SETTING NEW STANDARDS — Twenty (plus) questions for the TSE/OSC Task Force

Interim report deemed on right track, despite some confusion about role of QP Early next year, the Mining Standards Task Force, established by the Toronto Stock Exchange (TSE) and the Ontario Securities Commission (OSC), will release its final report on the need to set new standards governing mineral exploration programs and the disclosure of results.

The interim report, Setting New Standards, released earlier this year, concluded that there are few regulatory standards for the conduct of field practices by exploration and mining companies, and too many methods of reporting the results of programs and estimates of reserves and resources. The task force examining these and other issues also concluded that the current funding for regulatory oversight and law enforcement is inadequate.

The task force drafted a series of recommendations which are intended to raise the bar on field practices and disclosure, but without stifling the innovation, creativity and competitiveness that have kept Canadian companies at the forefront of the global mining industry. The key recommendations fell into four main areas, which are outlined below.

• Formalizing the role of the Qualified Person (QP) in Canadian mining — The task force felt that the integrity of the system, both in field practices and in disclosure, would be enhanced by professional engineers and geoscientists who are regulated by professional bodies with disciplinary powers. Their proposals called for the QP to be responsible for ensuring that generally accepted industry practices are followed. He or she would also be required to sign off on all disclosure relating to exploration programs and mining operations. Under certain circumstances, the company would be required to submit a report provided by an independent QP.
• Establishing exploration and field best practices, or generally accepted industry standards, in the mining industry — A number of the recommendations relate to implementing quality control in exploration and field practices. The task force felt this would ensure integrity of results and reported information, and would reduce the opportunities for fraud. They also felt that requiring the QP to oversee exploration and best practices would make implementation of the standards more effective. The interim report did not prescribe specific methods for the industry to follow. Instead, it challenged the industry to take responsibility for self-regulation in these areas, thereby “raising the bar” in terms of generally accepted industry standards. However, in the interim, the task force recommended that “Exploration Best Practices Guidelines” be incorporated into the TSE rules until industry guidelines are developed. These guidelines were compiled by Micon International, technical consultant to the Mining Standards Task Force, and were included as an appendix to the interim report. Micon’s report was based on a review of existing requirements and procedures for technical reporting and a subsequent assessment of the need for revising and improving those requirements. Micon also advised the task force on other technical matters, such as the effect and potential cost implications of the proposed rules, and the benefits to be expected.
• In the area of disclosure, the task force recommended that higher standards be set for exploration and mining companies. — It was recommended that these standards should address disclosure of exploration results in detail, that a clear national standard be established for the reporting of estimates of resources and reserves, and that detailed guidelines be established for the content of news releases. The task force also recommended that legal issues such as land tenure be included in disclosure relating to properties and that international standards be established for reporting costs of production.
• The interim report advocates national uniformity in regulation and improved regulatory oversight. — Specifically, it is recommended that both securities commissions and stock exchange rules be uniform across Canada, except in the area of listing standards. The task force believes this would improve the clarity of Canadian rules for both domestic and international companies, as well as investors. It was recommended that this objective be reinforced through mechanisms such as a national technical advisory committee. In the area of compliance, the task force noted that police agencies and securities regulators require additional resources for their enforcement functions in order to ensure effective deterrence mechanisms are in place.

As might be expected, these and other recommendations generated plenty of response, in the form of written comments sent directly to the task force, as well as in media reports and public forums. To discuss the overall response to the report and what direction the task force is likely to take in its final report, The Northern Miner sat down with officials of the TSE and OSC, and several members of the task force.

The TSE was represented by John Carson, senior vice-president of market regulation; Maureen Jensen, director of mining services; and spokesman Steve Kee. The OSC was represented by Vice-Chair Morley Carscallen, while the task force was represented by members Seven Vaughan, partner, Aird & Berlis; Neil Hillhouse, chairman of Orvana Minerals; and Ed Kimura, consulting geologist. Also present was Ken Grace of Micon International, technical consultant to the Mining Standards Task Force.