On October 31st, the SEC voted to adopt amendments to modernize the property disclosure requirements and related guidance for mining registrants under the Securities Act of 1933 and the Securities Exchange Act of 1934. Under these final rules, a registrant with material mining operations must disclose specified information regarding its mineral resources and reserves in its SEC filings. These amendments will provide investors with a more comprehensive understanding of a registrant’s mining properties, as well as more closely align the SEC’s disclosure requirements and policies for mining properties with current industry and global regulatory practices and standards as embodied by the Committee for Reserves International Reporting Standards (CRIRSCO). The amendments also rescind Industry Guide 7 and consolidate the disclosure requirements for registrants with material mining operations in a new subpart of Regulation S-K.
Monday, November 05. 2018
Under the final rules, mining registrants must disclose information about both their mineral resources and mineral reserves, which allows investors to make more informed judgments about the mining operation and its prospects.
A registrant with material mining operations must also disclose the results of explorations. These disclosures must be based on and accurately reflect information and supporting documentation prepared by a mining expert (“the qualified person”). Requiring the involvement of a qualified person further protects investors by fostering proper risk assessment and disclosure.
Registrants must obtain a dated and signed technical report summary from the qualified person that identifies and summarizes the information reviewed and the conclusions. This report should be included as an exhibit in an SEC filing when the registrant files information about a mineral resource or reserve for the first time or whenever there is a change in those resources and/or reserves.
The SEC altered the proposed amendments to bring them as in line as possible with CRIRSCO requirements to reduce the compliance burden on and costs to registrants. Notable differences between the proposed changes and the final rules are as follows:
- Requiring a qualified person to use a price for each commodity that provides a reasonable basis for establishing estimates of mineral resources or reserves, which may be a historical or a forward-looking price so long as the reasoning behind selecting this price is explained.
- Indicating that a qualified person will not be subject to expert liability under Section 11 of the Securities Act for certain aspects of specified modifying factors outside the expertise of the qualified person that are based on information provided by the registrant.
- Eliminating the proposed quantitative presumptions regarding when a registrant’s mining operations are deemed material.
- Eliminating the proposed summary provision requiring specific items of information in tabular format about a registrant’s top twenty properties and adopting a more principles-based approach wherein registrants provide an overview of their properties and operations.
- Reducing the number of individual property disclosure provisions requiring tables from seven to two and allowing other required disclosure to be presented in narrative or tabular format.
- Permitting (instead of requiring) a registrant to file a technical report summary to support its disclosure of exploration results.
- Permitting the disclosure of exploration targets in SEC filings if accompanied by certain specified cautionary and explanatory statements.
- Allowing a qualified person to determine the mineral resources and reserves at any specific point of reference rather than at three points of reference.
- Allowing a qualified person to include inferred resources in an economic analysis that he or she opts to use in an initial assessment as long as certain conditions are met.
- Defining “mineral reserve” to include diluting materials and allowances for losses that may occur when the material is mined or extracted.
- Permitting a qualified person to conduct either a pre-feasibility or final feasibility study to support a determination of mineral reserves even in high risk situations.
- Allowing the use of historical estimates of mineral resources or reserves in SEC filings pertaining to mergers, acquisitions, or business combinations if the registrant cannot update the estimate prior to completion of the transaction provided that this estimate is not treated as the current estimate.
- Permitting a registrant holding a royalty or similar interest to omit any information required under the summary and individual property disclosure provisions to which it lacks access and which it cannot obtain without incurring an unreasonable burden/cost.
The final rules do not require a registrant to format any new disclosures in XBRL.
Finally, the new rules clarify that a third-party firm, which employs the qualified person, may sign the technical report summary and provide the written consent required for an expert under the Securities Act.
There will be a two-year transition period concerning compliance so that registrants will not be required to conform to these new rules until their first fiscal year on or after January 1st, 2021. Subject to the SEC’s completion of necessary EDGAR changes, registrants may comply earlier than this date. Guide 7 will remain effective until the compliance date.
SEC Adopts Rules to Modernize Property Disclosures Required for Mining Registrants (www.sec.gov)
Modernization of Property Disclosures for Mining Registrants (www.sec.gov)
SEC Proposes Changes to Property Disclosure Requirements for Mining Registrants (www.novaworkssoftware.com)