Public Reporting of Exploration

Results, Mineral Resources and

Reserves

Dr. Kwame Awuah-Offei

Overview of S-K 1300

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 Learning Outcomes
At the end of this section, the participant should be able to
explain to his peers the general regulatory framework for
mining property disclosure under Regulation S-K 1300

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 Outline
• Overview of S-K 1300
• Materiality trigger for disclosure
• S-K 1300 disclosure requirements

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General Framework for Mining Disclosure

Securities law Property disclosure Mining property

disclosure

• Including listing • Required for all • Describes mining

rules of stock businesses properties
exchange (e.g. • For mining (material
NYSE listing registrants, that information)
rules) includes mining • Exploration
• Requires annual properties results, mineral
(e.g., 10-K, 20-F) & resources and
other periodic mineral reserves
(e.g. 8-K) are material for
reporting mining properties

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 General Framework in Canada
Securities law Mining Property CIM Standards
disclosure

• Canadian • NI 43-101 • Incorporated

securities law • TSX listing by NI 43-101
• TSX listing rules
rules etc.

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 General Framework in Australia
Securities law Mining Property JORC
disclosure

• Australian • ASX listing • Incorporated

securities law rules chapter 5 by ASX listing
• ASX listing rules as
rules Appendix 5A

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 General SEC Framework Under Guide 7
Reg. S-K (CFR 229) Item 102: Description of Guide 7
property

•§229.101 (Item 101) •General rule with •Calls for disclosures of

Description of business.
•§229.102 (Item 102)
Description of property.
•§229.103 (Item 103)
Legal proceedings.
•§229.104 (Item 104)
Mine safety disclosure.
instructions reserves and other
•Instruction 3 required disclosure items
disclosure of material •Very brief
information concerning •Provided mainly for
the production, individual property
reserves, locations, disclosure
development, and the
nature of the registrant’s
interest
•Instruction 7 refers
registrants with
significant in mining
operations to refer to
Guide 7
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 Industry Guide 7
• Brief resulting in extensive staff guidance
• Permitted disclosure of mineral reserves (with full feasibility study)
• Required registrants to use commodity prices that do not exceed 3 year
average
• Forbid disclosure of non-reserve material unless required by foreign or
state law
• Did not really distinguish between individual property vs registrant
disclosures

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 Purpose of the new rule
1. To modernize the property disclosure requirements for
mining registrants
2. To provide investors with a more comprehensive
understanding of a registrant’s mining properties
3. To more closely align the Commission’s disclosure
requirements and policies for mining properties with current
industry and global regulatory practices and standards

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 Summary
• Rescinds Industry Guide 7
• Consolidates all mining property disclosure into one standard
(Regulation S-K 1300)
• Requires certain disclosures by all registrants with material
mining operations

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 Timeline
• Registrants must comply with the rule for the first fiscal year
beginning on or after January 1, 2021.
• Registrants can voluntarily comply with the rules before then

Since Sept 30, 2019, SEC is now

able to receive S-K 1300
disclosure via EDGAR. No easy
way to search for EX-96 filings
yet.

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 12
Credit: Greg Gosson, Wood Group PLC
 General Framework
Reg. S-K (CFR 229) Item 102: Description of Subpart 1300
property

• §229.101 (Item 101) • General rule with • Calls for certain

Description of instructions disclosures from
business. • Instruction 3 refers registrants with
• §229.102 (Item 102) registrants engaged material mining
Description of in mining operations
property. operations to • Calls for those
• §229.103 (Item 103) subpart 1300-1305 registrants to
Legal proceedings. provide certain
• §229.104 (Item 104) disclosures as
Mine safety Exhibits per Subpart
disclosure. 601

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 Item 102
• State briefly the location and general character of the principal plants,
mines and other materially important physical properties of the
registrant and its subsidiaries. In addition, identify the segment(s), as
reported in the financial statements, that use the properties described. If
any such property is not held in fee or is held subject to any major
encumbrance, so state and describe briefly how held.
• Instruction 3 to Item 102: Registrants engaged in mining operations must
refer to and, if required, provide the disclosure under 17 CFR§229.1300
through §229.1305 (subpart 1300 of Regulation S–K), in addition to any
disclosure required by this section.

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 17 CFR§229.1301(b)
A registrant must provide the disclosure specified in this
subpart if its mining operations are material to its business or
financial condition.

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 §229.1301(c) - Materiality
When determining whether its mining operations are material, a registrant
must:
1) Consider both quantitative and qualitative factors, assessed in the
context of the registrant’s overall business and financial condition;
2) Aggregate mining operations on all of its mining properties, regardless
of the stage of the mining property, and size or type of commodity
produced; and
3) Include, for each property, as applicable, all related activities from
exploration through extraction to the first point of material external
sale, including processing, transportation, and warehousing.

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 Materiality
• Under S-K 1300, Materiality has the same meaning as Securities Act Rule
405 and Exchange Act Rule 12b–2: “a matter is material if there is a
substantial likelihood that a reasonable investor would attach
importance to it in determining whether to buy or sell the securities
registered.”
• This is consistent with the SCOTUS holding that a fact is material if there
is a substantial likelihood that the fact would have been viewed by a
reasonable investor as having significantly altered the ‘‘total mix’’ of
information made available (TSC Industries v. Northway, Inc.)

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 Materiality Factors
• Asset value of mining properties relative to total asset value
• Revenue, net income or operating income from mining operations relative to total Are there
revenues, net incomes or operating incomes other factors
• Evidence that disclosure of a similar property or properties has had a significant beside these
impact on the price of a registrant’s securities that you think
• Public disclosure by the registrant discussing the importance to its operations might affect a
(e.g., from an operational or competitive standpoint) of a particular property or determination
properties that mining
• The unique or rare nature of the particular mineral or the importance of the operations are
mineral to the registrant’s operations; material to
firm?
• The actual and projected expenditures on the registrant’s mining properties as
compared to its expenditures on non-mining business activities
• The amount of capital raised or planned to be raised by the registrant for its
mining properties.
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Special Cases for Materiality Determination
• Vertically-integrated firms with mining properties
• Firms with multiple mining properties
• Firms with royalty interest in mining properties

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 Vertically-Integrated Firms
• Should assess materiality of mining operations the same way other firms
will assess materiality considering the same quantitative and qualitative
factors that other firms would
• E.g., “the bauxite mining operations of an aluminum manufacturer,
whose primary business is manufacturing, not mining, could require
disclosure if its bauxite mining operations are material, even though
they are not the registrant’s primary operations, or the primary source of
the registrant’s revenues.” ~ Adopting Release

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Firms with Multiple Mining Properties
• Such registrants should consider all their mining properties in
the aggregate to determine if they should provide S-K 1300
disclosure
• They should apply the same quantitative and qualitative
factors to their mining operations in the aggregate

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 Royalty Companies
• Royalty companies should provide S-K 1300 disclosures so long as
revenues from mining properties are material to their business or
financial condition.
• They are however exempted from S-K 1300 disclosures that they lack
access to so long as they provide certain disclosures (see 1303(a)(3) and
1304(a)(2))
1304(a)(3): A registrant that has a royalty, streaming or other similar right, but which lacks access to any of the information specified
in paragraph (b) of this section about the underlying properties, may omit such information, provided that the registrant:
(i) Specifies the information to which it lacks access;
(ii) Explains that it does not have access to the required information
because: (A) Obtaining the information would result in an unreasonable burden or expense; or (B) It requested the information from
a person possessing knowledge of the information, who is not affiliated with the royalty company or similar registrant, and who
denied the request; and
(iii) Provides all required information that it does possess or which it can acquire without incurring an unreasonable burden 23 or
expense.
 Materiality for Individual Properties
• Registrants should evaluate the materiality of an individual property by
considering the same quantitative and qualitative factors it would
consider for its mining operations as a whole
• The difference is that registrants should evaluate these factors for a
particular property relative to the entire business

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 S-K 1300 Disclosures
• Summary disclosure on all of a registrant’s mining properties
• Individual property disclosure for each material property
– Exploration activity & results
– Mineral resources
– Mineral reserves
– File a technical report summary (TRS) as an exhibit to support disclosure of
mineral resources & reserves (optional for disclosure of exploration results)

• Internal controls disclosure

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 Exercise
Consider a US listed firm that primarily produces cement. The firm owns 10 limestone
mines that supply limestone to its 8 cement plants. Its largest cement plant is responsible
for 20% of its revenues. The firm owns a limestone and clay mine next to the largest
cement plant; it feeds limestone exclusively from the limestone mine. While it uses clay
from the clay mine at this one cement plant, it also sometimes uses shale and other
materials from nearby operations in its mix. The firm routinely discloses the competitive
advantage its limestone mines give it compared to its competitors (it uses limestone
exclusively from its own mines).

1. Should this firm be providing S-K 1300 disclosures? Under what conditions will it
have to do so? Under what conditions would it not do so?

2. Which of the three items of disclosure in the previous slide does this firm have to
provide, if it is to provide S-K 1300 disclosures?
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 Compared to Guide 7
• Makes clear distinction between overall registrant disclosure obligations and
property-level obligations
• Requires that disclosure of exploration results, resources and reserves be based
on work done by QP
• Requires disclosure of mineral resources supported by QP’s initial assessment
– Removes foreign or state law exemption
• Requires that mineral reserve disclosure be supported by QP’s pre- or final
feasibility study
• Permits use of price that provides “reasonable basis” for establishing prospects
of economic extraction or economic viability of a project

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 Compared to NI 43-101
• Is not linked to SME Guide as NI 43-101 is linked to CIM standards
• Only requires technical report to support disclosure of exploration results, mineral
resources or mineral reserves
• Forbids historical estimates except in M&A transactions
• Third-party QP firm can sign technical report on behalf of QP – No independence
requirement
• Defines an “initial assessment” as the study to support disclosure of mineral resources

“…Notwithstanding this prohibition, a registrant may include such an estimate in a

Commission filing that pertains to a merger, acquisition, or business combination if the
registrant is unable to update the estimate prior to the completion of the relevant
transaction.” – Item 1304(h) 28
 Compared to JORC/ASX
• Standalone code which is not linked to SME Guide as JORC/ASX rules are
linked
• Requires technical report (more comprehensive than JORC Table 1) to support
disclosure of exploration results, mineral resources or mineral reserves
• Forbids historical estimates except in M&A transactions
• Third-party QP firm can sign technical report on behalf of QP – No
independence requirement
• Defines an “initial assessment” as the study to support disclosure of mineral
resources

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QUESTIONS?

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 Take-Aways
• S-K 1300 rescinds Guide 7 and consolidates all mining property
disclosure into S-K 1300
• Requires summary, individual property and internal controls disclosure
on a registrant’s mining operations for registrants with material mining
operations regardless of type of firm
• S-K 1300 differs from Guide 7 and NI 43-101 in many respects as we will
see in the rest of this course

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