It is a core requirement of National Instrument 43-101 – Standards of Disclosure for Mineral Projects (NI 43-101) that an issuer file a technical report to support certain disclosures of scientific or technical information that relate to a mineral project on a property material to the issuer. While the usual case is that a mineral project is owned or controlled by the issuer filing a report, NI 43-101 specifically contemplates that ownership is not a prerequisite for a property to be material to an issuer. As a result, the requirement to file a technical report can pose a problem for issuers who have material interests in properties that they do not own or control, such as for royalty and streaming interests, as these issuers often do not have access to the appropriate resources and information to be in a position to prepare and file a technical report to support the scientific or technical disclosure that they are required to disclose.
Technical Report Exemption
Section 9.2(1) of NI 43-101 provides a royalty or streaming issuer (i.e., where the relevant interest in the property is only a royalty or similar interest) with an exemption from the requirement to file a technical report if the following criteria are also met:
(a) the operator or owner of the subject mineral project is a reporting issuer in Canada;
(b) the issuer identifies the source of the scientific and technical information; and
(c) the operator or owner of the mineral project has disclosed the scientific and technical information that is material to the issuer.
For (a) above, in situations where the operator or owner of the subject mineral project is not a reporting issuer in a jurisdiction of Canada, the issuer can still rely on this exception if the operator or owner is a producing issuer whose securities trade on a specified exchange and that discloses mineral resources and/or mineral reserves under an acceptable foreign code.
A “producing issuer” is an issuer with audited financial statements that disclose (a) gross revenue, derived from mining operations, of at least C$30 million for the issuer’s most recently completed financial year and (b) gross revenue, derived from mining operations, of at least C$90 million in the aggregate for the issuer’s three most recently completed financial years.
A “specified exchange” means the Australian Stock Exchange, the Johannesburg Stock Exchange, the London Stock Exchange Main Market, the Nasdaq Stock Market, the New York Stock Exchange, or the Hong Kong Stock Exchange.
An “acceptable foreign code” is the JORC Code, the PERC Code, the SAMREC Code, SEC Industry Guide 7, the Certification Code, or any other code, generally accepted in a foreign jurisdiction, that defines mineral resources and mineral reserves in a manner that is consistent with mineral resource and mineral reserve definitions and categories set out in Sections 1.2 and 1.3 of NI 43-101. Whether a code not specifically enumerated in the above list is an “acceptable foreign code” will need to be considered on a case-by-case basis with consultation from the relevant securities commission. Generally, other foreign codes will meet the test if they (a) have been adopted or recognized by appropriate government authorities or professional organizations in the foreign jurisdiction, and (b) use mineral resource and mineral reserve categories that are based on the CRIRSCO Template and are substantially the same as the CIM definitions mandated in NI 43-101, the JORC Code, the PERC Code, the SAMREC Code, and the Certification Code. Appendix A.1 to Companion Policy 43-101CP lists additional codes that have already been considered by the securities commissions and are thought to satisfy the definition of “acceptable foreign code,” which includes the Russian Code for the Public Reporting of Exploration Results, Mineral Resources and Mineral Reserves (NAEN Code).
For (b) above, this typically requires the issuer to name, in its continuous disclosure filings, the title of the document being relied on, and providing information as to where it is available. In the case of a reporting issuer in Canada, this would source to a document filed by that issuer on SEDAR+.
For (c) above, the nature of what is material to the issuer for satisfying this disclosure obligation will need to be assessed on a case-by-case basis, with reference to the nature of the interest held and its obligations under NI 43-101.
If a royalty or streaming issuer is not able to satisfy the above requirements, the exemption will not be available, and it will need to prepare and file a technical report. NI 43-101 only provides limited relief from certain of the technical report requirements in Section 9.2(2), and significant work may be required to ensure compliance with NI 43-101. Therefore, a royalty or streaming issuer should consider, when negotiating royalty, streaming or other agreements that provide them with an interest in a property, including provisions in such agreements that mandate the owner or operator of the subject mineral property to provide all necessary information to enable the issuer to prepare a technical report, or disclose other scientific or technical data if required under NI 43-101.
Naming A QP
Despite the above exemption, in all cases an issuer with a royalty or streaming interest in a mineral project that is material to the issuer and that is making scientific or technical disclosure in relation to that property remains subject to the requirement to name a qualified person who prepared or supervised the preparation of the disclosed information, or approved the written disclosure, and state the relationship of the qualified person to the issuer, in order to comply with Section 3.1 of NI 43-101.
One way to satisfy this requirement is for issuers negotiating royalty and streaming interests to ensure that the qualified persons for the owner or operator granting the royalty or stream agree to assist the issuer with their public disclosure, including by having its qualified persons involved. In the alternative, if the issuer does not want to rely on the other party to provide qualified persons, the issuer should ensure that they have internal qualified persons available to review and approve all of the scientific and technical disclosure that they make in relation to the mineral projects that the royalty or streaming interests are on. If this option is chosen, the qualified person should always check with their professional organization and industry standards to make sure that this is compliant with any requirements they might have.
Overall, the disclosure requirements for royalty and streaming issuers can be very nuanced and different situations may result in different requirements. These issuers should always remember to consult qualified legal counsel to ensure they are not offside applicable Canadian securities laws, including NI 43-101.
For more on NI 43-101, find all of our articles in this series here.
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