Mining firms are falling far short of full compliance with their disclosure obligations, according to a review by the Ontario Securities Commission (OSC).
The OSC published a staff notice Thursday setting out the results of its compliance review of the technical reports required from mining firms. The report says that the regulator discovered “an unacceptable level of compliance”.
Specifically, it says that 80% of the technical reports it reviewed had some form of non-compliance with the disclosure requirements, and approximately 40% had at least one major non-compliance concern. As a result, it says that “issuers and qualified persons need to further improve their disclosure.”
“We are particularly concerned with the major non-compliance issues noted in the technical reports reviewed as these deficiencies may have a significant impact on investors,” the commission says in its report. “Technical reports are a key disclosure document for mining issuers and investors and their advisors may place significant reliance and make investment decisions based on the disclosure in technical reports.”
The OSC reports that it found significant deficiencies in several areas of these reports, including: resource estimates; environmental studies, permitting and social or community impact; capital and operating costs; economic analysis; and, the interpretation and conclusions sections, where it found failures to reveal serious project risks, such as the availability of water rights, or the existence of ongoing civil war. It also noted frequent disclosure deficiencies in other sections of the reports.
In addition to setting out the deficiencies it found, the OSC also provides further disclosure to issuers in an effort to improve compliance. The commission says that it will continue to review these reports as part of its overall continuing disclosure reviews.
“Issuers should anticipate staff requests for re-filings or other staff action,” it notes, adding that the issues raised in a review will also be taken into consideration when determining whether a prospectus receipt should be issued. “Unresolved issues may delay the prospectus receipt, particularly for short form prospectus filings,” it says.
“Technical reports are fundamental disclosure documents and ensuring compliance among mining issuers is critical,” said Huston Loke, director corporate finance at the OSC. “It is important that investors have accurate and meaningful information about material mineral properties in order to make informed investment decisions.”