Top 5 disclosure deficiencies of NI 43-101 technical report

Do you have a skeleton in your closet? Undisclosed facts about your mineral projects which, if revealed, would damage perceptions of the mineral project value.

National Instrument 43-101 standard of disclosure for mineral projects

National Instrument 43-101 governs a company's public disclosure of scientific and technical information related to mineral exploration, development, and production activities. Its purpose is to provide a summary of the scientific and technical information concerning mineral exploration, development, and production.

Avoiding deficiencies can become a regular task for junior exploration companies. As an example, you may release any scientific and technical information relating to your mineral project over time, or include it in a NI 43-101 technical report or a press release. By doing so, you properly ensure that your public disclosure avoids any major deficiencies.

Top 5 disclosure deficiencies of NI 43-101 technical report

In this article, we will discuss the various types of deficiencies that you can avoid. We will also familiarize you with the major shortcomings of NI 43-101 and assist you in selecting the appropriate optimal procedures for your public disclosure.

Let's dive right in!

 

Table of content

 

 

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Industry standards and best practices

Canadian Institute of Mining and Metallurgy (CIM) resources are accessible on the CIM website.

  • CIM Definition Standards on Mineral Resources and Mineral Reserves, approved by CIM Council on May 10, 2014,
  • CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines, approved by CIM Council on November 29, 2019, and
  • Mineral Exploration Best Practices Guidelines, approved by CIM Council on November 23, 2018, are all available online for your convenience.

Additional guidance can be found in CIM's Library on Best Practices for estimating Mineral Resources and Reserves. It covers a range of commodities such as coal, industrial minerals, lateritic deposits, lithium brines, placer deposits, potash, rock-hosted diamonds, and uranium.

Common disclosure problems

Disclosure of historical estimates

Historical mineral resource estimates is defined in section 1.1 of NI 43-101, as:

"an estimation of the quantity, grade or metal or mineral content of a deposit that an issuer has not verified as a current mineral resource or mineral reserve, and which was prepared before the issuer acquiring, or entering into the property that contains the deposit."

Main NI 43-101 technical reports document pitfalls

  • No source, date, original classification (including grade and tonnage) available, which includes misuse of "ore" as a classification.
  • The technical report document does not include the key main assumptions if known
  • Additionally, the report does not provide the planned work required to verify the historical estimate, nor does it allows to recalculate or add the historical estimate to a current resource.
  • The technical report document lacks required cautionary language and uses terms such as "not NI 43-101 compliant."
  • The technical report document also discloses an economic analysis based on a historical estimate.

How to disclose metal equivalents

Mineralization consisting of multiple metals of interest is often converted to a single number. Why is this done?

  • It allows for easier presentation of numerous grades in terms of a single equivalent.
  • It also aids in delineating a body by using a single number.
  • This method is frequently observed in disclosure for polymetallic mineral deposits.

Some issuers have disclosed equivalent grades calculated entirely using price-weighting. Price weighting without considering the differential recovery
of each component element could be potentially misleading. Essentially, a price-weighted equivalent grade refers to a gross dollar value divided by a metal price, denominated in metal units instead of dollars. It is identical to a gross metal value but restricted by section 2.3(1)(c) of NI 43-101.

Neglecting recoveries may cause an overstatement of the potential volume of metal attainable through an equivalent grade. Alternatively other potentially misleading in the case that an equivalent grade can be employed to modify one deposit type into another. For example, one may reveal an AuEq grade in a Cu-Mo porphyry scheme with insignificantly low gold content.

To prevent misleading grade equivalents, use the provisions outlined in section 2.3(1)(d) of NI 43-101, and determine them utilizing the outcomes of metallurgical analytical tests. If test work is not available, including reasonable assumptions for recoveries from analogous deposits, follow CIM's guidance on equivalents. Use of a grade equivalent or value parameter should only be for the purpose of preparing the outlines of potentially economic mineralization. Subsequent grade estimations should be carried out for each element separately. This also applies to foreign codes and guidance. JORC, SAMREC, and SME provide comparable guidelines for disclosing equivalencies. These all serve as guidance for revealing equivalent levels.

Top 5 NI 43-101 technical report deficiencies

The five most frequent mineral project disclosure pitfalls or flaws that we recently encountered in NI 43-101 technical report are as follow:

Item 3: Reliance on other experts

Must be limited to reliance on legal, political, environmental, or tax (not technical).

Item 10: Drilling

Missing location, azimuth, and dip of drill holes, true widths, higher grade intervals.

Item 11: Sample preparation, analyses and security

Missing QA/QC info., assay & analytical procedures, name of lab, sample preparation.

Item 12: Data verification

Lack of data verification by the QP, & lack of QP’s opinion on adequacy of the data.

Item 14: Mineral resource estimates

Lack of key assumptions, parameters, methods, and no discussion of material risks.

Mining frequently asked questions (FAQs)

 

What is the NI 43-101 mineral resource classification?

The NI 43-101 includes metals, precious metals, and energy sources, as well as minerals like stone, gems, diamonds, and sand.

What are the consequences if a resource issuer does not file an NI 43-101 compliant technical report?

If a mining company fails to submit a required technical report under NI 43-101, Standards of Disclosure for Mineral Projects, it may:

  • lose the ability to use exemptions allowed under securities laws.
  • be listed as in default on the Reporting Issuers List.
  • face being Cease Traded without warning.
  • be unable to complete any prospectus financing until the necessary report is submitted.

There is also a possibility that the company may face additional enforcement actions.

What is the NI 43-101 compliant technical report?

An NI 43-101 technical report may take on several forms, such as an initial report on a mineral property (whether for minreal exploration or mining operation), a compendium of the exploration activities including inherent Quality Control and Quality Assurance (QAQC) measures on a mineral project, or a summary of the mineral resources estimated for a given mineral exploration property.

When do I need to file a technical report (Form 43-101F1) with an offering memorandum?

If your mining or exploration company is important, you need to submit a present-day technical report (Form 43-101F1) for every valuable mineral property. You must file these reports at the same time when you make the offering memorandum available to the general public in Canada. In case you've already submitted a current technical report, you don't need to resubmit it. Get in touch with Gosselin Mining if you have any questions about technical reports.

Why was the JORC Code created?


The JORC Code and similar codes (NI 43-101 and PERC) exist to guarantee that reports meant to inform investors and their advisors are clear, accurate, and complete, and that they originate from capable individuals. These codes help avoid confusion and deception among investors.

If this all seems daunting, we understand. We have gone through the same challenges to reach this stage and produce these compliant reports. To assist businesses, we offer a distinctive mini-service that involves aiding them in configuring compliant technical reports in NI 43-101 and coaching their staff on how to prepare and decode the public technical reports disclosure requirements. If you are interested, please refer to our website for further details on our services.

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