Is your company listed on a US stock exchange? Is mining a material part of your business? If so, then the new U.S. Securities and Exchange Commission (SEC) property disclosure requirements will impact your business.
As the SEC modernizes its approach to align with international reporting standards, it has revised the previous requirements for disclosing Exploration Results, Mineral Resources and Mineral Reserves. These amendments, called S-K 1300, followed an in-depth consultation process with industry stakeholders initiated more than four years ago and come into effect January 1, 2021.
To prepare your business, keep reading for the who, what, why, when and how of S-K 1300!
Who does it impact?
Moving from the previous “Industry Guide 7” to the new “S-K 1300” is no small change. It will affect all registrants who have mining as a material part of their business. Materiality is defined in Act Rule 12b-2 as: A matter is material if there is a substantial likelihood that a reasonable investor would attach importance to it in determining whether to buy or sell the securities registered.
Whether you are involved in metal mining, non-metal mining, or aggregate extraction, S-K 1300 applies to all types of mining, regardless of the location of your properties.
What does it change?
At a high level, the updated S-K 1300 rules change the amount of information required to be disclosed, how it should be presented, how it should be prepared, and improves the definitions within these requirements.
The major differences are outlined in the table below.
| Item | Current Rules | SEC S-K 1300 Rules |
|---|---|---|
| Guidelines | Industry Guide 7 | Federal Register Vol. 83, No. 246, Pages 66344-66461 |
| Mineral Resources | NA – Not allowed to be included in filing | Allowed to be included in filing |
| Economic Analysis | Must be ‘Economic’, not well defined | Resources – Initial Assessment Reserves – Preliminary Feasibility Study or Feasibility Study |
| Qualified Person (QP) | Not well defined | Experience and qualification requirements detailed |
| Influence Polygons for Resources | Not well defined; commodity-specific standards are accepted | Requires the QP to justify resource confidence intervals based on geologic evidence and reasonable prospects of economic extraction |
| Technical Studies | Not clearly defined as being required to support disclosure of Mineral Resources and Mineral Resources | An Initial Assessment is required for disclosure of Mineral Resources while a Preliminary Feasibility or Feasibility Study is required to support disclosure of Mineral Reserves |
| Materiality | Not applicable | Defined for the Registrant with regards to its company as well as by mining property |
The filing requirements under S-K 1300 detail the required disclosures at the company level, as well as for each individual material property. This is where a lot of work at the outset will come in. For major mining companies who have numerous properties, an internal review will need to be conducted to identify those properties which constitute a ‘material’ part of the business.
It’s important to note that any property, regardless of it being individually material or not, needs to have a minimum of a Preliminary Feasibility Study completed by a QP in order to list Mineral Reserves in a S-K 1300 Summary Disclosure.
Under S-K 1300, the following disclosures are required:
| Company (Registrant) | |||
|---|---|---|---|
| All Mining Properties | Each Material Mining Property | ||
| Summary Disclosure¹ | Internal Controls Disclosure | Individual Property Disclosure¹ | Technical Report Summary (TRS)² |
| Lists details about all properties in the filing, including a summary of Mineral Reserves and Mineral Resources | Describes quality assurance/quality control (QA/QC) procedures upheld by the company to justify Mineral Reserves and Mineral Resources | Lists details about each material property in the filing, including Mineral Reserves and Mineral Resources | Lists details about each material property in the filling, including Mineral Reserves and Mineral Resources through 25 Report Sections |
Note:
¹ QPs are required to estimate Mineral Reserves and Mineral Resources
² QPs are required to estimate Mineral Reserves and Mineral Resources and author the TRS
Why the change?
The SEC is making this change to align with international reporting standards, creating a more robust and transparent framework, with the aim of protecting and informing investors.
The new SEC S-K 1300 regulations are in general compliance with the Committee for Mineral Reserves International Reporting Standards (CRIRSCO), which are the baseline for most international reporting standards. These include such standards as: the Canadian National Instrument 43-101 (NI 43-101), the Australian Joint Ore Reserves Committee (The JORC Code), and the South African Code for Reporting of Mineral Resources and Mineral Reserves (The SAMREC Code).
When does it take effect?
The changes come into effect for your business’ first fiscal year on or after January 1, 2021. Any mention of Mineral Resources or Mineral Reserves, whether in an official filing or a public statement, after January 1, 2021 must be compliant with S-K 1300 regulations.
The SEC finalized the adopted amendments on December 26, 2018. Industry Guide 7 will remain effective until January 1, 2021, at which time Industry Guide 7 will be rescinded.
How do I prepare?
Every company will have a slightly different approach to preparing for S-K 1300. You may choose to start by reviewing your company profile to determine which properties, from your current SEC filing, you will want to select for reporting, or updating, their Mineral Resource and Mineral Reserve estimates to S-K 1300. Do you want all your properties upgraded? You will likely need to conduct a gap analysis to identify deficiencies preventing you from completing technical studies required to support Mineral Resources and Mineral Reserves. Once a property has been upgraded to S-K 1300 requirements, the results of the analysis must be disclosed.
You will want to review your internal processes and consult your legal team regarding the best approach for your company and properties, including assessing your appetite for liabilities if using internal QPs vs. external QPs. Consideration needs to be given to the long-term implications of your selected approach, and the cost and time required.
Beyond developing your strategy to navigating the change, there is the paperwork. S-K 1300 requires significantly more information to be included in your annual SEC filing than Industry Guide 7 did, and you will want to allow the necessary time to assemble and review reports and conduct studies as necessary.
There is a lot to consider as you familiarize yourself with the SEC’s S-K 1300 property disclosure requirements. Golder’s mining engineers and geologists have extensive experience with similar international reporting standards and have been following the SEC changes closely since the 2016 comment period.
Whether you seek an initial gap analysis, a review of your internal approach, or completion of reports, our global team is available to support you with the new disclosure requirements under S-K 1300 and to help you meet the regulatory deadline.
