In the mining industry, regulations are strict and omnipresent. Most mining companies have systems in place to ensure they comply with all regulations in the areas they operate. Through operation and proper data collection, storage, and analysis, most infractions can be avoided. Compliance officers and other professionals constantly work hard to help their companies avoid massive sanctions and other punishments that can be levied against them.
But one tricky regulation is the Canadian National Instrument 43-101. This instrument is a meticulously codified group of rules for reporting and displaying mineral properties information by exploration and mining companies on all Canadian stock exchanges. This regulation applies to foreign companies trading on all stock exchanges monitored by the Canadian Securities Administrators.
Many large Canadian and American mineral exploration and mining companies have listings on the TSX Venture Exchange and/or the Toronto Stock Exchange, as well as other stock markets in other large mining districts around the world. If a company lists on these exchanges, Canadian laws require that company disclose mineral exploration reports via press releases, report their resources and reserves, as well as other presentations, oral comments, and websites disclosing their operations.
The idea behind these regulations is to avoid misleading information from being disseminated to stockholders and brokers about a mining company’s operations on the Canadian stock exchanges. It’s similar to regulations in other countries, such as the Joint Ore Reserves Committee Code (JORC) in Australia and the South African Code for the Reporting of Mineral Resources and Mineral Reserves. In many cases, NI 43-101 and JORC reports are interchangeable and accepted in cases of dual-listed companies in the Australian and Canadian stock exchanges.
While this regulation is mainly in response to the Bre-X scandal that defrauded hundreds of investors with false information regarding massive gold deposits on a mining site in the 1990’s, most infractions of this regulation comes from improper information on press releases and little-checked disclosures. To make investor presentations compliant, they need to include precisely the correct information. Because investor presentations, website information, fact sheets, etc. are all considered “written disclosures” by rule, this information must be reviewed and signed off on by “qualified person,” (QP) as stipulated by the law. While the official document and information that goes to the stock market exchanges is usually well-governed in most mining companies or investor groups, not all of the written materials and disclosures by the company are as heavily monitored. All of these materials must be checked by qualified people as defined by the law to be compliant.
Mining companies listing on Canadian stock exchanges have run into problems with some of their materials not being compliant with NI 43-101 due to a lack of attention being paid to all written materials. All exploratory and material information in mines must be properly disclosed by qualified people and examined to be compliant. Even investor presentations and linked website material must be found to be accurate so as to not mislead investors. This regulation can catch even the most meticulous of mining companies and executives.
