National Instruments NI 43-101 Technical Reports

National Instruments NI 43-101 Technical Reports

National Instrument (NI) 43-101 is a Canadian mineral resource classification system used to guide the disclosure of information related to mineral properties. Any company, foreign or domestic that lists on stock exchanges overseen by the Canadian Securities Administration (CSA) are required to abide by the NI 43-101 rules and guidelines for distributing information related to mineral properties.

The NI 43-101 requirements originated post Bre-X Minerals Ltd. in the 1990s. Bre-X artificially inflated their gold reserves by adulterating the samples. Since this time the CSA has mandated that NI 43-101 reports be produced by qualified persons (QP).

Although the Canadian system is the most popular, similar reporting guidelines exist in Australia (JORC) and the USA (Securities Act of 1933 and the Securities Exchange Act of 1934 – Regulation S-K replacing Industry Guide 7).

NI 43-101 Reports

The Canadian Institute of Mining, Metallurgy and Petroleum (CIM) has set the standards for the NI 43-101 qualified persons as laid out in their publication National Instrument 43-101 Standards Of Disclosure For Mineral Projects.

These reports can take many forms and the 43-101 guidelines apply to any report that will be issued publicly or referred to publicly such as in a press release. Typical reports are:

a) Mineral Resource Estimate
b) Property of Merit
c) Scoping Studies
d) Preliminary Economic Assessment
e) Prefeasibility Study
f) Feasibility Study

The 43-101 requirements don’t apply to just formal reports but also to any discussion of a mineral property including drill results, summaries of reports, or any other pertinent data on a mineral property.

The goal is to ensure proper disclosure:

  • Requires that public reporting of technical information is:
    o Signed off by a professional (QP) who takes responsibly for the information
    o Clear, balanced, and not misleading – transparency is key!
    o Understandable to a reasonably informed investor
    o Consistent in its use of standardized terms and definitions
    o Based on reasonable assumptions which are clearly explained
    o Unbiased and identifies the potential risks and uncertainties

NI 43-101 reports are not:

  • It is not a guarantee of quality work
    o It places an obligation on the issuer to have work done by a qualified person (QP)
    o The QP is supposed to have the skills to make proper assessments
  • It’s not a guide for mineral estimation
    o 43-101 sets disclosure standards, not estimation practices
    o Enough disclosure must be provided so others can review and judge the QP’s work
  • Filed does not mean vetted by the regulatory agency
    o A filed report may not be compliant
    o It’s the issuer’s responsibility to comply with rules

Remember, written disclosure means any information that is open to the public including blogs, corporate websites, news releases, corporate fact sheets, MD&A, etc..

The main impetus of these guidelines is to provide for the proper classification for mineral resources/reserves.

There are two primary concepts that are important to understand within NI 43-101 reports;

  • mineral resources, and;
  • mineral reserves.

Each of these terms is divided into subcategories based on the quality and amount of work done to verify the amount of minerals available and the economic viability of extracting them.

A mineral resource is defined as:

“a concentration or occurrence of minerals in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction.”

There are three different types of mineral resource classifications:

  • Inferred Mineral Resource – The part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity.
  • Indicated Mineral Resource – The part of a mineral resource for which quantity, grade, quality, etc., can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of economic viability.
  • Measured Mineral Resource – The part of a mineral resource for which quantity, grade or quality, etc., are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical parameters to support production planning and evaluation of economic viability.

A mineral reserve is defined as:

“the economically mineable part of a measured or indicated mineral resource demonstrated by at least a preliminary feasibility study.

There are two different types of mineral reserve classifications:

  • Probable Mineral Reserve – The economically mineable part of an indicated and, in some cases, a measured mineral resource demonstrated by at least a preliminary feasibility study.
  • Proven Mineral Reserve – The economically mineable part of a measured mineral resource demonstrated by at least a preliminary feasibility study.

The figure below shows the relationship between the different categories

Contents of a 43-101 Report

NI 43-101 reports are filed by companies as part of their security listing requirements and are often available on the company website or through other online securities sources such as SEDAR. A complete 43-101 report will have 27 sections. Highlights of the key section are shown below:

  • Executive Summary – A summary of the entire report from a high level, including an overview of each section without as much analytical detail.
  • Introduction – The purpose, source of information, qualified persons, terms of reference, units of measure and other related information.
  • Property Description – The location, legal agreements, environmental liability and operational permits for the mineral property.
  • Exploration & Drilling – Data from rock samples, surface geochemistry, geophysical surveys, and other reports, as well as drilling procedures and results.
  • Sample Preparation & Analysis – Review of drilling campaigns, sample chains of custody, preparation and assay procedures, and the actual sampling study results.
  • Mineral Resource & Reserve Estimates – Grade estimates, resource optimization, mineral resource classifications, and other data.
  • Mineral Processing and Metallurgical Testing – An outline of the test work completed and a summary of the results and expected mineral recovery rates.
  • Mining Methods – A summary of the mining methods to be employed, the mining schedule and production rates of the various minerals.
  • Recovery Methods – A description of the process flowsheet and the processing capacity.
  • Capital and Operating Costs – Provide the development methodology for the project capital and operating costs as well as the schedule of expenditure.
  • Market Studies & Economic Analysis – Data that supports the economic feasibility of the development and production of mining, including any relevant models.
  • Conclusions & Recommendations – Overview of the data and conclusions that can be made from it, along with a recommendation of how to proceed.

Sources of NI-43-101 Technical Reports

43-101 reports may be produced by any qualified person(s) (QP). Typically, these reports are produced by independent companies without affiliation with the mineral property. One or more QPs may be involved in a report along with one more consulting companies.

  1. Independent Consultants
    a. Geologists
    b. Environmental Scientist
    c. Process Engineers
  2. Specialized Consulting Companies
    a. 911Metallurgy Corp
    b. Tetra Tech
    c. SRK
  3. Engineering Companies
    a. Global Resource Engineering
    b. Samuel Engineering
    c. Ausenco
    d. Bechtel
    e. SNC-Lavalin
    f. Jacobs

National Instruments NI 43-101 Qualified Person

National Instrument (NI) 43-101 is a Canadian mineral resource classification system used to guide the disclosure of information related to mineral properties. Any company, foreign or domestic that lists on stock exchanges overseen by the Canadian Securities Administration (CSA) are required to abide by the NI 43-101 rules and guidelines for distributing information related to mineral properties.

The NI 43-101 requirements originated post Bre-X Minerals Ltd. in the 1990s. Bre-X was a junior mining company listed in Canada with a gold property in Indonesia. The Busang property was a geological prospect that Bre-X began to explore. Bre-X announced unprecedented gold discoveries (a resource of 71 million ounces was ultimately declared) transforming their company into a $6 billion market capitalization.

http://www.goldchartsrus.com/chartstemp/BubbleComparisonBRE-X.php

It all came to a terrible ending with the “accidental” death of their geologist Michael de Guzman and the discovery that the drill samples had been salted (external gold was added to the samples to inflate the assays). Independent due diligence by potential takeover companies ultimately revealed the fraud.  Since this time the CSA has mandated that NI 43-101 reports be produced by qualified persons (QP).

Qualified Persons

The Canadian Institute of Mining, Metallurgy and Petroleum (CIM) has set the standards for the NI 43-101 qualified persons as laid out in their publication National Instrument 43-101 Standards Of Disclosure For Mineral Projects.

Qualified Persons are typically sourced from many disciplines depending on the type of NI 43-101 report being issued:

a) Geologist – most common discipline as most NI 43-101 reports relate to mineral resource and reserve estimates
b) Mining Engineer – required whenever a mine design is being presented
c) Metallurgical Engineer – required when mineral recoveries are being put forward or flowsheets are being presented
d) Environmental Engineer or Scientist – often part of the team when complete mine studies are being developed.
e) Geotechnical Engineer or Scientist – required when rock mechanics or tailings facilities are proposed
f) Other disciplines may be required for discussion of mineral markets, mining claim validations, social and political discussions, country risks etc.

“Qualified Person” means an individual who

(a) is an engineer or geoscientist with a university degree, or equivalent accreditation, in an area of geoscience, or engineering, relating to mineral exploration or mining;
(b) has at least five years of experience in mineral exploration, mine development or operation, or mineral project assessment, or any combination of these, that is relevant to his or her professional degree or area of practice;
(c) has experience relevant to the subject matter of the mineral project and the technical report;
(d) is in good standing with a professional association; and
(e) in the case of a professional association in a foreign jurisdiction, has a membership designation that

(i) requires attainment of a position of responsibility in their profession that requires the exercise of independent judgment; and
(ii) requires

A. a favorable confidential peer evaluation of the individual’s character, professional judgement, experience, and ethical fitness; or
B. a recommendation for membership by at least two peers, and demonstrated prominence or expertise in the field of mineral exploration or mining;

All technical reports issued by publicly traded mining/exploration companies overseen by the CSA must be NI 43-101 compliant and as such the report must be supervised by one or more qualified persons. Each QP is responsible to list the sections of the report that they drafted or supervised and to provide a certificate/consent signing off on their certification.

Certificates of Qualified Persons

  1. An issuer must, when filing a technical report, file a certificate that is dated, signed, and if the signatory has a seal, sealed, of each qualified person responsible for preparing or supervising the preparation of all or part of the technical report.
  2. A certificate under subsection (1) must state
    (a) the name, address, and occupation of the qualified person;
    (b) the title and effective date of the technical report to which the certificate applies;
    (c) the qualified person’s qualifications, including a brief summary of relevant experience, the name of all professional associations to which the qualified person belongs, and that the qualified person is a “qualified person” for purposes of this Instrument;
    (d) the date and duration of the qualified person’s most recent personal inspection of each property, if applicable;
    (e) the item or items of the technical report for which the qualified person is responsible;
    (f) whether the qualified person is independent of the issuer as described in section 1.5;
    (g) what prior involvement, if any, the qualified person has had with the property that is the subject of the technical report;
    (h) that the qualified person has read this Instrument and the technical report, or part that the qualified person is responsible for, has been prepared in compliance with this Instrument; and
    (i) that, at the effective date of the technical report, to the best of the qualified person’s knowledge, information, and belief, the technical report, or part that the qualified person is responsible for, contains all scientific and technical information that is required to be disclosed to make the technical report not misleading.

Consents of Qualified Persons

  1. An issuer must, when filing a technical report, file a statement of each qualified person responsible for preparing or supervising the preparation of all or part of the technical report, dated, and signed by the qualified person
    (a) consenting to the public filing of the technical report;
    (b) identifying the document that the technical report supports;
    (c) consenting to the use of extracts from, or a summary of, the technical report in the document; and
    (d) confirming that the qualified person has read the document and that it fairly and accurately represents the information in the technical report or part that the qualified person is responsible for.
  2. Paragraphs (1)(b), (c) and (d) do not apply to a consent filed with a technical report filed under section 4.1.
  3. If an issuer relies on subsection (2), the issuer must file an updated consent that includes paragraphs (1)(b), (c) and (d) for the first subsequent use of the technical report to support disclosure in a document filed under subsection 4.2(1).

Sources of Qualified Persons

Qualified Persons may be found in a variety of establishments including:

  1. Independent Consultants
    a. Online directories such as Infomine
    b. Mining Magazines
    c. Word of mouth recommendations
  2. Specialized Consulting Companies
    a. 911Metallurgy Corp
    b. Golder
    c. Burgex Mining Consultants
    d. KPMG
  3. Engineering Companies
    a. Global Resource Engineering
    b. Samuel Engineering
    c. Ausenco
    d. Bechtel
    e. SNC-Lavalin
    f. Jacobs