On June 16, 2016, the SEC proposed new rules to update disclosure requirements for mining properties. The intent of the proposed rules is align them more closely with current industry and global standards, specifically disclosure standards based on the Committee for Mineral Reserves International Reporting Standards. This rule revision is long overdue. The SEC’s current disclosure requirements for mining properties, Industry Guide 7 (Mining Operations), are woefully out of date, and their limitations (and limited exemptions for certain foreign issuers) create an uneven playing field regarding resource disclosure. In order to comply with Industry Guide 7, many issuers are forced to put certain information regarding their mining properties solely in press releases or on their websites in order to disseminate the same information that some foreign issuers are permitted to include in Securities Act and Exchange Act filings with the SEC.
The proposed rules:
- Apply to SEC filers that are U.S. domestic issuers or that are foreign private issuers (other than Canadian issuers that use the Multijurisdictional Disclosure System filing on Forms 40-F, F-10, F-7, F-8 or F-80),
- Eliminate the “foreign or state law” exception under Industry Guide 7 other than for MJDS filers,
- Require disclosure of material mining operations, or for royalty companies, the operations that underlie the material royalty payment,
- Require disclosure of mineral resources and material exploration results in addition to mineral reserves (Guide 7 currently only permits disclosure of mineral reserves),
- Permit mineral reserves to be based on a preliminary feasibility study or a final feasibility study (Guide 7 currently only permits reporting of reserves based on a final feasibility study),
- Update definitions of mineral reserves and mineral resources (Guide 7 currently does not define or permit disclosure of mineral resources),
- Require summary disclosure of mining operations as a whole in addition to detailed disclosure for material individual properties,
- Require disclosure of mineral resources, mineral reserves and material exploration results to be based on supporting documentation prepared by a “qualified person”, and
- Require a technical report summary to be obtained from a qualified person, and filed, for each material property.
We will be publishing a more detailed analysis of the proposed rules in the coming week. The proposed rules can be found here.