Industry Guide 7 l Mining Company Disclosures
In their SEC filings, in addition to the disclosures required by Regulation S-K and 20F, mining issuers must include the disclosures required by Industry Guide 7. All U.S mining companies that are SEC filers are required to report under its rules. Although there is widespread discontent with the guide among mining professionals, so far the SEC has been resistant to calls for change. The guide is divided into three sections. The first contains definitions. These definitions include the terms “reserve,” “proven (measured) reserves,” and “probable (indicated) reserves.” Generally, the SEC prohibits the disclosure of quantitative estimates for all mineral deposits other than proven and probable reserves unless such information is by foreign or state law. Guide 7 also defines the three stages of mining as “exploration,” “development” and “production”
The second section of Industry Guide 7 lists the information that must be disclosed for each of the mines, plants and other significant properties owned or operated, or intended to be owned or operated, by the issuer.
The information required by Guide 7 includes:
♦ The location and means of access to the property;
♦ A brief description of the title, claim, lease or option under which the issuer and its subsidiaries have or will have the right to hold or operate the property, indicating any conditions which the issuer must meet in order to obtain or retain the property. If held by leases or options, the expiration dates of such leases or options must be disclosed;
♦ A brief history of previous operations, including the names of previous operators of the mine, insofar as known;
♦ A brief description of the present condition of the property, the work completed by the issuer on the property, the issuer’s proposed program of exploration and development, and the current state of exploration and/or development. Mines must be identified as either open-pit or underground. If the property is without known reserves and the proposed program is exploratory in nature, a specific statement to that effect must be made which includes the age, details as to modernization and physical condition of the plant and equipment and subsurface improvements and equipment. Further, the total cost for each property and its associated plant and equipment must be disclosed as well as the source of power utilized with respect to each property must also be disclosed;
♦ A brief description of the rock formations and mineralization of existing or potential economic significance on the property, including the identity of the principal metallic or other constituents insofar as known. If proven (measured) or probable (indicated) reserves have been established, state
(i) the estimated tonnages and grades (or quality, where appropriate) of such classes of reserves, and
(ii) the name of the person making the estimates and the nature of his relationship to the issuer;
♦ If technical terms relating to geology, mining or other matters whose definition cannot readily be found in conventional dictionaries (as opposed to technical dictionaries or glossaries) are used, an appropriate glossary must be included in this report; and
♦ Detailed geographic maps and reports, feasibility studies and other highly technical data need not be included in the report but must be, to a degree, appropriate and necessary for the SEC’s understanding of the issuer’s presentation of business and property matters, furnished as supplemental information.
The third section requires the issuer to furnish supplemental information to the SEC that includes:
♦ If an estimate of proven (measured) or probable (indicated) reserves is set forth in the report:
i) maps drawn to scale showing any mine workings and the outlines of the reserve blocks involved together with the pertinent sample-assay thereon;
ii) all pertinent drill data and related maps; and
iii) the calculations whereby the basic sample-assay or drill data were translated into the estimates made the grade and tonnage of reserves in each block and in the complete reserve estimate;
♦ A complete copy of each material engineering, geological or metallurgical report concerning the issuer’s property, including governmental reports, which are known and available to the issuer; and
♦ All documents such as title documents, operating permits and easements needed to support representations made in the issuer’s report.
These disclosures may sound simple but they are not. They must be address with attention to detail, and all required information must be complete and accurate. Small miners sometimes appear to believe they’re free to make reference to “preparing an NI 43-101” simply because the term is familiar to investors and has a nice ting. It is, however incorrect for any U.S company to discuss it in public statements or filings. NI 43-101 is a Canadian national instrument that describes disclosure requirements for Canadian mining companies. It is not applicable to U.S mining companies.
All publicly traded mining companies require the assistance of an experienced securities attorney familiar with Industry Guide 7. Hamilton & Associates has represented numerous mining companies domestically and internationally.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
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Boca Raton, Florida 33432
Telephone: (561) 416-8956
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