Securities regulators are worried about the technical report disclosure of some mining firms, and so, it has issued a notice clarifying the rules.
The Canadian Securities Administrators (CSA) Thursday published a staff notice that aims to address compliance problems they have seen with the use and disclosure of “preliminary economic assessments” by mining firms.
In June 2011, the CSA amended the definition of these reports to give firms greater flexibility in disclosing the results of these early stage economic studies. However, regulators have since found that some issuers are disclosing these reports in ways that are not allowed.
The notice indicates that the analysis contained in these reports is generally the first signal to the public that a mineral project has potential viability, but that this is distinct from feasibility studies, which aim to demonstrate a project’s technical and economic viability. While these studies generally analyze the same geological, engineering, and economic factors, “the level of detail, precision, and confidence in the outcomes is significantly different”, the CSA says in its notice.
Yet, the regulators report that they are now seeing situations where issuers represent that their preliminary economic assessments are almost on par with feasibility studies. “In extreme cases, the issuers are representing that the study is a [pre-feasibility study] but for the inclusion of inferred mineral resources. In other cases, issuers appear to be treating the PEA as a substitute or proxy for a PFS,” it notes.
“The CSA recognizes that the amended PEA definition caused some confusion among mining issuers that needed to be addressed,” said Bill Rice, chair of the CSA and chair and CEO of the Alberta Securities Commission. “This notice will help mining issuers better understand the application and limitations of these studies.”
The notice emphasizes the importance of keeping PEA reports separate and distinct from the more comprehensive feasibility studies, and it provides further guidance on other aspects of preparing and disclosing these reports where potential compliance problems have been observed.
The notice reminds issuers that where it finds material disclosure deficiencies, it will generally request that they correct the deficiency. However, even if the issuer corrects the deficiency, the regulators may still pursue enforcement or other regulatory action.