Disclosure

MINING EXPLAINED

A public company is required, under the relevant securities regulations, to make “full, true and plain disclosure of all material facts” in its prospectus when it goes public or otherwise issues shares in the primary market and, thereafter, to make continuous financial disclosure and timely disclosure of material changes. Junior companies often have no revenue, rendering their financial disclosure of limited relevance. However, their technical disclosure filings can and should be used by investors to make informed decisions.

A mining company’s disclosure obligations begin with its activities (such as the way in which it conducts its exploration program), through the assembly of technical information (such as drilling records and assay results), to the production of technical filings, filing such reports with regulatory authorities and the disclosure of the information by way of public news release.

It is here that the Internet becomes a valuable tool for the investor. Securities regulators or stock exchanges around the world now operate websites that compile and present the news releases, quarterly and annual reports, and other documents that companies are required by law to file. In Canada, the provincial securities regulators have set up the System for Electronic Document Analysis and Retrieval, accessible at www.sedar.com. The Securities and Exchange Commission in the United States has a similar clearinghouse (called EDGAR, for Electronic Data Gathering, Analysis, and Retrieval) on its website, www.sec.gov.

In the United Kingdom, the London Stock Exchange puts corporate news filings on its website, and news from Australian-listed companies is posted by the Australian Stock Exchange.

The web archives of news dissemination services, and the websites of the companies themselves, are also good places to look for current information and filings.

Analysts’ interpretation for clients provide a different kind of disclosure about mining companies. A number of parties are involved in the process, including mining companies, promoters, brokers and analysts and investors themselves.

Several exchanges now require that a qualified person be responsible for designing programs and ensuring that these programs are carried out in accordance with industry standards. Any failure by a qualified person in the discharge of these responsibilities would make him subject to disciplinary action from his professional organization and, possibly, regulatory authorities. In addition, officers and directors who fail to discharge their duties could face limited statutory liability for the misleading continuous disclosure of their public companies.

Brokers and mining analysts are regulated by professional associations and securities regulators. In some jurisdictions, new regulations oblige them to differentiate between their opinions and information provided by mining companies, as well as provide the basis for any conclusions, opinions or calculations contained in their reports.

Under new guidelines imposed by most Canadian exchanges, technical reports on exploration results must include:

* results of all surveys and investigations on the property;

* details of the interpretation of exploration information and plans for future work on the property;

* a description of the geology, mineral occurrence and nature of mineralization found;

* mineral distribution, rock types, structural controls, the cutting criteria used to establish the sampling interval and the identification of any significantly higher-grade section within a lower-grade interval;

* details of the location, number, type, nature, spacing or density of samples collected and the area covered;

* details of the type of assaying or analytical procedure used, sample size and name and location of the assay or analytical laboratory used and its accreditation; and

* the true width of the individual assays, to the extent known.

All the disclosure in the world will not help investors if they do not know how to interpret technical information. It is important to realize that each mineral project is different, and what is relevant to one project may be of no significance to another. It is also important to realize that mining companies promote their projects by presenting them in the best possible light. As a consequence, investors must learn to interpret the technical information contained in news releases, such as drill results and reserve and resource calculations, in order to understand their economic significance.