There have been a few discussions on NI 43-101 regulations at different sites the past couple of weeks.
I’m not as well-known as the other commentators on this topic—I probably don’t smell as nice either. But I’ll throw in my two cents.
The NI 43-101 reports fill a vital role in shareholder communication. That being said, there are some problems in that way that they are handled. My comments below are directed more at early-stage technical reports, not resource estimates.
A lot of weight is placed on the QP, and I think that the system should have more trust in them. Geology is not a precise science, and there are times when the QP could make a statement which may not be completely supported by hard data, but which represents an interpretation based on past experience in similar (and possibly even genetically related) projects. These sorts of judgement calls are frowned on under the current rules, but I think they may convey valuable information to the market, provided they are properly qualified. The guiding principle should be whether this is a reasonable inference to make based on the sum of available data and the knowledge of the QP. Remember, we are not talking about resource definition—we are answering the question, “Is it reasonable for a company to raise money on the market to invest in this property?”
For example, I wrote a technical report on a property in which there was a considerable amount of artisanal gold mining activity. The local villagers had carved a sluice 500 m long into the side of a mountain; then tore off the top of the mountain and sent it down the sluice into the river, where more sluices had been set up to further process the fines. The mountain was a greenschist, with the more resistant layers acting as the riffles. The river had been reduced to a sad stream choked by immense piles of detritus. I could see the same process underway at all the surrounding mountains. All of this work was being done by hand, so I inferred that it would be reasonable to spend a little money further exploring the property. The report was rejected—and one of the comments was that the artisanal mining operations were irrelevant, and I was to remove all mention of them from the report.
Irrelevant? It is probably the single most reliable indicator of gold on a property, next to digging a hole and pulling out a nugget. I could see it being considered irrelevant were I presenting a resource estimate, as I could not provide an adequate estimate of the volume of rock removed, and had no production figures for the operations. But in terms of addressing the question, “Is it reasonable to raise money on the public market to investigate this property?”, I felt that the operations were relevant.
I should add that the artisanal operations were not the only line of evidence I had—there were numerous soil geochemistry and geophysical surveys over the property, adits, and about 30 boreholes, all suggesting it would be reasonable to explore the property—some of these reports dated back over 60 years. But the artisanal mining operations were deemed irrelevant. This is the type of judgement in which the QP should not be second-guessed by a lawyer who has never left his desk in Toronto.
On the same project, the company ran into a problem with their spending requirements. They had supplied a list of expenses that totaled well over $100k, but someone at the OSC disallowed several items, leaving a total of a little over $98k. The report was rejected on the basis that the company had failed to spend at least $100k on the property. My first thought was to object over the arbitrary nature of disallowing some expenses, but as I thought more about it, I began to question the validity of having a fixed number at all.
I understand that the reason for having some sort of limit is to prevent me from staking my backyard, sending a dozen samples to the local lab (say, $600 in analyses) and then floating a company. But I think the decision as to whether the company has spent enough money should be made by the QP.
If you were lucky enough to get a nice property in Mexico that had been mined continuously from the days of the conquistadors until 1998, when it closed down due to low gold prices—and you proposed to investigate the mountains of tailings from 400+ years of operations—I daresay you could successfully answer the question “Is it reasonable to raise public money to explore the feasibility of this idea?” in the affirmative while spending a good deal less than $100k. At the same time, you could spend well over $100k on a singularly remote property in the Yukon and know little more than fuck-all about it. So this is another case where the honest judgement of the QP should be respected, and not second-guessed by a desk-jockey in Toronto.
To which I would add this, and I have already made the comment that the regs are not intended to protect the retail investor--they are there to provide benefit to: institutional investors at the expense of the retail investor; major consulting firms at the expense of the individual practitioner; and large companies at the expense of the juniors.
Why are you here on Christmas Eve?
I’m not as well-known as the other commentators on this topic—I probably don’t smell as nice either. But I’ll throw in my two cents.
The NI 43-101 reports fill a vital role in shareholder communication. That being said, there are some problems in that way that they are handled. My comments below are directed more at early-stage technical reports, not resource estimates.
A lot of weight is placed on the QP, and I think that the system should have more trust in them. Geology is not a precise science, and there are times when the QP could make a statement which may not be completely supported by hard data, but which represents an interpretation based on past experience in similar (and possibly even genetically related) projects. These sorts of judgement calls are frowned on under the current rules, but I think they may convey valuable information to the market, provided they are properly qualified. The guiding principle should be whether this is a reasonable inference to make based on the sum of available data and the knowledge of the QP. Remember, we are not talking about resource definition—we are answering the question, “Is it reasonable for a company to raise money on the market to invest in this property?”
For example, I wrote a technical report on a property in which there was a considerable amount of artisanal gold mining activity. The local villagers had carved a sluice 500 m long into the side of a mountain; then tore off the top of the mountain and sent it down the sluice into the river, where more sluices had been set up to further process the fines. The mountain was a greenschist, with the more resistant layers acting as the riffles. The river had been reduced to a sad stream choked by immense piles of detritus. I could see the same process underway at all the surrounding mountains. All of this work was being done by hand, so I inferred that it would be reasonable to spend a little money further exploring the property. The report was rejected—and one of the comments was that the artisanal mining operations were irrelevant, and I was to remove all mention of them from the report.
Irrelevant? It is probably the single most reliable indicator of gold on a property, next to digging a hole and pulling out a nugget. I could see it being considered irrelevant were I presenting a resource estimate, as I could not provide an adequate estimate of the volume of rock removed, and had no production figures for the operations. But in terms of addressing the question, “Is it reasonable to raise money on the public market to investigate this property?”, I felt that the operations were relevant.
I should add that the artisanal operations were not the only line of evidence I had—there were numerous soil geochemistry and geophysical surveys over the property, adits, and about 30 boreholes, all suggesting it would be reasonable to explore the property—some of these reports dated back over 60 years. But the artisanal mining operations were deemed irrelevant. This is the type of judgement in which the QP should not be second-guessed by a lawyer who has never left his desk in Toronto.
On the same project, the company ran into a problem with their spending requirements. They had supplied a list of expenses that totaled well over $100k, but someone at the OSC disallowed several items, leaving a total of a little over $98k. The report was rejected on the basis that the company had failed to spend at least $100k on the property. My first thought was to object over the arbitrary nature of disallowing some expenses, but as I thought more about it, I began to question the validity of having a fixed number at all.
I understand that the reason for having some sort of limit is to prevent me from staking my backyard, sending a dozen samples to the local lab (say, $600 in analyses) and then floating a company. But I think the decision as to whether the company has spent enough money should be made by the QP.
If you were lucky enough to get a nice property in Mexico that had been mined continuously from the days of the conquistadors until 1998, when it closed down due to low gold prices—and you proposed to investigate the mountains of tailings from 400+ years of operations—I daresay you could successfully answer the question “Is it reasonable to raise public money to explore the feasibility of this idea?” in the affirmative while spending a good deal less than $100k. At the same time, you could spend well over $100k on a singularly remote property in the Yukon and know little more than fuck-all about it. So this is another case where the honest judgement of the QP should be respected, and not second-guessed by a desk-jockey in Toronto.
To which I would add this, and I have already made the comment that the regs are not intended to protect the retail investor--they are there to provide benefit to: institutional investors at the expense of the retail investor; major consulting firms at the expense of the individual practitioner; and large companies at the expense of the juniors.
Why are you here on Christmas Eve?
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