, at a minimum, include product specifications based on final geologic and metallurgical testing, supply and demand forecasts, historical prices for the preceding five or more years, estimated long term prices, evaluation of competitors (including products and estimates of production volumes, sales, and prices), customer evaluation of product specifications, and market entry strategies or sales contracts.  The study must provide justification for all assumptions, which must include all assumptions concerning the material contracts required to develop and sell the mineral reserves.
• Environmental Studies, Permitting, and Plans, Negotiations, or Agreements with Local Individuals or Groups.  Describe the factors pertaining to environmental compliance, permitting, and local individuals or groups, which are related to the project.  Include:
  • The results of environmental studies (e.g. environmental baseline studies or impact assessments);
  • Requirements and plans for waste and tailings disposal, site monitoring, and water management during operations and after mine closure;
  • Project permitting requirements, the status of any permit applications, and any known requirements to post performance or reclamation bonds;
  • Plans, negotiations or agreements with local individuals or groups;
  • Descriptions of any commitments to ensure local procurement and hiring;
  • Mine closure plans, including remediation and reclamation plans, and the associated costs; and
  • The qualified person’s opinion on the adequacy of current plans to address any issues related to environmental compliance, permitting and local individuals or groups.
• Capital and Operating Costs.  Provide estimates of capital and operating costs, with the major components set out in tabular form.  Explain and justify the basis for the cost estimates including any contingency budget estimates.  State the accuracy level of the capital and operating cost estimates.  To assess the accuracy of the capital and operating cost estimates, the qualified person must take into account the risks associated with the specific engineering estimation methods used to arrive at the estimates.  As part of this analysis, the qualified person must take into consideration the accuracy of the estimation methods in prior similar environments.  Operating and capital cost estimates in a pre-feasibility study must, at a minimum, have an accuracy level of approximately ±25% and a contingency range not exceeding 15%.  Operating and capital cost estimates in a feasibility study must, at a minimum, have an accuracy level of approximately ±15% and a contingency range not exceeding 10%.  The qualified person must state the accuracy level and contingency range in the study.
• Economic Analysis.  Describe:
  • The key assumptions, parameters, and methods used to demonstrate economic viability.  The qualified person must provide all material assumptions including discount rates, exchange rates, commodity prices, and taxes, royalties, and other government levies or interests applicable to the mineral project or to production, and to revenues or income from the mineral project;
  • Results of the economic analysis, including annual cash flow forecasts based on an annual production schedule for the life of project, and measures of economic viability such as net present value (NPV), internal rate of return (IRR), and payback period of capital; and
  • Sensitivity analysis results using variants in commodity price, grade, capital and operating costs, or other significant input parameters, as appropriate, and discuss the impact on the results of the economic analysis.

  When this information is included in a pre-feasibility study:

  • The qualified person must exclude inferred mineral resources from the pre-feasibility study’s demonstration of economic viability in support of a disclosure of a mineral reserve;
  • Factors to be considered are typically the same as those required for an initial assessment, but considered at a greater level of detail or at a later stage of development.  For example, a pre-feasibility study must define, analyze or otherwise address in detail:
    • The required access roads, infrastructure location and plant area, and the source of all utilities (e.g. power and water) required for development and production;
    • The preferred underground mining method or surface mine pit configuration, with detailed mine layouts drawn for each alternative;
    • The bench lab tests that have been conducted, the process flow sheet, equipment sizes, and general arrangement that have been completed, and the plant throughput;
    • The environmental compliance and permitting requirements or interests of agencies, non-governmental organizations, communities and other stakeholders, the baseline studies, and the plans for tailings disposal, reclamation and mitigation, together with an analysis establishing that permitting is possible; and
    • Any other reasonable assumptions, based on appropriate testing, on the modifying factors sufficient to demonstrate that extraction is economically viable.
  • The pre-feasibility study must also identify sources of uncertainty that require further refinement in a final feasibility study.

  When this information is included in a final feasibility study:

  • The qualified person must exclude inferred mineral resources from the pre-feasibility study’s demonstration of economic viability in support of a disclosure of a mineral reserve;
  • A feasibility study must contain the application and description of all relevant modifying factors in a more detailed form and with more certainty than a pre-feasibility study.  The list of factors is not exclusive.  For example, a feasibility study must define, analyze or otherwise address in detail, to the extent material:
    • Final requirements for site infrastructure, including well-defined access roads, finalized plans for infrastructure location, plant area, and camp or town site, and the established source of all required utilities (e.g. power and water) for development and production;
    • Finalized mining method, including detailed mine layouts and final development and production plan for the preferred alternative with the required equipment fleet specified.  The feasibility study must address detailed mining schedules, construction and production ramp up, and project execution plans;
    • Completed detailed bench lab tests and a pilot plant test, if required, based on risk.  The feasibility study must further address final requirements for process flow sheet, equipment sizes, and general arrangement and specify the final plant throughput;
    • The final identification and detailed analysis of environmental compliance and permitting requirements, and the completion of baseline studies and finalized plans for tailings disposal, reclamation and mitigation; and
    • The final assessments of other modifying factors necessary to demonstrate that extraction is economically viable.

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