Understanding the SEC’s Proposed New Mining Disclosure Rules: Questions and Answers

On June 16, 2016, the SEC proposed a major overhaul of the disclosure requirements for companies that are engaged in material mining operations, including royalty companies.  The proposed rules would replace the SEC’s decades-old guidelines, set forth in Industry Guide 7 (Guide 7), with new subpart 1300 of Regulation S-K, which would be based on the Committee for Mineral Reserves International Reporting Standards (CRIRSCO).  The new rules, if adopted, would be the most significant development in the SEC reporting requirements of mining and royalty companies since the passage of the Sarbanes-Oxley Act in 2002.  The proposed rules can be found here.

In this corporate update, we provide a discussion of the proposed rules in question and answer format.  To move forward to a particular question, you may click on one of the links below: 

• Why has the SEC proposed new rules for mining companies?
• What types of companies will be subject to the new rules?
• Will foreign private issuers be subject to the new rules?
• What are the main differences between the SEC’s existing guidance and the proposed rules?
• Are the SEC’s proposed rules the same as the standards under Canada’s National Instrument 43-101 or other CRIRSCO-based codes?
• How do the new rules affect the characterization of a mining company and its properties as being in the exploration, development or production stage?
• Who is a qualified person?
• What role does a qualified person serve under the proposed rules?
• What are mineral resources and how are they calculated?
• What are the differences between inferred, indicated and measured mineral resources?
• How will the new rules affect the definitions of mineral reserves, probable mineral reserves and proven mineral reserves?
• What are the different types of technical report summary?
• When must a technical report summary initially be filed?
• When must a technical report summary be updated?
• What information must be included in every technical report summary?
• What additional information must be included in a technical report summary that reports material exploration results?
• What additional information must be included in a technical report summary that reports the results of an initial assessment and, if applicable, mineral resources?
• What additional information must be included in a technical report summary that reports the results of a preliminary feasibility (pre-feasibility) study or a final feasibility study and, if applicable, mineral reserves?
• What information must a registrant disclose in its SEC filings regarding all of its mining properties, including those that are non-material?
• What information must a registrant disclose in its SEC filings regarding properties that are individually material to the registrant?
• What other information must a registrant disclose in its SEC filings?
• What consents must be obtained from a qualified person?
• Will registrants be permitted to include in their SEC filings supplemental disclosures that do not comply with the SEC’s proposed rules, but comply with a foreign mining code such as Canada’s National Instrument 43-101 (NI 43-101)?
• What is the status of the SEC’s proposed rules?
• Appendix A – Primary Differences Between Current and Proposed Rules
• Appendix B – Summary of Proposed Requirements for Technical Report Summaries

Why has the SEC proposed new rules for mining companies?

The SEC’s guidelines for mining disclosure, currently set forth in Guide 7, have not been updated for more than 30 years.  During this period, mining has become an increasingly globalized industry and several foreign countries have adopted mining disclosure standards based on the Committee for Mineral Reserves International Reporting Standards (CRIRSCO), which significantly differ from Guide 7.  For example, unlike Guide 7, CRIRSCO standards:

• Require companies to disclose material mineral resources;
• Require that any public report about a company’s exploration results, mineral resources and mineral reserves be prepared by a “competent or qualified person”; and
• Permit disclosure of mineral reserves to be based on a preliminary feasibility (pre-feasibility) study or a final feasibility study.

Because of the widespread adoption of the CRIRSCO standards¹, industry participants have requested revisions to Guide 7, urging the SEC to align its mining disclosure rules with the CRIRSCO-based codes.  The SEC’s proposal to replace Guide 7 with a CRIRSCO-based code takes into account these global developments and industry participants’ concerns.

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What types of companies will be subject to the new rules?

As proposed, the new rules would apply to an SEC registrant that has mining operations that are material to its business or financial condition.  

Mining operations is defined under the proposed rules as including operations on all mining properties that a registrant:

• Owns or in which it has, or it is probable that it will have, a direct or indirect economic interest;
• Operates, or it is probable that it will operate, under a lease or other legal agreement that grants the registrant ownership or similar rights that authorize it, as principal, to sell or otherwise dispose of the mineral; or
• Has, or it is probable that it will have, an associated royalty or similar right.

The SEC has not modified its definition of materiality in the proposed rules. Information is material if there is a substantial likelihood that a reasonable investor would attach importance to such information in determining whether to buy or sell the securities registered.

The proposed rules provide that a registrant’s mining operations are presumed to be material if they consist of 10% or more of its total assets.  They also provide that a registrant’s mining operations may be material even if they comprise less than 10% of its total assets if, when considered with other quantitative or qualitative factors, the required disclosure concerning the mining operations would significantly alter the total mix of information available.  The proposed rules do not specify what method of valuing a registrant’s assets should be used.

Because the proposed rules define mining operations to include both direct and indirect economic interests, and because the standard for disclosure is materiality, companies that hold royalties, streaming agreements or other economic interests with respect to mining properties, as well as companies that invest in mining companies, would be subject to the proposed rules if such interests are material to the registrant’s business or financial condition.

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Will foreign private issuers be subject to the new rules?

Foreign private issuers that file annual reports or registration statements with the SEC on Form 20-F, that file registration statements on Forms F-1, F-3 or F-4, that voluntarily file on U.S. domestic reporting forms or that prepare offering circulars on Form 1-A under Regulation A+ would be required to comply with the proposed rules in such forms.

Canadian issuers that file annual reports or registration statements with the SEC under the Multijurisdictional Disclosure System (MJDS), including Forms 40-F, F-10, F-7, F-8 and F-80, would not be required to comply with the proposed rules.

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What are the main differences between the SEC’s existing guidance and the proposed rules?

The chart in Appendix A provides an overview of the main differences between existing Guide 7 and related SEC guidance, and the proposed new rules.

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Are the SEC’s proposed rules the same as the standards under Canada’s National Instrument 43-101 or other CRIRSCO-based codes?

No.  While the SEC’s proposed rules are intended to be substantially similar to those of other CRIRSCO-based codes, they differ from each of those CRIRSCO-based codes in certain respects.  SEC registrants that are subject to other CRIRSCO-based codes should compare such codes to the SEC’s proposed rules and determine whether the differences would have any material implications for the registrant.

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How do the new rules affect the characterization of a mining company and its properties as being in the exploration, development or production stage?

The new rules would introduce a materiality threshold for being considered a development or production stage issuer.  Under the new rules, a registrant would be defined as:

• An exploration stage issuer if it has no material property with mineral reserves;
• A development stage issuer if it engaged in the preparation of mineral reserves for extraction on at least one material property; or
• A production stage issuer if it is engaged in material extraction of mineral reserves on at least one material property.

The new rules would also clarify how individual properties of a mining company should be described.  Under the new rules, an individual property would be defined as being:

• An exploration stage property if it has no mineral reserves disclosed;
• A development stage property if it has mineral reserves disclosed, but with no material extraction; and
• A production stage property if it has material extraction of mineral reserves.

It should be noted that both Guide 7 and the new rules require a registrant to have disclosed mineral reserves in order to describe itself as being either a development or production stage company, regardless of whether the registrant is actively constructing a mine or operating a producing mine. Guide 7 does not discuss the characterization of individual properties, or distinguish between properties of a registrant that are at different stages of development.

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Who is a qualified person?

Consistent with CRIRSCO-based mining codes, the new rules would introduce the concept of a qualified person, a mineral industry professional meeting certain criteria, whose expertise must be utilized in preparing certain mining disclosures.

As proposed, a qualified person would be defined as:

• A mineral industry professional with at least five years of relevant experience in the type of mineralization and type of deposit under consideration and in the specific type of activity that person is undertaking on behalf of the registrant; and
• An eligible member or licensee in good standing of a recognized professional organization at the time the technical report is prepared.

To be a recognized professional organization, an organization must:

• Be either:
  • An organization recognized within the mining industry as a reputable professional association, or
  • A board authorized by U.S. federal, state or foreign statute to regulate professionals in the mining, geoscience or related field;
• Admit eligible members primarily on the basis of their academic qualifications and experience;
• Establish and require compliance with professional standards of competence and ethics;
• Require or encourage continuing professional development;
• Have and apply disciplinary powers, including the power to suspend or expel a member regardless of where the member practices or resides; and
• Provide a public list of members in good standing.

The SEC has stated that it does not intend to publish and maintain a list of recognized professional organizations.

A person would not be required to be independent of the registrant in order to be a qualified person.  Therefore, an employee of the registrant that satisfies the requisite criteria of experience and membership in a recognized professional organization could serve as the registrant’s qualified person.

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What role does a qualified person serve under the proposed rules?

A registrant’s disclosure of exploration results, mineral resources and mineral reserves, as required by the new rules, must be based on and accurately reflect information and supporting documentation prepared by a qualified person. The registrant is responsible for determining that the person meets the requirements of a qualified person, and that the disclosure in the registrant’s filing accurately reflects the information provided by the qualified person.

With respect to any property that is material to the registrant’s business or financial condition, the registrant must obtain a dated and signed technical report summary from the qualified person, which identifies and summarizes the information reviewed and conclusions reached by the qualified person about the registrant’s mineral resources, mineral reserves or material exploration results determined to be on such property.

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What are mineral resources and how are they calculated?

Unlike Guide 7, the proposed rules would both recognize and require the disclosure of mineral resources.  The proposed rules would define a mineral resource as a concentration or occurrence of material of economic interest in or on the Earth’s crust in such form, grade or quality, and quantity, that there are reasonable prospects for economic extraction.  Material of economic interest would include mineralization, including dumps and tailings, geothermal fields, mineral brines, and other resources extracted on or within the Earth’s crust, but would not include oil and gas resources as defined in Regulation S-X, gases (e.g., helium and carbon dioxide), or water.

An instruction to the proposed rules clarifies that a mineral resource is a reasonable estimate of mineralization, taking into account relevant factors such as cut-off grade, likely mining dimensions, location or continuity, that, with the assumed and justifiable technical and economic conditions, is likely to, in whole or in part, become economically extractable.  The proposed rules set forth a definition of cut-off grade and provide for requirements that a qualified person must satisfy in determining the existence of a mineral resource.  These include the evaluation of modifying factors, which is the term used in the proposed rules to describe factors that affect the economic prospects of a deposit.

When mineral resources are determined, a qualified person must subdivide mineral resources, in order of increasing geological confidence, into inferred, indicated and measured mineral resources.

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What are the differences between inferred, indicated and measured mineral resources?

The proposed rules would create three different categories of mineral resources based on the level of geological confidence that the mineral resource exists.

An inferred mineral resource is that part of a mineral resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling, which means evidence that is only sufficient to establish that geological and grade or quality continuity is more likely than not.  An inferred mineral resource has the lowest level of geological confidence of all mineral resources, which in the SEC’s view prevents the application of the modifying factors in a manner useful for evaluation of economic viability.

An indicated mineral resource is that part of a mineral resource for which quantity and grade or quality are estimated on the basis of adequate geological evidence and sampling, which means evidence that is sufficient to establish geological and grade or quality continuity with reasonable certainty.  The level of geological certainty associated with an indicated mineral resource is sufficient to allow a qualified person to apply modifying factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit.  An indicated mineral resource has a lower level of confidence than that applying to a measured mineral resource and may only be converted to a probable mineral reserve.

A measured mineral resource is that part of a mineral resource for which quantity and grade or quality are estimated on the basis of conclusive geological evidence and sampling, which means evidence that is sufficient to test and confirm geological and grade or quality continuity.  A measured mineral resource has a higher level of confidence than that applying to either an indicated mineral resource or an inferred mineral resource.  It may be converted to a proven mineral reserve or to a probable mineral reserve.

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How will the new rules affect the definitions of mineral reserves, probable mineral reserves and proven mineral reserves?

Under existing Guide 7, a reserve is that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.  Reserves are to be identified as probable or proven based on the mineralization’s level of certainty.  The SEC’s staff has provided guidance that a final feasibility study is required to support the establishment of reserves and that the commodity prices used in establishing a Guide 7 reserve should not exceed the 3-year trailing average price of such commodity.

The proposed rules would retain the categories of probable and proven reserves, but would replace the existing Guide 7 definitions with new definitions, permit mineral reserves to be established on the basis of either a preliminary feasibility (pre-feasibility) study or a final feasibility study and replace the 3-year trailing average price limitation with a 24-month trailing average price limitation.

Under the proposed rules, a mineral reserve is an estimate of tonnage and grade or quality of indicated and measured mineral resources that, in the opinion of the qualified person, can be the basis of an economically viable project. More specifically, it is the economically mineable part of a measured or indicated mineral resource, net of allowances for diluting materials and for losses that may occur when the material is mined or extracted.

The determination that part of a measured or indicated mineral resource is economically mineable must be based on a pre-feasibility or feasibility study conducted by a qualified person applying the modifying factors to indicated or measured mineral resources.  Such study must demonstrate that, at the time of reporting, extraction of the mineral reserve is economically viable under reasonable investment and market assumptions.  The study must establish a life of mine plan that is technically achievable and economically viable, which will be the basis of determining the mineral reserve.

A probable mineral reserve is the economically mineable part of an indicated and, in some cases, a measured mineral resource.  For a probable mineral reserve, the qualified person’s confidence in the results obtained from the application of the modifying factors and in the estimates of tonnage and grade or quality is lower than what is sufficient for a classification as a proven mineral reserve, but is still sufficient to demonstrate that, at the time of reporting, extraction of the mineral reserve is economically viable under reasonable investment and market assumptions. 

A proven mineral reserve is the economically mineable part of a measured mineral resource.  For a proven mineral reserve, the qualified person has a high degree of confidence in the results obtained from the application of the modifying factors and in the estimates of tonnage and grade or quality.

For purposes of estimating mineral reserves, the modifying factors are the same factors as are used in estimating mineral resources, as applied to determine the economic viability of mineral reserves.  A qualified person must apply and evaluate modifying factors to convert measured and indicated mineral resources to proven and probable mineral reserves.

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What are the different types of technical report summary?

The proposed rules describe four types of technical report summary:

• A technical report summary that discloses material exploration results;
• An initial assessment, which is required to establish mineral resources;
• A preliminary feasibility study (pre-feasibility study), which is required to establish mineral reserves; and
• A feasibility study or final feasibility study.

Under the proposed rules, exploration results are defined as data and information generated by mineral exploration programs (i.e., programs consisting of sampling, drilling, trenching, analytical testing, assaying, and other similar activities undertaken to locate, investigate, define or delineate a mineral prospect or mineral deposit) that are not part of a disclosure of mineral resources or reserves.  

An initial assessment is a preliminary technical and economic study of the economic potential of all or parts of mineralization to support the disclosure of mineral resources.  The initial assessment must be prepared by a qualified person and must include appropriate assessments of reasonably assumed modifying factors, together with any other relevant operational factors that are necessary to demonstrate, at the time of reporting, that there are reasonable prospects for economic extraction.  An initial assessment is required for disclosure of mineral resources but cannot be used as the basis for disclosure of mineral reserves.

A preliminary feasibility study (pre-feasibility study) is a comprehensive study of a range of options for the technical and economic viability of a mineral project that has advanced to a stage where a qualified person has determined (in the case of underground mining) a preferred mining method, or (in the case of surface mining) a pit configuration, and in all cases has determined an effective method of mineral processing and an effective plan to sell the product.  A pre-feasibility study includes a financial analysis based on reasonable assumptions, based on appropriate testing, about the modifying factors and the evaluation of any other relevant factors that are sufficient for a qualified person to determine if all or part of the indicated and measured mineral resources may be converted to mineral reserves at the time of reporting. The financial analysis must have the level of detail necessary to demonstrate, at the time of reporting, that extraction is economically viable.  A pre-feasibility study is less comprehensive and results in a lower confidence level than a feasibility study. A pre-feasibility study is more comprehensive and results in a higher confidence level than an initial assessment.

A feasibility study is a comprehensive technical and economic study of the selected development option for a mineral project, which includes detailed assessments of all applicable modifying factors, as defined by this section, together with any other relevant operational factors, and detailed financial analysis that are necessary to demonstrate, at the time of reporting, that extraction is economically viable.  The results of the study may serve as the basis for a final decision by a proponent or financial institution to proceed with, or finance, the development of the project.  A feasibility study is more comprehensive, and with a higher degree of accuracy, than a pre-feasibility study.  It must contain mining, infrastructure, and process designs completed with sufficient rigor to serve as the basis for an investment decision or to support project financing.  The confidence level in the results of a feasibility study is higher than that with a pre-feasibility study.  Terms such as full, final, comprehensive, bankable, or definitive feasibility study are equivalent to a feasibility study.

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When must a technical report summary initially be filed?

The proposed rules would require that a registrant file a technical report summary authored by a qualified person as an exhibit to its SEC annual report or applicable registration statement² when the registrant is disclosing in such report or registration statement, for the first time, material exploration results, mineral resources or mineral reserves for a property that is material to the registrant’s business or financial condition.  A royalty company may incorporate a current technical report summary by reference if the producing mining company has already filed it.

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When must a technical report summary be updated?

The proposed rules would require the registrant to file an updated technical report summary in connection with the filing of the registrant’s SEC annual report or in connection with an applicable registration statement if, at such time, there has been a material change in the exploration results, mineral resources or mineral reserves for a material property from that reported in the previously-filed technical report summary.  The proposed rules would treat certain developments as material, including a change in exploration results that significantly alters the exploration target’s potential, an annual 10% change in resources or reserves (excluding production) or a cumulative 30% change in resources or reserves (excluding production).

Due to the number of requirements with which a technical report summary must comply, an updated technical report summary may, in practice, be required on an annual or other regular basis.

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What information must be included in every technical report summary?

Every technical report summary filed with the SEC must:

• be prepared, signed and dated by the qualified person,
• avoid the inclusion of large amounts of technical or other project data, either in the report or as appendices to the report,
• conform, to the extent practicable, with “plain English” principles,
• otherwise comply with subpart 1300 of Regulation S-K,

and comply with detailed disclosure requirements in the following general categories: (i) executive summary, (ii) introduction, (iii) property description, (iv) accessibility, climate, local resources, infrastructure and physiography, (v) history, (vi) geological setting, mineralization and deposit, (vii) hydrogeology, (viii) geotechnical data, testing and analysis, (ix) exploration, (x) sample preparation, analyses, and security, (xi) data verification, (xii) adjacent properties, (xiii) other relevant data and information, (xiv) interpretation and conclusions, (xv) recommendations and (xvi) references.  The details on disclosure for each of these categories are set forth in the proposed rules.  See Appendix B.

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What additional information must be included in a technical report summary that reports material exploration results?

None.

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What additional information must be included in a technical report summary that reports the results of an initial assessment and, if applicable, mineral resources?

A registrant’s disclosure of mineral resources must be based upon a qualified person’s initial assessment, which supports the determination of mineral resources.  As explained above in the discussion of mineral resources, the initial assessment must include the qualified person’s qualitative evaluation of applicable modifying factors to establish the economic potential of the mining property or project.  The technical report summary submitted by the qualified person to support a determination of mineral resources must describe the procedures, findings and conclusions reached for the initial assessment.  In addition to the information required to be included in every technical report summary, a technical report summary that reports the results of an initial assessment must include detailed disclosure in the following general categories: (i) mineral processing and metallurgical testing and (ii) mineral resource estimates.  The details on disclosure for each of these categories are set forth in the proposed rules.  See Appendix B.

A qualified person may, but is not required to, apply modifying factors to the mineral resources to include an economic analysis in the initial assessment.

To assist qualified persons in understanding the disclosure requirements in an initial assessment relating to modifying factors, the proposed rules include Table 1, extracted below, which describes certain information the qualified person is required or permitted to disclose, or permitted to assume, in an initial assessment relating to modifying factors.

Extract from Table 1 – Summary Description of Modifying Factors Evaluated in Technical Studies

Factors	Initial Assessment
Site infrastructure	Establish whether or not access to power and site is possible.  Assume infrastructure location, plant area required, type of power supply, site access roads and camp/town site, if required.
Mine design & planning	Mining method defined broadly as surface or underground.  Production rates assumed.
Processing plant	Establish that all products used in assessing prospects of economic extraction can be processed with methods consistent with each other.  Processing method and plant throughput assumed.
Environmental compliance & permitting	List of required permits & agencies drawn.  Determine if significant obstacles exist to obtaining permits.  Identify pre-mining land uses.  Assess requirements for baseline studies.  Assume post-mining land uses.  Assume tailings disposal, reclamation, and mitigation plans.
Other modifying factors1	Appropriate assessments of other reasonably assumed modifying factors necessary to demonstrate reasonable prospects for economic extraction.
Capital costs	Optional.2  If included:  Accuracy:  ±50%  Contingency:  ≤25%
Operating costs	Optional.2  If included:  Accuracy:  ±50%  Contingency:  ≤25%
Economic analysis3	Optional.  If included: Taxes and revenues are assumed.  Discounted cash flow analysis based on assumed production rates and revenues from available measured and indicated mineral resources.

<sub>1.   The modifying factors, as defined in this section, include, but are not limited to, the factors listed in this table.  The number, type and specific characteristics of the modifying factors applied will be a function of and depend upon the mineral, mine, property, or project.
2.   Initial assessment, as defined in this section, does not require cash flow analyses or operating and capital cost estimates.  The qualified person may include such cash flow analyses at his or her discretion.
3.   Initial assessment does not require capital and operating cost estimates or economic analysis, although it requires unit cost assumptions based on an assumption that the resource will be exploited with surface or underground mining methods.  Economic analyses, if included, must only be based on measured and indicated mineral resources.</sub>

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What additional information must be included in a technical report summary that reports the results of a preliminary feasibility (pre-feasibility) study or a final feasibility study and, if applicable, mineral reserves?

A registrant’s disclosure of mineral reserves must be based upon a qualified person’s pre-feasibility study or feasibility study which supports a determination of mineral reserves.  The pre-feasibility or feasibility study must include the qualified person’s detailed evaluation of all applicable modifying factors to demonstrate the economic viability of the mining property or project.  The technical report summary submitted by the qualified person to support a determination of mineral reserves must describe the procedures, findings and conclusions reached for the pre-feasibility or feasibility study.  All reserve disclosures based on a pre-feasibility study must include the qualified person’s justification for using a pre-feasibility study instead of a final feasibility study.  In addition to the information required to be included in a technical report summary that reports the results of an initial assessment, a technical report summary that reports the results of a pre-feasibility or feasibility study must include detailed disclosure in the following general categories: (i) mining methods, (ii) processing and recovery methods, (iii) infrastructure, (iv) market studies, (v) environmental studies, permitting, and social or community impact, (vi) capital and operating costs, and (vii) economic analysis.  The details on disclosure for each of these categories are set forth in the proposed rules.  See Appendix B.

To assist qualified persons in understanding the disclosure requirements relating to modifying factors, the proposed rules include the table below, which describes certain information regarding modifying factors that is required to be included in a pre-feasibility or feasibility study.

Extract from Table 1 – Summary Description of Modifying Factors Evaluated in Technical Studies

Factors	Preliminary Feasibility Study	Feasibility Study
Site infrastructure	Required access roads, infrastructure location and plant area defined.  Source of all utilities (power, water, etc.) required for development and production defined with initial designs suitable for cost estimates.  Camp/Town site finalized.	Required access roads, infrastructure location and plant area finalized.  Source of all required utilities (power, water, etc.) for development and production finalized.  Camp/Town site finalized.
Mine design & planning	Preferred underground mining method or the pit configuration for surface mine defined.  Detailed mine layouts drawn for each alternative.  Development and production plan defined for each alternative with required equipment fleet specified.	Mining method finalized. Detailed mine layouts finalized for preferred alternative.  Development and production plan finalized for preferred alternative with required equipment fleet specified.
Processing plant	Detailed bench lab tests conducted.  Detailed process flow sheet, equipment sizes, and general arrangement completed.  Detailed plant throughput specified.	Detailed bench lab tests conducted.  Pilot plant test completed, if required, based on risk.  Process flow sheet, equipment sizes, and general arrangement finalized.  Final plant throughput specified.
Environmental compliance & permitting	Identification and detailed analysis of requirements or interests of agencies, NGOs, communities and other stakeholders.  Detailed baseline studies with preliminary impact assessment (internal).  Detailed tailings disposal, reclamation and mitigation plans.	Identification and detailed analysis of requirements or interests of agencies, NGOs, communities and other stakeholders finalized.  Completed baseline studies with final impact assessment (internal).  Tailings disposal, reclamation and mitigation plans finalized.
Other modifying factors1	Reasonable assumptions, based on appropriate testing, on the modifying factors sufficient to demonstrate that extraction is economically viable.	Detailed assessments of modifying factors necessary to demonstrate that extraction is economically viable.
Capital costs	Accuracy: ±25%  Contingency: ≤15%	Accuracy: ±15%  Contingency: ≤10%
Operating costs	Accuracy: ±25%  Contingency: ≤15%	Accuracy:  ±15% Contingency:  ≤10%
Economic Analysis	Taxes described in detail; revenues are estimated based on at least a preliminary market study; economic viability assessed by detailed discounted cash flow analysis.	Taxes described in detail; revenues are estimated based on at least a final market study or possible letters of intent to purchase; economic viability assessed by detailed discounted cash flow analysis.

_{1.   The modifying factors, as defined in this section, include, but are not limited to, the factors listed in this table. The number, type and specific characteristics of the modifying factors applied will be a function of and depend upon the mineral, mine, property, or project.}

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What information must a registrant disclose in its SEC filings regarding all of its mining properties, including those that are non-material?

Registrants are currently required to disclose under Guide 7 information regarding mines, plants and significant properties owned or operated, or presently intended to be owned or operated, by the registrant.

The proposed rules would require differing levels of disclosure regarding a mining property depending on whether the property is material to the registrant.  In addition, the proposed rules would clarify that royalty and other companies that hold rights with respect to mining properties that are material to the registrant will be required to provide disclosure with respect to the underlying mining properties.

If a registrant with material mining operations (including a royalty or similar company) has more than one mining property that it:

• Owns or in which it has, or it is probable that it will have, a direct or indirect economic interest;
• Operates, or it is probable that it will operate, under a lease or other legal agreement that grants the registrant ownership or similar rights that authorize it, as principal, to sell or otherwise dispose of the mineral; or
• Has, or it is probable that it will have, an associated royalty or similar right,

then it must provide in its SEC annual report and applicable registration statements the following information regarding all such properties, including both material and non-material properties:

• A map or maps, of appropriate scale, showing the locations of all properties. Such maps should be legible on the page when printed.
• A presentation in tabular form, in decreasing order by asset value, of the 20 properties with the largest asset value (or fewer if the registrant has an economic interest in fewer than 20 mining properties). For each of the properties required to be included in the presentation, the registrant must identify the property, report the total production from the property for the three most recently completed fiscal years, and disclose the following information, in tabular format:
  • The location of the property;
  • The type and amount of ownership interest;
  • The identity of the operator;
  • Title, mineral rights, leases or options and acreage involved;
  • The stage of the property (exploration, development or production);
  • Key permit conditions;
  • Mine type & mineralization style; and
  • Processing plant and other available facilities.

  For purposes of this paragraph, a registrant may treat multiple mines with interrelated mining operations as one mining property.  A registrant with only a royalty or similar economic interest should provide only the portion of the production that led to royalty or other incomes for each of the three most recently completed fiscal years.

• A summary of all mineral resources and mineral reserves at the end of the most recently completed fiscal year by commodity and geographic area and for each property containing 10% or more of the registrant’s mineral reserves or 10% or more of the registrant’s combined measured and indicated mineral resources.  This summary must be provided for each class of mineral reserves (probable and proven) and resources (inferred, indicated and measured), together with total mineral reserves and total measured and indicated mineral resources, using a tabular format set forth in the proposed rules.

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What information must a registrant disclose in its SEC filings regarding properties that are individually material to the registrant?

In its SEC annual report and in applicable registration statements, a registrant engaged in mining operations would be required to disclose certain property-specific information for each property that is material to the registrant’s business or financial condition.  While the proposed rules do not specify how a registrant should determine what is an individual “property”, versus multiple properties, the SEC  noted in the proposing release that properties sharing the same processing plant or other facilities prior to the first point of material external sale could be treated as one mining property.  This suggests that such determinations should not be made on a strictly legal basis but should instead be based on how such properties are situated or operated.

The proposed rules acknowledge that some registrants have material mining operations but do not have any single property that is material to the registrant’s business or financial condition; for example, a registrant may have 50 distinct properties, none of which is individually material.  A registrant with no individually material properties need not comply with the disclosure requirements described in this section.

In addition to information similar to current Guide 7 requirements, the new rules would require, with respect to each material property:

• Tabular disclosure of material exploration activity and results;
• Tabular disclosure of mineral resources and mineral reserves, including year-to-year comparisons;
• Additional narrative disclosures; and
• As previously described, filing as an exhibit a technical report summary prepared by a qualified person in support of any material exploration results, any estimate of material resources, any estimate of material reserves, and any material change in the foregoing.

The new rules would require that a registrant engaged in mining operations include in its annual reports and applicable registration statements the following information with respect to each property that is material to the registrant’s business or financial condition:

• A brief description of the property including:
  • The location, accurate to within one mile, using an easily recognizable coordinate system. The registrant must provide appropriate maps, with proper engineering detail (such as scale, orientation, and titles). Such maps must be legible on the page when printed;
  • Existing infrastructure including roads, railroads, airports, towns, ports, sources of water, electricity, and personnel; and
  • A brief description, including the name or number and size (acreage), of the titles, claims, concessions, mineral rights, leases or options under which the registrant and its subsidiaries have or will have the right to hold or operate the property, and how such rights are obtained at this location, indicating any conditions that the registrant must meet in order to obtain or retain the property. If held by leases or options or if the mineral rights otherwise have termination provisions, the registrant must provide the expiration dates of such leases, options or mineral rights and associated payments.

  If the registrant holds a royalty or similar interest or will have an associated royalty or similar right, the disclosure must describe all of the above information, including, for example, the documents under which the owner or operator holds or operates the property, the mineral rights held by the owner or operator, conditions required to be met by the owner or operator, and the expiration dates of leases, options and mineral rights. The registrant must also briefly describe the agreement under which the registrant and its subsidiaries have or will have the right to a royalty or similar interest in the property, indicating any conditions that the registrant must meet in order to obtain or retain the royalty or similar interest, and indicating the expiration date

• A brief history of previous operations, including the names of previous operators, insofar as known;
• The following information, as relevant to the particular property
  • A brief description of the present condition of the property, the work completed by the registrant on the property, the registrant’s proposed program of exploration or development, the current stage of the property as exploration, development or production, the current state of exploration or development of the property, and the current production activities. Mines should be identified as either surface or underground, with a brief description of the mining method and processing operations. If the property is without known reserves and the proposed program is exploratory in nature or the registrant has started extraction without determining mineral reserves, the registrant must provide a statement to that effect;
  • The age, details as to modernization and physical condition of the equipment, facilities, infrastructure, and underground development; and
  • The total cost for or book value of the property and its associated plant and equipment;
• A brief description of any significant encumbrances to the property, including current and future permitting requirements and associated timelines, permit conditions, and violations and fines;
• Certain information regarding exploration activities, mineral resources and mineral reserves on the property, as follows:
  • A summary of the exploration activity for the most recently completed fiscal year in tabular form, which, for each sampling method used, discloses the number of samples, the total size or length of the samples, and the total number of assays. The information must be presented using a tabular format set forth in the proposed rules;
  • A summary of material exploration results for the most recently completed fiscal year in tabular form, which, for each property, identifies the hole that generated the exploration results, and describes the length, lithology and key geologic properties of the exploration results.  When determining whether exploration results are material, a registrant should consider their importance in assessing the value of a material property or in deciding whether to develop the property.  This information must be presented in a table using the format set forth in the proposed rules, accompanied by a brief discussion of the exploration results’ context and relevance.  If only results from selected holes and intersections are included, they should be accompanied with a discussion of the context and justification for excluding other results; and
  • If mineral resources or reserves have been determined, a summary of all mineral resources and reserves, which, for each property, discloses in tabular form, in the format set forth in the proposed rules, the estimated tonnages, grades (or quality, where appropriate), cut-off grades and metallurgical recovery, by class of mineral resource and reserve, occurring:
    • In-situ;
    • As plant/mill feed; and
    • As saleable product;
• Provide a comparison in tabular form of the property’s mineral resources and reserves as of the end of the last fiscal year against the mineral resources and reserves as of the end of the preceding fiscal year, with an explanation of any material change between the two. The comparison must use the tabular formats set forth in the proposed rules, which disclose information concerning:
  • The mineral resources or reserves at the end of the last two fiscal years;
  • The net difference between the mineral resources or reserves at the end of the last completed fiscal year and the preceding fiscal year, as a percentage of the resources or reserves at the end of the fiscal year preceding the last completed one;
  • An explanation of the causes of any discrepancy in mineral resources including depletion or production, changes in commodity prices, additional resources discovered through exploration, and changes due to the methods employed; and
  • An explanation of the causes of any discrepancy in mineral reserves including depletion or production, changes in the resource model, changes in commodity prices and operating costs, changes due to the methods employed, and changes due to acquisition or disposal of properties;
• If the registrant has not previously disclosed material exploration results, mineral reserve or resource estimates in a filing with the SEC or is disclosing material changes to its previously disclosed exploration results or mineral reserve or resource estimates:
  • In the case of mineral reserve or resource estimates or material changes thereto, provide a brief discussion of the material assumptions and criteria in the disclosure and cite to corresponding sections of the technical report summary, which must be filed as an exhibit; and
  • In the case of material exploration results or material changes thereto, provide sufficient information to allow for an accurate understanding of the significance of the exploration results. This must include information such as exploration context, type and method of sampling, sampling intervals and methods, relevant sample locations, distribution, dimensions, and relative location of all relevant assay and physical data, data aggregation methods, land tenure status, and any additional material information that may be necessary to make the required disclosure concerning the registrant’s exploration results not misleading. The registrant must cite to corresponding sections of the summary technical report, which must be filed as an exhibit.

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What other information must a registrant disclose in its SEC filings?

As proposed, every registrant with mining operations that are material to its business or financial condition must describe in its SEC annual report and applicable registration statements the internal controls that the registrant uses in its exploration and mineral resource and reserve estimation efforts.  This disclosure should include quality control and quality assurance (QC/QA) programs, verification of analytical procedures and a discussion of comprehensive risk inherent in the estimation.

In addition, if a registrant has filed a technical report summary with respect to any property, the registrant must identify the qualified person who prepared the technical report summary and state whether the qualified person is an employee of the registrant.  If the qualified person is not an employee of the registrant, the registrant must name the qualified person’s employer, disclose whether the qualified person or the qualified person’s employer is an affiliate of the registrant or another entity that has an ownership, royalty or other interest in the property that is the subject of the technical report summary, and if an affiliate, describe the nature of the affiliation.

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What consents must be obtained from a qualified person?

Prior to filing a technical report summary or updated technical report summary with the SEC, the registrant must obtain a written consent from each qualified person that is an author of the summary.  If the summary is used in a Securities Act registration statement, a written consent of the qualified person must be filed with the SEC.

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Will registrants be permitted to include in their SEC filings supplemental disclosures that do not comply with the SEC’s proposed rules, but comply with a foreign mining code such as Canada’s National Instrument 43-101 (NI 43-101)?

The proposed rules, if adopted, would not prohibit a registrant from including supplemental disclosures that are inconsistent with the SEC’s proposed rules in disclosures that are not subject to the proposed rules, such as disclosures on an issuer’s website, in press releases or in SEC submitted documents that are not subject to the SEC’s proposed rules, such as a Form 8-K filed under Regulation FD, or for foreign private issuers a Form 6-K that is not incorporated by reference into a covered form of registration statement.  This is consistent with the existing reporting regime for U.S. issuers, under which many U.S. issuers voluntarily prepare technical reports and other disclosures that comply with NI 43-101 or other foreign standards and make such reports available to the public outside their core “filed” SEC reports.  As under the existing regime, a registrant seeking to make such supplemental disclosures should assure itself that neither such disclosures nor its SEC filings are misleading.

If approved in their proposed form, the new rules would change the existing practice of Canadian issuers that file on non-MJDS forms including Forms 20-F, F-1, F-3 and F-4.  Existing Guide 7 includes an exception that permits the disclosure of information that would otherwise be prohibited by Guide 7, if such information is required by foreign or state law.  The SEC has taken the view that only Canada requires by law compliance with a particular mining disclosure code (NI 43-101).  In addition, the SEC has not permitted U.S. issuers that are subject to Canadian disclosure requirements to take advantage of the exemption.  Accordingly, the prevailing SEC guidance is that Canadian issuers filing with the SEC on non-MJDS forms are permitted to disclose NI 43-101 compliant information in their SEC filings as long as the filings are not misleading and the registrant also includes the information that would be required by Guide 7.  U.S. issuers and registrants from other countries are not permitted to vary from Guide 7.  In the proposing release for the new rules, the SEC proposed eliminating this exception on the basis that, because the new rules would permit the disclosure of mineral resources, such an exception would no longer be necessary.

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What is the status of the SEC’s proposed rules?

The SEC published its proposed rules on June 16, 2016.  The proposed rules are not yet effective.  In the proposing release, the SEC solicited comments on the proposed rules, requesting that comments be received on or before August 26, 2016.  The SEC is permitted to, but need not, extend the period for comments.  After the period for comments has expired, the SEC will evaluate the comments it has received and, if it decides to adopt final rules, issue a release containing the final rules, which may differ from the proposed rules.  We expect that the effective date of any final rules would be at least several months, if not longer, after the announcement of the final rules to provide the affected companies with time to prepare any required disclosure and supporting technical report summaries.

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1.   Including in Canada, Australia, South Africa, the European Union, Chile, Hong Kong, and Russia.
2.   Unless otherwise indicated, “applicable registration statement” and similar references shall mean a registration statement on Form S-1, S-3, S-4, F-1, F-3 or F-4 or an offering statement on Form 1-A.

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Appendix A
Primary Differences Between Current and Proposed Rules

	Industry Guide 7 and SEC Informal Guidance	Proposed Rules
Who must report?	Registrants with significant mining operations – the Staff has historically used 10% of assets as a benchmark Staff has treated royalty companies and vertically integrated companies as subject to Guide 7	Registrants with mining operations material to its business or financial condition, with a presumption of materiality at 10% of assets Specifically includes vertically integrated companies and royalty companies
What is a mineral?	Neither minerals nor mineral deposits are defined	More expansive.  Includes mineralization, including dumps and tailings, geothermal fields, mineral brines, and other resources extracted on or within the earth’s crust, but excluding oil and gas resources, gases and water
What is a mineral resource?	Not defined	Defined as a concentration or occurrence of material of economic interest in or on the earth’s crust in such form, grade or quality, and quantity that there are reasonable prospects for its economic extraction.
What is a mineral reserve?	That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination	An estimate of tonnage and grade or quality of indicated or measured mineral resources that, in the opinion of the qualified person, can be the basis of an economically viable project
What study can form the basis of reserves?	Final “bankable” feasibility study	Preliminary or Final Feasibility Studies
What price must be used to calculate reserves?	Based on trailing three-year average prices	Based on a commodity price no higher than the trailing 24-month average, or a reasonable contract price
What factors must be considered when converting resources to reserves?	Does not outline the factors that must be considered when making a reserve determination	Establishes the framework of applying modifying factors to indicated or measured mineral resources in order to convert them to mineral reserves
What reserves and resources may be disclosed?	Only proven and probable reserves (if foreign law requires additional disclosure, that additional disclosure may be included – only Canada’s NI 43-101 falls within this exemption) Resources may not be disclosed Informal Staff guidance allows disclosure of “mineralized material”, which must be presented as in-place tonnage and grade and may not include contained ounces	Reserves and resources must be disclosed, if determined in accordance with the rule requirements.  Otherwise, they may not be disclosed
Are exploration results required to be disclosed?	Not addressed	Yes
Is a technical report required to be filed with the SEC?	No	Yes
Must the resource determination be made by an expert or qualified person?	No	Yes
Characterization of the issuer as being in exploration, development or production stage	Guide 7 doesn’t discuss the characterization of individual properties, or distinguish between properties of a registrant that are at different stages of development	Introduces a materiality concept.  Adds classification standards for individual properties
Property Disclosure	Requires disclosure of certain items for each “mine, plant or other significant property” in which the registrant has an economic interest.  No rule provision regarding summary disclosure for multiple properties but the Staff has not objected to such summary disclosure	Additional disclosure for material properties.  Required summary disclosure for registrants with multiple mining properties
Disclosure of internal controls used in  exploration and mineral resource and reserve estimation efforts	No	Yes
Use of US Geological Survey published Circular 831 and 891?	The Staff has not objected to use of the circulars to classify resources of coal or industrial minerals	Circular 831 and 891 are inconsistent with the proposed rules

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Appendix B
Summary of Proposed Requirements for Technical Report Summaries

Required Content for All Technical Report Summaries:

• Executive Summary.  Briefly summarize the most significant information in the technical report summary, including property description (including mineral rights) and ownership, geology and mineralization, the status of exploration, development and operations, mineral resource and mineral reserve estimates, summary capital and operating cost estimates, permitting requirements, and the qualified person’s conclusions and recommendations.  The executive summary must be brief and should not contain all of the detailed information in the technical support summary;
• Introduction.  Disclose:
  • The registrant for whom the technical report summary was prepared;
  • The terms of reference and purpose for which the technical report summary was prepared;
  • The sources of information and data contained in the technical report summary or used in its preparation, with citations if applicable;
  • The details of the personal inspection on the property by each qualified person or, if applicable, the reason why a personal inspection has not been completed;
  • Whether the technical report summary’s purpose was to report mineral resources, mineral reserves or material exploration results;
  • If applicable, that the technical report summary updates a previously filed technical report summary; and
  • When filing an update, the name and date of the previous technical report summary.
• Property Description.  Describe:
  • The location of the property, accurate to within one mile, using an easily recognizable coordinate system.  The qualified person must provide appropriate maps, with proper engineering detail (such as scale, orientation, and titles) to portray the location of the property.  Such maps must be legible on the page when printed;
  • The area of the property;
  • The name or number of each title, claim, mineral right, lease or option under which the registrant and its subsidiaries have or will have the right to hold or operate the property.  If held by leases or options, the registrant must provide the expiration dates of such leases or options and associated payments;
  • The mineral rights, and how such rights have been obtained at this location, indicating any conditions that the registrant must meet in order to obtain or retain the property;
  • Any significant encumbrances to the property, including current and future permitting requirements and associated timelines, permit conditions, and violations and fines; and
  • Any other significant factors and risks that may affect access, title, or the right or ability to perform work on the property.

  If the registrant holds a royalty or similar interest in the property, the above information must be provided for the property that is owned or operated by a party other than the registrant.  In this event, for example, the report must address the documents under which the owner or operator holds or operates the property, the mineral rights held by the owner or operator, conditions required to be met by the owner or operator, significant encumbrances and significant factors and risks relating to the property or work on the property.

• Accessibility, Climate, Local Resources, Infrastructure and Physiography.  Describe:
  • The topography, elevation, and vegetation;
  • The means of access to the property, including highways, towns, rivers, railroads, and airports;
  • The climate and the length of the operating season, as applicable; and
  • The availability of and required infrastructure, including sources of water, electricity, personnel, and supplies.
• History.  Describe:
  • Previous operations, including the names of previous operators, insofar as known; and
  • The type, amount, quantity, and general results of exploration and development work undertaken by any previous owners or operators.
• Geological Setting, Mineralization and Deposit.  Describe briefly:
  • The regional, local, and property geology;
  • The significant mineralized zones encountered on the property, including a summary of the surrounding rock types, relevant geological controls, and the length, width, depth, and continuity of the mineralization, together with a description of the type, character, and distribution of the mineralization; and
  • Each mineral deposit type that is the subject of investigation or exploration together with the geological model or concepts being applied in the investigation or forming the basis of exploration program.

  The qualified person must include at least one stratigraphic column and one cross-section of the local geology to meet the requirements of this paragraph.

• Hydrogeology.  Describe:
  • The nature and quality of the sampling methods used to acquire data on surface and groundwater parameters;
  • The type and appropriateness of laboratory techniques used to test for groundwater flow parameters such as permeability.  Include discussions of the quality control and quality assurance procedures;
  • Results of laboratory testing and the qualified person’s interpretation, including any material assumptions.  The interpretation must include descriptions of permeable zones or aquifers, flow rates, in-situ saturation, recharge rates and water balance; and
  • The groundwater models used to characterize aquifers, including material assumptions used in the modeling.
• Geotechnical Data, Testing and Analysis.  Describe:
  • The nature and quality of the sampling methods used to acquire geotechnical data;
  • The type and appropriateness of laboratory techniques used to test for soil and rock strength parameters, including discussions of the quality control and quality assurance procedures; and
  • Results of laboratory testing and the qualified person’s interpretation, including any material assumptions.
• Exploration.  Describe the nature and extent of all relevant exploration work, conducted by or on behalf of, the registrant.
  • For all exploration work other than drilling, describe:
    • The procedures and parameters relating to the surveys and investigations;
    • The sampling methods and sample quality, including whether the samples are representative, and any factors that may have resulted in sample biases;
    • The location, number, type, nature, and spacing or density of samples collected, and the size of the area covered; and
    • The significant results of and the qualified person’s interpretation of the exploration information.
  • For drilling, describe:
    • The type and extent of drilling including the procedures followed;
    • Any drilling, sampling, or recovery factors that could materially impact the accuracy and reliability of the results; and
    • The material results and interpretation of the drilling results.

    For a technical report summary to support disclosure of material exploration results, the qualified person must provide information on all samples or drill holes.  If some information is excluded, the qualified person must identify the omitted information and explain why that information is not material.

    For a technical report summary to support disclosure of mineral resources or mineral reserves, the qualified person can meet the requirements of this section by providing sampling (including drilling) plans, representative plans and cross-sections of results.

  • Include a plan view of the property showing locations of all drill holes and other samples.
• Sample Preparation, Analyses, and Security.  Describe:
  • Sample preparation methods and quality control measures employed prior to sending samples to an analytical or testing laboratory, sample splitting and reduction methods, and the security measures taken to ensure the validity and integrity of samples;
  • Sample preparation, assaying and analytical procedures used, the name and location of the analytical or testing laboratories, the relationship of the laboratory to the registrant, and whether the laboratories are certified by any standards association and the particulars of such certification;
  • The nature, extent, and results of quality control procedures and quality assurance actions taken or recommended to provide adequate confidence in the data collection and estimation process; and
  • The author's opinion on the adequacy of sample preparation, security, and analytical procedures.  If the analytical procedures used in the analysis are not part of conventional industry practice, the qualified person must state so and provide a justification for why he or she believes the procedure is appropriate in this instance.
• Data Verification.  Describe the steps taken by the qualified person to verify the data being reported on or which is the basis of this technical report summary, including:
  • Data verification procedures applied by the qualified person;
  • Any limitations on or failure to conduct such verification, and the reasons for any such limitations or failure; and
  • The qualified person’s opinion on the adequacy of the data for the purposes used in the technical report summary.
• Adjacent Properties.  Where applicable, a qualified person may include relevant information concerning an adjacent property if:
  • Such information was publicly disclosed by the owner or operator of the adjacent property;
  • The source of the information is identified;
  • The qualified person states that he or she has been unable to verify the information and that the information is not necessarily indicative of the mineralization on the property that is the subject of the technical report; and
  • The technical report clearly distinguishes between the information from the adjacent property and the information from the property that is the subject of the technical report summary.
• Other Relevant Data and Information.  Include any additional information or explanation necessary to provide a complete and balanced presentation of the value of the property to the registrant.
• Interpretation and Conclusions.  The qualified person must summarize the interpretations of and conclusions based on the data and analysis in the technical report summary.  He or she must also discuss any significant risks and uncertainties that could reasonably be expected to affect the reliability or confidence in the exploration results, mineral resource or mineral reserve estimates, or projected economic outcomes.
• Recommendations.  If applicable, the qualified person must describe the recommendations for additional work with associated costs.  If the additional work program is divided into phases, the costs for each phase must be provided along with decision points at the end of each phase.
• References.  Include a list of all references cited in the technical report summary in sufficient detail so that a reader can locate each reference.

Required Additions for an Initial Assessment:

• Mineral Processing and Metallurgical Testing.  Describe:
  • The nature and extent of the mineral processing or metallurgical testing and analytical procedures;
  • The degree to which the test samples are representative of the various types and styles of mineralization and the mineral deposit as a whole;
  • The name and location of the analytical or testing laboratories, the relationship of the laboratory to the registrant, whether the laboratories are certified by any standards association and the particulars of such certification;
  • The relevant results including the basis for any assumptions or predictions about recovery estimates.  Discuss any processing factors or deleterious elements that could have a significant effect on potential economic extraction; and
  • The qualified person’s opinion on the adequacy of the data for the purposes used in the technical report summary.  If the analytical procedures used in the analysis are not part of conventional industry practice, the qualified person must state so and provide a justification for why he or she believes the procedure is appropriate, in this instance.
• Mineral Resource Estimates.  If this item is included, the technical report summary must:
  • Describe the key assumptions, parameters, and methods used to estimate the mineral resources, in sufficient detail for a reasonably informed person to understand the basis for and how the qualified person estimated the mineral resources;
  • Provide estimates of mineral resources for all commodities, including estimates of quantities, grade or quality, cut-off grades, and metallurgical or processing recoveries.  Mineral resources must be classified into inferred, indicated, and measured mineral resources.  The technical report summary must include mineral resource estimates of in-situ material, plant or mill feed, and saleable product.  The qualified person must round off, to appropriate significant figures chosen to reflect order of accuracy, any estimates of quantity and grade or quality.  The qualified person must estimate cut-off grades based on assumed costs for surface or underground operations and commodity prices that are no higher than the average spot price during the 24-month period prior to the end of the last fiscal year, determined as an unweighted arithmetic average of the daily closing price for each trading day within such period, provided that the qualified person may use sales prices as determined by applicable contractual agreements if such price is reasonable, and the qualified person discloses that he or she is using a contractual price and discloses the contractual price used;
  • When the qualified person reports the grade or quality for a multiple commodity mineral resource as metal or mineral equivalent, he or she must also report the individual grade of each metal or mineral and the commodity prices, recoveries, and any other relevant conversion factors used to estimate the metal or mineral equivalent grade;
  • State the uncertainty in the estimates of inferred, indicated, and measured mineral resources and discuss the sources of uncertainty and how they were considered in the uncertainty estimates.  Uncertainty estimates for indicated and measured mineral resources must be stated in the form “±x% relative accuracy at y% confidence level over [annual, quarterly, or monthly] production quantities.” Uncertainty estimates for inferred mineral resources must be stated in the form “the qualified person expects at least z% of inferred mineral resources to convert to indicated or measured mineral resources with further exploration and analysis.”  The qualified person must support the disclosure of uncertainty associated with each class of mineral resources with a list of all factors considered and explain how those factors contributed to the final conclusion about the level of uncertainty (i.e. confidence limits for indicated and measured mineral resources and the proportion of inferred resources expected to be converted to indicated or measured mineral resources with further exploration) underlying the resource; and
  • Provide the qualified person’s qualitative assessment of all relevant modifying factors to establish economic potential and opinion justifying why he or she believes that all issues can be resolved with further work.  Modifying factors include, but are not limited to:
    • Site infrastructure (e.g. whether access to power and site is possible);
    • Mine design and planning (e.g. what is the broadly defined mining method);
    • Processing plant (e.g. whether all products used in assessing prospects of economic extraction can be processed with methods consistent with each other);
    • Environmental compliance and permitting (e.g. what are the required permits and corresponding agencies and whether significant obstacles exist to obtaining those permits); and
    • Any other reasonably assumed modifying factors, including socio-economic factors, necessary to demonstrate reasonable prospects for economic extraction.

    In complying with the above requirements, the qualified person must take into account the following instructions:

  • The qualified person must consider all sources of uncertainty when reporting the uncertainty associated with each class of mineral resources.  Sources of uncertainty that affect such reporting of uncertainty include sampling or drilling methods, data processing and handling, geologic modeling and estimation.  The qualified person is not required to use estimates of confidence limits derived from geostatistics or other numerical methods to support the disclosure of uncertainty surrounding mineral resource classification.  If the qualified person chooses to use confidence limit estimates from geostatistics or other numerical methods, he or she should consider the limitations of these methods and adjust the estimates appropriately to reflect sources of uncertainty that are not accounted for by these methods.
  • Mineral resources must generally be reported exclusive of mineral reserves; however, in the technical report summary mineral resource estimates may be inclusive of mineral reserves so long as this is clearly stated with equal prominence to the rest of the item.  If the qualified person chooses to disclose resources inclusive of mineral reserves, he or she must also clearly state the mineral resources exclusive of mineral reserves in the technical report summary.
  • Unless otherwise stated, cut-off grades also refer to net smelter returns, pay limits and other similar terms.

A qualified person may, but is not required to, also include the following information in the initial assessment:

• Economic Analysis.  Describe:
  • The key assumptions, parameters, and methods used to demonstrate economic viability.  The qualified person must provide all material assumptions including discount rates, exchange rates, commodity prices, and taxes, royalties, and other government levies or interests applicable to the mineral project or to production, and to revenues or income from the mineral project;
  • Results of the economic analysis, including annual cash flow forecasts based on an annual production schedule for the life of project, and measures of economic viability such as net present value (NPV), internal rate of return (IRR), and payback period of capital; and
  • Sensitivity analysis results using variants in commodity price, grade, capital and operating costs, or other significant input parameters, as appropriate, and discuss the impact on the results of the economic analysis.

  When this information is included in an initial assessment:

  • The economic analysis must be based on only measured and indicated mineral resources. The qualified person must not include inferred mineral resources in any economic analysis;
  • The qualified person must also include a statement, of equal prominence to the rest of this section, that, unlike mineral reserves, mineral resources do not have demonstrated economic viability; and
  • Operating and capital cost estimates must have an accuracy level of at least approximately ±50% and a contingency level of no greater than 25%.  The qualified person must state the accuracy and contingency levels in the initial assessment.

Further Required Additions for a Preliminary Feasibility Study or a Final Feasibility Study:

• Mining Methods.  Describe the current or proposed mining methods and the reasons for selecting these methods as the most suitable for the mineral reserves under consideration. Include:
  • Geotechnical and hydrological models, and other parameters relevant to mine designs and plans;
  • Production rates, expected mine life, mining unit dimensions, and mining dilution and recovery factors;
  • Requirements for stripping, underground development, and backfilling;
  • Required mining equipment fleet and machinery, and personnel; and
  • At least one map of the final mine outline.
• Processing and Recovery Methods.  Describe the current or proposed mineral processing methods and the reasons for selecting these methods as the most suitable for extracting the valuable products from the mineralization under consideration.  Include:
  • A description or flow sheet of any current or proposed process plant;
  • Plant throughput and design, equipment characteristics and specifications;
  • Current or projected requirements for energy, water, process materials, and personnel; and
  • If the processing method, plant design or other parameters have never been used to successfully extract the valuable product from such mineralization, the qualified person must so state and provide a justification for why he or she believes the approach will be successful in this instance.

  If the processing method, plant design or other parameters have never been used to successfully extract the valuable product from such mineralization and is still under development, then no mineral resources or reserves can be disclosed on the basis of that method.

• Infrastructure.  Describe the required infrastructure for the project, including roads, rail, port facilities, dams, dumps and leach pads, tailings disposal, power, water and pipelines, as applicable.  The qualified person must include at least one map showing the layout of the infrastructure.
• Market Studies.  Describe the market for the products of the mine, including justification for demand or sales over the life of the mine (or length of cash flow projections).  Include:
  • Information concerning markets for the property’s production, including the nature and material terms of any agency relationships and the results of any relevant market studies, commodity price projections, product valuation, market entry strategies, and product specification requirements;
  • Descriptions of all material contracts required for the issuer to develop the property, including mining, concentrating, smelting, refining, transportation, handling, hedging arrangements, and forward sales contracts.  State which contracts have been executed and which are still under negotiation.  For all contracts with affiliated parties, discuss whether the registrant obtained terms, rates or charges the same as could be obtained had the contract been negotiated at arm’s length with an unaffiliated third party; and
  • If the mine’s product cannot be traded on an exchange, there is no other established market for the product, and no sales contract exists:
    • In the case of a pre-feasibility study, a preliminary market study, meaning a study that is sufficiently rigorous and comprehensive to determine and support the existence of a readily accessible market for the mineral.  It must, at a minimum, include product specifications based on preliminary geologic and metallurgical testing, supply and demand forecasts, historical prices for the preceding five or more years, estimated long term prices, evaluation of competitors (including products and estimates of production volumes, sales, and prices), customer evaluation of product specifications, and market entry strategies.  The study must provide justification for all assumptions.  It can, however, be less rigorous and comprehensive than a final market study, which is required for a full feasibility study; and
    • In the case of a feasibility study, a final market study, meaning a comprehensive study to determine and support the existence of a readily accessible market for the mineral.  It must, at a minimum, include product specifications based on final geologic and metallurgical testing, supply and demand forecasts, historical prices for the preceding five or more years, estimated long term prices, evaluation of competitors (including products and estimates of production volumes, sales, and prices), customer evaluation of product specifications, and market entry strategies or sales contracts.  The study must provide justification for all assumptions, which must include all material contracts required to develop and sell the mineral reserves.
• Environmental Studies, Permitting, and Social or Community Impact.  Describe the environmental, permitting, and social or community factors related to the project.  Include:
  • The results of environmental studies (e.g. environmental baseline studies or impact assessments);
  • Requirements and plans for waste and tailings disposal, site monitoring, and water management during operations and post mine closure;
  • Project permitting requirements, the status of any permit applications, and any known requirements to post performance or reclamation bonds;
  • Requirements and plans for social or community engagement and the status of any negotiations or agreements with local communities;
  • Descriptions of any commitments to ensure local procurement and hiring;
  • Mine closure plans, including remediation and reclamation plans, and the associated costs; and
  • The qualified person’s opinion on the adequacy of current plans to address any issues related to environmental, permitting and social or community factors.
• Capital and Operating Costs.  Provide estimates of capital and operating costs, with the major components set out in tabular form.  Explain and justify the basis for the cost estimates including any contingency budget estimates.  State the accuracy level of the capital and operating cost estimates.  To assess the accuracy of the capital and operating cost estimates, the qualified person must take into account the risks associated with the specific engineering estimation methods used to arrive at the estimates.  As part of this, the qualified person must take into consideration the accuracy of the estimation methods in prior similar environments.  Operating and capital cost estimates in a pre-feasibility study must, at a minimum, have an accuracy level of approximately ±25% and a contingency range not exceeding 15%.  Operating and capital cost estimates in a feasibility study must, at a minimum, have an accuracy level of approximately ±15% and a contingency range not exceeding 10%.  The qualified person must state the accuracy level and contingency range in the study.
• Economic Analysis.  Describe:
  • The key assumptions, parameters, and methods used to demonstrate economic viability.  The qualified person must provide all material assumptions including discount rates, exchange rates, commodity prices, and taxes, royalties, and other government levies or interests applicable to the mineral project or to production, and to revenues or income from the mineral project;
  • Results of the economic analysis, including annual cash flow forecasts based on an annual production schedule for the life of project, and measures of economic viability such as net present value (NPV), internal rate of return (IRR), and payback period of capital; and
  • Sensitivity analysis results using variants in commodity price, grade, capital and operating costs, or other significant input parameters, as appropriate, and discuss the impact on the results of the economic analysis.

  When this information is included in a pre-feasibility study:

  • The qualified person must exclude inferred mineral resources from the pre-feasibility study’s demonstration of economic viability in support of a disclosure of a mineral reserve;
  • Factors to be considered are typically the same as those required for an initial assessment, but considered at a greater level of detail or at a later stage of development.  For example, a pre-feasibility study must define, analyze or otherwise address in detail:
    • The required access roads, infrastructure location and plant area, and the source of all utilities (e.g. power and water) required for development and production;
    • The preferred underground mining method or surface mine pit configuration, with detailed mine layouts drawn for each alternative;
    • The bench lab tests that have been conducted, the process flow sheet, equipment sizes, and general arrangement that have been completed, and the plant throughput;
    • The environmental compliance and permitting requirements or interests of agencies, non-governmental organizations, communities and other stakeholders, the baseline studies, and the plans for tailings disposal, reclamation and mitigation, together with an analysis establishing that permitting is possible; and
    • Any other reasonable assumptions, based on appropriate testing, on the modifying factors sufficient to demonstrate that extraction is economically viable.
  • The pre-feasibility study must also identify sources of uncertainty that require further refinement in a final feasibility study.
  • In some instances, the risk factors associated with a project may indicate that more than a pre-feasibility study is required to disclose mineral reserves, e.g., in situations where the project is the first in a particular mining district with substantially different conditions than existing company projects, such as environmental and permitting restrictions, labor availability and skills, remoteness, and unique mineralization and recovery methods.  In such cases, the qualified person must use a feasibility study in order to achieve the level of confidence necessary for disclosing mineral reserves.

  When this information is included in a final feasibility study:

  • The qualified person must exclude inferred mineral resources from the pre-feasibility study’s demonstration of economic viability in support of a disclosure of a mineral reserve;
  • A feasibility study must contain the application and description of all relevant modifying factors in a more detailed form and with more certainty than a pre-feasibility study.  For example, a feasibility study must define, analyze or otherwise address in detail:
    • Final requirements for site infrastructure, including well-defined access roads, finalized plans for infrastructure location, plant area, and camp or town site, and the established source of all required utilities (e.g. power and water) for development and production;
    • Finalized mining method, including detailed mine layouts and final development and production plan for the preferred alternative with the required equipment fleet specified.  The feasibility study must address detailed mining schedules, construction and production ramp up, and project execution plans;
    • Completed detailed bench lab tests and a pilot plant test, if required, based on risk.  The feasibility study must further address final requirements for process flow sheet, equipment sizes, and general arrangement and specify the final plant throughput;
    • The final identification and detailed analysis of environmental compliance and permitting requirements, including the finalized interests of agencies, NGOs, communities and other stakeholders.  The feasibility study must further address the completion of baseline studies and finalized plans for tailings disposal, reclamation and mitigation; and
    • Detailed assessments of other modifying factors necessary to demonstrate that extraction is economically viable.

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