Some of the most difficult recurring issues arise in connection with the requirement that all disclosure of mineral grades and quantities be reported only within the prescribed categories of mineral resources and mineral reserves. Although there is a high degree of compliance among mining issuers, a number of terms outside of the prescribed categories have been noted frequently by staff of the Ontario Securities Commission. Use of such terms in a mining company's disclosure will likely lead to regulatory comment, as most of them are prohibited. Prohibited terms of this type include: "mineable resources"; "mineral inventory"; "global resources"; "geological resources"; and "geological potential." No adjectives other than "measured;" "indicated" or "inferred" should be used together with "resources" and no adjectives other than "proven" or "probable" should be used with "reserves." Another term that can be problematic under NI 43-101, but is nonetheless commonly used on its own, is "contained ounces." Its use will be accepted in some circumstances, but only where stated in tonnes and grade in each prescribed category.

"Ore" is another widely used term that should be used with caution. In its general sense, ore means mineralization in which the metal content is of sufficient economic value to justify extraction. This notion is largely inconsistent with the prescribed categories of mineral resources and mineral reserves, and while certain jurisdictions do recognize the term "ore" within their resource categories, it is not recognized under NI 43-101. For the most part, the term "ore" should not be used to describe a mineral deposit or an exploration target. Similarly, "ore" should not be used in conjunction with the categories of mineral resources or mineral reserves. However, the term "ore" is not fully prohibited under N1 43-101 its use will be acceptable in the context of describing active mining operations and also, for example, in connection with more technical references to parts of active mines, since material is being extracted in such operations precisely because it is believed to be of economic value.

One of the most frequently encountered problems identified by OSC staff in mining company disclosure, concerns the use of the information relating to each category. NI 43-101 requires that an issuer report each category of mineral resources and mineral reserves separately, and if both mineral resources and mineral reserves are disclosed, the issuer must state the extent, if any, to which mineral reserves are included in total mineral resources. The rule further includes the key requirement that "inferred mineral resources" must not be added to any other categories of resources, regardless of whether they are presented separately elsewhere in the disclosure. This latter point, which is still often missed by issuers, has been the subject of increasing regulatory attention.

Certain other terms, although not explicitly prohibited by NI 43-101, are nonetheless likely to attract regulatory comment. Although sometimes permissible under the rules of the Toronto Stock Exchange and the TSX Venture Exchange, disclosure using the terms and concepts "gross metal values," "metal equivalent" and "in situ values" will attract the attention of the staff of the OSC and other Canadian securities regulators. Because the concepts themselves are ambiguous and therefore can contribute to misrepresentative mineral disclosure, the use of these terms will often be challenged.

Other issues relating to the disclosure of mineral reserves and mineral resources:

• Mineral resources and mineral reserves should be presented together with enough information that a "reasonably informed person" will be able to understand the assumptions, parameters and methods that led to the definition of the mineral resources and mineral reserves.

• Mineral resources and mineral reserves should be calculated on the basis of a reasonable cut-off grade and should be presented together with enough background that a reasonable person would understand how the economic evaluation was made. Cut-off grade is a key issue for disclosure of mineral resources and mineral reserves: zero cut-off will not be accepted and very low cut-off grades will also likely be challenged.

• In determining the metal prices to be used in calculations of mineral resources and mineral reserves, issuers should be aware that the first company or companies to lead with a higher assumed metal price for any given metal will likely be called upon by the reviewing regulator to justify the assumption. The best guide for mining issuers will be current industry disclosure.

• An effective date of each estimate must be included.

• Any factors (such as environmental, permitting, title, taxation) that may materially affect the mineral resources and mineral reserves disclosed must also be discussed.

Exploration Targets

All disclosure of the potential quantity and grade of a possible mineral deposit that is not described within one of the categories of mineral resources or mineral reserves must be treated as an exploration target, as provided under section 2.3(2) of NI 43-101. All exploration target disclosure is required to follow the guidelines set out in section 2.3(2). This includes the following requirements:

• the potential quantity and grade must be expressed as a range of quantity and grade;

• the mineral deposit must be described as "a possible mineral deposit that is to be the target of further exploration";

• the basis on which the disclosed potential grade and quantity have been determined must be discussed; and

• the prescribed proximate statement: "the potential quantity and grade is conceptual in nature, there has been insufficient exploration to define a mineral resource on the property and it is uncertain if further exploration will result in the discovery of a mineral resource on the property" must be included.

This "proximate" statement disclosure is required for each exploration target, which means that it may be necessary to include the same statement more than once in a disclosure document. Each such statement must be presented in close conjunction with the ranges of potential grades and quantities being disclosed.

Disclosure of Exploration Targets

Exploration target disclosure should not be as specific as mineral resource disclosure. OSC staff has indicated that if the information presented by an issuer in respect of an exploration target appears similar to a mineral resource (identifying specific grade and quantity) and is not expressed more generally and in ranges, the issuer will be contacted. Even in circumstances where the exploration target disclosure is based upon historical estimates, it should be expressed in ranges.

Although the comparison by an issuer of one of its mineral projects to an analogous deposit or occurrence can constitute excellent disclosure, particularly for understanding geological modelling, deposit trends and mineralization assemblages, caution should be taken to compare it to a similar-sized deposit and to qualify the comparison. For example, if an issuer compares its own deposit to the biggest and best known of that type of deposit, readers may be left with an imbalanced view of the issuer's own property.

Disclosure of Exploration Results

The general requirement that the disclosure of exploration results should be balanced so as not to be misrepresentative gives rise to a number of considerations. In practical terms, ensuring balanced disclosure means that mining issuers should not report only in terms of best results or highlights of exploration activities, and, similarly, exploration results should not be presented only in descriptions of "values up to" a specified grade (for example, the most favourable one encountered during the exploration program).

Section 3.3 of NI 43-101, which sets out requirements applicable to written disclosure of exploration information, is quite comprehensive and provides detailed guidance in respect of exploration results. Key requirements in section 3.3 include the following:

• Exploration results should be accompanied by a summary of the geology and mineralogy of the deposit being explored.

• Exploration results should be presented together with a summary interpretation of the results.

• Where an issuer is reporting exploration results relating to mineral deposits with veining or vein-like geological structures, it should provide vein widths to the extent known, so that results presented are not simply down-vein results (which will be misrepresentative).

Several of the items under section 3.3 are only required to the extent that the issuer has not already made such disclosure in other public disclosure documents.

Issuers engaged in diamond exploration activities should note that although subsection 1.5(c) of Companion Policy 43-101CP provides that technical reports should conform to Guidelines for Reporting of Diamond Exploration Results, Identified Mineral Resources and Ore Reserves, published by the Association of Professional Engineers, Geologists and Geophysicists of the Northwest Territories, this requirement has been superseded pending the updating of these guidelines. Issuers estimating and reporting diamond mineral resources should follow the guidelines recommended by the Diamond Exploration Best Practices Committee established by the Canadian Institute of Mining, Metallurgy and Petroleum (CLICK TO VIEW).

Historical Estimates

As metal prices have risen, a number of historical mineral projects that have previously not been economically interesting have become subject to renewed exploration and development activities. Many of these projects have generally not been described in technical reports in Form 43-101F1 and disclosure in respect of mineralization at these projects has often not been made within the NI 43-101 mineral resource and mineral reserve categories.

Such historical estimates may be disclosed in accordance with the requirements under NI 43-101 section 2.4 if the estimate in question was prepared prior to NI 43-101 coming into force and is either (a) an estimate of mineral resources or mineral reserves by or on behalf of a person or company other than the issuer or (b) an estimate that accompanies disclosure of an estimate of mineral resources or mineral reserves prepared in accordance with the definitions and requirements of NI 43-101. Section 2.4 requires that disclosure of historical estimates include the source of the estimate, confirmation of its relevance, comment on its reliability, an assessment of the categories used and comments as to differences from the prescribed categories and more recent estimates and data available to the issuer. Key among these requirements is the confirmation of the estimate's relevance. For instance, an historical resource estimate relating to veining and mineralization that may have been relevant when originally calculated would not pass the relevance test if that mineralization is now, as an example, so far under the water table that the cost of recovery would be prohibitive. Similarly, an historical estimate relating to a deposit of material that could only be extracted economically (or at all) through the use of certain mining or treatment methods would not be relevant if the deposit is located in a jurisdiction in which those methods are prohibited by environmental protection legislation.

Disclosure Requirements: Other Sources

In addition to NI 43-101, Form 43-101F1 and Companion Policy 43-101CP, there are additional key sources of regulation and resources for guidance in preparing mineral disclosure. As mentioned above, Canadian Securities Administrators' Notice 43-302, Frequently Asked Questions - National Instrument 43-101 (first published October 19, 2001, revised February 8, 2002 and January 24, 2003) provides guidance on a range of NI 43-101 issues (CLICK TO VIEW). Additional requirements for issuers listed on the Toronto Stock Exchange are provided in The Toronto Stock Exchange Company Manual in Appendix B - Disclosure Standards for Companies Engaged in Mineral Exploration, Development & Production and, for issuers listed on the TSX Venture Exchange, Appendix 3 D - Non-Fire Assay Results, Appendix 3E - News Release Guidelines and Appendix 3F - Mining Standards Guidelines.I

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