As more ways of electronically disclosing information become available, mining companies need to remember that National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101) is applicable to all public disclosure related to scientific and technical information. Electronic communication, including but not limited to websites, blogs and social media, should be considered an extension of a company’s formal corporate disclosure record, and companies need to ensure that information disseminated is compliant with disclosure requirements.
Electronic disclosure and regulatory compliance
When securities regulators review the continuous disclosure of mining companies, one of the most significant areas of non-compliance is with website disclosure and associated corporate presentations, fact sheets and third-party information. In general, mining companies appear to be careful to make sure news releases, Management Discussion & Analysis and annual information forms are reviewed by a Qualified Person and checked for compliance with the requirements of NI 43-101. On the other hand, information contained on their website or other electronic disclosure does not appear to be reviewed with the same scrutiny. Some common deficiencies with companies’ website disclosure include:
• Failing to name the Qualified Person.
• Omitting the required cautionary language for historical estimates, exploration targets and preliminary assessments.
• Reporting in situ or gross metal values.
• Providing unsupported claims about the potential viability of a project or misrepresenting the project’s stage of development.
• Adding Inferred Resources to other categories of Mineral Resources.
• Stating quantity of contained metal without associated tonnes and grade.
• Not stating the effective date and missing key assumptions, parameters and methods for Mineral Resource and Mineral Reserve estimates.
• Linking third-party reports or providing hyperlinks to reports that are not compliant with NI 43-101.
When missing or non-compliant technical disclosure on a company’s website is identified during a regulatory review, the company will likely be required to immediately revise and remove the information and issue a clarifying/retracting news release identifying the missing or non-compliant disclosure.
When posting third-party reports on a company’s website, it is important to keep in mind that “if you disseminate it, you own it.” Companies should be careful about posting scientific and technical information prepared by third parties unless the information was prepared on behalf of the company or is general in nature and not specific to the company. If a company decides to distribute or post the information or report on its website, it then becomes part of its disclosure record and NI 43-101 applies. In addition, if a company chooses to post third-party reports, it must make every effort to ensure that all significant articles concerning the company are included and that negative and positive articles are given similar prominence. Companies that disclose positive news but withhold negative news could find their disclosure practices subject to scrutiny by regulators. Similar concerns also exist regarding the posting of media articles, including radio, television and online news reports, about the company on its website.
Instead of posting third-party reports on the company’s website, an alternative approach is to provide a complete list of all analysts who follow the company, together with contact information, so that investors may contact the third party directly.
Beyond the common disclosure deficiencies identified above, another area of concern is the posting of newsletters or “tout-sheets.” There have been some cases where companies provide technical information to an apparent independent newsletter writer, often for a substantial fee, and the writer suggests the company is on the brink of discovery, under-promoted and overlooked by the markets. Since this disclosure is made on behalf of the company, it is part of the company’s public disclosure record and the company should be prepared to support and justify any promotional statements and scientific and technical disclosure in the newsletter.
While websites, corporate presentations, blogs and social media provide a powerful way for companies to communicate with shareholders, it is important to remember that information provided must be in compliance with NI 43-101 disclosure requirements.
The views expressed in this article are those of the author and do not necessarily represent the views of the OSC.
Craig Waldie is a senior geologist with the Ontario Securities Commission.