TORONTO STOCK EXCHANGE - THE MINING
STANDARDS TASK FORCE RECOMMENDS
990202 - TORONTO STOCK EXCHANGE(TSE99) - TORONTO, ONTARIO
The Mining Standards Task Force today released the
much-anticipated Final Report entitled "Setting New Standards."
The Final Report recommends a number of important changes
designed to preserve Canada's position as a world leader in
mineral exploration development and mining financing. The Task
Force was established in 1997 and released its Interim Report
in June 1998.
"By enhancing investor protection through improved quality and
quantity of disclosure and better quality control practices in
mineral exploration, we aim to increase confidence in Canadian
securities markets. Standards will clearly be raised on many
fronts", said John Carson, Senior Vice-President of Market
Regulation at the TSE and Co-chair of the Task Force. "Our
recommendations will make Canada and the TSE global leaders in
setting disclosure requirements and professional standards for
the mining sector."
The Report recommends:
-formalization in securities regulations of the Qualified
Person concept, whereby the QP is responsible for scientific
and technical matters;
-establishment of mining and industry-related standards,
specifically,
-best practice guidelines for the conduct of mineral
exploration programs, development programs and mining
operations;
-standards for reporting resources and reserves estimates and
exploration and mining activities;
-accreditation and quality control standards for analytical
laboratories;
-standards for professionalism and supervision for mining
analysts;
-establishment of requirements for technical reports and
content requirements for news releases disclosing exploration
information;
-increased emphasis on sound corporate governance practices,
regulatory oversight of the mining industry and the enforcement
of securities laws.
"The OSC commends the Mining Standards Task Force on the
issuance of the Final Report today," said John A. Geller,
Vice-Chairman of the Ontario Securities Commission. "Many of
the Task Force's recommendations on disclosure and reporting
requirements are reflected in the CSA's proposed National
Instrument on Standards of Disclosure for Exploration,
Development and Mining Properties. (NI 43-101). The NI was
released for comment in draft form by the CSA in July 1998. The
CSA is currently in the process of analyzing the comments
received." He added, "The goal of the OSC through its
participation in the Mining Standards Task Force and its
efforts with the CSA to reformulate National Policies 2A and 22
is to enhance the reliability and comparability of information
available to the public, and in so doing to foster fairness and
integrity in the capital markets."
The Task Force has completed its work. The recommendations will
now be enacted into rules and policies, designed to protect
investors and the integrity of the industry, by the OSC and
other securities commissions, the TSE, professional
associations and others.
The recommendations are summarized in the attached "Questions
and Answers."
The Task Force was established by the Toronto Stock Exchange
and the Ontario Securities Commission to examine the need to
set standards for mineral exploration and mining companies on
co-ordinating efficient exploration programs and how the
programs should be carried out and the results disclosed. The
guiding principle was to increase investor confidence in
Canadian securities markets and to reinforce Canada's
leadership position in the global mining industry through
increased investor protection.
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MINING STANDARDS TASK FORCE QUESTIONS AND ANSWERS
Q. What has changed from the Interim Report?
During the consultation process it became clear that a number
of elements of the Interim Report were misunderstood. The Final
Report responds to questions that were raised, specifically
clarifying the concept of the Qualified Person, the reason for
best practice guidelines, and the need for accreditation for
analytical laboratories. The recommendations concerning the
role of the securities industry and research analysts have also
been strengthened and expanded.
Q. Why was the Task Force formed?
The Task Force was established to examine the need to set
standards for mineral exploration and mining companies on
coordinating efficient exploration programs and how the
programs should be carried out and the results disclosed. The
guiding principle was to increase investor confidence in
Canadian securities markets and to reinforce Canada's
leadership position in the global mining industry and mining
finance through increased investor protection. The mining
industry is very important to Ontario and the rest of Canada.
Q. What will this Report achieve?
The report will soon lead to changes in rules and policies,
which will
-provide investors with better disclosure;
-increase professionalism in the exploration and mining
industry;
-improve regulation of securities markets.
Q. The Task Force's key recommendations and the primary
supporting points may be summarized as follows:
1. The Task Force recommends the formalization and
enhancement of the role of the Qualified Person concept in the
Canadian mining industry.
-The integrity of the system, both in the field and in the area
of public disclosure of exploration and mining results, is
backed by professional engineers and geoscientists with
experience in the mining industry who are regulated by
provincial self-regulating professional bodies with
disciplinary powers.
-The proposed QP concept is broader than in other major mining
jurisdictions that use the "Competent Person" concept. The Task
Force proposes to significantly broaden the QP concept by: i)
making the QP responsible for ensuring industry standards and
best practice guidelines are followed; ii) requiring the
company to ensure that all scientific and technical disclosure
is based on the work of a QP; and iii) requiring, in a number
of special circumstances, that reports be prepared by
independent QP's.
2. The Report emphasizes the need to establish:
-National industry standards for the mining industry.
-Exploration "best practices guidelines" based on industry
standards.
-A number of recommendations relate to the need for quality
control in exploration and field programs. This is important to
ensure the integrity of results and reported information, as
well as to reduce opportunity for fraud.
-Requiring a QP to oversee exploration and field programs will
ensure that the best practice guidelines will be effectively
applied.
-The Task Force recommends adoption of interim best practice
guidelines, but does not recommend prescribing specific methods
for the industry to follow.
-In the longer term, the Task Force is challenging the industry
to take responsibility for self-regulation in these areas. The
industry has the opportunity to raise the bar by setting its
own best practice guidelines.
3. The Task Force proposes to set significantly higher
disclosure standards, which will improve the quality of
disclosure by exploration and mining companies. These higher
disclosure standards address:
-disclosure of exploration results;
-the establishment of a clear national standard for the
reporting of resource and reserve estimates;
-the establishment of detailed guidelines for the content of
news releases;
-the disclosure of certain legal, social, environmental and
political issues that might affect land tenure; and
-the establishment of standards for the reporting of production
costs.
4. The Report advocates national uniformity in regulation and
improved regulatory oversight.
-Both securities commission and stock exchange rules should be
uniform across Canada (except in the area of listing
standards), in order to clarify Canadian rules for both
domestic and international companies and investors.
-This objective should be reinforced through mechanisms such as
the national technical advisory committee recommended by the
Task Force.
-Compliance with existing and proposed rules requires an
effective deterrence mechanism. Police agencies, securities
regulators and criminal justice officials require additional
resources for their enforcement functions in order to ensure
that adequate deterrence is in place.
Q. Does the Final Report recommend that Canada take a
leadership position in any of these areas?
Most definitely, the Final Report makes ground-breaking
recommendations on a number of fronts which puts Canada and the
TSE in a leadership position in terms of many requirements,
including the following:
-Expanding the QP concept to ensure involvement of QPs in
overseeing exploration and mining programs, in signing off on
all disclosure relating to those programs, as well as clearly
delineating when an independent QP report is required.
-Accreditation of all independent assay laboratories.
stablishment of requirements for reporting on the results of
exploration programs, including detailed guidelines for the
content of technical reports and news releases.
-Requiring data verification in QP reports.
-Establishing specific corporate governance standards for
exploration and mining companies.
-Establishing professional standards for securities analysts
covering exploration and mining companies.
-Recognizing the need for international reciprocity in several
areas, including QP qualifications.
-Development of educational programs for listed companies to
acquaint them with their disclosure obligations as a result of
the recommendations.
Q. Who was involved in the preparation of the Report?
The Task Force held extensive consultations with all of the
stakeholders involved in the mining industry, including
companies, analysts, securities regulators, stock exchanges,
mining professionals and policing agencies. Many of these
groups will be actively involved in the implementation and
enforcement of the recommendations. We also received and
considered over 100 written responses to the Interim Report.
Q. What happens now?
The Task Force has completed its work. The recommendations will
now be enacted into rules and policies by the organizations
responsible for their enforcement. Much of that work is already
underway. The Toronto Stock Exchange has developed an
implementation plan. The Canadian Securities Administrators
have already drafted a National Instrument to be known as NI
43-101, "Standards for Disclosure for Exploration, Development
and Mining Properties", which was released for comment last
summer. NI 43-101 will implement many of the Task Force's
recommendations when it is finalized. Professional mining
associations are working towards licensing of Qualified
Persons. Mining industry associations are working on best
practice guidelines and standards.
Q. Would the recommendations have prevented another Bre-X?
No, you cannot regulate against fraud, especially where
collusion is involved. Ferreting out fraud is a matter of
investigating criminal activity. However, we believe the
recommendations will reduce the chances of fraud occurring in
this industry, and give markets the tools to potentially detect
any fraudulent activity at an earlier stage.
Q. What will all of this cost?
There will be an incremental cost but we believe it will not be
significant for the great majority of companies who are
currently following generally accepted industry practices. Some
smaller companies that maintain minimal staff and may not
operate their own programs will face the greatest increase in
costs if they devote fewer resources to issues such as quality
control in the field and careful preparation of disclosure
documents. The Task Force strongly believes the increased costs
are justified by the benefits of improved integrity and
investor protection.
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MEMBERS OF THE MINING STANDARDS TASK FORCE
Morley P. Carscallen, Co-Chair Former Vice-Chair, Current
Commissioner, Ontario Securities Commission
John W. Carson, Co-Chair Senior Vice-President, Market
Regulation, Toronto Stock Exchange
David M. Beatty, Vice President & Director, First Marathon
Securities Ltd.
Robert G. Cook, Director, Market Surveillance, Toronto Stock
Exchange
John J. Drury, Mining Consultant
James W. Gill, President & Chief Executive Officer, AUR
Resources Inc.
David E. Harquail, Senior Vice-President, Franco-Nevada Mining
Corporation Limited
D. Neill Hillhouse, Chairman & Chief Executive Officer, Orvana
Minerals Corp.
Edmund T. Kimura, Consulting Geologist
Kathryn A. Soden, Director, Corporate Finance, Ontario
Securities Commission
W.S. (Steve) Vaughan, Partner, Aird & Berlis
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Steve Kee Manager, Media Services Marketing and Communications
The Toronto Stock Exchange - tse.com
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