CANADIAN MINING

DISCLOSURE

(IN ONE HOUR!)

Jeff Wilson, Ph.D, P.Geo.

Director, Geology

Tetra Tech Wardrop

June 2012

Topics for the Hour

• The Canadian Market

• Regulatory Organizations

• National Instrument 43-101

• The Qualified Person (QP)

• Mineral Resources & Reserves

• The Technical Report

• Advanced property Studies

THE CANADIAN MARKET

Canadian Market Characteristics

• Majority of public mining companies

– 1531 issuers

– 58% of Public Companies

– 208 new listings in 2010

• Majority of money raised

– $17.8 B equity raised

• Highly Liquid market

– $416 B value traded

• Well regulated transparent market

– SEDAR

– NI 43-101

Mining Markets at a Glance

Source: Exchange Websites, World Federation of Exchanges, Capital IQ, as at or YTD September 30, 2011

TSX TSXV TSX&TSXV LSE AIM ASX JSE HKEx NYSE/

NYSE Amex

Number of Mining

Issuers Listed 367 1,262 1,629 58 144 691 57 60 138

Quoted Market Value

(C$ Billions)411.2 29.5 440.7 776.1 19.4 468.2 312.0 243.5 1,018.2

New Mining Listings 39 118 157 5 15 68 2 8 4

Equity Capital Raised

(C$ Billions)5.4 5.1 10.5 10.4 1.4 2.1 0 1.8 0.671

Number of Financings 167 1428 1595 5 110 50 0 6 1

• Canada dominates global mining equity

financing

• Smaller companies

• Higher risk investment profile

• Scandal-averse

• Regulation crucial to promote investor

confidence

The importance of good disclosure

REGULATORY

ORGANISATIONS

Regulatory Organisations

• Professional Associations

• CIM

• Securities Commissions

• Stock Exchanges

• IIROC

Professional Associations

• Established Provincially by law

– Engineers and geoscientists Act

• Self-regulatory

– Bylaws of the Association

• Admission by education and work experience

• Adherence to professional standards

– Competence and ethics

• Discipline by suspension or expulsion

• Grant Professional licences

– P. Geo., P. Eng.

Canadian Institute of Mining, Metallurgy and

Petroleum

• Independent organization of mining professionals

• Working definitions and procedures– Definition Standards for Mineral Resources and

Mineral Reserves

– Incorporated into NI 43-101

• Industry Best Practices– Exploration Best Practices Guidelines

– Estimation of Mineral Resources and Mineral Reserves

– Mineral Processing

Securities Commissions

• Securities law governed Provincially in Canada

• 13 provincial & territorial authorities

– BCSC & OSC dominant in Mining

• Independent government agencies

– Crown Corporations

– Report to Attorney General

– Self-funded through Issuer fees

• Enforce statutory regulations

– NI 43-101

TSX Guidelines

• TSX

– Disclosure Standards for Companies Engaged in

Mineral Exploration, Development & Production

• TSX Venture Exchange

– Appendix 3F Mining Standards Guidelines

– Appendix 3E News Release Guidelines

– Policy 3.3 Timely Disclosure

IIROC

• Investment Industry Regulatory Organization of

Canada

• Oversees investment dealers and trading activity

• Real-time trade monitoring and reviews

• Imposes and lifts trading halts or delays

• Administers TSX timely disclosure requirements

• Reviews pre-filed press releases

When in doubt

• Regulations do not cover every situation

• Always variation in interpretation and application

• If in doubt, go back to first principles

– Professional Code of Ethics

– Standard Language

– Full, Plain and Transparent disclosure

– Reasonable person test

NATIONAL INSTRUMENT

43-101

National Instrument NI43-101

• Federal Instrument, Provincial law

• Mandates technical disclosure

• Not an engineering/geological guideline

• Does not tell you how to do your job

• Requires disclosure be based on

– Technical report

– Other information prepared by QP

• Covers any written disclosure

– Writing, picture, map, paper & electronic, including

website

NI 43-101 Elements

• National Instrument 43-101– Standards of disclosure for Mineral Projects

• Form 43-101F1– Technical report requirements

• Companion Policy 43-101CP– NI 43-101 guidance and interpretation

• In force since 2001

• Revised June 30, 2011

Underlying Principles

• Minimum public reporting standards

– Exploration, Resources and Reserves

– Transparency, Materiality, Competence, Impartiality

• Classification by Resource or Reserve

– Subdivision by level of certainty or confidence

• Qualified Person (QP) involvement

– Defined by qualifications and experience

• QP & Issuer responsibilities defined

• Report preparation considerations

– List of items to be included

Timely disclosure and Materiality

• Companies are required by law to immediately

disclose a “material change” in their business

• Material Change

– Change in Issuer business, operations or capital

– Reasonable expectation of effect on market price

– Based on overall Company context

• Company determines materiality

– Time sensitive

– Scale dependant

– Historic movement triggers

NI 43-101 revisions

• Form 43-101F1 revised

– Single report format retained

– More adaptable for advanced properties

• Six-month report filing delay available

– Requires existing report

• No more updated consents and certificates

– Only with original technical report

• Acceptable foreign QPs clarified

– List plus list of typical requirements

NI 43-101 revisions (cont)

• Producing Issuers don’t need independent QP

for their reports

• Royalty holders generally avoid filing reports

• Historical Resource definition changed

– Any third party estimate before acquisition or LOI

• Acceptable Foreign Codes clarified

– JORC, PERC, SAMREC , SEC 7, Certification Code

(Chile), or

– Any other generally accepted CRISCO code

THE QUALIFIED PERSON

The Qualified Person (QP)

• Canadian legal concept

• Additional to, and separate from, Professional

Licence

• Responsibilities and liabilities established by law

• “A QP should be satisfied that they could face

their peers and demonstrate competence and

relevant experience in the commodity, type of

deposit and situation under consideration”

CIM Definitions Standards

What defines a QP?

• Engineer or Geoscientist

– Relevant Degree, or equivalent

• 5 years experience relevant to degree

– Exploration, development, operation, assessment

• Experience relevant to project and report

• In good standing with Professional Association

What is a Professional Association?

• Self-regulatory

– Engineers and/or geoscientists

• Established by statute in Canada, or

• Reputable foreign professional association

• In each case

– Admission by qualifications, experience and ethics

– Compliance with competence and ethics standards

– Professional development required or encouraged

– Discipline by suspension or expulsion

• Regardless of residence

Foreign jurisdiction designation

• Certain foreign membership designations

acceptable

• Published list is now guidance

• Additional list of objective membership criteria

• Designation requires

– Position requiring independent judgment

– Favourable confidential peer evaluation, or

– Recommendation by two peers, plus expertise

Membership Designation

Statutory QP Responsibilities

• Comply with Code of Ethics

• Comply with licensure laws

• Review and approve technical disclosure

• Prepare or supervise technical reports

• Verify technical data

• Conduct site visits

Current Personal Inspection

• QP or independent QP, must visit the site

– Cannot refuse, or delegate

– At least one QP must visit the site

– Minimum standard

– Multiple inspections for Advanced Properties

• Inspection current until later material change

• Issuer obliged to facilitate QP Inspection

• Limited Deferral available

– Early Stage seasonal weather properties only

– Please don’t try it

QP Liability

• Statutory liability for technical report

• Common law liability to Company and Investors

• Can’t disclaim statutory liability

• Can’t disclaim professional responsibility

• Separate liability for directors and officers

• Statutory liability in secondary market

• QP liability generally limited to cost of

professional fees, except for fraud

QP Independence

• Some reports require Independent QP

– E.g., Resources, Reserves, PEA

• Reasonable person test

– “no circumstance that, in the opinion of a reasonable

person aware of all relevant facts, could interfere with

the QP’s judgment”

Guidance on Independence

• Examples of Non-independence– Company employee, insider, or director

– Related party employee, insider, or director

– Partner of any person or company above

– Securities of Issuer or related party

– Property ownership, royalty, or other interest

– Adjacent property ownership, royalty, or other interest

– Majority of income, directly or indirectly, in the last 3 years

• Current or expected– Includes options

• Directly or indirectly

MINERAL RESOURCES &

RESERVES

Mineral Resource

• Concentration or occurrence

– Diamonds

– Natural solid inorganic material

– Industrial minerals

– Coal and natural solid fossilized organic material

– Base and precious metals

• Reasonable prospects for economic extraction

• Estimated or interpreted from specific geological

evidence and knowledge

Current Estimate

• CIM definitions incorporated into NI43-101

– “CIM Definition Standards on Mineral Resources and

Mineral Reserves”

• Use CIM Best Practice Guidelines

• Must be supported by assay results

• Some Foreign Codes acceptable with

reconciliation

– JORC, PERC, SAMRAC, SEC IG 7, Chilean Code

• First time disclosure pre-filed with IIROC

Mineral Resource Categories

• Inferred Resource

– Continuity assumed, but not verified

– Little statistical grade correlation between drillholes

– Insufficient for meaningful mine planning

• Indicated Resource

– Reasonably assumed continuity

– Mine planning & economic evaluation

• Measured Resource

– Confirmed continuity

– Production planning and economic evaluation

Mineral Reserve

• Economically mineable part of M&I Resource

• Requires Prefeasibility Study (PFS)

• Economic extraction justified at time of reporting

• Needs adequate Mining, processing, and

economic information

• Use term “Ore” only with mineral reserves

– Implies feasibility and economic viability

– Potentially misleading for resource

Reserve Categories

• Probable Mineral Reserve

– Economic extraction can be justified

• Proven Mineral Reserve

– Economic extraction is justified

– Restricted to deposit where production planning is

taking place

– Potential viability not significantly affected by variation

in estimate

Mineral Resource Categories

Exploration Information

Mineral

Resources

Measured

Indicated Probable

Proven

Mineral

Reserves

Increasing

geological

knowledge

and

confidence

Consideration of modifying factors

(Mining, met, economic, environmental, etc.

Inferred

THE TECHNICAL REPORT

Technical Report

• Prepared and filed in accordance with NI 43-101

and Form 43-101F1

• Summary of material scientific and technical

information

• Specific effective date

• Prepared by one or more QPs

– A QP takes responsibility for every report section

– QP determines material to be included

• Complete and current when filed

• Report triggers clearly defined

NI 43-101, Instructions

NI 43-101 Report Triggers

• On becoming Reporting Issuer

• First-time written disclosure

– Mineral resources

– Mineral reserves

– PEA

• To support various required filings

– Preliminary Prospectus/ Short form prospectus

– Information or Proxy Circular

– Offering Memorandum

– Annual Information Filing

– Take-Over Bid Circular

What is the report Filing Deadline?

• In most cases, 45 days after date of the

disclosure

• Conditional 6-month filing delay available

– Requires current existing technical report

– Primarily to allow smooth property acquisitions

Technical Report ItemsTitle Page

Date and Signature Page

Table of Contents

Illustrations

Item 1: Summary

Item 2: Introduction

Item 3: Reliance on Other Experts

Item 4: Property Description and Location

Item 5: Accessibility, Climate, Local Resources,

Infrastructure and Physiography

Item 6: History

Item 7: Geological Setting and Mineralization

Item 8: Deposit Types

Item 9: Exploration

Item 10: Drilling

Item 11: Sample Preparation, Analyses and

Security

Item 12: Data Verification

Item 13: Mineral Processing and Metallurgical

Testing

Item 14: Mineral Resource Estimates

Item 15: Mineral Reserve Estimates

Item 16: Mining Methods

Item 17: Recovery Methods

Item 18: Project Infrastructure

Item 19: Market Studies and Contracts

Item 20: Environmental Studies, Permitting and

Social or Community Impact

Item 21: Capital and Operating Costs

Item 22: Economic Analysis

Item 23: Adjacent Properties

Item 24: Other Relevant Data and Information

Item 25: Interpretation and Conclusions

Item 26: Recommendations

Item 27: References

ADVANCED PROPERTY

STUDIES

Advanced Property studies

• Property development is punctuated by the

publication of three milestone studies

– Preliminary Economic Assessment (PEA)

– Pre-feasibility Study (PFS)

– Feasibility (FS)

• Study definitions from CIM

• Independent involvement mandated by law

Preliminary Economic Assessment

• Any study with an economic analysis of potential

viability, other than PFS or FS

– Synonymous with Scoping Study

• Can be published before or after PFS/FS

– Discuss PEA impact on existing FS & PFS

• Measured, indicated and Inferred resources OK

• CAPEX Estimate -20% to +50%

• Three QPs, 2-3 months

• Principal parameters assumed and/or factored

Preliminary Feasibility Study

• Comprehensive study of project viability

• Range of development options studied

• Mining method & processing method determined

• Principal parameters have some engineering

basis

• Greatest optimisation at this stage

• Up to ten QPs, 6-9 months work

• CAPEX Estimate -15% to +35%

• Insufficient for bank financing– Still considerable assumptions

Feasibility Study

• Comprehensive technical and economic study

• Little flexibility

– Mining method and process previously decided

• Detailed financial analysis

• CAPEX Estimate -10% to +20%

• Ten or more QPs, from 9 to 12+ months

• Sufficient for debt capital financing

Useful Addresses

• NI 43-101 (BCSC Mining)

http://www.bcsc.bc.ca/mining.asp?id=1775

• TSX Mining Guidelines

http://www.tmx.com/en/pdf/Mining_Disclosure_Stds.pdf

• TSX-V manual

http://www.tmx.com/en/listings/venture_issuer_resources/finance_manual.html

• APEGBC Act, Bylaws & Code of Ethics

http://www.apeg.bc.ca/resource/publications/actbylawscode.html

• CIM Standards and Guidelines

http://www.cim.org/standards/

• IIROC

http://www.iiroc.ca/English/Pages/home.aspx

• SEDAR (Required PubCo disclosure repository)

http://www.sedar.com/issuers/issuers_en.htm

• Scottish news

http://news.scotsman.com/scotland

There you are!

Jeff Wilson, Ph.D. P.Geo.

Director, Geology

Tetra Tech Wardrop

Phone: 604.408.3788, ext. 527

Cell: 604.418.8507

jeff.wilson@tetratech.com