[Federal Register Volume 81, Number 123 (Monday, June 27, 2016)]
[Proposed Rules]
[Pages 41652-41734]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14632]



[[Page 41651]]

Vol. 81

Monday,

No. 123

June 27, 2016

Part II





Securities and Exchange Commission





-----------------------------------------------------------------------





17 CFR Parts 229, 239 and 249





Modernization of Property Disclosures for Mining Registrants; Proposed 
Rules

  Federal Register / Vol. 81 , No. 123 / Monday, June 27, 2016 / 
Proposed Rules  

[[Page 41652]]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 229, 239, and 249

[Release Nos. 33-10098; 34-78086; File No. S7-10-16]
RIN 3235-AL81


Modernization of Property Disclosures for Mining Registrants

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: We are proposing revisions to the property disclosure 
requirements for mining registrants, and related guidance, currently 
set forth in Item 102 of Regulation S-K under the Securities Act of 
1933 and the Securities Exchange Act of 1934 and in Industry Guide 7. 
The proposed revisions are intended to provide investors with a more 
comprehensive understanding of a registrant's mining properties, which 
should help them make more informed investment decisions. The proposed 
revisions would also modernize the Commission's disclosure requirements 
and policies for mining properties by aligning them with current 
industry and global regulatory practices and standards. In addition, we 
are proposing to rescind Industry Guide 7 and include the Commission's 
mining property disclosure requirements in a new subpart of Regulation 
S-K.

DATES: Comments should be received on or before August 26, 2016.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed.shtml); or
     Send an Email to [email protected]. Please include 
File Number S7-10-16 on the subject line; or
     Use the Federal eRulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

     Send paper comments to Brent J. Fields, Secretary, 
Securities and Exchange Commission, 100 F Street NE., Washington, DC 
20549-1090.

All submissions should refer to File Number S7-10-16. This file number 
should be included on the subject line if email is used. To help us 
process and review your comments more efficiently, please use only one 
method. The Commission will post all comments on the Commission's Web 
site (http://www.sec.gov/rules/proposed.shtml). Comments are also 
available for Web site viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE., Washington, DC 20549, on official 
business days between the hours of 10 a.m. and 3 p.m. All comments 
received will be posted without change; we do not edit personal 
identifying information from submissions. You should submit only 
information that you wish to make available publicly.
    Studies, memoranda or other substantive items may be added by the 
Commission or staff to the comment file during this rulemaking. A 
notification of the inclusion in the comment file of any such materials 
will be made available on the SEC's Web site. To ensure direct 
electronic receipt of such notifications, sign up through the ``Stay 
Connected'' option at www.sec.gov to receive notifications by email.

FOR FURTHER INFORMATION CONTACT: Elliot Staffin, Special Counsel, in 
the Division of Corporation Finance, at (202) 551-3450, or Dr. Kwame 
Awuah-Offei, Academic Mining Engineering Fellow, in the Division of 
Corporation Finance, at (202) 551-3790, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549.

SUPPLEMENTARY INFORMATION: We are proposing to rescind Industry Guide 7 
\1\ under the Securities Act \2\ and the Exchange Act,\3\ amend section 
102 of Regulation S-K,\4\ add new exhibit (96) to Item 601 of 
Regulation S-K,\5\ add new subpart 1300 of Regulation S-K,\6\ amend 
Form 1-A,\7\ and amend Form 20-F.\8\
---------------------------------------------------------------------------

    \1\ 17 CFR 229.801(g) and 229.802(g).
    \2\ 15 U.S.C. 77a et seq.
    \3\ 15 U.S.C. 78a et seq.
    \4\ 17 CFR 229.102.
    \5\ Proposed 17 CFR 229.601(b)(96).
    \6\ Proposed 17 CFR 229.1301 et seq.
    \7\ 17 CFR 239.90.
    \8\ 17 CFR 249.220f.
---------------------------------------------------------------------------

Table of Contents

I. Introduction
II. Proposed Mining Disclosure Rules
    A. Consolidation of the Mining Disclosure Requirements
    B. The Standard for Mining-Related Disclosure
    1. Overview
    2. Definitions of Exploration, Development and Production Stage
    C. Qualified Person and Responsibility for Disclosure
    1. The ``Qualified Person'' Requirement
    2. The Definition of ``Qualified Person''
    D. Treatment of Exploration Results
    E. Treatment of Mineral Resources
    1. Mineral Resource Definition
    2. Mineral Resource Classification
    3. The Initial Assessment Requirement
    4. USGS Circular 831 and 891
    F. Treatment of Mineral Reserves
    1. The Framework for Determining Mineral Reserves
    2. The Type of Study Required To Support a Reserve Determination
    G. Specific Disclosure Requirements
    1. Requirements for Summary Disclosure
    2. Requirements for Individual Property Disclosure
    3. Requirements for Technical Report Summaries
    4. Requirements for Internal Controls Disclosure
    H. Conforming Changes to Certain Forms Not Subject to Regulation 
S-K
    1. Form 20-F
    2. Form 1-A
III. General Request for Comments
IV. Economic Analysis
    A. Baseline
    1. Affected Parties
    2. Current Regulatory Framework and Market Practices
    B. Analysis of Potential Economic Effects
    1. Consolidation and Harmonization of the Mining Disclosure 
Requirements
    2. Qualified Person and Technical Report Summary Requirements
    3. Treatment of Exploration Results
    4. Treatment of Mineral Resources
    5. Treatment of Mineral Reserves
    6. The Pricing Model for Determination of Mineral Resources and 
Reserves
    7. Specific Disclosure Requirements
    8. Conforming Changes to Certain Forms Not Subject to Regulation 
S-K
    9. Compliance Costs of Preparing and Filing Forms
    C. Anticipated Impact on Efficiency, Competition, and Capital 
Formation
    D. Request for Comment
V. Paperwork Reduction Act
    A. Background
    B. Summary of Collection of Information Requirements
    C. Estimate of Potentially Affected Registrants
    D. Estimate of Reporting and Cost Burdens
    E. Request for Comments
VI. Initial Regulatory Flexibility Act Analysis
    A. Reasons For, and Objectives of, the Proposed Action
    B. Legal Basis
    C. Small Entities Subject to the Proposed Rule Amendments
    D. Reporting, Recordkeeping, and Other Compliance Requirements
    E. Duplicative, Overlapping or Conflicting Federal Rules
    F. Significant Alternatives
    G. Request for Comment
VII. Small Business Regulatory Enforcement Fairness Act
VIII. Statutory Authority

I. Introduction

    The Commission's disclosure requirements and related guidance for 
properties owned or operated by mining companies are contained in Item 
102 of Regulation S-K and Industry Guide 7. Item 102 sets forth the 
basic disclosure requirements for a registrant's ``principal'' mines 
that are ``materially

[[Page 41653]]

important.'' \9\ Instruction 3 to Item 102 requires disclosure of 
``material information'' concerning the ``production, reserves, 
locations, development, and the nature of the registrant's interest,'' 
including additional disclosure requirements for individual properties 
that ``are of major significance to an industry segment.'' Instruction 
7 to Item 102 states that ``the attention of issuers engaged in 
significant mining operations is directed to the information called for 
in Guide 7,'' which identifies disclosures beyond what is required by 
Item 102.
---------------------------------------------------------------------------

    \9\ Instruction 2 to Item 102 refers registrants to Instruction 
1 to Item 101 of Regulation S-K for the quantitative and qualitative 
factors they should take into account in determining whether 
properties should be described under Item 102.
---------------------------------------------------------------------------

    Guide 7 sets forth the views of the staff of the Division of 
Corporation Finance on how mining company registrants can comply with 
the Commission's description of property disclosure requirements 
applicable to registrants.\10\ The centerpiece of Guide 7 is its 
disclosure guidance for mineral reserves, which are defined as ``that 
part of a mineral deposit that can be economically and legally 
extracted or produced at the time of the reserve determination.'' \11\ 
Guide 7 further classifies mineral reserves into ``proven'' and 
``probable,'' with proven mineral reserves having a higher degree of 
assurance than probable mineral reserves. The Guide does not define the 
term ``mineral.''
---------------------------------------------------------------------------

    \10\ When it published the first Industry Guides in 1968, the 
Commission stated that, ``[t]hese guides are not rules of the 
Commission nor are they published as bearing the Commission's 
official approval. They represent policies and practices followed by 
the Commission's Division of Corporation Finance in the 
administration of the registration requirements of the Act, but do 
not purport to furnish complete criteria for the preparation of 
registration statements.'' Release No. 33-4936 (December 9, 1968) 
[33 FR 18617] (December 17, 1968).
    \11\ See paragraph (a)(1) of Guide 7.
---------------------------------------------------------------------------

    Under both Item 102 and the Guide, a registrant may not disclose 
estimates for non-reserve deposits, such as mineral resources,\12\ 
unless such information is required to be disclosed ``by foreign or 
state law'' or unless ``such estimates previously have been provided to 
a person (or any of its affiliates) that is offering to acquire, merge, 
or consolidate with the registrant, or otherwise to acquire the 
registrant's securities.'' \13\ While there are numerous foreign mining 
disclosure codes, only Canada \14\ has adopted its code as a matter of 
law.\15\
---------------------------------------------------------------------------

    \12\ Resources are generally defined in international mining 
codes, and generally understood in the industry, as mineral deposits 
having prospects for economic extraction that are less certain than 
those for reserves because economic viability has yet to be 
demonstrated. See, e.g, SME Guide for Reporting Exploration Results, 
Mineral Resources and Mineral Reserves (``SME Guide'') pt. 33 
(2014), which is available at: http://www.smenet.org/docs/publications/2014_SME_Guide_Reporting_%20June_10_2014.pdf. See also 
section II.E, infra.
    \13\ See Instruction 5 to Item 102 of Regulation S-K. 
Instruction 3 to paragraph (b)(5) of Guide 7 also includes the same 
provision limiting disclosure of estimates for deposits other than 
mineral reserves, as does Instruction 1 to Item 4.D of Form 20-F.
    \14\ See Canada's National Instrument (``NI'') 43-101 
(``Standards of Disclosure for Mineral Projects'') (2012), which is 
available at: http://web.cim.org/standards/documents/Block484_Doc111.pdf. Other foreign mining codes have been adopted as 
listing standards for foreign securities exchanges or as guidelines 
by foreign securities commissions. The staff in the Commission's 
Division of Corporation Finance has taken the view that these other 
codes are not covered by Item 102's ``foreign or state law'' 
exception. Therefore, in the staff's view, only the Canadian mining 
disclosure requirements serve as a basis for disclosure of mineral 
resource estimates in SEC filings, and only with respect to Canadian 
registrants.
    \15\ We are not aware of any state mining disclosure laws that 
are applicable and have not observed a company providing mineral 
resource disclosure based on state law.
---------------------------------------------------------------------------

    Guide 7 has not been updated for more than 30 years.\16\ During 
this period, mining has become an increasingly globalized industry and 
several foreign countries have adopted mining disclosure standards 
based on the Committee for Mineral Reserves International Reporting 
Standards (CRIRSCO) \17\ that significantly differ from the Guide. For 
example, the CRIRSCO standards \18\ require companies to disclose 
material mineral resources; require that any public report about a 
company's exploration results,\19\ mineral resources and mineral 
reserves be prepared by a ``Competent or Qualified Person;'' \20\ and 
permit disclosure of mineral reserves to be based on a preliminary 
feasibility (``pre-feasibility'') study or a final feasibility 
study.\21\
---------------------------------------------------------------------------

    \16\ The disclosure requirements for companies engaged in mining 
activities were last updated in 1982 when the Commission amended 
Form S-18 to add certain disclosure requirements applicable to 
mining companies. See Release No. 33-6406 (June 4, 1982) [47 FR 
25126] (June 10, 1982). The Commission later transferred its mining 
disclosure requirements from Form S-18 to Guide 7. See Release No. 
33-6949 (July 30, 1992) [57 FR 36442] (August 13, 1992).
    \17\ CRIRSCO is an international initiative to standardize 
definitions for mineral resources, mineral reserves, and related 
terms for public disclosure. CRIRSCO has representatives from 
professional societies involved in developing mineral reporting 
guidelines in Australasia (Australasian Code for Reporting of 
Exploration Results, Mineral Resources and Ore Reserves (JORC)), 
Canada (Canadian Institute of Mining Metallurgy and Petroleum 
(CIM)), Chile (Minera Comision), Europe (Pan-European Reserves and 
Resources Reporting Committee (PERC)), Mongolia (Mongolian 
Professional Institute of Geosciences and Mining (MPIGM)), Russia 
(National Association for Subsoil Examination (NAEN)), South Africa 
(South African Code for Reporting of Exploration Results, Mineral 
Resources and Mineral Reserves (SAMREC)), and the USA (Society for 
Mining, Metallurgy and Exploration, Inc. (SME)). CRIRSCO's Web site 
is located at: http://www.crirsco.com.
    \18\ The CRIRSCO-based codes, which are best practices of 
professional associations, have been incorporated into the listing 
rules of various foreign stock exchanges. All the codes (together 
with the listing rules that make them binding) require disclosure of 
exploration results, mineral resources, mineral reserves, and other 
information about mining properties as long as they are deemed 
material.
    \19\ Exploration results are defined as data and information 
generated by mineral exploration programs that might be of use to 
investors but which do not form part of a disclosure of mineral 
resources or mineral reserves. See, e.g., CRIRSCO's International 
Reporting Template pt. 18 (2013), which is available at: http://www.crirsco.com/templates/international_reporting_template_november_2013.pdf.
    \20\ In addition, the CRIRSCO-based codes require that the 
qualified person must consider and apply certain factors 
(``modifying factors'') in his/her evaluation of the economic 
prospects and economic viability of the minerals. See the discussion 
in Sections II.F.1 and II.F.2, infra.
    \21\ A feasibility study is a technical and economic study of a 
mineral project necessary to demonstrate that extraction is 
economically viable. The two kinds of studies commonly used to 
demonstrate economic viability, in public disclosure, are 
preliminary feasibility (also called pre-feasibility) and final 
feasibility (also called feasibility) studies. A feasibility study 
is more comprehensive, and as a result more accurate, than a pre-
feasibility study.
---------------------------------------------------------------------------

    Over the years, as part of its filing review and comment process, 
the staff has provided supplemental guidance, including requesting 
clarifications or additional disclosure, to assist registrants in 
providing the appropriate disclosure about their mining operations and 
properties. For example, in contrast to the practice under the CRIRSCO 
standards, the staff historically has requested that a registrant 
obtain a specific type of feasibility study (i.e., a final feasibility 
study) in order to support a determination of mineral reserves.
    Because of the widespread adoption of the CRIRSCO standards, 
industry participants have requested revisions to Guide 7.\22\ Among 
other matters,\23\ these participants have urged the Commission to 
align its mining disclosure rules with the CRIRSCO-based codes by 
allowing a mining registrant to disclose both mineral resources and 
reserves.\24\ These

[[Page 41654]]

participants asserted that this would provide investors with a more 
complete understanding of the economic potential of a registrant's 
properties.\25\ Finally, these participants also requested that the 
Commission address what they characterize as the uncertainty caused by 
the fact that Guide 7 and staff comment letters are not rules of the 
Commission, but rather non-binding guidance provided by the Division of 
Corporation Finance (``Division'').\26\
---------------------------------------------------------------------------

    \22\ See, e.g., the petition for rulemaking by the Society for 
Mining, Metallurgy and Exploration, Inc. (``SME Petition for 
Rulemaking '') (October 1, 2012), which is available at: http://www.sec.gov/rules/petitions/2012/petn4-654.pdf.
    \23\ For example, the SME also specifically expressed concern 
regarding the limited guidance provided by the staff on when the 
disclosure of certain non-reserve deposits known as ``mineralized 
material'' would be appropriate.
    \24\ We also have received letters from members of the United 
States Congress requesting that the Commission update and harmonize 
Guide 7 with global reporting requirements. See the letter, dated 
July 7, 2014, from Representatives Shelley Moore Capito, Stevan 
Pearce, Blaine Luetkemeyer, Sean Duffy, Steve Stivers, Stephen 
Fincher, Mick Mulvaney, Randy Hultgren, Ann Wagner, Andy Barr, Tom 
Cotton, Keith Rothfus, and William Lacy Clay; and the letter, dated 
August 13, 2014, from Senators Dean Heller, Mike Crapo and John 
Tester. These letters are available at: http://www.sec.gov/comments/disclosure-effectiveness/disclosureeffectiveness.shtml.
    \25\ Unless otherwise stated, in this release the term 
``property'' refers to mining properties, which are properties at 
which the registrant engages in mining activities. Mining activities 
include exploration, development and production of minerals. The 
term ``mine'' refers to a specific geographic location at which the 
registrant produces minerals. A property could include multiple 
mines.
    \26\ See SME Petition for Rulemaking at 9.
---------------------------------------------------------------------------

    In light of these global developments and industry participants' 
concerns, we are proposing to modernize our disclosure rules for 
properties owned or operated by mining companies by more closely 
aligning those rules with the CRIRSCO-based codes in several respects. 
For example, the proposed rules would require a registrant with 
material mining operations to disclose, in addition to its mineral 
reserves, mineral resources that have been determined based upon 
information and supporting documentation by one or more qualified 
persons. Industry participants assert that such an alignment should 
help place U.S. mining registrants on a more level playing field with 
non-U.S. mining companies that are subject to one or more of the 
CRIRSCO-based mining codes.\27\ This release requests comment on all 
aspects of our proposed rules, and we encourage all interested parties, 
including investors, companies, and other market participants, to 
submit comments.\28\
---------------------------------------------------------------------------

    \27\ In this regard, the SME has questioned the attractiveness 
of the U.S. capital markets for mining companies in light of the 
differences between Guide 7 and the CRIRSCO-based codes: ``All of 
these factors decrease the attractiveness of the U.S. market to 
current and potential reporting companies. In light of increased 
globalization, companies have more choices as to which capital 
markets to access. Although the U.S. still presents one of the 
largest markets and thus will attract companies on that basis alone, 
there is a marked reluctance, particularly among exploration-stage 
mining companies, to pursue initial listings in the U.S. This harms 
our stock exchanges, as well as our financial markets.'' SME 
Petition for Rulemaking at 14.
    \28\ The Commission also has issued a concept release on 
Regulation S-K seeking input on updating and modernizing our 
business and financial disclosure requirements. See Release No. 33-
10064 (April 13, 2016), [81 FR 23916] (April 22, 2016). The concept 
release requests comment on a range of topics that also may apply to 
mining companies, such as disclosure pertaining to risk factors, 
description of property and sustainability. We continue to encourage 
interested parties to submit comments on the concept release.
---------------------------------------------------------------------------

II. Proposed Mining Disclosure Rules

A. Consolidation of the Mining Disclosure Requirements

    As noted above, the Commission's current mining disclosure regime 
involves overlapping disclosure requirements and policies in different 
locations (Regulation S-K and Guide 7), with an instruction 
(Instruction 7 to Item 102) that registrants engaged in significant 
mining operations should ``direct their attention'' to Guide 7. The 
combination of the overlapping structure of the disclosure regime for 
mining registrants and the brevity of Guide 7 (which has led to a 
significant amount of staff interpretive guidance through the comment 
process) may have created some regulatory uncertainty among mining 
registrants, particularly new registrants.
    To help address this uncertainty, we propose to rescind Guide 7 and 
create new Regulation S-K subpart 1300 \29\ that would govern 
disclosure for registrants with mining operations.\30\ In addition, we 
propose to amend Item 102 of Regulation S-K to replace the instruction 
that ``the attention of issuers engaged in significant mining 
operations is directed to the information called for in Guide 7'' with 
a new instruction requiring all mining registrants to refer to and, if 
required, provide the disclosure under new Regulation S-K subpart 
1300.\31\
---------------------------------------------------------------------------

    \29\ Proposed 17 CFR 229.1301 et seq.
    \30\ Proposed Regulation S-K subpart 1300 would apply to 
registration statements under the Securities Act and the Exchange 
Act as well as to annual reports under the Exchange Act.
    \31\ Registrants that have material non-mining operations would 
continue to provide non-mining property disclosures under Item 102 
of Regulation S-K.
---------------------------------------------------------------------------

    Foreign private issuers that use Form 20-F to file their Exchange 
Act registration statements and annual reports, or that refer to Form 
20-F when filing their Securities Act registration statements on Forms 
F-1 and F-4, are generally not subject to Regulation S-K. Because we 
believe that the same property disclosure requirements should apply to 
both domestic and foreign mining registrants, the proposed rules would 
amend Form 20-F to instruct registrants to refer to, and if required, 
provide the disclosure under subpart 1300 of Regulation S-K.\32\ This 
proposed treatment would be consistent with current staff practice 
whereby foreign registrants are subject to the same Guide 7 and other 
disclosures as domestic mining registrants.
---------------------------------------------------------------------------

    \32\ See section II.H., infra.
---------------------------------------------------------------------------

    Having one source for mining disclosure obligations should 
facilitate mining registrants' compliance with their disclosure 
requirements by eliminating the complexity resulting from the existing 
structure of Commission disclosure obligations in Regulation S-K and 
staff disclosure guidance in Industry Guide 7. Moreover, consolidating 
the disclosure requirements from Guide 7 into Regulation S-K would 
eliminate any uncertainty about their authority.\33\
---------------------------------------------------------------------------

    \33\ See note 26, supra. We discuss the expected benefits and 
costs of the proposed rules in section IV, infra.
---------------------------------------------------------------------------

Request for Comment
    1. The Commission's current mining disclosure regime consists of 
disclosure requirements located in Item 102 of Regulation S-K and 
disclosure policies located in Guide 7. Has this disclosure regime 
caused uncertainty for mining registrants? If so, would establishing a 
sole regulatory source for mining disclosure by rescinding Guide 7 and 
including the disclosure requirements for mining registrants in a new 
Regulation S-K subpart, as proposed, reduce this uncertainty?
    2. Should we amend Item 102 of Regulation S-K by eliminating the 
instruction that refers mining registrants to the information called 
for in Guide 7 and instead instruct them to refer to, and if required, 
provide the disclosure under new Regulation S-K subpart 1300, as 
proposed? Should we instead retain Guide 7 and Item 102 of Regulation 
S-K as separate sources for mining disclosures? If so, how should they 
apply to registrants?

B. The Standard for Mining-Related Disclosure

1. Overview
    Under Item 102 of Regulation S-K, registrants are required to 
disclose principal mines, other materially important physical 
properties, and significant mining operations. Guide 7 only applies to 
registrants engaged or to be engaged in significant mining operations. 
When construed together, Item 102 and Guide 7 suggest that there are 
two levels of reporting under the Commission's current mining 
disclosure regime. For registrants that have one or

[[Page 41655]]

more principal mines or other materially important properties but lack 
significant mining operations, Item 102 requires less detailed 
information. For registrants that have significant mining operations, 
Guide 7 calls for more extensive disclosures. Although both Item 102 
and Guide 7 refer to ``significant'' mining operations, the staff 
historically has advised registrants to apply materiality in 
determining what disclosures to provide.
    Guide 7 does not define ``significant'' mining operations while 
Item 102 does not specify the particular quantitative factors to be 
considered in determining the materiality of a mine. In the absence of 
specific guidance, the staff has historically used 10% of a 
registrant's total assets as the benchmark for determining the 
materiality of a registrant's mining operations.
    We propose that a registrant be required to provide the disclosure 
under new subpart 1300 of Regulation S-K if its mining operations, as 
that term is defined in Instruction 1 to proposed Item 1301(b),\34\ are 
material to its business or financial condition.\35\ For purposes of 
the new subpart, the term ``material'' would have the same meaning as 
under Securities Act Rule 405 and Exchange Act Rule 12b-2.\36\
---------------------------------------------------------------------------

    \34\ The term ``mining operations'' would include operations on 
all mining properties that a registrant owns or in which it has, or 
it is probable that it will have, a direct or indirect economic 
interest. It also would include operations on mining properties that 
a registrant operates, or it is probable that it will operate, under 
a lease or other legal agreement that grants the registrant 
ownership or similar rights that authorize it, as principal, to sell 
or otherwise dispose of the mineral. Finally, ``mining operations'' 
would include operations on mining properties that a registrant has, 
or it is probable that it will have, an associated royalty or 
similar right. See Instruction 1 to proposed Item 1301(b). For 
purposes of subpart 1300, the term ``probable'' would have the same 
meaning as the U.S. GAAP definition of that term. See ASC Section 
450-20-20.
    \35\ See proposed Regulation S-K Item 1301(a). Because we are 
proposing to consolidate the revised mining disclosure rules under 
new Regulation S-K subpart 1300, the proposed rules would eliminate 
Instruction 3 to Item 102, which requires the disclosure of certain 
specified material information, including ``more detailed 
information'' about a mining registrant's individual properties that 
``are of major significance.''
    \36\ See Id. Pursuant to Securities Act Rule 405 (17 CFR 
230.405) and Exchange Act Rule 12b-2 (17 CFR 240.12b-2), 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. This definition is consistent 
with the U.S. Supreme Court's holding in TSC Industries v. Northway, 
Inc., 426 U.S. 438, 449 (1976), that a fact is material if there is 
a substantial likelihood that the fact would have been viewed by a 
reasonable investor as having significantly altered the ``total 
mix'' of information made available.
---------------------------------------------------------------------------

    Under proposed new subpart 1300, when determining the materiality 
of its mining operations, a registrant would have to:
     Consider both quantitative and qualitative factors, 
assessed in the context of the registrant's overall business and 
financial condition;
     aggregate mining operations on all of its mining 
properties, regardless of size or type of commodity produced, including 
coal, metalliferous minerals, industrial materials, geothermal energy, 
and mineral brines; \37\ and
---------------------------------------------------------------------------

    \37\ For a discussion of the treatment of mineral brines and 
energy under proposed subpart 1300, see section II.E.1, infra.
---------------------------------------------------------------------------

     include, for each property, as applicable, all related 
mining operations from exploration through extraction to the first 
point of material external sale, including processing, transportation, 
and warehousing.\38\
---------------------------------------------------------------------------

    \38\ See proposed Item 1301(b) of Regulation S-K.
---------------------------------------------------------------------------

    Consistent with current staff guidance, we are proposing to define 
``mining operations'' to include all related activities from 
exploration through extraction to the first point of material external 
sale.\39\ We believe that including all activities up to the point of 
first material external sale is appropriate because all such activities 
are necessary to convert the mineral resource to saleable product, 
which generates the registrants' revenues. This definition would, 
however, exclude all activities subsequent to the first point of sale. 
Although such activities may add value to the saleable mining product, 
they are not necessary to convert the resource into a saleable product. 
For example, an aluminum producer who has material bauxite mining 
operations and material external bauxite sales would not include any 
subsequent refinery activities (such as processing the bauxite into 
aluminum) in the scope of its mining property disclosure. We also note 
that, because this approach would be consistent with current staff 
guidance, it is not expected to significantly alter existing disclosure 
practices.
---------------------------------------------------------------------------

    \39\ See proposed Item 1301(b)(3) of Regulation S-K.
---------------------------------------------------------------------------

    Proposed new subpart 1300 would instruct that a registrant's mining 
operations are presumed to be material if its mining assets constitute 
10% or more of its total assets.\40\ We believe it would be appropriate 
to presume materiality under the proposed rules when mining assets are 
at or above a threshold of 10 percent of total assets because at that 
level the mining assets are likely to contribute significantly to the 
registrant's business or financial condition. We further believe that 
the 10% asset threshold is appropriate because it is consistent with 
similar 10% thresholds that the Commission has used to determine 
disclosure requirements under a variety of forms and rules.\41\ 
Finally, the proposed asset test would provide registrants with an 
easily applied quantitative standard to use regarding whether they are 
subject to the new mining disclosure requirements.
---------------------------------------------------------------------------

    \40\ See Instruction 2 to proposed Item 1301(b) of Regulation S-
K. The 10% test is a ``rule of thumb'' that the staff has 
historically applied in the mining context.
    \41\ See, e.g., Item 2.01 of Form 8-K (17 CFR 249.308); sections 
4-08 and 10-01 of Regulation S-X (17 CFR 210.4-08 and 210.10-01); 
and Items 101 and 911 of Regulation S-K (17 CFR 229.101 and 
229.911); see also ASC Section 280-10-50-12.
---------------------------------------------------------------------------

    The proposed new subpart would further instruct that if a 
registrant's mining assets fall below the 10% total assets threshold, 
it would need to consider if there are other factors, quantitative or 
qualitative, which would render its mining operations material.\42\ 
Such factors could include:
---------------------------------------------------------------------------

    \42\ See Instruction 3 to proposed Item 1301(b) of Regulation S-
K. Similarly, because the 10% asset test is a presumption, a 
registrant with mining operations that constitute more than 10% of 
its total assets could evaluate all the relevant quantitative and 
qualitative factors and conclude that the mining operations are not 
required to be disclosed under the proposed standard.
---------------------------------------------------------------------------

     Mining operations that constitute 10% or more of some 
other financial measure, such as the registrant's total revenues, net 
income or operating income;
     evidence that disclosure of a similar property or 
properties has had a significant impact on the price of a registrant's 
securities;
     public disclosure by the registrant discussing the 
importance to its operations (e.g., from an operational or competitive 
standpoint) of a particular property or properties;
     the unique or rare nature of the particular mineral or the 
importance of the mineral to the registrant's operations;
     the actual and projected expenditures on the registrant's 
mining properties as compared to its expenditures on non-mining 
business activities; and
     the amount of capital raised or planned to be raised by 
the registrant for its mining properties.\43\
---------------------------------------------------------------------------

    \43\ Many of these factors are similar to factors enunciated in 
Canada's Companion Policy 43-101CP to National Instrument 43-101, 
General Guidance, paragraph 5, which is available at: http://web.cim.org/standards/documents/Block484_Doc111.pdf. See also the 
Australian Stock Exchange (ASX) Listing Rules, Guidance Note 31, pt. 
2.2, which is available at: http://www.asx.com.au/documents/rules/gn31_reporting_on_mining_activities.pdf.
---------------------------------------------------------------------------

    The proposed standard is generally consistent with the existing 
disclosure

[[Page 41656]]

requirements that registrants routinely apply throughout their required 
filings. It is also consistent with existing staff guidance relating to 
the disclosure requirements for companies with mining operations. 
Moreover, as discussed below, we are proposing rules and instructions 
to help registrants apply the proposed standard under a variety of 
circumstances, including situations that are not expressly addressed by 
the current mining disclosure rules.\44\ We believe the proposed 
requirements could enhance disclosure to investors.
---------------------------------------------------------------------------

    \44\ See section II.B.1.i-iii, infra.
---------------------------------------------------------------------------

    Finally, because the proposed standard is generally consistent with 
the disclosure standard under the CRIRSCO-based mining codes, it should 
not alter the disclosure practices of the numerous mining companies 
that are listed and operate in multiple jurisdictions.
Request for Comment
    3. Should the disclosure standard under the revised mining 
disclosure rules be whether a registrant's mining operations are 
material to its business or financial condition, as proposed? Why or 
why not? If not, what standard should we adopt for determining whether 
a registrant must provide the mining disclosure under the revised 
rules? Why?
    4. Are the quantitative and qualitative factors described in this 
section relevant to the determination of the materiality of a 
registrant's mining operations? Why or why not? Are there other 
factors, such as those identified in Canada's Companion Policy 43-101CP 
to National Instrument 43-101, General Guidance, that a registrant 
should consider for the materiality determination instead of or in 
addition to the factors described in this section? Should we include 
these or other factors as part of the rule provision governing the 
materiality determination? If so, which factors should we include in 
the rule?
    5. Should we adopt the proposed presumption that a registrant's 
mining operations are material if they consist of 10% or more of its 
total assets? Would a percentage higher or lower than 10% be better 
than the proposed threshold? Why or why not? Should it be a 
presumption, as proposed, or should it be a bright line requirement? If 
the former, how might the presumption be rebutted? Is there another 
quantitative factor, such as revenues, that a registrant should 
consider instead of or in addition to the proposed asset test?
    6. When assessing the materiality of its mining operations, should 
we require a registrant to aggregate all of its mining properties, 
regardless of size or type of commodity produced, including coal, 
metalliferous minerals, industrial materials, geothermal energy, and 
mineral brines,\45\ as proposed? Why or why not? Should we exclude any 
of the specified commodities from the proposed aggregation requirement? 
If so, which commodities and why?
---------------------------------------------------------------------------

    \45\ As discussed in section II.E.1, we are proposing that the 
commodities covered by the definition of mineral resource include 
mineralization, including dumps and tailings, geothermal fields, 
mineral brines, and other resources extracted on or within the 
earth's crust. See proposed Item 1301(d)(14)(ii) of Regulation S-K.
---------------------------------------------------------------------------

    7. When assessing the materiality of its mining operations, should 
we require a registrant to include, for each property, as applicable, 
all related activities from exploration through extraction to the first 
point of material external sale, including processing, transportation, 
and warehousing, as proposed? Why or why not? Is ``the first point of 
material external sale'' the appropriate cut-off or should we use some 
other measure? Are there certain activities that we should exclude from 
the materiality determination, even if they occur before the first 
point of material external sale? If so, which activities, for which 
minerals or companies, and why? Are there certain activities after the 
point of first material external sale that we should include? If so, 
which activities, for which minerals or companies, and why?
    8. Are there specific qualitative or quantitative factors relating 
to the environmental or social impacts of a registrant's properties or 
operations that a registrant should consider in making its materiality 
determination?
i. Treatment of Vertically-Integrated Companies
    Some companies have material mining operations that are secondary 
to or in support of their main non-mining business. For example, a 
metal manufacturer may operate iron ore or coal mines to supply raw 
material for its primary business. Neither Guide 7 nor Item 102 
addresses whether or when a vertically-integrated manufacturer \46\ is 
required to provide mining disclosure.
---------------------------------------------------------------------------

    \46\ A vertically-integrated manufacturer is a company that owns 
part of its supply chain. In this context, it refers to a registrant 
that has mining operations to supply raw material to its 
manufacturing business.
---------------------------------------------------------------------------

    Proposed new subpart 1300 would apply to all registrants with 
mining operations, including vertically-integrated manufacturers. 
Specifically, a mining operation owned by a registrant to support its 
primary business could be material and require disclosure. The fact 
that the registrant's primary business operation is something other 
than minerals extraction would not be determinative of whether 
disclosure would be required under the proposed subpart.
    For example, the bauxite mining operations of an aluminum 
manufacturer, whose primary business is manufacturing, not mining, 
could be material and require disclosure if its bauxite operations 
represent ten percent or more of the registrant's assets, even though 
they are not the registrant's primary operations, or the primary source 
of the registrant's revenues. In addition, even if the bauxite or other 
mining operations of such a vertically-integrated manufacturer 
constitute less than ten percent of its total assets, its mining 
operations could still be material and trigger disclosure obligations 
if, for example, the manufacturer derives a competitive advantage from, 
or substantially relies upon, its ability to source that particular 
mineral from its mining operations.
    Requiring disclosure of mining operations in such circumstances 
would be consistent with the disclosure currently provided in SEC 
filings and should not significantly alter existing disclosure 
practices. In addition, subjecting vertically-integrated companies to 
the proposed rules would align the disclosure requirements for such 
companies with those of companies primarily engaged in mining 
activities. Also, we note that most of the foreign jurisdictions that 
have CRIRSCO-based rules require disclosure for material mining 
properties and provide no exemptions for vertically-integrated 
companies.\47\
---------------------------------------------------------------------------

    \47\ For example, ASX Listing Rules require disclosure of 
exploration results, mineral resources and mineral reserves for all 
``material mineral projects.'' In defining a ``material mineral 
project,'' the ASX Listing Rules, Guidance Note 31, pt. 2.2, 
provides that ``[i]n many cases, it will be readily apparent that a 
particular mining activity is a material mining project for the 
purposes of the Listing Rules and therefore the disclosure 
requirements in Listing Rules 5.7-5.19 will apply to any disclosures 
of exploration results, estimates of mineral resources or ore 
reserves, historical estimates or foreign estimates of 
mineralisation, or production targets for that project. Judgment 
however may need to be exercised where an entity has multiple mining 
projects or where it has a mix of mining projects and other business 
activities.''
---------------------------------------------------------------------------

Request for Comment
    9. Should we require vertically-integrated companies, such as 
manufacturers, to provide the disclosure required under new Regulation 
S-K subpart 1300, as proposed? Why or why not?

[[Page 41657]]

ii. Treatment of Multiple Property Ownership
    As discussed above, the primary focus of the current rules and 
guidance is on individually significant or material properties. It is, 
however, very common for registrants to own multiple mining properties. 
In some instances, the registrant will have multiple properties that 
all involve exploration, development or extraction of the same mineral. 
In other situations, the registrant's operations will primarily involve 
exploration, development or extraction of one mineral from several 
properties, but the registrant also will own one or more ancillary 
properties where it explores, develops or extracts small amounts 
(relative to the predominant mineral) of a different mineral. Neither 
Item 102 nor Guide 7 provides guidance concerning when or what 
disclosure is required in these situations. To address this, the staff 
has provided interpretive guidance about what, if any, disclosure is 
required by multiple or ancillary property owners.
    Under the proposed rules, a registrant with multiple properties 
would be required to consider all of its mining properties individually 
and in the aggregate, regardless of size or commodity produced, when 
assessing whether it must provide the mining disclosure required by new 
subpart 1300 of Regulation S-K.\48\ A registrant with multiple 
properties, none of which is individually material, but which in the 
aggregate constitute material mining operations, would have to provide 
summary disclosure \49\ concerning its combined mining activities 
rather than providing disclosure for individual properties.\50\
---------------------------------------------------------------------------

    \48\ See proposed Item 1301(b)(2) of Regulation S-K.
    \49\ See section II.G.1, infra for a more detailed discussion of 
the summary disclosure requirements, which would include summary 
information about a registrant's 20 largest properties, by asset 
value. In the case of a registrant with material mining operations 
in the aggregate, but with no individual properties that are 
material, we believe that investors would benefit more from the 
proposed summary disclosure concerning the registrant's properties 
in the aggregate than from detailed disclosure concerning each 
individual property, some or all of which may not have mineral 
resources, mineral reserves or exploration results.
    \50\ To the extent that an individual property is material to a 
registrant's operations, the proposed rules would also require 
detailed disclosure about that property. See section II.G.2, infra, 
for a discussion of those disclosure requirements.
---------------------------------------------------------------------------

    Under the proposed rules, a registrant could be required to provide 
disclosure for a particular property, depending on the facts and 
circumstances, even if ancillary to the registrant's predominant 
commodity. For example, a property on which a registrant explores, 
develops or extracts a relatively small amount of a particular mineral, 
compared to its predominant mineral, could be material based upon the 
amount of actual and projected expenditures on the property as compared 
to its expenditures on other properties.
    We believe the proposed rules would provide a clear and consistent 
standard for registrants to apply in determining the scope of their 
disclosure obligations, while helping to ensure that investors receive 
relevant information about the operations and risks associated with 
registrants' mining operations.
Request for Comment
    10. Should we require a registrant with multiple properties to 
provide the disclosure required by proposed Regulation S-K subpart 
1300, as proposed? Why or why not? Should we require a registrant with 
multiple properties, none of which is individually material, but which 
in the aggregate constitute material mining operations, to provide only 
summary disclosure concerning its combined mining activities, as 
proposed? Why or why not?
    11. Are there difficulties that a registrant with multiple 
properties could face when determining if disclosure is required under 
the proposed rules? If so, how should our mining disclosure rules 
address such difficulties?
    12. Should we require more detailed disclosure about individual 
properties that are material to a registrant's mining operations, as 
proposed? Why or why not?
iii. Treatment of Royalty Companies and Other Companies Holding 
Economic Interests in Mining Properties
    Some registrants are royalty companies, which are companies that do 
not own or operate a property, but rather own the right to receive 
payments, called a royalty right, from the owner or operator of a 
property.\51\ In addition, some registrants hold other economic 
interests, similar to royalty rights, also without owning or operating 
a property.\52\ Neither Item 102 nor Guide 7 address whether royalty or 
similar companies must provide disclosure about the mining operations 
and properties underlying their economic interest. Consequently, the 
staff has provided guidance about whether and how such companies should 
provide mining disclosure.
---------------------------------------------------------------------------

    \51\ A royalty, in this context, is typically a payment to the 
royalty right holder from the property owner or operator in return 
for: (i) Providing upfront capital; (ii) paying part of amount due 
land owners or mineral right holders; or (iii) converting a 
participating interest in a joint venture into a royalty right. Such 
payment is most often based on a percentage of the minerals, 
revenues, or profits generated from the property.
    \52\ Examples include the right to purchase all or a portion of 
minerals from a mine under a metal purchase agreement (a ``stream'' 
agreement) or a working interest in the underlying property.
---------------------------------------------------------------------------

    Under the proposed rules, consistent with prior staff guidance, a 
royalty company or other registrant that holds a similar economic 
interest would have to provide all applicable mining disclosure if the 
mining operations that generate the royalty or other payment (the 
underlying mining operations) are material to the royalty or similar 
company's operations as a whole. Similar to a producing mining company 
(that owns or operates properties), a royalty or similar company would 
have to assess both quantitative and qualitative factors to determine 
whether the underlying mining operations are material.\53\
---------------------------------------------------------------------------

    \53\ In this regard, because a registrant with royalty or other 
similar economic interests does not own or operate the producing 
property, revenues are often a more relevant benchmark than assets 
for determining materiality.
---------------------------------------------------------------------------

    Investors in royalty and other similar companies need information 
about the material mining properties that generate the payments to the 
registrant, including mineral reserves and production, to be able to 
assess the amounts, soundness and sustainability of future payments. 
For the royalty or similar company and its investors, the mining 
property underlying the royalty or similar payments is the primary or 
only source of revenues and cash flow. As such, we believe royalty 
companies and other companies holding similar economic interests should 
provide the same type and amount of disclosure as registrants with 
mining operations.
    The proposed rules would require a royalty or similar company to 
provide disclosure only for those underlying properties, or portions of 
underlying properties, that generate the registrant's royalties or 
similar payments, and only for the reserves and production that 
generated its payments in the reporting period.\54\ We do not believe 
that investors in a company holding royalty or similar rights need 
information relating to portions of the mining property that do not 
contribute to the registrant's royalty stream, as such portions do not 
impact the results of operations or overall value of the registrant. 
This proposed limitation on the scope of the disclosure required for 
royalty or other similar companies also recognizes the limitations of 
the

[[Page 41658]]

company's rights. Specifically, the registrant may not have access to 
information about portions of the mining property that do not 
contribute to the registrant's revenue stream.\55\
---------------------------------------------------------------------------

    \54\ See Instruction 2 to proposed Item 1303(b)(2) of Regulation 
S-K and Instruction 4 to proposed Item 1304(b)(5) through (7) of 
Regulation S-K.
    \55\ This is consistent with the Commission's current rules 
providing that information required need be given only insofar as it 
is known or reasonably available to the registrant. See Securities 
Act Rule 409 (17 CFR 230.409) and Exchange Act Rule 12b-21 (17 CFR 
240.12b 21).
---------------------------------------------------------------------------

    A royalty or similar company would need to describe the material 
properties that generate its royalties or similar payments and file a 
technical report summary for each such property.\56\ Such a registrant 
would not, however, have to submit a separate technical report summary 
about a property that is covered by a current technical report summary 
filed by the producing mining registrant. In that situation, the 
royalty or similar company may incorporate by reference the producing 
registrant's previously filed technical report summary.\57\
---------------------------------------------------------------------------

    \56\ As discussed, in section II.C.1 infra, the proposed rules 
would require registrants to file technical report summaries, as 
exhibits, to support disclosure of mineral resources, mineral 
reserves, and material exploration results.
    \57\ See 17 CFR 230.411 and 17 CFR 240.12b-32, which permit any 
document filed with the Commission under any act administered by the 
Commission to be incorporated by reference as an exhibit to a 
statement or report filed with the Commission by the same or any 
other person, and require that the registrant clearly identify in 
the reference the document from which the material is taken.
---------------------------------------------------------------------------

Request for Comment
    13. Should we require a royalty company, or a company holding a 
similar economic interest in another company's mining operations, to 
provide all applicable mining disclosure if the underlying mining 
operations are material to its operations as a whole, as proposed? Why 
or why not? Should disclosure for such companies be required under 
other circumstances?
    14. Should we permit a royalty company, or other similar company 
holding an economic interest in another company's mining operations, to 
provide only the required disclosure for the reserves and production 
that generated its royalty payments, or other similar payments, in the 
reporting period, as proposed? Why or why not? If not, what additional 
disclosure should be required by such registrants?
    15. Should we require a royalty company, or other similar company 
holding an economic interest in another company's mining operations, to 
describe its material properties and file a technical report summary 
for each such property, as proposed? Should we allow a royalty or other 
similar company to satisfy the technical report summary requirement by 
incorporating by reference a current technical report summary filed by 
the producing mining registrant for the underlying property, as 
proposed? Are there circumstances (e.g. when a royalty company 
purchases a royalty agreement and is not reasonably able to gain access 
to such information) in which a royalty or similar company should not 
be required to file a technical report summary concerning the 
underlying property?
2. Definitions of Exploration, Development and Production Stage
    Guide 7 defines the stages used to describe mining operations, 
``exploration stage,'' ``development stage,'' and ``production stage,'' 
as follows:
     Exploration Stage--includes all registrants engaged in the 
search for mineral deposits (reserves) which are not in either the 
development or production stage.
     Development Stage--includes all registrants engaged in the 
preparation of a determined commercially minable deposit (reserves) for 
its extraction which are not in the production stage.
     Production Stage--includes all registrants engaged in the 
exploitation of a mineral deposit (reserve).\58\
---------------------------------------------------------------------------

    \58\ Guide 7 paragraph (a)(4).
---------------------------------------------------------------------------

    Guide 7 applies these definitions to the registrant as a whole, 
however, and not on a property-by-property basis. As such, Guide 7 does 
not provide guidance as to when and how the definitions of exploration, 
development and production stage apply to registrants that own 
properties in different stages. To address this ambiguity and to help 
ensure that investors receive disclosure that accurately reflects a 
registrant's operational status, we are proposing to revise the Guide 7 
definitions of exploration, development and production stage so that 
the definitions apply to individual properties, as follows:
     An exploration stage property is a property that has no 
mineral reserves disclosed; \59\
---------------------------------------------------------------------------

    \59\ See proposed Item 1301(d)(6) of Regulation S-K.
---------------------------------------------------------------------------

     a development stage property is a property that has 
mineral reserves disclosed, but with no material extraction; \60\ and
---------------------------------------------------------------------------

    \60\ See proposed Item 1301(d)(3) of Regulation S-K.
---------------------------------------------------------------------------

     a production stage property is a property with material 
extraction of mineral reserves.\61\
---------------------------------------------------------------------------

    \61\ See proposed Item 1301(d)(20) of Regulation S-K.
---------------------------------------------------------------------------

    We also are proposing to revise the Guide 7 definitions as they 
apply to issuers in order to recognize that issuers may have properties 
in differing stages, as follows:
     an exploration stage issuer is one that has no material 
property with mineral reserves; \62\
---------------------------------------------------------------------------

    \62\ See proposed Item 1301(d)(5) of Regulation S-K.
---------------------------------------------------------------------------

     a development stage issuer is one that is engaged in the 
preparation of mineral reserves for extraction on at least one material 
property; \63\ and
---------------------------------------------------------------------------

    \63\ See proposed Item 1301(d)(2) of Regulation S-K.
---------------------------------------------------------------------------

     a production stage issuer is one that is engaged in 
material extraction of mineral reserves on at least one material 
property.\64\
---------------------------------------------------------------------------

    \64\ See proposed Item 1301(d)(19) of Regulation S-K.
---------------------------------------------------------------------------

    Finally, we propose to specify that a registrant that does not have 
reserves on any of its properties, even if it has mineral resources or 
exploration results, or even if it is engaged in extraction without 
first disclosing mineral reserves,\65\ cannot characterize itself as a 
development or production stage company.\66\ The proposed rules would 
also require a company to identify an individual property with no 
mineral reserves as an exploration stage property, even if it has other 
properties in development or production.\67\
---------------------------------------------------------------------------

    \65\ There are registrants that start development or production 
without first disclosing mineral reserves. Such practices increase 
the business' risks due to the absence of the detailed technical and 
economic analysis required to disclose reserves, thus increasing the 
degree of uncertainty surrounding the quantities and quality of the 
mineral to be extracted.
    \66\ See the Instruction to proposed Item 1304(b)(3) of 
Regulation S-K.
    \67\ Id.
---------------------------------------------------------------------------

    We believe that these proposed changes would resolve the 
ambiguities in the Guide 7 definitions. They also would be consistent 
with prior staff guidance, which should minimize changes in disclosure 
practices for registrants and their investors. Under the proposed 
definitions, a registrant would be able to characterize its properties 
separately, but would be limited in when and how it can characterize 
its operational stage. Specifically, it would not be able to 
characterize itself as a development stage registrant unless it is 
engaged in the preparation of mineral reserves for extraction on at 
least one material property. We believe this would benefit investors by 
providing them with clearer, more accurate and consistent disclosure 
about the type of company and level of risk involved. In particular, 
prohibiting a registrant without any

[[Page 41659]]

mineral reserves from characterizing itself as a production or 
development stage company would help eliminate the possibility that 
such a registrant, by definition a higher risk company, would 
incorrectly characterize itself as being in a lower risk stage, thereby 
potentially misleading or confusing investors.
    Further, providing definitions that apply to specific properties 
would align the disclosure requirements with current accounting 
practices under U.S. GAAP and International Financial Reporting 
Standards (IFRS) as issued by the International Accounting Standards 
Board (IASB).\68\ Conforming the definitions in the proposed 
requirements to the applicable accounting practice should benefit both 
registrants and investors by providing a consistent framework for the 
presentation of financial and property disclosures, thereby reducing 
compliance burdens and facilitating comparability.
---------------------------------------------------------------------------

    \68\ Although there is no authoritative guidance under U.S. GAAP 
that directly addresses accounting for mining activities, the 
accounting practice has typically been based on the definition of an 
asset in Statement of Financial Accounting Concepts Elements of 
Financial Statements (``Concept Statement 6''), with a focus on the 
operational stage of individual properties rather than on the stage 
of the registrant. Similarly, accounting for costs under IFRS also 
focuses on individual properties.
---------------------------------------------------------------------------

Request for Comment
    16. Should we define ``exploration stage property,'' ``development 
stage property'' and ``production stage property,'' as proposed? Why or 
why not? Would these definitions facilitate compliance by registrants 
with properties in more than one stage of operation?
    17. Should we also revise the definitions of ``exploration stage 
issuer,'' ``development stage issuer'' and ``production stage issuer,'' 
as proposed? Why or why not? Should the definition of ``development 
stage issuer'' and ``production stage issuer'' depend on having ``at 
least one material property'', as proposed? Should we instead base the 
definitions on consideration of the characteristics of all mining 
properties? For example, if a registrant has a single development-stage 
material property that constitutes 10% of its mining assets, with the 
remainder of the mining assets all constituting exploration stage 
properties, should the registrant be able to identify itself as a 
development stage issuer?
    18. Would the two proposed sets of definitions appropriately 
classify the particular stage of a registrant's mining operations? 
Should the definitions be property-based and dependent on whether 
mineral resources or reserves have been disclosed, are being prepared 
for extraction, or are being extracted, as applicable, on one or more 
material properties? Would having two proposed sets of definitions 
create unnecessary complexity or investor confusion?
    19. Should the proposed rules specify that a registrant that does 
not have mineral reserves on any of its properties, even if it has 
mineral resources or exploration results, or even if it is engaged in 
extraction without first disclosing mineral reserves, cannot 
characterize itself as a development or production stage company, as 
proposed? Why or why not?

C. Qualified Person and Responsibility for Disclosure

1. The ``Qualified Person'' Requirement
    All of the CRIRSCO-based codes require that any public report about 
a company's exploration results, mineral resources and mineral reserves 
be based on and fairly reflect information and supporting documentation 
prepared by a ``competent'' or ``qualified person.'' \69\ ``Public 
report'' as used in the CRIRSCO-based codes includes all communication 
by a company to investors on exploration results, mineral resources and 
mineral reserves.\70\ The purpose of this requirement is to ensure that 
a registrant's public declaration of exploration results, mineral 
resources and reserves is supported by the findings of a mineral 
industry professional having the relevant level of expertise.\71\ In 
contrast, neither Guide 7 nor Item 102 requires that a registrant's 
disclosure of mineral reserves be based on the findings of an 
appropriately experienced professional.\72\ While an author of a study 
or technical report that forms the basis of mineral reserves disclosure 
in a Securities Act registration statement must consent to the use of 
its name as an expert,\73\ there is no requirement to use an expert for 
reserves disclosure and, if one is used, there are no substantive 
requirements for that expertise.
---------------------------------------------------------------------------

    \69\ See, e.g., CRIRSCO's International Reporting Template pt. 
8; Canada's NI 43-101 pt. 2.1; and JORC Code pt. 9.
    \70\ For example, Australia's JORC Code defines public report 
as: ``. . . reports prepared for the purpose of informing investors 
or potential investors and their advisers on Exploration Results, 
Mineral Resources or Ore Reserves. They include, but are not limited 
to, annual and quarterly company reports, press releases, 
information memoranda, technical papers, Web site postings and 
public presentations.'' JORC Code pt. 6 (2012). The JORC Code is 
available at: http://www.jorc.org/docs/JORC_code_2012.pdf.
    \71\ The CRIRSCO-based standards are built on three governing 
principles: transparency, materiality and competence. All these 
codes define competence to mean that technical work should be done 
by a professional with requisite expertise. See, e.g., CRIRSCO's 
International Reporting Template pt. 3, which states: ``Competence 
requires that the Public Report be based on work that is the 
responsibility of suitably qualified and experienced persons who are 
subject to an enforceable professional code of ethics and rules of 
conduct.'' See also JORC Code pt. 9 and SME Guide pt. 3.
    \72\ Guide 7 only calls for disclosure of the name of the person 
estimating the reserves and the nature of his or her relationship to 
the registrant. See Guide 7 paragraph (b)(5)(ii). In addition, if a 
registrant supplementally provides a copy of a technical report to 
Division staff, Guide 7 specifies that the copy include the name of 
its author and the date of its preparation, if known to the 
registrant. See Guide 7 paragraph (c)(2).
    \73\ See Securities Act Rule 436 (17 CFR 230.436); see also 17 
CFR 229.601(b)(23)(i).
---------------------------------------------------------------------------

    We are proposing that every disclosure of mineral resources, 
mineral reserves and material exploration results reported in a 
registrant's filed registration statements and reports must be based 
on, and accurately reflect information and supporting documentation 
prepared by, a ``qualified person,'' \74\ as defined by the proposed 
rules.\75\ In addition, the proposed rules would require that the 
registrant:
---------------------------------------------------------------------------

    \74\ See proposed Item 1302(a) of Regulation S-K. While we refer 
to the qualified person in the singular throughout this release, we 
note that it is common for a registrant to have more than one 
qualified person prepare a technical report for a mining property or 
project. As proposed, the registrant's responsibilities would apply 
to each qualified person so engaged.
    \75\ See section II.C.2, infra.
---------------------------------------------------------------------------

     Be responsible for determining that the person meets the 
qualifications specified under the new subpart's definition of 
``qualified person'' and that the disclosure in the filing accurately 
reflects the information provided by the qualified person; \76\
---------------------------------------------------------------------------

    \76\ See proposed Item 1302(a).
---------------------------------------------------------------------------

     obtain a dated and signed technical report summary from 
the qualified person, which identifies and summarizes for each material 
property the information reviewed and conclusions reached by the 
qualified person about the registrant's exploration results, mineral 
resources or mineral reserves; \77\
---------------------------------------------------------------------------

    \77\ See proposed Item 1302(b)(1) of Regulation S-K.
---------------------------------------------------------------------------

     file the technical report summary with respect to every 
material mining property as an exhibit to the relevant registration 
statement or other Commission filing when the registrant is disclosing 
for the first time mineral reserves, mineral resources or material 
exploration results or when there is a material change in the mineral 
reserves, mineral resources or exploration results

[[Page 41660]]

from the last technical report filed for the property; \78\
---------------------------------------------------------------------------

    \78\ See proposed Item 1302(b)(2) of Regulation S-K and 
discussion in section II.G.2, infra.
---------------------------------------------------------------------------

     obtain the written consent of the qualified person to the 
use of the qualified person's name and any quotation or other use of 
the technical report summary in the registration statement or report 
prior to filing the document publicly with the Commission; \79\
---------------------------------------------------------------------------

    \79\ See proposed Item 1302(b)(3) of Regulation S-K.
---------------------------------------------------------------------------

     identify the qualified person who prepared the technical 
report summary in the filed registration statement or report; \80\ and
---------------------------------------------------------------------------

    \80\ See proposed Item 1302(b)(4) of Regulation S-K.
---------------------------------------------------------------------------

     state whether the qualified person is an employee of the 
registrant, and if the qualified person is not an employee of the 
registrant:
    [cir] Name the qualified person's employer;
    [cir] disclose whether the qualified person or the qualified 
person's employer is an affiliate \81\ of the registrant or another 
entity that has an ownership, royalty or other interest in the property 
that is the subject of the technical report summary; and
---------------------------------------------------------------------------

    \81\ As used in proposed Item 1302(b), the term ``affiliate'' 
has the same meaning as in Sec.  230.405 or Sec.  240.12b-2. See the 
Instruction to proposed Item 1302(b)(4) of Regulation S-K.
---------------------------------------------------------------------------

    [cir] if the qualified person or the qualified person's employer is 
an affiliate, disclose the nature of the affiliation.\82\
---------------------------------------------------------------------------

    \82\ See proposed Item 1302(b)(4) of Regulation S-K.
---------------------------------------------------------------------------

    If the filing that requires the technical report summary is a 
Securities Act registration statement, the qualified person would be 
deemed an ``expert'' who must provide his or her written consent as an 
exhibit to the filing pursuant to Securities Act Rule 436.\83\ In such 
situations, the qualified person would be subject to liability as an 
expert for any untrue statement or omission of a material fact 
contained in the technical report summary under Section 11 of the 
Securities Act.\84\
---------------------------------------------------------------------------

    \83\ See 17 CFR 230.436 and 229.601(b)(23). A registrant would 
also have to file the written consent as an exhibit to an Exchange 
Act registration statement or report when the Exchange Act filing is 
automatically incorporated into a previously filed Securities Act 
registration statement.
    \84\ 15 U.S.C. 77k(a)(4).
---------------------------------------------------------------------------

    The Securities Act and the Exchange Act each provide that the 
registration statements and periodic reports required under those 
statutes shall contain such information and documents as the Commission 
may require, as necessary or appropriate in the public interest and for 
the protection of investors.\85\ We believe that the proposed 
requirement that a registrant's disclosure of mineral resources, 
mineral reserves and material exploration results in SEC filings be 
based on and fairly reflect information and supporting documentation 
prepared by a ``qualified person'' would further the protection of 
investors for several reasons.
---------------------------------------------------------------------------

    \85\ See Securities Act Section 7(a) (15 U.S.C. 77g(a)) and 
Exchange Act Sections 12(b)(1),)12(g)(1), and 13(a) (15 U.S.C. 
78l(b)(1), 78l(g)(1), and 78m(a)).
---------------------------------------------------------------------------

    First, this requirement could make the determination and reporting 
of material exploration results or estimates of mineral resources and 
reserves more reliable.\86\ This is particularly important since we are 
proposing to require, for the first time, that a registrant with 
material mining operations disclose mineral resources and material 
exploration results in SEC filings. Second, we believe that the 
proposed requirement that a registrant file a copy of the technical 
report summary for each material property as an exhibit to the SEC 
filing would enhance investor understanding of a registrant's material 
properties. Specifically, it would provide investors with a summary of 
the scientific and technical information that is the basis for the 
registrant's disclosure of mineral resources, mineral reserves and 
material exploration results, which should enable investors to assess 
better the value of the registrant's material properties. Third, the 
proposed qualified person requirement would help to mitigate any risks 
associated with our proposal to require disclosure of mineral resources 
or material exploration results, which reflect a lower level of 
certainty about the economic value of mining properties than is 
reflected in the disclosure of mineral reserves.\87\ Finally, the 
proposed qualified person requirement would strengthen the Commission's 
disclosure requirements in a manner consistent with most foreign mining 
jurisdictions, thus benefiting investors and promoting uniformity.
---------------------------------------------------------------------------

    \86\ To the extent that a registrant's determination of mineral 
resources, mineral reserves and material exploration results is 
currently based on information and supporting documentation prepared 
by persons who would be ``qualified persons'' under the proposed 
rules, the potential benefits of this requirement could be less. In 
addition, our proposal presumes that the standards that we have set 
forth for determining who is a ``qualified person,'' which are 
consistent with CRIRSCO-based standards, are the appropriate 
standards. There may be situations when that presumption excludes a 
person with significant, relevant experience because that person has 
chosen not to be a member of a recognized professional organization. 
Despite the professional competency of such person, he or she will 
not be deemed to be a ``qualified person'' under the proposed rules.
    \87\ See sections II.D and E, infra.
---------------------------------------------------------------------------

    We propose to require the registrant to file the technical report 
summary as an exhibit (rather than in the body of the annual report or 
registration statement) in order to separate the underlying scientific 
and technical information in the technical report summary from the 
narrative disclosure concerning the registrant's operations.\88\ We 
believe this would result in clearer and more accessible disclosure for 
investors, enabling them to understand the disclosure more effectively 
from both an operational and technical viewpoint.
---------------------------------------------------------------------------

    \88\ The staff currently has the ability to request a copy of a 
technical report as supplemental material, where it is deemed 
appropriate, during the course of its review of a registration 
statement or report. See Securities Act Rule 418 (17 CFR 230.418) 
and Exchange Act Rule 12b-4 (17 CPR 240.12b-4). Securities Act Rule 
418(a)(6) specifically authorizes the staff, ``where reserve 
estimates are referred to in a document,'' to request ``a copy of 
the full report of the engineer or other expert who estimated the 
reserves.'' 17 CFR 230.418(a)(6).
---------------------------------------------------------------------------

    The proposed requirement to obtain a signed and dated technical 
report summary would help establish the authenticity and relevance of 
the technical report summary. The proposed requirement to obtain the 
written consent of the qualified person to use his or her name and any 
quotation or other use of the technical report summary would help 
ensure that such information is not included in an SEC filing without 
the qualified person's actual knowledge. In addition, requiring the 
registrant to file the qualified person's written consent is consistent 
with the Commission's approach to the use of an expert's report in 
Securities Act filings \89\ and would align the Commission's mining 
disclosure rules with the CRIRSCO-based codes, which impose a similar 
written consent requirement.\90\
---------------------------------------------------------------------------

    \89\ See, e.g., Securities Act Rule 436.
    \90\ See, e.g., Canada's NI 43-101 pt. 8.3; the JORC Code pt. 9; 
South Africa's SAMREC Code pt. 8 (2009), which is available at: 
http://www.samcode.co.za/downloads/SAMREC2009.pdf; and the SME Guide 
pt. 8.
---------------------------------------------------------------------------

    The proposed requirement that a registrant identify the qualified 
person that prepared the technical report summary and, if the qualified 
person is not an employee of the registrant, disclose whether the 
qualified person or the qualified person's employer is an affiliate 
would provide investors with relevant information to assess the 
reliability of the disclosure and align the Commission's mining rules 
with most of the CRIRSCO-based codes, which impose a similar 
identification requirement.\91\
---------------------------------------------------------------------------

    \91\ See, e.g., the JORC Code pt. 9; EU's PERC Reporting 
Standard pt. 9 (2013), which is available at: http://www.vmine.net/PERC/documents/PERC_REPORTING_STANDARD_2013_rev2.pdf. A limited 
exception to this is Canada, which requires a registrant to file a 
technical report summary prepared by an independent qualified person 
in certain circumstances: When becoming a first-time registrant; 
when supporting the first time reporting of mineral resources, 
mineral reserves, or a preliminary economic assessment of a material 
property; or when reporting a 100% or greater change in the total 
mineral resources or reserves on a material property, when compared 
to the last disclosure. See NI 43-101 pt. 5.3.

---------------------------------------------------------------------------

[[Page 41661]]

    We are not proposing that a qualified person must be independent 
from the registrant for several reasons. First, we believe that our 
approach would help to limit the compliance burdens on registrants. 
Second, we believe that other aspects of the recommended proposals, 
such as disclosure of the qualified person's credentials and his or her 
affiliated status with the registrant or another entity having an 
ownership or similar interest in the subject property, along with the 
application of potential expert liability in Securities Act filings, 
should provide adequate safeguards for investors. Finally, as discussed 
above, our approach is consistent with most of the CRIRSCO-based 
codes,\92\ which permit a qualified person to be an employee or other 
affiliate of the registrant as long as the registrant discloses its 
relationship with the qualified person.
---------------------------------------------------------------------------

    \92\ See Id.
---------------------------------------------------------------------------

Request for Comment
    20. Should we require, as proposed, that the determination of 
mineral resources, mineral reserves and material exploration results, 
as reported in a registrant's filed registration statements and 
reports, be based on and accurately reflect information and supporting 
documentation prepared by a qualified person? Why or why not? Would 
imposing a qualified person requirement help mitigate the risks 
associated with including disclosure about a registrant's mineral 
resources and exploration results in SEC filings, given that mineral 
resources and exploration results reflect a lower level of certainty 
about the economic value of mining properties? Why or why not?
    21. Should the registrant be responsible for determining that the 
qualified person meets the qualifications specified under the new 
subpart's definition of ``qualified person'' as proposed? Why or why 
not? If not the registrant, who should be responsible for this 
determination?
    22. Should we, as proposed, require a registrant to obtain a 
technical report summary from the qualified person, which identifies 
and summarizes the information reviewed and conclusions reached by the 
qualified person about the registrant's exploration results, mineral 
resources or mineral reserves, before it can disclose those results, 
resources or reserves in SEC filings? Why or why not? Should we instead 
require a registrant to obtain an unabridged technical report, rather 
than a technical report summary, before it can disclose exploration 
results, mineral resources or mineral reserves in SEC filings? Should 
we require the technical report summary to be dated and signed, as 
proposed? Why or why not?
    23. If we require, as proposed, that a registrant obtain a 
technical report summary from the qualified person, should we also, as 
proposed, require that the registrant file the technical report summary 
as an exhibit to the relevant registrant statement or other Commission 
filing when one is required? Why or why not?
    24. Should we require, as proposed, a registrant to file the 
technical report summary when the registrant is disclosing mineral 
reserves, mineral resources or material exploration results for the 
first time or when there is a material change in the mineral reserves, 
mineral resources or exploration results from the last technical report 
filed for the property? Why or why not? Should we instead require a 
registrant to file the technical report summary more frequently, such 
as with every Commission filing, or less frequently?
    25. Should we require, as proposed, a registrant to obtain the 
written consent of the qualified person to the use of the qualified 
person's name and any quotation or other use of the technical report 
summary in the registration statement or report prior to filing the 
document publicly with the Commission? Why or why not?
    26. Should we require that a registrant identify the qualified 
person that prepared the technical report summary and disclose whether 
the qualified person is an employee, as proposed? Why or why not? 
Should we also require a registrant to name the qualified person's 
employer if other than the registrant, and disclose whether the 
qualified person or the qualified person's employer is an affiliate of 
the registrant or another issuer that has an ownership, royalty or 
other interest in the property that is the subject of the technical 
report summary, as proposed? Why or why not?
    27. Should we require a registrant to state whether the qualified 
person is independent of the registrant? Why or why not? If we were to 
require the registrant to state whether the qualified person is 
independent of the registrant, should we define ``independent'' for 
purposes of that requirement? If so, how? For example, should we base 
the definition of independence on comparable provisions under Canada's 
NI 43-101? \93\ Similar to the Canadian provisions, should we provide 
examples of when a qualified person would not be considered to be 
independent? If so, what examples should we provide? Alternatively, 
similar to the Commission's rule regarding when an accountant is not 
independent,\94\ should we provide that a qualified person is not 
independent if the qualified person is not capable of, or a reasonable 
investor with knowledge of all relevant facts and circumstances would 
conclude that the qualified person is not capable of, exercising 
objective and impartial judgment on all issues encompassed within the 
qualified person's engagement? Are there any other alternative 
standards on which we should base a definition of independence for the 
purpose of the qualified person requirement?
---------------------------------------------------------------------------

    \93\ Pt. 1.5 of Canada's NI 43-101 provides that a ``qualified 
person is independent of an issuer if there is no circumstance that, 
in the opinion of a reasonable person aware of all relevant facts, 
could interfere with the qualified person's judgment regarding the 
preparation of the technical report.'' Pt. 1.4 of NI 43-101 (CP) 
then provides guidance regarding when a qualified person would not 
be considered to be independent: ``We consider a qualified person is 
not independent when the qualified person (a) is an employee, 
insider, or director of the issuer; (b) is an employee, insider, or 
director of a related party of the issuer; (c) is a partner of any 
person or company in paragraph (a) or (b); (d) holds or expects to 
hold securities, either directly or indirectly, of the issuer or a 
related party of the issuer; (e) holds or expects to hold 
securities, either directly or indirectly, in another issuer that 
has a direct or indirect interest in the property that is the 
subject of the technical report or in an adjacent property; (f) is 
an employee, insider, or director of another issuer that has a 
direct or indirect interest in the property that is the subject of 
the technical report or in an adjacent property; (g) has or expects 
to have, directly or indirectly, an ownership, royalty, or other 
interest in the property that is the subject of the technical report 
or an adjacent property; or (h) has received the majority of their 
income, either directly or indirectly, in the three years preceding 
the date of the technical report from the issuer or a related party 
of the issuer.''
    \94\ See Rule 2.01(b) of Regulation S-X (17 CFR 210.2-01(b)).
---------------------------------------------------------------------------

    28. Should we require that a registrant's disclosure of exploration 
results, mineral resources or mineral reserves in a SEC filing be based 
on the determination of a qualified person that is independent of the 
registrant? If so, should we impose such a requirement only under 
certain circumstances, such as when the filing discloses resources or 
reserves by the registrant for the first time; a material change in 
previously disclosed resources or reserves that has occurred or is 
likely to occur; or a 100% or greater change in the total mineral

[[Page 41662]]

resources or reserves on a material property, when compared to the last 
disclosure? In each case, why or why not?
    29. Alternatively, rather than requiring the qualified person to be 
independent, should we require, when the qualified person is affiliated 
with the registrant or another entity having an ownership or similar 
interest in the property, that a person independent of the registrant 
and qualified person review the qualified person's work? If so, what 
qualifications should the independent reviewer possess? If we require 
an independent review when the qualified person is affiliated with the 
registrant, should the review be for all disclosures of mineral 
resources, mineral reserves and material exploration results, or only 
those that are related to material properties? Should this review be 
required only in certain circumstances, such as when the filing 
discloses resources or reserves by the registrant for the first time; a 
material change in previously disclosed resources or reserves that has 
occurred or is likely to occur; or a 100% or greater change in the 
total mineral resources or reserves on a material property, when 
compared to the last disclosure? Should we instead adopt an independent 
review requirement for the work of an affiliated qualified person in 
all circumstances? In each case, why or why not?
    30. Should we require the registrant to disclose any material 
conflicts of interest that could reasonably affect the judgment or 
decision making of the qualified person, such as material ongoing 
business relationships between the registrant and the qualified person 
or the qualified person's employer?
    31. Would the proposed technical report summary filing requirement 
impose a significant burden on registrants? If so, which registrants 
and why? Are there changes that we could make to this proposed 
requirement to alleviate any such burden?
2. The Definition of ``Qualified Person''
    We are proposing to define a ``qualified person'' as a person who 
is a mineral industry professional with at least five years of relevant 
experience in the type of mineralization and type of deposit under 
consideration and in the specific type of activity that person is 
undertaking on behalf of the registrant. In addition, in order to be a 
qualified person, a person must be an eligible member or licensee in 
good standing of a recognized professional organization at the time the 
technical report is prepared.\95\
---------------------------------------------------------------------------

    \95\ See proposed Item 1301(d)(22) of Regulation S-K.
---------------------------------------------------------------------------

    For an organization to be a ``recognized professional 
organization,'' it must be either recognized within the mining industry 
as a reputable professional association,\96\ or be a board authorized 
by U.S. federal, state or foreign statute to regulate professionals in 
the mining, geoscience or related field. Furthermore, the organization 
must:
---------------------------------------------------------------------------

    \96\ This standard is also used in Canada's NI 43-101, although 
that instrument does not provide factors to assess when determining 
which organizations are reputable. See the definition of 
``professional association'' in NI 43-101 pt. 1.1.
---------------------------------------------------------------------------

     Admit eligible members primarily on the basis of their 
academic qualifications and experience;
     establish and require compliance with professional 
standards of competence and ethics;
     require or encourage continuing professional development;
     have and apply disciplinary powers, including the power to 
suspend or expel a member regardless of where the member practices or 
resides; and
     provide a public list of members in good standing.\97\
---------------------------------------------------------------------------

    \97\ See proposed Item 1301(d)(22) of Regulation S-K.
---------------------------------------------------------------------------

    This proposed definition is similar to the definition of competent 
or qualified person under the CRIRSCO-based codes.\98\ It differs, 
however, from those codes in at least one respect. Although CRIRSCO 
provides some guidance about what constitutes a ``recognized 
professional organization,'' \99\ most of the CRIRSCO-based codes 
require that a competent or qualified person be a member of one or more 
``approved'' organizations identified in an appendix to the code.\100\ 
This list is updated periodically by the various code regulators.
---------------------------------------------------------------------------

    \98\ The CRIRSCO standards require that a competent or qualified 
person have at least five years of relevant experience ``in the 
style of mineralization and type of deposit under consideration and 
in the activity which that person is undertaking'' and be a member 
or licensee in good standing of a recognized professional 
organization. See CRIRSCO's International Reporting Template pt. 11; 
see also the JORC Code pt. 11; the SAMREC Code pt. 10; the SME Guide 
pt. 9; and the PERC Reporting Standard pt. 10. The recognized 
professional organizations under CRIRSCO standards have and apply 
disciplinary powers to member classes eligible to serve as qualified 
persons and most require professional development to maintain such 
membership.
    \99\ See CRIRSCO's International Reporting Template pt. 11.
    \100\ See, e.g., the JORC Code pt. 11; the SAMREC Code pt. 9; 
the SME Guide pt. 9; and the PERC Reporting Standard pt. 10.
---------------------------------------------------------------------------

    In contrast, our proposed definition is more flexible while still 
providing assurance that the qualified person has the appropriate level 
of professional expertise to support disclosure of exploration results, 
mineral resources, or mineral reserves. Although this flexible approach 
would require registrants to exercise some judgment as to the qualified 
person's credentials, we believe it is a better option than requiring 
the person to be a member of one of several specifically identified 
organizations, as is the case under most of the CRIRSCO-based codes. 
Although the ``approved organization'' approach may be initially easier 
to apply, it could also become outdated as circumstances change. This 
could adversely impact the quality of disclosure. In contrast, our 
principles-based approach would provide flexibility to allow for ease 
of compliance and protection of investors.
    As discussed above, an organization that is recognized ``within the 
mining industry as a reputable professional association,'' can be, if 
all the other conditions are satisfied, a ``recognized professional 
organization.'' We are not, however, proposing any specific factors 
that would indicate that a professional association is reputable. We 
are instead seeking comment on what factors we should consider, and 
whether such factors should be incorporated into the final rules. 
Examples could include the frequency and quality of an association's 
peer-reviewed publications, the number and global distribution of its 
members, and whether and to what extent the association publishes 
guides or standards that are accepted and used in the industry.
    Regarding the minimum experience requirement, we believe five years 
would be an appropriate time frame to use for purposes of the 
definition of a qualified person. It ensures a prolonged period of 
professional experience without unduly restricting the pool of 
qualified experts. Furthermore, it is an accepted industry standard 
found in the corresponding definitions under the CRIRSCO-based 
codes.\101\
---------------------------------------------------------------------------

    \101\ See, e.g., NI 43-101 pt. 1.1, JORC pt. 11, CRIRSCO 
Template pt. 11, and SAMREC pt. 10.
---------------------------------------------------------------------------

    To assist registrants in applying the ``qualified person'' 
definition, we are also proposing detailed instructions to the 
definition of ``qualified person.'' \102\ The instructions describe the 
specific types and amount of experience necessary for various types of 
mining activities and mineral deposits. For example, if the qualified 
person is preparing or supervising the preparation of a technical 
report concerning

[[Page 41663]]

exploration results, the relevant experience must be in exploration. If 
the qualified person is estimating, or supervising the estimation of, 
mineral resources, the relevant experience must be in the estimation, 
assessment and evaluation of mineral resources and associated modifying 
factors.\103\ Similarly, if the qualified person is estimating, or 
supervising the estimation of, mineral reserves, the relevant 
experience must be in engineering and other disciplines required for 
the estimation, assessment, evaluation and economic extraction of 
mineral reserves.\104\
---------------------------------------------------------------------------

    \102\ See the proposed instructions to paragraph (d)(22) of Item 
1301.
    \103\ The term ``modifying factors'' is defined in proposed Item 
1301(d)(15) of Regulation S-K. They are the factors that a qualified 
person would be required to apply to mineralization or geothermal 
energy and then evaluate in order to establish the economic 
prospects of mineral resources, or the economic viability of mineral 
reserves. These factors include, but are not restricted to, mining, 
energy recovery and conversion, processing, metallurgical, economic, 
marketing, legal, environmental, infrastructure, social and 
governmental factors. See section II.F.1, infra, for a discussion of 
the proposed definition of modifying factors. Under the proposed 
rules, a qualified person would have to evaluate qualitatively the 
modifying factors to demonstrate ``reasonable prospects for economic 
extraction'' when determining mineral resources, but need not 
undertake the quantitative assessment to establish ``economic 
viability'' required for mineral reserve determination.
    \104\ See Instruction 1 to proposed Item 1301(d)(22).
---------------------------------------------------------------------------

    Pursuant to the proposed instructions, a qualified person must also 
have relevant experience in evaluating the specific type of mineral 
deposit under consideration (e.g., coal, metal, base metal, industrial 
mineral, mineral brine, or geothermal fields). What constitutes 
relevant experience in this regard is a facts and circumstances 
determination. For example, experience in a high-nugget, vein-type 
mineralization such as tin or tungsten would likely be relevant 
experience for estimating mineral resources for vein-gold 
mineralization whereas experience in a low grade disseminated gold 
deposit likely would not be relevant.\105\
---------------------------------------------------------------------------

    \105\ See Instruction 2 to proposed Item 1301(d)(22).
---------------------------------------------------------------------------

    The proposed instructions would further state that it is not always 
necessary for a person to have five years' experience in each and every 
type of deposit in order to be an eligible qualified person if that 
person has relevant experience in similar deposit types. For example, a 
person with 20 years' experience in estimating mineral resources for a 
variety of metalliferous hard-rock deposit types may not require as 
much as five years of specific experience in porphyry-copper deposits 
to act as a qualified person. Relevant experience in the other deposit 
types could count towards the experience in relation to porphyry-copper 
deposits.\106\
---------------------------------------------------------------------------

    \106\ See Instruction 3 to proposed Item 1301(d)(22).
---------------------------------------------------------------------------

    In addition to experience in the specific type of mineralization, 
if the qualified person is engaged in evaluating exploration results or 
preparing mineral resource estimates, the proposed instructions would 
require the qualified person to have sufficient experience with the 
sampling and analytical techniques, as well as extraction and 
processing techniques, relevant to the mineral deposit under 
consideration. As proposed, sufficient experience would mean that level 
of experience necessary to be able to identify, with substantial 
confidence, problems that could affect the reliability of data and 
issues associated with processing.\107\
---------------------------------------------------------------------------

    \107\ See Instruction 4 to proposed Item 1301(d)(22).
---------------------------------------------------------------------------

    For a qualified person applying the modifying factors to convert 
mineral resources to mineral reserves, the proposed instructions would 
require that the person must have both sufficient knowledge and 
experience in the application of these factors to the mineral deposit 
under consideration and experience with the geology, geostatistics, 
mining, extraction and processing that is applicable to the type of 
mineral and mining under consideration.\108\
---------------------------------------------------------------------------

    \108\ See Instruction 5 to proposed Item 1301(d)(22).
---------------------------------------------------------------------------

    These detailed instructions would help ensure that the qualified 
person has the appropriate level of experience for both the type of 
activity involved and the type of mineral deposit under consideration 
to make accurate assessments about the registrant's exploration 
results, mineral resources and mineral reserves. At the same time, we 
believe that the proposed definition of ``qualified person,'' taken 
together with the proposed instructions, would assist registrants in 
applying this definition and would provide sufficient flexibility in 
terms of the required level of experience and professional standing. 
Moreover, because the CRIRSCO-based codes provide similar guidance for 
the type of experience required for a competent or qualified person, 
the proposed definition should not significantly alter existing 
disclosure practices for registrants subject to those codes.\109\
---------------------------------------------------------------------------

    \109\ See, e.g. , the Canadian Institute of Mining, Metallurgy 
and Petroleum Definition Standards-For Mineral Resources and Mineral 
Reserves (``CIM Definition Standards'') 2 (2010), which is available 
at: http://web.cim.org/standards/MenuPage.cfm?sections=177&menu=178; 
the JORC Code pt. 11; the SAMREC Code pt. 10; the PERC Reporting 
Standard pt. 10; and the SME Guide pt. 9.
---------------------------------------------------------------------------

Request for Comment
    32. Should we define a qualified person in part to be a mineral 
industry professional with at least five years of relevant experience 
in the type of mineralization, as described here and in the proposed 
rule, and type of deposit under consideration and in the specific type 
of activity that person is undertaking on behalf of the registrant, as 
proposed? Why or why not? Should we specify the particular type of 
professional, such as a geologist, geoscientist or engineer, required 
under the definition? The years of experience required under the 
proposed definition is consistent with the CRIRSCO-based codes. Is five 
years the appropriate number of years to constitute the minimum amount 
of relevant experience required under the definition in our rules? 
Should we require a lesser or greater number of years of relevant 
experience (e.g., 3, 7, or 10 years)?
    33. Should we define a qualified person to be an individual, as 
proposed? Or should we expand the definition, in cases where the 
registrant engages an outside expert, to include legal entities, such 
as an engineering firm licensed by a board authorized by U.S. federal, 
state or foreign statute to regulate professionals in mining, 
geosciences or related fields? Why or why not? If we expand the 
definition in this manner, should the firm or the responsible 
individual sign the technical report summary and provide the required 
written consent? Similarly, what professional experience should be 
required and how would a firm satisfy the professional experience 
requirement? Should we adopt qualified person requirements for firms 
that are different than the proposed requirements for individual 
qualified persons? If so, what should these requirements be?
    34. Do the proposed instructions provide the appropriate guidance 
for what may constitute the requisite relevant experience in the 
particular activity involved and in the particular type of 
mineralization and deposit under consideration? Is there different or 
additional guidance that we should provide in this regard?
    35. Should we define a qualified person in part to be an eligible 
member or licensee in good standing of a recognized professional 
organization at the time the technical report is prepared, as proposed? 
Why or why not? Should we require an organization

[[Page 41664]]

to meet the six criteria specified in the proposed definition in order 
to be a recognized professional organization, as proposed? Should the 
definition of a qualified person take into account whether, and the 
extent to which, a person has been disciplined by their professional 
organization? If so, how? Should the definition specify that the 
organization must require, rather than require or encourage, continuing 
professional development? Are there different or additional criteria 
that we should require for an organization to be a recognized 
professional organization?
    36. What factors should we consider in determining whether a 
professional association is recognized as reputable with regards to the 
definition of a recognized professional organization? Are the examples 
we provided appropriate factors for determining whether a professional 
association is recognized as reputable or are other factors more 
appropriate? Should any of these factors be incorporated into the final 
rules?
    37. Instead of the proposed flexible approach, should we require 
that a qualified person be a member of an approved organization listed 
in an appendix to the mining disclosure rules or in a document posted 
on the Commission's Web site? If so, how should the Commission 
determine which organizations to approve and how frequently should the 
Commission update the approved organization list?
    38. Should we, as proposed, require a registrant to disclose the 
recognized professional organization(s) that the qualified person is a 
member of, and confirm that the qualified person is a member in good 
standing of the organization(s)?
    39. Are there different or additional conditions that a person 
should have to satisfy in order to meet the definition of qualified 
person? For example, should we require that a person have attained a 
particular level of formal education (bachelor's degree, master's 
degree, or doctorate) in order to be a qualified person? If so, what 
level of education would be appropriate? Would such a minimum education 
requirement disqualify a significant percentage of persons from being 
considered as qualified persons who otherwise possess the requisite 
relevant experience?
    40. Is the definition of qualified person too restrictive, thus 
increasing the cost and difficulty associated with finding a qualified 
person? Alternatively, should the definition be more restrictive, to 
help ensure a qualified person has an appropriate level of training and 
expertise? In either case, why?
    41. Instead of prescribing qualifications for the qualified person, 
should we instead require a registrant to provide detailed disclosure 
regarding the qualifications of the individual who prepared the 
technical report summary? Why or why not?

D. Treatment of Exploration Results

    Neither Guide 7 nor Item 102 addresses the disclosure of 
exploration results in Commission filings.\110\ In contrast, the 
CRIRSCO-based codes require the disclosure of material exploration 
results, which are defined as data and information generated by mineral 
exploration programs that might be of use to investors but which do not 
form part of a disclosure of mineral resources or mineral 
reserves.\111\
---------------------------------------------------------------------------

    \110\ Accordingly, the staff does not request disclosure of 
exploration results. If a registrant voluntarily provides 
exploration results, the staff will review, and if appropriate, 
issue comments on, such disclosure.
    \111\ See, e.g., the JORC Code pts. 17, 20 and 31; the SAMREC 
Code pts. 18-19; the PERC Reporting Standard pts. 16-18; and the SME 
Guide pts. 17, 20 and 31.
---------------------------------------------------------------------------

    We are proposing to require that a registrant disclose material 
exploration results for each of its material properties.\112\ Similar 
to the CRIRSCO-based codes, we propose to define exploration results as 
data and information generated by mineral exploration programs (i.e., 
programs consisting of sampling, drilling, trenching, analytical 
testing, assaying, and other similar activities undertaken to locate, 
investigate, define or delineate a mineral prospect or mineral deposit) 
that are not part of a disclosure of mineral resources or 
reserves.\113\ A proposed instruction would explain that when 
determining whether exploration results are material, a registrant 
should consider their importance in assessing the value of a material 
property or in deciding whether to develop the property.\114\ This 
instruction is consistent with the purpose of exploration activity, 
which is to determine whether a mining property contains a deposit that 
is economically viable and worth developing or to reduce the 
uncertainty surrounding that determination.\115\ Prior to establishing 
the economic viability to an acceptable degree of certainty, 
exploration results are also used to assess the potential value of the 
property.\116\ Hence, we believe that when determining whether 
exploration results are material, registrants should consider how the 
exploration results affect the valuation of a property or the decision 
to develop the property.
---------------------------------------------------------------------------

    \112\ See proposed Item 1304(b)(6) of Regulation S-K.
    \113\ See proposed Item 1301(d)(4) of Regulation S-K.
    \114\ See proposed Instruction to Item 1304(b)(6) of Regulation 
S-K.
    \115\ See, e.g., Jos[eacute] L. Lee-Moreno, ``Mineral 
Prospecting and Exploration,'' in 1 SME Mining Engineering Handbook 
105 (P. Darling, ed., 2011), which states that ''[t]he main 
objective of minerals exploration is to locate ore deposits, which 
are anomalous accumulations of one or more minerals that can be 
mined at a profit.''
    \116\ It is accepted industry practice that the presence of 
mineralization and indications of exploration potential are factors 
in valuation of mining properties. See, e.g., Code for the Technical 
Assessment and Valuation of Mineral and Petroleum Assets and 
Securities for Independent Expert Reports (``the VALMIN Code'') pt. 
74-79 (2005). Also, relevant accounting principles require valuation 
to include consideration of the so-called ``value beyond proven and 
probable,'' which includes exploration potential. See FASB ASC 930-
360 and 930-805 (formerly Emerging Issues Task Force, Fin. 
Accounting Standards Bd.), EITF Abstracts: Mining Assets: Impairment 
and Business Combinations, Issue No. 04-3 (Mar. 17-18, 2004), which 
is available at: http://www.fasb.org/pdf/abs04-3.pdf.
---------------------------------------------------------------------------

    The proposed rules would preclude the use of exploration results, 
by themselves, to derive estimates of tonnage, grade, and production 
rates, or in an assessment of economic viability \117\ because of the 
level of risk associated with exploration results. Exploration results, 
by themselves, are inherently speculative in that they do not include 
an assessment of geologic and grade or quality continuity and overall 
geologic uncertainty. Therefore, we believe exploration results are 
insufficient to support disclosure of estimates of tonnage, grade, or 
other quantitative estimates. Tonnage and grades should only be part of 
mineral resource and reserve estimates, which must include an 
assessment of geologic and grade or quality continuity and overall 
geologic uncertainty.\118\
---------------------------------------------------------------------------

    \117\ See proposed Item 1301(d)(4) of Regulation S-K.
    \118\ Similar restrictions on the use of exploration results 
exist in the CRIRSCO-based codes. See, e.g., CRIRSCO Template pt. 
18, which states that ``[i]t should be made clear in public reports 
that contain Mineral Exploration Results that it is inappropriate to 
use such information to derive estimates of tonnage and grade.'' See 
also SME Guide pt. 31 and JORC Code pt. 18.
---------------------------------------------------------------------------

    Despite these limitations, we believe that disclosure of material 
exploration results would provide investors with a more comprehensive 
picture of a registrant's mining operations and help them make more 
informed investment decisions. A company engaged in mining activities 
frequently uses exploration results, prior to a determination of 
mineral resources, to assess the economic potential of its property as 
part of its decision to develop a property. In addition, a

[[Page 41665]]

company uses exploration results to determine whether mineral resources 
exist and to estimate the mineral resources. To the extent that mineral 
resources (and mineral reserves estimated from them) on a particular 
property are material, depending on the facts and circumstances, the 
exploration results that led to the estimation of those mineral 
resources could also be material. For example, exploration results that 
have significantly impacted the registrant's analysis or estimates of 
the life of a material mining project would be considered material, 
thus triggering a disclosure obligation.
    Requiring the disclosure of material exploration results would 
align our disclosure rules with most foreign mining codes,\119\ which 
would help to provide for a consistent level of mining disclosure 
across relevant jurisdictions. We believe that the potential risk 
associated with the uncertainty inherent in exploration results would 
be mitigated by precluding the use of exploration results alone, 
without due consideration of geologic uncertainty and economic 
prospects, to serve as a basis for disclosure of tonnage, grade, and 
production rates, or in an assessment of economic viability.
---------------------------------------------------------------------------

    \119\ See note 111, supra.
---------------------------------------------------------------------------

    At this time, we are not proposing to require the disclosure of 
exploration results by a registrant that has material mining operations 
in the aggregate but no individual properties that are material.\120\ 
If a company has determined that it lacks material mining properties, 
we believe it is unlikely that such a company would have exploration 
results that are material. While a company with no material properties 
could voluntarily elect to disclose exploration results for its 
properties, we do not believe investors would benefit from a 
requirement to disclose exploration results under those circumstances.
---------------------------------------------------------------------------

    \120\ An example of such a registrant would be an industrial 
minerals company that has more than 50 properties none of which is 
individually material. Under the proposed rules, such a company 
would be required to provide summary disclosure concerning its 
mineral resources and mineral reserves. See section II.G.1, infra.
---------------------------------------------------------------------------

Request for Comment
    42. Should we require a registrant to disclose material exploration 
results for each of its material properties, as proposed? Why or why 
not? Alternatively, should we permit registrants to provide exploration 
results in a summary form?
    43. Should we define exploration results as data and information 
generated by mineral exploration programs (i.e., programs consisting of 
sampling, drilling, trenching, analytical testing, assaying, and other 
similar activities undertaken to locate, investigate, define or 
delineate a mineral prospect or mineral deposit) that do not form part 
of a disclosure of mineral resources or reserves, as proposed? Why or 
why not? Are there other characteristics that we should include in the 
definition of exploration results? Are there other activities that we 
should include as examples of mineral exploration programs? Are there 
activities that we should exclude as examples of mineral exploration 
programs?
    44. What are the risks that could result from requiring disclosure 
of material exploration results? Should we prohibit the use of 
exploration results to derive estimates of tonnage, grade, and 
production rates, or in an assessment of economic viability, as 
proposed? Why or why not? Would prohibiting the use of exploration 
results for these purposes, as proposed, adequately protect investors 
from the increased risk associated with including information having a 
lower level of certainty about the economic value of mining properties?
    45. When determining whether exploration results are material, 
should a registrant consider their importance in assessing the value of 
a material property or in deciding whether to develop the property, as 
proposed? Why or why not? Are there other circumstances that would 
better define when exploration results are material? If so, what are 
those circumstances?
    46. We are proposing to require the disclosure of material 
exploration results for each material property. Should we also require 
disclosure of material exploration results when the registrant has 
determined that it has in the aggregate material mining operations but 
no individual properties are material? Would disclosure of material 
exploration results for its properties in the aggregate (when none is 
individually material) provide additional meaningful disclosure for 
investors? If so, how should a registrant disclose such exploration 
results? Should it provide such results in summary form? Or should it 
provide detailed disclosure about all material exploration results for 
all of its properties?

E. Treatment of Mineral Resources

    The determination of mineral resources is the second step, after 
mineral exploration, that geoscientists and engineers use to assess the 
value of a mining property.\121\ Most foreign mining codes require the 
disclosure of material mineral resources.\122\ In contrast, Item 102 
and Guide 7 preclude the disclosure of mineral resources in Commission 
filings (subject to the ``foreign or state law'' exception discussed 
above).\123\ According to some industry groups,\124\ this restriction 
has limited the completeness and relevance of SEC filings.
---------------------------------------------------------------------------

    \121\ First, they use the exploration results to determine if a 
mineral deposit is present. Next, they estimate the mineral 
resources, which are the portions of the mineral deposit that have 
prospects of economic extraction. The last step is the determination 
of mineral reserves, which are the economically mineable portions of 
the mineral resources.
    \122\ See, e.g., the JORC Code pts. 4 and 14; the SAMREC Code 
pts. 4 and 14; the SME Guide pts. 3 and 20; and the PERC Reporting 
Standard pts. 4 and 13.
    \123\ See Instruction 3 to paragraph (b)(5) of Guide 7 and 
Instruction 5 to Item 102 of Regulation S-K.
    \124\ See the SME Petition for Rulemaking at 1.
---------------------------------------------------------------------------

    We are proposing to require a registrant with material mining 
operations to disclose specified information in its Securities Act and 
Exchange Act filings concerning any mineral resources, as defined in 
the proposed rules, that have been determined based on information and 
supporting documentation from a qualified person. As proposed, a 
registrant with material mining operations that has multiple properties 
would have to provide both summary disclosure about its mineral 
resources and more detailed disclosure concerning its mineral resources 
for each material property.\125\
---------------------------------------------------------------------------

    \125\ See sections II.G.1 and II.G.2, infra, respectively, for a 
discussion of the proposed summary and individual property 
disclosure requirements for mineral resources and reserves.
---------------------------------------------------------------------------

    Under the proposed rules, a registrant could not disclose that it 
has determined that a mineral deposit constitutes a ``mineral 
resource'' (or, for that matter, a ``mineral reserve'') unless that 
determination is based upon information and supporting documentation 
\126\ prepared by a qualified person. Nevertheless, there would be no 
requirement that a registrant make such an affirmative determination. 
For example, a registrant could choose not to engage a qualified person 
to conduct the analyses and prepare the documentation necessary to 
support a determination that a mineral deposit is a mineral resource 
(or reserve). In that case, under the proposed rules, in the absence of 
such

[[Page 41666]]

information and supporting documentation, the registrant would be 
deemed not to have any mineral resources, and as such, would not be 
required to disclose mineral resources in a filing. If, however, the 
registrant did make the determination that it had mineral resources 
based upon information and supporting documentation prepared by a 
qualified person (e.g., as part of its efforts to attract investors or 
secure project financing), then under the proposed rules the registrant 
would be required to disclose such mineral resources. This approach is 
consistent with the CRIRSCO-based codes.\127\
---------------------------------------------------------------------------

    \126\ As discussed in sections II.E.3 and II.F.2, infra, by 
``information and supporting documentation,'' we mean an initial 
assessment for mineral resource determination and a preliminary or 
final feasibility study for mineral reserve determination.
    \127\ Similarly, the other significant mining jurisdictions do 
not require a registrant to make the determination that it has 
mineral resources or reserves, as defined by those codes. The 
regulatory frameworks do, however, require disclosure of mineral 
resources and mineral reserves once the registrant has made the 
determination that it has them and they are material. See, e.g., ASX 
Listing Rules 5.7, 5.8, and 5.9, which provide guidance for 
disclosure of exploration results, mineral resources and mineral 
reserves for ``material mining projects,'' and which are available 
at: http://www.asx.com.au/documents/rules/Chapter05.pdf.
---------------------------------------------------------------------------

    Requiring a mining registrant with material mining operations to 
disclose mineral resources in addition to mineral reserves would 
provide investors with additional important information concerning the 
registrant's operations and prospects. The importance of this 
information is demonstrated by the fact that most foreign mining codes 
require the disclosure of mineral resources, U.S. registrants routinely 
disclose mineral resource information on their Web sites, and many 
mining company analysts consider mineral resource information as an 
important factor in their valuations and recommendations. Requiring the 
disclosure of mineral resources would also place U.S. registrants on a 
level playing field with Canadian mining registrants and non-U.S. 
mining companies that are subject to one or more of the other CRIRSCO-
based mining codes.
    Requiring disclosure of mineral resources in Commission filings 
could increase the reporting costs for those mining companies that do 
not currently disclose mineral resource information. We believe, 
however, that any such increase would be minimal as most mining 
companies already assess mineral resources in order to determine 
reserves.\128\ Requiring the disclosure of mineral resources could also 
increase the possibility that investors may misunderstand the economic 
value of a mining company, given that mineral resources are less 
certain than mineral reserves. As explained below, however, we believe 
that this risk is limited by the proposed definition of the term 
mineral resource, by requiring disclosure of the particular class of 
mineral resource, and by requiring an initial assessment for mineral 
resource disclosure. We also believe that there are potential benefits 
to investors from the disclosure of mineral resources, including more 
comprehensive and potentially more accurate disclosure of mineral 
reserves.\129\
---------------------------------------------------------------------------

    \128\ Best practice in mining engineering is to first determine 
the quantity and quality of the material of economic interest (i.e., 
mineral resource estimation), prior to engineering and economic 
evaluation, to determine if any or all of that material can be 
extracted economically (i.e., mineral reserve estimation). See, 
e.g., Alan C. Noble, ``Mineral Resource Estimation,'' in 1 SME 
Mining Engineering Handbook 203 (P. Darling, ed., 2011), which 
states ``[t]he ore reserve estimate follows the resource estimate.''
    \129\ Given that mineral reserves estimates are based on 
estimates of mineral resources, we believe that the rigor 
surrounding the disclosure of mineral resources as well as the 
attendant scrutiny from the qualified person, particularly with 
regards to mineral resource classification, is likely to lead to 
more reliable mineral reserves disclosure.
---------------------------------------------------------------------------

    As previously noted, Item 102 and Guide 7 preclude the disclosure 
of estimates other than reserves in SEC filings unless such information 
is required to be disclosed by foreign or state law. Since we are 
proposing to require the disclosure of estimates for mineral resources 
in addition to mineral reserves by a registrant with material mining 
operations, the foreign or state law exception would no longer be 
necessary. Therefore, the proposed rules would eliminate this 
exception.
Request for Comment
    47. Should we require a registrant with material mining operations 
to disclose mineral resources in addition to mineral reserves, as 
proposed? Why or why not?
    48. What are the risks that could result from requiring a 
registrant with material mining operations to disclose its mineral 
resources? How could the Commission mitigate those risks?
    49. Under the proposed rules, a registrant with material mining 
operations could choose not to engage a qualified person to determine 
whether a mineral deposit is a mineral resource, with the result that 
the registrant would not be required to disclose mineral resources that 
may exist. Should the rules, as proposed, preclude a registrant from 
disclosing mineral resources in an SEC filing if it has elected not to 
engage a qualified person to make the resource determination? 
Alternatively, should the rules permit a registrant to disclose mineral 
resources in an SEC filing, despite not having engaged a qualified 
person to make the resource determination, in certain instances? If so, 
in what instances would it be appropriate to permit such disclosure?
1. Mineral Resource Definition
    Because both Item 102 and Guide 7 prohibit the disclosure of non-
reserve estimates except as required under foreign or state law, there 
currently is no Commission definition of ``mineral resource.'' The 
proposed rules would define ``mineral resource'' as a concentration or 
occurrence of material of economic interest in or on the earth's crust 
in such form, grade or quality, and quantity that there are reasonable 
prospects for its economic extraction.\130\ The proposed rules would 
define the term ``material of economic interest,'' as used in the 
definition of mineral resource, to include mineralization, including 
dumps and tailings,\131\ geothermal fields, mineral brines, and other 
resources extracted on or within the earth's crust. As proposed, the 
term ``material of economic interest'' would not include oil and gas 
resources as defined in Regulation S-X,\132\ gases (e.g. helium and 
carbon dioxide), or water.\133\
---------------------------------------------------------------------------

    \130\ See proposed Item 1301(d)(14)(i) of Regulation S-K.
    \131\ The term ``dumps'' refers to stockpiles of mined material. 
The term ``tailings'' refers to a mixture of fine mineral matter and 
process effluents generated by mineral processing plants.
    \132\ See 17 CFR 210.4-10(a)(16)(D).
    \133\ See proposed Item 1301(d)(14)(ii) of Regulation S-K.
---------------------------------------------------------------------------

    The proposed rules would further specify that, when determining the 
existence of a mineral resource, a qualified person must be able to 
estimate or interpret the location, quantity, grade or quality 
continuity, and other geological characteristics of the mineral 
resource from specific geological evidence and knowledge, including 
sampling.\134\ In addition, when determining the existence of a mineral 
resource, as proposed, the qualified person must conclude that there 
are reasonable prospects for economic extraction of the mineral 
resource based on an initial assessment that he or she conducts by 
qualitatively applying the modifying factors \135\ likely to influence 
the prospect of economic extraction.\136\
---------------------------------------------------------------------------

    \134\ See proposed Item 1301(d)(14)(iii)(A) of Regulation S-K.
    \135\ See proposed Item 1301(d)(15) of Regulation S-K for the 
definition of modifying factors.
    \136\ See proposed Item 1301(d)(14)(iii)(B) of Regulation S-K.
---------------------------------------------------------------------------

    Similar to the CRIRSCO-based codes, the proposed definition of 
mineral resource would state that it is not to be merely an inventory 
\137\ of all

[[Page 41667]]

mineralization drilled or sampled.\138\ A mineral resource is instead a 
reasonable estimate of mineralization, taking into account relevant 
factors such as cut-off grade,\139\ likely mining dimensions, location 
or continuity, which, with the assumed and justifiable technical and 
economic conditions, is likely to, in whole or in part, become 
economically extractable.\140\
---------------------------------------------------------------------------

    \137\ The term ``inventory of mineralization'' means an estimate 
of the total quantity of mineralization based on the available 
evidence.
    \138\ See, e.g., JORC Code pt. 20; CRIRSCO International 
Reporting Template pt. 21; and SAMREC Code pt. 21.
    \139\ The term cut-off grade refers to the grade (the 
concentration of metal or mineral in rock) at which the destination 
of the material changes during mining. For establishing prospects of 
economic extraction, it is the grade that distinguishes between the 
material that is uneconomic and the material that is economic and 
therefore going to be mined and processed. Terms with similar 
meanings include net smelter return, pay limit and break-even 
stripping ratio. See Proposed Item 1301(d)(1) of Regulation S-K.
    \140\ See Note to proposed Item 1301(d)(14)(i) of Regulation S-
K.
---------------------------------------------------------------------------

    As proposed, the definition of mineral resource would include non-
solid matter, such as geothermal fields and mineral brines, in addition 
to mineralization. We believe this is appropriate because the 
scientific and engineering principles used to characterize mineral 
brine and geothermal resources and reserves are substantially similar 
to those used to characterize solid mineral resources and reserves. By 
definition, extracting minerals from mineral brines is mining.\141\ 
Although extracting energy from geothermal fields in the earth's crust 
is not identical to extracting minerals, we believe there are 
sufficient similarities to justify including geothermal energy in the 
proposed rules. For example, the exploration and development techniques 
leading to geothermal extraction are similar to the techniques used for 
mineral extraction. Also, the extraction of fluid in geothermal fields 
is similar to in-situ solution mining.\142\ In addition, mineral 
resource classification frameworks are widely accepted as appropriate 
for geothermal resource disclosure.\143\
---------------------------------------------------------------------------

    \141\ Mining can be defined as the ``[p]rocess of obtaining 
useful minerals from the earth's crust.'' Lewis & Clark, Elements of 
Mining 20 (1964). Although the CRIRSCO-based codes define a mineral 
resource as ``solid material'' (see, e.g., the CIM Definition 
Standards at 4 and the JORC code pt. 20), most of those codes 
regulate the mining of mineral brines under the same set of rules 
governing a mineral resource. See e.g., Ontario Securities 
Commission (OSC) Notice 43-704, Mineral Brine Projects and National 
Instrument 43-101 Standards of Disclosure for Mineral Projects (July 
22, 2011).
    \142\ In-situ solution mining is the selective dissolution and 
recovery of a target mineral by dissolving the mineral in its 
original location and pumping the mineral-laden solution to a 
processing plant located on the surface, where the desired metals 
are produced for market. The solution that dissolves the target 
mineral is pumped into the rock via injection wells and the mineral-
laden solution is recovered via production wells. Similarly, 
extracting energy from geothermal fields involves pumping fluids in 
and out of geologic material.
    \143\ For example, the Australian Geothermal Energy 
Association's Geothermal Code Committee concluded that JORC was a 
better model for the Australian Geothermal Reporting Code than the 
Society of Petroleum Engineers' Resources Management System. See 
J.V. Lawless, M. Ward and G. Beardsmore, ``The Australian Code for 
Geothermal Reserves and Resources Reporting: Practical Experience,'' 
in Proceedings of the World Geothermal Congress (2010).
---------------------------------------------------------------------------

    As such, we believe that including these non-solid materials in the 
proposed definition of mineral resource would provide a workable and 
reasonable framework for disclosure related to these activities. 
Moreover, including minerals extracted from mineral brines and energy 
extracted from geothermal fields within the definition should provide 
clarity and consistency for the disclosure obligations of registrants 
engaged in these activities.
    The proposed definition of ``mineral resource'' also would include 
dumps and tailings in recognition of the fact that, under certain 
circumstances, these byproducts from older mining operations possess 
value. We also note that the inclusion of dumps and tailings in the 
definition of mineral resource reflects industry practice and is 
consistent with the CRIRSCO-based codes.\144\
---------------------------------------------------------------------------

    \144\ See, e.g., the JORC Code pt. 20, the SAMREC Code pt. 21, 
and the SME Guide pt. 33.
---------------------------------------------------------------------------

    We are proposing to exclude oil and gas resources as defined by 
Regulation S-X from the definition of mineral resource because the 
Commission has adopted separate rules for oil and gas disclosure.\145\ 
We are proposing to exclude gases (such as helium and carbon dioxide) 
and water because the scientific and engineering principles used to 
estimate these resources are substantially different from those used to 
estimate mineral resources.
---------------------------------------------------------------------------

    \145\ See subpart 1200 of Regulation S-K (17 CFR 230.1201 et 
seq.).
---------------------------------------------------------------------------

    As noted above, we are proposing to require that in order to 
classify a deposit as a resource, a qualified person must establish 
that there are reasonable prospects of economic extraction by 
estimating or interpreting key geological characteristics from specific 
geological evidence. We believe that requiring an analysis based on 
specific geological evidence to establish prospects of economic 
extraction would provide an appropriately exacting standard, and 
importantly, one that is more exacting than what we propose to require 
for the disclosure of exploration results. A qualified person should 
have a higher level of confidence to determine that a deposit is 
properly classified as a mineral resource (which is an estimate of 
tonnage and grade that has prospects of economic extraction) than to 
report exploration results (which may not indicate the existence of any 
tonnage with reasonable prospects of economic extraction) because of 
the relatively greater weight that investors are likely to place on 
estimates of mineral resources. This in turn should help mitigate the 
uncertainty inherent in the determination of mineral resources. 
Moreover, because the CRIRSCO-based codes impose a substantially 
similar requirement, we do not believe this aspect of the proposed 
definition of mineral resources would significantly alter existing 
disclosure practices of registrants subject to these codes.
Request for Comment
    50. Should we define the term ``mineral resource,'' as proposed? 
Why or why not? In order for material to be classified as a mineral 
resource, should there be reasonable prospects for its economic 
extraction, as proposed? Why or why not?
    51. Should the definition of mineral resource include 
mineralization, including dumps and tailings, as proposed? Should the 
definition of mineral resource also include geothermal fields and 
mineral brines, as proposed? Why or why not? Is there any other 
material that should be explicitly included in the definition of 
mineral resource?
    52. Should the definition of mineral resource exclude oil and gas 
resources as defined in Regulation S-X,\146\ gases (e.g., helium and 
carbon dioxide), and water, as proposed? Why or why not? Is there any 
other material that should be explicitly excluded from the definition 
of mineral resource?
---------------------------------------------------------------------------

    \146\ See 17 CFR 210.4-10(a)(16)(D).
---------------------------------------------------------------------------

    53. Should the definition of mineral resource include the 
requirement that a qualified person estimate or interpret the location, 
quantity, grade or quality continuity, and other geological 
characteristics of the mineral resource from specific geological 
evidence and knowledge, including sampling, as proposed? Why or why 
not? Are there other geological characteristics that we should 
explicitly require a qualified person to estimate or interpret when 
determining the existence of mineral resources?
2. Mineral Resource Classification
    The proposed rules would adopt the CRIRSCO-based classification of 
mineral

[[Page 41668]]

resources \147\ into inferred, indicated and measured mineral 
resources, in order of increasing geological confidence,\148\ and 
define those terms. Further, the proposed rules would require a 
registrant with material mining operations to classify its mineral 
resources into inferred, indicated and measured mineral resources, in 
order of increasing confidence based on the level of underlying 
geological evidence. We believe this classification requirement would 
contribute to the accuracy of a registrant's mining disclosure in SEC 
filings, and thereby benefit investors, because it is based upon an 
assessment of ``geologic uncertainty,'' which is the risk related to 
the quality, quantity and location of the mineral in the ground. 
Geologic uncertainty directly impacts two very significant estimates, 
production quantities per period and related cash flows, which are 
crucial to a registrant's determination, and an investor's 
understanding, of mineral resource disclosure. We, therefore, believe 
that the proposed rules should require, and not merely allow, the 
classification of mineral resources.
---------------------------------------------------------------------------

    \147\ See, e.g., JORC Code pt. 20; CRIRSCO International 
Reporting Template pt. 21; and SAMREC Code pt. 21.
    \148\ See Note to proposed Item 1301(d)(14)(ii) of Regulation S-
K.
---------------------------------------------------------------------------

    Similar to the CRIRSCO-based codes,\149\ we propose to define 
``inferred mineral resource'' as that part of a mineral resource for 
which quantity and grade or quality are estimated on the basis of 
limited geological evidence and sampling.\150\ The proposed rules would 
explain that, as used in this proposed definition, ``limited geological 
evidence'' means evidence that is only sufficient to establish that 
geological and grade or quality continuity is more likely than not. The 
proposed rules would further provide that the level of geological 
uncertainty associated with an inferred mineral resource is too high to 
apply modifying factors in a manner useful for evaluation of economic 
viability.\151\ Because an inferred mineral resource has the lowest 
level of geological confidence of all mineral resources, under the 
proposed rules, it may not be considered when assessing the economic 
viability of a mining project and may not be converted to a mineral 
reserve.\152\
---------------------------------------------------------------------------

    \149\ See, e.g., JORC Code pt. 21; CRIRSCO International 
Reporting Template pt. 22; and SAMREC Code pt. 22.
    \150\ See proposed Item 1301(d)(10)(i) of Regulation S-K.
    \151\ See proposed Item 1301(d)(10)(ii) of Regulation S-K.
    \152\ See Note to proposed Item 1301(d)(10) of Regulation S-K.
---------------------------------------------------------------------------

    The proposed rules would establish the level of certainty that a 
qualified person must strive to achieve when determining the existence 
of an inferred mineral resource. First, the qualified person must have 
a reasonable expectation that the majority of inferred mineral 
resources could be upgraded to indicated or measured mineral resources 
with continued exploration. Second, the qualified person should be able 
to defend the basis of this expectation before his or her peers.\153\
---------------------------------------------------------------------------

    \153\ See proposed Item 1301(d)(10)(iii) of Regulation S-K.
---------------------------------------------------------------------------

    We understand that, because inferred mineral resources have the 
lowest level of geologic confidence, requiring their disclosure in a 
mining registrant's SEC filing could lead to investor misunderstanding 
about the nature of a registrant's mining operations (that would not be 
present absent such disclosure). We believe, however, that the proposed 
definition of inferred mineral resource \154\ would reduce any 
potential misunderstanding by providing appropriate context for and 
limitations on such disclosure. First, the proposed definition would 
clearly highlight for investors that inferred mineral resources have 
the highest degree of uncertainty, allowing investors to take this into 
account when assessing a registrant's disclosure. Second, the proposed 
definition would prohibit a registrant from using inferred mineral 
resources as a basis to determine mineral reserves. Rather, inferred 
resources would first have to meet the definitional requirements of, 
and be converted into, measured or indicated mineral resources. Only 
then would such inferred resources be eligible to be considered as 
potential mineral reserves under the proposed rules. This should help 
limit the incentive for a registrant to be aggressive in disclosing 
inferred mineral resources because such disclosure would not increase 
the likelihood that such resources would ultimately be deemed to be 
mineral reserves.
---------------------------------------------------------------------------

    \154\ See proposed Item 1301(d)(10) of Regulation S-K.
---------------------------------------------------------------------------

    We note that our proposal differs from the CRIRSCO-based codes, 
which allow a qualified person to make limited use of inferred mineral 
resources in his or her technical and economic studies as long as 
certain cautionary language is included in the disclosure.\155\ We 
believe, however, that the significant uncertainty associated with 
estimates of inferred mineral resources could call into question the 
results of technical or economic studies based on inferred mineral 
resources. As such, we do not believe that any such disclosure would be 
useful for investors.\156\ Consequently, our proposed rules would 
prohibit qualified persons from using inferred mineral resources in any 
economic analysis conducted to determine the economic viability of 
mineral projects or economic prospects of mineral deposits in support 
of SEC disclosures.
---------------------------------------------------------------------------

    \155\ See, e.g., CRIRSCO International Reporting Template pt. 
22, which states that ``[c]onfidence in the [inferred mineral 
resource] estimate is usually not sufficient to allow the results of 
the application of technical and economic parameters to be used for 
detailed planning. For this reason, there is no direct link from an 
Inferred Resource to any category of Mineral Reserves. Caution 
should be exercised if this category is considered in technical and 
economic studies.'' Also, Canada's NI 43-101 2.3(3) states, in part, 
that ``[d]espite paragraph (1)(b), an issuer may disclose the 
results of a preliminary economic assessment that includes or is 
based on inferred mineral resources if the disclosure (a) states 
with equal prominence that the preliminary economic assessment is 
preliminary in nature, that it includes inferred mineral resources 
that are considered too speculative geologically to have the 
economic considerations applied to them that would enable them to be 
categorized as mineral reserves, and there is no certainty that the 
preliminary economic assessment will be realized . . .'' See also 
JORC Code pt. 21 and 38, SAMREC Code pt. 23, and SME Guide pt. 34, 
which contain similar cautionary language.
    \156\ The CRIRSCO-based codes may allow the use of inferred 
resources in lower level technical or economic studies, but not in 
higher level studies to support a determination of economic 
viability. See, e.g., CIM Definition Standards at 4 (2012) which 
states that ``[c]onfidence in the [inferred mineral resource] 
estimate is insufficient to allow the meaningful application of 
technical and economic parameters or to enable an evaluation of 
economic viability worthy of public disclosure. Inferred Mineral 
Resources must be excluded from estimates forming the basis of 
feasibility or other economic studies.''
---------------------------------------------------------------------------

    We propose to define ``indicated mineral resource'' as that part of 
a mineral resource for which quantity and grade or quality are 
estimated on the basis of adequate geological evidence and 
sampling.\157\ The proposed rules would explain that, as used in this 
definition, ``adequate geological evidence'' means evidence that is 
sufficient to establish geological and grade or quality continuity with 
reasonable certainty. This means that the level of geological certainty 
associated with an indicated mineral resource is sufficient to allow a 
qualified person to apply modifying factors in sufficient detail to 
support mine planning and evaluation of the economic viability of the 
deposit.\158\ The proposed rules would further provide that an 
indicated mineral resource has a lower level of confidence than that 
applicable to a measured mineral resource and may only be

[[Page 41669]]

converted to a probable mineral reserve.\159\
---------------------------------------------------------------------------

    \157\ See proposed Item 1301(d)(9)(i) of Regulation S-K.
    \158\ See proposed Item 1301(d)(9)(ii) of Regulation S-K.
    \159\ See Note to proposed Item 1301(d)(9) of Regulation S-K. We 
define ``probable mineral reserve'' at proposed Item 1301(d)(18) of 
Regulation S-K.
---------------------------------------------------------------------------

    We propose to define ``measured mineral resource'' as that part of 
a mineral resource for which quantity and grade or quality are 
estimated on the basis of conclusive geological evidence and 
sampling.\160\ The proposed rules would explain that, as used in this 
definition, ``conclusive geological evidence'' means evidence that is 
sufficient to test and confirm geological and grade or quality 
continuity. This means that the level of geological certainty 
associated with a measured mineral resource is sufficient to allow a 
qualified person to apply modifying factors in sufficient detail to 
support detailed mine planning and final evaluation of the economic 
viability of the deposit.\161\ The proposed rules would further provide 
that, because a measured mineral resource has a higher level of 
confidence than that applying to either an indicated mineral resource 
or an inferred mineral resource, it may be converted to a proven 
mineral reserve or to a probable mineral reserve.\162\
---------------------------------------------------------------------------

    \160\ See proposed Item 1301(d)(12)(i) of Regulation S-K.
    \161\ See proposed Item 1301(d)(12)(ii) of Regulation S-K.
    \162\ See Note to proposed Item 1301(d)(12) of Regulation S-K.
---------------------------------------------------------------------------

    The proposed definitions of ``indicated mineral resource'' and 
``measured mineral resource'' are substantially similar to the 
corresponding CRIRSCO-based definitions. We believe aligning the U.S. 
definitions with the foreign mining code provisions would benefit 
registrants and investors by promoting uniformity in mining disclosure 
standards. For those mining registrants that are dual-listed and 
already subject to the CRIRSCO-based requirements, such alignment 
should help to reduce any potential additional costs caused by the 
proposed requirement to disclose indicated and measured mineral 
resources. In addition, some registrants, even if not currently subject 
to the CRIRSCO-based requirements, nonetheless apply substantially 
similar definitions of indicated and measured mineral resources as part 
of the process of determining mineral reserves.\163\
---------------------------------------------------------------------------

    \163\ As explained in note 128, supra, the best practice in 
mining engineering is to determine mineral resources, prior to 
engineering and economic evaluation, to determine if any or all of 
those resources can be classified as mineral reserves. The 
predominant approach in the mining engineering literature is that 
mineral resource classification should be based on the estimator's 
judgment of the uncertainty in estimates due to the geologic 
uncertainty. See, e.g., JORC pt. 24 and SAMREC pt. 26. This is 
consistent with our proposed definitions of mineral resource 
classifications.
---------------------------------------------------------------------------

    As noted above, geologic uncertainty directly affects the 
uncertainty associated with production quantities per period and 
related cash flows. As such, we believe that in addition to disclosure 
of resource estimates, it is appropriate to require disclosure of the 
level of geologic uncertainty associated with different classes of 
mineral resources. Specifically, we propose to require that the 
qualified person, as part of the initial assessment,\164\ quantify and 
disclose the uncertainty associated with the production estimates 
derived from such resources. A qualified person would be permitted to 
develop mineral resource estimates using any generally accepted method, 
including geostatistics, simulation or inverse distance. Regardless of 
the method used to develop resource estimates, however, the qualified 
person would be required to estimate and disclose, in the prescribed 
format, the uncertainty associated with each class of mineral 
resource.\165\ The appropriate methods for quantifying and disclosing 
this uncertainty will, as discussed below, depend upon the specific 
classification of the resource.
---------------------------------------------------------------------------

    \164\ We propose to define ``initial assessment'' as a 
preliminary technical and economic study of the economic potential 
of all or parts of mineralization to support the disclosure of 
mineral resources. An initial assessment is different from a pre-
feasibility study in that a pre-feasibility study is used to 
determine whether all or part of a mineral resource can be converted 
into a mineral reserve. We discuss the proposed requirement that the 
qualified person must conduct at least an initial assessment in 
order to determine resources in section II.E.3, infra.
    \165\ See Instruction 3 to proposed Item 601(b)(96)(iv)(B)(13) 
of Regulation S-K.
---------------------------------------------------------------------------

    Specifically, for indicated and measured mineral resources, the 
qualified person would be required to provide the confidence limits of 
relative accuracy,\166\ at a specific confidence level, of the 
preliminarily estimated production quantities per period from the 
resource.\167\ Using this approach, the geologic uncertainty associated 
with indicated and measured mineral resources is stated by keeping any 
two of the three relevant variables (confidence limits of relative 
accuracy, confidence level, and production periods) constant while 
varying the third. For example, the risk could be stated as 15% at 90% confidence for monthly, quarterly or annual production 
estimates, or 10% or 15% at 90% confidence for 
annual production estimates.
---------------------------------------------------------------------------

    \166\ The term ``confidence limits of relative accuracy'' refers 
to the values on both sides of zero (the average relative accuracy 
for unbiased mineral resource estimates) that show, for a specified 
probability (the confidence level), the range in which the relative 
accuracy lies. For example, if a report says the confidence limits 
of relative accuracy for a mineral resource is 10% at 
90% confidence for annual production quantities, it means there is a 
nine out of ten chance that the actual annual production quantities 
will be between 90% and 110% of the planned quantities.
    \167\ In this regard, the mining engineering literature makes 
clear that specifying the confidence limits of relative accuracy, at 
a specific confidence level, of production quantities per period is 
the best way to quantify uncertainty associated with resources. See, 
e.g., E.H. Isaaks, and R.M. Srivastava, An Introduction to Applied 
Geostatistics 489-513 (1990); and M.E. Rossi, and C.V. Deutsch, 
Mineral Resource Estimation 209-222 (2014). See generally P.R. 
Stephenson, Mineral Resource Classification. How the Viability of 
Your Project May Hang On a Qualified Person's Judgment (2011); and 
P. Stoker and C. Moorhead, Confidence in Resource Estimates--Beyond 
Classification (2009).
---------------------------------------------------------------------------

    We are proposing \168\ that qualified persons report the level of 
uncertainty for indicated and measured mineral resources using this 
approach with the condition that the stated production period must be 
monthly, quarterly or annually.\169\ This approach for reporting the 
level of uncertainty is consistent with what many have suggested in the 
mining engineering literature to be best practice.\170\ We are not, 
however, proposing any restrictions on the acceptable confidence limits 
of relative accuracy or confidence level required to disclose indicated 
or measured mineral resources. In that regard, we recognize that the 
natural variability of geologic characteristics is different for 
different deposits.
---------------------------------------------------------------------------

    \168\ See Instruction 3 to proposed Item 601(b)(96)(iv)(B)(13) 
of Regulation S-K.
    \169\ In this regard, we are of the view that the terms ``mine 
planning'' and ``detailed mine planning,'' as used in the 
definitions of indicated and measured mineral resources, must 
incorporate mine plans that include, respectively, production 
periods of one year and production periods of less than one year. We 
are not, however, proposing to require the qualified person to 
disclose the exact production quantity per period that is the basis 
for the uncertainty disclosure because we recognize that such 
quantities are preliminary at this stage and only reflect the 
qualified person's judgment of the scale (or size) of the likely 
mining project.
    \170\ See, e.g., Rossi & Deutsch, supra, note 167 at 209-222; 
and Stephenson, supra, note 167 at 6-8.
---------------------------------------------------------------------------

    When estimating the geologic uncertainty associated with indicated 
and measured mineral resources, the qualified person would be required 
to consider the limitations of the data, assumptions, and models used 
to determine the resource estimates.\171\ If the qualified person uses 
numerical estimates of uncertainty \172\ obtained

[[Page 41670]]

from geostatistical (e.g., kriging) or other numerical methods (e.g., 
conditional simulation) when determining the required estimates of 
confidence in mineral resources, he or she should consider all the risk 
factors, including those risk factors external to such numerical 
estimation, that will need to be addressed to prevent the uncertainty 
disclosure from being materially misleading. Specifically, the 
qualified person should consider those risk factors (e.g. reliability 
of drilling, sampling, or assaying techniques, and validity of modeling 
assumptions such as assumptions about geologic structures and domains) 
that may raise the level of uncertainty associated with the mineral 
resource estimate above the level of uncertainty derived solely from 
the numerical estimation process. This is because the numerical 
estimates of uncertainty from geostatistics or simulation do not 
account for risk factors associated with the input such as, but not 
limited to, drilling or sampling methods, laboratory assaying methods, 
outlier treatment, assumptions made during modeling of domains and 
geologic controls, compositing (averaging grades over similar sampling 
volumes or lengths) and establishing upper limits of grades. 
Consequently, such numerical estimates may underestimate the 
uncertainty associated with the mineral resources. Thus, the qualified 
person would need to take into account the impacts of these risk 
factors and make whatever adjustments are necessary so that the 
estimates of confidence limits disclosed are materially complete and 
accurate. This could be done, if appropriate, by either expanding the 
confidence limits or decreasing the confidence level.
---------------------------------------------------------------------------

    \171\ See Instruction 4 to proposed Item 601(b)(96)(iv)(B)(13) 
of Regulation S-K.
    \172\ Although the confidence limits of relative accuracy are 
expressed in a numeric format, the proposed rules do not require 
that a registrant derive such limits mathematically. We note in this 
regard that the CRIRSCO-based codes also anticipate that it is not 
always possible to estimate mathematically the confidence limits 
associated with a resource estimate. See, e.g., JORC Code pt. 25, 
which states ``Where a statement of the relative accuracy and 
confidence level is not possible, a qualitative discussion of the 
uncertainties should be provided in its place.'' Also, several 
authors have suggested alternative approaches for estimating 
uncertainty when mathematical estimates of confidence limits are not 
possible in the mining engineering literature. See generally, 
Stephenson, supra, note 167, and D.V. Snowden, Practical 
Interpretation of Mineral Resource and Ore Reserve Classification 
Guidelines (2001).
---------------------------------------------------------------------------

    For example, if a qualified person uses geostatistics or simulation 
to estimate the uncertainty associated with a particular mineral 
resource as ``15% relative accuracy at 90% confidence level 
for annual production quantities,'' then he or she, after determining 
that the risks associated with external risk factors are negligible, 
may report the numerically derived estimate without adjusting for any 
external risks. On the other hand, if the qualified person first 
determines that the risk factors external to the calculation are not 
negligible, then he or she would have to adjust the confidence limits 
to be wider than 15% or use a confidence level less than 
90% to account for the risk factors external to the calculation. In 
such case, the specific confidence limits (e.g., 25%) or 
confidence level (e.g. 80%) that would be appropriate depends on the 
nature and significance of the risk factors external to the calculation 
of confidence limits obtained using numerical methods (e.g., kriging or 
conditional simulation).
    We believe, therefore, that the qualified person should be required 
to justify, in the technical report summary, the final estimates of 
confidence limits he or she uses after adjusting for the external risk 
factors.\173\ Specifically, whether the qualified person uses numerical 
estimates of uncertainty (obtained from geostatistics/simulation) or 
non-numerical (qualitative) methods, he or she would be required to 
support the description of this uncertainty with a list of all factors 
considered and explain how those factors contributed to the final 
conclusion about the level of risk (confidence limits) underlying the 
resource classification included in the technical report summary.
---------------------------------------------------------------------------

    \173\ See Instructions 4 and 5 to proposed Item 
601(b)(96)(iv)(B)(13) of Regulation S-K.
---------------------------------------------------------------------------

    As noted above, a qualified person could use a method such as the 
inverse distance method to estimate mineral resources, determining that 
all the regions of the deposit that were estimated by means of drill 
holes with spacing of less than a certain distance are measured mineral 
resources.\174\ If the qualified person can conclude, based on his or 
her experience in similar deposits with similar facts and 
circumstances, that annual production estimates generated from these 
resources will deviate 15%, nine out of ten times, he or 
she could then disclose his or her confidence in the measured mineral 
resources of ``15% relative accuracy at 90% confidence 
level for annual production quantities.'' \175\
---------------------------------------------------------------------------

    \174\ For example, a qualified person using inverse distance 
could conclude that the portion of the resource that is estimated by 
drill holes 1,300 ft. apart is measured mineral resources.
    \175\ See note 172, supra.
---------------------------------------------------------------------------

    Unlike the proposed rules, the CRIRSCO-based codes do not require 
the qualified person to disclose numerical estimates of the uncertainty 
associated with the different classes of mineral resources. Instead, 
those codes only require the qualified person to report fully the 
assumptions and factors considered in classifying mineral 
resources.\176\ The CRIRSCO-based codes do, however, encourage 
qualified persons (in some instances) to disclose the level of 
uncertainty surrounding estimates where possible.\177\ We believe that 
this optional approach could lead to disparities in mineral resource 
classification and confusion for investors. Accordingly, we are 
proposing to require the disclosure of numerical estimates of 
uncertainty, as we believe it would promote transparency and 
comparability among registrants about mineral resource classification.
---------------------------------------------------------------------------

    \176\ See, e.g., JORC Code at 30, where the checklist provided 
for mineral resource classification requires the qualified person to 
provide ``the basis for the classification of the Mineral Resources 
into varying confidence categories [and] whether appropriate account 
has been taken of all relevant factors (i.e. relative confidence in 
tonnage/grade estimations, reliability of input data, confidence in 
continuity of geology and metal values, quality, quantity and 
distribution of the data).'' See also CIM's Estimation of Mineral 
Resources and Mineral Reserves Best Practice Guidelines 19 (2003), 
which states that ``[t]he criteria used for classification should be 
described in sufficient detail so that the classification is 
reproducible by others.'' We are also proposing to require the 
qualified person to discuss these assumptions in the technical 
report summary (see proposed Item 601(b)(96)(iv)(B)(13) of 
Regulation S-K) and to require the discussion of these assumptions 
for first time disclosure of mineral resources or material changes 
to mineral resource disclosure in SEC filings (see proposed Item 
1304(b)(9) of Regulation S-K).
    \177\ See e.g., JORC Code pt. 25, which states ``Competent 
Persons are encouraged, where appropriate, to discuss the relative 
accuracy and confidence level of the Mineral Resource estimates with 
consideration of at least sampling, analytical and estimation 
errors. The statement should specify whether it relates to global or 
local estimates, and, if local, state the relevant tonnage. Where a 
statement of the relative accuracy and confidence level is not 
possible, a qualitative discussion of the uncertainties should be 
provided in its place.''
---------------------------------------------------------------------------

    The disparity in practice in this area and the implications for 
investors have been discussed by many authors in the mining engineering 
literature.\178\ In particular, the disparity in determining the 
boundary between inferred and indicated mineral resources could 
significantly affect a qualified person's conclusion on whether a 
project is economically viable or not, since inferred mineral resources 
cannot be used in economic analysis. We believe investors would benefit 
from greater transparency and more reliable disclosure of the risk 
associated with each class of resources by requiring what is now only 
recommended as best practice by the CRIRSCO-based codes.
---------------------------------------------------------------------------

    \178\ See generally P.R. Stephenson, Mineral Resource 
Classification. How the Viability of Your Project May Hang On a 
Qualified Person's Judgment (2011); and P. Stoker and C. Moorhead, 
Confidence in Resource Estimates--Beyond Classification (2009).
---------------------------------------------------------------------------

    Finally, as regards inferred mineral resources, we believe that 
they have

[[Page 41671]]

such a low level of confidence that it would be inappropriate for a 
qualified person to use them in production estimates for a period equal 
to or shorter than a year. Differences between actual and estimated 
production for such periods would have such high standard deviations 
that they would not provide an appropriate basis for investment 
decisions.\179\ We are, therefore, proposing to require qualified 
persons to state the minimum percentage of inferred mineral resources 
they believe will be converted to indicated and measured mineral 
resources with further exploration.\180\
---------------------------------------------------------------------------

    \179\ Possible sources of uncertainty that affect the reporting 
of inferred resources may include sampling or drilling methods, data 
processing and handling, geologic modeling and estimation.
    \180\ See Instruction 3 to proposed Item 601(b)(96)(iv)(B)(13) 
of Regulation S-K. Uncertainty estimates for inferred mineral 
resources must be stated in the form ``the qualified person expects 
at least z% of inferred mineral resources to convert to indicated or 
measured mineral resources with further exploration and analysis.''
---------------------------------------------------------------------------

Request for Comment
    54. Should we require a registrant to classify its mineral 
resources into inferred, indicated and measured mineral resources, as 
proposed? Why or why not? If not, what classifications would be 
preferable and why?
    55. Should we define ``inferred mineral resource'' as proposed? Why 
or why not? Should we require the disclosure of inferred mineral 
resources although quantity and grade or quality with respect to those 
mineral resources can be estimated only on the basis of limited 
geological evidence and sampling, as proposed? Should we require a 
qualified person to describe the level of risk associated with an 
inferred mineral resource based on the minimum percentage that he or 
she estimates would convert to indicated or measured mineral resources 
with further exploration, as proposed? Should we permit rather than 
require a registrant to disclose inferred mineral resources because of 
the high level of geologic uncertainty associated with that class of 
mineral resource? Should we prohibit the disclosure of inferred mineral 
resources for that reason?
    56. Should we prohibit the use of inferred mineral resources to 
make a determination about the economic viability of extraction, and 
preclude the conversion of an inferred mineral resource into a mineral 
reserve, as proposed? Would these proposed prohibitions be sufficient 
to mitigate the added uncertainty that could result from the 
requirement to disclose inferred mineral resources? Are there 
circumstances that would justify a qualified person's use of inferred 
mineral resources to make a determination about the economic viability 
of extraction, or that would allow the conversion of an inferred 
mineral resource into a mineral reserve? Should we permit the use of 
inferred mineral resources to make a determination about the economic 
viability of extraction as long as the qualified person and registrant 
disclose the high level of risk associated with such mineral resources? 
If so, what would be the potential effects on registrants and 
investors?
    57. Should the definition of ``inferred mineral resource'' provide 
that such mineral resource has the lowest level of geological 
confidence of all mineral resources, which prevents the application of 
the modifying factors in a manner useful for evaluation of economic 
viability, as proposed? Should we require a registrant, when disclosing 
inferred resources, to provide a legend or cautionary statement about 
the geological uncertainty associated with inferred resources? If so, 
what should such legend or cautionary statement say and where in the 
SEC filing should it be disclosed?
    58. Should we define ``indicated mineral resource,'' as proposed? 
In particular, should the definition depend on a qualified person's 
ability to estimate quantity and grade or quality using adequate 
geological evidence and sampling, as proposed? Should the definition of 
``adequate geologic evidence'' be based on a qualified person's ability 
to apply modifying factors in sufficient detail to support mine 
planning and evaluation of the economic viability of the deposit, as 
proposed? Should we require a qualified person to describe the level of 
risk associated with indicated mineral resources based on the 
confidence limits of relative accuracy at a particular confidence level 
for production estimates for one-year periods, as proposed? Should we, 
instead, allow the qualified person to provide a qualitative discussion 
of the uncertainties in place of confidence limits if he or she so 
chooses? Why or why not?
    59. Should the definition of ``indicated mineral resource'' include 
that such mineral resource has a lower level of confidence than what 
applies to a measured mineral resource and may only be converted to a 
probable mineral reserve, as proposed?
    60. Should we define ``measured mineral resource,'' as proposed? In 
particular, should the definition depend on a qualified person's 
ability to estimate quantity and grade or quality on the basis of 
conclusive geological evidence? Should we base the definition of 
``conclusive geologic evidence'' on a qualified person's ability to 
apply modifying factors in sufficient detail to support detailed mine 
planning and final evaluation of the economic viability of the deposit, 
as proposed? Should we require a qualified person to describe the level 
of risk associated with measured mineral resources based on the 
confidence limits of relative accuracy at a particular confidence level 
for production estimates for periods of less than one year, as 
proposed? Should we, instead, allow the qualified person to provide a 
qualitative discussion of the uncertainties in place of confidence 
limits if he or she so chooses? Why or why not? Are there particular 
challenges to complying with the proposed requirement to disclose 
numerical estimates of the level of confidence for each class of 
mineral resource?
    61. Should the definition of ``measured mineral resource'' include 
that such mineral resource has a higher level of confidence than what 
applies to either an indicated mineral resource or an inferred mineral 
resource and may be converted to a proven mineral reserve or to a 
probable mineral reserve, as proposed?
    62. Should we require the disclosure of numerical estimates of the 
level of confidence associated with each class of mineral resource, as 
proposed? Why or why not? Should we instead follow the practice in the 
CRIRSCO-based codes and require only the disclosure of all material 
assumptions and the factors considered in classifying mineral 
resources? Why or why not?
3. The Initial Assessment Requirement
    As proposed, a registrant's disclosure of mineral resources must be 
based upon a qualified person's initial assessment supporting the 
determination of mineral resources.\181\ At a minimum, the qualified 
person's initial assessment must include a qualitative evaluation of 
modifying factors to establish the economic potential of the mining 
property or project (i.e., that there are reasonable prospects for 
economic extraction of the mineral resource.) We believe that requiring 
a well-defined and specific technical study to support disclosure of 
mineral resources would provide greater assurance to investors that 
mineral resource disclosure is reliable.
---------------------------------------------------------------------------

    \181\ See proposed Item 1302(c) of Regulation S-K.
---------------------------------------------------------------------------

    In connection with the registrant's disclosure of mineral 
resources, the proposed rules would specify that the qualified person 
must provide the registrant with information and

[[Page 41672]]

documentation of the initial assessment that supports a determination 
of mineral resources. If the property in question is material to the 
registrant, the qualified person must also provide the registrant with 
a technical report summary that supports the determination of mineral 
resources. As proposed, the summary must describe the procedures, 
findings and conclusions reached for the initial assessment.
    We propose to define an ``initial assessment'' as a preliminary 
\182\ technical and economic study of the economic potential of all or 
parts of mineralization to support the disclosure of mineral resources. 
As proposed, the initial assessment must be prepared by a qualified 
person and must include appropriate assessments of reasonably assumed 
modifying factors together with any other relevant operational factors 
that are necessary to demonstrate, at the time of reporting, that there 
are reasonable prospects for economic extraction.\183\ The proposed 
rules would explain that an initial assessment is required for 
disclosure of mineral resources but cannot be used as the basis for 
disclosure of mineral reserves.\184\
---------------------------------------------------------------------------

    \182\ The term ``preliminary'' as used in this context refers to 
a less rigorous study than what is required for feasibility studies, 
as defined and discussed in section II.F.2, infra.
    \183\ See proposed Item 1301(d)(11)(i) of Regulation S-K.
    \184\ See proposed Item 1301(d)(11)(ii) of Regulation S-K.
---------------------------------------------------------------------------

    An initial assessment, as proposed, is not a scoping \185\ or 
conceptual study as defined in some of the CRIRSCO-based codes \186\ or 
a preliminary economic assessment as defined in Canada's NI 43-
101.\187\ The purpose of an initial assessment is narrower than those 
studies as it would be done solely to support disclosure of mineral 
resources and not to determine whether to proceed with further work 
leading to preparing a pre-feasibility study for reserve determination.
---------------------------------------------------------------------------

    \185\ A scoping study is ``an order of magnitude technical and 
economic study of the potential viability of Mineral Resources. It 
includes appropriate assessments of realistically assumed Modifying 
Factors together with any other relevant operational factors that 
are necessary to demonstrate at the time of reporting that progress 
to a Pre-Feasibility Study can be reasonably justified.'' JORC Code 
pt. 19 and SME Guide pt. 48.
    \186\ See, e.g., the SME Guide, Table 2, at 62-63, which 
provides requirements for scoping, pre-feasibility and feasibility 
studies.
    \187\ See NI 43-101 pt. 1.1.
---------------------------------------------------------------------------

    We are proposing instructions to the initial assessment requirement 
that are designed to elicit material information concerning the basis 
for the qualified person's conclusion that there are reasonable 
prospects for economic extraction. The first proposed instruction is 
that an initial assessment must include cut-off grade estimation, based 
on assumed unit costs for surface or underground operations and 
estimated mineral prices.\188\ Cut-off grade refers to the grade at 
which the destination of the material changes during mining. For 
purposes of the initial assessment, it distinguishes between material 
that is going to the waste dump and material that is going to the 
processing plant (in surface mining) or material that is not mined and 
material mined to be processed (in underground mining).
---------------------------------------------------------------------------

    \188\ See proposed Instruction 1 to Item 1302(c) of Regulation 
S-K.
---------------------------------------------------------------------------

    We believe that a discussion of cut-off grade is an appropriate 
requirement for a technical study that supports mineral resource 
estimation because, by definition, a mineral resource estimate is not 
just an inventory of all mineralization. It is an estimate of that part 
of the deposit that has reasonable prospects of economic 
extraction.\189\ We believe the cut-off grade is the best indicator, at 
this stage, of such prospects because it requires the qualified person 
to estimate and exclude that portion of the deposit that has no 
reasonable prospects of economic extraction at the time of the 
analysis.
---------------------------------------------------------------------------

    \189\ See, e.g., CIM Definition Standards at 4 (``A Mineral 
Resource is an inventory of mineralization that under realistically 
assumed and justifiable technical and economic conditions might 
become economically extractable.'') See also the JORC Code pt. 20 
(``Portions of a deposit that do not have reasonable prospects for 
eventual economic extraction must not be included in a Mineral 
Resource''); and the SME Guide pt. 33 (``. . . a Mineral Resource is 
not an inventory of all mineralization drilled or sampled . . . 
[but] rather it is a realistic estimate of mineralization which, 
under assumed and justifiable technical and economic conditions, 
might become economically extractable.'')
---------------------------------------------------------------------------

    As part of the initial assessment, the qualified person would need 
to assume the cost to mine a typical unit of the specific material 
involved. We are not proposing to require the qualified person to 
estimate all specific operating and capital costs in detail in order to 
estimate unit cost as part of the initial assessment.\190\ Rather, for 
the initial assessment, the proposed rule requires the qualified person 
to make assumptions about the two key determinants of cut-off grade 
estimation--operating costs and commodity prices. Any cut-off grade 
estimation that is not based upon, or does not disclose, these two 
assumptions may not fully meet the standard required to demonstrate 
reasonable prospects of economic extraction.
---------------------------------------------------------------------------

    \190\ If the qualified person decides to include economic 
analysis in the initial assessment, then he/she must include 
detailed cost estimates. See discussion in section II.E.3, infra.
---------------------------------------------------------------------------

    As proposed, a qualified person must base the unit cost estimate 
used in cut-off grade estimation in an initial assessment on assumed 
unit costs derived, for example, from historic data or factoring, for 
either underground or surface mining.\191\ In addition, the qualified 
person must make and disclose an assumption about whether the deposit 
will be mined with underground or surface mining methods.\192\ Given 
the wide disparity between surface and underground mining costs, we are 
concerned that any unit costs estimate that is not specific to one of 
these two broad categories of mining methods may not adequately 
establish the prospects of economic extraction.
---------------------------------------------------------------------------

    \191\ See Instruction 1 to proposed Item 1302(c) of Regulation 
S-K.
    \192\ Id.
---------------------------------------------------------------------------

    When estimating mineral prices for the cut-off grade estimation, 
the qualified person would have to use a commodity price that is no 
higher than the average spot price during the 24-month period prior to 
the end of the last fiscal year, determined as an unweighted arithmetic 
average of the daily closing price for each trading day within such 
period, unless prices are defined by contractual arrangements.\193\ For 
purposes of consistency, we are proposing that qualified persons use 
this same ceiling for all other commodity price estimates in the 
proposed mining disclosure for both mineral resources and 
reserves.\194\
---------------------------------------------------------------------------

    \193\ Id.
    \194\ See, e.g., sections II.G.1 and II.G.2, infra.
---------------------------------------------------------------------------

    Commodity prices used to evaluate mineral resources and reserves 
should reflect the long term expectations of the qualified person 
conducting such analysis. The staff has provided guidance that 
commodity prices used in mineral reserve estimation should not exceed a 
3-year trailing average. The use of a trailing average is also the 
Commission's standard for oil and gas reserves (although oil and gas 
reserves use a 12-month trailing average).\195\ By contrast, most 
foreign jurisdictions allow the qualified person to use any reasonable 
and justifiable price, which is based on the qualified person's or 
management's view of long term market trends.\196\
---------------------------------------------------------------------------

    \195\ See Regulation S-X 4-10(a)(22)(v) (17 CFR 210.4-
10(a)(22)(v)).
    \196\ For example, the JORC Code and Canada's NI 43-101 and CIM 
Standards call for the qualified person to report the assumptions 
underlying price estimates and do not prescribe a price model. See, 
e.g., the JORC Code, Table 1 at 32 (requiring the qualified person 
to report ``[t]he derivation of assumptions made of metal or 
commodity price(s), for the principal metals, minerals and co-
products'' under revenue factors.) See also ASX Listing Rules-
Guidance Note 31 pt. 2.4 (``ASX also notes that to the extent that 
an estimate of mineral resources or ore reserves involves a 
representation about future matters, it must be based on reasonable 
grounds--meaning that the price, capital expenditure and operational 
expenditure assumptions used to calculate the estimates must also be 
objectively reasonable . . .'') NI 43-101pt. 3.4(c) requires that a 
registrant disclosing mineral resources or reserves must disclose 
``the key assumptions, parameters, and methods used to estimate the 
mineral resources and mineral reserves.'' The CIM Best Practice 
Guidelines lists [commodity] prices as one such key assumption but 
provides no guidance on how prices should be determined except that 
``if commodity prices used differ from current prices . . ., an 
explanation should be given, including the effect on the economics 
of the project if current prices were used.'' See CIM's Estimation 
of Mineral Resources and Mineral Reserves Best Practice Guidelines 
30 (2003).

---------------------------------------------------------------------------

[[Page 41673]]

    We believe the qualified person must use commodity price estimates 
that are reasonable and justifiable and represent long term \197\ 
market trends in mineral resource and reserve estimation. Such 
commodity price estimates should account for the current prices and 
long term price fluctuations. Since no universal commodity price model 
exists for predicting long term prices, we also believe a reasonable 
ceiling is necessary to ensure mineral resource and reserve estimates 
are based on prices that are realistic. The mining engineering 
literature contains several models for predicting commodity prices that 
have varying strengths and weaknesses. Most of these models rely to 
some degree on historical market prices. There is, however, no 
universally agreed upon model for predicting long term commodity 
prices.
---------------------------------------------------------------------------

    \197\ ``Long term'' in this context refers to the life of the 
mine. See, e.g., David Humphreys, ``Pricing and Trading in Metals 
and Minerals,'' in 1 SME Mining Engineering Handbook, supra note 
128, at 49 (stating that the assumed commodity price should be ``the 
expected annual average price to be achieved for the mined product 
during each year of the project's life.'')
---------------------------------------------------------------------------

    For the purpose of public disclosure, we believe a price model 
should be transparent, generally affordable, and promote comparability 
between mineral resources and reserves of different registrants. We 
also believe that the model should provide flexibility to registrants 
in selecting a price while helping to ensure that reserve estimates are 
based on prices that are realistic.
    We believe that a pricing model using historical prices to 
prescribe a reasonable ceiling best meets all the stipulated criteria. 
For exchange-traded commodities, the qualified person would have to use 
a price based on the unweighted arithmetic average of the daily closing 
price for each trading day within the 24-month period preceding the 
last day of the fiscal year covered by the SEC filing. For commodities 
that are not traded on an exchange, the qualified person would have to 
use the 24-month average of prevailing prices in the region as the 
ceiling.
    The sole exception to the 24-month trailing average ceiling price 
model would be when registrant has a sales contract in place that has 
defined the price of the commodity. In that case, the registrant may 
use the price stipulated by the sales contracts, provided that such 
price is reasonable \198\ and the qualified person preparing the 
resource estimates discloses that he or she is using a contractual 
price and discloses the contractual price used. In all cases and 
regardless of what price is used, the qualified person would have to 
disclose both the price used and the justification for such use.
---------------------------------------------------------------------------

    \198\ In this context, reasonable means that the contractual 
price must be a reasonable estimate of the expected annual average 
price to be achieved for the mined product during each year of the 
project's life. For example, for a new mine with a 25-year mine 
life, it would not be reasonable to use a contractual price (higher 
than the 24 month trailing average) if the contract price is for 
only 25% of the mine's production for the first six months. In this 
situation, the contractual price would not be a reasonable estimate 
of the expected annual average price over the 25-year mine life.
---------------------------------------------------------------------------

    We are proposing an average over a 24-month period because we 
believe it is more responsive to price changes, compared to a 3-year 
average, based on the staff's experience with the 3-year average in SEC 
filings. In this regard, we believe the pricing time frame for mineral 
resource and reserve disclosure should be long enough to ensure the 
average reflects long term market trends but short enough to prevent 
the average from lagging behind market trends. On the one hand, a 3-
year average lags farther behind market changes than, and is not as 
responsive as, a 2-year average. A 12-month average, on the other hand, 
could be too volatile and may not adequately reflect long term trends.
    The second proposed instruction to the initial assessment 
requirement states that the qualified person must provide a qualitative 
assessment of all other relevant modifying factors to establish 
economic potential and justify why he or she believes that all issues 
can be resolved with further exploration and analysis.\199\ The 
relevant modifying factors would include, but not be limited to, those 
set forth in the following proposed Table 1.\200\
---------------------------------------------------------------------------

    \199\ See proposed Instruction 2 to Item 1302(c) of Regulation 
S-K.
    \200\ See Table 1 following Instruction 4 to proposed Item 
1302(c) of Regulation S-K. The modifying factors and requirements in 
Table 1 are modeled on accepted industry practice and supported by 
the relevant mining engineering literature. See, e.g., Richard L. 
Bullock, ``Mineral Property Feasibility Studies,'' in 1 SME Mining 
Engineering Handbook, supra, note 115 at 227-261.

             Table 1--Summary Description of Modifying Factors Evaluated in Technical Studies \201\
----------------------------------------------------------------------------------------------------------------
                                                               Preliminary feasibility
             Factors                   Initial assessment               study               Feasibility study
----------------------------------------------------------------------------------------------------------------
Site infrastructure..............  Establish whether or not   Required access roads,    Required access roads,
                                    access to power and site   infrastructure location   infrastructure location
                                    is possible. Assume        and plant area defined.   and plant area
                                    infrastructure location,  Source of all utilities    finalized.
                                    plant area required,       (power, water, etc.)     Source of all required
                                    type of power supply,      required for              utilities (power,
                                    site access roads and      development and           water, etc.) for
                                    camp/town site, if         production defined with   development and
                                    required.                  initial designs           production finalized.
                                                               suitable for cost        Camp/Town site
                                                               estimates.                finalized.
                                                              Camp/town site
                                                               finalized..
Mine design and planning.........  Mining method defined      Preferred underground     Mining method finalized.
                                    broadly as surface or      mining method or the      Detailed mine layouts
                                    underground. Production    pit configuration for     finalized for preferred
                                    rates assumed.             surface mine defined.     alternative.
                                                               Detailed mine layouts     Development and
                                                               drawn for each            production plan
                                                               alternative.              finalized for preferred
                                                               Development and           alternative with
                                                               production plan defined   required equipment
                                                               for each alternative      fleet specified.
                                                               with required equipment
                                                               fleet specified.

[[Page 41674]]

 
Processing plant.................  Establish that all         Detailed bench lab tests  Detailed bench lab tests
                                    products used in           conducted. Detailed       conducted. Pilot plant
                                    assessing prospects of     process flow sheet,       test completed, if
                                    economic extraction can    equipment sizes, and      required, based on
                                    be processed with          general arrangement       risk. Process flow
                                    methods consistent with    completed. Detailed       sheet, equipment sizes,
                                    each other. Processing     plant throughput          and general arrangement
                                    method and plant           specified.                finalized. Final plant
                                    throughput assumed.                                  throughput specified.
Environmental compliance and       List of required permits   Identification and        Identification and
 permitting.                        and agencies drawn.        detailed analysis of      detailed analysis of
                                    Determine if significant   requirements or           requirements or
                                    obstacles exist to         interests of agencies,    interests of agencies,
                                    obtaining permits.         NGOs, communities and     NGOs, communities and
                                    Identify pre-mining land   other stakeholders.       other stakeholders
                                    uses. Assess               Detailed baseline         finalized. Completed
                                    requirements for           studies with              baseline studies with
                                    baseline studies. Assume   preliminary impact        final impact assessment
                                    post-mining land uses.     assessment (internal).    (internal). Tailings
                                    Assume tailings            Detailed tailings         disposal, reclamation
                                    disposal, reclamation,     disposal, reclamation     and mitigation plans
                                    and mitigation plans.      and mitigation plans.     finalized.
Other modifying factors \1\......  Appropriate assessments    Reasonable assumptions,   Detailed assessments of
                                    of other reasonably        based on appropriate      modifying factors
                                    assumed modifying          testing, on the           necessary to
                                    factors necessary to       modifying factors         demonstrate that
                                    demonstrate reasonable     sufficient to             extraction is
                                    prospects for economic     demonstrate that          economically viable.
                                    extraction.                extraction is
                                                               economically viable.
Capital costs....................  Optional.\2\ If included:  Accuracy: 25%.                minus>15%.
                                    minus>50%.                Contingency: <=15%......  Contingency: <=10%.
                                   Contingency: <=25%.......
Operating costs..................  Optional.\2\ If included:  Accuracy: 25%.                minus>15%.
                                    minus>50%.                Contingency: <=15%......  Contingency: <=10%.
                                   Contingency: <=25%.......
Economic analysis................  Optional.\3\ If included,  Taxes described in        Taxes described in
                                    taxes and revenues are     detail; revenues are      detail; revenues are
                                    assumed. Discounted cash   estimated based on at     estimated based on at
                                    flow analysis based on     least a preliminary       least a final market
                                    assumed production rates   market study; economic    study or possible
                                    and revenues from          viability assessed by     letters of intent to
                                    available measured and     detailed discounted       purchase; economic
                                    indicated mineral          cash flow analysis.       viability assessed by
                                    resources.                                           detailed discounted
                                                                                         cash flow analysis.
----------------------------------------------------------------------------------------------------------------
\1\ The modifying factors, as defined in this section, include, but are not limited to, the factors listed in
  this table. The number, type and specific characteristics of the modifying factors applied will necessarily be
  a function of and depend upon the mineral, mine, property, or project.
\2\ Initial assessment, as defined in this section, does not require cash flow analyses or operating and capital
  cost estimates. The qualified person may include such cash flow analyses at his or her discretion.
\3\ Initial assessment does not require an economic analysis, although it requires unit cost assumptions based
  on an assumption that the resource will be exploited with surface or underground mining methods. Economic
  analyses, if included, must only be based on measured and indicated mineral resources.


---------------------------------------------------------------------------

    \201\ As proposed, an initial assessment would be used to 
support disclosure of mineral resources while a prefeasibility or 
final feasibility study would be used to support disclosure of 
mineral reserves. We discuss feasibility studies in section II.F.2.
---------------------------------------------------------------------------

    This table sets forth the proposed minimum requirements for various 
factors that the qualified person must evaluate when preparing an 
initial assessment, pre-feasibility study, or feasibility study. We are 
presenting them all in this section, in one table, to facilitate a 
comparison of the modifying factors evaluation requirement across the 
three key technical studies proposed to be used for mineral resource 
and reserve disclosure. As this presentation demonstrates, the proposed 
modifying factors evaluative process becomes more exacting as mining 
property assessment progresses from mineral resource estimation to 
mineral reserve estimation.
    At the initial assessment stage, as proposed, a qualified person 
would be required to evaluate, at a minimum, the following modifying 
factors:
     Site infrastructure (e.g., whether access to power and 
site is possible);
     mine design and planning (e.g., what is the broadly 
defined mining method);
     processing plant (e.g., whether all products used in the 
preliminary economic assessment can be processed with methods 
consistent with each other);
     environmental compliance and permitting (e.g., what are 
the required permits and corresponding agencies and whether significant 
obstacles exist to obtaining those permits); and
     any other reasonably assumed modifying factors, including 
socio-economic factors, necessary to demonstrate reasonable prospects 
for economic extraction.
    We believe a qualitative evaluation of these listed factors, at a 
minimum, is necessary to determine the economic potential of a mining 
property. An assessment of the geological characteristics of the mined 
material would not be complete if it did not include a thorough 
evaluation and discussion of infrastructure, mine design, processing 
and environmental issues that could pose obstacles to the material's 
extraction.
    To demonstrate the economic feasibility of mining projects, 
estimates of future cash flows are necessary because capital 
expenditures, operating costs and revenues vary over the life of a mine 
due to variations in mining conditions. We believe, however, that an 
initial assessment, the singular goal of which is to demonstrate 
reasonable prospects of economic extraction, not economic viability, 
need not contain such quantitative analysis.
    Nevertheless, if the qualified person would like to demonstrate the 
economic potential of the mining property beyond the minimum 
requirements of an initial assessment \202\ by including a cash flow 
analysis, we believe such analysis could benefit investors, subject to 
restrictions. Thus, the third proposed instruction to the initial 
assessment requirement addresses the option of providing cash

[[Page 41675]]

flow analysis as part of the initial assessment. This instruction 
states that, while a qualified person may include cash flow analysis in 
an initial assessment to demonstrate economic potential, the qualified 
person may not use inferred mineral resources in such cash flow 
analysis.\203\ Moreover, if the qualified person includes cash flow 
analysis in the initial assessment, then operating and capital cost 
estimates must have an accuracy level of at least approximately 50% \204\ and a contingency level of no greater than 25% of the 
direct estimate.\205\ The proposed instruction would provide that the 
qualified person must state the accuracy and contingency levels in the 
initial assessment.
---------------------------------------------------------------------------

    \202\ As proposed, the minimum requirements of an initial 
assessment would consist of cut-off grade estimates, based on an 
assumed long term commodity price that is no higher than the 24 
month spot price average and unit cost of production, and 
qualitative evaluation of other relevant modifying factors.
    \203\ See Instruction 3 to proposed Item 1302(c) of Regulation 
S-K.
    \204\ The phrase ``accuracy level of at least approximately 
50%'' means that the qualified person must have a 
reasonable basis to believe that assumptions underlying the estimate 
will result in actual costs with a substantial likelihood of being 
within 50% and 150% of the estimate.
    \205\ The term ``contingency'' is used to address the level of 
confidence in the cost estimates. It generally means the amount 
``set aside for any additional, unforeseen costs associated with 
unanticipated geologic circumstances or engineering conditions.'' 
Scott A. Stebbins, ``Cost Estimating for Underground Mines,'' in 1 
SME Mining Engineering Handbook, supra, note 115, at 270. Thus, a 
contingency level of <=25% means the contingency cannot be more than 
25% of the direct cost estimate.
---------------------------------------------------------------------------

    We believe that the proposed prohibition against using inferred 
mineral resources in an initial assessment's cash flow analysis is 
reasonable because of the high level of geological risk associated with 
such mineral resources. We further believe that the proposed accuracy 
and contingency requirements \206\ for operating and capital costs are 
appropriate because they are generally consistent with those accepted 
for scoping studies.\207\
---------------------------------------------------------------------------

    \206\ As proposed, Table 1 includes both accuracy and 
contingency requirements for operating and capital cost estimates.
    \207\ See, e.g., the SME Guide, Table 2, at 62-63, which 
provides accuracy and contingency ranges for capital and operating 
cost estimates in scoping, pre-feasibility and feasibility studies. 
See also note 185, supra.
---------------------------------------------------------------------------

    We do not believe that other quantitative measures of economic 
potential that omit cash flows are appropriate and are concerned that 
they potentially could be misleading. As explained above, capital 
expenditures, operating costs and revenues vary over the life of a mine 
due to variations in mining conditions. Hence, economic analyses that 
do not account for these variations may not tell a complete story. For 
example, a gross profit evaluation that does not account for the timing 
of capital outlays and revenues could indicate that a project is 
viable, yet in actuality timely loan repayments may not be possible. 
Consequently, we are proposing that, to the extent a qualified person 
wants to include an economic analysis in an initial assessment, he or 
she would only be permitted to use a cash flow analysis; all other 
quantitative analyses would be prohibited.
    The fourth proposed instruction to the initial assessment 
requirement refers the qualified person to Table 1 for the assumptions 
permitted to be made when preparing the initial assessment. These 
include assumptions concerning infrastructure location and the required 
plant area, type of power supply, site access roads and camp or town 
site, production rates, processing method and plant throughput, post-
mining land uses, and plans for tailings disposal, reclamation, and 
mitigation. We believe that it is reasonable to permit assumptions to 
be made for these factors for the initial assessment. Allowing 
assumptions for a variety of factors at the resource determination 
stage is generally consistent with guidelines under the CRIRSCO-based 
codes.\208\ Moreover, the assumption phase is temporary as the 
qualified person must substitute most assumptions with empirical 
evidence and facts as part of the pre-feasibility or feasibility study 
that is required for determining mineral reserves.
---------------------------------------------------------------------------

    \208\ See, e.g., the SME Guide, Table 1, at 39-61.
---------------------------------------------------------------------------

Request for Comment
    63. Should we require that a registrant's disclosure of mineral 
resources be based upon a qualified person's initial assessment, which 
supports the determination of mineral resources, as proposed? Why or 
why not? Is there another form of analysis or means of disclosure that 
would be more appropriate for the determination and disclosure of 
mineral resources? Would disclosure of the material risks associated 
with mineral resource determination be an adequate substitute for the 
initial assessment requirement?
    64. If we require an initial assessment to support the 
determination of mineral resources, should we define ``initial 
assessment,'' as proposed, to require the consideration of applicable 
modifying factors and relevant operational factors for the purpose of 
determining (at the resource evaluation stage) whether there are 
reasonable prospects for economic extraction? Should we instead only 
require consideration of modifying and operational factors at the 
reserve determination stage?
    65. Should we require an initial assessment to include cut-off 
grade estimation, as proposed? Why or why not?
    66. Should we require a qualified person to base cut-off grade 
estimation on assumed unit costs for surface or underground operations, 
as proposed? Is it appropriate to allow the qualified person to make an 
assumption about unit costs, as proposed, or should we require a more 
detailed estimate of unit costs at the resource determination stage? Is 
it appropriate to require the qualified person to disclose whether the 
unit cost estimates are for surface or underground operations, as 
proposed?
    67. Should we also require a qualified person to base cut-off grade 
estimation on estimated mineral prices, as proposed? In this regard, 
should we require the qualified person to use a commodity price that is 
no higher than the average spot price during the 24-month period prior 
to the end of the last fiscal year, determined as an unweighted 
arithmetic average of the daily closing price for each trading day 
within such period, unless prices are defined by contractual 
arrangements, as proposed? Does a ceiling model based on historical 
prices best meet the goals of transparency, cost efficiency and 
comparability? Why or why not? Is there another model that would better 
meet these goals? If another price model better meets these goals, what 
should be the basis of estimated mineral prices for purposes of the 
initial assessment? Whatever price model we adopt, should it be used to 
determine the commodity price itself? Or should it be used, as 
proposed, to determine the ceiling of the commodity prices?
    68. Is the proposed 24-month period the most appropriate period for 
the estimated price requirement? Would a 12, 18, 30, or 36-month 
period, or some other duration, be more appropriate? Should the 24-
month period, or other period be fixed and apply to all registrants, or 
should the period vary depending upon the type of commodity being mined 
and other factors?
    69. Should we require, as proposed, the same ceiling price for 
mineral resource and reserve estimation? If not, how should the prices 
used for mineral resource and reserve estimation differ? Would such 
criteria meet the goals of transparency, cost efficiency and 
comparability?
    70. Should we require that for purposes of the initial assessment a 
qualified person must provide at least a qualitative assessment of all 
relevant modifying factors to establish economic potential and justify 
why he or she believes that all issues can be resolved with further 
exploration and analysis, as proposed? Are the modifying factors

[[Page 41676]]

provided as examples in the proposed instruction and table the most 
appropriate factors to be included? Are there other factors that should 
be specified in the instruction and table in lieu of or in addition to 
the mentioned factors? Would presentation of the modifying factors in a 
table benefit investors, registrants and qualified persons?
    71. Should we permit the qualified person to make assumptions about 
the modifying factors set forth in the proposed table at the resource 
determination stage, as proposed? Why or why not? Are there other 
assumptions that we should specify in lieu of or in addition to those 
already mentioned in the proposed table?
    72. Should we permit a qualified person to include cash flow 
analysis in an initial assessment to demonstrate economic potential, as 
proposed? Why or why not? If we should permit cash flow analysis in an 
initial assessment, should we require that operating and capital cost 
estimates in the analysis have an accuracy level of at least 50% and a contingency level of <=25%, as proposed? If not, what 
should the accuracy and contingency levels be? Should we require the 
qualified person to state the accuracy and contingency levels in the 
initial assessment?
    73. If we permit cash flow analysis in the initial assessment, 
should we prohibit the qualified person from using inferred mineral 
resources in the cash flow analysis, as proposed? Why or why not? Would 
there be disadvantages to registrants or investors if the use of 
inferred mineral resources in an initial assessment's cash flow 
analysis is prohibited? Would there be advantages to prohibiting the 
use of inferred resources in an initial assessment's cash flow analysis 
in the initial assessment?
    74. Should we prohibit the use of an initial assessment to support 
a determination of mineral reserves, as proposed? Why or why not?
4. USGS Circular 831 and 891
    In 1980, the US Geological Survey (``USGS'') published Circular 831 
as an update to USGS Bulletin 1450-A--``Principles of the Mineral 
Resource Classification System of the U.S. Bureau of Mines and U.S. 
Geological Survey.'' In 1983, the USGS published Circular 891--``Coal 
Resource Classification System of the U.S. Geological Survey,'' 
specifically for resource or reserve classification of coal.\209\ 
Consistent with the mission of the USGS, these circulars were mostly 
suitable for national and regional level reporting of mineral resources 
and reserves for government planning purposes,\210\ and were not 
intended to be the basis for public company disclosure to investors. 
Both circulars have been used by companies to classify coal and 
industrial minerals resources in the United States.\211\
---------------------------------------------------------------------------

    \209\ See USGS Circular 891 1 (1983), which states that ``In 
1980, the [USGS and Bureau of Mines] published Circular 831 . . . 
The circular, which outlines a classification system for all mineral 
commodities, filled the classification needs of the Bureau of Mines, 
which was no longer responsible for coal resource classification, 
and was the basis for this revision of the coal resource 
classification system by the Geological Survey. The revision, 
embodied in this report, has two main objectives: (1) To provide 
detailed information lacking in Bulletin 1450-B; and (2) to provide 
standard definitions, criteria, guidelines, and methods required for 
uniform application of the principles outlined in Circular 831.'' 
Gordon H. Wood, Jr et. al., U.S. Geological Survey, U.S. Dep't of 
the Interior, Coal Resource Reclassification System of the U.S. 
Geological Survey, USGS Circular 891 (1983), which is available at: 
http://pubs.usgs.gov/circ/1983/0891/report.pdf.
    \210\ See, e.g., USGS Circular 831 1 (1980), which states, ``The 
system can be used to report the status of mineral and energy-fuel 
resources for the Nation or for specific areas.'' U.S. Geological 
Survey & U.S. Bureau of Mines, U.S. Dep't of the Interior, 
Principles of a Resource/Reserve Classification for Minerals: A 
Revision of the Classification System Published as USGS Survey 
Bulletin 1450-A, USGS Circular 831 (1980), which is available at: 
http://pubs.usgs.gov/circ/1980/0831/report.pdf.
    \211\ Although Circular 831's classification system has been 
largely phased out in metal mining, it is still commonly used in 
coal and some industrial minerals mining.
---------------------------------------------------------------------------

    In the past, the staff has not objected to mineral reserve 
disclosure that used these circulars to classify mineral resources as 
inferred, indicated or measured resources.\212\ We do not believe the 
use of USGS Circulars 831 and 891 for resource classification in SEC 
filings would be consistent with the proposed rules. We believe that 
the CRIRSCO-based mineral resource classification scheme, upon which 
our proposed mineral resource disclosure rules are modeled, would 
provide a more appropriate basis for disclosure about a registrant's 
mineral resources.\213\
---------------------------------------------------------------------------

    \212\ Guide 7 prohibits mineral resource disclosure and as such 
does not provide any guidance (or place any restrictions) on how to 
classify mineral resources.
    \213\ The Circulars prescribe strict guidelines to classify 
mineral resources based on the distance from a drill hole (``drill 
hole spacing'') that do not vary depending on the complexity and 
specific facts of the deposit. For example, these Circulars define 
measured (0- to \1/4\-mile), indicated (\1/4\ to \3/4\-mile) and 
inferred (\3/4\- to 3-miles) mineral resources based on drill hole 
(or outcrop) radii.
---------------------------------------------------------------------------

    In contrast to the Circular's classification system, the proposed 
definitions require that all disclosed mineral resources must have 
reasonable prospects of economic extraction. Moreover, the primary 
criterion for the required mineral resource classification in our 
proposed rules is the geologic confidence in the estimates based on the 
geologic evidence (limited, adequate or conclusive). This is in 
contrast to the primary criterion in the Circulars, which is 
essentially the extent to which tonnages fall within particular 
distances from a drill hole or outcrop. Although drill hole spacing may 
be a factor that informs the qualified person's assessment of geologic 
confidence, for the purposes of public company disclosure to investors, 
we do not believe it should be the sole factor.\214\
---------------------------------------------------------------------------

    \214\ See, e.g., Ricardo A. Olea and James A. Luppens, 
``Modeling Uncertainty in Coal Resource Assessments, With an 
Application to a Central Area of the Gillette Coal Field,'' in USGS 
Scientific Investigations Report 2014-5196 1 (2014) (which concluded 
that an approach that involved establishing confidence limits, 
similar to the approach used in our proposal, ``should be considered 
realistic improvements over distance methods used for quantitative 
classification of uncertainty in coal resource, such as U.S. 
Geological Survey Circular 891'').
---------------------------------------------------------------------------

Request for Comment
    75. Are we correct in thinking that use of Circulars 831 and 891 to 
classify mineral resources would not be appropriate under the proposed 
rules? Why or why not?

F. Treatment of Mineral Reserves

    Guide 7 defines a mineral reserve as ``that part of a mineral 
deposit which could be economically and legally extracted or produced 
at the time of the reserve determination.'' \215\ The Guide does not, 
however, delineate the factors that must be considered when making a 
reserve determination. In contrast, other jurisdictions have adopted 
the CRIRSCO framework whereby the determination of mineral reserves 
occurs by applying and evaluating specifically defined ``modifying 
factors'' \216\ to indicated and measured mineral resources.\217\
---------------------------------------------------------------------------

    \215\ Paragraph (a)(1) of Guide 7.
    \216\ The modifying factors applied in this context are the same 
as the modifying factors applied in the context of the determination 
of mineral resources. See note 103, supra.
    \217\ See, e.g., the CIM Definition Standards at 5-6; the JORC 
Code pts. 30-31; the SME Guide pts. 40-41; the SAMREC Code pts. 33-
34; and the PERC Reporting Standard pts. 30-31.
---------------------------------------------------------------------------

    In addition, the CRIRSCO-based codes permit the use of either a 
preliminary feasibility study or feasibility study \218\ to establish 
the economic viability of extraction.\219\ Although Guide 7 does not 
address the issue, the staff has historically requested that 
registrants provide a final feasibility study to

[[Page 41677]]

support the determination and disclosure of mineral reserves.
---------------------------------------------------------------------------

    \218\ A preliminary feasibility study is also called a pre-
feasibility study. A feasibility study is also called a full, final, 
comprehensive, or bankable feasibility study.
    \219\ See, e.g., the CIM Definition Standards at p. 5; the JORC 
Code pt. 29; the SME Guide pt. 39; the SAMREC Code pt. 32; and the 
PERC Reporting Standard pt. 29.
---------------------------------------------------------------------------

    These differences between the staff's guidance and the CRIRSCO 
standards, the latter of which have become widely-accepted in industry 
practice, may have been a source of confusion for registrants and 
investors.\220\ To address this situation, we propose to revise the 
definition of mineral reserves to align it generally with the 
definition under the CRIRSCO-based standards by:
---------------------------------------------------------------------------

    \220\ See, e.g., the SME Petition for Rulemaking at 2, which 
states, ``The SEC's Industry Guide 7 is substantially different from 
these standards . . . [and] has caused much confusion among mining 
companies and their investors.''
---------------------------------------------------------------------------

     Adopting the framework of applying modifying factors to 
indicated or measured mineral resources in order to convert them to 
mineral reserves; and
     permitting either a pre-feasibility or feasibility study 
to provide the basis for determining and reporting mineral reserves.
1. The Framework for Determining Mineral Reserves
    We propose to establish a framework for mineral reserves 
determination and disclosure that is based on the following proposed 
definitions of ``mineral reserves,'' ``probable mineral reserves,'' 
``proven mineral reserves,'' and ``modifying factors.''
    We propose to define ``mineral reserve'' as an estimate of tonnage 
and grade or quality of indicated or measured mineral resources that, 
in the opinion of the qualified person, can be the basis of an 
economically viable project. More specifically, as proposed, a mineral 
reserve is the economically mineable part of a measured or indicated 
mineral resource, net of allowances for diluting materials and for 
losses that may occur when the material is mined or extracted.\221\
---------------------------------------------------------------------------

    \221\ See proposed Item 1301(d)(13)(i) of Regulation S-K.
---------------------------------------------------------------------------

    Under the proposed rules, the determination that part of a measured 
or indicated mineral resource is economically mineable would have to be 
based on a preliminary feasibility (pre-feasibility) or feasibility 
study conducted by a qualified person applying the modifying factors to 
indicated or measured mineral resources. Such study would have to 
demonstrate that, at the time of reporting, extraction of the mineral 
reserve is economically viable under reasonable investment and market 
assumptions. Moreover, the study would have to establish a life of mine 
plan that is technically achievable and economically viable, which 
would be the basis of determining the mineral reserve.\222\
---------------------------------------------------------------------------

    \222\ See proposed Item 1301(d)(13)(ii) of Regulation S-K.
---------------------------------------------------------------------------

    The proposed rules would provide that, as used in the definition of 
mineral reserve, ``economically viable'' means that the qualified 
person has determined, using a discounted cash flow analysis, or has 
otherwise analytically determined, that extraction of the mineral 
reserve is economically viable under reasonable investment and market 
assumptions.\223\ The proposed rules would further explain that, as 
used in this definition, ``investment and market assumptions'' includes 
all assumptions made about the prices, exchange rates, sales volumes 
and costs that are necessary and are used to determine the economic 
viability of the reserves.\224\
---------------------------------------------------------------------------

    \223\ See proposed Item 1301(d)(13)(iii) of Regulation S-K. 
Whether the investment and market assumptions are ``reasonable'' 
will necessarily be a facts and circumstances determination based 
upon the relevant economic and market factors.
    \224\ See proposed Item 1301(d)(13)(iv) of Regulation S-K.
---------------------------------------------------------------------------

    As proposed, the price used to determine the economic viability of 
the mineral reserves could not be higher than the average spot price 
during the 24-month period prior to the end of the fiscal year covered 
by the study, determined as an unweighted arithmetic average of the 
daily closing price for each trading day within such period, except in 
cases where sales prices are determined by contractual agreements. In 
such a case, the qualified person would be able to use the price set by 
the contractual arrangement, provided that such price is reasonable 
\225\ and the qualified person discloses that he or she is using a 
contractual price and discloses the contractual price used.\226\
---------------------------------------------------------------------------

    \225\ See note 198 for a discussion of when a contractual price 
may not be a reasonable estimate of the expected annual average 
price to be achieved for the mined product during each year of the 
project's life.
    \226\ See proposed Item 1301(d)(13)(iv) of Regulation S-K.
---------------------------------------------------------------------------

    The proposed rules would adopt the CRIRSCO classification scheme 
and framework for mineral reserve determination, which subdivides 
mineral reserves, in order of increasing confidence in the results 
obtained from the application of the modifying factors to the indicated 
and measured mineral resources, into probable mineral reserves and 
proven mineral reserves.\227\ Similar to the CRIRSCO classification 
scheme,\228\ we propose to define ``probable mineral reserves'' as the 
economically mineable part of an indicated and, in some cases, a 
measured mineral resource.\229\
---------------------------------------------------------------------------

    \227\ See Note to proposed Item 1301(d)(13) of Regulation S-K.
    \228\ See, e.g., JORC Code pt. 30; CIM Definition Standards at 
p. 6; and SAMREC Code pt. 33.
    \229\ See proposed Item 1301(d)(18)(i) of Regulation S-K.
---------------------------------------------------------------------------

    The proposed rules would explain that, for a probable mineral 
reserve, the qualified person's confidence in the results obtained from 
the application of the modifying factors and in the estimates of 
tonnage and grade or quality is lower than what is sufficient for a 
classification as a proven mineral reserve, but is still sufficient to 
demonstrate that, at the time of reporting, extraction of the mineral 
reserve is economically viable under reasonable investment and market 
assumptions.\230\ This lower level of confidence can be due either to 
higher geologic uncertainty when the qualified person converts an 
indicated mineral resource to a probable mineral reserve or higher risk 
in the results of the application of modifying factors at the time when 
the qualified person converts a measured mineral resource to a probable 
mineral reserve. The proposed rules would further require that a 
qualified person classify a measured mineral resource as a probable 
mineral reserve when his or her confidence in the results obtained from 
the application of the modifying factors to the measured mineral 
resource is lower than what is sufficient for a proven mineral 
reserve.\231\
---------------------------------------------------------------------------

    \230\ See proposed Item 1301(d)(18)(ii) of Regulation S-K.
    \231\ See proposed Item 1301(d)(18)(iii) of Regulation S-K.
---------------------------------------------------------------------------

    Similar to the CRIRSCO classification scheme,\232\ we propose to 
define ``proven mineral reserves'' as the economically mineable part of 
a measured mineral resource.\233\ The proposed rules would explain 
that, for a proven mineral reserve, the qualified person must have a 
high degree of confidence in the results obtained from the application 
of the modifying factors and in the estimates of tonnage and grade or 
quality.\234\ In addition, as proposed, a proven mineral reserve can 
only result from conversion of a measured mineral resource.\235\
---------------------------------------------------------------------------

    \232\ See, e.g., JORC Code pt. 31; CIM Definition Standards at 
p. 6; and SAMREC Code pt. 34.
    \233\ See proposed Item 1301(d)(21)(i) of Regulation S-K.
    \234\ See proposed Item 1301(d)(21)(ii) of Regulation S-K.
    \235\ See proposed Item 1301(d)(21)(iii) of Regulation S-K.
---------------------------------------------------------------------------

    We propose to define ``modifying factors'' as the factors that a 
qualified person must apply to mineralization or geothermal energy and 
then evaluate in order to establish the economic

[[Page 41678]]

prospects of mineral resources, or the economic viability of mineral 
reserves.\236\ Similar to the CRIRSCO framework, a qualified person 
would have to apply and evaluate modifying factors to convert measured 
and indicated mineral resources to proven and probable mineral 
reserves.\237\ These factors would include, but not be restricted to, 
mining, energy recovery and conversion, processing, metallurgical, 
economic, marketing, legal, environmental, infrastructure, social and 
governmental factors. The number, type and specific characteristics of 
the modifying factors that are applied would be a function of and 
depend upon the mineral, mine, property, or project.\238\
---------------------------------------------------------------------------

    \236\ See proposed Item 1301(d)(15) of Regulation S-K.
    \237\ See, e.g., JORC Code pt. 12; CRIRSCO International 
Reporting Template pt. 12; and SAMREC Code pt. 12.
    \238\ See proposed Item 1301(d)(15) of Regulation S-K.
---------------------------------------------------------------------------

    For example, applying and evaluating processing factors means the 
qualified person must examine the characteristics of the mineral 
resource and determine that the material can be processed economically 
into saleable product using existing technology. Similarly, applying 
and evaluating legal factors means the qualified person must examine 
the regulatory regime of the host jurisdiction to establish that the 
registrant can comply (fully and economically) with all laws and 
regulations (e.g., mining, environmental, reclamation and permitting 
regulations) that are relevant to operating a mineral project using 
existing technology. The only estimates of grade or quality and 
tonnages that a registrant can disclose as mineral reserves are those 
parts of the indicated and measured mineral resources that, after all 
such relevant factors have been evaluated, can be shown to be part of a 
viable mineral project.
    We also are proposing several instructions about the conversion of 
mineral resources into mineral reserves.\239\ For example, one 
instruction would explain that, similar to the CRIRSCO framework,\240\ 
if the uncertainties in the results obtained from the application of 
the modifying factors, which prevented a measured mineral resource from 
being converted to a proven mineral reserve, no longer exist, then the 
qualified person may convert the measured mineral resource to a proven 
mineral reserve.\241\
---------------------------------------------------------------------------

    \239\ We discuss additional instructions about the conversion of 
mineral resources into mineral reserves in the discussion of the 
requirements for pre-feasibility and feasibility studies below. See 
section II.F.2, infra.
    \240\ See, e.g., JORC Code pt. 32; CRIRSCO International 
Reporting Template pt. 33; and SAMREC Code pt. 35.
    \241\ See Instruction 11 to proposed Item 1302(d) of Regulation 
S-K.
---------------------------------------------------------------------------

    Another instruction would state that a qualified person cannot 
convert an indicated mineral resource to a proven mineral reserve 
unless there is new evidence that justifies conversion of the indicated 
mineral resource to a measured mineral resource.\242\ A third 
instruction would explain that a qualified person cannot convert an 
inferred mineral resource to a mineral reserve without first obtaining 
new evidence that justifies converting it to an indicated or measured 
mineral resource.\243\ These instructions are consistent with the 
CRIRSCO framework for conversion of mineral resources into mineral 
reserves.\244\
---------------------------------------------------------------------------

    \242\ See Instruction 12 to proposed Item 1302(d) of Regulation 
S-K.
    \243\ See Instruction 13 to proposed Item 1302(d) of Regulation 
S-K.
    \244\ See, e.g., JORC Code pt. 32; CRIRSCO International 
Reporting Template pt. 33; and SAMREC Code pt. 35.
---------------------------------------------------------------------------

    The proposed framework would require a registrant's disclosure of 
mineral reserves to be based on a qualified person's detailed 
evaluation of the modifying factors as applied to indicated or measured 
mineral resources, which would demonstrate the economic viability of 
the mining property or project.\245\ The proposed instructions would 
describe the relationship between the different classes of mineral 
resources and reserves and underscore the incremental nature of mineral 
resource and reserve determination. For example, a qualified person 
would not be able to use inferred mineral resources to support a 
determination of mineral reserves unless new evidence (e.g., data and 
analysis) has first caused an increased confidence in the geologic 
evidence \246\ sufficient to reclassify those resources as indicated or 
measured mineral resources. Similarly, a qualified person would not be 
able to convert an indicated mineral resource to a proven mineral 
reserve without first determining that conclusive, rather than just 
adequate, geological evidence exists to support reclassification to a 
measured mineral resource.
---------------------------------------------------------------------------

    \245\ See proposed Item 1302(d) of Regulation S-K.
    \246\ See the definitions of limited, adequate and conclusive 
geologic evidence under the respective definitions of inferred, 
indicated and measure mineral resource in proposed Item 1301(d) of 
Regulation S-K.
---------------------------------------------------------------------------

    This proposed framework for mineral reserve determination and 
disclosure would be more detailed and structured than Guide 7's 
approach. Although Guide 7 similarly defines a mineral reserve as that 
part of a mineral deposit that can be economically and legally 
extracted or produced, it does not specify the level of geologic 
evidence that must exist or the factors that must be considered to 
convert the deposit to a mineral reserve.
    In contrast, the proposed framework would only permit estimates of 
mineral reserves that result from the conversion of indicated and 
measured mineral resources for which adequate and conclusive geologic 
evidence exist. It would also prohibit the use of inferred mineral 
resources, for which there is only limited geologic evidence, to 
support a determination of mineral reserves. Finally, the proposed 
framework would require the qualified person to disclose the specific 
mining, processing, metallurgical, environmental, economic, legal and 
other applicable factors, the detailed evaluation of which has led the 
qualified person to conclude that extraction of the mineral reserve is 
economically viable.
    As a result, we believe that the proposed framework would result in 
clearer and more accurate disclosure about the economic viability of a 
registrant's mineral deposits, which would benefit investors. The 
proposed framework would also be substantially similar to the CRIRSCO 
framework. As such, its adoption should enhance consistency in mining 
disclosure across jurisdictions, facilitating comparability for 
investors. It also would reduce reporting costs for the numerous mining 
registrants that are dual-listed and have been subject to different 
U.S. and CRIRSCO-based disclosure requirements. The main difference 
between the proposed framework for determining mineral reserves and the 
CRIRSCO framework is the requirement to use commodity prices that are 
no higher than the 24-month trailing average.
    We are proposing a definition of mineral reserve as an estimate of 
tonnage and grade or quality that is net of allowances for diluting 
materials and mining losses. This is in contrast to the definition of 
mineral reserve under the CRIRSCO standards, which includes diluting 
materials in reserve estimates. We are proposing a net estimate for 
reserves because our proposed rules would require disclosure of mineral 
reserves at three points of reference: In-situ,\247\ plant or mill 
feed, and saleable

[[Page 41679]]

product.\248\ We believe estimates that are exclusive of diluting 
materials and mining losses would provide a clearer picture of the 
efficiency of the processing method, which we believe is important for 
investors.\249\ Because this difference is relatively minor (excluding 
diluting materials is a minor computational step in reserve 
estimation), we do not believe it would impose a significant additional 
compliance burden for registrants.
---------------------------------------------------------------------------

    \247\ In-situ means ``in its original place.'' It is used in 
this context to refer to mineral reserves estimated as in-place 
tons.
    \248\ See proposed Item 1304(b)(7) of Regulation S-K and 
Instruction 4 to proposed Item 601(b)(96)(iv)(B)(14) of Regulation 
S-K.
    \249\ The efficiency of the processing method demonstrates how 
well the registrant converts the resource into saleable products.
---------------------------------------------------------------------------

    As discussed in greater detail below,\250\ under the proposed 
rules, a qualified person's determination of mineral reserves would 
have to be based on either a preliminary (pre-feasibility) or 
feasibility study. In either case, the required technical study would 
have to include a technically and economically feasible life of mine 
plan that supports the study's demonstration that, at the time of 
reporting, extraction of the mineral reserve is economically viable 
under reasonable investment and market assumptions. We are including 
this life of mine requirement to provide clear guidance concerning the 
determination of mineral reserves to qualified persons and registrants. 
We do note, however, that many registrants already conduct life of mine 
plans to support their reserve disclosure.\251\
---------------------------------------------------------------------------

    \250\ See section II.F.2, infra.
    \251\ In this regard, we note that the SME Guide expressly 
requires a life of mine plan in its technical study. See the SME 
Guide, Table 1, at 49 (``Mining method(s), mine plans and production 
schedules defined for the life of the project'' are required to 
support mineral reserve disclosure.) Under the CRIRSCO-based codes, 
the qualified person has to develop mine plans in order to estimate 
cash flows, which are required by the codes for the financial 
analysis necessary to support mineral reserve disclosure. The cash 
flows must be based on costs and revenues associated with planned 
production over the life of the project. See JORC pt. 29, which 
states that ``[d]eriving an Ore Reserve without a mine design or 
mine plan through a process of factoring of the Mineral Resource is 
unacceptable. . . The studies will have determined a mine plan and 
production schedule that is technically achievable and economically 
viable and from which the Ore Reserves can be derived.''
---------------------------------------------------------------------------

    As proposed, the qualified person must demonstrate economic 
viability by conducting a discounted cash flow analysis or other 
similar financial analysis using a commodity price that is no higher 
than the 24 month trailing average price model proposed for the 
determination of mineral resources.\252\
---------------------------------------------------------------------------

    \252\ Consistent with this proposed requirement, the proposed 
rules would not permit a registrant to provide a supplemental 
mineral reserve determination (i.e., an estimate based upon a price 
higher than the 24 month trailing average).
---------------------------------------------------------------------------

    When discussing the analysis in the technical report summary, the 
qualified person must disclose the assumptions made about prices, 
exchange rates, discount rate, sales volumes and costs necessary to 
determine the economic viability of the reserves.\253\ The proposed 
requirement to conduct a discounted cash flow or other similar analysis 
is consistent with the requirement under the CRIRSCO-based codes that 
mineral reserve determination must be based on a financial analysis 
under reasonable assumptions demonstrating that extraction of the 
reserve is economically viable.\254\ In addition, the staff has 
historically requested such financial analysis to support disclosure of 
mineral reserves. As such, it should not significantly alter existing 
disclosure practices.
---------------------------------------------------------------------------

    \253\ See Instruction 3 to proposed Item 601(b)(96)(iv)(B)(21).
    \254\ See, e.g., the SME Guide pt. 39 (``The term `economically 
viable' implies that extraction of the Mineral Reserve has been 
determined or analytically demonstrated (e.g., such as by a cash 
flow in the report) to be viable and justifiable under reasonable 
investment and market assumptions.'') See also the JORC Code pt. 29 
(``The term `economically mineable' implies that extraction of the 
Ore Reserves has been demonstrated to be viable under reasonable 
financial assumptions'').
---------------------------------------------------------------------------

Request for Comment
    76. Should we establish a framework for mineral reserves 
determination and disclosure, as proposed? Why or why not? Is there 
another framework that would be preferable to the proposed framework? 
If so, what would be the advantages and disadvantages of the 
alternative framework?
    77. Should we define ``mineral reserve,'' as proposed? Are there 
conditions that we should include in the definition of mineral reserves 
instead of, or in addition to, those proposed to be included in the 
definition? Are there any conditions that we should exclude from the 
definition of mineral reserves? For example, should we modify the 
condition that mineral reserves be based on a pre-feasibility or 
feasibility study to only permit a feasibility study? Should we exclude 
in its entirety the condition that mineral reserves be based on a 
feasibility or pre-feasibility study? Are there terms that we should 
define differently? For example, should we define a mineral reserve as 
an estimate of tonnage and grade or quality that includes diluting 
materials and allowances for losses, instead of a net estimate, as 
proposed? Why or why not?
    78. Should we explicitly include a life of mine plan disclosure 
requirement in the technical studies required to support a 
determination of mineral reserves, as proposed? Why or why not?
    79. Should we require the use of a discounted cash flow analysis or 
other similar analysis to establish the economic viability of a mineral 
reserve's extraction, as proposed? Why or why not? If so, should we 
require the use of a price that is no higher than a trailing 24 month 
average spot price in the discounted cash flow analysis, except in 
cases where sales prices are determined by contractual agreements, as 
proposed? Is there some other period (e.g., 12 or 36 months) or measure 
that should determine the price used in the discounted cash flow 
analysis?
    80. Should we allow registrants to use an alternate price in 
addition to a price that is no higher than a trailing 24 month average 
spot price, as long as they disclose the alternate price and their 
justification? Alternatively, should we require every registrant to use 
a fixed 24 month trailing average price with the option to use an 
alternate price(s) that is reasonably achieved? Are there other pricing 
methods (e.g., management's long term view or using spot, forward or 
futures prices at the end of the last fiscal year to determine the 
ceiling price allowed) that we should require or permit registrants to 
use in discounted cash flow analysis? Would such pricing methods be 
transparent, easy for registrants to apply and investors to understand, 
and to the extent practicable, provide some degree of comparability?
    81. Should we define the terms ``probable mineral reserve'' and 
``proven mineral resource,'' as proposed? Why or why not? If not, how 
should we modify these definitions?
    82. Should we define ``modifying factors,'' as proposed? Are there 
any factors that we should include in the definition of modifying 
factors instead of or in addition to those already included in the 
definition? Are there any factors that we should exclude from the 
definition?
    83. Should we adopt the above discussed instructions, as proposed? 
Why or why not?
2. The Type of Study Required To Support a Reserve Determination
i. Preliminary Feasibility Study
    Like the CRIRSCO framework for mineral reserve determination the 
proposed rules would require either a preliminary feasibility study or 
a feasibility study in support of a determination of mineral 
reserves.\255\ We propose to define a ``preliminary

[[Page 41680]]

feasibility study'' (or ``pre-feasibility study'') as a comprehensive 
study of a range of options for the technical and economic viability of 
a mineral project that has advanced to a stage where a qualified person 
has determined (in the case of underground mining) a preferred mining 
method, or (in the case of surface mining) a pit configuration, and in 
all cases has determined an effective method of mineral processing and 
an effective plan to sell the product.\256\
---------------------------------------------------------------------------

    \255\ See proposed Item 1302(d) of Regulation S-K.
    \256\ See proposed Item 1301(d)(16)(i) of Regulation S-K. This 
proposed definition is similar to the comparable definition under 
the CRIRSCO-based codes. See, e.g., JORC Code pt. 39; CRIRSCO 
International Reporting Template pt. 38; and SAMREC Code at p. 3.
---------------------------------------------------------------------------

    The proposed rules would further provide that a pre-feasibility 
study must include a financial analysis based on reasonable 
assumptions, based on appropriate testing, about the modifying factors 
and the evaluation of any other relevant factors that are sufficient 
for a qualified person to determine if all or part of the indicated and 
measured mineral resources may be converted to mineral reserves at the 
time of reporting. The study's financial analysis must have the level 
of detail necessary to demonstrate, at the time of reporting, that 
extraction is economically viable.\257\ The proposed rules would also 
note that, while a pre-feasibility study is less comprehensive and 
results in a lower confidence level than a feasibility study, a pre-
feasibility study is more comprehensive and results in a higher 
confidence level than an initial assessment.\258\
---------------------------------------------------------------------------

    \257\ See proposed Item 1301(d)(16)(ii) of Regulation S-K.
    \258\ See Note to proposed Item 1301(d)(16) of Regulation S-K.
---------------------------------------------------------------------------

    As discussed in greater detail below, we propose to define a 
``feasibility study'' \259\ as a comprehensive technical and economic 
study of the selected development option for a mineral project, which 
includes detailed assessments of all applicable modifying factors 
together with any other relevant operational factors, and detailed 
financial analysis that are necessary to demonstrate, at the time of 
reporting, that extraction is economically viable.\260\ The proposed 
rules would further provide that, similar to the CRIRSCO 
framework,\261\ a feasibility study is more comprehensive, with a 
higher degree of accuracy, and yielding results with a higher level of 
confidence, than a pre-feasibility study. Under the proposed rules, it 
must contain mining, infrastructure, and process designs completed with 
sufficient rigor to serve as the basis for an investment decision or to 
support project financing.\262\
---------------------------------------------------------------------------

    \259\ As proposed, terms such as ``full, final, comprehensive, 
bankable, or definitive'' feasibility study are equivalent to a 
feasibility study. See Note to proposed Item 1301(d)(7) of 
Regulation S-K.
    \260\ See proposed Item 1301(d)(7)(i) of Regulation S-K. This 
proposed definition is similar to the comparable definition under 
the CRIRSCO-based codes. See, e.g., JORC Code pt. 40; CRIRSCO 
International Reporting Template pt. 39; and SAMREC Code at p. 2.
    \261\ Id.
    \262\ See proposed Item 1301(d)(7)(ii) of Regulation S-K; see 
also Note to proposed Item 1301(d)(7)(ii) of Regulation S-K.
---------------------------------------------------------------------------

    As proposed, the key differences between a pre-feasibility study 
and a final or bankable feasibility study are:
     A pre-feasibility study discusses a ``range of options'' 
for the technical and economic viability of a mineral project whereas a 
final feasibility study focuses on a particular option selected for the 
development of the project;
     a pre-feasibility study generally has a less detailed 
assessment of the modifying factors necessary to demonstrate that 
extraction is economically viable than the corresponding assessment in 
a final feasibility study; and
     a pre-feasibility study generally has a less detailed 
financial analysis that is based on less firm budgetary considerations 
(e.g., historical costs rather than actual, firm quotations for major 
capital items) and more assumptions than the financial analysis in a 
final feasibility study.
    Despite these differences, we believe that revising our rules to 
allow a pre-feasibility study to support the determination and 
disclosure of mineral reserves is appropriate because of the expected 
resulting benefits for both registrants and investors. Permitting the 
use of a pre-feasibility study to determine mineral reserves under our 
rules would align the Commission's disclosure regime with those under 
the CRIRSCO-based codes and, as such, provide greater uniformity in 
global mining disclosure requirements to the benefit of both mining 
registrants and their investors. Permitting the use of a pre-
feasibility study could also significantly reduce a mining registrant's 
costs in connection with the determination of mineral reserves.
    Although the use of a pre-feasibility study could increase the 
uncertainty regarding a registrant's disclosure about mineral reserves, 
we believe that any such uncertainty would be reduced by the 
requirements included in the proposed definitions and corresponding 
proposed instructions.
    First, as proposed, the pre-feasibility study must include a 
financial analysis at a level of detail sufficient to demonstrate the 
economic viability of extraction. A proposed instruction would state 
that the pre-feasibility study must include an economic analysis that 
supports the property's economic viability as assessed by a detailed 
discounted cash flow analysis.\263\ This economic analysis must 
describe in detail applicable taxes and provide an estimate of 
revenues, which in certain situations (e.g. where the products are not 
traded on an exchange or no established market or sales contract 
exists) must be based on at least a preliminary market study.\264\ We 
believe that this proposed level of detail for the economic analysis in 
a pre-feasibility study is consistent with current practice in the 
industry and comparable to the requirements for mineral reserve 
disclosure based on a pre-feasibility study in the CRIRSCO-based 
jurisdictions.\265\
---------------------------------------------------------------------------

    \263\ See Instruction 4 to proposed Item 1302(d) of Regulation 
S-K.
    \264\ As defined in proposed Item 1301(d)(17) of Regulation S-K, 
a preliminary market study is a study that is sufficiently rigorous 
and comprehensive to determine and support the existence of a 
readily accessible market for the mineral. It must, at a minimum, 
include product specifications based on preliminary geologic and 
metallurgical testing, supply and demand forecasts, historical 
prices for the preceding five or more years, estimated long term 
prices, evaluation of competitors (including products and estimates 
of production volumes, sales, and prices), customer evaluation of 
product specifications, and market entry strategies. The study must 
provide justification for all assumptions. It can, however, be less 
rigorous and comprehensive than a final market study, which is 
required for a full feasibility study.
    \265\ For example, the CIM Definition Standards at 3 states that 
the standard ``requires the completion of a Preliminary Feasibility 
Study as the minimum prerequisite for the conversion of Mineral 
Resources to Mineral Reserves.'' Also, CIM's Estimation of Mineral 
Resources and Mineral Reserves Best Practice Guidelines 45 (2003), 
in discussing work to determine economic merits of a deposit, states 
``[t]his work specifically includes mining engineering evaluations 
and, most importantly, the preparation of an appropriate cash flow 
analysis. These aspects are normal components of both feasibility 
studies and preliminary feasibility studies.''
---------------------------------------------------------------------------

    Second, the proposed rules would require a qualified person to 
include the justification for using a pre-feasibility study, if one is 
used, instead of a final feasibility study.\266\ This requirement would 
help ensure that investors are fully informed of the qualified person's 
basis for determining that a pre-feasibility study is adequate given 
the particular facts and circumstances. It also should encourage a 
qualified person to consider carefully his or her decision to use a 
pre-feasibility study to support the determination of mineral reserves.
---------------------------------------------------------------------------

    \266\ See proposed Item 1302(d) of Regulation S-K.
---------------------------------------------------------------------------

    Third, another proposed instruction would require the use of a 
final

[[Page 41681]]

feasibility study in high risk situations.\267\ For example, a final 
feasibility study would be required in situations where the project is 
the first in a particular mining district with substantially different 
conditions than existing company projects, such as environmental and 
permitting restrictions, labor availability and skills, remoteness, and 
unique mineralization and recovery methods.\268\ In such cases, the 
qualified person would have to use a feasibility study in order to 
achieve the level of confidence necessary for disclosing mineral 
reserves because, as discussed above, a pre-feasibility study is less 
comprehensive and yields results with a lower level of confidence than 
a feasibility study. We are concerned that using a pre-feasibility 
study in such high risk situations would not sufficiently reduce the 
uncertainty surrounding the results of the application of modifying 
factors to support disclosure of mineral reserves. We note that the SME 
Guide reflects a similar concern.\269\
---------------------------------------------------------------------------

    \267\ See Instruction 7 to proposed Item 1302(d) of Regulation 
S-K.
    \268\ See Instruction 7 to proposed Item 1302(d) of Regulation 
S-K.
    \269\ The SME Guide (2014) pt. 50 states: ``The Guide does not 
require that a Feasibility Study has been undertaken to convert 
Mineral Resources to Mineral Reserves, but it does require that at 
least a Pre-feasibility Study will have determined that the mining 
project is technically and economically feasible, and that relevant 
Modifying Factors have been considered for such a conversion. 
However, there may be some projects for which the Competent Person 
determines that a Feasibility Study, instead of a Pre-Feasibility 
Study, is required before the Mineral Resources may be converted to 
Mineral Reserves due to uncertainties in the Modifying Factors.''
---------------------------------------------------------------------------

    Moreover, similar to provisions in the CRIRSCO-based codes, an 
instruction to the proposed rules would prohibit a qualified person 
from using inferred mineral resources in the pre-feasibility study's 
financial analysis.\270\
---------------------------------------------------------------------------

    \270\ See Instruction 2 to proposed Item 1302(d) of Regulation 
S-K.
---------------------------------------------------------------------------

    Other proposed instructions are designed to help ensure that the 
pre-feasibility study is sufficiently rigorous to support a conclusion 
that extraction of the reserve is economically viable. For example, one 
proposed instruction would explain that the factors to be considered in 
a pre-feasibility study are typically the same as those required for an 
initial assessment, but considered at a greater level of detail or at a 
later stage of development.\271\ For example, a pre-feasibility study 
would have to define, analyze or otherwise address in detail:
---------------------------------------------------------------------------

    \271\ See Instruction 3 to proposed Item 1302(d) of Regulation 
S-K. These factors are also set forth in proposed Table 1, which is 
referenced in the instructions to proposed Items 1302(c) and (d) of 
Regulation S-K.
---------------------------------------------------------------------------

     The required access roads, infrastructure location and 
plant area, and the source of all utilities (e.g., power and water) 
required for development and production;
     the preferred underground mining method or surface mine 
pit configuration, with detailed mine layouts drawn for each 
alternative;
     the bench lab tests \272\ that have been conducted, the 
process flow sheet, equipment sizes, and general arrangement that have 
been completed, and the plant throughput;
---------------------------------------------------------------------------

    \272\ In the design of industrial process plants, engineers test 
the design concepts at increasingly larger scales. An initial step 
in this process is to conduct laboratory tests using a laboratory 
simulation of the conceptual process plant (referred to as bench lab 
tests). If successful, engineers then conduct tests using a small 
scale field plant that can process bulk samples (referred to as 
pilot or demonstration plant tests). It is only when these tests are 
successful that designs for full scale industrial plants are 
approved and the plants are constructed. Feasibility studies, 
depending on the stage, involve bench lab scale or pilot scale 
tests. See, e.g., Christopher G. Morris, Academic Press Dictionary 
of Science and Technology 244 (1992) which defines bench-scale 
testing as ``[t]he practice of examining materials, methods, or 
chemical processes on a scale that can be performed on a work 
bench.'' See also American Geological Institute, Dictionary of 
Mining, Mineral, and Related Terms 406 (2d ed. 1997), which defines 
a pilot plant as ``a small-scale processing plant in which 
representative tonnages of ore can be tested under conditions which 
foreshadow (or imitate) those of the full-scale operation proposed 
for a given ore.''
---------------------------------------------------------------------------

     the environmental compliance and permitting requirements 
or interests of agencies, non-governmental organizations, communities 
and other stakeholders, the baseline studies, and the plans for 
tailings disposal, reclamation and mitigation, together with an 
analysis establishing that permitting is possible; and
     any other reasonable assumptions, based on appropriate 
testing, on the modifying factors sufficient to demonstrate that 
extraction is economically viable.\273\
---------------------------------------------------------------------------

    \273\ See Instruction 3 to proposed Item 1302(d) of Regulation 
S-K.
---------------------------------------------------------------------------

    Another proposed instruction would provide that the operating and 
capital cost estimates in a pre-feasibility study must have an accuracy 
level and a contingency range that are significantly narrower than 
those permitted to support a determination of mineral resources. 
According to this instruction, operating and capital cost estimates in 
a pre-feasibility study must, at a minimum, have an accuracy level of 
approximately 25% and a contingency range not exceeding 
15%.\274\ The instruction would require the qualified person to state 
the accuracy level and contingency range in the pre-feasibility study.
---------------------------------------------------------------------------

    \274\ See Instruction 6 to proposed Item 1302(d) of Regulation 
S-K. These accuracy level and contingency range requirements are 
also provided in proposed Table 1.
---------------------------------------------------------------------------

    These latter two instructions (addressing the level at which the 
modifying factors are assessed and the appropriate accuracy level and 
contingency range for operating and capital costs) are consistent with 
current industry practice and comparable to requirements for the use of 
a pre-feasibility study in the CRIRSCO-based jurisdictions.\275\ As 
such, the proposed instructions would help ensure that a registrant's 
use of a pre-feasibility study in SEC filings meets the industry 
established minimum level of detail and rigor sufficient to determine 
reserves.
---------------------------------------------------------------------------

    \275\ See, e.g., the SME Guide, Tables 1 and 2.
---------------------------------------------------------------------------

    Another proposed instruction would address whether and when a 
registrant would be required to take additional steps to support its 
determination of mineral reserves. That instruction would explain that 
a determination of ``mineral reserves'' does not necessarily require 
that extraction facilities are in place or operational, that the 
company has obtained all necessary permits, or that the company has 
entered into sales contracts for the sale of mined products. The 
instruction would explain, however, that such determination does 
require that the qualified person has, after reasonable investigation, 
not identified any obstacles to obtaining permits and entering into the 
necessary sales contracts, and reasonably believes that the chances of 
obtaining such approvals and contracts in a timely manner are highly 
likely.\276\ The instruction would also state that, when assessing 
mineral reserves, the qualified person must take into account the 
potential adverse impacts, if any, from any unresolved material matter 
on which extraction is contingent and which is dependent on a third 
party. Under the proposed instruction, a determination of mineral 
reserves does not necessarily mean that extraction facilities have been 
built, permits have been obtained or that sales contracts have been 
entered into. Rather, for a determination that mineral reserves exist, 
it is sufficient for the qualified person to conclude, after reasonable 
investigation, that there are no obstacles to obtaining permits and 
revenues from the mine's products. This proposed instruction is 
consistent with similar

[[Page 41682]]

guidance under the CRIRSCO-based codes.
---------------------------------------------------------------------------

    \276\ See Instruction 1 to proposed Item 1302(d) of Regulation 
S-K.
---------------------------------------------------------------------------

    Additionally, the proposed instructions would address when the 
completion of a preliminary or final market study, as part of a pre-
feasibility or feasibility study, may be required to support a 
determination of mineral reserves. Specifically, proposed Instruction 1 
to Item 1302(d) would explain that the determination of mineral 
reserves may, in certain circumstances, require the completion of a 
preliminary market study (in the context of a pre-feasibility study) or 
a final market study (in the context of a final feasibility study) to 
support the qualified person's conclusions about the chances of 
obtaining revenues from sales. As proposed, a preliminary or final 
market study would be required where the mine's product cannot be 
traded on an exchange, there is no other established market for the 
product, and no sales contract exists. We believe that this proposed 
instruction would result in more detailed disclosure, when required 
under the circumstances, concerning the basis for the qualified 
person's conclusions as to whether the deposit is a mineral 
reserve.\277\
---------------------------------------------------------------------------

    \277\ See Instruction 1 to proposed Item 1302(d) of Regulation 
S-K. Cf. Instruction 4 to proposed Item 1302(d) of Regulation S-K, 
which would otherwise permit a pre-feasibility study to be based on 
a preliminary market study, and Instruction 9 to proposed Item 
1302(d) of Regulation S-K, which permits a feasibility study to be 
based on ``a final market study or possible letters of intent to 
purchase.''
---------------------------------------------------------------------------

    Finally, another proposed instruction would require a pre-
feasibility study to identify sources of uncertainty that require 
further refinement in a final feasibility study.\278\ This requirement 
is intended to elicit appropriate disclosure about the areas of risk 
present in the pre-feasibility study, which should help investors in 
assessing the reliability of the study.
---------------------------------------------------------------------------

    \278\ See Instruction 5 to proposed Item 1302(d) of Regulation 
S-K.
---------------------------------------------------------------------------

    We believe that the proposed rule and its related proposed 
instructions, taken as a whole, would sufficiently mitigate the level 
of risk resulting from permitting the use of a pre-feasibility study to 
support the determination and disclosure of mineral reserves. As such, 
we believe it would be appropriate to permit the use of a pre-
feasibility study for reserve determination and disclosure.
ii. Feasibility Study
    As proposed, a feasibility study is a comprehensive technical and 
economic study of the selected development option for a mineral 
project.\279\ Because of the comprehensiveness and level of detail 
required for a feasibility study, as provided under the proposed 
definition of feasibility study and similar to the comparable 
definition under the CRIRSCO-based codes,\280\ the results of the study 
may serve as the basis for a final decision by a proponent or financial 
institution to proceed with, or finance, the development of the 
project.\281\
---------------------------------------------------------------------------

    \279\ See proposed Item 1301(d)(7) of Regulation S-K.
    \280\ See, e.g., JORC Code pt. 40; CRIRSCO International 
Reporting Template pt. 39; and SAMREC Code at p. 2.
    \281\ See proposed Item 1301(d)(7)(i) of Regulation S-K.
---------------------------------------------------------------------------

    We are proposing several instructions regarding the use of a 
feasibility study to support the determination and disclosure of 
mineral reserves. One proposed instruction would require a feasibility 
study to contain the application and description of all relevant 
modifying factors in a more detailed form and with more certainty than 
a pre-feasibility study.\282\ Pursuant to that instruction, a 
feasibility study would have to define, analyze or otherwise address in 
detail:
---------------------------------------------------------------------------

    \282\ See Instruction 8 to proposed Item 1302(d) of Regulation 
S-K.
---------------------------------------------------------------------------

     Final requirements for site infrastructure, including 
well-defined access roads, finalized plans for infrastructure location, 
plant area, and camp or town site, and the established source of all 
required utilities (e.g., power and water) for development and 
production;
     a finalized mining method, including detailed mine layouts 
and final development and production plan for the preferred alternative 
with the required equipment fleet specified, together with detailed 
mining schedules, construction and production ramp up, and project 
execution plans;
     completed detailed bench lab tests and a pilot plant 
test,\283\ if required, based on risk, in addition to final 
requirements for process flow sheet, equipment sizes, general 
arrangement and the final plant throughput;
---------------------------------------------------------------------------

    \283\ See note 272, supra.
---------------------------------------------------------------------------

     the final identification and detailed analysis of 
environmental compliance and permitting requirements, including the 
finalized interests of agencies, NGOs, communities and other 
stakeholders, together with the completion of baseline studies and 
finalized plans for tailings disposal, reclamation and mitigation; and
     detailed assessments of other modifying factors necessary 
to demonstrate that extraction is economically viable.\284\
---------------------------------------------------------------------------

    \284\ In addition to Instruction 8 of proposed Item 1302(d), 
proposed Table 1 also addresses these factors.
---------------------------------------------------------------------------

    Another proposed instruction \285\ would require a feasibility 
study to include an economic analysis that, in addition to describing 
taxes in detail and assessing economic viability by a detailed 
discounted cash flow analysis, also estimates revenues based on at 
least a final market study \286\ or possible letters of intent to 
purchase.
---------------------------------------------------------------------------

    \285\ See Instruction 9 to proposed Item 1502(d) of Regulation 
S-K.
    \286\ As defined in proposed Item 1301(d)(8) of Regulation S-K, 
a final market study is a comprehensive study to determine and 
support the existence of a readily accessible market for the 
mineral. It must, at a minimum, include product specifications based 
on final geologic and metallurgical testing, supply and demand 
forecasts, historical prices for the preceding five or more years, 
estimated long term prices, evaluation of competitors (including 
products and estimates of production volumes, sales, and prices), 
customer evaluation of product specifications, and market entry 
strategies or sales contracts. The study must provide justification 
for all assumptions, which must include all material contracts 
required to develop and sell the reserves.
---------------------------------------------------------------------------

    A third proposed instruction would require operating and capital 
cost estimates in a feasibility study, at a minimum, to have an 
accuracy level of approximately 15% and a contingency range 
not exceeding 10%.\287\ As proposed, the qualified person would have to 
state the accuracy level and contingency range in the feasibility 
study.
---------------------------------------------------------------------------

    \287\ See Instruction 10 to proposed Item 1502(d) of Regulation 
S-K; see also proposed Table 1.
---------------------------------------------------------------------------

    These proposed requirements for the use of a feasibility study to 
support mineral reserve estimates are intended to promote accurate and 
uniform disclosure of mineral reserves in SEC filings, which should 
benefit investors as well as registrants. As proposed, the requirements 
concerning the accuracy level and contingency range for operating and 
capital cost estimates, and level of detail or stage of development for 
the evaluation of modifying factors, are comparable to those required 
for the use of a feasibility study to support mineral reserve estimates 
under the CRIRSCO-based codes.\288\ We believe aligning the U.S. 
requirements with international standards would benefit investors and 
registrants by promoting uniformity in mining disclosure standards. In 
addition, the proposed instructions are generally consistent with staff 
guidance for the use of a feasibility study to support a determination 
and disclosure of mineral reserves. Accordingly, we do not believe that 
adoption of the proposed definition

[[Page 41683]]

of feasibility study and the corresponding proposed instructions would 
significantly change existing disclosure practices of registrants.
---------------------------------------------------------------------------

    \288\ See, e.g., the SME Guide, Tables 1 and 2.
---------------------------------------------------------------------------

Request for Comment
    84. Should we define ``preliminary feasibility study'' and 
``feasibility study,'' as proposed? Are there any terms and conditions 
that we should include instead of or in addition to those included in 
the proposed definitions? Are there any terms or conditions under each 
definition that we should exclude?
    85. Should we permit the use of either a pre-feasibility study or a 
feasibility study to support the determination and disclosure of 
mineral reserves, as proposed? Why or why not?
    86. Should we require qualified persons to use a feasibility study 
in situations where the risk is high, as proposed? Why or why not? Are 
there other conditions, in addition to or in lieu of high risk 
situations, where we should require a feasibility study in support of 
mineral reserve disclosure?
    87. Should we adopt the proposed instructions about the use of a 
pre-feasibility study to support the determination and disclosure of 
mineral reserves? Are there any instructions that we should provide 
instead of or in addition to the proposed instructions for such use of 
a pre-feasibility study? Are there any instructions that we should 
exclude? Would the proposed instructions mitigate the risk of less 
certain disclosure that could result from the use of a pre-feasibility 
study to support the determination and disclosure of mineral reserves? 
If not, why not?
    88. Should we adopt the proposed instructions for the use of a 
feasibility study to support the determination and disclosure of 
mineral reserves? Are there any instructions that we should provide 
instead of or in addition to the proposed instructions for such use of 
a feasibility study? Are there any instructions that we should exclude?
    89. As part of the instructions for pre-feasibility and feasibility 
studies, should we define preliminary and final market studies as 
proposed?

G. Specific Disclosure Requirements

    Item 102 refers issuers ``engaged in significant mining 
operations'' to Guide 7. Guide 7 in turn calls for the disclosure of 
certain items for each ``mine, plant or other significant property'' in 
which the registrant has an economic interest.\289\ As written, the 
current rules and guidance presume that if a registrant's mining 
operations are ``significant,'' investors need and registrants should 
provide disclosure on every property. Neither Item 102 nor Guide 7 
contemplates the situation where a registrant has significant mining 
operations with multiple mining properties, some or all of which may 
not be individually significant. As such, neither addresses the 
disclosure required in that situation. In practice, however, there are 
registrants that have a large number of properties, such that providing 
disclosure on all properties may not be practicable or provide any 
meaningful benefit to investors. In such circumstances, on a case by 
case basis as part of the filing review process, and when appropriate 
under the specific facts and circumstances, the staff has not objected 
if a registrant with multiple mining properties provides summary 
disclosure that encompasses all of its properties instead of on a 
property by property basis. There is, however, no Commission rule that 
registrants can use to determine when summary disclosure would be 
appropriate. In addition, this informal approach can lead to 
inconsistent disclosure as Guide 7 does not address whether and to what 
extent its disclosure items for each individual property also apply for 
summary disclosure purposes.
---------------------------------------------------------------------------

    \289\ See paragraph (b) of Guide 7.
---------------------------------------------------------------------------

1. Requirements for Summary Disclosure
    We believe that, for registrants with economic interests in 
multiple mining properties, investors would benefit from an overview of 
the mining operations in addition to a property by property 
description. We believe that this would also result in more efficient 
and more effective disclosure, as registrants would be able to provide 
summary disclosure about all properties where some or all are not 
individually material. As such, we are proposing that registrants that 
own two or more mining properties must provide summary disclosure of 
their mining operations.\290\
---------------------------------------------------------------------------

    \290\ See proposed Item 1303(a) of Regulation S-K. The 
registrant would be required to provide the summary disclosure for 
all properties that the registrant owns or in which it has, or it is 
probable that it will have, a direct or indirect economic interest. 
It also would have to provide summary disclosure for properties that 
it operates, or it is probable that it will operate, under a lease 
or other legal agreement that grants the registrant ownership or 
similar rights that authorize it, as principal, to sell or otherwise 
dispose of the mineral. Further, a registrant would have to provide 
summary disclosure for properties for which it has, or it is 
probable that it will have, an associated royalty or similar right.
---------------------------------------------------------------------------

    The summary disclosure would include a map or maps showing the 
locations of all mining properties.\291\ We believe the proposed 
requirement for a map showing the location of all mining properties 
would provide investors a point of reference to assess the geographic 
and socio-political risks associated with the registrant's mining 
operations.\292\
---------------------------------------------------------------------------

    \291\ See proposed Item 1303(b)(1) of Regulation S-K.
    \292\ Item 102 requires registrants to provide ``appropriate 
maps'' disclosing ``the location'' of significant properties, but 
does not address whether or when registrants with multiple 
properties, none of which are material, should provide a map (or 
maps) showing the location of all its mining properties. We believe 
that the proposed requirement, which is consistent with current 
staff guidance, would provide investors with beneficial information 
but not significantly impact current disclosure practices.
---------------------------------------------------------------------------

    The proposed summary disclosure would also include a presentation, 
in tabular form, of certain specified information about the 20 
properties with the largest asset values (or fewer, if the registrant 
has an economic interest in fewer than 20 mining properties),\293\ and 
a summary, in tabular form, of all mineral resources and reserves at 
the end of the most recently completed fiscal year.\294\ We believe 
that the proposed requirement to disclose property-specific information 
for a registrant's 20 largest properties based on asset value would 
provide investors with an appropriately comprehensive and thorough 
understanding of a registrant's mining operations. In this regard, we 
think it is likely that, for registrants having a relatively small 
number of properties (e.g., 20-30), the proposed requirement would 
capture all or most of their mining properties. For those registrants 
with a higher number of properties, we believe the 20 largest 
properties based on asset value are likely to capture most of their 
material properties and as such provide an appropriately comprehensive 
overview of the registrants' mining operations.
---------------------------------------------------------------------------

    \293\ See proposed Item 1303(b)(2) of Regulation S-K.
    \294\ See proposed Item 1303(b)(3) of Regulation S-K.
---------------------------------------------------------------------------

    As proposed, for each of the properties required to be included in 
the summary disclosure, a registrant would have to identify the 
property, report the total production from the property for the three 
most recently completed fiscal years,\295\ and disclose the following 
information:
---------------------------------------------------------------------------

    \295\ As proposed, a registrant with only a royalty interest 
would have to provide only the portion of the production that led to 
royalty income for each of the three most recently completed fiscal 
years. See proposed Instruction 2 to proposed Item 1303(b)(2) of 
Regulation S-K.
---------------------------------------------------------------------------

     The location of the property;
     the type and amount of ownership interest;

[[Page 41684]]

     the identity of the operator;
     title, mineral rights, leases or options and acreage 
involved;
     the stage of the property (exploration, development or 
production);
     key permit conditions;
     mine type and mineralization style; and
     processing plant and other available facilities.
    For the purpose of determining the registrant's 20 largest 
properties, a registrant would be permitted to treat multiple mines 
with interrelated mining operations \296\ as one mining property.\297\ 
For example, multiple mines that share the same processing plant or 
other facilities, prior to the first point of material external sale, 
could be considered a single property.\298\
---------------------------------------------------------------------------

    \296\ See the definition of mining operations in Instruction 1 
to proposed Item 1301(b) of Regulation S-K.
    \297\ See Instruction 1 to proposed Item 1303(b)(2) of 
Regulation S-K.
    \298\ Registrants could take a similar approach when determining 
what is ``a property'' for the purposes of determining an 
``individual property'' under proposed Item 1304 of Regulation S-K, 
as discussed in section II.G.2, infra.
---------------------------------------------------------------------------

    Guide 7 currently calls for the disclosure of all of the above 
items of information. We continue to believe that these items are 
important to the description of, and necessary to an understanding of, 
a mining property. The summary information required about each of the 
20 largest properties, by asset value, however, would be less than what 
we are proposing to require for individual material properties. For 
example, we are not proposing to require summary information on the 
exploration work carried out and material exploration results in the 
reporting period.\299\ Nevertheless, we believe that, for these 20 
properties, the proposed disclosure is sufficient to present a 
reasonably comprehensive summary of the registrant's mining operations. 
In order to standardize the disclosure, facilitate a registrant's 
compliance with the disclosure requirements, and enhance an investor's 
understanding of this information, we are proposing that a registrant 
must provide this information in tabular form using the format of the 
following table, designated as Table 2: \300\
---------------------------------------------------------------------------

    \299\ See section II.G.2, infra, for a discussion of the 
required disclosure for individual material properties.
    \300\ See proposed Table 2, which follows Instruction 2 to 
proposed Item 1303(b)(2) of Regulation S-K.

---------------------------------------------------------------------------

[[Page 41685]]

[GRAPHIC] [TIFF OMITTED] TP27JN16.000

    In addition, under the proposed rules, a registrant would have to 
provide a summary of its mineral resources and mineral reserves at the 
end of its most recently completed fiscal year, by commodity and 
geographic area, and for each property containing 10% or more of the 
registrant's mineral reserves or 10% or more of the registrant's 
combined measured and indicated mineral resources. The registrant would 
have to provide this summary for each class of mineral reserves 
(probable and proven) and resources (inferred, indicated and measured), 
together with total mineral reserves and total measured and indicated 
mineral

[[Page 41686]]

resources.\301\ As proposed, all mineral reserves and resources 
reported in the summary table must be based on, and accurately reflect, 
information and supporting documentation prepared by a qualified 
person.
---------------------------------------------------------------------------

    \301\ See proposed Item 1303(b)(3) of Regulation S-K.
---------------------------------------------------------------------------

    We believe that this proposed requirement would provide investors 
with information necessary to understand a registrant's material mining 
operations at fiscal year's end.\302\ Such information would, for 
example, enable investors to understand and evaluate the registrant's 
ability to replenish depleting mineral reserves, a well-established 
measure of financial performance in mining.\303\ The breakdown of the 
mineral resources and reserves by category and source (geographic area 
and property) also would provide investors with a measure of the 
associated risk. In order to standardize the disclosure, facilitate a 
registrant's compliance with the disclosure requirements, and enhance 
an investor's understanding of this information, we are proposing that 
a registrant must provide this information in tabular form using the 
format of the following table, designated as Table 3: \304\
---------------------------------------------------------------------------

    \302\ See, e.g., SME Petition for Rulemaking at 1 (``Mining 
companies and investors around the world consider Mineral Resource 
estimates as material and fundamental information about a company 
and its projects.'')
    \303\ See, e.g., R. L. Robinson and B. W. Mackenzie, Economic 
Comparison of Mineral Exploration and Acquisition Strategies to 
Obtain Ore Reserves 281-282 (1987). (``Mining company objectives are 
. . . profit, growth, and survival . . . To survive, the company 
must successfully invest . . . in replacing the depleted ore 
reserves. An underlying thread among the profit, growth, and 
survival objectives is ore reserve replacement and growth.'') See 
also H. R. Bullis, Gold Deposits, Exploration Realities, and the 
Unsustainability of Very Large Gold Producers 313-320 (2003).
    \304\ See proposed Table 3, which follows Instruction 5 to 
proposed Item 1303(b)(3) of Regulation S-K.

                         Table 3--Summary Mineral Resources and Reserves for the Fiscal Year Ending [DATE] Based on [PRICE] \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                Measured  +
                                                                  Proven      Probable      Total       Measured    Indicated    Indicated     Inferred
                                                                 mineral      mineral      mineral      mineral      mineral      mineral      mineral
                                                                 reserves     reserves     reserves    resources    resources    resources    resources
--------------------------------------------------------------------------------------------------------------------------------------------------------
Commodity A
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Geographic area A........................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Geographic area B........................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
        Mine/Property A......................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
        Mine/Property B......................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
        Other mines/properties...............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Other geographic areas...................................
                                                              ------------------------------------------------------------------------------------------
Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
Commodity B
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Geographic area A........................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Geographic area B........................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
        Mine/Property A......................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
        Mine/Property B......................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
        Other mines/properties...............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Other geographic areas...................................
                                                              ------------------------------------------------------------------------------------------
Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Unless prices are defined by contractual arrangements, the registrant must use a commodity price that is no higher than the average spot price
  during the 24-month period prior to the end of the last fiscal year, determined as an unweighted arithmetic average of the daily closing price for
  each trading day within such period and must disclose the price used. When prices are defined by contractual agreements, the registrant may use the
  price set by the contractual arrangement, provided that such price is reasonable, and the registrant discloses that it is using a contractual price
  and discloses the contractual price used.

    We also are proposing several instructions to this summary 
disclosure requirement. The proposed instructions would:
     Define the term ``by geographic area'' to mean by 
individual country, regions of a country, state, groups of states, 
mining district, or other political units, to the extent material to 
and necessary for an investor's understanding of a registrant's mining 
operations; \305\
---------------------------------------------------------------------------

    \305\ See Instruction 1 to proposed Item 1303(b)(3) of 
Regulation S-K.
---------------------------------------------------------------------------

     explain that all disclosure of mineral resources must be 
exclusive of mineral reserves; \306\
---------------------------------------------------------------------------

    \306\ See Instruction 2 to proposed Item 1303(b)(3) of 
Regulation S-K.
---------------------------------------------------------------------------

     require that all disclosure of mineral resources and 
reserves must be only for the portion of the resources or

[[Page 41687]]

reserves attributable to the registrant's interest in the property; 
\307\
---------------------------------------------------------------------------

    \307\ See Instruction 3 to proposed Item 1303(b)(3) of 
Regulation S-K.
---------------------------------------------------------------------------

     require all mineral resource and reserve estimates to be 
based on prices that are no higher than the average spot price during 
the 24-month period prior to the end of the fiscal year covered by the 
report, determined as an unweighted arithmetic average of the daily 
closing price for each trading day within such period, unless prices 
are defined by contractual arrangements; \308\ and
---------------------------------------------------------------------------

    \308\ See Instruction 4 to proposed Item 1303(b)(3) of 
Regulation S-K.
---------------------------------------------------------------------------

     require that the mineral resource and reserve estimates 
called for in proposed Table 3 must be in terms of saleable 
product.\309\
---------------------------------------------------------------------------

    \309\ See Instruction 5 to proposed Item 1303(b)(3) of 
Regulation S-K.
---------------------------------------------------------------------------

    We believe that these instructions would facilitate the clear and 
consistent presentation of information concerning a registrant's 
mineral reserves and resources for investors while providing 
flexibility to the registrant regarding the basis of the information 
presented. For example, the requirement to use any price below the 24-
month trailing average provides registrants some flexibility on the 
price used in its reserve estimation. Also, the definition of ``by 
geographic area'' provides registrants flexibility on how to organize 
the information requested in Table 2.
    For registrants with mining operations that are, in the aggregate, 
material but for which no individual property is material, this summary 
disclosure under proposed Item 1303 would be the only mining disclosure 
required in the registrant's filings. For registrants with individual 
properties that are material, we are proposing additional, more 
detailed, disclosure about such properties.\310\ In addition, the 
proposed rules would exclude registrants with only one mining property 
from the summary disclosure requirement \311\ because we do not see any 
benefit to requiring summary disclosure, in addition to individual 
disclosure, for a single material property.
---------------------------------------------------------------------------

    \310\ See section II.G.2, infra, for a discussion of the 
requirements for individual property disclosure.
    \311\ See proposed Item 1303(a)(2) of Regulation S-K.
---------------------------------------------------------------------------

    We believe the proposed requirement for summary disclosure would be 
beneficial for both registrants and investors. We believe it would 
provide more efficient and effective disclosure and would better 
accommodate the diversity among registrants in terms of the number and 
relative size of their mining properties. Registrants would be required 
to disclose an appropriate level of information based on their 
particular facts and circumstances, specifically taking into account 
whether they own individually material properties. Under this approach, 
investors would be provided with information necessary to understand 
the registrant's mining operations even if it owns no individually 
material property. For those registrants with individually material 
properties, investors would obtain aggregate information about the 
registrant's mining operations as well as more detailed information 
about individually material properties.
Request for Comment
    90. Should we require summary disclosure, as proposed, for all 
registrants with material mining operations? Why or why not? Should 
such summary disclosure require maps showing the locations of all 
mining properties, a presentation of the proposed information about the 
20 properties with the largest asset values, and a summary of all 
mineral resources and reserves at the end of the most recently 
completed fiscal year, as proposed?
    91. Should we permit registrants to treat multiple mines with 
interrelated mining operations as one mining property, as proposed? 
Should we instead require registrants to treat such mines as separate 
properties? Why or why not?
    92. Should we exclude registrants with only one mining property 
from the summary disclosure requirements, as proposed? Why or why not? 
Alternatively, should we use a different threshold than the proposed 
``only one'' threshold for excluding a registrant from the summary 
disclosure requirements? If so, what threshold should we use and why 
would this threshold be more appropriate?
    93. Regarding the proposed summary disclosure requirement for the 
20 largest properties, should we require other information, in addition 
to or in lieu of the proposed items? Why or why not? For example, 
should we require the registrant to disclose the asset value of each 
property included in its summary disclosure? Should we revise the 
proposed form and content of Table 2? If so, how should we revise the 
table's form or content?
    94. Should the presentation of information about the mining 
properties with the largest asset values include the 20 largest 
properties, as proposed? Should this number be higher or lower? If so, 
what number is appropriate? Why? Should the summary disclosure include 
only those properties that represent 5% or more in asset value? Should 
we permit the summary disclosure to omit any property that represents 
1% or less in asset value? Alternatively, should we require the 
specified information based on some criteria (e.g. revenues) other than 
asset value?
    95. Should we require summary disclosure to include information on 
mineral resources and reserves, as proposed? Why or why not? If mineral 
resources and reserves are required in summary disclosure, should we 
require their disclosure by class of mineral reserves (probable and 
proven) and resources (inferred, indicated and measured), together with 
total mineral reserves and total measured and indicated mineral 
resources, as proposed? Should we require the summary disclosure by 
commodity and geographic area or property containing 10% or more of 
mineral reserves or sum of measured and indicated mineral resources, as 
proposed? Why or why not? In particular, is the proposed instruction to 
Table 3 regarding the scope of geographic area to be disclosed 
sufficiently clear, and if not, how should it be clarified? Should we 
require disclosure of mineral reserves and resources by some other 
attribute (e.g., segments), in addition to or in lieu of commodity and 
geographic area? If so, which attributes should we use and why? Should 
we revise the proposed form and content of Table 3? If so, how should 
we revise the table's form or content?
    96. Should we require the disclosure in Tables 2 and 3 to be made 
available in the eXtensible Business Reporting Language (XBRL) format? 
Why or why not?
    97. If we require the disclosure in Tables 2 and 3 to be made 
available in XBRL, are the current requirements for the format and 
elements of the tables suitable for tagging? If not, how should they be 
revised? In particular, are the proposed instructions for Tables 2 and 
3 sufficiently specific to make the data reported in the tables 
suitable for direct comparative analysis? If not, how should the 
instructions be revised to increase the usefulness of having the data 
made available in XBRL, including the comparability and quality of XBRL 
data?
    98. If we require Tables 2 and 3 to be made available in XBRL, is 
there a particular existing taxonomy that should be used? 
Alternatively, what features should a suitable taxonomy have in this 
case?
2. Requirements for Individual Property Disclosure
    We believe that summary property disclosure alone would not provide 
all

[[Page 41688]]

relevant information about the properties and assets that generate a 
mining registrant's revenues. Therefore, we are proposing that a 
registrant provide more detailed information for each of its individual 
properties that is material to its business or financial condition. 
When determining whether an individual property is material to its 
business or financial condition, a registrant would have to apply the 
same standards and consider the same factors as required when 
determining whether its mining operations as a whole are material.\312\
---------------------------------------------------------------------------

    \312\ See proposed Item 1304(a) of Regulation S-K, which 
references proposed Item 1301(b). A registrant would have to apply 
those standards and other considerations to each individual property 
that it owns or in which it has, or it is probable that it will 
have, a direct or indirect economic interest; that it operates, or 
it is probable that it will operate, under a lease or other legal 
agreement that grants the registrant ownership or similar rights 
that authorize it, as principal, to sell or otherwise dispose of the 
mineral; or that it has, or it is probable that it will have, an 
associated royalty or similar right.
---------------------------------------------------------------------------

    As proposed, for each material individual property, a registrant 
would have to provide a brief description of the property,\313\ 
including:
---------------------------------------------------------------------------

    \313\ See proposed Item 1304(b)(1).
---------------------------------------------------------------------------

     The property's location, accurate to within one mile, 
using an easily recognizable coordinate system, including appropriate 
maps, with proper engineering detail (such as scale, orientation, and 
titles), which must be legible on the page when printed; \314\
---------------------------------------------------------------------------

    \314\ See proposed Item 1304(b)(1)(i). We believe the level of 
accuracy that would be required by the proposed rule is similar to 
the level of detail required by the CRIRSCO-based codes. See, e.g., 
PERC Table 1 requirement on key plan, maps and diagrams, which calls 
for a location or index map and more detailed maps showing all 
important features described in the text, including all relevant 
cadastral and other infrastructure features . . . All maps, plans 
and sections noted in this checklist, should be legible, and include 
a legend, coordinates, coordinate system, scale bar and north 
arrow.'' Similarly, SAMREC Table 1 also calls for a ``detailed topo-
cadastral map.''
---------------------------------------------------------------------------

     existing infrastructure, including roads, railroads, 
airports, towns, ports, sources of water, electricity, and personnel; 
\315\ and
---------------------------------------------------------------------------

    \315\ See proposed Item 1304(b)(1)(ii).
---------------------------------------------------------------------------

     a brief description, including the name or number and size 
(acreage), of the titles, claims, concessions, mineral rights, leases 
or options under which the registrant and its subsidiaries have or will 
have the right to hold or operate the property, and how such rights are 
obtained at this location, indicating any conditions that the 
registrant must meet in order to obtain or retain the property. If held 
by leases or options or if the mineral rights otherwise have 
termination provisions, the registrant would have to provide the 
expiration dates of such leases, options or mineral rights and 
associated payments.\316\
---------------------------------------------------------------------------

    \316\ See proposed Item 1304(b)(1)(iii) of Regulation S-K.
---------------------------------------------------------------------------

    For each material property, the proposed rules also would require a 
registrant to disclose a history of previous operations,\317\ a 
description of the condition and status of the property,\318\ and a 
description of any significant encumbrances to the property, including 
current and future permitting requirements and associated deadlines, 
permit conditions, regulatory violations and associated fines.\319\
---------------------------------------------------------------------------

    \317\ See proposed Item 1304(b)(2) of Regulation S-K.
    \318\ See proposed Item 1304(b)(3) of Regulation S-K.
    \319\ See proposed Item 1304(b)(4) of Regulation S-K.
---------------------------------------------------------------------------

    In addition to providing a brief description of the present 
condition of the property, a registrant would have to disclose the work 
completed by the registrant on the property; the registrant's proposed 
program of exploration or development; the current stage of the 
property as exploration, development or production; the current state 
of exploration or development of the property; and the current 
production activities. Mines would have to be identified as either 
surface or underground, with a brief description of the mining method 
and processing operations. If the property is without known reserves 
and the proposed program is exploratory in nature or the registrant has 
started extraction without determining mineral reserves, the registrant 
would have to provide a statement to that effect.\320\
---------------------------------------------------------------------------

    \320\ See proposed Item 1304(b)(3)(i) of Regulation S-K.
---------------------------------------------------------------------------

    The proposed rules would also require a registrant to disclose, for 
each material property, the age, details as to modernization and 
physical condition of the equipment, facilities, infrastructure, and 
underground development.\321\ In addition, the registrant would have to 
disclose the total cost for or book value of the property and its 
associated plant and equipment.\322\ Regarding significant encumbrances 
to the property, a registrant would have to describe current and future 
permitting requirements and associated timelines, permit conditions, 
and violations and fines.\323\
---------------------------------------------------------------------------

    \321\ See proposed Item 1304(b)(3)(ii) of Regulation S-K.
    \322\ See proposed Item 1304(b)(3)(iii) of Regulation S-K. An 
instruction to this Item would reiterate that a registrant must 
identify an individual property with no mineral reserves as an 
exploration stage property, even if it has other properties in 
development or production; and a registrant that does not have 
reserves on any of its properties cannot characterize itself as a 
development or production stage company, even if it has mineral 
resources or exploration results, or even if it is engaged in 
extraction without first disclosing mineral reserves.
    \323\ See proposed Item 1304(b)(4) of Regulation S-K.
---------------------------------------------------------------------------

    The above proposed items of disclosure are substantially similar to 
items called for by Item 102 of Regulation S-K and Guide 7.\324\ We 
continue to believe that these items are necessary to enable an 
investor to have an informed understanding of a registrant's material 
mining properties. In particular, property location is frequently used 
to assess socio-political and geographic risk, level of infrastructure, 
significance of adjacent properties and regional geology. In light of 
this, we believe that the required level of accuracy in the proposed 
rules is necessary. For example, the distance between a property and 
other (developing or producing) properties or in relation to major 
geologic structures can significantly impact the assessment of a 
property's value, especially in the exploration stage.\325\
---------------------------------------------------------------------------

    \324\ For example, paragraph (b) of Guide 7 calls for 
registrants to disclose the location and means of access to the 
property, a description of the title, claim, lease or option under 
which the registrant operates the property with appropriate maps to 
portray the location, a history of previous operations, a 
description of the present condition of the property, the work 
completed by the registrant on the property, the registrant's 
proposed program of exploration and development, the current state 
of exploration or development of the property, and a description of 
the rock formations and mineralization of existing or potential 
economic significance on the property, including the identity of the 
principal metallic or other constituents insofar as known.
    \325\ Location of a mineral prospect relative to known deposits 
or geologic structures is an attribute used to determine the mineral 
potential (i.e., the probability that mineral deposits of the type 
sought can be found at the prospect). See, e.g., E. J. M. Carranza, 
``Geocomputation of mineral exploration targets,'' Computers & 
Geosciences, 1907-1916 (2011); and A. Porwal and E. J. M. Carranza, 
``Introduction to the Special Issue: GIS-based mineral potential 
modelling and geological data analyses for mineral exploration,'' 
Ore Geology Reviews 477-483 (2015).
---------------------------------------------------------------------------

    To increase the quality and usefulness of the disclosure provided 
pursuant to the existing mining disclosure regime, the proposed rules 
would include several additional items of individual property 
disclosure. For example, unlike Guide 7, which does not address the 
issue, the proposed rules would apply to the disclosure obligations of 
a registrant holding a royalty interest or other similar economic 
interest in a property. Under the proposed rules, such a registrant 
would be required to describe all of the above information that an 
owner or operator of the property would have to provide, including, for 
example, the documents

[[Page 41689]]

under which the owner or operator holds or operates the property, the 
mineral rights held by the owner or operator, conditions required to be 
met by the owner or operator, and the expiration dates of leases, 
options and mineral rights. The registrant would also have to describe 
briefly the agreement under which the registrant and its subsidiaries 
have or will have the right to a royalty or similar interest in the 
property, indicating any conditions that the registrant must meet in 
order to obtain or retain the royalty or similar interest, and 
indicating the expiration date.\326\ We believe this information would 
help investors understand a royalty holder's property interest. We also 
believe that including individual property disclosure requirements in 
the rules for holders of royalty and other economic interests would 
help to elicit more complete and consistent disclosure in this regard 
to the benefit of those holders and their investors.
---------------------------------------------------------------------------

    \326\ See proposed Item 1304(b)(1)(iv) of Regulation S-K.
---------------------------------------------------------------------------

    In addition, we are proposing to require several of the disclosure 
items in tabular form because we believe this would standardize the 
disclosure, facilitate a registrant's compliance with the disclosure 
requirements, and enhance an investor's understanding of the 
registrant's material mining properties.\327\ Specifically, we are 
proposing that a registrant, for each material property, would provide 
the tabular information required by Tables 4, 5, and 6 as set forth 
below. While we are proposing general guidelines for the tabular 
presentations, we would permit registrants to modify the tables for 
ease of presentation, to add information, or to combine two or more 
required tables throughout their disclosure.\328\
---------------------------------------------------------------------------

    \327\ See, e.g., proposed Items 1304(b)(5) through (7) of 
Regulation S-K.
    \328\ See Instruction 2 to proposed Items 1304(b)(5) through (7) 
of Regulation S-K.
---------------------------------------------------------------------------

    As proposed, Table 4 would require a summary of the exploration 
activity for the most recently completed fiscal year, which, for each 
sampling method used, discloses the number of samples, the total size 
or length of the samples, and the total number of assays.\329\ A 
registrant would have to provide this information in tabular form using 
the format of the following table, designated as Table 4:
---------------------------------------------------------------------------

    \329\ See proposed Table 4 and proposed Item 1304(b)(5) of 
Regulation S-K.

       Table 4--[INDIVIDUAL PROPERTY NAME]--Summary Exploration Activity for the Fiscal Year Ending [DATE]
----------------------------------------------------------------------------------------------------------------
                                                                     Number of     Total size or   Total number
                        Sampling methods                            samples \1\     length \2\       of assays
----------------------------------------------------------------------------------------------------------------
Method 1
----------------------------------------------------------------------------------------------------------------
Method 2
----------------------------------------------------------------------------------------------------------------
\1\ This refers to number of drill holes, trenches, geophysical survey lines, etc.
\2\ This refers to the total length of drill holes, trenches, and geophysical survey lines or total amount of
  material in bulk sampling.

    As proposed, Table 5 would require a registrant to provide a 
summary of material exploration results for the most recently completed 
fiscal year, which, for each material property, identifies the hole 
that generated the exploration results, and describes the length, 
lithology \330\ and key geologic properties (e.g., grades, 
contaminants, and energy content) of the exploration results. A 
registrant would have to provide this information in tabular form using 
the format of the following table, designated as Table 5, accompanied 
by a brief discussion of the exploration results' context and 
relevance: \331\
---------------------------------------------------------------------------

    \330\ Lithology, as used in this context, refers to the 
description of a particular rock unit. Generally, it refers to the 
characteristics of a rock formation.
    \331\ See proposed Table 5 and proposed Item 1304(b)(6) of 
Regulation S-K.

                                             Table 5--[INDIVIDUAL PROPERTY NAME]--Summary Exploration Results for the Fiscal Year Ending [DATE] \1\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                     Geologic        Geologic                        Geologic
                             Hole ID                                   From             To            Length         Lithology      Property 1      Property 2         . . .        Property n
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 \1\ If only results from selected holes and intersections are included, they should be accompanied by a discussion of the context and justification for excluding other results.

    Neither Guide 7 nor Item 102 calls for disclosure of exploration 
results, although Guide 7 does call for the disclosure of the 
registrant's exploration program.\332\ As discussed above, we are 
proposing to require disclosure of a registrant's material exploration 
results because we believe such disclosure would provide investors with 
a more comprehensive view of a registrant's mining operations and help 
them make more informed investment decisions.\333\
---------------------------------------------------------------------------

    \332\ See paragraph (b)(4)(i) of Guide 7.
    \333\ See section II.D, supra, for a more detailed discussion of 
our reasons for requiring disclosure of material exploration 
results.
---------------------------------------------------------------------------

    Table 6, as proposed, would require a registrant to disclose, if 
mineral resources or reserves have been determined, a summary of all 
mineral resources and reserves, which, for each material property, 
provides the estimated tonnages, grades (or quality, where 
appropriate), cut-off grades and metallurgical recovery, by class of 
mineral resource and reserve, occurring in-situ, as plant/mill feed, 
and as saleable product.\334\ A registrant would have to provide this 
information in tabular form using the format of the following table, 
designated as Table 6:
---------------------------------------------------------------------------

    \334\ See proposed Table 6 and proposed Item 1304(b)(7) of 
Regulation S-K.

[[Page 41690]]



Table 6--[INDIVIDUAL PROPERTY NAME]-- Summary of [COMMODITY/COMMODITIES] Mineral Reserves and Resources at the End of the Fiscal Year Ended [DATE] Based
                                                                     on [PRICE] \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      In-situ                     Plant/mill feed
                                         ----------------------------------------------------------------    Saleable                      Metallurgical
                                                              Grades/                         Grades/         product     Cut-off grades     recovery
                                              Amount         Qualities        Amount         Qualities
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proven mineral
 reserves
--------------------------------------------------------------------------------------------------------------------------------------------------------
Probable mineral
 reserves
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total mineral reserves
--------------------------------------------------------------------------------------------------------------------------------------------------------
Measured mineral
 resources
--------------------------------------------------------------------------------------------------------------------------------------------------------
Indicated mineral
 resources
--------------------------------------------------------------------------------------------------------------------------------------------------------
Measured + Indicated mineral resources
--------------------------------------------------------------------------------------------------------------------------------------------------------
Inferred mineral
 resources
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Unless prices are defined by contractual arrangements, the registrant must use a commodity price that is no higher than the average spot price
  during the 24-month period prior to the end of the last fiscal year, determined as an unweighted arithmetic average of the daily closing price for
  each trading day within such period and must disclose the price used. When prices are defined by contractual agreements, the registrant may use the
  price set by the contractual arrangement, provided that such price is reasonable, and the registrant discloses that it is using a contractual price
  and discloses the contractual price used.

    We also are proposing a few instructions to the provisions 
requiring a registrant to disclose its exploration activity, material 
exploration results, and mineral resource and reserve estimates for 
each material property. One instruction would advise a registrant not 
to include an extensive description of regional geology, but, rather, 
to include geological information that is brief and relevant to 
property disclosure.\335\ Another proposed instruction would explain 
that all disclosure of mineral resources must be exclusive of mineral 
reserves.\336\ A third proposed instruction would state that a 
registrant with only a royalty interest should provide only the portion 
of the resources or reserves that are subject to the royalty or similar 
agreement.\337\ We believe that these proposed instructions would 
facilitate a registrant's compliance with the individual property 
disclosure requirements while providing investors with focused and 
consistent disclosure.
---------------------------------------------------------------------------

    \335\ See Instruction 1 to proposed Items 1304(b)(5) through 
(7).
    \336\ See Instruction 3 to proposed Items 1304(b)(5) through 
(7).
    \337\ See Instruction 4 to proposed Items 1304(b)(5) through 
(7).
---------------------------------------------------------------------------

    The proposed rules would further require a registrant to provide, 
in proposed Tables 7 and 8, a comparison of its mineral resources and 
reserves as of the end of the last fiscal year against the mineral 
resources and reserves as of the end of the preceding fiscal year, with 
an explanation of any change between the two.\338\ The comparison would 
have to disclose information concerning:
---------------------------------------------------------------------------

    \338\ See proposed Tables 7 and 8 and proposed Item 1304(b)(8) 
of Regulation S-K.
---------------------------------------------------------------------------

     The mineral resources or reserves at the end of the last 
two fiscal years;
     the net difference between the mineral resources or 
reserves at the end of the last completed fiscal year and the preceding 
fiscal year, as a percentage of the resources or reserves at the end of 
the fiscal year preceding the last completed one;
     an explanation of the causes of any discrepancy in mineral 
resources including depletion or production, changes in commodity 
prices, additional resources discovered through exploration, and 
changes due to the methods employed; and
     an explanation of the causes of any discrepancy in mineral 
reserves including depletion or production, changes in the resource 
model, changes in commodity prices and operating costs, changes due to 
the methods employed, and changes due to acquisition or disposal of 
properties.\339\
---------------------------------------------------------------------------

    \339\ See proposed Item 1304(b)(8)(i)-(iv) of Regulation S-K.
---------------------------------------------------------------------------

    A registrant would have to provide this comparison in tabular form 
in the following format:

                                                                            Table 7--Mineral Resource Reconciliation
                                                 [Only the sum of Measured and Indicated Resources should be used in reconciliation disclosure]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Resource at  Resource at                                Causes of discrepancies in resources
                                                                     the end of   the end of    Net   --------------------------------------------------------------------------------
                                                                    fiscal year  fiscal year   Diff.    Depletion                                                                       Comments
                                                                     ending mm/   ending mm/    (%)         or       Price     Cost   Exploration  Methodology  Acquisition/   Others
                                                                     dd/yy \1\    dd/yy \1\             production                                                disposal
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Ore type 1........................................................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Ore type 2........................................................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Use these two columns to disclose resources at the end of each of the last two fiscal years.


[[Page 41691]]


                                                                            Table 8--Mineral Reserve Reconciliation.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Reserves at  Reserves at                                 Causes of discrepancies in reserves
                                                                    the end of   the end of    Net   ---------------------------------------------------------------------------------
                                                                   fiscal year  fiscal year   Diff.    Depletion                                                                        Comments
                                                                    ending mm/   ending mm/    (%)         or      Resource   Price       Cost     Methodology  Acquisition/   Others
                                                                    dd/yy \1\    dd/yy \1\             production    model                                        disposal
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Ore type 1.......................................................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Ore type 2.......................................................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Use these two columns to disclose reserves at the end of each of the last two fiscal years.

We believe that this comparative disclosure requirement would help 
investors understand the reasons for the year to year changes in a 
registrant's mineral resources and reserves, which should help 
investors analyze and evaluate a registrant's future prospects.
    While Guide 7 calls for annual disclosure of mineral reserves, it 
does not call for registrants to compare their current mineral reserve 
disclosure with previously provided disclosure. Thus, this proposed 
comparative disclosure requirement could increase reporting costs for 
registrants. We believe, however, that much of the disclosure that 
would be required under the proposed comparative disclosure requirement 
is often provided by registrants pursuant to current disclosure 
practices. We believe that in most cases this disclosure is 
sufficiently important to an investor's understanding of the 
registrant's material properties that it would be appropriate to have a 
separate, stand-alone requirement set forth in our rules.
    If the registrant has not previously disclosed mineral reserve or 
resource estimates in a filing with the Commission or is disclosing 
material changes to its previously disclosed mineral reserve or 
resource estimates, we are proposing that it provide a brief discussion 
of the material assumptions and criteria in the disclosure. The 
material assumptions and criteria would depend on the specific facts 
and circumstances surrounding the particular property and the mineral 
resource and reserve estimates. The disclosure of these assumptions and 
criteria, however, would need to include all of the material 
information necessary for investors to understand the disclosed mineral 
resources or reserves. In addition, the registrant would have to cite 
to corresponding sections of the technical report summary, which would 
be filed as an exhibit pursuant to proposed Item 1302(b).\340\
---------------------------------------------------------------------------

    \340\ See proposed Item 1304(b)(9) of Regulation S-K.
---------------------------------------------------------------------------

    Similarly, if the registrant has not previously disclosed material 
exploration results in a filing with the Commission, or is disclosing 
material changes to its previously disclosed exploration results, we 
are proposing that it must provide sufficient information to allow for 
an accurate understanding of the significance of the exploration 
results. This must include information such as exploration context, 
type and method of sampling, sampling intervals and methods, relevant 
sample locations, distribution, dimensions, and relative location of 
all relevant assay and physical data, data aggregation methods, land 
tenure status, and any additional material information that may be 
necessary to make the required disclosure concerning the registrant's 
exploration results not misleading. In addition, the registrant would 
have to cite to corresponding sections of the summary technical report, 
which would be filed as an exhibit pursuant to proposed Item 
1302(b).\341\
---------------------------------------------------------------------------

    \341\ See proposed Item 1304(b)(10) of Regulation S-K.
---------------------------------------------------------------------------

    Finally, we are proposing some individual property disclosure 
instructions applicable to registrants that have not previously 
disclosed mineral resource or reserve estimates or material exploration 
results or that are disclosing a material change in previously 
disclosed mineral resource or reserve estimates or material exploration 
results. Most of these proposed instructions are designed to assist 
registrants in determining whether there has been a material change in 
estimates of mineral resources, mineral reserves, or material 
exploration results. For example, one key proposed instruction would 
explain that whether a change in exploration results, mineral 
resources, or mineral reserves, is material must be based on all facts 
and circumstances, both quantitative and qualitative.\342\ Another 
proposed instruction would provide that a change in exploration results 
that significantly alters the potential of the exploration target is 
considered material.\343\
---------------------------------------------------------------------------

    \342\ See Instruction 1 to proposed Items 1304(b)(9) and (10).
    \343\ See Instruction 2 to proposed Items 1304(b)(9) and (10).
---------------------------------------------------------------------------

    Other proposed instructions would establish quantitative thresholds 
for presumed materiality of a change in estimates of mineral resources 
or reserves. For example, one proposed instruction would state that an 
annual change in total resources or reserves of 10% or more, excluding 
production as reported in proposed Tables 7 and 8, is presumed to be 
material, and thus would need to be disclosed.\344\ Another proposed 
instruction would establish that a cumulative change in total resources 
or reserves of 30% or more in absolute terms, excluding production as 
reported in Tables 7 and 8, from the current filed technical report 
summary is presumed to be material.\345\ A third proposed instruction 
would require that, when applying these quantitative thresholds for 
presumed materiality, the registrant should consider the change in 
total resources or reserves on the basis of total tonnage or volume of 
saleable product.\346\
---------------------------------------------------------------------------

    \344\ See Instruction 3 to proposed Items 1304(b)(9) and (10).
    \345\ See Instruction 4 to proposed Items 1304(b)(9) and (10).
    \346\ See Instruction 5 to proposed Items 1304(b)(9) and (10).
---------------------------------------------------------------------------

    Another proposed instruction would require a registrant to consider 
carefully whether the filed technical report summary is current with 
respect to all material assumptions and information, including 
assumptions relating to or underlying all modifying factors and 
scientific and technical information (e.g., sampling data, estimation 
assumptions and methods). To the extent that the registrant is not 
filing a technical report summary but instead is basing the required 
disclosure upon a previously filed report, that report would also have 
to be current in these respects. If the previously filed report is not 
current in these respects, the registrant would have to file a revised 
or new summary technical report from a qualified person, in compliance 
with Item 601(b)(96) of Regulation S-K, which supports the registrant's 
mining property disclosures.\347\
---------------------------------------------------------------------------

    \347\ See Instruction 6 to proposed Items 1304(b)(9) and (10).

---------------------------------------------------------------------------

[[Page 41692]]

    Finally, a proposed instruction would explain that a report 
containing estimates of the quantity, grade, or metal or mineral 
content of a deposit or exploration results that a registrant has not 
verified as a current mineral resource, mineral reserve, or exploration 
results, and which was prepared before the registrant acquired, or 
entered into an agreement to acquire, an interest in the property that 
contains the deposit, would not be considered current and could not be 
filed in support of disclosure.\348\
---------------------------------------------------------------------------

    \348\ See Instruction 7 to proposed Items 1304(b)(9) and (10).
---------------------------------------------------------------------------

    We believe these instructions would help a registrant determine 
when it must file a technical report summary as an exhibit to the 
filing and provide the appropriate accompanying disclosure in the 
filing about the resource or reserve estimates and material exploration 
results. At the same time, the proposed instructions would help to 
ensure that investors are provided with current information about their 
mineral resources and reserves and material exploration results.
Request for Comment
    99. Should we require disclosure on individually material 
properties, as proposed? Why or why not? Should such disclosure require 
a description of the property, a history of previous operations, a 
description of the condition and status of the property, a description 
of any significant encumbrances to the property, a summary of the 
exploration activity for the most recently completed fiscal year, a 
summary of material exploration results for the most recently completed 
fiscal year, and a summary of all mineral resources and reserves, if 
mineral resources or reserves have been determined, as proposed?
    100. Should we require that a registrant provide the property's 
location, including in maps, accurate within one mile? Why or why not? 
If not, should we use a standard for degree of accuracy similar to that 
used in the CRIRSCO-based codes, such as PERC or SAMREC? Why or why 
not? If not, what level of accuracy should we require?
    101. Should we require that a registrant provide in tabular format 
each of the summaries required for its exploration activity, material 
explorations results, and mineral resources and reserves, as proposed? 
Why or why not? Should we require all of the information specified in 
Tables 4-8 to be in tabular form? Why or why not? Should we revise the 
proposed form and content of these tables? If so, how should we revise 
the tables' form or content?
    102. Should we permit registrants to disclose estimates of mineral 
resources and reserves based on different price criteria, which may 
reasonably be achieved, in lieu of, or in addition to, the price which 
is no higher than the 24-month trailing average? Why or why not? What 
factors should we use to determine what may reasonably be achieved? 
Should we require all registrants to use the 24-month average spot 
price (or average over a different period) as the commodity price 
instead of as a ceiling? Why or why not?
    103. Should we require the registrant to provide a comparison of 
the mineral resources and reserves as of the end of the last fiscal 
year against the mineral resources and reserves as of the end of the 
preceding fiscal year, with an explanation of any material change 
between the two, as proposed? Why or why not? Are there items of 
information that we should include in the comparison instead of or in 
addition to the proposed items of information? Are there any proposed 
items of information that we should exclude from the comparison?
    104. If the registrant has not previously disclosed material 
exploration results, mineral reserve or resource estimates in a filing 
with the Commission or is disclosing material changes to its previously 
disclosed exploration results, mineral reserve or mineral resource 
estimates, should we require it to provide a brief discussion of the 
material assumptions and criteria in the disclosure and cite to any 
sections of the technical report summary, as proposed? Should we 
require registrants to file updated summary technical reports to 
support disclosure of material exploration results, mineral resources 
or mineral reserves when the registrant is relying on a previously 
filed technical report summary that is no longer current with respect 
to all material scientific and technical information, as proposed? Why 
or why not?
    105. Regarding the proposed requirement to disclose a material 
change in mineral resources or reserves, should we adopt an instruction 
that an annual change in total resources or reserves of 10% or more, or 
a cumulative change in total resources or reserves of 30% or more in 
absolute terms, excluding production as reported in Tables 7 and 8, is 
presumed to be material, as proposed? Why or why not? If not, should we 
remove the materiality presumptions altogether or use different 
quantitative thresholds from those proposed? If the latter, what 
alternative thresholds or measure(s) should replace the proposed 
presumptions of materiality?
    106. Should we require the disclosure in Tables 4 through 8 to be 
made available in the XBRL format? Why or why not?
    107. If we require the disclosure in Tables 4 through 8 to be made 
available in XBRL, are the current requirements regarding for the 
format and elements of the tables suitable for tagging? If not, how 
should they be revised? In particular, are the proposed instructions 
for Tables 4 through 8 sufficiently specific to make the data reported 
in the tables suitable for direct comparative analysis? If not, how 
should the instructions be revised to increase the usefulness of having 
the data made available in XBRL, including the comparability and 
quality of XBRL data?
    108. If we require Tables 4 through 8 to be made available in XBRL, 
is there a particular existing taxonomy that should be used? 
Alternatively, what features should a suitable taxonomy have in this 
case?
3. Requirements for Technical Report Summaries
    As previously discussed, the proposed rules would require a 
registrant to file, as an exhibit, a technical report summary to 
support the disclosure of mineral resources, mineral reserves, or 
material exploration results for each material property. We believe 
that requiring disclosure of the important scientific and technical 
information that forms the basis for disclosure of exploration results, 
mineral resources and mineral reserves in SEC filings would benefit 
investors. In this regard, a registrant's estimates of its mineral 
reserves, resources and exploration results are entirely dependent on 
the scientific and technical information considered by the qualified 
person. There is always a level of uncertainty associated with 
estimates of mineral deposits under the ground. As such, the report 
would provide investors with important contextual information with 
which to evaluate the reliability of the registrant's disclosure.
    The proposed rules would require a qualified person to identify and 
summarize the scientific and technical information and conclusions 
reached concerning material mineral exploration results, initial 
assessments used to support disclosure of mineral resources, and 
preliminary or final feasibility studies used to support disclosure of 
mineral reserves, for each material property, in the technical report

[[Page 41693]]

summary.\349\ The qualified person would also have to sign and date the 
technical report summary.\350\ This requirement should help to ensure 
the reliability of the technical report summary.
---------------------------------------------------------------------------

    \349\ See proposed Item 601(b)(96)(i) of Regulation S-K.
    \350\ See proposed Item 601(b)(96)(ii) of Regulation S-K.
---------------------------------------------------------------------------

    The proposed requirements for the contents of the technical report 
summary are intended to elicit the scientific and technical information 
necessary to support the determination and disclosure of mineral 
resources, mineral reserves and material exploration results. These 
proposed requirements, as discussed below, are similar in most respects 
to the items of information required for the summary report under the 
Canadian mining disclosure provisions in NI 43-101.\351\ They are also 
similar to the contents suggested in the mining engineering 
literature.\352\ These similarities support our view that the proposed 
sections of the technical report summary would provide relevant and 
useful information to facilitate an investor's understanding of a 
registrant's mineral resources, mineral reserves and material 
exploration results.
---------------------------------------------------------------------------

    \351\ See Form 43-101F1, which prescribes 27 sections for the 
technical report summary required for each material property 
pursuant to Part 4 of NI 43-101, and which is available at: http://web.cim.org/standards/documents/Block484_Doc111.pdf.
    \352\ See, e.g., W. Hustrulid, M. Kuchta and R. Martin, 1 Open 
Pit Mine Planning & Design 14-16 (3rd ed. 2013); Richard West, 
``Preliminary, Prefeasibility and Feasibility Studies,'' Australian 
Mineral Economics--A Survey of Important Issues (Philip Maxwell and 
Pietro Guj, eds, 2006).
---------------------------------------------------------------------------

    As proposed, the technical report summary must not include large 
amounts of technical or other project data, either in the report or as 
appendices to the report.\353\ This requirement would prohibit the 
current practice, by some registrants, of providing large amounts of 
drill hole data \354\ and other technical information as appendices to 
technical report summaries. In addition, the qualified person must 
draft the summary to conform, to the extent practicable, with plain 
English principles under the Securities Act and Exchange Act.\355\ 
These proposed requirements should help improve the readability of the 
technical report summary for the benefit of those investors who do not 
have a technical engineering background. They also are consistent with 
similar Canadian mining disclosure standards.\356\
---------------------------------------------------------------------------

    \353\ See proposed Item 601(b)(96)(iii) of Regulation S-K.
    \354\ Drill hole data, as used in this context, refers to 
information obtained from drilling that includes results of 
laboratory analysis of samples obtained from drilling and rock 
types.
    \355\ See Securities Act Rule 421 (17 CFR 230.421) and 
Securities Exchange Act Rule 13a-20 (17 CFR 240.13a-20).
    \356\ See Instruction 3 to Form 43-101F1, which states: ``The 
qualified person preparing the technical report should keep in mind 
that the intended audience is the investing public and their 
advisors who, in most cases, will not be mining experts. Therefore, 
to the extent possible, technical reports should be simplified and 
understandable to a reasonable investor. However, the technical 
report should include sufficient context and cautionary language to 
allow a reasonable investor to understand the nature, importance, 
and limitations of the data, interpretations, and conclusions 
summarized in the technical report.''
---------------------------------------------------------------------------

    We are proposing that the technical report summary consist of some 
or all of the following 26 sections,\357\ depending upon the specific 
scope of the summary:
---------------------------------------------------------------------------

    \357\ See proposed Item 601(b)(96)(iv)(B), which is set forth in 
its entirety in section VIII, infra, for a complete list and 
description of the contents of the technical report summary The 
description of these sections that follows is not intended to be 
comprehensive.
---------------------------------------------------------------------------

     An executive summary that briefly summarizes the most 
significant information in the technical report summary, including 
property description and ownership, geology and mineralization, the 
status of exploration, development and operations, mineral resource and 
mineral reserve estimates, summary capital and operating cost 
estimates, permitting requirements, and the qualified person's 
conclusions and recommendations; \358\
---------------------------------------------------------------------------

    \358\ See proposed Item 601(b)(96)(iv)(B)(1) of Regulation S-K.
---------------------------------------------------------------------------

     an introduction, which, among other matters, must identify 
the registrant for whom the technical report summary was prepared, 
disclose the terms of reference and purpose for which the technical 
report summary was prepared, and briefly describe any personal 
inspection of the property by each qualified person \359\ or, if none 
was made, the reason why a personal inspection was not completed; \360\
---------------------------------------------------------------------------

    \359\ As indicated in note 74, supra, a registrant may have more 
than one qualified person prepare a technical report summary for a 
mining property or project.
    \360\ See proposed Item 601(b)(96)(iv)(B)(2) of Regulation S-K.
---------------------------------------------------------------------------

     a description of the property, including the location of 
the property, accurate to within one mile, using an easily recognizable 
coordinate system, together with appropriate maps, with proper 
engineering detail (such as scale, orientation, and titles) to portray 
the location of the property; \361\
---------------------------------------------------------------------------

    \361\ The property description must include the area of the 
property, the name or number of each title, claim, mineral right, 
lease or option under which the registrant and its subsidiaries have 
or will have the right to hold or operate the property, the mineral 
rights, and how such rights have been obtained at this location, 
indicating any conditions that the registrant must meet in order to 
obtain or retain the property, any significant encumbrances to the 
property, including current and future permitting requirements and 
associated timelines, permit conditions, and violations and fines, 
and any other significant factors and risks that may affect access, 
title, or the right or ability to perform work on the property. See 
proposed Item 601(b)(96)(iv)(B)(3) of Regulation S-K.
---------------------------------------------------------------------------

     a description of the property's accessibility, climate, 
local resources, infrastructure and physiography; \362\
---------------------------------------------------------------------------

    \362\ Physiography refers to physical geography. This section 
requires a description of the property's topography, elevation, and 
vegetation, means of access to the property, the climate and length 
of the operating season, as applicable, and the availability of and 
required infrastructure, including sources of water, electricity, 
personnel, and supplies. See proposed Item 601(b)(96)(iv)(B)(4) of 
Regulation S-K.
---------------------------------------------------------------------------

     a history of the property, which must include a 
description of previous operations, together with the names of previous 
operators if known, and the type, amount, quantity, and general results 
of exploration and development work undertaken by any previous owners 
or operators; \363\
---------------------------------------------------------------------------

    \363\ See proposed Item 601(b)(96)(iv)(B)(5) of Regulation S-K.
---------------------------------------------------------------------------

     a brief description of the regional, local, and property 
geology, the significant mineralized zones encountered on the property, 
and each mineral deposit type that is the subject of investigation or 
exploration, together with the geological model or concepts being 
applied in the investigation or forming the basis of exploration 
program; \364\
---------------------------------------------------------------------------

    \364\ The qualified person must include at least one 
stratigraphic column and one cross-section of the local geology to 
meet these requirements. ``Stratigraphic column'' refers to the 
vertical order, by age, of rocks units (strata). Typically, the 
oldest rocks are located at the bottom and youngest at the top of 
the column. See proposed Item 601(b)(96)(iv)(B)(6) of Regulation S-
K.
---------------------------------------------------------------------------

     a description of the property's hydrogeology; \365\
---------------------------------------------------------------------------

    \365\ Hydrogeology is the branch of geology concerned with the 
study of the occurrence, distribution, movement and geological 
interaction of water. This section requires, among other matters, a 
description of the nature and quality of the sampling methods used 
to acquire data on surface and groundwater parameters, and the type 
and appropriateness of laboratory techniques used to test for 
groundwater flow parameters such as permeability. See proposed Item 
601(b)(96)(iv)(B)(7) of Regulation S-K.
---------------------------------------------------------------------------

     a description of geotechnical data, testing and analysis; 
\366\
---------------------------------------------------------------------------

    \366\ This section requires a description of the nature and 
quality of the sampling methods used to acquire geotechnical data, 
the type and appropriateness of laboratory techniques used to test 
for soil and rock strength parameters, and the results of laboratory 
testing, including the qualified person's interpretation and 
material assumptions made. See proposed Item 601(b)(96)(iv)(B)(8) of 
Regulation S-K.
---------------------------------------------------------------------------

     a description of the nature and extent of all relevant 
exploration work

[[Page 41694]]

conducted by or on behalf of the registrant; \367\
---------------------------------------------------------------------------

    \367\ This description must include drilling and all other 
exploration work, such as geophysical and geochemical surveys and 
analysis. See proposed Item 601(b)(96)(iv)(B)(9) of Regulation S-K.
---------------------------------------------------------------------------

     a description of sample preparation methods and quality 
control measures employed prior to sending samples to an analytical or 
testing laboratory, sample splitting and reduction methods, and the 
security measures taken to ensure the validity and integrity of 
samples; \368\
---------------------------------------------------------------------------

    \368\ This description must include sample preparation, assaying 
and analytical procedures used, the name and location of the 
analytical or testing laboratories, the relationship of the 
laboratory to the registrant, and whether the laboratories are 
certified by any standards association and the particulars of such 
certification. This description must also include the nature, 
extent, and results of quality control procedures and quality 
assurance actions taken or recommended to provide adequate 
confidence in the data collection and estimation process. This 
section must further include the qualified person's opinion on the 
adequacy of sample preparation, security, and analytical procedures. 
If the analytical procedures used in the analysis are not part of 
conventional industry practice, the qualified person must so state 
and provide a justification for why he or she believes the procedure 
is appropriate in this instance. See proposed Item 
601(b)(96)(iv)(B)(10) of Regulation S-K.
---------------------------------------------------------------------------

     a description of the steps taken by the qualified person 
to verify the data being reported on or which is the basis of the 
technical report summary; \369\
---------------------------------------------------------------------------

    \369\ This section must include, among other matters, the 
qualified person's opinion on the adequacy of the data for the 
purposes used in the technical report summary. See proposed Item 
601(b)(96)(iv)(B)(11) of Regulation S-K.
---------------------------------------------------------------------------

     a description of the nature and extent of the mineral 
processing or metallurgical testing and analytical procedures; \370\
---------------------------------------------------------------------------

    \370\ This description must include the degree to which the test 
samples are representative of the various types and styles of 
mineralization and the mineral deposit as a whole, and the relevant 
results, including the basis for any assumptions or predictions 
about recovery estimates. The description must also identify the 
analytical or testing laboratories, the relationship of the 
laboratory to the registrant, whether the laboratories are certified 
by any standards association and the particulars of such 
certification. In addition, this section requires the qualified 
person's opinion on the adequacy of the data for the purposes used 
in the technical report summary. If the analytical procedures used 
in the analysis are not part of conventional industry practice, the 
qualified person must so state and provide a justification for why 
he or she believes the procedure is appropriate in this instance. 
See proposed Item 601(b)(96)(iv)(B)(12) of Regulation S-K.
---------------------------------------------------------------------------

     if mineral resource estimates are being reported, a 
description of the key assumptions, parameters, and methods used to 
estimate the mineral resources, in sufficient detail for a reasonably 
informed person to understand the basis for and how the qualified 
person estimated the mineral resources; \371\
---------------------------------------------------------------------------

    \371\ This section must provide estimates of mineral resources 
for all commodities, including estimates of quantities, grade or 
quality, cut-off grades, and metallurgical or processing recoveries. 
It must also provide the qualified person's opinion on whether all 
issues relating to all relevant modifying factors can be resolved 
with further work. See proposed Item 601(b)(96)(iv)(B)(13) of 
Regulation S-K.
---------------------------------------------------------------------------

     if mineral reserves are being reported, a description of 
the key assumptions, parameters, and methods used to estimate the 
mineral reserves, in sufficient detail for a reasonably informed person 
to understand the basis for converting, and how the qualified person 
converted, indicated and measured mineral resources into the mineral 
reserves; \372\
---------------------------------------------------------------------------

    \372\ This section must provide estimates of mineral reserves 
for all commodities, including estimates of quantities, grade or 
quality, cut-off grades, and metallurgical or processing recoveries. 
It must also provide the qualified person's opinion on how the 
mineral reserve estimates could be materially affected by risk 
factors associated with or changes to any aspect of the modifying 
factors. If a pre-feasibility study is used to support mineral 
reserve disclosure, the qualified person must provide a 
justification for using a pre-feasibility study instead of a 
feasibility study. See proposed Item 601(b)(96)(iv)(B)(14) of 
Regulation S-K.
---------------------------------------------------------------------------

     a description of the current or proposed mining methods 
and the reasons for selecting these methods as the most suitable for 
the mineral reserves under consideration; \373\
---------------------------------------------------------------------------

    \373\ This description must include, among other matters, 
geotechnical and hydrological models, and other parameters relevant 
to mine designs and plans. As used in this context, a ``hydrological 
model'' refers to a conceptual model of surface and ground water at 
the mine site, which impacts the selection and design of mining 
methods. See proposed Item 601(b)(96)(iv)(B)(15) of Regulation S-K.
---------------------------------------------------------------------------

     a description of the current or proposed processing and 
recovery methods and the reasons for selecting those methods as the 
most suitable for extracting the valuable products from the 
mineralization under consideration; \374\
---------------------------------------------------------------------------

    \374\ This section must include a description or flow sheet of 
any current or proposed process plant, plant throughput and design, 
equipment characteristics and specifications, and current or 
projected requirements for energy, water, process materials, and 
personnel. If the processing method, plant design or other 
parameters have never been used to successfully extract the valuable 
product from such mineralization, the qualified person must so state 
and provide a justification for why he or she believes the approach 
will be successful in this instance. In addition, as proposed, if 
the processing method has never been used to successfully extract 
product from such mineralization and it is still under development, 
no mineral resources or reserves can be disclosed on the basis of 
that method. See proposed Item 601(b)(96) (iv)(B)(16) of Regulation 
S-K.
---------------------------------------------------------------------------

     a description of the required infrastructure for the 
project, including roads, rail, port facilities, dams, dumps and leach 
pads, tailings disposal, power, water and pipelines, as applicable; 
\375\
---------------------------------------------------------------------------

    \375\ See proposed Item 601(b)(96)(iv)(B)(17) of Regulation S-K.
---------------------------------------------------------------------------

     a description of the market for the products of the mine, 
including justification for demand or sales over the life of the mine 
(or length of cash flow projections); \376\
---------------------------------------------------------------------------

    \376\ This section must include information concerning markets 
for the property's production, including the nature and material 
terms of any agency relationships and the results of any relevant 
market studies; commodity price projections, product valuation, 
market entry strategies, and product specification requirements; and 
descriptions of all material contracts required for the registrant 
to develop the property, including mining, concentrating, smelting, 
refining, transportation, handling, hedging arrangements, and 
forward sales contracts. See proposed Item 601(b)(96)(iv)(B)(18) of 
Regulation S-K.
---------------------------------------------------------------------------

     a description of the environmental, permitting, and social 
or community factors related to the project; \377\
---------------------------------------------------------------------------

    \377\ This description must include, among other matters, the 
results of environmental studies, such as environmental baseline 
studies or impact assessments; requirements and plans for waste and 
tailings disposal; project permitting requirements; plans for social 
or community engagement and the status of any negotiations or 
agreements with local communities; and mine closure plans, including 
remediation and reclamation plans, and the associated costs. This 
section must also include the qualified person's opinion on the 
adequacy of current plans to address any issues related to 
environmental, permitting and social or community factors. See 
proposed Item 601(b)(96)(iv)(B)(19) of Regulation S-K.
---------------------------------------------------------------------------

     an estimate of capital and operating costs, with the major 
components set out in tabular form; \378\
---------------------------------------------------------------------------

    \378\ This section requires the qualified person to explain and 
justify the basis for the cost estimates, including any contingency 
budget estimates, and state the accuracy level of the capital and 
operating cost estimates. The accuracy of capital and operating cost 
estimates must comply with proposed Item 1302 of Regulation S-K. See 
proposed Item 601(b)(96)(iv)(B)(20) of Regulation S-K.
---------------------------------------------------------------------------

     an economic analysis, which, among other matters, 
describes the key assumptions, parameters, and methods used to 
demonstrate economic viability, and includes the results of the 
economic analysis presented as annual cash flow forecasts based on an 
annual production schedule for the life of the project, and measures of 
economic viability such as net present value, internal rate of return, 
and payback period of capital; \379\
---------------------------------------------------------------------------

    \379\ See proposed Item 601(b)(96)(iv)(B)(21) of Regulation S-K.
---------------------------------------------------------------------------

     a discussion of relevant information concerning an 
adjacent property provided that certain conditions have been met; \380\
---------------------------------------------------------------------------

    \380\ As proposed, the qualified person may provide a discussion 
of relevant information concerning an adjacent property only if such 
information has been publicly disclosed by the owner or operator of 
the adjacent property, the source of the information is identified, 
and the qualified person states that he or she has been unable to 
verify the information and that the information is not necessarily 
indicative of the mineralization on the property that is the subject 
of the technical report. In addition, the technical report must 
clearly distinguish between the information from the adjacent 
property and the information from the property that is the subject 
of the technical report summary. See proposed Item 
601(b)(96)(iv)(B)(22) of Regulation S-K.

---------------------------------------------------------------------------

[[Page 41695]]

     a discussion of any other relevant data or information 
necessary to provide a complete and balanced presentation of the value 
of the property to the registrant; \381\
---------------------------------------------------------------------------

    \381\ If provided, the additional information or explanation 
must comply with proposed subpart 1300 of Regulation S-K. See 
proposed Item 601(b)(96)(iv)(B)(23) of Regulation S-K.
---------------------------------------------------------------------------

     a summary of the qualified person's interpretations and 
conclusions based on the data and analysis in the technical report 
summary; \382\
---------------------------------------------------------------------------

    \382\ The qualified person must also discuss in this section any 
significant risks and uncertainties that could reasonably be 
expected to affect the reliability or confidence in the exploration 
results, mineral resource or mineral reserve estimates, or projected 
economic outcomes. See proposed Item 601(b)(96)(iv)(B)(24) of 
Regulation S-K.
---------------------------------------------------------------------------

     a description of the qualified person's recommendations 
for additional work with associated costs, if applicable; \383\ and
---------------------------------------------------------------------------

    \383\ See proposed Item 601(b)(96)(iv)(B)(25) of Regulation S-K.
---------------------------------------------------------------------------

     a list of all references cited in the technical report 
summary in sufficient detail so that a reader can locate each 
reference.\384\
---------------------------------------------------------------------------

    \384\ See proposed Item 601(b)(96)(iv)(B)(26) of Regulation S-K.
---------------------------------------------------------------------------

    A technical report summary that reports the results of a 
preliminary or final feasibility study would have to include all of the 
information specified in the above proposed sections. A technical 
report summary that reports the results of an initial assessment or 
that reports material exploration results could omit information 
required by certain of the proposed technical report summary 
sections.\385\
---------------------------------------------------------------------------

    \385\ A technical report summary that reports the results of an 
initial assessment would have to include, at a minimum, the 
information specified in proposed Items 601(b)(96)(iv)(B)(1) through 
(13) and (22) through (26), and may also include the information 
specified in proposed Item 601(b)(96)(iv)(B)(21). A technical report 
summary that reports material exploration results would have to 
include, at a minimum, the information specified in proposed Items 
601(b)(96)(iv)(B)(1) through (11) and (22) through (26). See 
proposed Item 601(b)(96)(iv)(A) of Regulation S-K.
---------------------------------------------------------------------------

    As noted above, these proposed sections are similar in most 
respects to the items of information required for the summary report 
under Canada's NI 43-101.\386\ There are, however, some notable 
differences. First, the proposed rules do not permit a qualified person 
to include a disclaimer of responsibility if he or she relies on a 
report, opinion, or statement of another expert in preparing the 
technical report summary.\387\ We believe such a disclaimer would be 
inappropriate since the qualified person, as the professional expert, 
has prepared and is responsible for the information contained in the 
technical report summary.\388\ We recognize that in preparing complex 
reports of this nature, the responsible person(s) would, when 
necessary, rely on information and input from others. Nonetheless, we 
believe the qualified person, as the consenting expert, must take 
responsibility for any report, opinion or statement provided by another 
person upon which the qualified person has relied. This would help to 
ensure that the qualified person has taken the necessary steps to 
verify any information provided by other experts that are included in 
the report. We believe that this standard is both appropriate and 
reasonable, as evidenced by its similarity to standards found in the 
code of ethics of engineering professionals.\389\
---------------------------------------------------------------------------

    \386\ See Form 43-101F1 and note 351, supra.
    \387\ In contrast, Canada's NI 43-101 would permit the qualified 
person to include a disclaimer of responsibility if he or she relies 
on a report, opinion, or statement of another expert who is not a 
qualified person in preparing the technical report summary.
    \388\ As previously noted, if the technical report summary is 
filed as an exhibit to a Securities Act registration statement, the 
qualified person will be subject to liability as an expert for any 
untrue statement or omission of a material fact contained in the 
technical report summary under Section 11 of the Securities Act.
    \389\ See, the National Society of Professional Engineers (NSPE) 
Code of Ethics for Engineers, section II.2, which states: 
``Engineers shall perform services only in the areas of their 
competence. (a) Engineers shall undertake assignments only when 
qualified by education or experience in the specific technical 
fields involved. (b) Engineers shall not affix their signatures to 
any plans or documents dealing with subject matter in which they 
lack competence, nor to any plan or document not prepared under 
their direction and control. (c) Engineers may accept assignments 
and assume responsibility for coordination of an entire project and 
sign and seal the engineering documents for the entire project, 
provided that each technical segment is signed and sealed only by 
the qualified engineers who prepared the segment.''
---------------------------------------------------------------------------

    In addition, we are proposing to include sections about 
hydrogeology and geotechnical data, including testing and analysis, 
which are not included in NI 43-101. We believe that these two items 
are sufficiently important that investors would benefit from having 
them as separate requirements, rather than subsumed under other 
requirements, because they can directly impact the economic viability 
of a mining project. Hydrogeology and geotechnical data are the basis 
for determining several design parameters that directly impact the 
safety of the designed mine. Moreover, these design parameters can 
affect the operating and capital costs and can, therefore, directly 
impact the economics of the mine (i.e., the determination of reserves). 
Detailed hydrogeology and geotechnical data would therefore provide 
insight into the adequacy and appropriateness of the mine's design 
parameters, which would allow investors and their advisors to evaluate 
fully the disclosed economic viability of the mine.
Request for Comment
    109. Should we require the qualified person to include in a 
technical report summary the 26 items, as proposed? Are there any items 
of information that we should include instead of or in addition to the 
proposed 26 sections of the technical report summary? Are there any 
items of information that we should exclude from the proposed technical 
report summary?
    110. As previously noted, the qualified person would have to apply 
and evaluate relevant modifying factors to assess prospects of economic 
extraction or to convert measured and indicated mineral resources to 
proven or probable mineral reserves. These would include a variety of 
factors such as economic, legal, and environmental as discussed more 
fully above. For example, to apply and evaluate legal factors the 
qualified person must examine the regulatory regime of the host 
jurisdiction to establish that the registrant can comply (fully and 
economically) with all laws and regulations (e.g., mining; 
environmental, including regulations governing water use and impacts, 
waste management, and biodiversity impacts; reclamation; and permitting 
regulations) that are relevant to operating a mineral project using 
existing technology. Should we expand proposed Item 
601(b)(96)(iv)(B)(19)(vi) to provide additional specific examples, in 
addition to those set forth in Items 601(b)(96)(iv)(B)(19)(i)-(iv), of 
``issues related to environmental, permitting and social or community 
factors'' that the qualified person must include in the technical 
report summary? For example, should we expressly require that the 
qualified person include a discussion of other sustainability issues 
such as how he or she considered issues related to managing greenhouse 
gas emissions or workforce health, safety and well-being? Are there 
other items for which it would be appropriate to require the qualified 
person to include a discussion in the technical report summary? If so, 
please provide examples and explain why.
    111. Should we require, as proposed, a qualified person who 
prepares a technical report summary that reports the results of a 
preliminary or final feasibility study to provide information for all 
26 items? If not, which items should not be required? Should we 
require, as proposed, a qualified person who prepares a technical 
report summary that reports the results of an initial assessment to 
provide, at a

[[Page 41696]]

minimum, the information specified in paragraphs (iv)(B)(1) through 
(13) and (iv)(B)(22) through (26) of proposed Item 601(b)(96)?
    112. The proposed rules would permit a qualified person who 
prepares a technical report summary that reports the results of an 
initial assessment to use mineral resources in economic analysis (and 
provide the information specified in paragraph (iv)(B)(21) of proposed 
Item 601(b)(96)). Should we permit a qualified person to do so if he or 
she wishes?
    113. Should we require a qualified person who prepares a technical 
report summary that reports material exploration results to provide, at 
least, the information specified in paragraphs (iv)(B)(1) through (11) 
and (iv)(B)(22) through (26) of proposed Item 601(b)(96), as proposed?
    114. Should we preclude a qualified person from disclaiming 
responsibility if he or she relies on a report, opinion, or statement 
of another expert who is not a qualified person in preparing the 
technical report summary, as proposed? Why or why not?
    115. Should we require that the technical report summary not 
include large amounts of technical or other project data, either in the 
report or as appendices to the report, as proposed? Why or why not? 
Should we require a qualified person to draft the technical report 
summary to conform, to the extent practicable, with plain English 
principles under the Securities Act and Exchange Act, as proposed?
4. Requirements for Internal Controls Disclosure
    Although not called for by Guide 7, some registrants provide 
disclosure about their internal controls, including quality control and 
quality assurance measures, which they have put in place to help ensure 
the reliability of their disclosure of exploration results and 
estimates of mineral resources and mineral reserves. The staff has also 
requested, on a case by case basis, that registrants provide a brief 
description of the quality control and quality assurance protocols for 
sample preparation, controls, custody, assay precision and accuracy as 
they relate to exploration programs.
    We believe that disclosure about the internal controls that a 
registrant uses to help ensure the reliability of its disclosure of 
exploration results and estimates of mineral resources and mineral 
reserves would benefit investors. Accordingly, we are proposing to 
require that a registrant describe the internal controls \390\ that it 
uses in its exploration and mineral resource and reserve estimation 
efforts. As specified in the proposed rules, such disclosure should 
address quality control and quality assurance programs, verification of 
analytical procedures, and comprehensive risk inherent in the 
estimation.\391\ Such disclosure would help investors evaluate whether 
the registrant has established acceptable levels of certainty and 
precision during exploration and whether and how it has verified and 
validated the quality of the data used in its analysis. In addition, we 
note that this requirement is consistent with disclosure requirements 
in most foreign mining jurisdictions.\392\
---------------------------------------------------------------------------

    \390\ Internal controls in this context refers to the internal 
controls used to ensure reliable disclosure of exploration results 
and estimation of mineral resources and mineral reserves. It is not 
to be confused with internal control over financial reporting. In 
this regard, the Commission's disclosure requirements for 
registrants engaged in oil and gas producing activities require 
similar disclosure of internal controls over estimation efforts. See 
Item 1202(a)(7) of Regulation S-K. (17 CFR 229.1202(a)(7)).
    \391\ See proposed Item 1305 of Regulation S-K.
    \392\ See JORC Table 1 checklist and NI 43-101 pt. 3.3, which 
call for disclosure of quality control and quality assurance 
programs. The SME Petition also recognizes the need for and 
importance of appropriate internal and disclosure controls in the 
estimation of mineral reserves. See SME Petition for Rulemaking at 
17.
---------------------------------------------------------------------------

    A proposed instruction would state that a registrant must provide 
the required internal controls disclosure whether it is providing 
summary disclosure under proposed Item 1303, individual property 
disclosure under proposed Item 1304, or under both items.\393\ 
Estimating mineral resources and reserves requires use of statistical 
techniques to estimate tonnages and grades based on data derived from 
laboratory analysis of representative samples. In any such scientific 
study, best practice requires the analyst to disclose the quality 
control and quality assurance techniques employed to ensure the data 
used in the analysis is reliable.\394\ We believe this same practice 
should apply when preparing and analyzing data for the purpose of 
individual property disclosure. We also believe an internal controls 
disclosure requirement is particularly important for a company with 
multiple properties in order to ensure that best practice is followed 
across all properties.
---------------------------------------------------------------------------

    \393\ See the Instruction to proposed Item 1305 of Regulation S-
K.
    \394\ See S.C. Kazmierczak, ``Laboratory Quality Control: Using 
Patient Data to Assess Analytical Performance,'' in Clinical 
Chemistry and Laboratory Medicine 617-627 (2003); see generally M.J. 
Chandra, Statistical Quality Control (2001).
---------------------------------------------------------------------------

    Moreover, all the CRIRSCO-based codes require the disclosure of 
quality control and quality assurance procedures as they relate to 
exploration results (data) and techniques and assumptions (analysis) 
used for mineral resource and reserve estimation.\395\ In addition, the 
listing rules of several of these jurisdictions specifically call for 
disclosure of the internal controls relating to estimates of mineral 
resources and reserves.\396\ Our proposal is substantially similar to 
these internal control disclosure requirements and therefore should not 
significantly alter the disclosure practices of those registrants that 
are listed in these jurisdictions. For registrants that are not 
currently subject to an internal controls disclosure requirement, we 
believe investors would benefit from such disclosure, though we 
recognize that registrants may incur additional costs.
---------------------------------------------------------------------------

    \395\ See, e.g., Canada's NI 43-101 pt. 3.3 and 43-101F1 Item 
11. See also JORC Table 1 and SAMREC Table 1 T3.
    \396\ See, e.g., ASX Listing Rule 5.21.5 which requires 
registrants to disclose ``[a] summary of the governance arrangements 
and internal controls that the mining entity has put in place with 
respect to its estimates of mineral resources and ore reserves and 
the estimation process.''
---------------------------------------------------------------------------

Request for Comment
    116. Should we require registrants to describe the internal 
controls that they use to help ensure the reliability of their 
disclosure of exploration results and estimates of mineral resources 
and mineral reserves, as proposed? Should we require that such internal 
controls disclosure address quality control and quality assurance 
programs, verification of analytical procedures, and comprehensive risk 
inherent in the estimation, as proposed? Are there other items, in 
addition to or in lieu of those proposed items, that should be included 
in such disclosure? Are there items that should be excluded from the 
proposed internal controls disclosure requirement? In each case, why or 
why not?
    117. Should we require registrants to describe the internal 
controls that they use to help ensure the reliability of their 
disclosure of exploration results and estimates of mineral resources 
and mineral reserves, as proposed? Should we require that such internal 
controls disclosure address quality control and quality assurance 
programs, verification of analytical procedures, and comprehensive risk 
inherent in the estimation, as proposed? Are there other items, in 
addition to or in lieu of those proposed items, that should be included 
in such disclosure? Are there items that should be excluded from the 
proposed internal controls disclosure

[[Page 41697]]

requirement? In each case, why or why not?

H. Conforming Changes to Certain Forms Not Subject to Regulation S-K

1. Form 20-F
    Foreign private issuers \397\ use Form 20-F \398\ as a registration 
statement under Section 12 of the Exchange Act \399\ or as an annual or 
transition report filed under Section 13(a) \400\ or 15(d) of the 
Exchange Act.\401\ Form 20-F also provides much of the substantive 
disclosure requirements for foreign private issuers filing Securities 
Act registration statements on Forms F-1,\402\ F-3 \403\ and F-4.\404\
---------------------------------------------------------------------------

    \397\ A foreign private issuer is any foreign issuer other than 
a foreign government, except for an issuer that has more than 50% of 
its outstanding voting securities held of record by U.S. residents, 
and regarding which any of the following is true: a majority of its 
officers and directors are citizens or residents of the United 
States, more than 50 percent of its assets are located in the United 
States, or its business is principally administered in the United 
States. See Securities Act Rule 405 (17 CFR 230.405) and Exchange 
Act Rule 3b-4(c) (17 CFR 240.3b-4(c)).
    \398\ 17 CFR 249.220f.
    \399\ 15 U.S.C. 78l.
    \400\ 15 U.S.C. 78m(a).
    \401\ 15 U.S.C. 78o(d).
    \402\ 17 CFR 239.31.
    \403\ 17 CFR 239.33.
    \404\ 17 CFR 239.34.
---------------------------------------------------------------------------

    The Commission revised Form 20-F in 1999 to conform its disclosure 
requirements to the international disclosure standards endorsed by the 
International Organization of Securities Commissions (``IOSCO'') in 
September 1998.\405\ As a result, Form 20-F, rather than Regulation S-
K, provides the primary non-financial disclosure requirements for 
foreign private issuers under the Securities Act and the Exchange Act. 
For example, Item 4.D of Form 20-F sets forth the disclosure 
requirements for a foreign private issuer's property \406\ rather than 
Item 102 of Regulation S-K.
---------------------------------------------------------------------------

    \405\ See Release No. 33-7745 (September 28, 1999), [64 FR 
53900] (October 5, 1999).
    \406\ Form 20-F Item 4.D provides that the registrant must 
provide information regarding any material tangible fixed assets, 
including leased properties, and any major encumbrances thereon, 
including a description of the size and uses of the property; 
productive capacity and extent of utilization of the company's 
facilities; how the assets are held; the products produced; and the 
location. The registrant must also describe any environmental issues 
that may affect the company's utilization of the assets. With regard 
to any material plans to construct, expand or improve facilities, 
the registrant must describe the nature of and reason for the plan, 
an estimate of the amount of expenditures including the amount of 
expenditures already paid, a description of the method of financing 
the activity, the estimated dates of start and completion of the 
activity, and the increase of production capacity anticipated after 
completion.
---------------------------------------------------------------------------

    We believe that the proposed rules should apply equally to foreign 
private issuers and domestic registrants. This treatment would be 
consistent with the current requirements for foreign private issuers 
and domestic registrants under Form 20-F \407\ and Item 102 of 
Regulation S-K whereby both foreign private issuers and domestic 
registrants provide the disclosures set forth in Guide 7.\408\
---------------------------------------------------------------------------

    \407\ Instruction 1 to Item 4 of Form 20-F directs the 
registrant to ``[f]urnish the information specified in any industry 
guide listed in Subpart 229.800 of Regulation S-K.''
    \408\ As discussed in section I, supra, Canadian registrants are 
currently able to provide disclosure pursuant to NI 43-101 under the 
foreign law exception included in Item 102, Guide 7 and Form 20-F. 
Accordingly, the staff has not objected to disclosure by such 
registrants of resources as well as reserves calculated in 
accordance with Canadian law.
---------------------------------------------------------------------------

    Accordingly, in order to make foreign private issuers filing on 
Form 20-F subject to the new mining disclosure regime, we propose to 
amend Form 20-F by adding an instruction to Item 4 that issuers engaged 
in mining operations must refer to and, if required, provide the 
disclosure under subpart 1300 of Regulation S-K.\409\ We further 
propose to remove in their entirety the current instructions to Item 
4.D of Form 20-F, which, among other matters, limit the disclosure of 
estimates to proven and probable reserves.\410\ Because the proposed 
rules would require the disclosure of determined mineral resources, 
mineral reserves and material exploration results by a registrant with 
material mining operations, the Item 4.D instructions would be 
inconsistent with the proposed new disclosure requirements.
---------------------------------------------------------------------------

    \409\ See proposed Instruction 3 to Item 4 of Form 20-F.
    \410\ These instructions provide, among other matters, that, in 
the case of an extractive enterprise, other than an oil and gas 
producing activity, the issuer must provide material information 
about production, reserves, locations, developments and the nature 
of its interest. If individual properties are of major significance, 
the issuer must provide more detailed information about those 
properties and use maps to disclose information about their 
location. These instructions further provide that, in documents 
filed publicly with the Commission, the issuer must not disclose 
estimates of reserves unless the reserves are proven or probable and 
must not give estimated values of those reserves, unless foreign or 
state law requires the issuer to disclose the information. See 
Instruction 1 to Item 4.D of Form 20-F.
---------------------------------------------------------------------------

    In addition, we propose to add an instruction to the exhibits 
section of Form 20-F stating that a registrant that is required to file 
a technical report summary pursuant to Item 1302(b)(2) of Regulation S-
K must provide the information specified in Item 601(b)(96) of 
Regulation S-K as an exhibit to its registration statement or annual 
report on Form 20-F.\411\ This would make the same technical report 
summary filing requirements applicable to domestic registrants apply as 
well to foreign private issuers registering securities or reporting 
pursuant to Form 20-F.
---------------------------------------------------------------------------

    \411\ See proposed Instruction 17 to Form 20-F. Because Forms F-
1, F-3 and F-4 are already subject to the exhibit requirements of 
Item 601 of Regulation S-K, registrants using those forms that meet 
the requirements of proposed Item 1302(b)(2) would have to file a 
technical report summary as an exhibit pursuant to proposed Item 
601(b)(96).
---------------------------------------------------------------------------

    Thus, following adoption of these proposed revisions to Form 20-F, 
foreign private issuers that use Form 20-F to file their Exchange Act 
annual reports and registration statements, or that refer to Form 20-F 
for their Securities Act registration statements on Forms F-1, F-3 and 
F-4, would have to comply with the mining disclosure requirements of 
new Regulation S-K subpart 1300. This would include Canadian 
registrants that report pursuant to Form 20-F and that currently are 
permitted to provide mining disclosure under NI 43-101 pursuant to the 
``foreign or state law'' exception under Item 102 and Guide 7. We note 
that the proposed disclosure requirements would be substantially 
similar to Canada's NI 43-101. As previously noted, the proposed rules 
would eliminate this ``foreign or state law'' exception.\412\ Thus, the 
sole group of Canadian registrants that could continue to report 
pursuant to Canadian disclosure requirements following adoption of the 
revised mining disclosure rules would be those Canadian issuers that 
report pursuant to the Multijurisdictional Disclosure System 
(``MJDS'').\413\ We are not proposing to subject MJDS registrants to 
new subpart 1300 because the ability of those registrants to use their 
Canadian disclosure documents for purposes of their Exchange Act and 
Securities Act filings is based on their eligibility to file under the 
MJDS, and not on the ``foreign or state law'' exception under Guide 7 
and Item 102.
---------------------------------------------------------------------------

    \412\ See section II.E.1, supra.
    \413\ The MJDS permits seasoned Canadian issuers meeting certain 
other requirements to use their Canadian disclosure documents when 
filing their Exchange Act registration statements and annual reports 
on Form 40-F or their Securities Act registration statements on 
Forms F-10, F-7, F-8 and F-80.
---------------------------------------------------------------------------

Request for Comment
    118. Should we amend Form 20-F to conform it to the disclosure 
requirements of subpart 1300 of Regulation S-K and Item 601(b)(96), as 
proposed?
    119. Should foreign private issuers that use or refer to Form 20-F 
for their SEC filings be subject to the same mining disclosure 
requirements as

[[Page 41698]]

domestic mining registrants, as proposed? Why or why not?
    120. Should we continue to permit Canadian issuers to provide 
disclosure under NI 43-101, as they are currently allowed to do 
pursuant to the foreign or state law exception, as an alternative to 
providing disclosure under the proposed rules? If so, what would be the 
justification for such differential treatment?
2. Form 1-A
    Regulation A provides an exemption from the registration 
requirements of the Securities Act for certain securities offerings 
that satisfy specified conditions, such as filing an offering statement 
with the Commission,\414\ limiting the dollar amount of the offering 
\415\ and, in certain instances, filing ongoing reports with the 
Commission.\416\ Form 1-A is the offering statement used by issuers 
that are eligible to engage in securities offerings under Regulation 
A.\417\
---------------------------------------------------------------------------

    \414\ See Securities Act Rule 251(d) (17 CFR 230.251(d)).
    \415\ See Securities Act Rule 251(a) (17 CFR 230.251(a)).
    \416\ See Securities Act Rule 257 (17 CFR 230.257).
    \417\ 17 CFR 230.251 through 230.263. To be eligible to offer 
securities under Regulation A, at a minimum, an issuer must be 
organized and have its principal place of business in the United 
States or Canada. Excluded from Regulation A eligibility are: 
Exchange Act reporting companies; blank check companies; investment 
companies registered or required to be registered under the 
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) or business 
development companies as defined under that Act; issuers of 
fractional undivided interests in oil, gas or mineral rights; 
issuers that have been subject to a Commission order under Exchange 
Act Section 12(j) within 5 years preceding the filing of the 
offering statement; issuers that have failed to file the reports 
required by Regulation A (under 17 CFR 230.257) during the two years 
preceding the filing of the offering statement; and issuers that 
have been disqualified under Securities Act Rule 262. See Securities 
Act Rule 251(b) (17 CFR 230.251(b)).
---------------------------------------------------------------------------

    The Commission amended Regulation A in March of 2015 to permit two 
tiers of offerings: Tier 1, for offerings of up to $20 million of 
securities within a 12-month period; and Tier 2, for offerings of up to 
$50 million of securities within a 12-month period.\418\ The amendments 
require the filing and qualification of Form 1-A for both Tier 1 and 
Tier 2 offerings and impose ongoing disclosure obligations for Tier 2 
offerings.\419\ The Commission further amended Part II of Form 1-A by 
eliminating the Model A (Question and Answer) disclosure format and 
updating the Model B (Narrative) disclosure format allowed for both 
tier offerings.\420\
---------------------------------------------------------------------------

    \418\ See Release No. 33-9741 (March 25, 2015) [80 FR 21806 
(April 20, 2015)] (the ``2015 Regulation A Adopting Release'').
    \419\ The Commission adopted new Forms 1-K (annual report), 1-SA 
(semi-annual report) and 1-U (current report) for the Tier 2 ongoing 
reporting regime. The Commission also adopted Form 1-Z, an exit 
form, which must be filed by Tier 1 issuers upon termination or 
completion of the offering and by most Tier 2 issuers when eligible 
to suspend ongoing reporting.
    \420\ Issuers also have the option of providing disclosure under 
Part II of Form 1-A that meets the requirements of Part I of either 
Form S-1 or Form S-11.
---------------------------------------------------------------------------

    When updating Item 7 of Part II of Form 1-A concerning the required 
``Description of Business'' disclosure, the Commission added a 
provision stating that the disclosure guidelines in all Securities Act 
Industry Guides must be followed. The provision also stated that, to 
the extent that the industry guides are codified into Regulation S-K, 
the Regulation S-K industry disclosure items must be followed.\421\
---------------------------------------------------------------------------

    \421\ See Form 1-A, Part II, Item 7(c).
---------------------------------------------------------------------------

    The purpose of this provision was to incorporate into Form 1-A the 
disclosure guidance in all of the Securities Act Industry Guides.\422\ 
Moreover, because Regulation S-K does not directly apply to Form 1-A, 
the Commission sought to require Form 1-A issuers to follow the 
disclosure guidelines in any industry guides that have been codified as 
disclosure items under Regulation S-K.
---------------------------------------------------------------------------

    \422\ See Release No. 33-9497 (December 18, 2013) [79 FR 3926 
(January 23, 2014)] (``Updates to the Offering Circular would also 
incorporate the disclosure guidelines in the Securities Act Industry 
Guides . . .''); see also the 2015 Regulation A Adopting Release 
(``As adopted, the Offering Circular includes disclosure based on 
disclosure guidelines set forth in the Securities Act Industry 
Guides . . .'').
---------------------------------------------------------------------------

    Because this provision, however, only appears in Item 7(c) of Part 
II, which governs ``business'' disclosure, we are proposing to amend 
Part II of Form 1-A to apply the scope of the requirement to the 
description of property for certain issuers by adding similar language 
under Item 8 of Part II to Form 1-A.\423\ Specifically, in order to 
require the Form 1-A property disclosure requirements to include the 
mining disclosure provisions under proposed subpart 1300 of Regulation 
S-K, we propose to add a provision stating that issuers engaged in 
mining operations must refer to and, if required, provide the 
disclosure under subpart 1300 of Regulation S-K in addition to any 
disclosure required by Item 8.
---------------------------------------------------------------------------

    \423\ See proposed Item 8(b) of Form 1-A. Item 8 (Description of 
Property) currently requires that an issuer: ``[s]tate briefly the 
location and general character of any principal plants or other 
material physical properties of the issuer and its subsidiaries. If 
any such property is not held in fee or is held subject to any major 
encumbrance, so state and briefly describe how held. Include 
information regarding the suitability, adequacy, productive capacity 
and extent of utilization of the properties and facilities used in 
the issuer's business.'' The proposed rules would designate this 
current provision as paragraph (a) of Item 8.
---------------------------------------------------------------------------

    We also propose to amend the instruction to Item 8, which currently 
provides that ``[d]etailed descriptions of the physical characteristics 
of individual properties or legal descriptions by metes and bounds are 
not required and should not be given.'' Because much of the disclosure 
under proposed subpart 1300 of Regulation S-K would require detailed 
descriptions of mining properties, the proposed rules would amend this 
instruction by excepting from its scope the disclosure required under 
these rules, as referenced in paragraph (b) of Item 8.
    Thus, Regulation A issuers with material mining operations would be 
subject to all of the disclosure requirements in subpart 1300 of 
Regulation S-K. In order to require those Regulation A issuers to be 
subject to the new subpart's technical report summary filing 
requirement, we propose to amend Item 17 (Description of Exhibits) of 
Part III under Form 1-A by adding a provision stating that an issuer 
that is required to file a technical report summary pursuant to Item 
1302(b)(2) of Regulation S-K must provide the information specified in 
Item 601(b)(96) of Regulation S-K as an exhibit to its Form 1-A.\424\
---------------------------------------------------------------------------

    \424\ See proposed paragraph (15) under Item 17 of Part III 
under Form 1-A.
---------------------------------------------------------------------------

Request for Comment
    121. Should we amend Form 1-A to require Regulation A issuers 
engaged in mining operations to refer to, and if required, provide the 
disclosure under subpart 1300 of Regulation S-K, in addition to any 
disclosure required by Item 8 of that Form, as proposed? Why or why 
not? Alternatively, should the disclosure requirements in proposed 
subpart 1300 apply to only some Regulation A issuers (e.g., Regulation 
A issuers in Tier 2 offerings)? Should we instead exempt all Regulation 
A issuers from the proposed subpart 1300 disclosure requirements?
    122. In lieu of imposing full subpart 1300 disclosure requirements 
on Regulation A issuers, should we limit, in whole or in part, the 
proposed subpart 1300 disclosure requirements for issuers in Regulation 
A offerings? If so, should these requirements be limited only for 
issuers in Tier 1 offerings? Why or why not? Further, which provisions 
of proposed subpart 1300 should, and should not, apply to issuers in 
Regulation A offerings? For example, should we require compliance with 
Item 1302's requirement to file the technical

[[Page 41699]]

report summary as an exhibit only in Tier 2 offerings?
    123. Would limiting disclosure of the information required under 
proposed subpart 1300 for issuers in Regulation A offerings increase 
the risk of inaccurate disclosure in such offerings or otherwise 
increase risks to investors?

III. General Request for Comments

    We request and encourage any interested person to submit comments 
on any aspect of our proposals, other matters that might have an impact 
on the amendments, and any suggestions for additional changes. With 
respect to any comments, we note that they are of greatest assistance 
to our rulemaking initiative if accompanied by supporting data and 
analysis of the issues addressed in those comments and by alternatives 
to our proposals where appropriate.

IV. Economic Analysis

    As discussed above, we are proposing revisions to the property 
disclosure requirements for mining registrants under the Securities Act 
of 1933 and the Securities Exchange Act of 1934. The proposed revisions 
are intended to modernize the Commission's mining disclosure 
requirements and policies by aligning them with industry practices and 
global regulatory practices and standards. Overall, we believe that the 
proposed revisions would increase the amount and quality of information 
about a registrant's mining operations available to investors as well 
as provide a single source in Regulation S-K for these disclosure 
obligations. We further believe that this will facilitate compliance by 
eliminating the complexity resulting from the existing structure of 
Commission disclosure obligations in Regulation S-K and staff 
disclosure guidance in Industry Guide 7.\425\
---------------------------------------------------------------------------

    \425\ See SME Petition for Rulemaking at 9.
---------------------------------------------------------------------------

    We are mindful of the costs imposed by, and the benefits obtained 
from, our proposed revisions. In this section we analyze the expected 
economic effects of the proposed revisions relative to the current 
baseline, which consists of the current regulatory framework and market 
practices. We consider the potential economic impact of the proposed 
revisions on the main affected parties, including registrants, 
investors and other financial statement users, and mining 
professionals, such as geologists and engineers, who provide services 
to registrants in support of mineral exploration and estimation of 
mineral resources and reserves. Our analysis considers the anticipated 
benefits and costs of the proposed revisions as well as the likely 
impact on efficiency, competition, and capital formation.\426\
---------------------------------------------------------------------------

    \426\ Securities Act Section 2(a) and Exchange Act 3(f) require 
us, when engaging in rulemaking that requires us to consider or 
determine whether an action is necessary or appropriate in the 
public interest, to consider, in addition to the protection of 
investors, whether the action will promote efficiency, competition, 
and capital formation. Further, Exchange Act Section 23(a)(2) 
requires us, when proposing rules under the Exchange Act, to 
consider the impact that any new rule would have on competition and 
to not adopt any rule that would impose a burden on competition that 
is not necessary or appropriate in furtherance of the purposes of 
the Exchange Act.
---------------------------------------------------------------------------

    We also analyze the potential benefits and costs of reasonable 
alternatives to the proposed revisions. The alternatives we consider 
below represent different approaches to achieving the goal of 
modernizing the Commission's mining disclosure requirements and 
policies. Given the goal of updating the existing regulatory framework, 
we evaluate the potential costs and benefits of these alternative 
approaches against the potential costs and benefits of the proposed 
disclosure requirements, rather than against the baseline.

A. Baseline

    To assess the economic impact of the proposed revisions, our 
baseline consists of the current disclosure requirements and policies 
in Item 102 of Regulation S-K, Guide 7 and Form 20-F and current market 
practices. We also consider the CRIRSCO-based disclosure codes because 
mining registrants compete in the international commodities and capital 
markets, making international disclosure standards an important 
benchmark for investors evaluating mining companies. Furthermore, these 
standards are relevant to consider because, as discussed above, many 
mining registrants are foreign private issuers or U.S. incorporated 
registrants with reporting obligations in foreign jurisdictions. Thus, 
to the extent that the proposed revisions align the Commission's 
requirements with the CRIRSCO-based disclosure codes, we expect their 
economic impact to be lower for these registrants.
1. Affected Parties
    The proposed revisions would primarily affect current and future 
registrants with mining activities that are, or would be, subject to 
the mining disclosure requirements and policies contained in Item 102 
of Regulation S-K and in Guide 7. In addition to U.S. registrants with 
mining operations that are required to report under Regulation S-K in 
their annual reports and registration statements, the proposed 
revisions would affect foreign private issuers with mining operations 
that file their Exchange Act annual reports and registration statements 
using Form 20-F, or that refer to Form 20-F for certain of their 
disclosure obligations under Securities Act registration statements 
filed on Forms F-1, F-3 and F-4. Moreover, the affected registrants 
would include mining companies filing Form 1-A offering statements 
under Regulation A. Investors, analysts, and other users of the 
information in the registrants' annual reports and registration 
statements filed with the Commission would also be affected by the 
proposed revisions. Finally, mining professionals, such as geologists 
and mining engineers, who provide services to registrants related to 
exploration and estimation of mineral resources and reserves would be 
potentially affected due to the proposed qualified person requirement 
and related provisions.
    To estimate the number of current registrants that would be 
potentially affected by the proposed revisions, we first consider the 
active registrants as of December 2015 that filed annual reports or 
relevant registration statements at least once from January 2014 
through December 2015. We then identify registrants with mining primary 
Standard Industrial Classification (``SIC'') codes.\427\ We also 
identify those registrants without mining primary SIC codes that 
provide disclosure concerning their mining operations in their SEC 
filings pursuant to Item 102 of Regulation S-K and Guide 7. Based on 
this approach, we estimate that the total number of potentially 
affected registrants is 345 (50 of which are registrants that do not 
have mining primary SIC codes).
---------------------------------------------------------------------------

    \427\ Specifically, the mining SIC codes considered are 1000, 
1011, 1021, 1031, 1040, 1041, 1044, 1061, 1081, 1090, 1094, 1099, 
1220, 1221, 1222, 1231, 1400, 1422, 1423, 1429, 1442, 1446, 1455, 
1459, 1474, 1475, 1479, 1481, 1499, 3300, 3334, and 6795.
---------------------------------------------------------------------------

    Among these registrants, we anticipate that the proposed revisions 
would have a more significant effect on those mining registrants that 
are not currently reporting based on CRIRSCO standards. To estimate the 
number of registrants reporting based on CRIRSCO standards, we identify 
those registrants incorporated in jurisdictions using CRIRSCO-based 
codes in addition to those U.S. incorporated registrants that we can 
manually verify are cross or dual listed, or otherwise reporting, in 
CRIRSCO jurisdictions. Out of 345 registrants, we identify 129 
registrants--85 foreign private issuers and 44 U.S. registrants--that 
are potentially reporting mining operations according to CRIRSCO-based 
disclosure standards.

[[Page 41700]]

Accordingly, we estimate that there are 216 identified registrants that 
solely report to the Commission and would therefore be more 
significantly affected by the proposed revisions than registrants that 
report elsewhere.
    Included among the 129 registrants that are potentially reporting 
mining operations according to CRIRSCO-based disclosure standards are 
63 Canadian registrants. As discussed above, Canadian registrants are 
currently able to provide disclosure in their Commission filings 
pursuant to NI 43-101, in addition to the disclosure called for by 
Guide 7 or Form 20-F. A number of the proposed revisions would more 
closely align our disclosure requirements with those in NI 43-101. As 
such, we estimate that the Canadian registrants that are currently 
providing disclosure pursuant to NI 43-101 likely would be less 
significantly affected by the proposed revisions than the 66 non-
Canadian registrants that are potentially reporting mining operations 
according to CRIRSCO-based disclosure standards.\428\
---------------------------------------------------------------------------

    \428\ For example, the technical report summary requirement in 
our proposed rule is very similar to the NI 43-101 requirement to 
file a technical report summary. That requirement is not, however, 
part of the other CRIRSCO-based codes, so only Canadian filers would 
not incur an additional cost to prepare the summary report.
---------------------------------------------------------------------------

2. Current Regulatory Framework and Market Practices
    As discussed in Sections I and II above, we evaluate the economic 
effects of the proposed revisions against the Commission's current 
disclosure requirements and policies. Below we discuss three 
economically important aspects: (1) The structure and detail of the 
current disclosure framework, (2) the scope of the current disclosure 
framework, and (3) the lack of an expertise requirement for the 
preparer of technical information in the disclosures.
i. Structure and Detail of Current Disclosure Framework
    The following aspects of the current disclosure regime may give 
rise to compliance challenges for mining registrants:
     Overlapping disclosure framework. The current disclosure 
framework is set forth in Item 102 of Regulation S-K, which is a 
Commission rule, Form 20-F, which is a form used by foreign private 
issuers that contains disclosure requirements,\429\ and Industry Guide 
7, which represents the disclosure policies and practices followed by 
the Division of Corporation Finance. This overlapping structure may 
give rise to unnecessary compliance burdens for mining 
registrants.\430\
---------------------------------------------------------------------------

    \429\ See 17 CFR 249.220f.
    \430\ See section II.A and note 26, supra.
---------------------------------------------------------------------------

     Multiple thresholds for disclosure. Item 102 of Regulation 
S-K currently implies a two-tiered reporting standard. Registrants with 
``significant'' mining operations are referred to the more extensive 
disclosure policies in Guide 7, whereas registrants without significant 
mining operations but with one or more ``principal'' mines or other 
``materially important'' properties are required to comply with only 
the more limited disclosure requirements in Item 102. As discussed 
above, Commission staff historically has advised that registrants apply 
a materiality standard for disclosure and, when that standard is met, 
provide disclosure according to both Item 102 and Guide 7.
     Level of detail. Because the disclosure policies in Guide 
7 are broadly drafted, registrants often rely on staff guidance to 
apply those policies. For example, as discussed above, Guide 7 calls 
for the disclosure of mineral reserves, defined as the part of a 
mineral deposit that can be economically and legally extracted or 
produced. It does not, however, specify the level of geological 
evidence or the analysis required, such as the modifying factors the 
registrant should consider, to convert existing mineral deposits to 
reserves. By contrast, the CRIRSCO standards specify a more detailed 
framework for determination and disclosure of mineral reserves that 
specifically addresses such issues. These aspects of the current 
disclosure framework may have rendered it unnecessarily complex and 
confusing for mining registrants, especially new registrants. In this 
regard, industry participants have raised concerns regarding the need 
to rely on informal staff guidance to ensure compliance.\431\ Reliance 
on staff guidance also may affect the consistency of the disclosures, 
which can impact comparability across registrants and over time for 
investors.
---------------------------------------------------------------------------

    \431\ Id.
---------------------------------------------------------------------------

ii. Scope of the Current Disclosure Requirements and Policies
    The technological process for evaluating the value of a mineral 
property starts with mineral exploration, then continues with 
estimation of mineral resources (i.e., the quantity and quality of the 
material of interest that has economic prospects of extraction), which 
in turn forms the basis for the estimation of mineral reserves (i.e., 
the amount of material that can be extracted economically). As 
discussed above, Item 102 of Regulation S-K, Guide 7 and Form 20-F 
currently call for the disclosure of mineral reserves and preclude the 
disclosure of non-reserve estimates such as mineral resources unless 
required by foreign or state law. In practice, only Canadian issuers 
have been able to take advantage of this exception because only Canada 
has adopted its mining disclosure requirements as a matter of law.\432\ 
In addition, none of Guide 7, Item 102 of Regulation S-K or Form 20-F 
calls for or requires disclosure of mineral exploration results. By 
contrast, CRIRSCO-based codes require disclosure of material 
exploration results and material mineral resources in addition to 
material mineral reserves.
---------------------------------------------------------------------------

    \432\ See note 14, supra.
---------------------------------------------------------------------------

    The scope of the Commission's current disclosure regime relative to 
current industry practices for evaluating the prospects of mining 
properties can result in mining registrants omitting from their 
disclosures information about their mineral resources they possess but 
are not allowed to disclose. Omitting such information may increase the 
information asymmetries between mining registrants and investors, which 
could lead to potentially negative capital market consequences, such as 
reduced stock market liquidity and higher cost of capital.\433\ 
Moreover, because mining companies providing disclosure in foreign 
jurisdictions based on CRIRSCO standards are required to disclose 
material exploration results and mineral resources, U.S. registrants 
may suffer adverse competitive effects to the extent that the more 
limited scope of their disclosures has negative capital market effects. 
Industry participants have raised concerns regarding the adverse 
competitive effects potentially stemming from the current disclosure 
regime and, in particular, from the inability to disclose mineral 
resources.\434\
---------------------------------------------------------------------------

    \433\ The link between asymmetric information and cost of 
capital is well established in the academic literature. See, e.g., 
Douglas W. Diamond and Robert. E. Verrecchia ``Disclosure. 
Liquidity, and the Cost of Capital'' (1991), Journal of Finance, 
Volume 46, Issue 4, pp. 1325-1359, and David Easley and Maureen 
O'Hara, ``Information and the cost of capital'' (2004), Journal of 
Finance, Volume 59, Issue 4, pp. 1553-1583.
    \434\ See note 27, supra.
---------------------------------------------------------------------------

    Currently, registrants can supplement, to some extent, the limited 
scope of the current disclosure regime in two ways. First, although 
there is no requirement to disclose material exploration results, 
registrants can voluntarily disclose such information in their SEC 
filings. However, the value of such voluntary disclosures to investors 
may be reduced in the absence of a requirement that ensures consistency 
and quality of the

[[Page 41701]]

disclosures. Second, regarding the disclosure of mineral resources, 
Commission staff has, on a case-by-case basis, not objected to 
disclosure of non-reserve mineral deposits in the form of ``mineralized 
material.'' In practice, although the mineral resources covered by the 
definition of ``mineralized material'' generally correspond with the 
indicated and measured mineral resource categories defined in the 
CRIRSCO standards, they are not completely consistent with CRIRSCO 
resource categories. For example, Commission staff historically has 
advised registrants that they should not disclose as mineralized 
material in their SEC filings non-reserve mineral deposits that would 
be equivalent to inferred resources. Moreover, the absence of specific, 
published guidelines establishing how registrants should estimate and 
report mineralized materials may have contributed to compliance 
uncertainty and lack of consistency in the disclosures.
    As discussed above, disclosure of mineral resources is currently 
prohibited unless required by foreign or state law.\435\ Under this 
exception, Canadian registrants are able to disclose mineral resources 
in SEC filings if they do so in their Canadian filings. Therefore, any 
potential competitive disadvantage of not being allowed to disclose 
mineral resources in SEC filings primarily affects U.S. registrants and 
non-Canadian foreign registrants,\436\ which in our estimates represent 
about 82% of the registrants potentially affected by the proposed 
revisions. Given this, and also given that the disclosures of 
mineralized material that are currently permitted in SEC filings are 
not directly comparable to the disclosures of mineral resources 
required by the CRIRSCO standards, some registrants have reported their 
mineral resources in press releases, on their Web site, or in their 
annual reports. Such disclosures, made outside of SEC filings, may 
present risks for investors who rely on such disclosures. First, these 
disclosures are not subject to the full range of disclosure rules and 
regulations, including corresponding liability provisions, to which SEC 
filings are subject (although disclosures outside SEC filings would be 
subject to the antifraud provisions of the federal securities laws), 
are not subject to staff review and comment, and may not be reported 
using commonly recognized standards.
---------------------------------------------------------------------------

    \435\ See note 14, supra.
    \436\ See SME Petition for Rulemaking at 14.
---------------------------------------------------------------------------

iii. Role of Experts in Support of Disclosures of Mineral Reserves
    As discussed above, Guide 7 provides, and Form 20-F requires that a 
registrant disclose the name of the person estimating the reserves and 
describe the nature of his or her relationship to the registrant. There 
is, however, no current disclosure policy or requirement in Guide 7, 
Item 102 or Form 20-F that a registrant must base disclosures of 
mineral reserves (or a study or technical report supporting such 
disclosures) on findings of a professional with a particular level of 
expertise. The absence of an expertise requirement is in contrast to 
the CRIRSCO-based codes, which all require that disclosures of mineral 
reserves--as well as exploration results and mineral resources--be 
based on information and supporting documentation prepared by a 
``competent'' or ``qualified person.'' \437\
---------------------------------------------------------------------------

    \437\ An author of a study or technical report that forms the 
basis of mineral reserves disclosure in a Securities Act 
registration statement is required to consent to the use of his or 
her name as an expert, and is therefore subject to expert liability 
under Section 11 of the Securities Act. See also 17 CFR 230.436 and 
17 CFR 229.601(b)(23). While this provides some assurance that the 
disclosure accurately reflects the technical study or report, it 
does not require that the author have any minimum level of technical 
expertise.
---------------------------------------------------------------------------

    In the absence of an expertise requirement, disclosures of 
exploration results, mineral resources and mineral reserves may be 
viewed as less credible. The lack of an expertise requirement may put 
U.S. registrants at a comparative disadvantage in terms of how 
investors value the disclosed information compared to companies 
disclosing mineral resources and reserves based on CRIRSCO-based 
codes.\438\
---------------------------------------------------------------------------

    \438\ Under the current disclosure regime, registrants can 
choose to hire an expert with similar qualifications as those 
required by the CRIRSCO standards and voluntarily disclose this fact 
to mitigate any competitive disadvantage. However, investors may 
discount such disclosures if they are not derived from a formal 
regulatory requirement. Moreover, investors that tend to diversify 
their investments across companies in the mining sector, rather than 
in any specific mining company, may discount the sector as a whole 
in jurisdictions that are perceived to have less robust disclosure 
standards in this regard.
---------------------------------------------------------------------------

B. Analysis of Potential Economic Effects

    In this section, we analyze the anticipated costs and benefits 
associated with the proposed revisions to the mining disclosure 
requirements.
1. Consolidation and Harmonization of the Mining Disclosure 
Requirements
    As discussed above, the proposed revisions would consolidate the 
mining disclosure requirements and policies of Regulation S-K and Guide 
7 into new subpart 1300 of Regulation S-K, and rescind Guide 7. 
Codifying the current mining disclosure requirements in Regulation S-K 
would provide a single source for a mining registrant's disclosure 
obligations, eliminating the complexity associated with the fact that 
Guide 7 provides staff guidance and is not incorporated in the 
Commission rules, such as in Regulation S-K, thus facilitating 
compliance and promoting more consistent disclosures to investors.
    As described in Section II.A.1, the proposed revisions would 
replace the current multiple standards for disclosure (i.e., 
``principal'' mines, ``other materially important'' physical 
properties, and ``significant'' mining operations) included in Item 102 
of Regulation S-K with a single materiality standard for when a 
registrant must provide disclosure about its mining properties or 
operations. The definition of ``material'' in the proposed rule would 
be the same as under Securities Act Rule 405 and Exchange Act Rule 12b-
2. This single standard should reduce any confusion or compliance 
uncertainty that arises from the current multiple standards. In 
addition, the proposed rules would provide more detailed guidance to 
registrants about how to apply the proposed standard under varied 
circumstances,\439\ which should further reduce compliance uncertainty 
and help ensure consistency in the disclosures. Finally, given that the 
proposed standard is similar to the disclosure standard under the 
CRIRSCO-based mining codes, the proposed revision would harmonize the 
U.S. standard with global practice.\440\
---------------------------------------------------------------------------

    \439\ See, e.g., section II.B.1.i-iii, supra.
    \440\ See section II.B.1, supra.
---------------------------------------------------------------------------

    The proposed standard would generally be consistent with current 
staff guidance for applying the existing disclosure thresholds. To the 
extent that registrants currently follow this guidance in determining 
which disclosures to make concerning their mining operations, the 
proposed new threshold would not significantly alter existing 
disclosure practices.
    As discussed above, the proposed rules would redefine the 
classifications of ``exploration,'' ``development'' and ``production'' 
stage so that they apply to individual properties as well as the 
totality of a registrant's mining activities, the latter of which is 
the case in Guide 7. This individual property classification would in 
turn guide the classification of the registrant as a whole, as 
described above in Section II.A.2. Applying the classification of the 
technological stages at the property

[[Page 41702]]

level should have several potential benefits. First, by providing the 
classification at the property level, the proposed rules would provide 
more precise information to investors about the nature and risk of 
registrants' mining operations. In addition, because the classification 
at registrant level would be derived from the individual property 
classifications, the proposed rules would prevent a registrant without 
material reserves from characterizing itself as a development stage or 
production stage company, which is possible under the current 
classification scheme.\441\ Second, since many registrants have mining 
properties in different stages, the proposed rules would instruct how 
registrants should apply the definitions to their operations, thereby 
reducing compliance uncertainty. Third, the proposed rules would align 
the disclosure requirements with current accounting practice under U.S. 
GAAP and IFRS (as issued by the IASB),\442\ facilitating consistency 
among the disclosures. Because registrants already possess the 
information necessary to be able to classify properties at the 
individual property level, and the proposed classifications are 
consistent with current accounting practice, we do not expect a 
significant increase in compliance costs for registrants.
---------------------------------------------------------------------------

    \441\ See note 65, supra.
    \442\ See note 68, supra.
---------------------------------------------------------------------------

2. Qualified Person and Technical Report Summary Requirements
    As discussed above, we propose to require that every disclosure of 
mineral resources, mineral reserves and material exploration results be 
based on and accurately reflect information and supporting 
documentation prepared by an identified qualified person. Moreover, we 
propose to require that, for each material mining property, registrants 
obtain and file a signed and dated technical report summary prepared by 
this qualified person.
    We anticipate that the qualified person requirement paired with the 
technical report summary requirement would enhance the accuracy, 
transparency, and credibility of the proposed disclosures for 
investors. For example, the requirement that the qualified person have 
at least five years of relevant experience and be an eligible member or 
licensee in good standing of a recognized professional association 
should ensure that the estimates provided in the disclosures are based 
on work consistent with current professional best practice. This should 
in turn increase the reliability and informational value of the 
disclosures. Moreover, the technical report summaries for material 
mining properties would provide investors and analysts with technical 
details to allow them to improve their own individual assessments of 
the value of the mining properties, including better estimates for 
their own forecasting models. These anticipated benefits should be 
especially pronounced in conjunction with the proposed disclosures of 
mineral resources and material exploration results, since estimates of 
mineral resources and material exploration results are typically 
associated, for technological reasons, with a higher degree of 
uncertainty compared to estimates of mineral reserves.
    These potential benefits from the proposed qualified person 
requirement are not without associated costs.\443\ Regarding the 
proposed qualified person requirement, we expect any increase in 
compliance costs to be related to an increase in search and hiring 
costs of qualified persons. Registrants that are not currently 
employing or contracting with professionals meeting the proposed 
definition of qualified person would incur costs, including expenses 
for identifying a pool of professionals that would meet the definition 
of qualified person and be willing to provide their services. The costs 
for services of a qualified person may also increase for such 
registrants due to the level of expertise required under the proposed 
rules. Because the required disclosures derive from activities mining 
registrants are already performing as a crucial part of their 
businesses (i.e., mineral exploration and estimation of mineral 
resources and reserves), we believe that most registrants likely 
already engage experienced professionals meeting the proposed level of 
expertise, either as employees or as contractors. In particular, this 
should be the case for registrants reporting based on CRIRSCO 
standards, as those disclosure codes already require a similarly 
defined ``qualified'' or ``competent'' person to support the 
disclosures. To the extent registrants already engage professionals 
meeting the proposed qualified person requirement, the incremental 
compliance costs of the proposed requirement would be minimal or none.
---------------------------------------------------------------------------

    \443\ Quantifying these cost are challenging due to data 
limitations. For example, we do not have access to data that would 
allow us to more precisely measure the current supply of mining 
professionals meeting the definition of a ``qualified person.'' We 
also do not have access to readily available data sources of 
comprehensive compensation data for geologists and mining engineers 
(in the United Sates or other countries), which would help us 
estimate the marginal cost of hiring a qualified person with the 
minimum level of expertise versus professionals that do not qualify 
as qualified persons.
---------------------------------------------------------------------------

    Registrants that are currently employing or contracting with 
professionals meeting the proposed definition of a qualified person 
would not incur costs associated with hiring such a person but may 
nevertheless experience an increase in compensation costs. One reason 
for such an increase is that qualified persons would provide, sign and 
consent to the filing of more extensive documentation in support of the 
disclosures, which potentially would expose them to greater legal 
liability. Moreover, if the qualified person requirement reduces the 
pool of eligible mining professionals, compensation costs could 
increase due to increased competition among registrants for the 
services of these eligible professionals. However, we anticipate this 
competitive effect on compensation costs to be minor as there is 
currently a large pool of professionals both in the United States and 
around the world that would meet the definition of qualified person. 
For example, the Society for Mining, Metallurgy, and Exploration 
currently has 15,000 members around the world.\444\ More than 800 of 
these members are registered with the organization and already meet the 
definition of a qualified person.\445\ Moreover, a study by the Bureau 
of Labor Statistics reported that in 2014 there were 34,000 
geoscientists, 16,500 geological and petroleum technicians, and 8,300 
mining and geological engineers employed in the United States.\446\ A 
significant fraction of these professionals would likely meet the 
definition of qualified person, or could meet it after some 
professional development.\447\ For example, California alone had more 
than 5,000 recorded licensed professional geologists as of November 
2014.\448\ We

[[Page 41703]]

note that these estimates largely exclude professionals who are active 
in foreign markets and who could also qualify.
---------------------------------------------------------------------------

    \444\ See the SME Web site at: https://www.smenet.org/about-sme/overview.
    \445\ See the SME Web site at: http://www.smenet.org/membership/registered-member-directory.
    \446\ See Bureau of Labor Statistics, U.S. Department of Labor, 
Occupational Outlook Handbook, 2016-17 Edition, Geoscientists, 
(available at: http://www.bls.gov/ooh/life-physical-and-social-science/geoscientists.htm.), Geological and Petroleum Technicians, 
(available at: http://www.bls.gov/ooh/life-physical-and-social-science/geological-and-petroleum-technicians.htm), and Mining and 
Geological Engineers, (available at: http://www.bls.gov/ooh/architecture-and-engineering/mining-and-geological-engineers.htm).
    \447\ The increased demand for qualified persons' services is 
likely to incentivize more professionals to become qualified.
    \448\ See the Web site of the National Association of State 
Boards of Geology, http://asbog.org/states/cd_states.htm#California. 
A geologist licensed by any state in the United States, provided 
they have five years' relevant experience in mining with respect to 
the type of mineralization under consideration, would likely meet 
the proposed definition of a qualified person.
---------------------------------------------------------------------------

    Regarding the proposed technical report summary requirement, we 
expect that registrants would experience an increase in compliance 
costs related to the preparation of the report summaries for material 
mining properties.\449\ Even registrants that currently produce 
technical documentation and reports in compliance with requirements in 
other jurisdictions would likely incur additional costs to conform the 
reports to the specific requirements in the proposed rule. In this 
regard, the proposal seeks to limit the additional compliance costs by 
requiring that a registrant only has to file a technical report for 
material properties, rather than for all its properties, and only when 
the registrant is first reporting, or reporting a material change in, 
exploration results, resources and reserves.
---------------------------------------------------------------------------

    \449\ It is challenging to estimate reliably the compliance 
costs associated with the requirement to prepare a technical report 
summary because of the diversity in the scope and complexity of the 
reports that are to be summarized and the labor costs (by sector of 
the industry and geographic location). Also, we could not find any 
studies that have examined this question. For purposes of the 
Paperwork Reduction Act, based on staff analysis of similar 
reporting requirements in other jurisdictions, we estimate that 
registrants would each incur between 11 and 50 burden hours to 
prepare the required technical report summary, depending on whether 
they are subject to CRIRSCO standards. These estimates assume that 
all the information required to prepare a technical report summary 
is already available to the qualified person as part of the 
scientific and engineering assessment required to support disclosure 
of exploration results, mineral resources, and mineral reserves. See 
Section V, infra.
---------------------------------------------------------------------------

    The proposed qualified person and technical report summary 
requirements are similar to the corresponding requirements in the 
CRIRSCO-based disclosure codes, which generally should mitigate the 
incremental impact of the proposed requirements on registrants 
currently reporting in jurisdictions that use these codes. However, 
some of the differences may be economically important. For example, 
although the CRIRSCO jurisdictions require that a company's exploration 
results, mineral resources and mineral reserves be based on and fairly 
reflect information and supporting documentation prepared by a 
``competent'' or ``qualified'' person, only Canada and Australia 
require the filing of a technical report summary to support such 
disclosure.\450\ Accordingly, we expect that the proposed technical 
report summary requirement would increase the costs of compliance for 
registrants currently reporting in foreign jurisdictions other than 
Canada and Australia. On the other hand, these registrants would 
receive the incremental benefits (identified above) associated with the 
filing of such report summaries.
---------------------------------------------------------------------------

    \450\ Canada's NI 43-101 requires a registrant to file a 
technical report summary, substantially similar to what we are 
proposing, for each material mining property. See NI 43-101 pt. 4. 
That Instrument also prescribes the form of the technical report 
summary. See Form 43-101F1. Australia's ASX requires all public 
disclosure of exploration results, mineral resources and mineral 
reserves to be accompanied by an appendix that reports pursuant to 
JORC Table 1. See ASX Listing Rules 5.7.1, 5.8.2 and 5.9.2. This 
requirement is equivalent to requiring an abbreviated version of the 
technical report summary.
---------------------------------------------------------------------------

    The proposed rules do not require the qualified person to be 
independent of the registrant. The absence of an independence 
requirement is consistent with the CRIRSCO-based codes, with the 
exception of Canada where the qualified person supporting the 
registrant's mining disclosures must be independent of the company for 
new registrants or, in cases of significant changes to existing 
disclosures, for established registrants.\451\ Although there is some 
evidence that outside experts reduce information asymmetries about 
companies' valuations in related circumstances,\452\ we believe this 
benefit should be balanced against the additional cost of having to 
find and hire an outside expert, instead of using an existing 
affiliated expert. Moreover, an outside expert may in practice not be 
independent of the company if the person derives a large fraction of 
overall compensation from that same company. We also believe that the 
expert liability incurred under section 11 of the Securities Act would 
mitigate the potential for misleading or fraudulent disclosures by all 
qualified persons, whether or not the person is affiliated with the 
company or an independent expert.
---------------------------------------------------------------------------

    \451\ See NI 43-101 pt. 5.3.
    \452\ See, e.g., Karl A. Muller III and Edward J. Riedl, 
``External Monitoring of Property Appraisal Estimates and 
Information Asymmetry'' (2002), Journal of Accounting Research, 
Volume 40, Issue 3, pp. 865-881. Using a sample of UK investment 
property firms, the paper finds that bid-ask spreads are lower for 
firms employing external appraisers of property values versus those 
employing internal appraisers, suggesting the information asymmetry 
about the value of the company is lower in the former case.
---------------------------------------------------------------------------

    We have considered reasonable alternatives to the proposed 
qualified person and technical report summary requirements. One 
alternative would be not to require or define the professional 
requirements of the expert producing information and supporting 
documents for the disclosures, but to require that registrants disclose 
the relevant qualifications and professional background of the expert 
as well as any affiliation with the registrant. Investors could use 
this information to decide for themselves if the expert is likely to be 
competent and reliable. Compared to the proposed rule, this alternative 
would potentially lower costs for the services provided by qualified 
persons since registrants could hire from a broader population of 
experts. Moreover, registrants that already use experts not meeting the 
definition of a qualified person under the proposed rule would avoid 
switching costs. However, this alternative would potentially lead to 
less consistency in the type of expertise and quality of reports across 
firms. Moreover, this alternative would significantly differ from the 
approach in the CRIRSCO standards of requiring a minimum level of 
expertise in support of the disclosures. As a result, even when keeping 
the actual level of competence of experts constant across 
jurisdictions, this alternative could lead to a perception among 
investors that disclosures of mineral resources and reserves within SEC 
filings are not as well supported as disclosures in the CRIRSCO 
jurisdictions, which could discourage investors from investing in 
securities of mining companies listed in the U.S. markets.
    Another alternative would be not to require the filing of a 
technical report summary to reduce expected compliance costs and be 
consistent with the majority of CRIRSCO-based codes. Under this 
alternative, the potential benefits discussed above that come from 
investors having access to the information in the technical report 
summary would be foregone.
3. Treatment of Exploration Results
    The proposed rules would require a registrant to disclose material 
exploration results (as and if determined by a qualified person) for 
each of its material mining properties. This proposed disclosure 
requirement would align the Commission's disclosure requirements for 
exploration results with those in CRIRSCO-based codes. The proposed 
rules also would provide guidance for registrants when exploration 
results are considered material.
    Although the Commission's current disclosure requirements and 
policies do not provide for the disclosure of exploration results, some 
registrants

[[Page 41704]]

disclose exploration results on a voluntary basis. Presumably, 
registrants currently providing such voluntary disclosures benefit from 
doing so. From an individual mining registrant's perspective, the 
proposed requirements would be beneficial if the associated incremental 
economic benefits exceed the incremental costs of complying with the 
disclosure requirements, as proposed. From an investor's perspective, 
the proposed rule would be incrementally beneficial if the expected 
benefit in terms of more efficient investment decisions due to the 
additional information exceeds the cost of processing the same 
information.
    Because a new mining project inevitably starts from some form of 
exploration activity, disclosure of material exploration results would 
provide important information to investors about registrants' mining 
operations and potential growth opportunities. We expect the disclosure 
of exploration results by smaller mining registrants to be especially 
useful to investors as such registrants tend to have a narrower range 
of mining operations and fewer individual projects. We estimate that a 
majority of mining registrants are very small firms: 51% of mining 
registrants (176 out of the 345 registrants identified above) have $5 
million or less in total assets, suggesting they are mainly exploration 
stage registrants.
    It is important to recognize that exploration results, by 
themselves, without the assessment of geologic and grade continuity 
required in resource estimation, are inherently speculative. Thus, it 
may be difficult for investors to value exploration results accurately 
and there is a risk that some investors would put too much weight on 
this information, which in turn could lead to inefficient investment 
decisions. The proposed requirements are intended to mitigate any 
potential costs related to the uncertainty associated with the 
disclosure of exploration results in a couple of ways. First, the 
proposed rules would preclude the use of exploration results, by 
themselves, to derive estimates of tonnage, grade, and production 
rates, or in an assessment of economic viability. This should reduce 
the potential for overvaluing the disclosed exploration results. 
Second, disclosure of material exploration results must be based on the 
analysis of a qualified person submitting a technical report summary 
that is filed as an exhibit with the Commission. The proposed qualified 
person and technical report summary requirements should increase the 
accuracy and reliability of the disclosed exploration results. In 
addition, the proposed requirements would also increase the usefulness 
of this information to investors by aligning the disclosure of material 
exploration results with the requirements in CRIRSCO-based codes, which 
would improve the comparability of the disclosed information relative 
to similar disclosures by mining companies in jurisdictions such as 
Canada and Australia.
    Quantifying the anticipated net benefit to investors from the 
proposed disclosure requirement is difficult. There is some academic 
evidence suggesting that investors respond favorably to the disclosures 
of exploration results. For example, an academic study of 1,260 
exploration results announcements made by 307 unique Australian mining 
companies over the 2005-2008 time period documents an average abnormal 
stock return of 2.8% on the announcement day.\453\ For each such 
company, the abnormal return was calculated relative to the return on 
the same day for a size-matched non-announcing commodity peer. 
Consistent with exploration results being more value relevant for 
smaller firms, the study also finds a significantly higher announcement 
day return for smaller firms, where size is measured by pre-
announcement market capitalization. We also note that the announcements 
of explorations results in the sample were compliant with the 2004 
edition of the Australian JORC code for mining disclosure, which 
contains requirements for disclosure of exploration results that are 
similar to the proposed requirements.\454\
---------------------------------------------------------------------------

    \453\ See Ron Bird, Matthew Grosse, and Danny Yeung, ``The 
market response to exploration, resources, and reserve announcements 
by mining companies: Australian data'' (2013), Australian Journal of 
Management, Volume 38, Issue 2, pp. 311-331.
    \454\ See the JORC Code, 2004 Edition, pts. 16, 17, and 18.
---------------------------------------------------------------------------

    We expect an increase in compliance costs for those registrants 
that disclose material exploration results for the first time for any 
particular project. These costs would include the assessment of 
materiality, the costs of preparing the required technical report 
summary, and the costs of reporting the results in annual reports and 
registration statements filed with the Commission. To the extent that 
these costs are fixed rather than scaled to the size of the project, 
the cost burden would be relatively larger for smaller registrants.
    We note that the proposed requirement to disclose material 
exploration results does not impose an affirmative obligation to hire a 
qualified person to make a determination about exploration results. 
Registrants who perceive that the compliance costs related to engaging 
a qualified person are prohibitive can refrain from engaging a 
qualified person to make a determination about the exploration results. 
In that situation, the registrant would not be required to disclose 
material exploration results because the required information and 
documentation by an expert necessary to support the public disclosure 
of material exploration results would not be present.
    The compliance costs of the proposed disclosure requirement should 
be substantially mitigated for registrants that already report based on 
CRIRSCO standards, as those standards have similar disclosure 
requirements for material exploration results.
    The proposed rules require disclosure of determined material 
exploration results only with respect to individually material 
properties.\455\ One alternative to the proposed requirement would be 
also to require disclosure of material exploration results when the 
registrant has determined that the aggregate mining operations are 
material but no individual property is material.\456\ Relative to the 
proposed rules, this alternative would provide investors with more 
information concerning the prospects of the registrant's mining 
operations but it would be significantly costlier for affected 
registrants. The costs of this alternative could be mitigated by 
requiring the additional material exploration results to be presented 
in summary form.
---------------------------------------------------------------------------

    \455\ See Section II.D., supra.
    \456\ See Section II.B.1, supra.
---------------------------------------------------------------------------

4. Treatment of Mineral Resources
    As discussed above, disclosure of mineral resources is currently 
precluded in SEC filings unless required pursuant to foreign or state 
law. Industry participants have raised concerns regarding the adverse 
competitive effects potentially stemming from the inability of U.S. 
registrants to disclose mineral resources.\457\ These industry 
participants have stated that mining companies and their investors 
consider mineral resource estimates to be material and fundamental 
information about a company and its projects.\458\
---------------------------------------------------------------------------

    \457\ See note 27, supra.
    \458\ See SME Petition for Rulemaking at 1 and 13.
---------------------------------------------------------------------------

    The proposed rule would require a registrant with material mining 
operations to disclose specified information concerning any mineral 
resources that have been determined based on information and supporting 
documentation from a qualified person.

[[Page 41705]]

In the absence of such information and supporting documentation, the 
registrant would not have mineral resources as defined in the proposed 
rules, and as such, would not be required or allowed to disclose 
mineral resources in a SEC filing.\459\
---------------------------------------------------------------------------

    \459\ In other words, the disclosure requirement would not be 
triggered if the registrant chose not to hire a qualified person 
because it would lack the information and documentation to support 
the disclosure of mineral resources, as required by the proposed 
rule.
---------------------------------------------------------------------------

    As proposed, a registrant with material mining operations that has 
multiple properties would be required to provide both summary 
disclosure about its mineral resources in addition to more detailed 
disclosure concerning its mineral resources for each material 
property.\460\ As discussed above, the proposed requirement would 
expand the scope of the current disclosure regime, while aligning the 
Commission's mining disclosure rules with those in foreign 
jurisdictions based on the CRIRSCO standards.
---------------------------------------------------------------------------

    \460\ See the discussion in section II.B, supra.
---------------------------------------------------------------------------

    We expect the proposed framework for disclosure of mineral 
resources to result in additional useful information concerning a 
registrant's operations and prospects. Because mining registrants 
already assess mineral resources in the course of developing mining 
projects, requiring information about mineral resources to be disclosed 
would significantly reduce the information asymmetries between 
investors and registrants. Reducing information asymmetry relating to 
mineral resources should lower the cost of capital and improve capital 
formation.\461\
---------------------------------------------------------------------------

    \461\ Although we expect disclosures that reduce information 
asymmetries to reduce cost of capital for the typical mining 
company, we also expect there to be a reallocation of capital from 
relatively low quality companies to higher quality companies as 
better information on the companies' prospects are revealed. This 
reallocation would help improve efficiency and capital formation 
overall, but also means that some poorer quality mining companies 
would likely experience a higher cost of capital.
---------------------------------------------------------------------------

    Moreover, since the CRIRSCO-based codes already require similar 
disclosure of mineral resources, the proposed framework would improve 
competition among mining registrants by removing the competitive 
disadvantage that U.S. registrants currently experience relative to 
reporting firms in foreign jurisdictions. This also may improve the 
attractiveness of U.S. capital markets for mining companies. Similar to 
the case of the proposed requirement to disclose material exploration 
results, the proposed requirement to disclose mineral resources may be 
particularly beneficial to smaller exploration stage mining registrants 
(and their investors) as their valuations may be more dependent on non-
reserve mineral deposits.
    We note that for registrants that currently disclose ``mineralized 
materials'' there should be a comparatively lower incremental reduction 
in information asymmetries. Nonetheless, the proposed framework would 
result in disclosures that are more consistently presented and more 
transparent to investors, thereby increasing comparability of such 
information across mining registrants. For example, the differences 
between measured and indicated mineral resources would be clear under 
the proposed rules since they will be distinct and not aggregated as 
mineralized material. The proposed requirement that the disclosures 
must be supported by information and documentation provided by a 
qualified person would also improve the quality and reliability of the 
disclosures compared to the current disclosures of mineralized 
material. To the extent the above expected incremental improvement in 
disclosure to investors reduces information asymmetries, the efficiency 
of investment decisions would increase and registrants that currently 
disclose mineralized material may still experience a reduction in cost 
of capital. Finally, relative to the current practice for disclosure of 
mineralized materials, requiring the disclosure of mineral resources by 
rule should reduce registrant uncertainty and facilitate compliance.
    Estimates of mineral resources are typically associated with a 
greater uncertainty than estimates of mineral reserves. To help 
investors better assess the uncertainty surrounding mineral resource 
estimates, the proposed disclosure framework would mandate a 
classification of mineral resources into inferred, indicated and 
measured mineral resources, in order of increasing confidence based on 
the level of underlying geological evidence, with the estimates for 
inferred mineral resources being the most uncertain.\462\ In addition, 
we are proposing that resource disclosures must be supported by an 
initial assessment by a qualified person and that this assessment, at a 
minimum, must include a qualitative evaluation of modifying factors to 
establish the economic potential of the mining property or project. We 
believe that requiring an initial assessment by a qualified person 
would reduce the uncertainty surrounding mineral resource estimates and 
increase the value of the information for investors. Specifically, we 
believe that a well-defined and specific technical study to support 
disclosure of mineral resources should improve the accuracy and 
reliability of the mineral resource estimates for investors. Since 
estimates of mineral reserves are based on estimates of mineral 
resources, the greater accuracy of the resource findings should lead to 
better mineral reserve determinations.
---------------------------------------------------------------------------

    \462\ Because of the inherent uncertainty associated with 
inferred resources, we note that registrants may have an incentive 
to aggressively report such resources. However, this incentive would 
be mitigated by not allowing inferred resources to later be directly 
converted to mineral reserves. See section II.E.2, supra.
---------------------------------------------------------------------------

    The proposed rule would generate compliance costs for registrants 
with material mining operations that disclose mineral resources. The 
increase in costs would be greater for registrants not currently 
disclosing mineralized material. The costs would include the 
incremental costs (above the registrant's mineral resource assessment 
practices) of the initial assessment and the costs of preparing the 
technical report summary, in the case that one is required. As 
discussed above, if registrants are currently using a professional who 
would not meet the qualified person definition, search costs and 
potentially higher compensation costs may also be incurred. In deciding 
whether to disclose mineral resources, we expect companies would weigh 
the incremental compliance costs of producing reports that meet the 
required standards against the expected benefits stemming from such 
disclosure, based on their individual facts and circumstances.
    The compliance costs associated with the proposed framework for 
disclosure of mineral resources would be mitigated to some extent for 
registrants that report in foreign jurisdictions with CRIRSCO-based 
disclosure codes given the similarity between the requirements in those 
codes and our proposal. In this regard, however, although all CRIRSCO-
based codes require some type of study to support the determination and 
disclosure of mineral resources, most do not define a specific type of 
study. As such, the proposed initial assessment requirement could 
result in increased burdens for these mining registrants to the extent 
that our proposed initial assessment differs from registrants' 
practices for determining resources.
    For example, although the CRIRSCO-based codes prohibit the use of 
inferred mineral resources to support a determination of mineral 
reserves, they typically permit the use of inferred

[[Page 41706]]

mineral resources in a scoping study \463\ as long as the competent or 
qualified person provides appropriate cautionary language regarding the 
low level of geological confidence in those resources. Accordingly, a 
registrant may incur costs if it has obtained a scoping study that 
would not be in compliance with the proposed rules because it contains 
an economic analysis that includes inferred mineral resources.\464\
---------------------------------------------------------------------------

    \463\ A scoping study (called a preliminary economic analysis in 
NI 43-101) is used to determine whether to proceed with further work 
leading to preparing a pre-feasibility or feasibility study for 
mineral reserve determination. In contrast to our proposed rules, 
CRIRSCO-based codes allow registrants to disclose results of scoping 
studies that use some inferred mineral resources in the economic and 
technical assessment.
    \464\ See note 155, supra.
---------------------------------------------------------------------------

    There is evidence suggesting that investors respond favorably to 
the disclosures of mineral resources. For example, the previously 
discussed study regarding the disclosure of exploration results also 
analyzes the announcement returns to disclosures of mineral 
resources.\465\ Analyzing 624 resource announcements by 278 publicly 
traded Australian firms between 2005 and 2008, the authors document an 
average abnormal stock return of 2.5% on the announcement day. As for 
the exploration results announcements, the abnormal return was 
calculated relative to the return on the same day for a size-matched 
non-announcing commodity peer. Unlike the announcements of exploration 
results, the authors find no relation between company size and the 
abnormal returns. However, abnormal returns are significantly greater 
when a mining company announces mineral resources for the first time. 
The authors suggest this may be the case because much of the existing 
information asymmetry is resolved at the time of the first 
announcement.
---------------------------------------------------------------------------

    \465\ See Ron Bird, Matthew Grosse, and Danny Yeung (2013), pp. 
123-125.
---------------------------------------------------------------------------

    One alternative to the proposed disclosure requirement for mineral 
resources is not to require the qualified person to provide an 
assurance that all issues relating to the relevant modifying factors 
can be resolved with further exploration and analysis. Instead, as is 
required by the CRIRSCO-based codes, the qualified person could be 
guided by the definition of mineral resources provided in the proposed 
rules in determining that the mineral resources have ``reasonable 
prospects of economic extraction.'' \466\ The compliance cost related 
to preparing an initial assessment to support mineral resource 
disclosure associated with this alternative would likely be lower than 
the costs associated with the proposed requirement. First, the 
alternative would reduce the amount of work that the qualified person 
has to do to support his or her determination of resources. In 
addition, the absence of the requirement to provide the specified 
assurance could reduce the qualified person's potential liability, and 
as a result, reduce the cost of engagement of the qualified person. At 
the same time, this alternative could increase the uncertainty 
surrounding the prospects of economic extraction of mineral resources 
and therefore reduce the value of the disclosure of such resources.
---------------------------------------------------------------------------

    \466\ See, e.g., CRIRSCO's International Reporting Template pt. 
21, which states ``[t]he term `reasonable prospects for eventual 
economic extraction' implies a judgment (albeit preliminary) by the 
Competent Person in respect of the technical and economic factors 
likely to influence the prospect of economic extraction, including 
the approximate mining parameters.''
---------------------------------------------------------------------------

    Another alternative we considered is not to require the preparation 
of a technical report summary, as in most CRIRSCO jurisdictions. This 
alternative would further lower compliance costs but would also reduce 
consistency in the disclosures and increase the uncertainty about the 
quality of the mineral resources estimates.
5. Treatment of Mineral Reserves
    As discussed above, we propose to revise the definition of mineral 
reserves to align it with the CRIRSCO standards by requiring that the 
qualified person apply defined modifying factors to the indicated and 
measured mineral resources in order to convert them to mineral 
reserves. The proposed rules would permit either a pre-feasibility or a 
feasibility study to provide the basis for determining and reporting 
mineral reserves. The proposed rules would also require that the 
reserve estimations and disclosures thereof be based on the work of a 
qualified person.\467\
---------------------------------------------------------------------------

    \467\ See section II.F, supra.
---------------------------------------------------------------------------

    We expect the proposed revisions to the disclosure of mineral 
reserves to have several economic benefits. First, the proposed 
revisions specify in more detail the process that is required for 
registrants to convert mineral resources to probable or proven mineral 
reserves, including, as noted above, requiring the application and 
description of relevant modifying factors that affect the conversion. 
The increased detail and clarity of the proposed requirements should 
lead to more reliable and consistent disclosures. Second, because the 
determination of mineral reserves would be based on the analysis and 
documentation provided by a qualified person, the disclosure would be 
associated with the incremental benefits potentially stemming from the 
qualified person requirement, as discussed above. Third, the staff 
currently requests that registrants obtain a full feasibility study to 
support the determination of mineral reserves, but the proposed rules 
would allow, under certain conditions, the use of a pre-feasibility 
study, thus reducing compliance costs relative to current practice. 
This benefit is likely to be more significant for smaller, capital-
constrained registrants since the cost of feasibility studies is 
positively related to the size of individual projects rather than the 
size of the registrant.
    Pre-feasibility studies, while adequate for disclosure of mineral 
reserves, require less time than feasibility studies. For example, one 
study estimates that between 12% and 15% of the engineering work on a 
project is completed by the end of the pre-feasibility study compared 
to between 18% and 25% at the end of the feasibility study.\468\ Thus, 
assuming the same cost per worker-hour, a pre-feasibility study will be 
around 33-40% less costly than a feasibility study. Allowing pre-
feasibility studies would be especially beneficial for registrants that 
already have studies meeting the pre-feasibility standard, but not the 
feasibility standard.
---------------------------------------------------------------------------

    \468\ See Richard L. Bullock, ``Mineral Property Feasibility 
Studies,'' in 1 SME Mining Engineering Handbook, supra note115, at 
227-261.
---------------------------------------------------------------------------

    In addition to compliance cost savings, allowing the use of pre-
feasibility studies could provide several ancillary benefits for 
registrants and investors. Because CRIRSCO-based disclosure codes 
already allow the use of pre-feasibility studies, allowing their use 
under the proposed rules would place U.S. and non-Canadian foreign 
registrants on equal footing with Canadian registrants availing 
themselves of the ``foreign or state law'' exception and other mining 
companies reporting only in CRIRSCO jurisdictions. Finally, the 
proposed detailed requirements for feasibility studies should reduce 
compliance uncertainty, while increasing consistency in disclosures 
where feasibility studies are used to determine mineral reserves.
    Because the proposed treatment of mineral reserves is consistent 
with established best practices in the mining industry, we do not 
expect a significant increase in compliance costs beyond the potential 
cost increases related to the qualified person requirement and the 
filing of the technical report summary, as discussed above. Given the 
potentially large compliance cost savings associated with allowing pre-

[[Page 41707]]

feasibility studies, we expect most registrants to experience an 
overall reduction in compliance costs. However, because a pre-
feasibility study is typically associated with a lower confidence level 
than a feasibility study, allowing the use of pre-feasibility studies 
would likely lead to higher uncertainty associated with the mineral 
reserve disclosures. This increased uncertainty should be mitigated by 
the proposed qualified person requirement and proposed requirement of a 
final feasibility study in certain specified high risk situations.
    One reasonable alternative to the proposed rules would be to 
require feasibility studies by a qualified person and not allow pre-
feasibility studies. This alternative could lead to less uncertainty 
surrounding mineral reserve estimates but would be associated with 
significantly higher compliance costs than the proposed revisions. 
Moreover, this alternative would continue to place U.S. and non-
Canadian registrants at a competitive disadvantage.
6. The Pricing Model for Determination of Mineral Resources and 
Reserves
    As discussed above, Guide 7 does not include a specific pricing 
model for the estimation of mineral reserves. Currently, registrants 
generally use a commodity price that is no higher than the trailing 3-
year average price. The proposed disclosure requirements for mineral 
resources and mineral reserves would require registrants to use in 
their reserve and resource estimations a commodity price that is no 
higher than the average closing price during the 24-month period prior 
to the end of the last fiscal year, with the exception that registrants 
can use a higher price if set by contractual arrangements.
    A key consideration when deciding on a pricing model is that a 
price is assigned to mineral material that is in the ground and likely 
will not be extracted for many years. Ideally, our rules would use a 
pricing model that could accurately predict what prices will be at the 
time of future expected extraction. Given that commodity prices are 
volatile and generally difficult to predict, there is no established 
industry ``best practice'' model. Absent an established industry 
standard for the pricing model, we believe that, for the purpose of 
public disclosure, the pricing model should be transparent and cost 
effective, while producing unbiased estimates of future prices and 
promoting comparability of estimated resources and reserves across 
registrants. At the same time, given the inherent difficulty of 
forecasting future commodity prices and the segmented nature of the 
markets for some of the minerals involved, we also believe that the 
pricing model should provide registrants with some flexibility to draw 
on their knowledge and experience. However, we recognize that allowing 
firms to use their internal pricing models may hurt comparability and 
may create incentives to use unrealistically high prices that result in 
overestimated mineral resources and reserves.
    A ceiling price model based on a trailing average, like the 3-year 
trailing average price used as a ceiling in the current staff guidance, 
strikes a balance between the objectives outlined above. First, the 
ceiling price itself is transparent, easy to calculate, and consistent 
for any given commodity and time, thus promoting comparability across 
registrants. Second, because the trailing average price is a ceiling, 
it gives registrants some flexibility to use their own preferred 
pricing model as long as it does not exceed the ceiling. Third, any 
tendency by registrants to select overly optimistic prices in an 
attempt to inflate estimates is mitigated by the ceiling price, which 
prevents registrants from assigning a price that is greater than what 
has been observed over the time period of the trailing average.
    We believe that the proposed rules, which use a shorter time to 
calculate the historic average price than current practice, would 
result in a ceiling price that is more sensitive to shifts in price 
trends and therefore would be more relevant for estimating the inherent 
value of mineral resources and reserves. We also believe that the 24-
month time period is preferable to using a shorter time period. An 
average price determined over, for example, a one-year period could be 
affected by short-term price volatility in such a way that the value of 
the estimated resources and reserves could reflect more short-term 
market conditions than long-term fundamental market factors. The 
proposed 24-month period intends to strike a balance between the 
ceiling price being sensitive to recent changes in fundamental market 
conditions while avoiding introducing fluctuations in the ceiling price 
that may be driven more by short-term price volatility than by changes 
in fundamental market conditions.\469\
---------------------------------------------------------------------------

    \469\ To illustrate the differences in the volatility depending 
on the time horizon used for the ceiling price, staff analysis shows 
that for copper prices on the London Metal Exchange over the 1986-
2015 time period, the standard deviation of the percentage change in 
year-over-year prices was 16.6%, 20.0%, and 25.9% for average prices 
calculated based on horizons of 36 months, 24 months, and 12 months, 
respectively. This can be compared to the standard deviation of the 
year-over-year change in daily prices, which was 34.1%. A 
qualitatively similar pattern was found for a wide variety of 
different minerals. (Note that for these calculations, end of the 
month prices were used to calculate the year-over-year changes for 
each of the different price alternatives, which means that the 
standard deviations are based on 360 observations of year-to-year 
percentage changes for each time horizon). The data used for the 
analysis was collected from Thomson Reuters Markets LLC's DataStream 
database.
---------------------------------------------------------------------------

    In practice, if the price that many mining registrants currently 
use to estimate resources and reserves is at or below the 24-month 
average closing price, the proposed rules would not significantly 
impact compliance costs for these registrants.\470\ To the extent that 
the price that management is using is above the 24-month average, 
however, there would be a potential significant cost to registrants to 
recalculate mineral resource and reserve estimates in compliance with 
the proposed rules.\471\
---------------------------------------------------------------------------

    \470\ The only costs would be to calculate the 24 month average 
price and determine whether the price that management currently uses 
to estimate its mineral resources and reserves is below that price.
    \471\ These costs would vary significantly depending on the 
facts and circumstances, including the type of deposit, mining 
methods, and magnitude of price change. In some instances, a price 
change may require very little additional engineering and economic 
analysis to determine the economic viability of the mineral 
resources in question. In other instances, a price change may lead 
to a significant change in the scale of the proposed mining project. 
The qualified person would then have to repeat almost all the 
engineering and economic analysis to determine mineral resources.
---------------------------------------------------------------------------

    We recognize that because the proposed ceiling price model is a 
trailing average of historical prices, the ceiling price by design may 
be slow to incorporate recent price trends. Thus, to the extent that a 
recent significant trend in prices marks a true structural break 
towards higher (lower) commodity prices on the long run, the proposed 
ceiling price may result in underestimation (overestimation) of mineral 
reserves and resources. It is worth noting that, to mitigate the risk 
that the ceiling price does not appropriately reflect recent changes in 
the fundamental market conditions, the proposed rules would allow 
registrants that have contracts with prices that are higher than the 
ceiling to use such prices. Moreover, the proposed rules would require 
disclosure of the assumptions used in the economic analysis underlying 
the estimates of mineral resources and reserves, including the price 
chosen, if the registrant has not previously disclosed mineral reserve 
or resource estimates in a filing with the Commission or is disclosing 
material changes to its previously disclosed mineral reserve or

[[Page 41708]]

resource estimates.\472\ The overall economic effects of the proposed 
pricing model are particularly difficult to quantify, and we request 
comment on these effects.
---------------------------------------------------------------------------

    \472\ See proposed Item 1304(b)(9) of Regulation S-K.
---------------------------------------------------------------------------

    There are several reasonable alternatives to the proposed pricing 
model. One alternative would be the approach followed by several 
foreign jurisdictions with CRIRSCO-based codes, where the qualified 
person is allowed to use any reasonable and justifiable price based on 
that qualified person's or management's view of long-term market 
trends.\473\ Compared to the proposed price ceiling model, this 
alternative approach would reduce the risk of underestimation of 
mineral reserves and resources following a fundamental upward shift in 
the commodity price, but would also carry a higher risk of 
overestimation. A modified version of this alternative would be to 
require registrants also to provide a sensitivity analysis of the 
estimates of mineral resources and reserves with respect to the 
commodity price used, where the price points used in the sensitivity 
analysis surrounding the base price would be selected by the 
registrant. A sensitivity analysis with respect to price would help 
investors better assess the risk associated with the estimated mineral 
resources and reserves and could, therefore, lead to more efficient 
investment decisions. However, because a sensitivity analysis would 
require registrants to calculate at least three estimates of resources 
and reserves (the base price, as well as one price each above and below 
the base price, respectively), compliance costs would be increased. 
These compliance costs would be mitigated to the extent that 
registrants are able to use estimates based on existing calculations 
from an internal sensitivity analysis.
---------------------------------------------------------------------------

    \473\ See note 196, supra.
---------------------------------------------------------------------------

    A second alternative would be to calculate the ceiling price 
differently, for example, as spot, forward, or futures price as of the 
end of the last fiscal year to incorporate more quickly shifts in price 
trends. However, due to the volatility associated with prices from any 
given specific day, the disclosed estimates of mineral resources and 
reserves may fluctuate more than the underlying fundamental values of 
the resources and reserves, thus increasing the uncertainty of the 
estimates for investors. Moreover, to the extent the ceiling price 
calculated using this alternative is below the price that registrants 
use based upon their own internal calculations, the higher volatility 
of this alternative ceiling price may create higher compliance costs as 
registrants may have to provide more frequent recalculations of their 
mineral resources and reserves, solely for the purpose of their SEC 
filings.
    A third alternative would be to require registrants to estimate 
mineral resources and reserves using a price no higher than the 24-
month trailing average price and allow registrants to also disclose 
mineral resources and reserves based on a higher price of their own 
choosing, to the extent that they include a description of the model 
and assumptions used to select the price.\474\ This approach would 
present standardized estimates that are transparent and comparable 
across registrants, while letting managers present supplement estimates 
based on an alternative price if they, for example, believe that the 
24-month average may lead to inaccurate estimates. Because reporting a 
second set of estimates based on prices higher than the ceiling price 
would be voluntary, presumably registrants only would provide such 
alternative estimates if they expect the benefits of doing so to 
outweigh the costs. The potential cost of this alternative is that the 
price ceiling mechanism would lose its ability to constrain disclosure 
of overestimated mineral resources and mineral reserves due to the use 
of overly optimistic prices, which is one of the objectives for the 
price model discussed above.
---------------------------------------------------------------------------

    \474\ As currently proposed, a registrant would not be permitted 
to provide a supplemental mineral reserve determination (i.e., 
estimate based upon prices higher than the 24 month trailing 
average). See note 252, supra.
---------------------------------------------------------------------------

7. Specific Disclosure Requirements
i. Requirements for Summary Disclosure
    Currently, Guide 7 does not explicitly address what disclosure 
should be provided when a registrant has multiple mining properties. 
Instead, on a filing-by-filing basis, staff has not objected to a 
registrant with multiple mining properties providing summary disclosure 
that encompasses all of its properties instead of providing disclosure 
on a property by property basis. The proposed rules would require that 
registrants that own multiple mining properties provide summary 
disclosure of their mining operations. The summary disclosure would 
include maps of the locations of all mining properties, a tabular 
presentation of certain material information about the 20 properties 
with the largest asset values, and a summary of all mineral resources 
and reserves at the end of the most recently completed fiscal 
year.\475\
---------------------------------------------------------------------------

    \475\ See the discussion in Section II.G.1., supra.
---------------------------------------------------------------------------

    We expect that the proposed summary disclosure would help 
registrants to convey more effectively to investors information about 
their aggregate mining properties and operations. Because of the 
clarity and detail in the proposed summary requirement, it should also 
reduce compliance uncertainty and increase consistency of summary 
disclosures across registrants. These benefits should be particularly 
important for registrants with a diverse set of mining properties.\476\
---------------------------------------------------------------------------

    \476\ See section II.B. 2, supra.
---------------------------------------------------------------------------

    Given that the proposed requirement for summary disclosure would 
align with what most registrants already provide in their SEC filings, 
we do not expect the requirement to impose significant additional costs 
on registrants with mining operations that are material in the 
aggregate, but have no individual property that is material. We also 
note that one CRIRSCO-based jurisdiction, Australia, through the ASX 
listing rules, requires summary disclosure similar to the proposed 
summary disclosure requirements.\477\ For registrants that do not 
already provide summary disclosure, whether reporting pursuant to Guide 
7 or under any of the CRIRSCO-based codes, other than the ASX listing 
rules, there could be additional costs to comply with the summary 
disclosure requirements in addition to any individual property 
disclosure requirements.
---------------------------------------------------------------------------

    \477\ See ASX Listing Rules 5.1.2 and 5.3.2.
---------------------------------------------------------------------------

    One alternative to the proposed summary disclosure would be to 
limit the disclosure required by proposed Item 1303(b)(3) to only the 
mineral resources and reserves for the 20 largest properties, rather 
than for all mining operations. This would reduce compliance costs for 
registrants with greater than 20 mining properties. The cost of this 
alternative would be a potentially significant reduction in the 
information about mineral resources and reserves available to investors 
by excluding such information for many properties, which could be a 
significant portion or majority of the registrant's mineral resources 
and reserves. This reduction in information would be particularly 
significant for registrants with multiple properties where no 
individual property is material.
    Another alternative would be to require summary information about 
the mining operations in aggregate but not for any individual property. 
Compared to the proposed requirements, this alternative would lower not 
only

[[Page 41709]]

compliance costs but also the amount of information available to 
investors, especially when the registrant has material mining 
operations in aggregate but no individual mining property that is 
material.
    The required summary disclosures would increase the accessibility 
of the information to investors and other data users. The proposed 
tabular formats (Tables 2 and 3), however, may not be readily machine-
readable or directly comparable across filers without additional 
structure. An alternative to the proposed summary requirements would be 
also to require the disclosure required in Tables 2 and 3 to be made 
available in a structured data format, such as eXtensible Business 
Reporting Language (XBRL). When registrants provide disclosure items in 
a structured data format, investors and other data users (e.g., 
analysts) can more easily retrieve and use the information reported by 
registrants and perform comparisons of common disclosures across 
registrants and reporting periods.\478\ Investors can download 
information directly into spreadsheets or statistical analysis 
software, which eliminates the need to enter the information manually 
and minimizes the time burden and risk of errors associated with data 
entry. The structuring of the data would require the development of a 
taxonomy (a standard list of tags necessary for reporting in XBRL), 
which in turn would require some level of standardization of the 
various data elements based on mining industry practices. To the extent 
that the proposed rules permit tailoring of the disclosures in Tables 2 
and 3 to registrants' unique circumstances and provide filers with the 
flexibility in how to report the required information, the 
comparability of the data across registrants would be decreased, which 
in turn would decrease the usefulness of requiring the data in Tables 2 
and 3 to be made available in the XBRL format.
---------------------------------------------------------------------------

    \478\ See Release No. 33-9002A (Apr. 1, 2009) [74 FR 15666] 
(``Financial Statement Information Adopting Release'').
---------------------------------------------------------------------------

    A company may choose to tag its own disclosures in-house or to 
outsource the tagging process. Whether structured data filings are 
prepared in-house or by an outside service provider, registrants would 
incur additional costs to make the disclosure available in a structured 
data format, including initial set-up costs and ongoing costs. To the 
extent that such costs have a fixed component, they could impose a 
relatively greater burden on smaller registrants.
ii. Requirements for Individual Property Disclosure
    As discussed above, the proposed requirements for individual 
property disclosure for material properties would standardize the 
current policies and requirements in Guide 7, Item 102 of Regulation S-
K, and Form 20-F, including a requirement that registrants present most 
of the disclosure in tabular format. The proposed requirements would 
also increase the amount and type of individual property information 
that registrants disclose. Much of this new information would be a 
direct consequence of the proposed new requirements to disclose 
material exploration results and mineral resources. Another new item of 
information would be the required comparison of a registrant's mineral 
resources and reserves as of the end of the last fiscal year against 
the mineral resources and reserves as of the end of the preceding 
fiscal year, with an explanation of any change between the two.
    The standardizations of the proposed format for disclosures 
relative to the current disclosure regime should increase the 
effectiveness of the information conveyed to investors. The comparative 
year-to-year disclosure requirement should also help investors better 
understand the risk and prospects of the registrants' mining 
operations.
    We expect that the tabular format of some of the individual 
property requirements could initially result in additional compliance 
costs. However, we expect that ultimately the costs for the disclosure 
of a registrant's mineral resources, mineral reserves and material 
exploration results may decline over time because companies should only 
have to incur the costs to update their systems and procedures to 
collect and structure the required information once, and thereafter 
will only have to update the reported information. The remainder of the 
individual property disclosure requirements should not increase costs 
to registrants since they are substantially similar to those currently 
provided under the existing disclosure regime.\479\
---------------------------------------------------------------------------

    \479\ The costs we consider in this subsection are only the 
costs related to the format of the individual property disclosure 
requirements, as costs related to the proposed expansion of 
information required to be disclosed are discussed in preceding 
sections.
---------------------------------------------------------------------------

    Similar to the above discussed requirement for summary disclosure, 
an alternative to the proposed requirements for individual property 
disclosure would be to require the disclosures in Tables 4 to 8 to be 
made available in XBRL format. This alternative would have the same 
potential benefits and costs as those discussed above in Section 
IV.B.7.i.
iii. Requirements for Technical Report Summaries
    We expect that the proposed technical report summary requirement 
would have the largest impact on registrants' compliance costs since 
currently only registrants from Canada and Australia are subject to a 
similar requirement.\480\ The proposed requirements for the technical 
report summaries are largely consistent with the items of information 
required under the Canadian NI 43-101 standards, with some relevant 
differences. One important difference is that NI 43-101 allows the 
qualified person to include a disclaimer of responsibility if he or she 
relies on a report, opinion, or statement of another expert who is not 
a qualified person in preparing the technical report summary, while the 
proposed requirement would not allow such a disclaimer. The potential 
benefit of not allowing such a disclaimer is that it would give the 
qualified person, as a consenting expert, greater incentive to verify 
information included in the technical report that is provided by 
others. However, the resulting increase in legal liability could also 
raise the cost of hiring a qualified person.\481\
---------------------------------------------------------------------------

    \480\ We estimate that 113 out of the 345 existing mining 
registrants are currently also reporting in Canada or Australia.
    \481\ As discussed in Section II.F.3 above, other differences 
from NI 43-101 in the proposed requirement concern the structure of 
how certain types of information are presented, which we believe 
would enhance the presentation of the information without any 
significant impact on compliance costs relative to NI 43-101.
---------------------------------------------------------------------------

iv. Requirements for Internal Controls Disclosure
    The proposed requirement that a registrant describe the internal 
controls that it uses in the disclosure of its exploration results and 
in its estimates of mineral resources and mineral reserves would align 
the Commission's disclosure regime with the requirements of the 
CRIRSCO-based codes. Current rules and guidance do not address internal 
controls. Commission staff has, on a case-by-case basis when warranted 
by the specific facts and circumstances, requested a brief description 
of the quality control and quality assurance protocols used for 
exploration plans.
    We expect disclosure of the internal controls that a registrant 
uses to improve significantly investors' understanding of the risks 
related to the quality and reliability of a registrant's disclosure of 
exploration results and estimates of mineral resources and

[[Page 41710]]

mineral reserves, and therefore also lead to more efficient investment 
decisions. We also expect the requirement to increase compliance costs 
for registrants. Registrants already disclosing internal controls in 
CRIRSCO jurisdictions or voluntarily providing such disclosures in 
their SEC filings should be largely unaffected by the proposed 
requirements.
8. Conforming Changes to Certain Forms Not Subject to Regulation S-K
i. Form 20-F
    The proposed conforming changes to Form 20-F are intended to ensure 
consistency in the mining disclosures across both domestic registrants 
and foreign private issuers (excluding Canadian 40-F filers). The 
proposed changes would particularly affect Canadian registrants that 
report pursuant to Form 20-F and are currently permitted to provide 
additional mining disclosure under NI 43-101 pursuant to the ``foreign 
or state law'' exception under Guide 7 and the ``foreign law'' 
exception under Form 20-F. The proposed rules would eliminate this 
exception and may thus increase compliance costs for these registrants 
to the extent that, as discussed previously, the proposed disclosure 
requirements differ from NI 43-101.\482\ That said, to the extent that 
these differences in disclosure requirements also provide expected 
incremental benefits, these benefits would mitigate any increase in 
compliance costs.
---------------------------------------------------------------------------

    \482\ Although the disclosure requirements of the proposed rules 
are similar to those in NI 43-101, there are some differences that 
may impose additional costs. For example, the requirements in the 
proposed rules concerning how to determine prices for mineral 
reserve estimates are different from those in NI 43-101. In 
addition, the proposed rules require that the qualified person 
conduct a preliminary evaluation of the relevant modifying factors 
to establish the prospects of economic extraction in estimating 
resources, which NI 43-101 does not.
---------------------------------------------------------------------------

ii. Form 1-A
    The proposed conforming changes to Form 1-A would subject 
Regulation A issuers with material mining operations to the full mining 
disclosure requirements in the proposed subpart 1300 of Regulation S-K. 
Thus, these issuers may incur the benefits and costs of these 
requirements, as previously discussed. Because Regulation A issuers are 
typically smaller companies, the economic considerations discussed 
above about smaller companies would apply to this group of issuers. In 
general, we expect that the proposed rules would benefit Regulation A 
issuers given that smaller companies typically suffer a higher degree 
of information asymmetry between the company and investors, which may 
increase capital costs and lower access to financing. Nevertheless, the 
expected increase in compliance costs from the proposed mining 
disclosures requirements may be of particular importance for mining 
issuers that are likely to consider Regulation A offerings. Under the 
proposed requirements, mining issuers would be able to avoid the costs 
associated with the prescribed technical reports by forgoing disclosure 
of exploration results, mineral resources, and reserves, as defined, 
which would mitigate any negative effect of increased compliance costs 
on the propensity to use a Regulation A offering. Mining issuers may 
also be able to avoid costs by choosing to offer securities under other 
exemptions under the Securities Act, such as Regulation D. However, 
this may put such issuers at a competitive disadvantage relative to 
their peers who are raising capital with the benefit of these 
disclosures.
    One alternative to the proposed conforming changes to Form 1-A 
would be to require the proposed mining disclosures for Tier 2 
offerings only. Because Tier 2 offerings may be larger than Tier 1 
offerings, the relative importance of fixed compliance costs could be 
lower for Tier 2 issuers, and thus the net benefit to Tier 2 issuers 
from the disclosure requirements could potentially be larger. Another 
alternative we considered would be to require disclosure only of the 
information in the proposed summary disclosure requirement discussed in 
Section II.F, including for issuers that only own one material mining 
property. This would lower compliance costs, but would also reduce the 
information to investors about material mining properties.
9. Compliance Costs of Preparing and Filing Forms
    The most significant compliance costs associated with the proposed 
rules for mining disclosure would likely be the costs associated with 
engaging qualified persons and the technical analyses and reports they 
prepare. Registrants would also incur direct compliance costs from the 
proposed rules related to preparing and incorporating the required 
information in relevant Commission forms. For purposes of the Paperwork 
Reduction Act, we analyze these costs in more detail in Section V, but 
for the average firm, we expect an increase of 44.64 internal company 
burden hours and an increase of costs for outside professionals equal 
to $11,975.\483\ As we discuss in Section V, we expect the incremental 
company burden hours and professional costs would be lower than these 
estimates for registrants subject to CRIRSCO-based codes and larger for 
registrants not subject to such codes. Moreover, the incremental burden 
and costs would likely vary with the size and complexity of the 
registrant's mining operations.
---------------------------------------------------------------------------

    \483\ The average increase in internal burden hours and outside 
professional costs are calculated using the estimates of total 
incremental company burden hours (15,400) and total incremental 
professional costs ($4,131,200), as reported in Table 2 of Section 
V.D, supra, and dividing them by the estimated number of total 
annual responses (345).
---------------------------------------------------------------------------

C. Anticipated Impact on Efficiency, Competition, and Capital Formation

    We expect the proposed disclosure requirements to increase the 
amount and quality of disclosed information about registrants' mining 
operations, and thereby to have a positive effect on efficiency and 
capital formation. For example, the proposed rules would require 
registrants with material mining operations to disclose determined 
mineral reserves, mineral resources and material exploration results. 
These proposed requirements would better align the Commission's 
disclosure requirements with the current practices used by mining 
companies to evaluate their projects, thereby reducing information 
asymmetries between registrants and investors about the prospects of 
mining operations. In addition, the qualified person requirement, 
together with detailed requirements for the supporting technical 
studies, should generate higher quality and more consistent 
disclosures, which should reduce any uncertainty surrounding the 
disclosures. In turn, reduced information asymmetries and reduced 
uncertainty about the disclosures would help investors achieve a more 
efficient capital allocation, while reducing the cost of capital and 
enhancing capital formation for registrants.\484\
---------------------------------------------------------------------------

    \484\ The significant risk and negative impact on capital 
formation from uncertainty surrounding mining disclosure is 
illustrated by the evidence in William O. Brown, Jr. and Richard 
C.K. Burdekin, ``Fraud and Financial Markets: The 1997 Collapse of 
the Junior mining Stocks'' (2000), Journal of Economics and 
Business, Volume 52, Issue 3, pp. 277-288. The authors utilize event 
study methodology to analyze the effect on Canadian mining 
companies' stock returns around the revelations in spring 1997 of 
fraudulent disclosures of gold resources by the Canadian mining 
company Bre-X. The study documents that a portfolio of 59 Canadian 
gold mining stocks experienced significantly negative abnormal stock 
returns around the Bre-X fraud revelations. Similarly, the Vancouver 
Composite Index, which at the time was dominated by natural resource 
companies, also experienced significantly negative abnormal returns 
for the same event time period. We note that the Bre-X fraud 
contributed to the development of the Canadian NI 43-101 mining 
disclosure standards.

---------------------------------------------------------------------------

[[Page 41711]]

    In particular, we believe that the proposed requirements for 
disclosure of material exploration results and mineral resources would 
reduce information asymmetries and uncertainty for smaller mining 
registrants, as these registrants tend to have mining properties in 
earlier stages of development with relatively fewer reported mineral 
reserves. As a result, we expect the anticipated positive effects on 
efficiency and capital formation to be relatively larger for smaller 
registrants. However, these effects would only materialize to the 
extent smaller registrants make the required investment in the studies 
that are required to support disclosure in the first place. We 
anticipate that there likely are some smaller registrants who do not 
have access to the liquid funds needed to make that investment.
    Although we expect the overall amount of disclosed information to 
increase under the proposed rules, there may be exceptions. As 
discussed previously, we expect that the proposed disclosure 
requirements would increase the compliance costs for disclosure of 
material exploration results and the currently allowed (on a case-by-
case basis) equivalent of mineral resources (i.e., mineralized 
material). Therefore, despite the anticipated benefits from the 
proposed disclosure requirements, some registrants may find that these 
benefits do not outweigh the compliance costs and reduce what they 
disclose currently.
    The positive effects we expect on efficiency and capital formation 
from the proposed rules would be lower for the registrants that 
currently report in foreign jurisdictions with CRIRSCO-based disclosure 
codes. These registrants to a large degree already provide the proposed 
disclosures. This is particularly the case for Canadian registrants, 
who disclose the information pursuant to NI 43-101 standards in their 
Forms 20-F under the ``foreign or state law'' exception.
    We expect the proposed rules to have some competitive effects. For 
example, there may be reallocation of capital as registrants that 
previously could not disclose mineral resources or could not afford the 
feasibility studies required for disclosure of mineral reserves (but 
could afford pre-feasibility studies) may start to disclose a broader 
range of their business prospects, making it easier for these 
registrants to raise capital and compete with the mining companies that 
already report material mineral resources and reserves. We also 
anticipate that by aligning our disclosure requirements with the 
CRIRSCO-based codes, the proposed rules would improve the 
competitiveness of U.S. securities markets and increase the likelihood 
of prospective registrants listing their securities in the United 
States, while decreasing the likelihood that current registrants would 
exit U.S. markets.\485\ In particular the qualified person requirement 
and associated requirements for the supporting technical studies may 
improve the global competiveness of U.S. registrants because such 
quality assurances have become internationally recognized practice and 
may help signal to market participants that U.S. registrants are able 
to meet the standards codified by the proposed rules.
---------------------------------------------------------------------------

    \485\ There could be an opposite effect in some cases. Among 
foreign private issuers, the registrants not currently reporting in 
foreign jurisdictions based on CRIRSCO standards are most likely to 
experience an increase in compliance costs. If these compliance 
costs become too burdensome, some of these foreign private issuers 
may choose to withdraw from U.S. securities markets. The impact of 
such a potential outcome is limited, however, as we have only 
identified seven (as of December 2015) foreign private issuers that 
are not subject to CRIRSCO reporting standards. Moreover, a company 
that did not want to comply with these or similar disclosure 
standards would only have a limited number of alternative 
jurisdictions to list, none of whose markets are as developed or 
robust as the U.S. or other financial markets that have such 
standards.
---------------------------------------------------------------------------

D. Request for Comment

    We request comment on the costs and benefits described throughout 
this release. We seek estimates of these costs and benefits, as well as 
any costs and benefits not already identified, that may result from the 
adoption of the proposed rules. We also request qualitative feedback on 
the nature of the economic effects, including the benefits and costs, 
we have identified and any benefits and costs we may have overlooked. 
We request comment from the point of view of registrants, investors, 
mining professionals such as geologists and engineers, and other market 
participants. We further seek information that would help us quantify 
or otherwise qualitatively assess the impact of the proposed rules on 
efficiency, competition, and capital formation. In addition, we seek 
information on how any impact on efficiency, competition, and capital 
formation would vary with company size.
    In particular, we request comment on the following:
    124. We seek comment and data on the magnitude of the costs and 
benefits identified as well as any other costs and benefits that may 
result from the adoption of the proposed rules. In addition, we are 
interested in views regarding these costs and benefits for particular 
types of covered registrants, such as smaller registrants or 
registrants currently reporting according to CRIRSCO-based disclosure 
codes.
    125. We seek information that would help us quantify compliance 
costs. In particular, we invite comment from registrants or other 
mining companies that have had experience reporting under any of the 
CRIRSCO-based disclosure codes. For example, what are the costs 
associated with the qualified person requirement? If reporting in 
Canada or Australia, what are the costs associated with producing and 
filing the technical report summaries?
    126. We invite comment on the structure of compliance costs. In 
particular, to what extent are the compliance costs fixed versus 
variable? Are there scale advantages or disadvantages in the compliance 
costs, both in terms of project size or company size?
    127. Are our estimates of the difference in costs of a pre-
feasibility study relative to a feasibility study reasonable? If not, 
what would be more reasonable estimates of the difference in costs?
    128. We also seek comment on the alternatives to the proposed rules 
discussed in this section, and to the costs and benefits of each 
alternative. Are there any other alternatives that we should consider 
in lieu of the proposed rules? If so, what are those alternatives and 
what are their expected costs and benefits?
    129. We are interested in comments and data related to any 
potential competitive effects from the proposed rules. In particular, 
we are interested in evidence and views on the current global 
competitive situation of U.S. mining registrants as well as the 
attractiveness of U.S. securities markets for foreign mining companies. 
To what extent does the current mining disclosure regime affect this 
competitive situation, if at all? Would the proposed rules improve the 
global competitiveness of U.S. mining registrants and securities 
markets? If so, how?

V. Paperwork Reduction Act

A. Background

    Certain provisions of the proposed rules contain ``collection of 
information'' requirements within the meaning of the Paperwork 
Reduction

[[Page 41712]]

Act of 1995 (``PRA'').\486\ The Commission is submitting the proposed 
rules to the Office of Management and Budget (``OMB'') for review in 
accordance with the PRA.\487\ The titles for the collections of 
information are:
---------------------------------------------------------------------------

    \486\ 44 U.S.C. 3501 et seq.
    \487\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

     ``Regulation S-K'' (OMB Control No. 3235-007); \488\
---------------------------------------------------------------------------

    \488\ The paperwork burden from Regulation S-K is imposed 
through the forms that are subject to the requirements in that 
regulation and is reflected in the analysis of those forms. To avoid 
a Paperwork Reduction Act inventory reflecting duplicative burdens 
and for administrative convenience, we assign a one-hour burden to 
Regulation S-K.
---------------------------------------------------------------------------

     ``Form S-1'' (OMB Control No. 3235-0065);
     ``Form S-4'' (OMB Control Number 3235-0324);
     ``Form F-1'' (OMB Control Number 3235-0258);
     ``Form F-4'' (OMB Control Number 3235-0325);
     ``Form 10'' (OMB Control No. 3235-0064);
     ``Form 10-K'' (OMB Control No. 3235-0063);
     ``Form 20-F'' (OMB Control No. 3235-0063); and
     Regulation A (Form 1-A) (OMB Control Number 3235-0286).
    We adopted Regulation S-K and these forms pursuant to the 
Securities Act or the Exchange Act. Regulation S-K and the forms, other 
than Form 1-A, set forth the disclosure requirements for annual reports 
and registration statements that are prepared by registrants to provide 
investors with the information they need to make informed investment 
decisions in registered offerings and in secondary market transactions. 
We adopted Regulation A to provide an exemption from registration under 
the Securities Act for offerings that satisfy certain conditions, such 
as filing an offering statement with the Commission on Form 1-A, 
limiting the dollar amount of the offering and, in certain instances, 
filing ongoing reports with the Commission.
    The hours and costs associated with preparing and filing the forms 
constitute reporting and cost burdens imposed by each collection of 
information. An agency may not conduct or sponsor, and a person is not 
required to comply with, a collection of information unless it displays 
a currently valid control number. Compliance with the proposed rules 
would be mandatory. Responses to the information collections would not 
be kept confidential, and there would be no mandatory retention period 
for the information disclosed.

B. Summary of Collection of Information Requirements

    The proposed rules would require a registrant with material mining 
operations to disclose its determined mineral resources, mineral 
reserves and material exploration results in Securities Act 
registration statements filed on Forms S-1, S-4, F-1 and F-4, in 
Exchange Act registration statements on Forms 10 and 20-F, in Exchange 
Act annual reports on Forms 10-K and 20-F,\489\ and in Regulation A 
offering statements filed on Form 1-A. The proposed rules would further 
require that such a registrant base its disclosure regarding mineral 
resources, mineral reserves and material exploration results in SEC 
filings on information and supporting documentation by a qualified 
person. In addition, the proposed rules would require a registrant with 
material mining operations to file as an exhibit to its Securities Act 
registration statement, Exchange Act registration statement or report, 
or its Form 1-A offering statement, a technical report summary prepared 
by the qualified person for each material property that summarizes the 
information and supporting documentation forming the basis of the 
registrant's disclosure in the SEC form. The proposed rules would 
require the filing of the technical report summary when the registrant 
first reports mineral resources, mineral reserves or material 
exploration results or when it reports a material change in a prior 
disclosure of resources, reserves or exploration results.
---------------------------------------------------------------------------

    \489\ Form 20-F is the form used by a foreign private issuer to 
file either a registration statement or annual report under the 
Exchange Act. Because the proposed rule amendments would impose the 
same substantive requirements for a registration statement and 
annual report filed under Form 20-F, we have not separately 
allocated the estimated reporting and cost burdens for a Form 20-F 
registration statement and Form 20-F annual report.
---------------------------------------------------------------------------

    The Commission's existing disclosure regime for mining registrants 
precludes the disclosure of non-reserves, such as mineral resources, 
unless such disclosure is required by foreign or state law.\490\ In 
addition, the existing regime permits, but does not require, the 
disclosure of material exploration results. The existing regime also 
does not currently require a registrant to base its mining disclosure 
on information and supporting documentation of a qualified person.
---------------------------------------------------------------------------

    \490\ Because only Canada has adopted its mining code as a 
matter of law, the disclosure of non-reserves in SEC filings has 
been limited to Canadian registrants.
---------------------------------------------------------------------------

    Accordingly, we expect the proposed rules would cause an increase 
in the reporting and cost burdens for each collection of information. 
The additional requirements imposed by the proposed rules would, 
however, be similar to requirements under foreign (CRIRSCO-based) 
mining codes. As such, we expect the increase in reporting and cost 
burdens to be less for those registrants that are already subject to 
the CRIRSCO standards. Nevertheless, because there are differences 
between the proposed rules' requirements and those under the CRIRSCO-
based codes, we expect there would be some increase in reporting and 
cost burdens even for those registrants already subject to foreign 
mining code requirements.\491\
---------------------------------------------------------------------------

    \491\ For example, unlike the CRIRSCO-based codes, the proposed 
rules would require a particular type of technical study, an 
``initial assessment,'' to support the disclosure of mineral 
resources in SEC filings. See section II.E.3, supra.
---------------------------------------------------------------------------

C. Estimate of Potentially Affected Registrants

    We estimate the number of registrants potentially affected by the 
proposed rules to be 345.\492\ Of these registrants, we estimate that 
129 are already subject to the disclosure requirements under one or 
more CRIRSCO-based codes and, therefore, likely would incur a lesser 
increase in reporting and cost burdens to comply with the proposed 
rules' requirements.\493\ Accordingly, we estimate that 216 registrants 
would bear the full paperwork burden of the proposed rules.
---------------------------------------------------------------------------

    \492\ We have based this estimate on the number of registrants 
with mining operations that filed the above described Securities Act 
and Exchange Act forms from January 2014 through December 2015.
    \493\ Most of these registrants are subject to the disclosure 
requirements in Canada's NI 43-101.
---------------------------------------------------------------------------

    The following table summarizes the number of potentially affected 
registrants by the particular form expected to be filed and whether the 
registrant is subject to CRIRSCO-based code requirements in addition to 
the proposed rules.

[[Page 41713]]



                                             PRA Table 1--Estimated Number of Affected Registrants per Form
--------------------------------------------------------------------------------------------------------------------------------------------------------
                         Form                             S-1        S-4        F-1        F-4         10        10-K       20-F       1-A     All Forms
--------------------------------------------------------------------------------------------------------------------------------------------------------
# Affected Registrants Subject to CRIRSCO                      7          3          1          1          0         46         70          1        129
 Requirements........................................
# Affected Registrants Not Subject to CRIRSCO                 29          6          0          0          5        169          7          0        216
 Requirements........................................
                                                      --------------------------------------------------------------------------------------------------
    Total # Affected Registrants.....................         36          9          1          1          5        215         77          1        345
--------------------------------------------------------------------------------------------------------------------------------------------------------

D. Estimate of Reporting and Cost Burdens

    We have estimated the reporting and cost burdens of the proposed 
rules by estimating the average number of hours it would take a 
registrant to prepare, review and file the disclosure required by the 
proposed rules for each collection of information. In deriving our 
estimates, we recognize that the burdens would likely vary among 
individual registrants based on a number of factors, including the size 
and complexity of their mining operations. The estimates represent the 
average burden for all registrants, both large and small.
    We believe that the resulting increase in reporting and cost 
burdens would be substantially the same for each collection of 
information since the proposed rules would require substantially the 
same disclosure for a Securities Act registration statement or 
Regulation A offering statement as they would for an Exchange Act 
registration statement or report. The sole difference between the 
proposed rules' effect on Securities Act registrants and Form 1-A 
issuers, on the one hand, and Exchange Act registrants, on the other, 
is that a Securities Act registrant and a Regulation A issuer would be 
required to obtain and file as an exhibit the written consent of each 
qualified person whose information and supporting documentation as an 
expert provide the basis for the disclosure required under the 
amendments.\494\ To account for this difference, we have allocated one 
extra hour to the reporting burdens estimated for the Securities Act 
registration statement forms and Regulation A's Form 1-A.
---------------------------------------------------------------------------

    \494\ A Securities Act registrant must file the written consent 
of an expert upon which it has relied pursuant to Securities Act 
Rule 436 (17 CFR 230.436). A Regulation A issuer's obligation to 
file the written consent of an expert is based on Item 17(11)(a) of 
Form 1-A.
---------------------------------------------------------------------------

    We estimate that the proposed rules would cause a registrant that 
is not already subject to CRIRSCO requirements to incur an increase of 
96 hours in the reporting burden for each Securities Act registration 
statement (Forms S-1, S-4, F-1, and F-4), and an increase of 95 hours 
in the reporting burden for each Exchange Act registration statement or 
annual report (Forms 10, 10-K and 20-F.) For a registrant that is 
subject to the CRIRSCO requirements, we estimate that the proposed 
rules would cause an increase of 41 hours in the reporting burden for 
Securities Act registration statements and Form 1-A offering 
statements, and an increase of 40 hours in the reporting burden for 
Exchange Act registration statements and annual reports.
    We have based our estimated burden hours and costs under the 
proposed rules on an assessment by the Commission's staff mining 
engineers of the work required to prepare the required information for 
disclosure. In particular, our estimates have been based on the staff 
engineers' assessment of similar reporting requirements under CRIRSCO 
standards (especially Canada's NI 43-101 and Australia's JORC).\495\ 
The engineers' estimates of time and costs for NI 43-101 and JORC 
reporting were adjusted for the differences between the proposed rules 
and those standards.
---------------------------------------------------------------------------

    \495\ These estimates include the burden associated with 
preparing a technical report summary to support the disclosure of 
mineral resources, mineral reserves and material exploration 
results. For purposes of this PRA analysis, we estimate that 
registrants subject to the CRIRSCO standards would each incur 11 
hours, and registrants not subject to those standards would each 
incur 50 hours, to prepare the required technical report summary.
---------------------------------------------------------------------------

    The following tables summarize, respectively, the estimated 
incremental and total reporting costs and burdens resulting from the 
proposed rules. When determining these estimates, for all forms other 
than Form 10-K and Form 1-A, we have assumed that 25% of the burden of 
preparation is carried by the registrant internally and 75% of the 
burden of preparation is carried by outside professionals retained by 
the registrant at an average cost of $400 per hour.\496\ For Form 10-K 
and Form 1-A, we have assumed that 75% of the burden of preparation is 
carried by the registrant internally and 25% of the burden of 
preparation is carried by outside professionals at an average cost of 
$400 per hour. The portion of the burden carried by outside 
professionals is reflected as a cost, while the portion of the burden 
carried by the registrant internally is reflected in hours.
---------------------------------------------------------------------------

    \496\ We recognize that the costs of retaining outside 
professionals may vary depending on the nature of the professional 
services, but for purposes of this PRA analysis we estimate that 
such costs would be an average of $400 per hour. This is the rate we 
typically estimate for outside services used in connection with 
public company reporting.
---------------------------------------------------------------------------

    We have determined the estimated total incremental registrant 
burden hours for each form under the proposed rules by first 
determining the hour burden per registrant response estimated as a 
weighted average of the burden hours of registrants subject to and 
those not subject to the CRIRSCO requirements.\497\ We then multiplied 
this average burden hour per response by the total number of responses 
for each form estimated to occur annually. We similarly estimated the 
incremental professional costs for each form under the proposed rules 
by first estimating the incremental professional costs as a weighted 
average of the incremental professional costs estimated to be incurred 
by registrants subject and not subject to the CRIRSCO requirements. We 
then multiplied the average incremental professional costs by the total 
number of annual responses estimated to occur for each form.\498\
---------------------------------------------------------------------------

    \497\ For example, we determined the estimated incremental 
burden hours for Form S-1 as follows: 41 hours x 0.25 = 10.25 
internal burden hours for CRIRSCO filers; 10.25 hours x 7 = 71.75 
total incremental hours for CRIRSCO filers. 96 hours x 0.25 = 24 
internal burden hours for non-CRIRSCO filers; 24 hours x 29 = 696 
total incremental burden hours for non-CRIRSCO filers. 71.75 hours + 
696 hours = 767.75 total internal hours (or 768 hours rounded to the 
nearest whole number). 768 hours/36 = 21.33 avg. incremental burden 
hours.
    \498\ For example, we determined the estimated incremental 
professional costs for Form S-1 as follows: 41 hours x 0.75 = 30.75 
outside hours for CRIRSCO filers; 30.75 hours x 7 = 215.25 total 
outside hours for CRIRSCO filers. 96 hours x 0.75 = 72 outside hours 
for non-CRIRSCO filers; 72 hours x 29 = 2088 total outside hours for 
non-CRIRSCO filers. 215.25 hours + 2088 hours = 2303.25 total 
outside hours. 2303.25 hours x $400 = $921,300 total incremental 
professional costs.
---------------------------------------------------------------------------

    Based on these calculations, as set forth below, we estimate that 
the total number of incremental burden hours for all forms resulting 
from complying with the proposed rules is 15,400 burden hours. We 
further estimate that the

[[Page 41714]]

resulting total incremental professional costs for all forms under the 
proposed rules is $4,131,200.\499\
---------------------------------------------------------------------------

    \499\ The total incremental burden hours and total incremental 
professional costs are rounded to the nearest whole number.

                  PRA Table 2--Estimated Incremental Burden and Costs Under the Proposed Rules
----------------------------------------------------------------------------------------------------------------
                                                                       Total
                                     Number of                      incremental     Incremental        Total
                                      annual        Hour burden     registrant     professional     incremental
                                     responses     per response    burden  hours       costs       professional
                                                                         *                            costs *
                                             (A)             (B)     (C) = (A) x             (D)     (E) = (A) x
                                                                             (B)                             (D)
----------------------------------------------------------------------------------------------------------------
Form S-1........................              36           21.33             768      $25,591.67        $921,300
Form S-4........................               9           19.42             175          23,300         209,700
Form F-1........................               1           10.25              10          12,300          12,300
Form F-4........................               1           10.25              10          12,300          12,300
Form 10.........................               5           23.75             119          28,500         142,500
Form 10-K.......................             215           62.42          13,421        8,323.26       1,789,500
Form 20-F.......................              77           11.25             866          13,500       1,039,500
Regulation A (Form 1-A).........               1           30.75              31           4,100           4,100
                                 -------------------------------------------------------------------------------
    Total.......................             345  ..............          15,400  ..............       4,131,200
----------------------------------------------------------------------------------------------------------------
* Rounded to nearest whole number.

    We have determined the estimated total burden of complying with the 
proposed rules for each form by adding the above described estimated 
incremental company burden hours to the current burden hours estimated 
for each form. We have similarly determined the estimated total 
professional costs under the proposed rules for each form by adding the 
estimated total incremental professional costs to the current 
professional costs estimated for each form. Based on these 
calculations, as summarized below, we estimate that, as a result of the 
proposed rules, the estimated annual burden for all forms would 
increase to 13,753,285 hours, compared to the current annual estimate 
of 13,737,885 hours. We further estimate that the proposed rules would 
result in estimated annual professional costs for all forms of 
$3,329,079,082, compared to the current annual estimate of 
$3,324,947,882.

                                         PRA Table 3--Estimated Total Burden and Costs Under the Proposed Rules
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                            Current    Proposed     Current    Increase    Proposed        Current        Increase in       Proposed
                                            annual      annual      burden     in burden    burden       professional    professional     professional
                                           responses   responses     hours       hours       hours          costs            costs           costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form S-1................................         901         901     219,015         768     219,783       $262,818,096     $921,300        $263,739,396
Form S-4................................         619         619     634,425         175     634,600        761,310,576      209,700         761,520,276
Form F-1................................          63          63      28,462          10      28,472         34,154,568       12,300          34,166,868
Form F-4................................          68          68      24,769          10      24,779         29,722,800       12,300          29,735,100
Form 10.................................         238         238      12,805         119      12,924         15,366,042      142,500          15,508,542
Form 10-K...............................       8,137       8,137  12,198,095      13,421  12,211,515      1,627,400,000    1,789,500       1,629,189,500
Form 20-F...............................         725         725     479,501         866     480,367        575,400,600    1,039,500         576,440,100
Reg. A..................................         250         250     140,813          31     140,844         18,775,200        4,100          18,779,400
(Form 1-A)..............................
                                         ---------------------------------------------------------------------------------------------------------------
Total...................................      11,001      11,001  13,737,885      15,400  13,753,285      3,324,947,882    4,131,200       3,329,079,082
--------------------------------------------------------------------------------------------------------------------------------------------------------

E. Request for Comments

    We request comments in order to evaluate: (1) Whether the proposed 
collections of information are necessary for the proper performance of 
the functions of the agency, including whether the information would 
have practical utility; (2) the accuracy of our estimate of the burden 
of each proposed collection of information; (3) whether there are ways 
to enhance the quality, utility, and clarity of the information to be 
collected; (4) whether there are ways to minimize the burden of the 
collections of information on those who are to respond, including 
through the use of automated collection techniques or other forms of 
information technology; and (5) whether the proposed rules would have 
any effects on any other collections of information not previously 
identified in this section.\500\
---------------------------------------------------------------------------

    \500\ We request comment pursuant to 44 U.S.C. 3506(c)(2)(B).
---------------------------------------------------------------------------

    Any member of the public may direct to us any comments about the 
accuracy of these burden estimates and any suggestions for reducing 
these burdens. Persons submitting comments on the collection of 
information requirements should direct the comments to the Office of 
Management and Budget, Attention: Desk Officer for the Securities and 
Exchange Commission, Office of Information and Regulatory Affairs, 
Washington, DC 20503, and should send a copy to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE.,

[[Page 41715]]

Washington, DC 20549-1090, with reference to File No. S7-10-16. 
Requests for materials submitted to OMB by the Commission with regard 
to these collections of information should be in writing, refer to File 
No. S7-10-16, and be submitted to the Securities and Exchange 
Commission, Office of FOIA Services, 100 F Street NE., Washington, DC 
20549-2736. OMB is required to make a decision concerning the 
collection of information between 30 and 60 days after publication of 
this release. Consequently, a comment to OMB is best assured of having 
its full effect if OMB receives it within 30 days of publication.

VI. Initial Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (``RFA'') \501\ requires the 
Commission, in promulgating rules under Section 553 of the 
Administrative Procedures Act,\502\ to consider the impact of those 
rules on small entities. Section 603(a) of the RFA \503\ generally 
requires the Commission to undertake a regulatory flexibility analysis 
of all proposed rules.
---------------------------------------------------------------------------

    \501\ 5 U.S.C. 601 et seq.
    \502\ 5 U.S.C. 553.
    \503\ 5 U.S.C. 603(a).
---------------------------------------------------------------------------

A. Reasons For, and Objectives of, the Proposed Action

    The proposed rules are intended to modernize the Commission's 
mining disclosure requirements and policies by conforming them to 
current industry and global regulatory practices and standards. In so 
doing, the proposed rules seek to provide investors with a more 
comprehensive understanding of a registrant's mining operations, which 
should help them make more informed investment decisions. As noted 
above, the proposed rules would:
     provide a clear and consistent standard for when 
registrants with mining operations are required to provide the 
applicable mining disclosures;
     consolidate current mining disclosure requirements and 
standards and related Commission and staff guidance;
     require the disclosure of determined mineral resources and 
material exploration results; and
     require that a registrant's disclosure of exploration 
results, mineral resources or mineral reserves be based upon and fairly 
reflect information and supporting documentation prepared by a mining 
industry professional having the requisite level of expertise.

B. Legal Basis

    We are proposing the rule amendments pursuant to sections 3(b), 7, 
10, 19(a), and 28 of the Securities Act and sections 3(b), 12, 13, 
15(d), 23(a), and 36(a) of the Exchange Act.

C. Small Entities Subject to the Proposed Rule Amendments

    The proposed rules would affect small entities that have, or for 
which it is probable that they will have, material mining operations, 
and which file registration statements under Section 6 of the 
Securities Act or Section 12 of the Exchange Act, and reports under 
Section 13(a) or 15(d) of the Exchange Act. For purposes of the RFA, 
under our rules, an issuer, other than an investment company, is a 
``small business'' or ``small organization'' if it has total assets of 
$5 million or less as of the end of its most recent fiscal year and is 
engaged or proposing to engage in an offering of securities that does 
not exceed $5 million.\504\ From staff review of Securities Act and 
Exchange Act filings made by registrants with mining operations from 
January 2014 through December 2015, we estimate that there are 
approximately 176 issuers that may be considered small entities.
---------------------------------------------------------------------------

    \504\ See Securities Act Rule 157 (17 CFR 230.157); and Exchange 
Act Rule 0-10(a) (17 CFR 240.0-10(a)).
---------------------------------------------------------------------------

D. Reporting, Recordkeeping, and Other Compliance Requirements

    As described in greater detail above, the proposed rules would add 
to the Securities Act and Exchange Act disclosure requirements of 
registrants, including small entities, with material mining operations 
by requiring:
     The disclosure of determined mineral resources and 
material exploration results in addition to mineral reserves;
     the disclosure of exploration results, mineral resources 
and mineral reserves in SEC filings to be based on and accurately 
reflect information and supporting documentation prepared by a 
qualified person; and
     the filing of a technical report summary prepared by a 
qualified person for each material property for certain SEC filings.
    The proposed rules would also codify certain existing disclosure 
policies for registrants with material mining operations, including 
small entities. The same mining disclosure requirements would apply to 
both U.S. and foreign registrants.

E. Duplicative, Overlapping or Conflicting Federal Rules

    As noted above, the proposed rules would generally establish new 
mining disclosure requirements that we believe would not duplicate or 
overlap with other federal rules. The proposed rules would consolidate 
all of the Commission's mining disclosure requirements. The proposed 
rules would further harmonize certain existing disclosure requirements 
and policies, including the disclosure standard for mining disclosure. 
We believe that this consolidation would help a mining registrant, 
including a small entity, comply with its disclosure obligations under 
the Securities Act and Exchange Act, which could mitigate its reporting 
burden. We do not believe that the proposed rules would conflict with 
other federal rules.

F. Significant Alternatives

    As noted above, we considered a number of alternatives to the 
proposed rules. In considering these alternatives, we sought to 
accomplish our stated objectives, while minimizing any significant 
economic impact on small entities. In connection with the proposed 
rules, we considered the following:
     Establishing different compliance or reporting 
requirements or timetables that take into account the resources 
available to small entities;
     Clarifying, consolidating or simplifying compliance and 
reporting requirements under the rules for small entities;
     Use of performance rather than design standards; and
     Exempting small entities from all or part of the proposed 
rules.
    Neither the current mining disclosure requirements nor the proposed 
rules exempt or treat differently a small entity with material mining 
operations. Providing an exemption for, or imposing less extensive 
disclosure requirements on, small entities with material mining 
operations would likely increase the risk of inaccurate disclosure 
concerning those entities' mineral resources, mineral reserves and 
material exploration results, to the detriment of investors. Moreover, 
as noted above, a primary goal of the proposed rules is generally to 
align the Commission's mining disclosure regime with the standards that 
have developed under the foreign (CRIRSCO-based) codes so that 
investors would have a more complete understanding of a registrant's 
mining operations. Those codes do not provide for an exemption for 
small entities or otherwise treat such entities

[[Page 41716]]

differently. Therefore, we believe it would be inappropriate for our 
rules to provide an exemption for, or otherwise treat differently, 
small entities with material mining operations. We also note that, 
given that the majority of mining registrants are small entities, 
exempting them from the proposed rules would effectively disapply the 
Commission's mining disclosure regime to most of the companies for 
which such disclosure would be potentially beneficial.\505\
---------------------------------------------------------------------------

    \505\ See Section IV.B.3., supra.
---------------------------------------------------------------------------

    As noted above, the proposed rules would consolidate existing 
mining disclosure rules and policies and thereby facilitate compliance 
for all registrants, including small entities. We have used design 
rather than performance standards in connection with the proposed rules 
because, based on our past experience, we believe the proposed rules 
would be more beneficial to investors if there were specific disclosure 
requirements that were uniform for all registrants with material mining 
operations. The specific disclosure requirements in the proposed rules 
are intended to promote consistent and comparable disclosure among all 
such registrants.

G. Request for Comment

    We encourage the submission of comments with respect to any aspect 
of this Initial Regulatory Flexibility Analysis. In particular, we 
request comments regarding:
     How the proposed rule amendments can achieve their 
objective while lowering the burden on small entities;
     the number of small entity companies that may be affected 
by the proposed amendments;
     the existence or nature of the potential impact of the 
proposed amendments on small entity companies discussed in the 
analysis; and
     how to quantify the impact of the proposed amendments.
    Respondents are asked to describe the nature of any impact and 
provide empirical data supporting the extent of the impact. We will 
consider such comments in the preparation of the Final Regulatory 
Flexibility Analysis, if the proposed rule amendments are adopted, and 
will place those comments in the same public file as comments on the 
proposed amendments themselves.

VII. Small Business Regulatory Enforcement Fairness Act

    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of 1996,\506\ a rule is ``major'' if it has resulted, or is likely 
to result in:
---------------------------------------------------------------------------

    \506\ Pub. L. 104-121, Title II, 110 Stat. 857 (1996).
---------------------------------------------------------------------------

     An annual effect on the U.S. economy of $100 million or 
more;
     a major increase in costs or prices for consumers or 
individual industries; or
     significant adverse effects on competition, investment, or 
innovation.
    We request comment and empirical data on whether our proposal would 
be a ``major rule'' for purposes of the Small Business Regulatory 
Enforcement Fairness Act.

VIII. Statutory Authority

    We are proposing the amendments contained in this document pursuant 
to Sections 3(b), 7, 10, 19(a), and 28 of the Securities Act and 
Sections 3(b), 12, 13, 15(d), 23(a), and 36(a) of the Exchange Act.

List of Subjects

17 CFR Parts 229 and 239

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 249

    Brokers, Reporting and recordkeeping requirements, Securities.
    In accordance with the foregoing, title 17, chapter II of the Code 
of Federal Regulations is proposed to be amended as follows:

PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES 
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND 
CONSERVATION ACT OF 1975--REGULATION S-K

0
1. The authority citation for part 229 continues to read as follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 
77nnn, 77sss, 78c, 78i, 78j, 78j-3, 78l, 78m, 78n, 78n-1, 78o, 78u-
5, 78w, 78ll, 78 mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-
31(c), 80a-37, 80a-38(a), 80a-39, 80b-11 and 7201 et seq.; 18 U.S.C. 
1350; Sec. 953(b) Pub. L. 111-203, 124 Stat. 1904; Sec. 102(a)(3) 
Pub. L. 112-106, 126 Stat. 309; and Sec. 84001, Pub. L. 114-94, 129 
Stat. 1312.

0
2. Amend Sec.  229.102 by:
0
a. Removing ``, mines'' in the introductory text;
0
b. Removing the heading ``Instructions to Item 102:'';
0
c. Redesignating Instructions 1, 2, 3, and 4 to Item 102 as 
``Instruction 1 to Item 102:'', ``Instruction 2 to Item 102:'', 
``Instruction 3 to Item 102:'', and ``Instruction 4 to Item 102:'', 
respectively;
0
d. Revising newly redesignated Instruction 3 to Item 102;
0
e. Removing instructions 5 and 7 to Item 102;
0
f. Redesignating Instruction 6 as ``Instruction 5 to Item 102:'' and 
Instructions 8 and 9 as ``Instruction 6 to Item 102:'' and 
``Instruction 7 to Item 102:'', respectively.
    The revision reads as follows:


Sec.  229.102  (Item 102) Description of property.

* * * * *
    Instruction 3 to Item 102: Registrants engaged in mining operations 
must refer to and, if required, provide the disclosure under subpart 
229.1300 of Regulation S-K (Sec. Sec.  229.1301 through 229.1305), in 
addition to any disclosure required by this section.
* * * * *
0
3. Amend Sec.  229.601 by:
0
a. Revising the column headings and adding entry (96) to the exhibit 
table in paragraph (a);
0
b. Redesignating paragraphs (b)(95)(1) through (3) as paragraphs 
(b)(95)(i) through (iii), respectively; and
0
c. Adding paragraph (b)(96).
    The revisions and additions read as follows:


Sec.  229.601  (Item 601) Exhibits.

    (a) * * *

Exhibit Table

* * * * *

                                                                                          Exhibit Table
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                Exchange act forms
              Securities act forms              ------------------------------------------------------------------------------------------------------------------------------------------------
                                                   S-1      S-3      SF-1     SF-3   S-4 \1\    S-8      S-11     F-1      F-3    F-4 \1\     10    8-K \2\    10-D     10-Q     10-K    ABS-EE
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                                                                          * * * * * * *
(96) Technical report summary \7\..............       X        X   .......  .......       X   .......  .......       X        X        X        X   .......  .......  .......       X   ........

[[Page 41717]]

 
 
                                                                                          * * * * * * *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ An exhibit need not be provided about a company if: (1) With respect to such company an election has been made under Form S-4 or F-4 to provide information about such company at a level
  prescribed by Form S-3 or F-3; and (2) the form, the level of which has been elected under Form S-4 or F-4, would not require such company to provide such exhibit if it were registering a
  primary offering.
\2\ A Form 8-K exhibit is required only if relevant to the subject matter reported on the Form 8-K report. For example, if the Form 8-K pertains to the departure of a director, only the
  exhibit described in paragraph (b)(17) of this section need be filed. A required exhibit may be incorporated by reference from a previous filing.
* * *
\7\ If required pursuant to Item 1302 of Regulation S-K.

* * * * *
    (b) * * *
    (96) Technical report summary. (i) A registrant that, pursuant to 
subpart 229.1300 of Regulation S-K (Sec. Sec.  229.1301 through 
229.1305), discloses information concerning its mineral resources, 
mineral reserves or material exploration results must file a technical 
report summary by a qualified person that, for each material property, 
identifies and summarizes the scientific and technical information and 
conclusions reached concerning mineral exploration results, initial 
assessments used to support disclosure of mineral resources, and 
preliminary or final feasibility studies used to support disclosure of 
mineral reserves. Pursuant to Sec.  229.1302(b), a registrant must file 
the technical report summary as an exhibit to its Securities Act 
registration statement or Exchange Act registration statement or report 
when disclosing for the first time mineral resources, mineral reserves 
or material exploration results or when there is a material change in 
the mineral resources, mineral reserves or exploration results from the 
last technical report summary filed for the property.
    (ii) The qualified person must sign and date the technical report 
summary. The qualified person's signature must comply with 17 CFR 
230.402(e) or 17 CFR 240.12b-11(d).
    (iii) The technical report summary must not include large amounts 
of technical or other project data, either in the report or as 
appendices to the report. The qualified person must draft the summary 
to conform, to the extent practicable, with the plain English 
principles set forth in 17 CFR 230.421 or 17 CFR 240.13a-20.
    (iv)(A) A technical report summary that reports the results of a 
preliminary or final feasibility study must provide all of the 
information specified in paragraph (b)(96)(iv)(B) of this section. A 
technical report summary that reports the results of an initial 
assessment must, at a minimum, provide the information specified in 
paragraphs (b)(96)(iv)(B)(1) through (13) and (b)(96)(iv)(B)(22) 
through (26) of this section, and may also include the information 
specified in paragraph (b)(96)(iv)(B)(21) of this section. A technical 
report summary that reports material exploration results must, at a 
minimum, provide the information specified in paragraphs 
(b)(96)(iv)(B)(1) through (11) and (b)(96)(iv)(B)(22) through (26) of 
this section.
    (B) A qualified person must include the following information in 
the technical report summary, as required by paragraph (b)(96)(iv)(A) 
of this section.
    (1) Executive summary. Briefly summarize the most significant 
information in the technical report summary, including property 
description (including mineral rights) and ownership, geology and 
mineralization, the status of exploration, development and operations, 
mineral resource and mineral reserve estimates, summary capital and 
operating cost estimates, permitting requirements, and the qualified 
person's conclusions and recommendations. The executive summary must be 
brief and should not contain all of the detailed information in the 
technical support summary.
    (2) Introduction. Disclose:
    (i) The registrant for whom the technical report summary was 
prepared;
    (ii) The terms of reference and purpose for which the technical 
report summary was prepared;
    (iii) The sources of information and data contained in the 
technical report summary or used in its preparation, with citations if 
applicable; and
    (iv) The details of the personal inspection on the property by each 
qualified person or, if applicable, the reason why a personal 
inspection has not been completed.
    Instruction to paragraph (b)(96)(iv)(B)(2): The qualified person 
must state whether the technical report summary's purpose was to report 
mineral resources, mineral reserves or material exploration results. 
The qualified person must also state, when applicable, that the 
technical report summary updates a previously filed technical report 
summary. When filing an update, the qualified person must identify the 
previous technical report summary by name and date.
    (3) Property description. Describe:
    (i) The location of the property, accurate to within one mile, 
using an easily recognizable coordinate system. The qualified person 
must provide appropriate maps, with proper engineering detail (such as 
scale, orientation, and titles) to portray the location of the 
property. Such maps must be legible on the page when printed;
    (ii) The area of the property;
    (iii) The name or number of each title, claim, mineral right, lease 
or option under which the registrant and its subsidiaries have or will 
have the right to hold or operate the property. If held by leases or 
options, the registrant must provide the expiration dates of such 
leases or options and associated payments;
    (iv) The mineral rights, and how such rights have been obtained at 
this location, indicating any conditions that the registrant must meet 
in order to obtain or retain the property;
    (v) Any significant encumbrances to the property, including current 
and future permitting requirements and associated timelines, permit 
conditions, and violations and fines; and
    (vi) Any other significant factors and risks that may affect 
access, title, or the right or ability to perform work on the property.
    Instruction to paragraph (b)(96)(iv)(B)(3): If the registrant holds 
a royalty or similar interest in the property, the information in 
paragraph (b)(96)(iv)(B)(3) of this section must be provided for the 
property that is owned or operated by a party other than the 
registrant. In this event, for example, the report must address the 
documents under which the owner or operator holds or operates the 
property, the mineral rights held by the owner or operator, conditions 
required to be met by the owner or operator, significant encumbrances 
and significant factors

[[Page 41718]]

and risks relating to the property or work on the property.
    (4) Accessibility, climate, local resources, infrastructure, and 
physiography. Describe:
    (i) The topography, elevation, and vegetation;
    (ii) The means of access to the property, including highways, 
towns, rivers, railroads, and airports;
    (iii) The climate and the length of the operating season, as 
applicable; and
    (iv) The availability of and required infrastructure, including 
sources of water, electricity, personnel, and supplies.
    (5) History. Describe:
    (i) Previous operations, including the names of previous operators, 
insofar as known; and
    (ii) The type, amount, quantity, and general results of exploration 
and development work undertaken by any previous owners or operators.
    (6) Geological setting, mineralization, and deposit. Describe 
briefly:
    (i) The regional, local, and property geology;
    (ii) The significant mineralized zones encountered on the property, 
including a summary of the surrounding rock types, relevant geological 
controls, and the length, width, depth, and continuity of the 
mineralization, together with a description of the type, character, and 
distribution of the mineralization; and
    (iii) Each mineral deposit type that is the subject of 
investigation or exploration together with the geological model or 
concepts being applied in the investigation or forming the basis of 
exploration program.
    Instruction to paragraph (b)(96)(iv)(B)(6): The qualified person 
must include at least one stratigraphic column and one cross-section of 
the local geology to meet the requirements of this paragraph.
    (7) Hydrogeology. Describe:
    (i) The nature and quality of the sampling methods used to acquire 
data on surface and groundwater parameters;
    (ii) The type and appropriateness of laboratory techniques used to 
test for groundwater flow parameters such as permeability. Include 
discussions of the quality control and quality assurance procedures;
    (iii) Results of laboratory testing and the qualified person's 
interpretation, including any material assumptions. The interpretation 
must include descriptions of permeable zones or aquifers, flow rates, 
in-situ saturation, recharge rates and water balance; and
    (iv) The groundwater models used to characterize aquifers, 
including material assumptions used in the modeling.
    (8) Geotechnical data, testing, and analysis. Describe:
    (i) The nature and quality of the sampling methods used to acquire 
geotechnical data;
    (ii) The type and appropriateness of laboratory techniques used to 
test for soil and rock strength parameters, including discussions of 
the quality control and quality assurance procedures; and
    (iii) Results of laboratory testing and the qualified person's 
interpretation, including any material assumptions.
    (9) Exploration. Describe the nature and extent of all relevant 
exploration work, conducted by or on behalf of, the registrant.
    (i) For all exploration work other than drilling, describe:
    (A) The procedures and parameters relating to the surveys and 
investigations;
    (B) The sampling methods and sample quality, including whether the 
samples are representative, and any factors that may have resulted in 
sample biases;
    (C) The location, number, type, nature, and spacing or density of 
samples collected, and the size of the area covered; and
    (D) The significant results of and the qualified person's 
interpretation of the exploration information.
    (ii) For drilling, describe:
    (A) The type and extent of drilling including the procedures 
followed;
    (B) Any drilling, sampling, or recovery factors that could 
materially impact the accuracy and reliability of the results; and
    (C) The material results and interpretation of the drilling 
results.
    Instruction 1 to paragraph (b)(96)(iv)(B)(9): The technical report 
summary must comply with all disclosure standards for material 
exploration results under Regulation S-K, subpart 229.1300 of this part 
(Sec. Sec.  229.1301 through 229.1305).
    Instruction 2 to paragraph (b)(96)(iv)(B)(9): For a technical 
report summary to support disclosure of material exploration results, 
the qualified person must provide information on all samples or drill 
holes to meet the requirements of paragraph (b)(96)(iv)(B)(9)(ii) of 
this section. If some information is excluded, the qualified person 
must identify the omitted information and explain why that information 
is not material.
    Instruction 3 to paragraph(b)(96)(iv)(B)(9): For a technical report 
summary to support disclosure of mineral resources or mineral reserves, 
the qualified person can meet the requirements of paragraph 
(b)(96)(iv)(B)(9)(ii) of this section by providing sampling (including 
drilling) plans, representative plans and cross-sections of results.
    Instruction 4 to paragraph(b)(96)(iv)(B)(9): Reports must include a 
plan view of the property showing locations of all drill holes and 
other samples.
    (10) Sample preparation, analyses, and security. Describe:
    (i) Sample preparation methods and quality control measures 
employed prior to sending samples to an analytical or testing 
laboratory, sample splitting and reduction methods, and the security 
measures taken to ensure the validity and integrity of samples;
    (ii) Sample preparation, assaying and analytical procedures used, 
the name and location of the analytical or testing laboratories, the 
relationship of the laboratory to the registrant, and whether the 
laboratories are certified by any standards association and the 
particulars of such certification; and
    (iii) The nature, extent, and results of quality control procedures 
and quality assurance actions taken or recommended to provide adequate 
confidence in the data collection and estimation process.
    Instruction to paragraph (b)(96)(iv)(B)(10): This item must also 
include the author's opinion on the adequacy of sample preparation, 
security, and analytical procedures. If the analytical procedures used 
in the analysis are not part of conventional industry practice, the 
qualified person must state so and provide a justification for why he 
or she believes the procedure is appropriate in this instance.
    (11) Data verification. Describe the steps taken by the qualified 
person to verify the data being reported on or which is the basis of 
this technical report summary, including:
    (i) Data verification procedures applied by the qualified person;
    (ii) Any limitations on or failure to conduct such verification, 
and the reasons for any such limitations or failure; and
    (iii) The qualified person's opinion on the adequacy of the data 
for the purposes used in the technical report summary.
    (12) Mineral processing and metallurgical testing. Describe:
    (i) The nature and extent of the mineral processing or 
metallurgical testing and analytical procedures;
    (ii) The degree to which the test samples are representative of the 
various types and styles of mineralization and the mineral deposit as a 
whole;
    (iii) The name and location of the analytical or testing 
laboratories, the relationship of the laboratory to the

[[Page 41719]]

registrant, whether the laboratories are certified by any standards 
association and the particulars of such certification; and
    (iv) The relevant results including the basis for any assumptions 
or predictions about recovery estimates. Discuss any processing factors 
or deleterious elements that could have a significant effect on 
potential economic extraction.
    Instruction to paragraph (b)(96)(iv)(B)(12): This item must include 
the qualified person's opinion on the adequacy of the data for the 
purposes used in the technical report summary. If the analytical 
procedures used in the analysis are not part of conventional industry 
practice, the qualified person must state so and provide a 
justification for why he or she believes the procedure is appropriate, 
in this instance.
    (13) Mineral resource estimates. If this item is included, the 
technical report summary must:
    (i) Describe the key assumptions, parameters, and methods used to 
estimate the mineral resources, in sufficient detail for a reasonably 
informed person to understand the basis for and how the qualified 
person estimated the mineral resources;
    (ii) Provide estimates of mineral resources for all commodities, 
including estimates of quantities, grade or quality, cut-off grades, 
and metallurgical or processing recoveries; and
    (iii) Provide the qualified person's opinion on whether all issues 
relating to all relevant modifying factors can be resolved with further 
work.
    Instruction 1 to paragraph (b)(96)(iv)(B)(13): The technical report 
summary must comply with all disclosure standards for mineral resources 
under subpart 229.1300 of Regulation S-K (Sec. Sec.  229.1301 through 
229.1305).
    Instruction 2 to paragraph (b)(96)(iv)(B)(13): The qualified person 
preparing the mineral resource estimates must round off, to appropriate 
significant figures chosen to reflect order of accuracy, any estimates 
of quantity and grade or quality.
    Instruction 3 to paragraph (b)(96)(iv)(B)(13): The qualified person 
must classify mineral resources into inferred, indicated, and measured 
mineral resources in accordance with
    Sec. Sec.  229.1303 and 229.1304. The qualified person must state 
the uncertainty in the estimates of inferred, indicated, and measured 
mineral resources and discuss the sources of uncertainty and how they 
were considered in the uncertainty estimates. Uncertainty estimates for 
indicated and measured mineral resources must be stated in the form 
``x% relative accuracy at y% confidence level over [annual, 
quarterly, or monthly] production quantities.'' Uncertainty estimates 
for inferred mineral resources must be stated in the form ``the 
qualified person expects at least z% of inferred mineral resources to 
convert to indicated or measured mineral resources with further 
exploration and analysis.''
    Instruction 4 to paragraph (b)(96)(iv)(B)(13): The qualified person 
must consider all sources of uncertainty when reporting the uncertainty 
associated with each class of mineral resources. Sources of uncertainty 
that affect such reporting of uncertainty include sampling or drilling 
methods, data processing and handling, geologic modeling and 
estimation. The qualified person is not required to use estimates of 
confidence limits derived from geostatistics or other numerical methods 
to support the disclosure of uncertainty surrounding mineral resource 
classification. If the qualified person chooses to use confidence limit 
estimates from geostatistics or other numerical methods, he or she 
should consider the limitations of these methods and adjust the 
estimates appropriately to reflect sources of uncertainty that are not 
accounted for by these methods.
    Instruction 5 to paragraph (b)(96)(iv)(B)(13): The qualified person 
must support the disclosure of uncertainty associated with each class 
of mineral resources with a list of all factors considered and explain 
how those factors contributed to the final conclusion about the level 
of uncertainty (i.e. confidence limits for indicated and measured 
mineral resources and the proportion of inferred resources expected to 
be converted to indicated or measured mineral resources with further 
exploration) underlying the resource.
    Instruction 6 to paragraph(b)(96)(iv)(B)(13): Sections 229.1303 and 
1304 of Regulation S-K (Sec. Sec.  229.1303 and 229.1304) 
notwithstanding, in this technical report summary mineral resource 
estimates may be inclusive of mineral reserves so long as this is 
clearly stated with equal prominence to the rest of the item. If the 
qualified person chooses to disclose resources inclusive of mineral 
reserves, he or she must also clearly state the mineral resources 
exclusive of mineral reserves in the technical report summary.
    Instruction 7 to paragraph (b)(96)(iv)(B)(13): The technical report 
summary must include mineral resource estimates of in-situ material, 
plant or mill feed, and saleable product.
    Instruction 8 to paragraph (b)(96)(iv)(B)(13): The qualified person 
must estimate cut-off grades based on assumed costs for surface or 
underground operations and commodity prices that are no higher than 24-
month average prices. The qualified person may use sales prices as 
determined by applicable contractual agreements.
    Instruction 9 to paragraph (b)(96)(iv)(B)(13): Unless otherwise 
stated, cut-off grades also refer to net smelter returns, pay limits 
and other similar terms.
    Instruction 10 to paragraph (b)(96)(iv)(B)(13): When the qualified 
person reports the grade or quality for a multiple commodity mineral 
resource as metal or mineral equivalent, he or she must also report the 
individual grade of each metal or mineral and the commodity prices, 
recoveries, and any other relevant conversion factors used to estimate 
the metal or mineral equivalent grade.
    (14) Mineral reserve estimates. If this item is included, the 
technical report summary must:
    (i) Describe the key assumptions, parameters, and methods used to 
estimate the mineral reserves, in sufficient detail for a reasonably 
informed person to understand the basis for converting, and how the 
qualified person converted, indicated and measured mineral resources 
into the mineral reserves;
    (ii) Provide estimates of mineral reserves for all commodities, 
including estimates of quantities, grade or quality, cut-off grades, 
and metallurgical or processing recoveries;
    (iii) Provide the qualified person's opinion on how the mineral 
reserve estimates could be materially affected by risk factors 
associated with or changes to any aspect of the modifying factors; and
    (iv) If a pre-feasibility study is used to support mineral reserve 
disclosure, the qualified person must provide a justification for using 
a pre-feasibility study instead of a feasibility study.
    Instruction 1 to paragraph (b)(96)(iv)(B)(14): The technical report 
summary must comply with all disclosure standards for mineral resources 
under subpart 229.1300 of Regulation S-K (Sec. Sec.  229.1301 through 
229.1305)
    Instruction 2 to paragraph (b)(96)(iv)(B)(14): The qualified person 
preparing mineral reserve estimates must round off, to appropriate 
significant figures chosen to reflect order of accuracy, any estimates 
of quantity and grade or quality.

[[Page 41720]]

    Instruction 3 to paragraph (b)(96)(iv)(B)(14): The qualified person 
must classify mineral reserves into probable and proven mineral 
reserves in accordance with Sec. Sec.  229.1303 and 229.1304.
    Instruction 4 to paragraph (b)(96)(iv)(B)(14): The technical report 
summary must include mineral reserve estimates of in-situ material, 
plant or mill feed, and saleable product.
    Instruction 5 to paragraph (b)(96)(iv)(B)(14): The qualified person 
must estimate cut-off grades based on detailed cut of grade analysis 
that includes long term prices that are no higher than the 24-month 
historical average prices. The qualified person may use the sales 
prices as determined by applicable contractual agreements.
    Instruction 6 to paragraph (b)(96)(iv)(B)(14): When the qualified 
person reports the grade or quality for a multiple commodity mineral 
reserve as metal or mineral equivalent, he or she must also report the 
individual grade of each metal or mineral and the commodity prices, 
recoveries, and any other relevant conversion factors used to estimate 
the metal or mineral equivalent grade.
    (15) Mining methods. Describe the current or proposed mining 
methods and the reasons for selecting these methods as the most 
suitable for the mineral reserves under consideration. Include:
    (i) Geotechnical and hydrological models, and other parameters 
relevant to mine designs and plans;
    (ii) Production rates, expected mine life, mining unit dimensions, 
and mining dilution and recovery factors;
    (iii) Requirements for stripping, underground development, and 
backfilling; and
    (iv) Required mining equipment fleet and machinery, and personnel.
    Instruction to paragraph (b)(96)(iv)(B)(15): The qualified person 
must include at least one map of the final mine outline.
    (16) Processing and recovery methods. Describe the current or 
proposed mineral processing methods and the reasons for selecting these 
methods as the most suitable for extracting the valuable products from 
the mineralization under consideration. Include:
    (i) A description or flow sheet of any current or proposed process 
plant;
    (ii) Plant throughput and design, equipment characteristics and 
specifications; and
    (iii) Current or projected requirements for energy, water, process 
materials, and personnel.
    Instruction 1 to paragraph (b)(96)(iv)(B)(16): If the processing 
method, plant design or other parameters have never been used to 
successfully extract the valuable product from such mineralization, the 
qualified person must so state and provide a justification for why he 
or she believes the approach will be successful in this instance.
    Instruction 2 to paragraph (b)(96)(iv)(B)(16): If the processing 
method, plant design or other parameters have never been used to 
successfully extract the valuable product from such mineralization and 
is still under development, then no mineral resources or reserves can 
be disclosed on the basis of that method.
    (17) Infrastructure. Describe the required infrastructure for the 
project, including roads, rail, port facilities, dams, dumps and leach 
pads, tailings disposal, power, water and pipelines, as applicable.
    Instruction to paragraph (b)(96)(iv)(B)(17): The qualified person 
must include at least one map showing the layout of the infrastructure.
    (18) Market studies. Describe the market for the products of the 
mine, including justification for demand or sales over the life of the 
mine (or length of cash flow projections). Include:
    (i) Information concerning markets for the property's production, 
including the nature and material terms of any agency relationships and 
the results of any relevant market studies, commodity price 
projections, product valuation, market entry strategies, and product 
specification requirements; and
    (ii) Descriptions of all material contracts required for the issuer 
to develop the property, including mining, concentrating, smelting, 
refining, transportation, handling, hedging arrangements, and forward 
sales contracts. State which contracts have been executed and which are 
still under negotiation. For all contracts with affiliated parties, 
discuss whether the registrant obtained terms, rates or charges the 
same as could be obtained had the contract been negotiated at arm's 
length with an unaffiliated third party.
    (19) Environmental studies, permitting, and social or community 
impact. Describe the environmental, permitting, and social or community 
factors related to the project. Include:
    (i) The results of environmental studies (e.g. environmental 
baseline studies or impact assessments);
    (ii) Requirements and plans for waste and tailings disposal, site 
monitoring, and water management during operations and post mine 
closure;
    (iii) Project permitting requirements, the status of any permit 
applications, and any known requirements to post performance or 
reclamation bonds;
    (iv) Requirements and plans for social or community engagement and 
the status of any negotiations or agreements with local communities;
    (v) Mine closure plans, including remediation and reclamation 
plans, and the associated costs; and
    (vi) The qualified person's opinion on the adequacy of current 
plans to address any issues related to environmental, permitting and 
social or community factors.
    Instruction to paragraph (b)(96)(iv)(B)(19): The qualified person 
must include descriptions of any commitments to ensure local 
procurement and hiring.
    (20) Capital and operating costs. Provide estimates of capital and 
operating costs, with the major components set out in tabular form. 
Explain and justify the basis for the cost estimates including any 
contingency budget estimates. State the accuracy level of the capital 
and operating cost estimates.
    Instruction to paragraph (b)(96)(iv)(B)(20): To assess the accuracy 
of the capital and operating cost estimates, the qualified person must 
take into account the risks associated with the specific engineering 
estimation methods used to arrive at the estimates. As part of this, 
the qualified person must take into consideration the accuracy of the 
estimation methods in prior similar environments. The accuracy of 
capital and operating cost estimates must comply with Sec.  229.1302.
    (21) Economic analysis. Describe:
    (i) The key assumptions, parameters, and methods used to 
demonstrate economic viability;
    (ii) Results of the economic analysis, including annual cash flow 
forecasts based on an annual production schedule for the life of 
project, and measures of economic viability such as net present value 
(NPV), internal rate of return (IRR), and payback period of capital; 
and
    (iii) Sensitivity analysis results using variants in commodity 
price, grade, capital and operating costs, or other significant input 
parameters, as appropriate, and discuss the impact on the results of 
the economic analysis.
    Instruction 1 to paragraph (b)(96)(iv)(B)(21): The qualified person 
may, but is not required to, include an economic analysis in an initial 
assessment. If an initial assessment includes this item, the economic 
analysis must be based on only measured and indicated mineral

[[Page 41721]]

resources. The qualified person must not include inferred mineral 
resources in any economic analysis.
    Instruction 2 to paragraph (b)(96)(iv)(B)(21): If the qualified 
person includes an economic analysis in an initial assessment, the 
qualified person must also include a statement, of equal prominence to 
the rest of this section, that, unlike mineral reserves, mineral 
resources do not have demonstrated economic viability.
    Instruction 3 to paragraph (b)(96)(iv)(B)(21): To comply with 
paragraph (b)(96)(iv)(B) (21)(i) of this section, the qualified person 
must provide all material assumptions including discount rates, 
exchange rates, commodity prices, and taxes, royalties, and other 
government levies or interests applicable to the mineral project or to 
production, and to revenues or income from the mineral project.
    (22) Adjacent properties. Where applicable, a qualified person may 
include relevant information concerning an adjacent property if:
    (i) Such information was publicly disclosed by the owner or 
operator of the adjacent property;
    (ii) The source of the information is identified;
    (iii) The qualified person states that he or she has been unable to 
verify the information and that the information is not necessarily 
indicative of the mineralization on the property that is the subject of 
the technical report; and
    (iv) The technical report clearly distinguishes between the 
information from the adjacent property and the information from the 
property that is the subject of the technical report summary.
    (23) Other relevant data and information. Include any additional 
information or explanation necessary to provide a complete and balanced 
presentation of the value of the property to the registrant. 
Information included in this item must comply with subpart 229.1300 of 
Regulation S-K (Sec. Sec.  229.1301 through 229.1305).
    (24) Interpretation and conclusions. The qualified person must 
summarize the interpretations of and conclusions based on the data and 
analysis in the technical report summary. He or she must also discuss 
any significant risks and uncertainties that could reasonably be 
expected to affect the reliability or confidence in the exploration 
results, mineral resource or mineral reserve estimates, or projected 
economic outcomes.
    (25) Recommendations. If applicable, the qualified person must 
describe the recommendations for additional work with associated costs. 
If the additional work program is divided into phases, the costs for 
each phase must be provided along with decision points at the end of 
each phase.
    (26) References. Include a list of all references cited in the 
technical report summary in sufficient detail so that a reader can 
locate each reference.


Sec.  229.801  [Amended]

0
4. Amend Sec.  229.801 by removing paragraph (g).


Sec.  229.802  [Amended]

0
5. Amend Sec.  229.802 by removing paragraph (g).
0
6. Add subpart 229.1300 to read as follows:

Subpart 229.1300--Disclosure by Registrants Engaged in Mining 
Operations

Sec.
229.1301 (Item 1301) General instructions and definitions.
229.1302 (Item 1302) Qualified person, technical report summary, and 
technical studies.
229.1303 (Item 1303) Summary disclosure.
229.1304 (Item 1304) Individual property disclosure.
229.1305 (Item 1305) Internal controls disclosure.

Subpart 229.1300--Disclosure by Registrants Engaged in Mining 
Operations


Sec.  229.1301  (Item 1301) General instructions and definitions.

    (a) A registrant must provide the disclosure specified in subpart 
229.1300 of this part if its mining operations are material to its 
business or financial condition. For purposes of this subpart, the term 
material has the same meaning as under Sec.  230.405 or Sec.  240.12b-2 
of this chapter.
    (b) When determining whether its mining operations are material, a 
registrant must:
    (1) Consider both quantitative and qualitative factors, assessed in 
the context of the registrant's overall business and financial 
condition;
    (2) Aggregate mining operations on all of its mining properties, 
regardless of the stage of the mining property, and size or type of 
commodity produced, including coal, metalliferous minerals, industrial 
materials, geothermal energy, and mineral brines; and
    (3) Include, for each property, as applicable, all related 
activities from exploration through extraction to the first point of 
material external sale, including processing, transportation, and 
warehousing.
    Instruction 1 to paragraph (b): As used in this section, the term 
mining operations includes operations on all mining properties that a 
registrant:
    i. Owns or in which it has, or it is probable that it will have, a 
direct or indirect economic interest;
    ii. Operates, or it is probable that it will operate, under a lease 
or other legal agreement that grants the registrant ownership or 
similar rights that authorize it, as principal, to sell or otherwise 
dispose of the mineral; or
    iii. Has, or it is probable that it will have, an associated 
royalty or similar right.
    Instruction 2 to paragraph (b): A registrant's mining operations 
are presumed to be material if they consist of 10% or more of its total 
assets.
    Instruction 3 to paragraph (b): A registrant's mining operations 
may be material even if they comprise less than 10% of its total assets 
if, when considered with other quantitative or qualitative factors, the 
required disclosure concerning the mining operations would 
significantly alter the total mix of information available.
    (c) Upon a determination that its mining operations are material, a 
registrant must provide summary disclosure concerning all of its mining 
activities, as specified in Sec.  229.1303, as well as individual 
property disclosure concerning each of its mining properties that is 
material to its business or financial condition, as specified in Sec.  
229.1304. When providing either summary or individual property 
disclosure, the registrant:
    (1) Should provide an appropriate glossary if the disclosure 
requires the use of technical terms relating to geology, mining or 
related matters, which cannot readily be found in conventional 
dictionaries;
    (2) Should not include detailed illustrations and technical 
reports, full feasibility studies or other highly technical data. The 
registrant shall, however, furnish such reports and other material 
supplementally to the staff upon request; and
    (3) Should use plain English principles, to the extent practicable, 
such as those provided in 17 CFR 230.421 and 17 CFR 240.13a-20, to 
enhance the readability of the disclosure for investors.
    (d) Definitions. As used in this subpart, these terms have the 
following meanings:
    (1) Cut-off grade is the grade (i.e., the concentration of metal or 
mineral in rock) which determines the destination of the material 
during mining. For purposes of establishing ``prospects of economic 
extraction,'' the cut-off grade is the grade which distinguishes 
material that is deemed to have no

[[Page 41722]]

economic value (it will not be mined in underground mining or if mined 
in surface mining, its destination will be the waste dump) from 
material that is deemed to have economic value (its ultimate 
destination during mining will be a processing facility). Other terms 
used in similar fashion as cut-off grades include net smelter returns, 
pay limits, and break-even stripping ratio.
    (2) A development stage issuer is one that is engaged in the 
preparation of mineral reserves for extraction on at least one material 
property.
    (3) A development stage property is one that has mineral reserves 
disclosed, pursuant to this subpart, but no material extraction.
    (4) Exploration results are data and information generated by 
mineral exploration programs (i.e., programs consisting of sampling, 
drilling, trenching, analytical testing, assaying, and other similar 
activities undertaken to locate, investigate, define or delineate a 
mineral prospect or mineral deposit) that are not part of a disclosure 
of mineral resources or reserves. A registrant must not use exploration 
results alone to derive estimates of tonnage, grade, and production 
rates, or in an assessment of economic viability.
    (5) An exploration stage issuer is one that has no material 
property with mineral reserves disclosed.
    (6) An exploration stage property is one that has no mineral 
reserves disclosed.
    (7) A feasibility study:
    (i) Is a comprehensive technical and economic study of the selected 
development option for a mineral project, which includes detailed 
assessments of all applicable modifying factors, as defined by this 
section, together with any other relevant operational factors, and 
detailed financial analysis that are necessary to demonstrate, at the 
time of reporting, that extraction is economically viable. The results 
of the study may serve as the basis for a final decision by a proponent 
or financial institution to proceed with, or finance, the development 
of the project.
    (ii) A feasibility study is more comprehensive, and with a higher 
degree of accuracy, than a pre-feasibility study. It must contain 
mining, infrastructure, and process designs completed with sufficient 
rigor to serve as the basis for an investment decision or to support 
project financing.
    Note to paragraph (d)(7): The confidence level in the results of a 
feasibility study is higher than that with a pre-feasibility study. 
Terms such as full, final, comprehensive, bankable, or definitive 
feasibility study are equivalent to a feasibility study.
    (8) A final market study is a comprehensive study to determine and 
support the existence of a readily accessible market for the mineral. 
It must, at a minimum, include product specifications based on final 
geologic and metallurgical testing, supply and demand forecasts, 
historical prices for the preceding five or more years, estimated long 
term prices, evaluation of competitors (including products and 
estimates of production volumes, sales, and prices), customer 
evaluation of product specifications, and market entry strategies or 
sales contracts. The study must provide justification for all 
assumptions, which must include all material contracts required to 
develop and sell the mineral reserves.
    (9)(i) An indicated mineral resource is that part of a mineral 
resource for which quantity and grade or quality are estimated on the 
basis of adequate geological evidence and sampling.
    (ii) As used in this subpart, the term adequate geological evidence 
means evidence that is sufficient to establish geological and grade or 
quality continuity with reasonable certainty. The level of geological 
certainty associated with an indicated mineral resource is sufficient 
to allow a qualified person to apply modifying factors, as defined in 
this section, in sufficient detail to support mine planning and 
evaluation of the economic viability of the deposit.
    Note to paragraph (d)(9): An indicated mineral resource has a lower 
level of confidence than that applying to a measured mineral resource 
and may only be converted to a probable mineral reserve.
    (10)(i) An inferred mineral resource is that part of a mineral 
resource for which quantity and grade or quality are estimated on the 
basis of limited geological evidence and sampling.
    (ii) As used in this subpart, the term limited geological evidence 
means evidence that is only sufficient to establish that geological and 
grade or quality continuity is more likely than not. The level of 
geological uncertainty associated with an inferred mineral resource is 
too high to apply modifying factors, as defined in this section, in a 
manner useful for evaluation of economic viability.
    (iii) A qualified person: (A) Must have a reasonable expectation 
that the majority of inferred mineral resources could be upgraded to 
indicated or measured mineral resources with continued exploration; and
    (B) Should be able to defend the basis of this expectation before 
his or her peers.
    Note to paragraph (d)(10): An inferred mineral resource has the 
lowest level of geological confidence of all mineral resources, which 
prevents the application of the modifying factors in a manner useful 
for evaluation of economic viability. As such, inferred mineral 
resource may not be considered when assessing the economic viability of 
a mining project and may not be converted to a mineral reserve.
    (11)(i) An initial assessment is a preliminary technical and 
economic study of the economic potential of all or parts of 
mineralization to support the disclosure of mineral resources. The 
initial assessment must be prepared by a qualified person and must 
include appropriate assessments of reasonably assumed modifying 
factors, as defined by this section, together with any other relevant 
operational factors that are necessary to demonstrate, at the time of 
reporting, that there are reasonable prospects for economic extraction.
    (ii) An initial assessment is required for disclosure of mineral 
resources but cannot be used as the basis for disclosure of mineral 
reserves.
    (12)(i) A measured mineral resource is that part of a mineral 
resource for which quantity and grade or quality are estimated on the 
basis of conclusive geological evidence and sampling.
    (ii) As used in this subpart, the term conclusive geological 
evidence means evidence that is sufficient to test and confirm 
geological and grade or quality continuity. The level of geological 
certainty associated with a measured mineral resource is sufficient to 
allow a qualified person to apply modifying factors, as defined in this 
section, in sufficient detail to support detailed mine planning and 
final evaluation of the economic viability of the deposit.
    Note to paragraph (d)(12): A measured mineral resource has a higher 
level of confidence than that applying to either an indicated mineral 
resource or an inferred mineral resource. It may be converted to a 
proven mineral reserve or to a probable mineral reserve.
    (13)(i) A mineral reserve is an estimate of tonnage and grade or 
quality of indicated and measured mineral resources that, in the 
opinion of the qualified person, can be the basis of an economically 
viable project. More specifically, it is the economically mineable part 
of a measured or indicated mineral resource, net of allowances for 
diluting materials and for losses that may occur when the material is 
mined or extracted.

[[Page 41723]]

    (ii) The determination that part of a measured or indicated mineral 
resource is economically mineable must be based on a preliminary 
feasibility (pre-feasibility) or feasibility study, as defined by this 
section, conducted by a qualified person applying the modifying factors 
to indicated or measured mineral resources. Such study must demonstrate 
that, at the time of reporting, extraction of the mineral reserve is 
economically viable under reasonable investment and market assumptions. 
The study must establish a life of mine plan that is technically 
achievable and economically viable, which will be the basis of 
determining the mineral reserve.
    (iii) As used in this subpart, the term economically viable means 
that the qualified person has determined, using a discounted cash flow 
analysis, or has otherwise analytically determined, that extraction of 
the mineral reserve is economically viable under reasonable investment 
and market assumptions.
    (iv) As used in this subpart, the term investment and market 
assumptions includes all assumptions made about the prices, exchange 
rates, sales volumes and costs that are necessary and are used to 
determine the economic viability of the reserves. The price shall be no 
higher than the average spot price during the 24-month period prior to 
the end of the fiscal year covered by the report, determined as an 
unweighted arithmetic average of the daily closing price for each 
trading day within such period, except in cases where sales prices are 
determined by contractual agreements. In such a case, the qualified 
person may use the price set by the contractual arrangement, provided 
that such price is reasonable, and the qualified person discloses that 
he or she is using a contractual price and discloses the contractual 
price used.
    Note to paragraph (d)(13): A qualified person must subdivide 
mineral reserves, in order of increasing confidence in the results 
obtained from the application of the modifying factors to the indicated 
and measured mineral resources, into probable mineral reserves and 
proven mineral reserves, as defined in this section.
    (14)(i) A mineral resource is a concentration or occurrence of 
material of economic interest in or on the Earth's crust in such form, 
grade or quality, and quantity that there are reasonable prospects for 
economic extraction.
    Note to paragraph (d)(14)(i): A mineral resource is a reasonable 
estimate of mineralization, taking into account relevant factors such 
as cut-off grade, likely mining dimensions, location or continuity, 
that, with the assumed and justifiable technical and economic 
conditions, is likely to, in whole or in part, become economically 
extractable. It is not merely an inventory of all mineralization 
drilled or sampled. (ii) As used in this subpart, the term material of 
economic interest includes mineralization, including dumps and 
tailings, geothermal fields, mineral brines, and other resources 
extracted on or within the earth's crust. It does not include oil and 
gas resources as defined in Regulation S-X Sec.  210.4-10(a)(16)(D) of 
this chapter, gases (e.g., helium and carbon dioxide), and water.
    Note to paragraph (d)(14)(ii): A qualified person must subdivide 
mineral resources, in order of increasing geological confidence, into 
inferred, indicated and measured mineral resources.
    (iii) When determining the existence of a mineral resource, a 
qualified person, as defined by this section, must:
    (A) Be able to estimate or interpret the location, quantity, grade 
or quality continuity, and other geological characteristics of the 
mineral resource from specific geological evidence and knowledge, 
including sampling; and
    (B) Conclude that there are reasonable prospects for economic 
extraction of the mineral resource based on an initial assessment, as 
defined in this section, that he or she conducts by qualitatively 
applying the modifying factors, as defined by this section, likely to 
influence the prospect of economic extraction.
    (15) Modifying factors are the factors that a qualified person must 
apply to mineralization or geothermal energy and then evaluate in order 
to establish the economic prospects of mineral resources, or the 
economic viability of mineral reserves. A qualified person must apply 
and evaluate modifying factors to convert measured and indicated 
mineral resources to proven and probable mineral reserves. These 
factors include, but are not restricted to, mining, energy recovery and 
conversion, processing, metallurgical, economic, marketing, legal, 
environmental, infrastructure, social and governmental factors. The 
number, type and specific characteristics of the modifying factors 
applied will necessarily be a function of and depend upon the mineral, 
mine, property, or project.
    (16)(i) A preliminary feasibility study (pre-feasibility study) is 
a comprehensive study of a range of options for the technical and 
economic viability of a mineral project that has advanced to a stage 
where a qualified person has determined (in the case of underground 
mining) a preferred mining method, or (in the case of surface mining) a 
pit configuration, and in all cases has determined an effective method 
of mineral processing and an effective plan to sell the product.
    (ii) A pre-feasibility study includes a financial analysis based on 
reasonable assumptions, based on appropriate testing, about the 
modifying factors and the evaluation of any other relevant factors that 
are sufficient for a qualified person to determine if all or part of 
the indicated and measured mineral resources may be converted to 
mineral reserves at the time of reporting. The financial analysis must 
have the level of detail necessary to demonstrate, at the time of 
reporting, that extraction is economically viable.
    Note to paragraph (d)(16): A pre-feasibility study is less 
comprehensive and results in a lower confidence level than a 
feasibility study. A pre-feasibility study is more comprehensive and 
results in a higher confidence level than an initial assessment.
    (17) A preliminary market study is a study that is sufficiently 
rigorous and comprehensive to determine and support the existence of a 
readily accessible market for the mineral. It must, at a minimum, 
include product specifications based on preliminary geologic and 
metallurgical testing, supply and demand forecasts, historical prices 
for the preceding five or more years, estimated long term prices, 
evaluation of competitors (including products and estimates of 
production volumes, sales, and prices), customer evaluation of product 
specifications, and market entry strategies. The study must provide 
justification for all assumptions. It can, however, be less rigorous 
and comprehensive than a final market study, which is required for a 
full feasibility study.
    (18)(i) A probable mineral reserve is the economically mineable 
part of an indicated and, in some cases, a measured mineral resource.
    (ii) For a probable mineral reserve, the qualified person's 
confidence in the results obtained from the application of the 
modifying factors and in the estimates of tonnage and grade or quality 
is lower than what is sufficient for a classification as a proven 
mineral reserve, but is still sufficient to demonstrate that, at the 
time of reporting, extraction of the mineral reserve is economically 
viable under reasonable investment and market assumptions. The lower 
level of confidence is due to higher geologic uncertainty when the 
qualified person converts an indicated mineral resource to a probable 
reserve or higher risk in the results of the application of

[[Page 41724]]

modifying factors at the time when the qualified person converts a 
measured mineral resource to a probable mineral reserve.
    (iii) A qualified person must classify a measured mineral resource 
as a probable mineral reserve when his or her confidence in the results 
obtained from the application of the modifying factors to the measured 
mineral resource is lower than what is sufficient for a proven mineral 
reserve.
    (19) A production stage issuer is one that is engaged in material 
extraction of mineral reserves on at least one material property.
    (20) A production stage property is one with material extraction of 
mineral reserves.
    (21)(i) A proven mineral reserve is the economically mineable part 
of a measured mineral resource.
    (ii) For a proven mineral reserve, the qualified person has a high 
degree of confidence in the results obtained from the application of 
the modifying factors and in the estimates of tonnage and grade or 
quality.
    (iii) A proven mineral reserve can only result from conversion of a 
measured mineral resource.
    (22) A qualified person is:
    (i) A mineral industry professional with at least five years of 
relevant experience in the type of mineralization and type of deposit 
under consideration and in the specific type of activity that person is 
undertaking on behalf of the registrant; and
    (ii) An eligible member or licensee in good standing of a 
recognized professional organization at the time the technical report 
is prepared. For an organization to be a recognized professional 
organization, it must:
    (A) Be either:
    (1) An organization recognized within the mining industry as a 
reputable professional association, or
    (2) A board authorized by U.S. federal, state or foreign statute to 
regulate professionals in the mining, geoscience or related field;
    (B) Admit eligible members primarily on the basis of their academic 
qualifications and experience;
    (C) Establish and require compliance with professional standards of 
competence and ethics;
    (D) Require or encourage continuing professional development;
    (E) Have and apply disciplinary powers, including the power to 
suspend or expel a member regardless of where the member practices or 
resides; and (F) Provide a public list of members in good standing.
    Instruction 1 to paragraph (d)(22): The term relevant experience 
means, for purposes of determining whether a party is a qualified 
person, that the party has experience in the specific type of activity 
that the person is undertaking on behalf of the registrant. If the 
qualified person is preparing or supervising the preparation of a 
technical report concerning exploration results, the relevant 
experience must be in exploration. If the qualified person is 
estimating, or supervising the estimation of mineral resources, the 
relevant experience must be in the estimation, assessment and 
evaluation of mineral resources and associated modifying factors, as 
defined in this section. If the qualified person is estimating, or 
supervising the estimation of mineral reserves, the relevant experience 
must be in engineering and other disciplines required for the 
estimation, assessment, evaluation and economic extraction of mineral 
reserves.
    Instruction 2 to paragraph (d)(22): The term relevant experience 
also means, for purposes of determining whether a party is a qualified 
person, that the party has experience evaluating the specific type of 
mineral deposit under consideration, e.g., coal, metal, base metal, 
industrial mineral, mineral brine, or geothermal fields. The type of 
experience necessary to qualify as relevant is a facts and 
circumstances determination. For example, experience in a high-nugget, 
vein-type mineralization such as tin or tungsten would likely be 
relevant experience for estimating mineral resources for vein-gold 
mineralization whereas experience in a low grade disseminated gold 
deposit likely would not be relevant.
    Instruction 3 to paragraph (d)(22): It is not always necessary for 
a person to have five years' experience in each and every type of 
deposit in order to be an eligible qualified person if that person has 
relevant experience in similar deposit types. For example, a person 
with 20 years' experience in estimating mineral resources for a variety 
of metalliferous hard-rock deposit types may not require as much as 
five years of specific experience in porphyry-copper deposits to act as 
a qualified person. Relevant experience in the other deposit types 
could count towards the experience in relation to porphyry-copper 
deposits.
    Instruction 4 to paragraph (d)(22): For a qualified person 
providing a technical report for exploration results or mineral 
resource estimates, relevant experience also requires, in addition to 
experience in the type of mineralization, sufficient experience with 
the sampling and analytical techniques, as well as extraction and 
processing techniques, relevant to the mineral deposit under 
consideration. Sufficient experience means that level of experience 
necessary to be able to identify, with substantial confidence, problems 
that could affect the reliability of data and issues associated with 
processing.
    Instruction 5 to paragraph (d)(22): For a qualified person applying 
the modifying factors, as defined by this section, to convert mineral 
resources to mineral reserves, relevant experience also requires:
    i. Sufficient knowledge and experience in the application of these 
factors to the mineral deposit under consideration; and
    ii. Experience with the geology, geostatistics, mining, extraction 
and processing that is applicable to the type of mineral and mining 
under consideration.


Sec.  229.1302  (Item 1302) Qualified person, technical report summary, 
and technical studies.

    (a) A registrant's disclosure of exploration results, mineral 
resources or mineral reserves, as required by Sec.  229.1303 and Sec.  
229.1304, must be based on and accurately reflect information and 
supporting documentation prepared by a qualified person, as defined in 
Sec.  229.1301(d). The registrant is responsible for determining that 
the person meets the qualifications specified under the definition of 
qualified person in Sec.  229.1301(d), and that the disclosure in the 
registrant's filing accurately reflects the information provided by the 
qualified person.
    (b)(1) The registrant must obtain a dated and signed technical 
report summary from the qualified person, which, pursuant to Sec.  
229.601(b)(96), identifies and summarizes the information reviewed and 
conclusions reached by the qualified person about the registrant's 
mineral resources, mineral reserves or material exploration results 
determined to be on each material property.
    (2) The registrant must file the technical report summary, pursuant 
to Sec.  229.601(b)(96), as an exhibit to the relevant registration 
statement or other Commission filing when disclosing for the first time 
mineral reserves, mineral resources or material exploration results or 
when there is a material change in the mineral reserves, mineral 
resources or exploration results from the last technical report summary 
filed for the property.
    Instruction to paragraph (b)(2): A royalty company does not have to 
submit a separate technical report summary for a property that is 
covered by a current technical report summary

[[Page 41725]]

filed by the producing mining registrant. In that situation, the 
royalty company must incorporate by reference the producing 
registrant's previously filed technical report summary in the royalty 
company's filing with the Commission.
    (3)(i) The registrant must obtain the written consent of the 
qualified person to the use of the qualified person's name and any 
quotation or other use of the technical report summary in the 
registration statement or report prior to filing the technical report 
summary with the Commission.
    (ii) For Securities Act filings, the registrant must file the 
written consent as an exhibit to the registration statement pursuant to 
Sec. Sec.  230.436 and 230.601(b)(23) of this chapter.
    (4) The registrant must identify the qualified person who prepared 
the technical report summary in the filed registration statement or 
report and state whether the qualified person is an employee of the 
registrant. If the qualified person is not an employee of the 
registrant, the registrant must name the qualified person's employer, 
disclose whether the qualified person or the qualified person's 
employer is an affiliate of the registrant or another entity that has 
an ownership, royalty or other interest in the property that is the 
subject of the technical report summary, and if an affiliate, describe 
the nature of the affiliation.
    Instruction to paragraph (b)(4): As used in this section, affiliate 
has the same meaning as in Sec.  230.405 or Sec.  240.12b-2 of this 
chapter.
    (c) A registrant's disclosure of mineral resources under subpart 
229.1300 of this part must be based upon a qualified person's initial 
assessment, as defined in Sec.  229.1301(d), which supports the 
determination of mineral resources. At a minimum, the initial 
assessment must include the qualified person's qualitative evaluation 
of applicable modifying factors to establish the economic potential of 
the mining property or project. The technical report summary submitted 
by the qualified person to support a determination of mineral resources 
must describe the procedures, findings and conclusions reached for the 
initial assessment, as required by Sec.  229.601(b)(96).
    Instruction 1 to paragraph (c): A qualified person must include 
cut-off grade estimation, based on assumed unit costs for surface or 
underground operations and estimated mineral prices, in the initial 
assessment. To estimate mineral prices, the qualified person must use a 
commodity price that is no higher than the average spot price during 
the 24-month period prior to the end of the last fiscal year, 
determined as an unweighted arithmetic average of the daily closing 
price for each trading day within such period, unless prices are 
defined by contractual arrangements. In such a case, the qualified 
person may use the price set by the contractual arrangement, provided 
that such price is reasonable, and the qualified person discloses that 
he or she is using a contractual price and discloses the contractual 
price used.
    Instruction 2 to paragraph (c): The qualified person must provide 
qualitative assessment of all relevant modifying factors, as defined in 
Sec.  229.1301(d), to establish economic potential and justify why he 
or she believes that all issues can be resolved with further 
exploration and analysis. As provided by Table 1 of this subpart, those 
factors include, but are not limited to:
    i. Site infrastructure (e.g. whether access to power and site is 
possible);
    ii. Mine design and planning (e.g. what is the broadly defined 
mining method);
    iii. Processing plant (e.g. whether all products used in assessing 
prospects of economic extraction can be processed with methods 
consistent with each other);
    iv. Environmental compliance and permitting (e.g. what are the 
required permits and corresponding agencies and whether significant 
obstacles exist to obtaining those permits); and
    v. Any other reasonably assumed modifying factors, including socio-
economic factors, necessary to demonstrate reasonable prospects for 
economic extraction.
    Instruction 3 to paragraph (c): Additionally, a qualified person 
may include cash flow analysis in an initial assessment to demonstrate 
economic potential. The qualified person may not, however, use inferred 
mineral resources in such cash flow analysis. If the qualified person 
includes cash flow analysis in the initial assessment, then operating 
and capital cost estimates must have an accuracy level of at least 
approximately 50% and a contingency level of no greater 
than 25%, as provided by Table 1 of this subpart. The qualified person 
must state the accuracy and contingency levels in the initial 
assessment.
    Instruction 4 to paragraph (c): The qualified person should refer 
to Table 1 of this subpart for the assumptions permitted to be made 
when preparing the initial assessment.

      Table 1 to Subpart 229.1300--Summary Description of Modifying Factors Evaluated in Technical Studies
----------------------------------------------------------------------------------------------------------------
                                                                Preliminary feasibility
               Factors                    Initial assessment             study              Feasibility study
----------------------------------------------------------------------------------------------------------------
Site infrastructure..................  Establish whether or     Required access roads,   Required access roads,
                                        not access to power      infrastructure           infrastructure
                                        and site is possible.    location and plant       location and plant
                                        Assume infrastructure    area defined. Source     area finalized. Source
                                        location, plant area     of all utilities         of all required
                                        required, type of        (power, water, etc.)     utilities (power,
                                        power supply, site       required for             water, etc.) for
                                        access roads and camp/   development and          development and
                                        town site, if required.  production defined       production finalized.
                                                                 with initial designs     Camp/Town site
                                                                 suitable for cost        finalized
                                                                 estimates. Camp/Town
                                                                 site finalized.
Mine design & planning...............  Mining method defined    Preferred underground    Mining method
                                        broadly as surface or    mining method or the     finalized. Detailed
                                        underground.             pit configuration for    mine layouts finalized
                                        Production rates         surface mine defined.    for preferred
                                        assumed.                 Detailed mine layouts    alternative.
                                                                 drawn for each           Development and
                                                                 alternative.             production plan
                                                                 Development and          finalized for
                                                                 production plan          preferred alternative
                                                                 defined for each         with required
                                                                 alternative with         equipment fleet
                                                                 required equipment       specified
                                                                 fleet specified.

[[Page 41726]]

 
Processing plant.....................  Establish that all       Detailed bench lab       Detailed bench lab
                                        products used in         tests conducted.         tests conducted. Pilot
                                        assessing prospects of   Detailed process flow    plant test completed,
                                        economic extraction      sheet, equipment         if required, based on
                                        can be processed with    sizes, and general       risk. Process flow
                                        methods consistent       arrangement completed.   sheet, equipment
                                        with each other.         Detailed plant           sizes, and general
                                        Processing method and    throughput specified.    arrangement finalized.
                                        plant throughput                                  Final plant throughput
                                        assumed.                                          specified
Environmental compliance & permitting  List of required         Identification and       Identification and
                                        permits & agencies       detailed analysis of     detailed analysis of
                                        drawn. Determine if      requirements or          requirements or
                                        significant obstacles    interests of agencies,   interests of agencies,
                                        exist to obtaining       NGOs, communities and    NGOs, communities and
                                        permits. Identify pre-   other stakeholders.      other stakeholders
                                        mining land uses.        Detailed baseline        finalized. Completed
                                        Assess requirements      studies with             baseline studies with
                                        for baseline studies.    preliminary impact       final impact
                                        Assume post-mining       assessment (internal).   assessment (internal).
                                        land uses. Assume        Detailed tailings        Tailings disposal,
                                        tailings disposal,       disposal, reclamation    reclamation and
                                        reclamation, and         and mitigation plans.    mitigation plans
                                        mitigation plans.                                 finalized
Other modifying factors \1\..........  Appropriate assessments  Reasonable assumptions,  Detailed assessments of
                                        of other reasonably      based on appropriate     modifying factors
                                        assumed modifying        testing, on the          necessary to
                                        factors necessary to     modifying factors        demonstrate that
                                        demonstrate reasonable   sufficient to            extraction is
                                        prospects for economic   demonstrate that         economically viable
                                        extraction.              extraction is
                                                                 economically viable.
Capital costs........................  Optional.\2\ If          Accuracy: 25%.               minus>15%.
                                        50%.        Contingency: <=15%.....  Contingency: <=10%.
                                       Contingency: <=25%.....
Operating costs......................  Optional.\2\ If          Accuracy: 25%.               minus>15%.
                                        50%.        Contingency: <=15%.....  Contingency: <=10%.
                                       Contingency: <=25%.....
Economic analysis \3\................  Optional. If included:   Taxes described in       Taxes described in
                                        Taxes and revenues are   detail; revenues are     detail; revenues are
                                        assumed. Discounted      estimated based on at    estimated based on at
                                        cash flow analysis       least a preliminary      least a final market
                                        based on assumed         market study; economic   study or possible
                                        production rates and     viability assessed by    letters of intent to
                                        revenues from            detailed discounted      purchase; economic
                                        available measured and   cash flow analysis.      viability assessed by
                                        indicated mineral                                 detailed discounted
                                        resources.                                        cash flow analysis
----------------------------------------------------------------------------------------------------------------
\1\ The modifying factors, as defined in this section, include, but are not limited to, the factors listed in
  this table. The number, type and specific characteristics of the modifying factors applied will be a function
  of and depend upon the mineral, mine, property, or project.
\2\ Initial Assessment, as defined in this section, does not require cash flow analyses or operating and capital
  cost estimates. The qualified person may include such cash flow analyses at his or her discretion.
\3\ Initial assessment does not require capital and operating cost estimates or economic analysis, although it
  requires unit cost assumptions based on an assumption that the resource will be exploited with surface or
  underground mining methods. Economic analyses, if included, must only be based on measured and indicated
  mineral resources.

    (d) A registrant's disclosure of mineral reserves under subpart 
229.1300 of this part must be based upon a qualified person's pre-
feasibility study or feasibility study, each as defined in Sec.  
229.1301(d), which supports a determination of mineral reserves. The 
pre-feasibility or feasibility study must include the qualified 
person's detailed evaluation of all applicable modifying factors to 
demonstrate the economic viability of the mining property or project. 
The technical report summary submitted by the qualified person to 
support a determination of mineral reserves must describe the 
procedures, findings and conclusions reached for the pre-feasibility or 
feasibility study, as required by Sec.  229.601(b)(96). All reserve 
disclosures based on a pre-feasibility study must include the qualified 
person's justification for using a pre-feasibility study instead of a 
final feasibility study.
    Instruction 1 to paragraph (d): The term mineral reserves does not 
necessarily require that extraction facilities are in place or 
operational, that the company has obtained all necessary permits or 
that the company has entered into sales contracts for the sale of mined 
products. It does require, however, that the qualified person has, 
after reasonable investigation, not identified any obstacles to 
obtaining permits and entering into the necessary sales contracts, and 
reasonably believes that the chances of obtaining such approvals and 
contracts in a timely manner are highly likely. In addition, in certain 
circumstances, it may require the completion of at least a preliminary 
market study, as defined in Sec.  229.1301(d), in the context of a pre-
feasibility study, or a final market study, as defined in Sec.  
229.1301(d), in the context of a feasibility study, to support the 
qualified person's conclusions about the chances of obtaining revenues 
from sales. For example, a preliminary or final market study would be 
required where the mine's product cannot be traded on an exchange, 
there is no other established market for the product, and no sales 
contract exists. When assessing mineral reserves, the qualified person 
must take into account the potential adverse impacts, if any, from any 
unresolved material matter on which extraction is contingent and which 
is dependent on a third party.
    Instruction 2 to paragraph (d): The qualified person must exclude 
inferred mineral resources from the pre-feasibility study's 
demonstration of economic viability in support of a disclosure of a 
mineral reserve.
    Instruction 3 to paragraph (d): Factors to be considered in a pre-
feasibility study are typically the same as those required for an 
initial assessment, but considered at a greater level of detail or at a 
later stage of development. For

[[Page 41727]]

example, as provided in Table 1 of this subpart, a pre-feasibility 
study must define, analyze or otherwise address in detail:
    i. The required access roads, infrastructure location and plant 
area, and the source of all utilities (e.g., power and water) required 
for development and production;
    ii. The preferred underground mining method or surface mine pit 
configuration, with detailed mine layouts drawn for each alternative;
    iii. The bench lab tests that have been conducted, the process flow 
sheet, equipment sizes, and general arrangement that have been 
completed, and the plant throughput;
    iv. The environmental compliance and permitting requirements or 
interests of agencies, non-governmental organizations, communities and 
other stakeholders, the baseline studies, and the plans for tailings 
disposal, reclamation and mitigation, together with an analysis 
establishing that permitting is possible; and
    v. And any other reasonable assumptions, based on appropriate 
testing, on the modifying factors sufficient to demonstrate that 
extraction is economically viable.
    Instruction 4 to paragraph (d): A pre-feasibility study must 
include an economic analysis that supports the property's economic 
viability as assessed by a detailed discounted cash flow analysis or 
other similar financial analysis. The economic analysis must describe 
in detail applicable taxes and provide an estimate of revenues. As 
discussed in Instruction 1 to paragraph (d) of this section, in certain 
situations, estimates of revenues must be based on at least a 
preliminary market study.
    Instruction 5 to paragraph (d): The pre-feasibility study must also 
identify sources of uncertainty that require further refinement in a 
final feasibility study.
    Instruction 6 to paragraph (d): Operating and capital cost 
estimates in a pre-feasibility study must, at a minimum, have an 
accuracy level of approximately 25% and a contingency range 
not exceeding 15%, as provided in Table 1 of this subpart. The 
qualified person must state the accuracy level and contingency range in 
the pre-feasibility study.
    Instruction 7 to paragraph (d): In some instances, the risk factors 
associated with a project may indicate that more than a pre-feasibility 
study is required to disclose mineral reserves, e.g., in situations 
where the project is the first in a particular mining district with 
substantially different conditions than existing company projects, such 
as environmental and permitting restrictions, labor availability and 
skills, remoteness, and unique mineralization and recovery methods. In 
such cases, the qualified person must use a feasibility study in order 
to achieve the level of confidence necessary for disclosing mineral 
reserves.
    Instruction 8 to paragraph (d): A feasibility study must contain 
the application and description of all relevant modifying factors in a 
more detailed form and with more certainty than a pre-feasibility 
study. For example, as provided in Table 1 of this subpart, a 
feasibility study must define, analyze or otherwise address in detail:
    i. Final requirements for site infrastructure, including well-
defined access roads, finalized plans for infrastructure location, 
plant area, and camp or town site, and the established source of all 
required utilities (e.g., power and water) for development and 
production;
    ii. Finalized mining method, including detailed mine layouts and 
final development and production plan for the preferred alternative 
with the required equipment fleet specified. The feasibility study must 
address detailed mining schedules, construction and production ramp up, 
and project execution plans;
    iii. Completed detailed bench lab tests and a pilot plant test, if 
required, based on risk. The feasibility study must further address 
final requirements for process flow sheet, equipment sizes, and general 
arrangement and specify the final plant throughput;
    iv. The final identification and detailed analysis of environmental 
compliance and permitting requirements, including the finalized 
interests of agencies, NGOs, communities and other stakeholders. The 
feasibility study must further address the completion of baseline 
studies and finalized plans for tailings disposal, reclamation and 
mitigation; and
    v. Detailed assessments of other modifying factors necessary to 
demonstrate that extraction is economically viable.
    Instruction 9 to paragraph (d): A feasibility study must also 
include an economic analysis that describes taxes in detail, estimates 
revenues and assesses economic viability by a detailed discounted cash 
flow analysis. As discussed in Instruction 1 to paragraph (d) of this 
section, in certain situations, estimates of revenues must be based on 
a final market study or letters of intent to purchase.
    Instruction 10 to paragraph (d): Operating and capital cost 
estimates in a feasibility study must, at a minimum, have an accuracy 
level of approximately 15% and a contingency range not 
exceeding 10%, as provided by Table 1 of this subpart. The qualified 
person must state the accuracy level and contingency range in the 
feasibility study.
    Instruction 11 to paragraph (d): If the uncertainties in the 
results obtained from the application of the modifying factors that 
prevented a measured mineral resource from being converted to a proven 
mineral reserve no longer exist, then the qualified person may convert 
the measured mineral resource to a proven mineral reserve.
    Instruction 12 to paragraph (d): The qualified person cannot 
convert an indicated mineral resource to a proven mineral reserve 
unless new evidence first justifies conversion to a measured mineral 
resource.
    Instruction 13 to paragraph (d): The qualified person cannot 
convert an inferred mineral resource to a mineral reserve without first 
obtaining new evidence that justifies converting it to an indicated or 
measured mineral resource.


Sec.  229.1303  (Item 1303) Summary disclosure.

    (a)(1) A registrant that has material mining operations, as 
determined pursuant to Sec.  229.1301, and two or more mining 
properties, must provide the information specified in paragraph (b) of 
this section for all properties that the registrant:
    (i) Owns or in which it has, or it is probable that it will have, a 
direct or indirect economic interest;
    (ii) Operates, or it is probable that it will operate, under a 
lease or other legal agreement that grants the registrant ownership or 
similar rights that authorize it, as principal, to sell or otherwise 
dispose of the mineral; or
    (iii) Has, or it is probable that it will have, an associated 
royalty or similar right.
    (2) A registrant that has material mining operations but only one 
mining property is not required to provide the information specified in 
paragraph (b) of this section. That registrant need only provide the 
disclosure required by Sec.  229.1304 for the mining property that is 
material to its business.
    (b) Disclose the following information for all properties specified 
in paragraph (a) of this section:
    (1) A map or maps, of appropriate scale, showing the locations of 
all properties. Such maps should be legible on the page when printed.
    (2) A presentation in tabular form, in decreasing order by asset 
value, of the

[[Page 41728]]

20 properties with the largest asset value (or fewer if the registrant 
has an economic interest in fewer than 20 mining properties). For each 
of the properties required to be included in the presentation, the 
registrant must identify the property, report the total production from 
the property for the three most recently completed fiscal years, and 
disclose the following information, using the format in Table 2 of this 
subpart:
    (i) The location of the property;
    (ii) The type and amount of ownership interest;
    (iii) The identity of the operator;
    (iv) Title, mineral rights, leases or options and acreage involved;
    (v) The stage of the property (exploration, development or 
production);
    (vi) Key permit conditions;
    (vii) Mine type & mineralization style; and
    (viii) Processing plant and other available facilities.
    Instruction 1 to paragraph (b)(2): For purposes of this paragraph, 
a registrant may treat multiple mines with interrelated mining 
operations as one mining property.
    Instruction 2 to paragraph (b)(2): A registrant with only a royalty 
or similar economic interest should provide only the portion of the 
production that led to royalty or other incomes for each of the three 
most recently completed fiscal years.

[[Page 41729]]

[GRAPHIC] [TIFF OMITTED] TP27JN16.001

    (3) A summary of all mineral resources and mineral reserves at the 
end of the most recently completed fiscal year by commodity and 
geographic area and for each property containing 10% or more of the 
registrant's mineral reserves or 10% or more of the registrant's 
combined measured and indicated mineral resources. This summary must be 
provided for each class of mineral reserves (probable and proven) and 
resources (inferred, indicated and measured), together with total 
mineral reserves and total measured and indicated mineral resources, 
using the format in Table 3 of this subpart.
    Instruction 1 to paragraph (b)(3): The term by geographic area 
means by individual country, regions of a country, state, groups of 
states, mining district, or other political units, to the extent 
material to and necessary for an investor's understanding of a 
registrant's mining operations.
    Instruction 2 to paragraph (b)(3): All disclosure of mineral 
resources must be exclusive of mineral reserves.
    Instruction 3 to paragraph (b)(3): All disclosure of mineral 
resources and reserves must be only for the portion of the resources or 
reserves attributable to the registrant's interest in the property.
    Instruction 4 to paragraph (b)(3): All mineral resource and reserve 
estimates

[[Page 41730]]

must be based on long term price that is no higher than the average 
spot price over the 24-month period prior to the end of the fiscal year 
covered by the report, determined as an unweighted arithmetic average 
of the daily closing price for each trading day within such period, 
unless prices are defined by contractual arrangements.
    Instruction 5 to paragraph (b)(3): Mineral resource and reserve 
estimates called for in Table 3 of this subpart must be in terms of 
saleable product.

             Table 3 to Subpart 229.1300--Summary Mineral Resources and Reserves at End of the Fiscal Year Ended [DATE] Based on [PRICE] \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                Measured  +
                                                                  Proven      Probable      Total       Measured    Indicated    indicated     Inferred
                                                                 mineral      mineral      mineral      mineral      mineral      mineral      mineral
                                                                 reserves     reserves     reserves    resources    resources    resources    resources
--------------------------------------------------------------------------------------------------------------------------------------------------------
Commodity A
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Geographic area A........................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Geographic area B........................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
        Mine/Property A......................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
        Mine/Property B......................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
        Other mines/properties...............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Other geographic areas...................................
                                                              ------------------------------------------------------------------------------------------
            Total............................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
Commodity B
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Geographic area A........................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Geographic area B........................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
        Mine/Property A......................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
        Mine/Property B......................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
        Other mines/properties...............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Other geographic areas...................................
                                                              ------------------------------------------------------------------------------------------
            Total............................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Unless prices are defined by contractual arrangements, the registrant must use a commodity price that is no higher than the average spot price
  during the 24-month period prior to the end of the last fiscal year, determined as an unweighted arithmetic average of the daily closing price for
  each trading day within such period and must disclose the price used. When prices are defined by contractual agreements, the registrant may use the
  price set by the contractual arrangement, provided that such price is reasonable, and the registrant discloses that it is using a contractual price
  and discloses the contractual price used.

Sec.  229.1304  (Item 1304) Individual property disclosure.

    (a) A registrant must disclose the information specified in 
paragraph (b) of this section for each property that is material to its 
business or financial condition. When determining the materiality of a 
property relative to its business or financial condition, a registrant 
must apply the standards and other considerations specified in Sec.  
229.1301(b) to each individual property that it:
    (i) Owns or in which it has, or it is probable that it will have, a 
direct or indirect economic interest;
    (ii) Operates, or it is probable that it will operate, under a 
lease or other legal agreement that grants the registrant ownership or 
similar rights that authorize it, as principal, to sell or otherwise 
dispose of the mineral; or
    (iii) Has, or it is probable that it will have, an associated 
royalty or similar right.
    (b) Disclose the following information for each material property 
specified in paragraph (a) of this section:
    (1) A brief description of the property including:
    (i) The location, accurate to within one mile, using an easily 
recognizable coordinate system. The registrant must provide appropriate 
maps, with proper engineering detail (such as scale, orientation, and 
titles). Such maps must be legible on the page when printed;
    (ii) Existing infrastructure including roads, railroads, airports, 
towns, ports, sources of water, electricity, and personnel; and
    (iii) A brief description, including the name or number and size 
(acreage), of the titles, claims, concessions, mineral rights, leases 
or options under which the registrant and its subsidiaries have or will 
have the right to hold or operate the property, and how such rights are 
obtained at this location, indicating any conditions that the 
registrant must meet in order to obtain or retain the property. If held 
by leases or options or if the mineral rights otherwise have 
termination provisions, the registrant must provide the expiration 
dates of such leases, options or mineral rights and associated 
payments.
    (iv) If the registrant holds a royalty or similar interest or will 
have an associated royalty or similar right, the disclosure must 
describe all of the information in paragraph (b)(1) of this

[[Page 41731]]

section, including, for example, the documents under which the owner or 
operator holds or operates the property, the mineral rights held by the 
owner or operator, conditions required to be met by the owner or 
operator, and the expiration dates of leases, options and mineral 
rights. The registrant must also briefly describe the agreement under 
which the registrant and its subsidiaries have or will have the right 
to a royalty or similar interest in the property, indicating any 
conditions that the registrant must meet in order to obtain or retain 
the royalty or similar interest, and indicating the expiration date.
    (2) A brief history of previous operations, including the names of 
previous operators, insofar as known;
    (3) The following information, as relevant to the particular 
property:
    (i) A brief description of the present condition of the property, 
the work completed by the registrant on the property, the registrant's 
proposed program of exploration or development, the current stage of 
the property as exploration, development or production, the current 
state of exploration or development of the property, and the current 
production activities. Mines should be identified as either surface or 
underground, with a brief description of the mining method and 
processing operations. If the property is without known reserves and 
the proposed program is exploratory in nature or the registrant has 
started extraction without determining mineral reserves, the registrant 
must provide a statement to that effect;
    (ii) The age, details as to modernization and physical condition of 
the equipment, facilities, infrastructure, and underground development; 
and
    (iii) The total cost for or book value of the property and its 
associated plant and equipment.
    Instruction to paragraph (b)(3): A registrant must identify an 
individual property with no mineral reserves as an exploration stage 
property, even if it has other properties in development or production. 
Similarly, a registrant that does not have reserves on any of its 
properties cannot characterize itself as a development or production 
stage company, even if it has mineral resources or exploration results, 
or even if it is engaged in extraction without first disclosing mineral 
reserves.
    (4) A brief description of any significant encumbrances to the 
property, including current and future permitting requirements and 
associated timelines, permit conditions, and violations and fines.
    (5) A summary of the exploration activity for the most recently 
completed fiscal year in tabular form, which, for each sampling method 
used, discloses the number of samples, the total size or length of the 
samples, and the total number of assays. The information must be 
presented using the format in Table 4 of this subpart.

  Table 4 to Subpart 229.1300--[INDIVIDUAL PROPERTY NAME]--Summary Exploration Activity for Fiscal Year Ending
                                                     [DATE]
----------------------------------------------------------------------------------------------------------------
                                                                     Number of     Total size or   Total number
                        Sampling methods                            samples \1\     length \2\       of assays
----------------------------------------------------------------------------------------------------------------
Method 1........................................................
----------------------------------------------------------------------------------------------------------------
Method 2........................................................
----------------------------------------------------------------------------------------------------------------
\1\ This refers to number of drill holes, trenches, geophysical survey lines etc.
\2\ This refers to the total length of drill holes, trenches, and geophysical survey lines or total amount of
  material in bulk sampling.

    (6) A summary of material exploration results for the most recently 
completed fiscal year in tabular form, which, for each property, 
identifies the hole that generated the exploration results, and 
describes the length, lithology and key geologic properties of the 
exploration results. This information must be presented using the 
format provided in Table 5 of this subpart, and accompanied by a brief 
discussion of the exploration results' context and relevance.
    Instruction to paragraph (b)(6): When determining whether 
exploration results are material, a registrant should consider their 
importance in assessing the value of a material property or in deciding 
whether to develop the property.

               Table 5 to Subpart 229.1300--[INDIVIDUAL PROPERTY NAME]--Summary Exploration Results for the Fiscal Year Ending [DATE] \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Geologic        Geologic                        Geologic
                   Hole ID                      From      To       Length     Lithology     property 1      property 2         . . .        property n
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
 \1\ If only results from selected holes and intersections are included, they should be accompanied with a discussion of the context and justification
  for excluding other results.

    (7) If mineral resources or reserves have been determined, a 
summary of all mineral resources and reserves, which, for each 
property, discloses in tabular form, as provided in Table 6 of this 
subpart, the estimated tonnages, grades (or quality, where 
appropriate), cut-off grades and metallurgical recovery, by class of 
mineral resource and reserve, occurring:
    (i) In-situ;
    (ii) As plant/mill feed; and
    (iii) As saleable product.

[[Page 41732]]



Table 6 to Subpart 229.1300--[INDIVIDUAL PROPERTY NAME]--Summary of [COMMODITY/COMMODITIES] Mineral Reserves and Resources at the End of the Fiscal Year
                                                            Ended [DATE] Based on [PRICE] \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      In-situ               Plant/Mill feed
                                                            ----------------------------------------------------   Saleable     Cut-off    Metallurgical
                                                                            Grades/                   Grades/      product       grades       recovery
                                                                Amount     Qualities      Amount     Qualities
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proven mineral reserves....................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Probable mineral reserves..................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total mineral reserves.....................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Measured mineral resources.................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Indicated mineral resources................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Measured + Indicated mineral resources.....................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Inferred mineral resources.................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Unless prices are defined by contractual arrangements, the registrant must use a commodity price that is no higher than the average spot price
  during the 24-month period prior to the end of the last fiscal year, determined as an unweighted arithmetic average of the daily closing price for
  each trading day within such period and must disclose the price used. When prices are defined by contractual agreements, the registrant may use the
  price set by the contractual arrangement, provided that such price is reasonable, and the registrant discloses that it is using a contractual price
  and discloses the contractual price used.

    Instruction 1 to paragraphs (b)(5) through (7): The registrant 
should not include extensive description of regional geology. Rather, 
it should include geological information that is brief and relevant to 
property disclosure.
    Instruction 2 to paragraphs (b)(5) through (7): The registrant may 
modify the tabular formats in Tables 4 through 6 of this subpart for 
ease of presentation, to add information, or to combine two or more 
required tables.
    Instruction 3 to paragraphs (b)(5) through (7): All disclosure of 
mineral resources must be exclusive of mineral reserves.
    Instruction 4 to paragraphs (b)(5) through (7): A registrant with 
only a royalty interest should provide only the portion of the 
resources or reserves that are subject to the royalty or similar 
agreement.
    (8) Provide a comparison in tabular form of the property's mineral 
resources and reserves as of the end of the last fiscal year against 
the mineral resources and reserves as of the end of the preceding 
fiscal year, with an explanation of any material change between the 
two. The comparison must use the tabular format, as provided in Tables 
7 and 8 of this subpart, which discloses information concerning:
    (i) The mineral resources or reserves at the end of the last two 
fiscal years;
    (ii) The net difference between the mineral resources or reserves 
at the end of the last completed fiscal year and the preceding fiscal 
year, as a percentage of the resources or reserves at the end of the 
fiscal year preceding the last completed one;
    (iii) An explanation of the causes of any discrepancy in mineral 
resources including depletion or production, changes in commodity 
prices, additional resources discovered through exploration, and 
changes due to the methods employed; and
    (iv) An explanation of the causes of any discrepancy in mineral 
reserves including depletion or production, changes in the resource 
model, changes in commodity prices and operating costs, changes due to 
the methods employed, and changes due to acquisition or disposal of 
properties.


                   Table 7 to Subpart 229.1300--Mineral Resource Reconciliation (Only the Sum of Measured and Indicated Resources Should Be Used in Reconciliation Disclosure)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Resource   Resource                                        Causes of discrepancies in resources
                                                                     at the     at the          ------------------------------------------------------------------------------------------------
                                                                     end of     end of     Net
                                                                     fiscal     fiscal    Diff.   Depletion
                                                                      year       year      (%)        or       Price   Cost     Exploration     Methodology    Acquisition/    Others   Comments
                                                                   ending mm/ ending mm/          production                                                     disposal
                                                                    dd/yy\1\   dd/yy\1\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Ore type 1.......................................................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Ore type 2.......................................................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Use these two columns to disclose resources at the end of each of the last two fiscal years.


                                                                   Table 8 to Subpart 229.1300--Mineral Reserve Reconciliation
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Reserves   Reserves                                Causes of discrepancies in reserves
                                                                     at the     at the          ---------------------------------------------------------------------------------
                                                                     end of     end of     Net
                                                                     fiscal     fiscal    Diff.   Depletion                                                                          Comments
                                                                      year       year      (%)        or       Resource   Price   Cost     Methodology    Acquisition/    Others
                                                                   ending mm/ ending mm/          production    model                                       disposal
                                                                    dd/yy\1\   dd/yy\1\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Ore type 1.......................................................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 41733]]

 
Ore type 2.......................................................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Use these two columns to disclose reserves at the end of each of the last two fiscal years.

    (9) If the registrant has not previously disclosed mineral reserve 
or resource estimates in a filing with the Commission or is disclosing 
material changes to its previously disclosed mineral reserve or 
resource estimates, provide a brief discussion of the material 
assumptions and criteria in the disclosure and cite to corresponding 
sections of the technical report summary, which must be filed as an 
exhibit pursuant to Sec.  229.1302(b).
    (10) If the registrant has not previously disclosed material 
exploration results in a filing with the Commission, or is disclosing 
material changes to its previously disclosed exploration results, it 
must provide sufficient information to allow for an accurate 
understanding of the significance of the exploration results. This must 
include information such as exploration context, type and method of 
sampling, sampling intervals and methods, relevant sample locations, 
distribution, dimensions, and relative location of all relevant assay 
and physical data, data aggregation methods, land tenure status, and 
any additional material information that may be necessary to make the 
required disclosure concerning the registrant's exploration results not 
misleading. The registrant must cite to corresponding sections of the 
summary technical report, which must be filed as an exhibit pursuant to 
Sec.  229.1302(b).
    Instruction 1 to paragraphs (b)(9) and (10): Whether a change in 
exploration results, mineral resources, or mineral reserves, is 
material is based on all facts and circumstances, both quantitative and 
qualitative.
    Instruction 2 to paragraphs (b)(9) and (10): A change in 
exploration results that significantly alters the potential of the 
exploration target is considered material.
    Instruction 3 to paragraphs (b)(9) and (10): An annual change in 
total resources or reserves of 10% or more, excluding production as 
reported in Tables 7 and 8 of this subpart, is presumed to be material.
    Instruction 4 to paragraphs (b)(9) and (10): A cumulative change in 
total resources or reserves of 30% or more in absolute terms, excluding 
production as reported in Tables 7 and 8 of this subpart, from the 
current filed technical report summary is presumed to be material.
    Instruction 5 to paragraphs (b)(9) and (10): In assessing the 
presumption of materiality tests, the registrant should consider the 
change in total resources or reserves on the basis of total tonnage or 
volume of saleable product.
    Instruction 6 to paragraphs (b)(9) and (10): A registrant must also 
carefully consider whether the filed technical report summary is 
current with respect to all material assumptions and information, 
including assumptions relating to all modifying factors and scientific 
and technical information (e.g. sampling data, estimation assumptions 
and methods). To the extent that the registrant is not filing a 
technical report summary but instead is basing the required disclosure 
upon a previously filed report, that report must also be current in 
these material respects. If the previously filed report is not current 
in these material respects, the registrant must file a revised or new 
summary technical report from a qualified person, in compliance with 
Item 601(b)(96) of Regulation S-K (17 CFR 229.601(b)(96)), that 
supports the registrant's mining property disclosures.
    Instruction 7 to paragraphs (b)(9) and (10): A report containing 
estimates of the quantity, grade, or metal or mineral content of a 
deposit or exploration results that a registrant has not verified as a 
current mineral resource, mineral reserve, or exploration results, and 
which was prepared before the registrant acquired, or entered into an 
agreement to acquire, an interest in the property that contains the 
deposit, is not considered current and cannot be filed in support of 
disclosure.


Sec.  229.1305  (Item 1305) Internal controls disclosure.

    Describe the internal controls that the registrant uses in its 
exploration and mineral resource and reserve estimation efforts. This 
disclosure should include quality control and quality assurance (QC/QA) 
programs, verification of analytical procedures, and a discussion of 
comprehensive risk inherent in the estimation.
    Instruction to Item 1305: A registrant must provide the internal 
controls disclosure required by this section whether it is providing 
the disclosure under Sec.  229.1303, Sec.  229.1304, or under both 
sections.

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

0
7. The authority citation for part 239 continues to read in part as 
follows:

    Authority:  15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-
3, 77sss, 78c, 78l, 78m, 78n, 78o(d), 78o-7 note, 78u-5, 78w(a), 
78ll, 78mm, 80a-2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13, 80a-24, 
80a-26, 80a-29, 80a-30, and 80a-37, and Sec. 71003 and Sec. 84001, 
Pub. L. 114-94, 129 Stat. 1312, unless otherwise noted.
* * * * *
0
8. Amend Form 1-A (referenced in Sec.  239.90) by:
0
a. Designating the introductory text of Item 8 under Part II as 
paragraph (a);
0
b. Adding paragraph (b) to Item 8 under Part II;
0
c. Revising the Instruction to Item 8 under Part II;
0
d. Redesignating paragraph (15) as paragraph (16) of Item 17 
(Description of Exhibits) under Part III; and
0
e. Adding new paragraph (15) of Item 17 (Description of Exhibits) under 
Part III.
    The additions and revision read as follows:
    [Note: The text of Form 1-A does not, and these amendments will 
not, appear in the Code of Federal Regulations.]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549

FORM 1-A REGULATION A OFFERING STATEMENT UNDER THE SECURITIES ACT OF 
1933

* * * * *

PART II--INFORMATION REQUIRED IN OFFERING CIRCULAR

* * * * *

OFFERING CIRCULAR

* * * * *

[[Page 41734]]

Item 8. Description of Property

    (a) State briefly the location and general character of any 
principal plants or other material physical properties of the issuer 
and its subsidiaries. If any such property is not held in fee or is 
held subject to any major encumbrance, so state and briefly describe 
how held. Include information regarding the suitability, adequacy, 
productive capacity and extent of utilization of the properties and 
facilities used in the issuer's business.
    (b) Issuers engaged in mining operations must refer to and, if 
required, provide the disclosure under Subpart 1300 of Regulation S-K 
(Sec. Sec.  229.1301 et seq.), in addition to any disclosure required 
by this Item.
    Instruction to Item 8:
    Except as required by paragraph (b) of this Item, detailed 
descriptions of the physical characteristics of individual properties 
or legal descriptions by metes and bounds are not required and should 
not be given.
* * * * *

PART III--EXHIBITS

* * * * *

Item 17. Description of Exhibits

* * * * *
    15. The technical report summary under Item 601(b)(96) of 
Regulation S-K--An issuer that is required to file a technical report 
summary pursuant to Item 1302(b)(2) of Regulation S-K must provide the 
information specified in Item 601(b)(96) of Regulation S-K as an 
exhibit to Form 1-A.
* * * * *

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
9. The authority citation for part 249 continues to read in part as 
follows:

    Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C. 
5461 et seq.; 18 U.S.C. 1350; Sec. 953(b) Pub. L. 111-203, 124 Stat. 
1904; and Sec. 102(a)(3) Pub. L. 112-106, 126 Stat. 309, unless 
otherwise noted.
    Section 249.220f is also issued under secs. 3(a), 202, 208, 302, 
306(a), 401(a), 401(b), 406 and 407, Pub. L. 107-204, 116 Stat. 745.
* * * * *
0
10. Amend Form 20-F (referenced in Sec.  249.220f) by:
0
a. Revising the heading ``Instruction to Item 4:''
0
b. Adding Instruction 3 to Item 4;
0
c. Removing the Instructions to Item 4.D;
0
d. Adding Instruction 17 to the Instructions as to Exhibits; and
0
e. Reserving paragraphs 18 through 99 under Instructions as to 
Exhibits.
    The revision and additions read as follows:
    [Note: The text of Form 20-F does not, and these amendments will 
not, appear in the Code of Federal Regulations.]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 20-F

* * * * *

PART I

* * * * *
    Instructions to Item 4:
* * * * *
    3. Issuers engaged in mining operations must refer to and, if 
required, provide the disclosure under Subpart 1300 of Regulation S-K 
(Sec. Sec.  229.1301 et seq. of this chapter).
* * * * *

INSTRUCTIONS AS TO EXHIBITS

* * * * *
    17. The technical report summary under Item 601(b)(96) of 
Regulation S-K (Sec.  229.601 of this chapter).
    A registrant that is required to file a technical report summary 
pursuant to Item 1302(b)(2) of Regulation S-K (Sec.  229.1302(b)(2) of 
this chapter) must provide the information specified in Item 601(b)(96) 
of Regulation S-K as an exhibit to its registration statement or annual 
report on Form 20-F.
    18 through 99 [Reserved]
* * * * *

    By the Commission.

    Dated: June 16, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016-14632 Filed 6-24-16; 8:45 am]
 BILLING CODE 8011-01-P