On February 6, 2014, the Ontario Securities Commission (OSC) issued Staff Notice 51-722, Report on a Review of Mining Issuers' Management’s Discussion and Analysis and Guidance (the Report). The Report was issued to provide guidance around a review conducted by the OSC of the annual and interim Management’s Discussion and Analysis (MD&A) filed by 100 Ontario mining issuers, each with market capitalization under $100 million. The review was primarily focused on compliance with various aspects of the MD&A requirements in National Instrument 51-102, Continuous Disclosure Obligations, including:
- venture issuer disclosure;
- discussion of operations;
- liquidity and capital resources disclosure;
- disclosure of transactions between related parties;
- disclosure of risk factors and uncertainties; and
- reporting on use of financing proceeds.
In the Report, the OSC recognized that the current market environment is making it difficult for mining issuers to raise capital, with smaller mining issuers being particularly affected. The OSC also acknowledged that such an environment can make complying with reporting requirements quite challenging for smaller issuers because of their relative lack of resources. As such, the Report is intended to assist smaller mining issuers to better understand certain MD&A reporting requirements and assist the management of these companies in complying with their disclosure obligations.
While the guidance provided in the Report is specific to the mining issuers reviewed, the content of the Report, including the specific disclosure examples, will benefit all issuers.
The Report identified the following specific areas for improvement in MD&A disclosure:
- venture issuers without significant revenue from operations did not provide a breakdown of material components of exploration and evaluation assets or expenditures;
- issuers with exploration projects did not adequately discuss and itemize their exploration expenditures;
- issuers with a working capital deficiency provided very general discussion or no discussion about potential sources of financing and how they plan on continuing operations; and
- issuers did not appropriately disclose the identity of the parties involved in related party transactions.
The Report specifically noted that the MD&A reviewed often contained "boilerplate disclosure" that lacked the specificity required by securities regulations. The Report includes several examples of what the OSC views as boilerplate disclosure and provides helpful guidance as to how such examples can be revised to include the disclosure required.
A copy of the Report is available on the OSC’s website at the following link: Staff Notice 51-722 - Report on a Review of Mining Issuers' Management’s Discussion and Analysis and Guidance.
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