[Federal Register Volume 83, Number 246 (Wednesday, December 26, 2018)]
[Rules and Regulations]
[Pages 66344-66461]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-26337]



[[Page 66343]]

Vol. 83

Wednesday,

No. 246

December 26, 2018

Part II





Securities and Exchange Commission





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17 CFR Parts 229, 230, 239, et al.





Modernization of Property Disclosures for Mining Registrants; Final 
Rule

  Federal Register / Vol. 83 , No. 246 / Wednesday, December 26, 2018 / 
Rules and Regulations  

[[Page 66344]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 229, 230, 239, and 249

[Release Nos. 33-10570; 34-84509; File No. S7-10-16]
RIN 3235-AL81


Modernization of Property Disclosures for Mining Registrants

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: We are adopting amendments to modernize 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 amendments 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 
amendments also will more closely align the Commission's disclosure 
requirements and policies for mining properties with current industry 
and global regulatory practices and standards. In addition, we are 
rescinding Industry Guide 7 and relocating the Commission's mining 
property disclosure requirements to a new subpart of Regulation S-K.

DATES: Effective date: The final rule amendments are effective February 
25, 2019, except for the amendments to 17 CFR 229.801(g) and 
229.802(g), which will be effective on January 1, 2021.
    Compliance date: Registrants engaged in mining operations must 
comply with the final rule amendments for the first fiscal year 
beginning on or after January 1, 2021. Industry Guide 7 will remain 
effective until all registrants are required to comply with the final 
rules, at which time Industry Guide 7 will be rescinded.

FOR FURTHER INFORMATION CONTACT: Elliot Staffin, Special Counsel, in 
the Division of Corporation Finance, at (202) 551-3430, U.S. Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: We are amending 17 CFR 229.102 (``Item 102 
of Regulation S-K'') under the Securities Act of 1933 (``Securities 
Act'') \1\ and the Securities Exchange Act of 1934 (``Exchange 
Act''),\2\ adding new exhibit (96) to 17 CFR 229.601(b) (``Item 601 of 
Regulation S-K''), adding new 17 CFR part 229, subpart 229.1300 
(``subpart 1300 of Regulation S-K''), amending 17 CFR 230.436 under the 
Securities Act, amending Form 1-A,\3\ amending Form 20-F,\4\ and 
rescinding 17 CFR 229.801(g) and 229.802(g) under the Securities Act 
and Exchange Act.
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    \1\ 15 U.S.C. 77a et seq.
    \2\ 15 U.S.C. 78a et seq.
    \3\ 17 CFR 239.90.
    \4\ 17 CFR 249.220f.
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Table of Contents

I. Introduction
    A. Summary of, and Commenters' Principal Concerns Regarding, the 
Commission's Proposed Revisions to the Current Mining Property 
Disclosure Regime
    B. Summary of Principal Changes to the Final Rules
II. Final Mining Property Disclosure Rules
    A. Consolidation of the Mining Disclosure Requirements
    1. Rule Proposal
    2. Comments on the Rule Proposal
    3. Final Rules
    B. Overview of the Standard for Mining-Related Disclosure
    1. The Threshold Materiality Standard
    2. Treatment of Vertically-Integrated Companies
    3. Treatment of Multiple Property Ownership
    4. Treatment of Royalty Companies and Other Companies Holding 
Economic Interests in Mining Properties
    5. 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
    1. Rule Proposal
    2. Comments on the Rule Proposal
    3. Final Rules
    E. Treatment of Mineral Resources
    1. The Mineral Resource Disclosure Requirement
    2. Definition of Mineral Resource
    3. Classification of Mineral Resources
    4. The Initial Assessment Requirement
    5. 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
    I. Transition Period and Compliance Date
III. Other Matters
IV. Economic Analysis
    A. Baseline
    1. Affected Parties
    2. Current Regulatory Framework and Market Practices
    B. Analysis of Potential Economic Effects
    1. Broad Economic Effects of the Final Rules and Impact on 
Efficiency, Competition, and Capital Formation
    2. Consolidation of the Mining Disclosure Requirements
    3. The Standard for Mining-Related Disclosure
    4. Qualified Person and Responsibility for Disclosure
    5. Treatment of Exploration Results
    6. Treatment of Mineral Resources
    7. Treatment of Mineral Reserves
    8. Specific Disclosure Requirements
    9. Conforming Changes to Certain Forms Not Subject to Regulation 
S-K
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
VI. Final Regulatory Flexibility Act Analysis
    A. Need for, and Objectives of, the Final Rules
    B. Significant Issues Raised by Public Comments
    C. Small Entities Subject to the Final Rules
    D. Reporting, Recordkeeping, and Other Compliance Requirements
    E. Duplicative, Overlapping or Conflicting Federal Rules
    F. Agency Action To Minimize Effect on Small Entities
VII. Statutory Authority

I. Introduction

    On June 16, 2016, the Commission proposed revisions to its 
disclosure requirements and related guidance under the Securities Act 
and Exchange Act for properties owned or operated by mining companies 
to provide investors with a more comprehensive understanding of a 
registrant's mining properties to help them make more informed 
investment decisions.\5\ The Commission also proposed to modernize its 
disclosure requirements and policies for mining properties by more 
closely aligning them with current industry and global regulatory 
practices and standards.\6\ The Commission's disclosure requirements 
are currently

[[Page 66345]]

found in Item 102 of Regulation S-K, and the related guidance appears 
in Industry Guide 7.\7\
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    \5\ See Modernization of Property Disclosures for Mining 
Registrants, Securities Act Release No. 33-10098 (June 16, 2016) [81 
FR 41651] (``Proposing Release'').
    \6\ We proposed to modernize our disclosure requirements for 
mining properties following a request by some industry participants 
to revise Guide 7. See Petition for Rulemaking from Society for 
Mining, Metallurgy and Exploration, Inc. to Elizabeth M. Murphy, 
Secretary, U.S. Securities & Exchange Commission (Oct. 1, 2012), 
(``SME Petition for Rulemaking''), http://www.sec.gov/rules/petitions/2012/petn4-654.pdf. In accordance with 17 CFR 201.192 
(Rule 192 of the Commission's Rules of Practice), the Secretary of 
the Commission will notify the petitioners of the action taken by 
the Commission following the publication of this release in the 
Federal Register.
    \7\ See U.S. Sec. & Exch. Comm'n. Industry Guide 7: Description 
of Property By Issuers Engaged or to Be Engaged in Significant 
Mining Operations (``Guide 7'').
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    We received over 60 comment letters on the proposed revisions \8\ 
primarily from participants in, or representatives of, the mining 
industry, including mining companies,\9\ mining standards groups,\10\ 
mining consulting groups,\11\ professional and trade associations,\12\ 
law firms,\13\ mining royalty companies,\14\ and individual geologists 
and mining engineers.\15\ We also received comments from several groups 
expressing various environmental or sustainability concerns in 
connection with the mining industry.\16\
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    \8\ See Comments on Proposed Rule: Modernization of Property 
Disclosures for Mining Registrants, U.S. Sec. & Exch. Comm'n, 
https://www.sec.gov/comments/s7-10-16/s71016.htm.
    \9\ See, e.g., letters from Alliance Resource Partners, L.P. 
(Sept. 23, 2016) (``Alliance''); AngloGold Ashanti Limited (Aug. 22, 
2016) (``AngloGold''); BHP Billiton (Sept. 23, 2016) (``BHP''); 
Cloud Peak Energy Inc. (Sept. 22, 2016) (``Cloud Peak''); Coeur 
Mining, Inc. (Aug. 19, 2016) (``Coeur''); Energy Fuels Inc. (Sept. 
29, 2016) (``Energy Fuels''); Freeport-McMoRan Inc. (Sept. 23, 2016) 
(``FCX''); Gold Resource Corporation (Aug. 26, 2016) (``Gold 
Resource''); Newmont Mining Corporation (Sept. 26, 2016) 
(``Newmont''); Northern Dynasty Minerals Ltd. (Aug. 15, 2016) 
(``Northern Dynasty''); Randgold Resources Ltd. (Sept. 26, 2016) 
(``Randgold''); Rio Tinto plc (Sept. 26, 2016) (``Rio Tinto''); Ur-
Energy Inc. (Sept. 26, 2016) (``Ur-Energy''); and Vale S.A. (Aug. 
26, 2016) (``Vale'').
    \10\ See, e.g., letters from Australasian Institute of Mining 
and Metallurgy (Sept. 26, 2016) (``AusIMM''); Canadian Institute of 
Mining, Metallurgy and Petroleum (Aug. 26, 2016) (``CIM''); Comissao 
Brasileira de Recursos e Reservas (Sept. 5, 2016) (``CBRR''); 
Committee for Mineral Reserves International Reporting Standards 
(Sept. 23, 2016) (``CRIRSCO''); Joint Ore Reserves Committee of 
Australasia (Sept. 26, 2016) (``JORC''); SAMCODES Standards 
Committee (Sept. 22, 2016) (``SAMCODES 1'') and (Sept. 26, 2016) 
(``SAMCODES 2''); and Society for Mining, Metallurgy and 
Exploration, Inc. (Aug. 4, 2016) (``SME 1'') and Aug. 25, 2016) 
(``SME 2'').
    \11\ See, e.g., letters from Amec Foster Wheeler (Sept. 26, 
2016) (``Amec''); CPM Group (Aug. 24, 2016) (``CPM''); Golder 
Associates, Inc. (Sept. 26, 2016) (``Golder''); and SRK Consulting 
(U.S.), Inc. (Aug. 19, 2016) (``SRK 1'') and Sept. 26, 2016 (``SRK 
2'').
    \12\ See, e.g., letters from American Institute of Professional 
Geologists (Aug. 22, 2016) (``AIPG''); Mining and Metallurgical 
Society of America (Sept. 26, 2016) (``MMSA''); and National Mining 
Association (Sept. 23, 2016) (``NMA 1'') and Sept. 29, 2017 (``NMA 2 
and SME 3''). The latter letter from NMA was co-signed by SME and 
was submitted at the meeting between representatives of the National 
Mining Association and Ur-Energy and staff of the Commission's 
Division of Corporation Finance on October 10, 2017. That letter is 
available at: https://www.sec.gov/comments/s7-10-16/s71016-2633677-161226.pdf. See also letters from National Society of Professional 
Engineers (Aug. 16, 2016) (``NSPE''); National Stone, Sand & Gravel 
Association (Sept. 26, 2016) (``NSSGA 1'') and (Apr. 28, 2017) 
(``NSSGA 2''); Prospectors & Developers Association of Canada (Oct. 
12, 2016) (``PDAC''); and U.S. Chamber of Commerce (Sept. 26, 2016) 
(``Chamber'').
    \13\ See, e.g., letters from Andrews Kurth Kenyon LLP (Sept. 26, 
2016) (``Andrews Kurth''); Cleary Gottlieb Steen & Hamilton LLP 
(Sept. 30, 2016) (``Cleary Gottlieb''); Crowell & Moring LLP (Sept. 
16, 2016) (``Crowell and Moring''); Davis Polk & Wardwell LLP (Sept. 
26, 2016) (``Davis Polk''); Dorsey & Whitney LLP (Sept. 26, 2016) 
(``Dorsey & Whitney''); Shearman & Sterling LLP (Sept. 26, 2016) 
(``Shearman & Sterling''); Sullivan & Cromwell LLP (Aug. 15, 2016) 
(``Sullivan & Cromwell''); Troutman Sanders LLP (Sept. 26, 2016) 
(``Troutman Sanders''); and Vinson & Elkins LLP (Sept. 26, 2016) 
(``Vinson & Elkins'').
    \14\ See, e.g., letters from Natural Resource Partners L.P. 
(Sept. 26, 2016) (``NRP''); and Royal Gold, Inc. (Sept. 26, 2016) 
(``Royal Gold'').
    \15\ See, e.g., letters from Ted Eggleston, Ph.D. (Aug. 19, 
2016) (``Eggleston''); Douglas H. Graves, P.E. (Sept. 21, 2016) 
(``Graves''); Keith Laskowski (Aug. 26, 2016) (``Laskowski''); 
Michael Moats (Aug. 31, 2016) (``Moats''); Dr. Pierre Mousset-Jones 
(June 20, 2016) (``Mousset-Jones''); and Dana Willis, P.G. (Aug. 4, 
2016) (``Willis'').
    \16\ See, e.g., letters from Carbon Tracker Initiative (Aug. 26, 
2016) (``Carbon Tracker''); Center for Science in Public 
Participation (Sept. 22, 2016) (``CSP\2\''); Columbia Water Center 
(Sept. 26, 2016) (``Columbia Water''); Earthworks (and 21 other 
environmental advocates) (Sept. 26, 2016) (``Earthworks et al.''); 
Montana Trout Unlimited (Sept. 25, 2016) (``Montana Trout''); and 
Sustainability Accounting Standards Board (Aug. 26, 2016) 
(``SASB'').
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    Most commenters supported modernizing the Commission's property 
disclosure requirements for mining registrants by more closely aligning 
them with current industry and global regulatory practices and 
standards,\17\ as embodied by the Committee for Reserves International 
Reporting Standards (``CRIRSCO'').\18\ Numerous industry 
commenters,\19\ however, expressed concern that the proposed rules 
deviated, in certain respects, from the CRIRSCO standards \20\ or the 
various international, CRIRSCO-based disclosure codes.
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    \17\ See, e.g., letters from Andrews Kurth, AngloGold, AusIMM, 
CIM, CSP\2\, Cleary Gottlieb, Coeur, Columbia Water, CBRR, CRIRSCO, 
Davis Polk, Dorsey & Whitney, Earthworks et al., Golder, Graves, 
JORC, MMSA, Montana Trout, Newmont, PDAC, Randgold, Rio Tinto, SME 
1, Chamber, Ur-Energy, Vale, and Willis.
    \18\ 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)), 
Brazil (Brazilian Commission for Mineral Resources and Reserves 
(CBRR)), Canada (Canadian Institute of Mining Metallurgy and 
Petroleum (CIM)), Chile (Minera Comision), Europe (Pan-European 
Reserves and Resources Reporting Committee (PERC)), Indonesia (the 
KCMI Joint Committee (KOMPERS)), Kazakhstan (Kazakhstan Association 
for Public Reporting on Exploration Results, Mineral Resources and 
Mineral Reserves (KAZRC)), 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 website is 
located at: http://www.crirsco.com.
    \19\ See, e.g., letters from Amec, AIPG, Andrews Kurth, 
AngloGold, AusIMM, BHP, Chamber , CIM, Cleary & Gottlieb, Coeur, 
CRIRSCO, Davis Polk, Dorsey & Whitney, Eggleston, Energy Fuels, FCX, 
Gold Resource, Golder, Graves, JORC, Newmont, NMA 1, NMA 2 and SME 
3, Northern Dynasty, NSSGA 1 and 2, PDAC, Randgold, Rio Tinto, 
SAMCODES 1 and 2, Shearman & Sterling, SME 1, SRK 1, Ur-Energy, 
Vale, and Willis.
    \20\ The CRIRSCO standards are found in its International 
Reporting Template. See, e.g., Committee for Mineral Reserves 
International Reporting Standards, CRIRSCO International Reporting 
Template, cl. 18 (2013), http://www.crirsco.com/templates/international_reporting_template_november_2013.pdf.
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    As explained below, in a number of instances, we have revised the 
proposed requirements in line with commenters' suggestions to be more 
consistent with the CRIRSCO standards and improve the comparability of 
mining property disclosures, which should help decrease, relative to 
the proposed rules, the expected compliance costs and burden of the 
final rules and enhance investor understanding of registrants' mining 
operations. In other instances, we have not changed the proposed 
requirements because we believe that those requirements are necessary 
to protect investors. Overall, we believe that the final rules reflect 
an appropriate consideration of the extent to which the final rules 
promote efficiency, competition, and capital formation in addition to 
the protection of investors.\21\ The final rules will modernize the 
Commission's mining property disclosure regime by amending or removing 
requirements that may have placed U.S. mining registrants at a 
competitive disadvantage \22\ and by adding other requirements that 
will help investors make more informed investment decisions about those 
registrants.
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    \21\ See Section 2(b) of the Securities Act [15 U.S.C. 77b(b)] 
and Section 3(f) of the Exchange Act [15 U.S.C. 78c(f)]. See also 
infra Section IV.
    \22\ See, e.g., infra Section II.E.1.iii (discussing the 
treatment of mineral resources).
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A. Summary of, and Commenters' Principal Concerns Regarding, the 
Commission's Proposed Revisions to the Current Mining Property 
Disclosure Regime

    In light of global developments in the mining industry's disclosure 
standards and industry participants' concerns, we proposed to align the 
Commission's disclosure rules for properties owned or operated by 
mining companies with the CRIRSCO-based codes in several respects. For 
example, we proposed to require a registrant with material mining 
operations to disclose, in addition to its mineral reserves, mineral 
resources that

[[Page 66346]]

have been determined based upon information and supporting 
documentation by one or more qualified persons. We proposed to use the 
CRIRSCO standards' classification scheme regarding mineral resources 
and reserves, and proposed substantially similar definitions of many of 
the technical terms used under the CRIRSCO-based codes, such as the 
definition of the various categories of mineral resources and mineral 
reserves, qualified person, pre-feasibility study, and feasibility 
study. We also proposed to permit the qualified person to use the 
results of either a pre-feasibility study or a final feasibility study 
to support a determination of reserves in most situations.
    Further, we proposed to establish a single set of rules for mining 
property disclosure by rescinding Guide 7, replacing it with a new 
subpart of Regulation S-K, and amending Item 102 of Regulation S-K to 
refer to the new subpart. The proposed mining property disclosure rules 
would require a registrant with material mining operations to provide 
both summary disclosure concerning its properties in the aggregate as 
well as more detailed disclosure about individually material 
properties.
    While most commenters supported the Commission's goal of 
modernizing its mining property disclosure requirements in light of 
global standards, numerous commenters expressed concern that the 
proposed rules deviated from the CRIRSCO standards in several respects. 
Their principal concerns included that:

     Requiring both mineral resource and reserve estimates 
to be based on a price, which may not exceed the average price for 
the preceding 24 months, except when a contract has defined the 
price, would diverge from global industry practice, which permits 
the qualified person to use any reasonable and justifiable price, 
and which is typically a price based on forward-looking pricing 
forecasts;
     The proposed summary and individual property disclosure 
requirements are overly prescriptive, burdensome to meet, and do not 
account for the diversity of operations within the mining industry;
     Prohibiting the use of inferred resources in a 
quantitative assessment of resources would be inconsistent with the 
CRIRSCO standards, and in particular Canadian mining disclosure 
requirements, which permit the inclusion of inferred resources to 
demonstrate the potential economic viability of a deposit;
     Requiring the use of a feasibility study, rather than a 
pre-feasibility study, to support a determination of reserves in 
high risk situations would run counter to the CRIRSCO-based codes, 
which leave the decision of what type of technical report is 
required to support the determination of reserves, including in high 
risk situations, to the discretion and judgment of the competent or 
qualified person;
     The proposed prohibition against disclaimers would be 
contrary to the CRIRSCO-based codes, and in particular the Canadian 
requirements, which permit disclaimers in certain circumstances;
     Prohibiting the use of historical estimates would be 
contrary to the Canadian and Australian approaches, which allow such 
use, and might preclude the consummation of some mergers, 
acquisitions or business combinations because there would not be 
enough time to verify an estimate provided by the target company;
     Requiring all applicable mining property disclosure 
from a royalty, streaming, or other similar company would be 
burdensome for such companies because they generally have no rights 
beyond receiving royalties and lack access to the technical data and 
other information available to the owner or operator, and which is 
necessary to comply with the mining property disclosure 
requirements; and
     The proposed rules could compel a registrant to 
disclose its exploration results before they become material to 
investors, which would run counter to the CRIRSCO-based codes.

    Many commenters maintained that, unless the Commission revised the 
proposed rules, their adoption would result in mining registrants 
incurring an unnecessarily heavy compliance burden, increase the costs 
of compliance for mining registrants that also report in CRIRSCO-based 
jurisdictions, and result in inconsistent disclosure that could cause 
investor confusion and diminish comparability. Some commenters also 
maintained that, if adopted, the proposed rules would continue to place 
U.S. registrants at a significant competitive disadvantage and leave in 
place significant barriers to entry for foreign mining companies that 
would otherwise list or raise capital in the United States.
    We have carefully considered all of the comments received on the 
proposed rules. As discussed below, the final rules reflect changes 
from the rule proposal that were made in response to many of these 
comments.

B. Summary of Principal Changes to the Final Rules

    The final rules include several revisions to more closely align the 
Commission's mining property disclosure requirements with the CRIRSCO 
standards and thereby help decrease, relative to the proposed rules, 
the compliance burden and costs for the many registrants that are 
subject to one or more of the CRIRSCO-based codes while still providing 
important investor protections. For example, the final rules:

     Require a qualified person to use a price for each 
commodity that provides a reasonable basis for establishing the 
prospects of economic extraction when assessing mineral resources, 
and that provides a reasonable basis for establishing that the 
project is economically viable when determining mineral reserves, 
which may be a historical or forward-looking price, as long as the 
qualified person discloses and explains, with particularity, his or 
her reasons for using the selected price, including the material 
assumptions underlying the selection;
     Eliminate the proposed quantitative presumptions 
regarding when a registrant's mining operations, and when a change 
in previously reported estimates of mineral resources or mineral 
reserves, are deemed to be material;
     Eliminate the proposed summary disclosure provision 
requiring specific items of information in tabular format about a 
registrant's top 20 properties and, instead, adopt a more 
principles-based approach by requiring the registrant to provide 
investors with an overview of its properties and mining operations;
     Reduce the number of summary and individual property 
disclosure provisions requiring tables from seven, as proposed, to 
two, and permit other required disclosure to be in either narrative 
or tabular format;
     Permit, but not require, a registrant to file a 
technical report summary to support its disclosure of exploration 
results;
     Provide that a qualified person will not be subject to 
expert liability under Section 11 of the Securities Act for findings 
and conclusions regarding certain aspects of specified modifying 
factors discussed in the technical report summary or other parts of 
the registration statement that the qualified person has indicated 
are based on information provided by the registrant;
     Permit a qualified person to determine mineral 
resources and reserves at any specific point of reference, which 
must be disclosed in the technical report summary, rather than at 
three points of reference;
     Exclude geothermal energy from the definition of 
mineral resource;
     Require a qualified person to apply relevant technical 
and economic factors likely to influence the prospect of economic 
extraction, rather than all modifying factors, when determining 
mineral resources;
     Permit a qualified person in the technical report 
summary to disclose mineral resources as including mineral reserves 
as long as he or she also discloses mineral resources as excluding 
mineral reserves; \23\
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    \23\ However, as proposed, the final rules prohibit a registrant 
from including mineral reserves when disclosing mineral resource 
estimates in a prospectus or other Commission filing.
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     Permit a qualified person to include inferred resources 
in an economic analysis that the qualified person opts to include in 
an initial assessment as long as certain conditions are met;
     Define mineral reserve to include diluting materials 
and allowances for losses that may occur when the material is mined 
or extracted;

[[Page 66347]]

     Permit a qualified person to conduct either a pre-
feasibility or final feasibility study to support a determination of 
mineral reserves even in high risk situations;
     Permit the use of historical estimates of mineral 
resources or reserves in Commission filings pertaining to mergers, 
acquisitions, or business combinations if the registrant is unable 
to update the estimate prior to the completion of the relevant 
transaction, provided that the registrant discloses the source and 
date of the estimate, and does not treat the estimate as a current 
estimate; and
     Permit a registrant holding a royalty or similar 
interest to omit any information required under the summary and 
individual property disclosure provisions to which it lacks access 
and which it cannot obtain without incurring an unreasonable burden 
or expense.
    We also are clarifying our position on a few issues raised by 
commenters that were not fully addressed in the Proposing Release. 
For example:
     Multiple qualified persons may prepare a technical 
report summary if certain conditions are met;
     If a qualified person is employed by a third-party 
firm, that firm may sign the technical report summary and provide 
the written consent required for an expert under the Securities Act;
     A registrant's disclosure of information regarding its 
exploration activity and exploration results is voluntary until such 
information becomes material to investors; and
     A registrant and its qualified person may disclose 
exploration targets in Commission filings if accompanied by certain 
specified cautionary and explanatory statements.

    In addition, we are adopting a two-year transition period so that a 
registrant will not have to comply with the new rules until its first 
fiscal year beginning on or after January 1, 2021, although a 
registrant may voluntarily comply with the new rules prior to the 
compliance date, subject to the Commission's completion of necessary 
EDGAR reprogramming changes.

II. Final Mining Property Disclosure Rules

A. Consolidation of the Mining Disclosure Requirements

1. Rule Proposal
    The combination of the overlapping structure of the current 
disclosure regime for mining registrants (in Item 102 of Regulation S-K 
and Industry Guide 7) 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.\24\ To help address this 
uncertainty, we proposed to rescind Guide 7 and create new subpart 1300 
of Regulation S-K that would govern disclosure for registrants with 
mining operations. In addition, we proposed to amend Item 102 of 
Regulation S-K to replace the instruction that directed issuers 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 subpart 1300 of Regulation S-K. We also proposed to provide 
the same instruction on Form 20-F \25\ and Form 1-A.\26\
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    \24\ See Proposing Release, supra note 5, at Section II.A.
    \25\ Foreign private issuers use Form 20-F to file their 
Exchange Act registration statements and annual reports, and also 
refer to Form 20-F when filing their Securities Act registration 
statements on Forms F-1 and F-4. See 17 CFR 249.220f.
    \26\ Form 1-A is the offering statement used by issuers that are 
eligible to engage in securities offerings under Regulation A. See 
17 CFR 230.251-230.263.
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2. Comments on the Rule Proposal
    Many commenters stated that they supported the Commission's 
proposal to rescind Guide 7 and replace it with a single set of 
disclosure standards as long as those standards are consistent with the 
CRIRSCO standards.\27\ Several commenters also reiterated that the 
Commission's current disclosure regime for mining properties has caused 
uncertainty for mining registrants.\28\ Two commenters, however, urged 
the Commission to withdraw its proposal and, instead, make more modest 
revisions to Guide 7 out of concern that the proposed rules were overly 
prescriptive and deviated from the CRIRSCO standards in several key 
respects.\29\
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    \27\ See letters from AIPG, Amec, AngloGold, BHP, CBRR, Coeur, 
Eggleston, Golder, MMSA, Midas Gold Corp. (June 23, 2016) 
(``Midas''), Randgold, Rio Tinto, SAMCODES 1 and 2, Ur-Energy, Vale 
and Willis.
    \28\ See letters from Amec, BHP, Crowell & Moring, Eggleston, 
Golder, Midas, Rio Tinto and SRK 1.
    \29\ See letter from NMA 2 and SME 3.
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    Regarding the content of the new mining property disclosure rules, 
some commenters recommended that the Commission specifically 
incorporate the CRIRSCO template by reference.\30\ Other commenters 
requested that the Commission adopt Canada's legal instrument, NI-43-
101, establishing mining property disclosure requirements, or recognize 
the use of Canada's Form 43-101F as the basis for a mining registrant's 
technical reports.\31\ A few commenters stated that the Commission's 
mining property disclosure rules should follow Australia's JORC or 
South Africa's SAMCODES on the grounds that Canada's NI 43-101 is too 
prescriptive.\32\
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    \30\ See, e.g., letters from AIPG and Rio Tinto.
    \31\ See, e.g., letters from AIPG, Coeur, Gold Resource, Graves, 
SME 1, SRK 1, and Willis.
    \32\ See, e.g., letters from JORC, Randgold, and SAMCODES 2.
---------------------------------------------------------------------------

3. Final Rules
    We are adopting final rules that will rescind Guide 7, as proposed, 
and codify the Commission's mining property disclosure requirements in 
new subpart 1300 of Regulation S-K.\33\ We are also amending Item 102 
of Regulation S-K, as proposed, to state that registrants engaged in 
mining operations must refer to and, if required, provide the 
disclosure under subpart 1300 of Regulation S-K \34\ in addition to any 
non-mining property disclosure required by Item 102.\35\ Having one 
source for mining disclosure obligations should facilitate mining 
registrants' compliance with their disclosure requirements by reducing 
the complexity resulting from the existing disclosure structure. 
Moreover, consolidating the mining property disclosure requirements 
into Regulation S-K should eliminate the uncertainty noted by several 
commenters concerning the Commission's current mining property 
disclosure regime.\36\
---------------------------------------------------------------------------

    \33\ 17 CFR 229.1300 through 229.1305. Subpart 1300 will apply 
to registration statements under the Securities Act and the Exchange 
Act as well as to annual reports under the Exchange Act.
    \34\ Instruction 3 to Item 102 of Regulation S-K [17 CFR 
229.102]. We are similarly amending Form 20-F and Form 1-A to 
provide the same instruction and reference to Regulation S-K subpart 
1300. See infra Section II.H.
    \35\ Registrants that have material non-mining operations will 
continue to provide non-mining property disclosures under Item 102 
of Regulation S-K.
    \36\ See supra note 28. For this reason, we continue to believe 
that codification of our mining property disclosure requirements is 
a better approach than revising Guide 7, as suggested by two 
commenters. See letter from NMA 2 and SME 3. Moreover, we note that 
the final rules are less prescriptive and conform more closely to 
CRIRSCO standards than the proposed rules.
---------------------------------------------------------------------------

    Many commenters supported our proposal to consolidate the 
Commission's mining property disclosure requirements under a single set 
of rules as long as the final rules align with the CRIRSCO 
standards.\37\ As discussed throughout this release, the final rules 
include revisions that will substantially more closely align the 
Commission's mining property disclosure requirements with the CRIRSCO 
standards as compared to the proposed rules.\38\ The final rules also

[[Page 66348]]

emphasize transparency, materiality, and competence--the three 
governing principles of the CRIRSCO standards.\39\ We therefore believe 
that the final rules are responsive to commenters' overarching concern 
that the Commission's mining property disclosure requirements be 
substantially more consistent with current industry standards.
---------------------------------------------------------------------------

    \37\ See supra note 27.
    \38\ Some commenters noted that, although the proposed rules 
differed from the CRIRSCO standards in certain respects, they did 
generally align with the CRIRSCO standards in several other 
respects. See, e.g., letter from AusIMM (``Most of the CRIRSCO 
Standard definitions have been incorporated in the release as they 
were in the 2014 SME Guide'').
    \39\ See CRIRSCO International Reporting Template, supra note 
20, at cl. 3 (``The main principles governing the operation and 
application of the Template are transparency, materiality and 
competence. Transparency requires that the reader of a Public Report 
is provided with sufficient information, the presentation of which 
is clear and unambiguous, so as to understand the report and not to 
be misled. Materiality requires that a Public Report contains all 
the relevant information which investors and their professional 
advisers would reasonably require, and reasonably expect to find in 
a Public Report, for the purpose of making a reasoned and balanced 
judgement regarding the Exploration Results, Mineral Resources or 
Mineral Reserves being reported. 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'').
---------------------------------------------------------------------------

    We do not believe it would be appropriate, however, to incorporate 
by reference or otherwise adopt in its entirety on a going forward 
basis the CRIRSCO international template, Canada's NI 43-101, or 
another specific CRIRSCO-based code or guide, as requested by some 
commenters. Granting such a request would effectively bind the 
Commission's rules both to current and future iterations and 
interpretations of the CRIRSCO standards, codes or guides, over which 
the Commission would have little to no control or influence. It also 
would ignore the need to adopt mining property disclosure rules that 
are consistent with the unique purposes and characteristics of the U.S. 
federal securities laws.\40\
---------------------------------------------------------------------------

    \40\ See, e.g., consideration of the qualified person as an 
expert under Section 11 of the Securities Act in Section II.C.1. 
below.
---------------------------------------------------------------------------

B. Overview of the Standard for Mining-Related Disclosure

1. The Threshold Materiality Standard
i. Rule Proposal
    Item 102 of Regulation S-K currently requires registrants to 
disclose information about 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. However, 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.
    For registrants that have one or 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. However, although both Item 102 and Guide 7 refer to 
``significant'' mining operations, the staff historically has advised 
registrants to apply a materiality standard in determining what 
disclosures to provide, and has used 10% of a registrant's total assets 
as the benchmark for determining the materiality of a registrant's 
mining operations.
    In order to clarify the mining property disclosure standard, we 
proposed that a registrant would be required to provide the disclosure 
under new subpart 1300 of Regulation S-K if its mining operations are 
material to its business or financial condition.\41\ The Commission 
also proposed specific steps a registrant would have to take when 
determining the materiality of its mining operations.\42\
---------------------------------------------------------------------------

    \41\ As proposed, the term ``material'' would have the same 
meaning as under 17 CFR 230.405 [Securities Act Rule 405] and 17 CFR 
240.12b-2 [Exchange Act Rule 12b-2].
    \42\ See Proposing Release, supra note 5, at Section II.B.1.
---------------------------------------------------------------------------

    The Commission further proposed that a registrant's mining 
operations are presumed to be material if its mining assets constitute 
10% or more of its total assets. The proposed rules also instructed, 
however, 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.\43\
---------------------------------------------------------------------------

    \43\ See id.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Many commenters supported the Commission's proposal to require 
disclosure if a registrant determines that its mining operations are 
material to its business or financial condition.\44\ Some commenters 
supported the proposed provision that a registrant's mining operations 
are presumed to be material if they consist of 10% or more of its total 
assets, but only if the provision is a presumption and not a bright 
line test, and not exclusive of other factors.\45\
---------------------------------------------------------------------------

    \44\ See, e.g., letters from AngloGold, CBRR, CIM, Eggleston, 
Midas, Rio Tinto, SRK 1 and Vale.
    \45\ See, e.g., letters from CBRR, Midas, and SRK 1.
---------------------------------------------------------------------------

    Some commenters supported using a quantitative measure for 
determining the materiality of a registrant's mining operations for 
purposes of the proposed rules, but recommended that the Commission 
adopt the U.S. GAAP thresholds for segment reporting under Accounting 
Standards Codification (``ASC'') 280,\46\ rather than the proposed 10% 
asset metric.\47\ Those commenters preferred this particular U.S. GAAP 
approach because of their concern that large companies may not meet the 
proposed 10% asset test or because, in their view, the U.S. GAAP 
approach is more suitable and equitable.\48\
---------------------------------------------------------------------------

    \46\ Accounting Standards Code (``ASC'') 280 requires an 
enterprise to report separately information concerning an operating 
segment if any of the following quantitative thresholds are met: (i) 
Its reported revenue, including both sales to external customers and 
intersegment sales or transfers, is 10% or more of the combined 
revenue, internal and external, of all operating segments; (ii) the 
absolute amount of its reported profit or loss is 10% or more of the 
greater, in absolute amount, of either the combined reported profit 
of all operating segments that did not report a loss, or the 
combined reported loss of all operating segments that did report a 
loss; or (iii) its assets are 10% or more of the combined assets of 
all operating segments. Under ASC 280, information about operating 
segments that do not meet any of the quantitative thresholds may 
also be considered reportable, and separately disclosed, if 
management believes that information about the segment would be 
useful to readers of the financial statements. See ASC 280-10-50-12.
    \47\ See letters from Alliance, SAMCODES 1 and SME 1; see also 
letter from JORC (stating that materiality should be determined 
under GAAP without specifying the particular GAAP provision) and 
letter from SRK 1 (stating that the actual and projected 
expenditures, revenues and income as well as the amount of capital 
raised or planned to be raised have a direct impact on materiality, 
and that if any of those amounts comprise 10% or more of a 
registrant's value, they should be considered material).
    \48\ See letters from JORC, SAMCODES 1, and SME 1.
---------------------------------------------------------------------------

    Other commenters recommended that the Commission avoid a specific 
materiality test and instead adopt the approach taken in Canada's 
Companion Policy 43-101CP.\49\ That approach requires an issuer to 
``determine materiality in the context of the issuer's overall business 
and financial condition taking into account qualitative and 
quantitative factors, assessed in respect of the issuer as a whole.'' 
\50\ Another commenter \51\ opposed ``special materiality tests (such 
as 10% of total assets)'' and advocated instead using the standards for 
materiality established by the U.S. Supreme Court in TSC v. Northway 
\52\ and Basic v. Levinson.\53\
---------------------------------------------------------------------------

    \49\ See letters from CIM, Eggleston, and Vale.
    \50\ National Instrument Companion Policy 43-101CP, pt. General 
Guidance (4), https://www.bcsc.bc.ca/Securities_Law/Policies/Policy4/PDF/43-101CP__CP___February_25__2016/. That document then 
lists several factors that are likely to support the conclusion that 
a property is material. See id. at (5).
    \51\ See letter from Chamber.
    \52\ 426 U.S. 438 (1976).
    \53\ 485 U.S. 224 (1988).

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[[Page 66349]]

    Several commenters specifically addressed the Commission's proposal 
to require the aggregation of all mining properties, regardless of size 
or type of commodity produced, when assessing the materiality of a 
registrant's mining operations.\54\ A number of commenters generally 
supported this proposal, with one noting that aggregation of the mining 
properties represents the actual composition of the registrant's 
value,\55\ and two others concurring so long as the aggregation 
correlated to the segment disclosure mandated under the accounting 
framework.\56\ Two commenters supported the aggregation of assets based 
on shared infrastructure and product integration, but only if the 
assets are in the same geographic region,\57\ with one also asserting 
that very different commodities, such as coal and metalliferous metals, 
should not be aggregated.\58\ Another commenter, however, opposed the 
aggregation of assets because ``it does not allow investors to 
determine the significance of a property, or understand that asset.'' 
\59\
---------------------------------------------------------------------------

    \54\ See letters from Alliance, Amec, AngloGold, CBRR, 
Eggleston, Midas, Rio Tinto, and SRK 1.
    \55\ See letter from SRK 1; see also letter from CBRR.
    \56\ See letters from Alliance and AngloGold. Another commenter 
stated that no commodity should be excluded, but suggested that only 
commodities from material properties should be included in technical 
reports although ``[n]on-material mines could be aggregated for 
annual disclosures.'' Letter from Eggleston.
    \57\ See letter from Rio Tinto; see also letter from Amec 
(opposing the aggregation of assets in different countries, and 
recommending that the Commission follow the guidance in the Canadian 
Companion Policy 43-101CP, which states that a property includes 
multiple claims that are contiguous or in such close proximity that 
any underlying mineral deposits would likely be developed using 
common infrastructure).
    \58\ See letter from Amec.
    \59\ Letter from Midas.
---------------------------------------------------------------------------

    Several commenters addressed the Commission's proposal, as part of 
the materiality determination, to require a registrant to include for 
each property all related activities from exploration through 
extraction to the first point of material external sale, including 
processing, transportation and warehousing.\60\ One commenter supported 
this proposal because it is required by Canada's NI43-101, is the 
benchmark for mineral project reporting, and provides investors with 
the information they need to understand the project.\61\ Another 
commenter generally supported using the first point of material 
external sale as the appropriate cut-off because this is generally 
where a mining company loses control of the product.\62\
---------------------------------------------------------------------------

    \60\ See, e.g., letters from Amec, CBRR, Earthworks, Eggleston, 
Midas and SRK.
    \61\ Letter from Midas.
    \62\ Letter from SRK 1. This commenter recommended that, ``for 
companies that have significant downstream processing, there should 
be a requirement to calculate the materiality based on the point in 
the supply chain where that raw material would be purchased if the 
company did not own the mining assets.'' Id. Another commenter 
stated that exploration through the first point of external sale is 
appropriate, but noted that not all properties will include all 
activities. See letter from Eggleston. See also letter from CBRR 
(stating that ``comprehensive, end-to-end reporting can assist the 
investors with the relevant information in order to understand 
mineral projects for exploration and development stage issuers'' 
but, for production stage registrants, ``the materiality criteria 
should be applied and exploration results are not necessarily 
relevant'').
---------------------------------------------------------------------------

    Another commenter, however, did not support the first point of 
material external sale as the appropriate cut-off because it believed 
that a registrant's materiality determination should account for costs 
associated with mine reclamation on the grounds that reclamation 
constitutes one of the greatest environmental and social liabilities 
mining registrants should disclose to investors.\63\
---------------------------------------------------------------------------

    \63\ See letter from Earthworks. Two other commenters stressed 
the importance of considering environmental and sustainability 
factors in the materiality determination. See letters from CSP\2\ 
and Montana Trout.
---------------------------------------------------------------------------

iii. Final Rules
    We are adopting the proposed provision that a registrant must 
provide the disclosure specified in subpart 1300 of Regulation S-K if 
its mining operations are material to its business or financial 
condition.\64\ We are also adopting the provision, as proposed, that 
for purposes of subpart 1300, the term material has the same meaning as 
under Securities Act Rule 405 or Exchange Act Rule 12b-2.\65\ 
Commenters generally supported basing the Commission's mining property 
disclosure threshold on whether a registrant's mining operations are 
material to its business or financial condition.\66\ Establishing 
materiality as the threshold for disclosure is consistent with the 
CRIRSCO standards, which lists materiality as one of the three 
governing principles underlying those standards.\67\ Moreover, by 
providing that materiality is to be determined pursuant to Securities 
Act Rule 405 and Exchange Act Rule 12b-2, we are clarifying that, 
although, as described below, a registrant must consider certain 
factors when determining the materiality of its mining operations, the 
ultimate governing considerations in this regard are the general 
principles reflected in those rules.\68\
---------------------------------------------------------------------------

    \64\ 17 CFR 229.1301(b) [Item 1301(b) of Regulation S-K].
    \65\ Id; see also supra note 41 and accompanying text. Pursuant 
to Securities Act Rule 405 and Exchange Act Rule 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.
    \66\ See, e.g., letters from AngloGold, CBRR, SRK 1, and Rio 
Tinto.
    \67\ See CRIRSCO's International Reporting Template, supra note 
20, at cl. 3.
    \68\ See supra note 65.
---------------------------------------------------------------------------

    In a change from the proposed rules, and as suggested by one 
commenter,\69\ we are not including an instruction to the materiality 
provision stating that a registrant's mining operations are presumed to 
be material if they consist of 10% or more of its total assets. Even as 
a presumption, we are concerned that such an instruction could become a 
de facto threshold. We also believe that an assessment that takes into 
consideration all relevant facts and circumstances will lead to better 
materiality determinations. For similar reasons, we are not adopting a 
quantitative measure of materiality based on the reportable segment 
disclosure thresholds in U.S. GAAP. Rather than referring to a specific 
U.S. GAAP provision, we believe it is appropriate to rely on a more 
principles-based approach to the materiality provision.
---------------------------------------------------------------------------

    \69\ See letter from Chamber.
---------------------------------------------------------------------------

    Consistent with comments received,\70\ we are adopting the proposed 
provision that, when determining whether its mining operations are 
material, a registrant must:
---------------------------------------------------------------------------

    \70\ See supra note 44 and accompanying text.

     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 the stage of the mining property, and size 
or type of commodity produced, including coal, metalliferous 
minerals, industrial materials, and mineral brines; \71\ and
---------------------------------------------------------------------------

    \71\ As explained in Section II.E.1., below, we are removing 
geothermal energy from the scope of these rules, and have therefore 
eliminated geothermal energy from the list of commodities required 
to be aggregated.
---------------------------------------------------------------------------

     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.\72\
---------------------------------------------------------------------------

    \72\ See 17 CFR 229.1301(c) [Item 1301(c) of Regulation S-K].


[[Page 66350]]


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

    Although some commenters sought to exclude certain commodities or 
properties in the aggregation process,\73\ we continue to believe, and 
agree with those commenters who asserted, that the aggregation of all 
mining properties, regardless of the mined commodity, is necessary to 
gauge accurately the materiality of a registrant's mining 
operations.\74\ For example, the exclusion from the aggregation process 
of properties that a registrant believes are not individually material 
\75\ would overlook and improperly remove from the scope of the mining 
property disclosure rules a registrant that owns two or more 
properties, neither of which is individually material, but which, when 
considered in the aggregate and in the context of the registrant's 
overall business, constitute material mining operations. Therefore, the 
final rules require such a registrant to provide summary disclosure of 
its overall mining operations,\76\ although it will not be subject to 
the more extensive disclosure requirements for individual material 
properties.
---------------------------------------------------------------------------

    \73\ See, e.g., letters from Amec and Eggleston.
    \74\ See, e.g., letters from CBRR and SRK 1.
    \75\ See letter from Eggleston.
    \76\ See infra Section II.G.1; see also 17 CFR 229.1301(d) [Item 
1301(d) of Regulation S-K].
---------------------------------------------------------------------------

    Most commenters who addressed the issue supported requiring, as 
part of the materiality determination, the inclusion for each property 
of all related activities from exploration through extraction to the 
first point of material external sale, including processing, 
transportation, and warehousing.\77\ Such inclusion is consistent with 
the ``end-to-end reporting'' required under the CRIRSCO-based 
codes.\78\ In this regard, we are not adopting the suggestion of one 
commenter to specify reclamation of the mine as the end point to be 
considered in the materiality provision. Mine reclamation and closure 
plans are important considerations that must be addressed by the 
qualified person, under the CRIRSCO-based codes. However, those plans 
are usually prepared as part of the assessment of technical and 
economic factors relevant to the reasonable prospects of economic 
extraction when determining mineral resources, or when applying all 
applicable modifying factors to resources for the purpose of assessing 
the economic viability of a project when determining mineral reserves. 
Also, mine reclamation costs are included in capital and operating 
costs during feasibility studies to estimate mineral reserves. The 
final rules follow this approach \79\ and therefore do not specifically 
include reclamation as the end point in the materiality determination. 
However, we believe that mining properties that are at the reclamation 
stage are still considered mining properties and should be included in 
evaluations of the materiality of mining operations.
---------------------------------------------------------------------------

    \77\ See supra notes 61-62 and accompanying text.
    \78\ See, e.g., letter from Midas.
    \79\ See 17 CFR 229.601(b)(96)(iii)(B)(17) [Item 
601(b)(96)(iii)(B)(17) of Regulation S-K], which requires the 
qualified person to describe the factors pertaining to environmental 
compliance, permitting, and local individuals or groups, which are 
related to the project, including ``[m]ine closure plans, including 
remediation and reclamation plans, and the associated costs.'' 17 
CFR 229.601(b)(96)(iii)(B)(17)(v).
---------------------------------------------------------------------------

    Similar to a proposed instruction to the materiality provision, we 
are adopting a provision stating that the term ``mining operations'' 
includes 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;
     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
 Has, or it is probable that it will have, an associated 
royalty or similar right.\80\
---------------------------------------------------------------------------

    \80\ 17 CFR 229.1301(a) [Item 1301(a) of Regulation S-K].

    Commenters did not object to including within the definition 
operations on mining properties that a registrant owns or operates 
pursuant to a lease or other similar agreement. Moreover, although 
several commenters objected to the scope of the proposed disclosure 
required of royalty or other similar right holders, only a few 
commenters recommended their complete exclusion from the proposed 
rules.\81\
---------------------------------------------------------------------------

    \81\ See infra Section II.B.4.
---------------------------------------------------------------------------

2. Treatment of Vertically-Integrated Companies
i. Rule Proposal
    As noted in the Proposing Release, some companies have material 
mining operations that are secondary to or in support of their main 
non-mining business.\82\ For example, a metal manufacturer may operate 
iron ore or coal mines to supply raw material for its primary business. 
Yet neither Guide 7 nor Item 102 addresses whether or when a 
vertically-integrated manufacturer \83\ is required to provide mining 
disclosure.
---------------------------------------------------------------------------

    \82\ See Proposing Release, supra note 5, at Section II.B.1.i.
    \83\ 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.
---------------------------------------------------------------------------

    In order to clarify the treatment of vertically-integrated 
manufacturers, the Commission explained that proposed new subpart 1300 
of Regulation S-K 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.\84\
---------------------------------------------------------------------------

    \84\ See Proposing Release, supra note 5, at Section II.B.1.i.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Most commenters that addressed the issue supported the Commission's 
proposal to require vertically-integrated companies, such as 
manufacturers, to provide the disclosure under proposed subpart 1300 of 
Regulation S-K.\85\ One commenter agreed that the proposed rules should 
apply to a vertically-integrated company if its mine is material, but 
disagreed that the mine's providing a competitive advantage should be a 
criterion for disclosure.\86\
---------------------------------------------------------------------------

    \85\ See letters from Amec, AngloGold, CBRR, Midas, Rio Tinto, 
and SRK 1. AngloGold stated that ``[i]f the mining component of a 
vertically-integrated company is material to its operations, such as 
a secure source of supply, perceived cost advantage etc., then the 
same disclosures as mining companies should be required in order to 
provide a complete set of information to enable an investor to 
determine an investment decision.''
    \86\ See letter from Eggleston.
---------------------------------------------------------------------------

iii. Final Rules
    As proposed, and consistent with comments received,\87\ new subpart 
1300 of Regulation S-K will apply to all registrants with material 
mining operations, including vertically-integrated manufacturers. Like 
a company whose primary business is mining, such a vertically-
integrated company will be required to assess relevant quantitative and 
qualitative factors to determine if its mining operations are material. 
For example, the bauxite mining operations of an aluminum manufacturer, 
whose primary business is manufacturing, not mining, could require 
disclosure if its bauxite mining operations are material, even though 
they are not the registrant's primary operations, or the primary source 
of the registrant's revenues. Factors to be considered in such a 
materiality determination could include if the manufacturer derives a

[[Page 66351]]

competitive advantage from, or substantially relies upon, its ability 
to source that particular mineral from its mining operations.
---------------------------------------------------------------------------

    \87\ See supra note 85 and accompanying text.
---------------------------------------------------------------------------

    Requiring disclosure of mining operations by vertically-integrated 
manufacturers is consistent with the disclosure currently provided in 
Commission filings and should not significantly alter existing 
disclosure practices. In addition, this treatment of vertically-
integrated companies is consistent with the CRIRSCO-based codes, which 
require disclosure for material mining properties and do not provide 
exemptions for vertically-integrated companies.
3. Treatment of Multiple Property Ownership
i. Rule Proposal
    As noted in the Proposing Release, it is common for registrants to 
own multiple mining properties.\88\ In some instances, a 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.
---------------------------------------------------------------------------

    \88\ See Proposing Release, supra note 5, at Section II.B.1.ii.
---------------------------------------------------------------------------

    The primary focus of the current rules and guidance is on 
individually significant or material properties. Neither Item 102 nor 
Guide 7 provides guidance concerning when or what disclosure is 
required when a registrant owns multiple or ancillary mining 
properties. To clarify the disclosure that is required in these 
circumstances, we proposed that a registrant with multiple properties 
would be required to consider all of its mining properties in the 
aggregate, as noted above,\89\ as well as individually, regardless of 
size or commodity produced, when assessing whether it must provide the 
mining disclosure required by new subpart 1300 of Regulation S-K.\90\ 
We also proposed that 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 
concerning its combined mining activities rather than provide 
disclosure for individual properties.\91\ We further proposed that, to 
the extent that an individual property is material to its operations, a 
registrant would be required to provide detailed disclosure about that 
property. As proposed, such individual property disclosure would be in 
addition to the required summary disclosure if the registrant owns two 
or more individual properties.\92\ Finally, we explained that, 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.\93\
---------------------------------------------------------------------------

    \89\ See id. at Section II.B.1.i.
    \90\ See id. at Section II.B.1.ii.
    \91\ See id. at Section II.G.1.
    \92\ See id. at Section II.G.2.
    \93\ See id. at Section II.B.1.ii.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    As discussed above, commenters generally supported requiring a 
registrant to consider all of its mining properties in the aggregate as 
well as individually, regardless of size or commodity produced, when 
assessing whether its mining properties are material, although some of 
the commenters stated that there should be limits on such 
aggregation.\94\ Commenters similarly generally supported the proposal 
to require summary disclosure of their properties in the aggregate,\95\ 
although some commenters conditioned their support consistent with 
their conditional support of the proposed disclosure threshold based on 
materiality.\96\ The commenters that opposed the proposed summary 
disclosure requirements did so largely because they viewed those 
requirements as being ``out of line with current industry standards.'' 
\97\
---------------------------------------------------------------------------

    \94\ See supra notes 56-58 and accompanying text.
    \95\ See, e.g., letter from CBRR; see also letter from Vale 
(stating that because under the CRIRSCO standards, a public report 
should contain ``all the relevant information which investors and 
their professional advisers would reasonably require, and reasonably 
expect to find in a public report . . . it is appropriate to require 
any registrant with economic interests in multiple mining 
properties, none of which may be individually material, to provide 
summary disclosure of its mining operations,'' but also stating that 
qualified persons should be allowed ``to use their judgment to 
determine the best presentation of summary disclosure, including 
whether to aggregate interrelated mining operations or to group 
mines and plants by geographic region or commodity'').
    \96\ See, e.g., letters from Alliance and AngloGold 
(conditioning support of the proposed approach regarding multiple 
properties as long as that approach aligns with a materiality 
determination based on financial segment disclosure); see also 
letter from Rio Tinto (similarly conditioning support as long as 
aggregation of properties do not cross national or regional 
boundaries).
    \97\ See, e.g., letter from SRK 1; see also letter from Midas 
(stating that ``[o]nly material properties should require 
disclosure, and then in a comprehensive technical report as in NI 
43-101'').
---------------------------------------------------------------------------

iii. Final Rules
    We are adopting the proposed treatment of multiple property 
ownership.\98\ In the event that none of a registrant's mining 
properties is individually material, it will need to provide only 
summary disclosure. If the registrant has individually material mining 
properties, it must provide more detailed disclosure concerning those 
properties in addition to summary disclosure.\99\ If a registrant has 
only one mining property, following a determination that its mining 
operations are material, the registrant will be required to provide 
only the individual property disclosure.\100\
---------------------------------------------------------------------------

    \98\ 17 CFR 229.1301(d), which references 17 CFR 229.1303 [Item 
1303 of Regulation S-K]. The latter provision sets forth the 
specific requirements for summary disclosure.
    \99\ 17 CFR 229.1301(d), which references 17 CFR 229.1304 [Item 
1304 of Regulation S-K]. The latter provision provides the specific 
disclosure requirements for individually material properties.
    \100\ 17 CFR 229.1303(a)(2) [Item 1303(a)(2) of Regulation S-K].
---------------------------------------------------------------------------

    We also are adopting the proposed treatment of ancillary 
properties, which, depending on the facts and circumstances, could give 
rise to disclosure obligations. 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.\101\
---------------------------------------------------------------------------

    \101\ Commenters did not oppose the proposed treatment of 
ancillary properties.
---------------------------------------------------------------------------

    In response to the concern expressed by some commenters that the 
proposed summary disclosure requirements were too prescriptive,\102\ 
and as discussed in greater detail below,\103\ we have significantly 
revised the proposed summary disclosure requirements to make them less 
prescriptive. For example, instead of the proposed requirement to 
provide specific items of information concerning a registrant's top 20 
properties (by asset value) in tabular format, the final rules take a 
more principles-based approach and require the registrant to provide an 
overview of its mining properties and operations in either narrative or 
tabular format.\104\ When presenting the overview, the registrant 
should include the amount and type of disclosure concerning its mining 
properties that is material to an investor's understanding

[[Page 66352]]

of the registrant's properties and mining operations in the 
aggregate.\105\
---------------------------------------------------------------------------

    \102\ See, e.g., letter from Vale; see also letter from Amec.
    \103\ See infra Section II.G.1.
    \104\ 17 CFR 229.1303(b)(2) [Item 1303(b)(2) of Regulation S-K].
    \105\  17 CFR 1303(b)(2)(iii) [Item 1303(b)(2)(iii) of 
Regulation S-K].
---------------------------------------------------------------------------

    As discussed in greater detail below,\106\ we also have made the 
disclosure requirements for individually material properties less 
prescriptive and aligned them more closely with the CRIRSCO standards. 
For example, among several other revisions, we have:
---------------------------------------------------------------------------

    \106\ See infra Section II.G.2.

     reduced the number of required tables from five to two; 
\107\
     replaced the proposed requirement to present mineral 
resource and reserve disclosure at three separate points of 
reference with the requirement to present the disclosure at one 
specific point of reference selected by the qualified person; \108\ 
and
     replaced the requirement to present mineral reserve 
disclosure as net of diluting materials and allowances for losses 
that may occur when the mineral resource is mined or extracted with 
the requirement to disclose reserves as including such diluting 
materials and allowances for losses.\109\

    \107\  17 CFR 229.1304(d)(1) [Item 1304(d)(1) of Regulation S-
K], which requires a summary of all mineral resources or reserves as 
of the end of the most recently completed fiscal year presented in 
two separate tables (one for resources, the other for reserves).
    \108\ See id.
    \109\ See the definition of mineral reserve in 17 CFR 229.1300 
[Item 1300 of Regulation S-K].

    In light of these revisions, we believe the final rules concerning 
summary and individual property disclosure will provide clear and 
consistent standards for registrants to apply in determining the scope 
of their disclosure obligations without unduly burdening registrants. 
We also believe that the final rules will help ensure that investors 
receive all material information about registrants' mining operations 
and associated risks.
4. Treatment of Royalty Companies and Other Companies Holding Economic 
Interests in Mining Properties
i. Rule Proposal
    As noted in the Proposing Release,\110\ 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.\111\ In 
addition, some registrants hold other economic interests, similar to 
royalty rights, also without owning or operating a property.\112\ 
Because neither Item 102 nor Guide 7 addresses whether royalty or 
similar companies must provide disclosure about the mining operations 
and properties underlying their economic interest, the staff has 
provided comments in the filing review process to help guide 
registrants in determining whether and how such companies should 
provide mining disclosure.
---------------------------------------------------------------------------

    \110\ See Proposing Release, supra note 5, at Section 
II.B.1.iii.
    \111\ 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 
landowners 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.
    \112\ 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.
---------------------------------------------------------------------------

    Consistent with prior staff comments, we proposed to require a 
royalty company or other registrant holding a similar economic interest 
to provide all applicable mining disclosure if the underlying mining 
operations that generate the royalty or other payment are material to 
the royalty or similar company's operations as a whole. As proposed, 
and 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.\113\ Upon an affirmative 
materiality determination, 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.\114\
---------------------------------------------------------------------------

    \113\ See Proposing Release, supra note 5, at Section 
II.B.1.iii.
    \114\ See id.
---------------------------------------------------------------------------

    The proposed rules would require a royalty or similar company to 
describe the material properties that generate its royalties or similar 
payments and file a technical report summary for each such property. As 
proposed, such a registrant would not be required to submit a separate 
technical report summary about a property covered by a current 
technical report summary filed by the producing mining registrant. In 
that situation, the royalty or similar company could incorporate by 
reference \115\ the producing registrant's previously filed technical 
report summary.\116\
---------------------------------------------------------------------------

    \115\ See 17 CFR 230.411, 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.
    \116\ See Proposing Release, supra note 5, at Section 
II.B.1.iii.
---------------------------------------------------------------------------

    We based this approach to royalty and other similar companies on 
our belief that 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. We also recognized, however, that because a royalty or 
other similar company may not have access to information about portions 
of the mining property that do not contribute to the registrant's 
revenue stream, it should not be required to disclose information 
concerning the non-contributing portions.\117\
---------------------------------------------------------------------------

    \117\ See id.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Many commenters generally supported the Commission's proposal to 
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.\118\ For example, one commenter 
stated that, in principle, a royalty company should be required to 
provide disclosures similar to those provided by the underlying mining 
company, but noted that such a requirement could give rise to 
difficulties when the royalty company is a registrant with the 
Commission but the underlying mining company is not, and when the 
property that is the subject of the royalty arrangement is not material 
to the underlying mining company, but the royalty stream is material to 
the royalty company.\119\ In those circumstances, the required 
disclosure may not be readily available to the royalty company.\120\
---------------------------------------------------------------------------

    \118\ See letters from Amec, AngloGold, CBRR, Davis Polk, Dorsey 
& Whitney, Eggleston, Midas, MMSA, Newmont, Rio Tinto, and SAMCODES 
2.
    \119\ See letter from AngloGold.
    \120\ See id.
---------------------------------------------------------------------------

    Another commenter noted that the Commission's proposed disclosure 
for royalty companies is consistent with current guidance as it would 
only be required with respect to portions of the underlying mining 
properties that contribute to the royalty company's revenue 
stream.\121\ Like the previous commenter, this commenter stated that 
the ability of royalty companies to comply with the proposed disclosure 
obligations, even as circumscribed, may be limited by their inability 
to access the requisite information and supporting documentation by the 
underlying mining company's qualified

[[Page 66353]]

person. Moreover, even if the royalty company has access to appropriate 
supporting documentation, this commenter stated that the operating 
mining company's qualified person may be unwilling to consent to its 
use by the royalty company for liability reasons. Accordingly, this 
commenter recommended that the Commission clarify that the disclosure 
obligations of a royalty company are limited to information that is 
known or reasonably available to it.\122\
---------------------------------------------------------------------------

    \121\ See letter from Davis Polk.
    \122\ Id. Two other commenters made a similar recommendation. 
See letters from Dorsey & Whitney and Newmont. Another commenter 
urged the Commission to adopt special rules for royalty companies 
that would recognize their potential inability to provide detailed 
disclosure regarding the underlying property. This commenter stated 
that, at a minimum, a royalty company should be able to rely on 
information provided by the operator while disclaiming liability for 
that information. See letter from MMSA.
---------------------------------------------------------------------------

    Regarding the proposed provision requiring a royalty company to 
file a technical report summary if the owner or operator of the 
underlying mining operations has not done so, one commenter supported 
applying the proposed rules to royalty companies, but recommended that 
the Commission provide a limited exemption similar to the exemption 
under Canada's NI 43-101.\123\ Two other commenters stated that a 
royalty company should be required to file summaries of current 
technical reports by an operating company but only for material 
properties.\124\ Those commenters also indicated that a royalty company 
may not have access to all of the information required to complete a 
technical report at the level of detail required by the owner of the 
underlying mine. Therefore, one of the commenters recommended that the 
Commission allow such a royalty company to prepare an abbreviated 
report \125\ while the other commenter recommended that the royalty 
company be permitted to reference the operating company's technical 
reports.\126\
---------------------------------------------------------------------------

    \123\ See letter from Amec. Canada's NI 43-101 exempts a royalty 
company from having to file a technical report if: The owner or 
operator of the underlying mine is a reporting issuer in a Canadian 
jurisdiction or is a producing issuer whose securities trade on a 
specified exchange and that discloses mineral resources and reserves 
under an acceptable foreign code; the owner or operator has 
disclosed the scientific and technical information that is material 
to the royalty company; and the royalty company identifies in its 
disclosure document the source of the scientific and technical 
information. See Canada's National Instrument (``NI'') 43-101 
(``Standards of Disclosure for Mineral Projects''), NI 43-101 (2011) 
34 OSCB 7043 pt. 9.2 (Can.), http://web.cim.org/standards/documents/Block484_Doc111.pdf. Canada's NI 43-101 also exempts a royalty 
company from having to file a technical report or from complying 
with disclosure items requiring data verification, inspection of 
documents, or personal inspection of the property if the royalty 
company has requested but has not received access to the necessary 
data from the owner or operator and is not able to obtain the 
necessary information from the public domain. See id. at pt. 9.2(2). 
But see letter from SME 2 (stating that neither the Canadian 
approach nor the Commission's incorporation by reference proposal is 
workable because of ``the U.S securities law liability regime and 
the litigation environment in the U.S.'').
    \124\ See letters from Eggleston and Rio Tinto.
    \125\ See letter from Eggleston.
    \126\ See letter from Rio Tinto.
---------------------------------------------------------------------------

    Numerous other commenters opposed the Commission's proposal to 
require a royalty company to provide all applicable mining disclosure 
if the underlying mining operations are material to the royalty 
company.\127\ Most of these commenters stated that because royalty 
holders generally have no executive or operational interest or other 
participation in the mineral properties to which the royalties relate, 
they typically have no access to the underlying mining operations or to 
the extensive technical data and other information available to the 
operator.\128\
    According to one of those commenters, because, typically, the 
information a royalty holder is entitled to receive is limited to mill 
production, marketing, and sales data that is used to confirm the 
calculation of royalty payments, a royalty company generally lacks 
sufficient information to prepare a current technical report 
summary.\129\ That commenter further objected to the proposed provision 
that would allow a royalty company to incorporate by reference a 
technical report summary previously filed by the owner or operator of 
the underlying property because it would impose potential Securities 
Act or Exchange Act liability on the royalty company for a third 
party's technical or other information regarding which the royalty 
company lacked responsibility or the ability to review or verify. 
According to the commenter, in order for a royalty company to verify a 
technical report summary or provide a technical report summary of its 
own, the royalty company would need to acquire extensive information 
and access rights from the owner or operator of a mineral property, 
which the commenter believed the owner or operator would not be willing 
to provide due to the proprietary nature of much of the information. 
Moreover, even if the owner or operator were willing to provide the 
information, the royalty company would be required to re-negotiate its 
royalty agreement, which would disadvantage a U.S. royalty company 
compared to its foreign competitors.
---------------------------------------------------------------------------

    \127\ See letters from AIPG, Alliance, Crowell & Moring, 
Laskowski, NRP, Royal Gold, SME 2, SRK 2, and Vinson & Elkins.
    \128\ See, e.g., letters from Crowell & Moring, NRP, Royal Gold, 
SME 2, and Vinson & Elkins.
    \129\ See letter from SME 2; see also letter from NRP (``along 
with royalty payments, the company receives only monthly production 
reports and ``certain other limited economic and mining information 
that enables NRP to evaluate its royalty business and make periodic 
reports to its common unitholders'').
---------------------------------------------------------------------------

iii. Final Rules
    We continue to believe that investors in royalty, streaming, and 
other registrants holding a similar economic interest in mining 
operations 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 that royalty companies and other companies 
holding similar economic interests should provide similar disclosure as 
provided by registrants conducting the underlying mining operations.
    Accordingly, the final rules will require a royalty or other 
similar company to provide applicable mining disclosure if the mining 
operations that generate the royalty or other payment are material to 
the royalty or similar company's operations as a whole, subject to that 
information being known or reasonably available to the registrant.\130\ 
Thus, a royalty or similar company will have to assess both 
quantitative and qualitative factors to determine whether the 
underlying mining operations are material.\131\ Also as proposed, upon 
an affirmative materiality determination, the final rules will require 
a royalty or similar company to provide summary disclosure \132\ and 
the disclosure required for individually material properties,\133\ but 
only for those underlying properties, or portions of underlying 
properties, that generate the registrant's royalties or similar

[[Page 66354]]

payments, and only for the reserves and production that generated its 
payments in the reporting period.\134\
---------------------------------------------------------------------------

    \130\ 17 CFR 229.1301(a)(3) [Item 1301(a)(3) of Regulation S-K].
    \131\ 17 CFR 1301(c)(1) [Item 1301(c)(1) of Regulation S-K]. As 
we noted in the Proposing Release, 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. See Proposing Release, 
supra note 5, at Section II.B.1.iii.
    \132\ 17 CFR 229.1303(a)(1)(iii) [Item 1303(a)(1)(iii) of 
Regulation S-K].
    \133\ 17 CFR 229.1304(a)(1)(iii) [Item 1304(a)(1)(iii) of 
Regulation S-K].
    \134\ 17 CFR 229.1303(b)(2)(iv) [Item 1303(b)(2)(iv) of 
Regulation S-K] and 17 CFR 229.1304(d)(3) [Item 1304(d)(3) of 
Regulation S-K].
---------------------------------------------------------------------------

    In addition, as proposed, the final rules will also require the 
royalty or similar company to file a technical report summary for each 
material underlying property as an exhibit to the Commission 
filing.\135\ However, as proposed, the final rules will not require a 
royalty or similar company 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 event, the 
royalty or similar company should refer to the producing registrant's 
previously filed technical report summary in its filing with the 
Commission.\136\ The purpose of this provision is to inform an investor 
or other interested party as to where to find detailed information 
about the underlying property. In a change from the proposed rules, 
such a reference will not be deemed to incorporate into the royalty 
company's or other similar company's filing the technical report 
summary previously filed by the mining registrant, absent an express 
statement that the company intends to incorporate it by reference.\137\ 
We agree with commenters that it would not be appropriate to impose 
potential liability under the Securities Act or Exchange Act on a 
royalty company through the company's incorporation by reference of a 
third party owner's technical report summary if the royalty company has 
not been able to review and verify the information contained in the 
summary because of its lack of access to such information under its 
existing royalty agreement.\138\
---------------------------------------------------------------------------

    \135\ 17 CFR 229.1302(b)(2) [Item 1302(b)(2) of Regulation S-K].
    \136\ 17 CFR 229.1302(b)(3)(i) [Item 1302(b)(3)(i) of Regulation 
S-K].
    \137\ Id.
    \138\ See, e.g., letter from SME 2.
---------------------------------------------------------------------------

    As mentioned by many commenters,\139\ we are cognizant that a 
royalty or similar company may lack, and may have difficulty obtaining, 
access to the information and supporting documentation required to 
comply with the Commission's disclosure requirements concerning the 
underlying mining properties. We therefore emphasize that what is true 
generally for our public company disclosure requirements applies to a 
royalty company's disclosure obligations regarding the underlying 
mining properties as well. Specifically, the required information 
concerning the underlying mining properties need be given only insofar 
as it is known or reasonably available to the registrant.\140\ In order 
to underscore this basic tenet, in a change from the proposed rules, 
the final rules provide that a registrant that has a royalty, 
streaming, or other similar right, but which lacks access to any of the 
information about the underlying properties specified in either the 
summary disclosure provision (Item 1303 of Regulation S-K) or the 
individual property provision (Item 1304 of Regulation S-K) may omit 
such information, provided that the registrant:

    \139\ See supra note 128 and accompanying text.
    \140\ This is consistent with 17 CFR 230.409 [Securities Act 
Rule 409] and 17 CFR 240.12b-21 [Exchange Act Rule 12b-21], the 
general rules governing the situation when required information is 
unknown or not reasonably available.
---------------------------------------------------------------------------

     Specifies the information to which it lacks access;
     Explains that it does not have access to the required 
information because:
    [cir] Obtaining the information would result in an unreasonable 
effort or expense; or
    [cir] It requested the information from a person possessing 
knowledge of the information, who is not affiliated with the royalty 
company or similar registrant, and who denied the request; and
     Provides all required information that it does possess 
or which it can acquire without unreasonable effort or expense.\141\
---------------------------------------------------------------------------

    \141\ 17 CFR 229.1303(a)(3) [Item 1303(a)(3) of Regulation S-K] 
and 17 CFR 229.1304(a)(2) [Item 1304(a)(2) of Regulation S-K].

    The final rules further provide that a royalty company or similar 
registrant is not required to file a technical report summary for an 
underlying property if the registrant lacks access to the technical 
report summary because of substantially similar reasons.\142\ For 
example, if the underlying property holder is private, and denies 
access to relevant information about the property, under the final 
rules, the royalty company will not be obligated to prepare a technical 
report summary. Overall, we believe that the adopted treatment of 
royalty and other similar companies will provide investors with 
information relevant to assessing investments in those companies 
without unduly burdening registrants.
---------------------------------------------------------------------------

    \142\ 17 CFR 229.1302(b)(3)(ii) [Item 1302(b)(3)(ii) of 
Regulation S-K] (conditioning omission of the technical report 
summary on a lack of access because obtaining the information would 
result in an unreasonable burden or expense; or because the 
registrant requested the technical report summary from the owner, 
operator, or other person possessing the technical report summary, 
who is not affiliated with the registrant, and who denied the 
request).
---------------------------------------------------------------------------

5. Definitions of Exploration, Development and Production Stage
i. Rule Proposal
    As noted in the Proposing Release,\143\ Guide 7 defines the stages 
used to describe mining operations as ``exploration stage,'' \144\ 
``development stage,'' \145\ and ``production stage,'' \146\ but 
applies these definitions to the registrant as a whole 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 proposed to revise the Guide 7 definitions so that they 
apply to individual properties, as follows:
---------------------------------------------------------------------------

    \143\ See Proposing Release, supra note 5, at Section II.B.2.
    \144\ As defined by Guide 7, exploration stage ``includes all 
issuers engaged in the search for mineral deposits (reserves) which 
are not in either the development or production stage.'' Guide 7, 
supra note 7, ] (a)(4)(i).
    \145\ As defined by Guide 7, development stage ``includes all 
issuers engaged in the preparation of a determined commercially 
minable deposit (reserves) for its extraction which are not in the 
production stage.'' Guide 7, supra note 7, ] (a)(4)(ii).
    \146\ As defined by Guide 7, production stage ``includes all 
registrants engaged in the exploitation of a mineral deposit 
(reserve).'' Guide 7, supra note 7, ] (a)(4)(iii).

     An ``exploration stage property'' is a property that 
has no mineral reserves disclosed;
     A ``development stage property'' is a property that has 
mineral reserves disclosed, but with no material extraction; and
     A ``production stage property'' is a property with 
material extraction of mineral reserves.\147\
---------------------------------------------------------------------------

    \147\ See Proposing Release, supra note 5, at Section II.B.2.

    We also proposed to revise the Guide 7 definitions as they apply to 
issuers 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;
     A ``development stage issuer'' is one that is engaged 
in the preparation of mineral reserves for extraction on at least 
one material property; and
     A ``production stage issuer'' is one that is engaged in 
material extraction of mineral reserves on at least one material 
property.\148\
---------------------------------------------------------------------------

    \148\ See id.

    We further proposed 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

[[Page 66355]]

without first disclosing mineral reserves, cannot characterize itself 
as a development or production stage company.\149\ Finally, we proposed 
to 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.\150\
---------------------------------------------------------------------------

    \149\ As we noted in the Proposing Release, 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. See Proposing Release, supra note 5, at 29, n. 65.
    \150\ See Proposing Release, supra note 5, at Section II.B.2.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Commenters expressed varying degrees of support for the 
Commission's proposed definitions of exploration, development and 
production stage as applied, respectively, to properties and 
issuers.\151\ One commenter stated that both sets of definitions would 
be operable for the company and supported the proposed restriction on 
the use of the terms ``development and production stage companies.'' 
\152\
---------------------------------------------------------------------------

    \151\ See, e.g., letters from Alliance, AngloGold, CBRR, Midas, 
Rio Tinto, SME 1, and SRK 1.
    \152\ See letter from AngloGold (supporting that a registrant 
lacking 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).
---------------------------------------------------------------------------

    Another commenter supported the proposed definitions of exploration 
stage and development stage properties, but stated that the definition 
of production stage property should be revised to include ``current'' 
or ``on-going'' as opposed to past production.\153\ This commenter 
further recommended that the Commission define a development stage 
issuer as one having at least one development stage property comprising 
more than 10% of the issuer's assets, and a production stage issuer as 
having at least one producing mine comprising more than 10% of the 
issuer's assets.\154\
---------------------------------------------------------------------------

    \153\ See letter from Midas.
    \154\ See id.
---------------------------------------------------------------------------

    While a third commenter generally found the two sets of definitions 
to be adequate, it stated that at least one material property should be 
enough to justify the production stage if it represents more than 50% 
of the registrant's asset value.\155\ This commenter also believed that 
if a registrant has disclosed mineral resources, it should be able to 
characterize itself as a development stage company.\156\
---------------------------------------------------------------------------

    \155\ Letter from CBRR.
    \156\ See id.
---------------------------------------------------------------------------

    One commenter supported the proposed definitions of exploration, 
development, and production stage issuers because they are 
substantially similar to the Guide 7 definitions.\157\ The commenter 
suggested that the proposed definitions as applied to issuers should be 
used for accounting purposes only (i.e., for the purposes of financial 
statement characterization), but did not think the proposed definitions 
would be useful as applied to properties.\158\ In contrast, a different 
commenter supported having a set of definitions of exploration, 
development, and production stage applied to properties, but opposed 
having a corresponding set of definitions applied to issuers.\159\
---------------------------------------------------------------------------

    \157\ See letter from SME 1.
    \158\ Id.
    \159\ See letter from SRK 1 (stating that ``[t]echnical 
disclosure should be dictated by property stage and materiality'' 
and ``[a] company's production status should not impact disclosure 
as there are many mining companies with immaterial small scale 
production or reserves that would classify them as production stage 
or development stage, but most of their value is in an exploration 
stage project'').
---------------------------------------------------------------------------

    Two other commenters opposed the proposed definitions.\160\ One 
believed that both sets of definitions were too prescriptive for the 
mining industry and stated that because many mining operations have 
portions that are in the exploration, development, and production 
stages, it will be extremely difficult to attach a single label to a 
property.\161\ In addition, that commenter did not believe it would be 
useful to define an issuer based on the characteristics of all of its 
mining properties, and further noted that a registrant is not required 
to characterize itself as being a particular type of issuer under the 
Canadian rules.\162\ The other commenter asserted that the proposed 
sets of definitions were unnecessary, would add complexity and 
confusion, and be of limited value to issuers and investors.\163\ A 
third commenter strongly opposed the definition of production stage 
because it depends on whether the company has mineral reserves and not 
on whether it is in production.\164\
---------------------------------------------------------------------------

    \160\ See letters from Amec and Eggleston.
    \161\ See letter from Amec.
    \162\ See id.
    \163\ See letter from Eggleston.
    \164\ See letter from Energy Fuels. This commenter did not 
address the proposed definitions of exploration stage and 
development stage. The commenter described itself as the second 
largest uranium producer in the United States, but said that it does 
not currently own, and never has owned, any mineral reserves as 
defined by Guide 7. Most of its production at its largest facility 
has come from inferred mineral resources. The commenter stated that 
not being able to refer to itself as a production stage company is 
potentially misleading to investors.
---------------------------------------------------------------------------

iii. Final Rules
    We are adopting the definitions of ``exploration stage property,'' 
``development stage property,'' ``production stage property,'' 
``exploration stage issuer,'' ``development stage issuer,'' and 
``production stage issuer,'' as proposed.\165\ Similar to a proposed 
instruction, we are also adopting a provision stating 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. The provision further states 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, cannot 
characterize itself as a development or production stage company.\166\
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    \165\ Definitions of specified terms used in subpart 1300 are 
located in 17 CFR 229.1300.
    \166\ 17 CFR 229.1304(c)(1) [Item 1304(c)(1) of Regulation S-K].
---------------------------------------------------------------------------

    We believe that these adopted definitions and related provision 
will resolve the ambiguities in the Guide 7 definitions. Under the 
definitions, a registrant will be able to characterize its properties 
separately, but will be limited in when and how it can characterize its 
operational stage. Specifically, a registrant will not be able to 
characterize itself as a development stage issuer unless it is engaged 
in the preparation of mineral reserves for extraction on at least one 
material property. We believe this will 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 mineral reserves from characterizing itself as 
a production or development stage issuer will help eliminate the 
possibility that such a registrant, by definition a company in a higher 
risk operational stage, will incorrectly characterize itself as being 
in a lower risk stage, thereby potentially misleading or confusing 
investors.
    We do not believe it would be appropriate to adopt definitions of 
development stage issuer and production stage issuer that are based on 
a specific quantitative measure (i.e., the development stage or 
production stage property must comprise more than 10% of the issuer's 
assets).\167\ We

[[Page 66356]]

believe the less prescriptive approach of the final rules, which bases 
those definitions on the principle of materiality, is more consistent 
with the adopted disclosure threshold of materiality, which requires 
the consideration of both quantitative and qualitative factors, and is 
therefore preferable to a bright-line test. For the same reasons, we do 
not believe it would be appropriate to adopt a definition of a 
production stage issuer specifying that one material property will 
suffice provided that it represents more than 50% of the 
registrant[acute]s asset value.\168\
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    \167\ See letter from Midas.
    \168\ See letter from CBRR.
---------------------------------------------------------------------------

    We also do not believe it would be appropriate to define a 
production stage issuer as an issuer that is in production even if it 
has no mineral reserves,\169\ or to define a development stage issuer 
as a company that has disclosed mineral resources, but not 
reserves.\170\ We are concerned that such an approach would diminish 
the real difference in risk between a mining project for which only 
resources have been disclosed, and a more advanced project involving 
the affirmative determination of reserves, which could lead to investor 
confusion. Moreover, as a commenter noted, when applied to properties, 
such an approach would run counter to the definitions of ``development 
stage'' and ``production stage'' that are widely accepted in the 
industry.\171\
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    \169\ See letter from Energy Fuels.
    \170\ See letter from CBRR.
    \171\ See letter from SRK 1.
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C. Qualified Person and Responsibility for Disclosure

1. The ``Qualified Person'' Requirement
i. Rule Proposal
    We proposed 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,'' \172\ as defined by the proposed 
rules.\173\ We proposed the qualified person \174\ requirement to align 
the Commission's mining property disclosure rules with the CRIRSCO 
standards and to remedy a perceived gap in the current reporting 
regime.
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    \172\ See Proposing Release, supra note 5, at Section II.C.1. 
The proposed provision specified that the qualified person 
requirement would apply to the disclosure required by the proposed 
summary disclosure provision (Item 1303) and the proposed individual 
property disclosure provision (Item 1304).
    \173\ See infra Section II.C.2. for a discussion of the proposed 
definition of qualified person.
    \174\ While we referred to the qualified person in the singular 
throughout the Proposing Release, we noted that it is common for a 
registrant to have more than one qualified person prepare a 
technical report for a mining property or project. We also noted 
that, as proposed, the registrant's responsibilities regarding the 
qualified person would apply to each qualified person so engaged. 
See Proposing Release, supra note 5, at 33, n. 74.
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    All of the CRIRSCO-based codes require any public report \175\ 
about a company's exploration results, mineral resources, and mineral 
reserves to be based on and fairly reflect information and supporting 
documentation prepared by a ``competent'' or ``qualified person.'' 
\176\ The purpose of this requirement is to ensure that a registrant's 
public declaration of exploration results, mineral resources, and 
mineral reserves is supported by the findings of a mineral industry 
professional having the relevant level of expertise.\177\ In contrast, 
neither Guide 7 nor Item 102 requires a registrant's disclosure of 
mineral reserves to be based on the findings of an appropriately 
experienced professional.\178\ 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,\179\ there is no requirement to use an expert for 
reserves disclosure and, if one is used, there are no substantive 
requirements for that expertise.
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    \175\ As used in the CRIRSCO-based codes, ``public report'' 
includes all communication by a company to investors on exploration 
results, mineral resources, and mineral reserves. For example, 
Australia's JORC Code defines public s 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, website postings and public 
presentations.'' Joint Ore Reserves Committee, the JORC Code, pt. 6 
(2012), http://www.jorc.org/docs/JORC_code_2012.pdf.
    \176\ See, e.g., CRIRSCO International Reporting Template, supra 
note 20, cl. 8; Canada's NI 43-101, supra note 123, at pt. 2.1; JORC 
Code, supra note 175, at pt. 9.
    \177\ The competent or qualified person requirement supports the 
``competence'' principle, one of the three governing principles that 
underlie the CRIRSCO standards. See supra note 39. All of the 
CRIRSCO-based codes define competence to mean that technical work 
should be done by a professional with requisite expertise. See, 
e.g., CRIRSCO International Reporting Template, supra note 20, at 
cl. 3; JORC Code, supra note 175, at pt. 9; see also Society for 
Mining, Metallurgy & Exploration, SME Guide for Reporting 
Exploration Results, Mineral Resources and Mineral Reserves, pt. 3 
(July 2017) (``SME Guide''), https://www.smenet.org/SME/media/Publications-Resources/SMEGuideReporting_082017.pdf.>
    \178\ 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, supra note 7, at ] 
(b)(5)(ii). In addition, if a registrant supplementally provides a 
copy of a technical report to 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, supra note 7, at ] (c)(2).
    \179\ See 17 CFR 230.436 [Securities Act Rule 436]; see also 17 
CFR 229.601(b)(23)(i) [Item 601(b)(23)(i) of Regulation S-K].
---------------------------------------------------------------------------

    In connection with the qualified person requirement, we proposed 
that the registrant must:

     Be responsible for determining that the person meets 
the qualifications specified under the proposed subpart's definition 
of ``qualified person'' and that the disclosure in the filing 
accurately reflects the information provided by the qualified 
person;
     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;
     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 
from the last technical report filed for the property;
     Prior to filing the technical report summary as part of 
a registration statement or report, obtain the written consent of 
the qualified person to the use of the qualified person's name or 
any quotation from, or summarization of the technical report 
summary;
     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, 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 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
    [cir] If the qualified person or the qualified person's employer 
is an affiliate, disclose the nature of the affiliation.\180\
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    \180\ See Proposing Release, supra note 5, at Section II.C.1.
---------------------------------------------------------------------------

    In the Proposing Release, we explained that 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.\181\ In such situations, the qualified

[[Page 66357]]

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.\182\
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    \181\ See id. 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.
    \182\ 15 U.S.C. 77k(a)(4).
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ii. Comments on the Rule Proposal
    Numerous commenters supported the Commission's proposal 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.'' \183\ One commenter stated that investors would benefit from 
the qualified person requirement because it would provide the 
appropriate level of assurance and disclosure about both a registrant's 
operations and developing opportunities.\184\ Other commenters 
maintained that the qualified person requirement would mitigate the 
risks associated with including disclosure about a registrant's mineral 
resource and exploration results in Commission filings.\185\ Some 
commenters explained that the qualified person requirement would result 
in more accurate and reliable reports, foster proper risk level 
identification, and ensure that all aspects of industry standards are 
being assessed and implemented, which would assist investors in 
understanding each stage of a project.\186\ Other commenters emphasized 
that adoption of the qualified person requirement would be a 
significant step in aligning the Commission's rules with the CRIRSCO 
standards and global industry practice.\187\
---------------------------------------------------------------------------

    \183\ See letters from AIPG, Amec, AngloGold, BHP, CBRR, 
Columbia Water, Earthworks, Eggleston, FCX, Gold Resource, Golder, 
Midas, Mousset-Jones, Newmont, NSPE, Northern Dynasty, Rio Tinto, 
SAMCODES 1, SME 1, SRK 1, Ur-Energy, Vale, and Willis.
    \184\ See letter from Rio Tinto.
    \185\ See, e.g., letters from AngloGold, BP, and Gold Resource.
    \186\ See, e.g., letters from CBRR, Eggleston, Midas, SRK 1, and 
Willis.
    \187\ See, e.g., letters from AIPG and SME 1.
---------------------------------------------------------------------------

    Many commenters also supported the Commission's proposal to make 
the registrant responsible for determining that the qualified person 
meets the qualifications specified under the new subpart's definition 
of ``qualified person.'' \188\ One commenter stated that the 
registrant, through its board of directors, is ultimately responsible 
for the information disclosed by it and attributed to the qualified 
person.\189\ A second commenter indicated that, in the case of a 
qualified person employed by a registrant, the registrant is in the 
best position to evaluate the qualified person's credentials and 
determine if he or she meets the requisite qualifications.\190\ Other 
commenters stated that the responsibility for determining who is a 
qualified person should be a joint decision by the registrant and the 
named qualified person since the qualified person is responsible for 
preparing the technical report and knows what type of information he or 
she is qualified to provide an opinion on.\191\ One commenter opposed 
imposing the responsibility for verifying the qualifications of the 
qualified person on the registrant because such verification would be 
based on personal information not readily available to the public.\192\
---------------------------------------------------------------------------

    \188\ See letters from AngloGold, CBRR, Eggleston, Gold 
Resource, Golder, MMSA, Rio Tinto, SME 1, and Vale.
    \189\ See letter from AngloGold.
    \190\ See letter from Vale.
    \191\ See letters from Amec, Eggleston, and Rio Tinto.
    \192\ See letter from SRK 1.
---------------------------------------------------------------------------

    Many commenters supported the Commission's proposal to require a 
registrant to obtain a technical report summary for each material 
property 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 the registrant can disclose those results, 
resources, or reserves in Commission filings.\193\ Two commenters noted 
that the technical report summary proposal is a requirement under all 
CRIRSCO codes,\194\ with one maintaining that the requirement would not 
be a significant burden for issuers because many mining companies, 
including U.S. registrants that are cross-listed, are already required 
in CRIRSCO-based jurisdictions to prepare technical reports either for 
public filing or for internal use.\195\ Another commenter stated that 
the technical report summary requirement ensures that facts, forward-
looking statements and cautionary language considered to be material by 
the qualified persons involved are fully disclosed and in full 
context.\196\ A fourth commenter indicated that technical reports have 
proven to be a useful method of providing transparency to the mining 
industry and have enhanced the confidence of investors.\197\
---------------------------------------------------------------------------

    \193\ See letters from AngloGold, CBRR, CSP\2\, Coeur, 
Eggleston, Gold Resource, Golder, Northern Dynasty, Rio Tinto, SME 
1, Vale, and Willis.
    \194\ See letters from Rio Tinto and SRK 1.
    \195\ See letter from SRK 1.
    \196\ See letter from Golder.
    \197\ See letter from Eggleston.
---------------------------------------------------------------------------

    Some commenters recommended that our disclosure framework follow 
the format of Canada's NI 43-101F1 so that technical report summaries 
under the Commission's rules would be interchangeable with those filed 
under the Canadian reporting regime.\198\ For similar reasons, some 
commenters stated that the technical report summary should follow the 
CRIRSCO Table 1 format of the registrant's home listing 
jurisdiction.\199\
---------------------------------------------------------------------------

    \198\ See letters from Coeur, Gold Resource, SME 1, and Willis.
    \199\ See, e.g., letters from AngloGold and Rio Tinto.
---------------------------------------------------------------------------

    Several commenters expressly supported the filing of a summarized 
technical report rather than an unabridged report.\200\ One commenter, 
however, recommended requiring the filing of both the summarized 
technical report and the full technical report \201\ while another 
commenter stated that an unabridged technical report should be required 
when a project advances to the development stage.\202\
---------------------------------------------------------------------------

    \200\ See letters from CSP\2\, Eggleston, Gold Resource, Golder, 
and SRK 1. On a related point, four commenters stated that the name 
``technical report summary'' was confusing as it suggested that 
there existed an unabridged technical report. See letters from 
Coeur, Eggleston, Northern Dynasty, and SME 1.
    \201\ See letter from Columbia Water.
    \202\ Letter from CSP\2\.
---------------------------------------------------------------------------

    Many commenters supported the Commission's proposal to require the 
filing of a technical report summary for a material property when the 
registrant first discloses mineral resources, mineral reserves, or 
material exploration results, or when there is a material change in the 
previously disclosed resources, reserves and exploration results.\203\ 
Commenters stated that a requirement imposing more frequent filing 
would be unduly burdensome and costly.\204\
---------------------------------------------------------------------------

    \203\ See letters from AngloGold, CBRR, CSP\2\, Eggleston, 
Golder, Midas, Northern Dynasty, Rio Tinto, SRK 1, and Vale.
    \204\ See, e.g., letters from AngloGold, Golder, Midas, and SRK 
1.
---------------------------------------------------------------------------

    Some commenters stated that the proposed requirement to file a 
technical report summary for material properties would be a significant 
burden for smaller companies.\205\ A few of these commenters suggested 
that the Commission could alleviate this burden by: Conforming the 
technical report summary to Table 1 of the CRIRSCO

[[Page 66358]]

International Reporting Template; \206\ not requiring the filing of the 
technical report summary more frequently than under the CRIRSCO-based 
codes; \207\ not requiring the disclosure of exploration results; or 
minimizing the required use of an independent qualified person.\208\ 
One commenter also stated that the Commission could reduce the 
compliance burden by allowing all Canadian registrants, and not just 
those that file under the MJDS, to report under Canada's NI 43-101, and 
by considering a similar accommodation for foreign issuers that report 
under the other CRIRSCO-based codes.\209\
---------------------------------------------------------------------------

    \205\ See, e.g., letters from AngloGold, Eggleston, and Gold 
Resource.
    \206\ See letter from AngloGold.
    \207\ See letters from AngloGold and Midas.
    \208\ See letter from Gold Resource.
    \209\ See letter from Northern Dynasty.
---------------------------------------------------------------------------

    Some commenters opposed a requirement to file a technical report 
summary as an exhibit to a Commission filing because they believed it 
would be burdensome for registrants that are not subject to similar 
requirements in other jurisdictions.\210\ Other commenters opposed the 
technical report summary filing requirement because it would compel the 
disclosure of information that is proprietary and competitively 
sensitive.\211\
---------------------------------------------------------------------------

    \210\ See letters from Alliance, Chamber, Davis Polk, and FCX. 
Davis Polk and the Chamber believed that, because only Canada and 
Australia impose a similar requirement, the proposed technical 
report summary requirement would ``result in an incremental 
reporting burden in the United States relative to most other 
jurisdictions.''
    \211\ See letters from Alliance and FCX.
---------------------------------------------------------------------------

    Several commenters supported the Commission's proposal to have each 
qualified person date and sign the technical report summary prepared by 
him or her.\212\ According to the commenters, this requirement would 
help establish the document's legitimacy \213\ as well as a reference 
date for the report.\214\ One commenter noted that the proposed 
requirement to have a qualified person date and sign the technical 
report summary is a requirement under all of the CRIRSCO-based 
codes.\215\
---------------------------------------------------------------------------

    \212\ See, e.g., letters from AngloGold, CSP\2\, Eggleston, 
Golder, and SRK 1.
    \213\ See letter from SRK 1.
    \214\ See letters from Golder and SRK 1. Golder indicated that 
the dating requirement would protect the qualified person by 
establishing the effective or cutoff dates of data and observations 
used and alleviate other timing-related issues.
    \215\ See letter from Rio Tinto.
---------------------------------------------------------------------------

    In addition, many commenters supported the Commission's proposal to 
require a registrant to obtain the written consent of each qualified 
person who prepared a technical report summary to the use of the 
qualified person's name or any quotation from, or summarization of the 
technical report summary in the registration statement or report.\216\ 
One commenter indicated that the written consent requirement ``is very 
important to ensure that a QP's descriptions, summaries, results, 
conclusions and recommendations are construed accurately and 
appropriately by a registrant'' and ``also provides the QP with an 
additional opportunity to access the quality control and quality 
assurance of a registrant's disclosure as they pertain to the QP.'' 
\217\
---------------------------------------------------------------------------

    \216\ See letters from AngloGold, Eggleston, Midas, Newmont, 
Northern Dynasty, Rio Tinto, SRK 1, Vale, and Willis.
    \217\ Letter from SRK 1.
---------------------------------------------------------------------------

    In connection with the proposed written consent requirement, some 
commenters noted that registrants frequently hire multiple qualified 
persons for a particular mining project.\218\ Those commenters 
recommended that the final rules clarify that multiple qualified 
persons may prepare a technical report summary and, in such a 
situation, a registrant must have each qualified person identify the 
particular parts of the technical report summary for which he or she is 
responsible, date and sign each part, and provide his or her written 
consent for the use of his or her name and reference to those parts of 
the technical report summary prepared by each qualified person.\219\
---------------------------------------------------------------------------

    \218\ See letters from Coeur, Eggleston, Energy Fuels, Golder, 
MMSA, SME 1, Ur-Energy, Vale, and Willis; see also letter from 
Newmont (recommending the use by the qualified person of a ``sub-
certifications control process accompanied by disclosure of the 
areas and personnel relied upon'').
    \219\ See, e.g., letters from Coeur, MMSA, and SME 1.
---------------------------------------------------------------------------

    Some commenters opposed the proposed requirement to have the 
qualified person sign the technical report summary on an individual 
basis.\220\ These commenters objected on the grounds that liability 
concerns are more pronounced in the United States and such a 
requirement would place a qualified person in a position similar to an 
executive or financial officer of the registrant.
---------------------------------------------------------------------------

    \220\ See letters from Andrews Kurth, Gold Resource, and NMA 1.
---------------------------------------------------------------------------

    Numerous other commenters maintained that the Commission should not 
subject qualified persons to expert liability under Section 11 of the 
Securities Act.\221\ Those commenters opposed such expert liability on 
the grounds that: Ultimate responsibility for a public report 
concerning a registrant's exploration results, mineral resources, or 
mineral reserves rests with the registrant, acting through its board of 
directors; \222\ the proposed requirements for qualified persons, such 
as membership in a professional organization that requires compliance 
with standards of competence and ethics, and the written consent 
provisions, would provide adequate safeguards to ensure the reliability 
of supporting documentation by a qualified person; \223\ the Section 11 
liability regime is unique and would impose significant costs on 
individuals that are not yet subject to it; \224\ imposing Section 11 
liability on qualified persons would likely have a chilling effect on 
the willingness of individuals to serve in that role and thereby 
increase the cost of hiring a qualified person, and could deter 
registrants from hiring qualified persons; \225\ and the naming of 
individual professionals in Commission filings is not required with 
respect to accounting, auditing, and legal matters or in the 
determination of oil and gas reserves and, in any event, is not 
important to the protection of investors.\226\
---------------------------------------------------------------------------

    \221\ See letters from AusIMM, Chamber, Cleary & Gottlieb, Cloud 
Peak, Davis Polk, FCX, JORC, MMSA, NSSGA, SAMCODES 1, Shearman & 
Sterling, Sullivan & Cromwell, and Ur-Energy.
    \222\ See, e.g., letters from AusIMM, FCX, JORC, SAMCODES 1, and 
Shearman & Sterling.
    \223\ See letters from Davis Polk, Shearman & Sterling, and 
Sullivan & Cromwell.
    \224\ See id.; see also letter from Andrews Kurth.
    \225\ See letters from Andrews Kurth, Chamber, Davis Polk, FCX, 
MMSA, NSSGA, Shearman & Sterling, and Ur-Energy.
    \226\ See letter from FCX.
---------------------------------------------------------------------------

    Some commenters that expressed concerns about Section 11 liability 
requested that the Commission explore alternatives to the individual 
signing requirement, such as permitting the firm employing the 
qualified person to sign the technical report summary, which would be 
consistent with the Commission's treatment of auditors and its 
treatment of engineering firms under the Commission's oil and gas 
rules.\227\ Those commenters further noted that not requiring an 
individual qualified person to sign the technical report summary would 
be consistent with the Commission's treatment of audit engagement 
partners whereby the naming or signature of the individual audit 
engagement partner is not required in Commission filings.\228\
---------------------------------------------------------------------------

    \227\ See letters from Gold Resource and NMA 1. See also letter 
from SME 1 (suggesting a sub-certification procedure to deal with 
the liability concerns regarding qualified persons).
    \228\ See letters from Gold Resource and NMA 1. An audit 
engagement partner is, however, required to be named on PCAOB Form 
AP. See Public Company Accounting Oversight Board; Order Granting 
Approval of Proposed Rules To Require Disclosure of Certain Audit 
Participants on a New PCAOB Form and Related Amendments to Auditing 
Standards, Exchange Act Release No. 34-77787 (May 9, 2016) [81 FR 
29925].

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

[[Page 66359]]

    On a related issue, many commenters recommended that the Commission 
adopt the approach under Canada's NI 43-101 or another CRIRSCO-based 
code and permit a qualified person to disclaim liability if relying on 
a report, opinion or statement of another expert who is not a qualified 
person, or on information provided by the issuer, concerning legal, 
political, environmental, or tax matters relevant to the technical 
report.\229\ According to these commenters, a limited disclaimer is 
necessary because the consideration of all applicable modifying factors 
in the determination of reserves, or all relevant technical and 
economic factors in the determination of resources, is typically beyond 
the scope and knowledge of a single individual. Commenters maintained 
that without a limited disclaimer provision, and particularly in light 
of concerns about Section 11 liability, the Commission would be 
imposing liability on qualified persons for opinions and conclusions 
outside of their fields of expertise, which would discourage 
individuals from acting as qualified persons under the Commission's 
rules, and potentially discourage registrants from hiring qualified 
persons.\230\
---------------------------------------------------------------------------

    \229\ See letters from AIPG, Amec, BHP, CIM, Cleary Gottlieb, 
Cloud Peak, Coeur, CRIRSCO, Davis Polk, Eggleston, Energy Fuels, 
FCX, Gold Resource, Graves, Midas, MMSA, Newmont, NMA, Northern 
Dynasty, PDAC, Randgold, Rio Tinto, Shearman & Sterling, SME 1, SRK 
1, Ur-Energy, Vale, and Willis.
    \230\ See, e.g., letters from CIM, Davis Polk, Eggleston, FCX, 
Shearman & Sterling, SME 1, and Ur-Energy.
---------------------------------------------------------------------------

    Other commenters, however, supported the Commission's proposal to 
preclude a qualified person from disclaiming responsibility if relying 
on a report, opinion, or statement of another expert who is not a 
qualified person.\231\ One commenter stated that such a provision ``is 
key to obtaining reliable and accurate information'' on a project.\232\
---------------------------------------------------------------------------

    \231\ See letters from Columbia, CSP\2\, and Montana Trout.
    \232\ See letter from CSP\2\.
---------------------------------------------------------------------------

    Many commenters supported the Commission's proposal to require a 
registrant to identify the qualified person who prepared the technical 
report summary, disclose whether the qualified person is an employee of 
the registrant, identify 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 or similar interest in the subject 
mining property.\233\ Commenters stated that such disclosure would be 
consistent with the CRIRSCO standards' transparency obligations.\234\ 
One commenter, however, opposed a requirement to name a qualified 
person's employer, as this may have changed since it prepared the 
technical report summary.\235\ Instead, that commenter suggested that a 
registrant state whether the qualified person is independent of the 
registrant and, if not, provide an explanation for the lack of 
independence.
---------------------------------------------------------------------------

    \233\ See letters from AngloGold, CBRR, CIM, Coeur, Eggleston, 
Gold Resource, Golder, Midas, MMSA, Northern Dynasty, Rio Tinto, 
SAMCODES 2, SME 1, SRK 1, Vale, and Willis.
    \234\ See, e.g., letters from Eggleston and Vale. As previously 
noted, transparency is one of the three governing principles 
underlying the CRIRSCO standards. See supra note 39.
    \235\ See letter from Amec.
---------------------------------------------------------------------------

    In response to whether, as an alternative to the rule proposal, we 
should require a registrant to state whether its qualified person is 
independent, numerous commenters answered in the affirmative, but also 
recommended that, consistent with Canada's NI 43-101, the final rules 
require an independent qualified person only under certain 
circumstances (e.g., for the first-time disclosure of mineral resources 
and mineral reserves and for 100% or greater changes to previously 
disclosed resources and reserves) with an exception for producing 
issuers.\236\ Those commenters also recommended adopting Canada's NI 
43-101's definition of independence and related guidance. Most of those 
commenters opposed requiring a registrant to obtain an independent 
review of a technical report prepared by a qualified person that is an 
employee or affiliate of the registrant.\237\
---------------------------------------------------------------------------

    \236\ See letters from Amec, CIM, Coeur, Eggleston, Gold 
Resource, Midas, MMSA, Newmont, Northern Dynasty, SAMCODES 2, SME 1, 
SRK 1, Vale, and Willis. Another commenter supported requiring a 
registrant to state whether its qualified person is independent, but 
did not mention the circumstances under Canada's NI 43-101 that 
would limit when an independent qualified person is required. See 
letter from Golder.
    \237\ See letters from AngloGold, Eggleston, Gold Resource, 
Golder, Midas, Northern Dynasty and SRK 1.
---------------------------------------------------------------------------

    Other commenters opposed any provision that would require a 
registrant to hire an independent qualified person or to conduct an 
independent review.\238\ One commenter also opposed any provision that 
would require the registrant to state whether the qualified person is 
independent.\239\ According to that commenter, there is very little 
difference between an employee and a consultant who is paid by the 
company and both could be unduly influenced. To guard against such 
undue influence, this commenter recommended requiring a qualified 
person to be a member of a professional organization that can sanction 
``those that transgress.'' \240\
---------------------------------------------------------------------------

    \238\ See letters from AngloGold, BHP, CRIRSCO, FCX, JORC, and 
Rio Tinto.
    \239\ See letter from AngloGold.
    \240\ Id.
---------------------------------------------------------------------------

    One commenter did not believe that naming a qualified person would 
add value to the registrant's Commission filings. This commenter noted 
that many outside specialists assist it with various estimations and 
evaluations used in its Form 10-K annual report, and ``assistance 
regarding reserve estimations is not exceptionally greater than any 
other area of consultation or professional guidance.'' \241\ This 
commenter did state, however, that if the Commission requires the 
naming of a qualified person, it would be appropriate for a registrant 
to disclose whether the qualified person is independent using the 
definition of independence under Canada's NI 43-101.
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    \241\ Letter from Alliance.
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iii. Final Rules
    We are adopting the requirement, as proposed, that a registrant's 
disclosure of exploration results, mineral resources, or mineral 
reserves in Commission filings must be based on and accurately reflect 
information \242\ and supporting documentation prepared by a qualified 
person,\243\ as defined in subpart 1300 of Regulation S-K.\244\ 
Adopting this requirement will more closely align the Commission's 
mining property disclosure regime with the CRIRSCO standards.\245\
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    \242\ As used in subpart 1300 of Regulation S-K, the term 
``information'' prepared by a qualified person includes the findings 
and conclusions of a qualified person relating to material 
exploration results or estimates of mineral resources or mineral 
reserves. See 17 CFR 229.1302(a)(1) [Item 1302(a)(1) of Regulation 
S-K].
    \243\ id. Like the proposed provision, the final rule refers to 
Item 1303, the summary disclosure provision, and Item 1304, the 
individual property disclosure provision, to specify the disclosure 
to which the qualified person requirement applies.
    \244\ We define ``qualified person'' in Item 1300 of Regulation 
S-K. See infra Section II.C.2.
    \245\ This requirement is consistent with the ``competence'' 
principle underlying the CRIRSCO standards, which requires that each 
person who has prepared the technical report summary meets the 
definition of qualified person and is, therefore, competent to make 
the findings and conclusions contained in the technical report 
summary.
---------------------------------------------------------------------------

    The Securities Act and the Exchange Act both 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

[[Page 66360]]

for the protection of investors.\246\ We believe that the requirement 
that a registrant's disclosure of mineral resources, mineral reserves, 
and material exploration results in Commission filings be based on and 
fairly reflect information and supporting documentation prepared by a 
``qualified person'' will further the protection of investors by 
helping to make the determination and reporting of estimates of mineral 
resources and reserves or exploration results more reliable. This is 
particularly important since we are adopting rules that, for the first 
time, will allow a registrant with material mining operations to 
disclose mineral resources in its Commission filings. As commenters 
noted, the qualified person requirement will help to mitigate any risks 
associated with the disclosure of mineral resources or 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.\247\ Requiring that the disclosure of exploration 
results, mineral resources, and mineral reserves in Commission filings 
be based on the work of a person having the requisite professional 
credentials and experience should help to foster proper risk assessment 
and disclosure, which is key to an investor's understanding of each 
stage of a mining project.\248\ Moreover, by adopting the qualified 
person requirement, the Commission will be strengthening its mining 
property disclosure requirements in a manner consistent with most 
foreign jurisdictions' mining disclosure requirements, thus promoting 
uniformity and comparability, which should benefit both registrants and 
investors.
---------------------------------------------------------------------------

    \246\ See Securities Act Section 7(a) [15 U.S.C. 77g(a)]; 
Exchange Act Sections 12(b)(1),)12(g)(1), 13(a) [15 U.S.C. 
78l(b)(1), 78l(g)(1), 78m(a)].
    \247\ See supra note 185 and accompanying text.
    \248\ See supra note 186 and accompanying text.
---------------------------------------------------------------------------

    We also are adopting the requirement that the registrant is 
responsible for determining that the qualified person meets the 
specified qualifications, and that the disclosure in the registrant's 
filing accurately reflects information provided by the qualified 
person.\249\ Although we acknowledge that the qualified person has a 
role to play in establishing that he or she possesses the requisite 
credentials and experience,\250\ placing the ultimate responsibility on 
the registrant is consistent with the registrant's duty under federal 
securities laws to ensure that the information in a Commission filing 
is accurate and free of material misstatements or omissions.
---------------------------------------------------------------------------

    \249\ 17 CFR 229.1302(a)(2) [Item 1302(a)(2) of Regulation S-K]. 
This requirement is consistent with the CRIRSCO standards. See, 
e.g., CRIRSCO International Reporting Template, supra note 20, at 
cl. 8; JORC Code, supra note 175, at pt. 9.
    \250\ See supra note 191 and accompanying text.
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    We are adopting the requirement that a registrant must obtain a 
dated and signed 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 
mineral resources or mineral reserves determined to be on each material 
property.\251\ We also are adopting the requirement that a registrant 
must file the technical report summary as an exhibit to the relevant 
Commission filing when disclosing mineral reserves or mineral resources 
for the first time or when there is a material change in the mineral 
reserves or mineral resources from the last technical report summary 
filed for the property.\252\
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    \251\ 17 CFR 229.1302(b)(1) [Item 1302(b)(1) of Regulation S-K].
    \252\ 17 CFR 229.1302(b)(2)(i) [Item 1302(b)(2)(i) of Regulation 
S-K].
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    We believe that the technical report summary filing requirement 
will not only help ensure that the registrant's disclosure in the 
Commission filing is accurate and reliable, it will also enhance 
investor understanding of a registrant's material mining properties. 
Specifically, the technical report summary will 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 exploration results, which should enable investors to better assess 
the value of the registrant's material mining properties. Moreover, to 
the extent that the data in the technical report summary constitutes 
part of the information used by the board of directors and management 
for corporate planning purposes (e.g., deciding which mining projects 
to pursue) and, once the mining project is underway, to help assess the 
operational performance of the mine, requiring this information to be 
filed will enable investors to better understand the corporate 
decision-making of the mining registrant.
    As commenters noted, mining companies, including U.S. registrants 
that are cross-listed, are already required in jurisdictions with 
CRIRSCO-based codes to obtain technical reports either for public 
filing or for internal use.\253\ We agree with commenters that stated 
that such reports enhance transparency in the industry to the benefit 
of investors.\254\ Moreover, as noted by some commenters, the 
requirement to have the technical report summary dated and signed will 
help to establish the authenticity and relevance of the document.\255\
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    \253\ See, e.g., letters from Rio Tinto and SRK 1.
    \254\ See, e.g., letter from Eggleston.
    \255\ See, e.g., letters from Golder and SRK 1.
---------------------------------------------------------------------------

    As proposed, the final rules 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.\256\ We believe this will result in clearer and more 
accessible disclosure for investors, enabling them to understand the 
disclosure more effectively from both an operational and technical 
viewpoint.
---------------------------------------------------------------------------

    \256\ 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 17 CFR 230.418 [Securities Act Rule 418]; 
17 CFR 240.12b-4 [Exchange Act Rule 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).
---------------------------------------------------------------------------

    A few commenters objected to the required filing of the technical 
report summary based on their belief that, because only Canada and 
Australia have a similar technical report filing requirement, the 
Commission's filing requirement will be burdensome for mining 
registrants that are not listed in those countries.\257\ While we 
acknowledge that the final rules will impose a new compliance burden 
for some registrants, as explained above, we believe the filing of a 
technical report summary will provide important benefits to investors. 
In response to commenters' concerns, we are adopting measures that we 
believe will limit this compliance burden by requiring technical report 
summaries only for material properties, and by requiring the filing of 
those documents only when a registrant first discloses mineral 
resources or mineral reserves, or when there is a material change in 
the mineral reserves or mineral resources from the last technical 
report summary filed for the property.
---------------------------------------------------------------------------

    \257\ See letters from Chamber, Davis Polk, and FCX.
---------------------------------------------------------------------------

    In addition, in a change from the proposed rules, as further 
discussed below,\258\ while exploration results, if disclosed, must be 
based on the findings and conclusions of a qualified person, we are not 
mandating that a registrant

[[Page 66361]]

obtain a dated and signed technical report summary from a qualified 
person to support the disclosure of exploration results. Under the 
final rules, a registrant may elect to obtain a technical report 
summary in connection with the disclosure of exploration results on a 
material property and file it as an exhibit to the relevant Commission 
filing, but it is not required to do so.\259\ We believe that this 
elective treatment will help to mitigate the concern of some commenters 
that opposed the technical report summary filing requirement because it 
would compel the disclosure of proprietary and competitively sensitive 
information.\260\
---------------------------------------------------------------------------

    \258\ See infra Section II.D.
    \259\ See Item 1302(b)(1) of Regulation S-K.
    \260\ See supra note 211 and accompanying text; see also infra 
Section II.D.
---------------------------------------------------------------------------

    Some commenters indicated that the proposed disclosure of certain 
specified information in the technical report summary, such as pricing 
assumptions or cash flow analysis, could reveal proprietary and 
commercially sensitive information.\261\ As discussed below,\262\ the 
final rules do not exclude pricing assumptions and cash flow analysis 
from the technical report summary because we believe that such 
exclusion would omit material information about a registrant's mineral 
resource or reserve estimates that is necessary for an investor to 
assess the registrant's current and prospective mining operations.
---------------------------------------------------------------------------

    \261\ See, e.g., letters from BHP and SME 1.
    \262\ See infra Sections II.E.4., II.F.1., and II.G.3.
---------------------------------------------------------------------------

    Consistent with the suggestion of some commenters,\263\ the final 
rules clarify that a registrant may use multiple qualified persons to 
prepare a technical report summary. First, the final rules provide that 
if a registrant has relied on more than one qualified person to prepare 
the information and documentation supporting its disclosure of 
exploration results, mineral resources or mineral reserves, the 
registrant's responsibilities as specified in 17 CFR 229.1302 (Item 
1302 of Regulation S-K) pertain to each qualified person.\264\ Second, 
the final rules state that if more than one qualified person has 
prepared the technical report summary, each qualified person must date 
and sign the technical report summary, and the technical report summary 
must clearly delineate the section or sections of the summary prepared 
by each qualified person.\265\
---------------------------------------------------------------------------

    \263\ See, e.g., letters from Coeur, MMSA, and SME 1.
    \264\ 17 CFR 229.1302(a)(3) [Item 1302(a)(3) of Regulation S-K].
    \265\ 17 CFR 229.1302(b)(1)(i) [Item 1302(b)(1)(i) of Regulation 
S-K].
---------------------------------------------------------------------------

    We also are adopting the proposed requirement that a registrant 
obtain the written consent of each qualified person who prepared a 
technical report summary to the use of the qualified person's name or 
any quotation from, or summarization of, the technical report summary 
in the relevant registration statement or report, and to the filing of 
the technical report summary as an exhibit to the registration 
statement or report.\266\ The written consent would only pertain to the 
particular section or sections of the technical report summary prepared 
by each qualified person.
---------------------------------------------------------------------------

    \266\ 17 CFR 229.1302(b)(4)(i) [Item 1302(b)(4)(i) of Regulation 
S-K].
---------------------------------------------------------------------------

    Adoption of the written consent requirement will align the 
Commission's mining disclosure rules with the CRIRSCO-based codes, 
which impose a similar written consent requirement.\267\ It also will 
help ensure that the qualified person's findings and conclusions are 
not included in a Commission filing without that person's actual 
knowledge.
---------------------------------------------------------------------------

    \267\ See, e.g., Canada's NI 43-101, supra note 123, at pt. 8.3; 
JORC Code, supra note 175, at pt. 9; SAMREC Committee, The South 
African Code for the Reporting of Exploration Results, Mineral 
Resources and Mineral Reserves: SAMREC Code, pt. 8 (2016) (``SAMREC 
Code''), https://www.samcode.co.za/samcode-ssc/about-samcodes; SME 
Guide, supra note 177, at pt. 8.
---------------------------------------------------------------------------

    In addition, requiring the registrant to obtain 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.\268\ In 
this regard, as proposed, the final rules provide that, for Securities 
Act filings, the registrant must file the written consent as an exhibit 
to the registration statement.\269\ Because a mining registrant is 
currently required to file the written consent of the mining engineer, 
geologist, or other expert upon whom it has relied when filing a 
Securities Act registration statement, the adopted written consent 
requirement should not impose an additional burden.\270\ For Exchange 
Act reports, the registrant is not required to file the written consent 
obtained from the qualified person, but should retain the written 
consent for as long as it is relying on the qualified person's 
information and supporting documentation for its current estimates 
regarding mineral resources, mineral reserves, or exploration 
results.\271\
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    \268\ See, e.g., Securities Act Rule 436.
    \269\ 17 CFR 229.1302(b)(4)(iv) [Item 1302(b)(4)(iv) of 
Regulation S-K].
    \270\ As discussed below, current practice has permitted a 
third-party firm employing the individual mining expert to provide 
the written consent.
    \271\ See Item 1302(b)(4)(iv). A registrant may be required to 
furnish supplementally a written consent obtained in connection with 
an Exchange Act report at the request of Commission staff during a 
review of the Exchange Act filing. In addition, consistent with 
current practice, a registrant must file the qualified person's 
written consent as an exhibit to an Exchange Act report that is 
being incorporated by reference into a Securities Act registration 
statement.
---------------------------------------------------------------------------

    In a clarification of the proposed rules, the final rules provide 
that a third-party firm comprising mining experts, such as professional 
geologists or mining engineers, may sign the technical report summary 
instead of, and without naming, its employee, member, or other 
affiliated person who prepared the summary.\272\ If a third-party firm 
signs the technical report summary, the final rules further provide 
that the third-party firm must provide the written consent.\273\ This 
is consistent with current practice, pursuant to which the third-party 
firm that employs or controls the expert upon whom the registrant has 
relied typically files the written consent instead of the individual 
expert. It is also consistent with the treatment of other written 
consents provided by auditors and engineering experts, whether in oil, 
natural gas, or mining.
---------------------------------------------------------------------------

    \272\ 17 CFR 229.1302(b)(1)(ii) [Item 1302(b)(1)(ii) of 
Regulation S-K].
    \273\ 17 CFR 229.1302(b)(4)(iii) [Item 1302(b)(4)(iii) of 
Regulation S-K].
---------------------------------------------------------------------------

    We are adopting these third-party firm signature and written 
consent provisions to assuage some of the concerns raised by commenters 
in connection with the potential Section 11 liability of qualified 
persons. Because the third-party firm that signs the technical report 
summary and provides the written consent will be treated as the expert 
upon whom the registrant has relied when making its mining property 
disclosures,\274\ and because the third-party firm is not required to 
name the individual employee, member or other affiliated person who 
prepared the various sections of the technical report summary, the 
third-party firm will incur potential liability under Section 11 rather 
than the unnamed individual. Thus, qualified persons who are employed 
or otherwise affiliated with third-party firms will not automatically 
be exposed to potential Section 11 liability as a result of their 
participation in the preparation of supporting

[[Page 66362]]

documentation for registrants that are subject to our final rules. The 
final rules should therefore mitigate concerns expressed by some 
commenters that potential Section 11 liability may reduce the 
willingness of some individuals to serve as qualified persons.\275\
---------------------------------------------------------------------------

    \274\ A registrant that receives a technical report summary 
signed by a third-party firm is nevertheless subject to its 
responsibilities regarding the qualified person under subpart 1300 
of Regulation S-K. See Item 1302(a) of Regulation S-K. Therefore, if 
a registrant receives a technical report summary signed by a third-
party firm, it should consult with the firm and confirm that each 
individual employee, member, or other person affiliated with the 
third-party firm who prepared the technical report summary meets the 
specified qualifications under the definition of qualified person. 
See 17 CFR 229.1300.
    \275\ See supra note 225 and accompanying text.
---------------------------------------------------------------------------

    If the qualified person is an employee of the registrant, however, 
he or she must provide the written consent on an individual basis.\276\ 
This is consistent with current practice concerning other experts who 
are employees of the registrant. For example, when a legal opinion is 
provided by a registrant's in-house counsel, the individual counsel 
typically provides the written consent.
---------------------------------------------------------------------------

    \276\ See Item 1302(b)(4)(iii) of Regulation S-K.
---------------------------------------------------------------------------

    The final rules do not provide a complete exemption for qualified 
persons from expert liability under Section 11 of the Securities Act. 
While we acknowledge the concerns raised by commenters in this 
regard,\277\ not imposing Section 11 liability would be a departure 
from the current requirement that imposes such liability on the named 
person that prepares the reserve estimates.\278\ It also would be at 
odds with the express design of the statute, which specifically posits 
engineers or ``any person whose profession gives authority to a 
statement made by him'' as potentially subject to Section 11 liability, 
and would greatly diminish the protection afforded investors under the 
Securities Act.\279\
---------------------------------------------------------------------------

    \277\ See supra note 221.
    \278\ See Guide 7, supra note 7, at ] (b)(5)(ii) (calling for 
the name of the person making the estimates and the nature of his 
relationship to the registrant).
    \279\ See 15 U.S.C. 77k(a)(4) (referring to ``every accountant, 
engineer, or appraiser, or any person whose profession gives 
authority to a statement made by him, who has with his consent been 
named as having prepared or certified any part of the registration 
statement, or as having prepared or certified any report or 
valuation which is used in connection with the registration 
statement, with respect to the statement in such registration 
statement, report, or valuation, which purports to have been 
prepared or certified by him'').
---------------------------------------------------------------------------

    However, we recognize that in preparing complex reports of this 
nature, the qualified person will, when necessary, rely on information 
and input from others, including the registrant. For example, while the 
qualified person typically estimates capital and operating costs for 
the mining project,\280\ he or she typically relies on the registrant 
to provide other economic information regarding macroeconomic trends, 
data, and assumptions, and interest rates, all of which are material to 
the economic analysis required to support the qualified person's 
reserve estimate.\281\
---------------------------------------------------------------------------

    \280\ See 17 CFR 229.601(b)(96)(iii)(B)(18) [Item 
601(b)(96)(iii)(B)(18) of Regulation S-K].
    \281\ See 17 CFR 229.601(b)(96)(iii)(B)(19) [Item 
601(b)(96)(iii)(B)(19) of Regulation S-K].
---------------------------------------------------------------------------

    There are other required matters in the technical report summary 
that may fall outside the expertise of the qualified person, and 
regarding which the registrant may provide assistance. For example, the 
qualified person may require assistance from the registrant when 
considering the following aspects of some of the modifying factors:

     Marketing information and plans within the control of 
the registrant; \282\
---------------------------------------------------------------------------

    \282\ See 17 CFR 229.601(b)(96)(iii)(B)(16) [Item 
601(b)(96)(iii)(B)(16) of Regulation S-K].
---------------------------------------------------------------------------

     legal matters outside the expertise of the qualified 
person, such as statutory and regulatory interpretations affecting 
the mine plan; \283\
---------------------------------------------------------------------------

    \283\ See, e.g., 17 CFR 229.601(b)(96)(iii)(B)(3) and (17) 
[Items 601(b)(96)(iii)(B)(3) and 601(b)(96)(iii)(B)(17) of 
Regulation S-K].
---------------------------------------------------------------------------

     environmental matters outside the expertise of the 
qualified person; \284\
---------------------------------------------------------------------------

    \284\ See Item 601(b)(96)(iii)(B)(17) of Regulation S-K.
---------------------------------------------------------------------------

     accommodations the registrant commits or plans to 
provide to local individuals or groups in connection with its mine 
plans; \285\ and
---------------------------------------------------------------------------

    \285\ See id.
---------------------------------------------------------------------------

     governmental factors outside the expertise of the 
qualified person.\286\
---------------------------------------------------------------------------

    \286\ See, e.g., Items 601(b)(96)(iii)(B)(3) and (17) of 
Regulation S-K.

Because the qualified person may require assistance from the registrant 
on these matters, the final rules provide that the qualified person may 
indicate in the technical report summary that the qualified person has 
relied on information provided by the registrant in preparing its 
findings and conclusions regarding those modifying factors.\287\ The 
final rules also provide that, in a separately captioned section of the 
technical report entitled ``Reliance on Information Provided by the 
Registrant,'' the qualified person must: Identify the categories of 
information provided by the registrant; identify the particular 
portions of the technical report summary that were prepared in reliance 
on information provided by the registrant pursuant to paragraph (f)(1) 
of this section, and the extent of that reliance; and disclose why the 
qualified person considers it reasonable to rely upon the registrant 
for any of the information specified according to this rule.\288\ We 
believe that this disclosure will help investors and other interested 
persons understand the source and reliability of the information 
pertaining to those factors. We also note that this disclosure is 
consistent with the disclosure recommended when a qualified or 
competent person relies on information provided by the registrant under 
the CRIRSCO standards.\289\
---------------------------------------------------------------------------

    \287\ 17 CFR 229.1302(f)(1) [Item 1302(f)(1) of Regulation S-K].
    \288\ 17 CFR 229.1302(f)(2) [Item 1302(f)(2) of Regulation S-K].
    \289\ See, e.g., SME Guide For Reporting Exploration 
Information, Mineral Resources, And Mineral Reserves (2017) (2017 
SME Guide), Appendix C.
---------------------------------------------------------------------------

    Where the registrant has provided the information relied upon by 
the qualified person when addressing these modifying factors, we 
believe that it would be appropriate for the registrant, rather than 
the qualified person, to be subject to potential Section 11 liability 
pertaining to a discussion of these matters in the technical report 
summary or other part of the registration statement.\290\ In these 
situations, requiring the qualified person to certify this information 
may not be necessary for investor protection given that the registrant 
remains liable for the contents of the registration statement and 
consequently will be incentivized to exercise due care in the 
preparation of this information. Accordingly, the final rules provide 
that any description in the technical report summary or other part of 
the registration statement of the procedures, findings, and conclusions 
reached about matters identified by the qualified person as having been 
based on information provided by the registrant pursuant to this 
section, shall not be considered a part of the registration statement 
prepared or certified by the qualified person within the meaning of 
Sections 7 and 11 of the Securities Act.\291\ We have limited this 
accommodation to the above described aspects of certain modifying 
factors because we believe that these aspects are most likely to fall 
outside of the qualified person's expertise and for which he or she is 
most likely to require assistance from the registrant.
---------------------------------------------------------------------------

    \290\ Some commenters indicated that liability for mining 
property disclosure in a Commission filing should fall primarily on 
the registrant. See letter from BHP (stating that because a public 
report is the responsibility of the company acting through its board 
of directors, which should act as an assurance element for 
investors, any potential liability imposed on a qualified person 
should not be broader than that of the company's principal executive 
and financial officers); see also letter from Cloud Peak.
    \291\ 17 CFR 229.1302(f)(3) [Item 1302(f)(3) of Regulation S-K]; 
see also 17 CFR 230.436(h) [Securities Act Rule 436(h)]. For the 
reasons discussed herein, we find that these provisions are 
necessary and appropriate in the public interest and consistent with 
the protection of investors. See 15 U.S.C. 77z-3.
---------------------------------------------------------------------------

    We also recognize that the qualified person may hire on his or her 
own third-party specialists who are not qualified persons. For this 
reason, the final rules provide that a qualified person may include in 
the technical

[[Page 66363]]

report summary information and documentation provided by a third-party 
specialist who is not a qualified person, such as an attorney, 
appraiser, and economic or environmental consultant, upon which the 
qualified person has relied in preparing the technical report 
summary.\292\ However, unlike the case with certain information 
provided by the registrant, the final rules provide that the qualified 
person may not disclaim responsibility for any information and 
documentation prepared by a third-party specialist upon which the 
qualified person has relied, or any part of the technical report 
summary based upon or related to that information and 
documentation.\293\ Although many commenters suggested that we permit 
such disclaimers,\294\ doing so could undermine the quality of the 
technical report summary, as neither the qualified person nor the 
third-party specialist would be accountable for material misstatements 
or omissions in such information and documentation. This is in contrast 
to the situation in which the registrant retains Section 11 liability 
for the information that it provides to the qualified person and which 
may be disclaimed by the qualified person. We understand the concern of 
commenters that, by prohibiting disclaimers of responsibility, a 
qualified person could become liable for material misstatements or 
omissions of fact in the technical report summary that are attributed 
to the third-party specialist upon whom the qualified person has 
relied.\295\ However, under the final rules, the qualified person will 
be able to determine whether and under what terms it engages the third-
party specialist, which should help the qualified person mitigate any 
attendant risks.
---------------------------------------------------------------------------

    \292\ 17 CFR 229.1302(b)(6)(i) [Item 1302(b)(6)(i) of Regulation 
S-K].
    \293\ 17 CFR 229.1302(b)(6)(ii)] [Item 1302(b)(6)(ii) of 
Regulation S-K].
    \294\ See supra note 229 and accompanying text.
    \295\ See supra note 230 and accompanying text.
---------------------------------------------------------------------------

    Although we are not providing a complete exemption from Section 11 
liability for qualified persons or otherwise permitting them to 
disclaim information provided by a third-party specialist, there are 
limitations on the extent of liability the qualified person will incur, 
particularly when other qualified persons are involved in preparation 
of the technical report summary, as the final rules now expressly 
permit. Under Section 11, a qualified person, as an expert, would have 
an affirmative defense against liability for such misstatements or 
omissions made on the authority of another expert if the qualified 
person ``had no reasonable ground to believe and did not believe, at 
the time such part of the registration statement became effective, that 
the statements therein were untrue or that there was an omission to 
state a material fact required to be stated therein or necessary to 
make the statements therein not misleading, or that such part of the 
registration statement did not fairly represent the statement of the 
expert or was not a fair copy of or extract from the report or 
valuation of the expert.'' \296\ In addition, the written consent 
requirement, which requires a qualified person to provide a consent 
only regarding the section or sections of the technical report summary 
prepared by that person, would further serve to limit the qualified 
person's liability under Section 11 for material misstatements or 
omissions made by other contributing qualified persons.
---------------------------------------------------------------------------

    \296\ See Section 11(b)(3) of the Securities Act [15 U.S.C. 
77k(b)(3)]. One commenter stated that the Commission ``does not 
specify how a Qualified Person might establish a due diligence 
defense'' under Section 11 of the Securities Act. See letter from 
Chamber. We typically do not indicate how persons may establish 
defenses under the Securities Act, and we refrain from doing so 
here.
---------------------------------------------------------------------------

    The final rules provide that a registrant is not required to file a 
written consent of any third-party specialist upon which a qualified 
person has relied.\297\ This is consistent with other Commission rules, 
which do not require a registrant to provide the written consent of a 
secondary specialist upon which a consenting expert has relied.\298\
---------------------------------------------------------------------------

    \297\ 17 CFR 229.1302(b)(6)(iii) [Item 1302(b)(6)(iii) of 
Regulation S-K].
    \298\ See 17 CFR 230.436(f) [Securities Act Rule 436(f)] 
(``Where the opinion of one counsel relies upon the opinion of 
another counsel, the consent of the counsel whose prepared opinion 
is relied upon need not be furnished'').
---------------------------------------------------------------------------

    As proposed, the final rules require the registrant to state 
whether each qualified person who prepared the technical report summary 
is an employee of the registrant.\299\ If the qualified person is not 
an employee of the registrant, the final rules require the registrant 
to 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.\300\ The terms ``affiliate'' and ``affiliated'' have the 
same meaning as in Securities Act Rule 405 or Exchange Act Rule 12b-
2.\301\
---------------------------------------------------------------------------

    \299\ 17 CFR 229.1302(b)(5) [Item 1302(b)(5) of Regulation S-K].
    \300\ See id.
    \301\ See id.
---------------------------------------------------------------------------

    This provision will 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.\302\ Although several commenters 
also recommended that we require a registrant to state whether its 
qualified person satisfies the independence requirement of Canada's NI 
43-101,\303\ we do not believe an independence requirement is 
appropriate for the reasons stated in the Proposing Release.\304\ 
First, we believe that our approach will help to limit the compliance 
burdens on registrants. Second, we believe that other aspects of the 
final rules, 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, our 
approach is consistent with most of the CRIRSCO-based codes, 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.\305\
---------------------------------------------------------------------------

    \302\ See, e.g., JORC Code, supra note 175, at pt. 9; see also 
the Pan-European Reserves and Resources Reporting Committee, PERC 
Reporting Standard pt. 3.5 (2017) (``PERC Reporting Standard''), 
http://www.vmine.net/PERC/documents/PERC%20REPORTING%20STANDARD%202017.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 Canada's NI 43-101, supra note 123, at 
pt. 5.3 (Can.).
    \303\ See supra note 236 and accompanying text.
    \304\ See Proposing Release, supra note 5, at Section II.C.1. 
For similar reasons, we also do not believe it would be appropriate 
to require an independent review of a technical report prepared by a 
qualified person that is an employee or affiliate of the registrant.
    \305\ See id.
---------------------------------------------------------------------------

2. The Definition of ``Qualified Person''
i. Rule Proposal
    We proposed 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

[[Page 66364]]

undertaking on behalf of the registrant. In addition, the proposed 
definition requires a qualified person to be an eligible member or 
licensee in good standing of a recognized professional organization at 
the time the technical report is prepared.\306\
---------------------------------------------------------------------------

    \306\ See Proposing Release, supra note 5, at Section II.C.2.
---------------------------------------------------------------------------

    Under the proposed rules, a ``recognized professional 
organization,'' would have to be either recognized within the mining 
industry as a reputable professional association,\307\ 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:
---------------------------------------------------------------------------

    \307\ The ``reputable professional association'' standard is 
also used in Canada's NI 43-101. See the definition of 
``professional association'' in Canada's NI 43-101, supra note 123, 
at 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.\308\
---------------------------------------------------------------------------

    \308\ See Proposing Release, supra note 5, at Section II.C.2.

    As we explained in the Proposing Release, this proposed definition 
is similar to the definition of competent or qualified person under the 
CRIRSCO-based codes.\309\ It differs, however, from those codes in at 
least one respect. Although CRIRSCO provides some guidance about what 
constitutes a ``recognized professional organization,'' \310\ 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.\311\ This list is updated periodically by the 
various code regulators. We did not propose a similar ``approved list'' 
approach because of our belief that a more principles-based approach 
provides flexibility.\312\
---------------------------------------------------------------------------

    \309\ 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 International Reporting 
Template, supra note 20, at pt. 11; JORC Code, supra note 175, at 
pt. 11; see also SAMREC Code, pt. 10 (2016); PERC Reporting 
Standard, supra note 302, at pt. 3.1. The recognized professional 
organizations under CRIRSCO standards have and apply disciplinary 
powers to members and most require professional development to 
maintain such membership.
    \310\ See CRIRSCO International Reporting Template, supra note 
20, at cl. 11 (stating that the organization of which a competent 
person is a member must have ``enforceable disciplinary processes 
including the powers to suspend or expel a member'').
    \311\ See, e.g., JORC Code, supra note 175, at pt. 11; SAMREC 
Code, supra note 267, at pt. 9; SME Guide, supra note 177, at pt. 9; 
and PERC Reporting Standard, supra note 302, at pt. 3.1.
    \312\ See Proposing Release, supra note 5, at Section II.C.1.
---------------------------------------------------------------------------

    We also proposed detailed instructions to the definition of 
``qualified person'' to assist registrants in applying the definition. 
The proposed instructions describe the specific types and amount of 
experience necessary for various types of mining activities and mineral 
deposits.\313\
---------------------------------------------------------------------------

    \313\ See id.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Numerous commenters supported the Commission's proposal to require 
the qualified person to be an individual person.\314\ Commenters noted 
that this requirement is consistent with the CRIRSCO standards and 
indicated that it helps ensure that the qualified person assumes the 
appropriate personal responsibility for his or her findings and 
conclusions.\315\ One commenter, however, maintained that professional 
associations have no ability to sanction a company and most have no 
mechanism for corporate membership.\316\ Another stated that if a firm 
can meet all the qualifications required under the qualified person 
definition and has quality controls recognized by professional boards 
or state regulatory agencies in place, the firm should be allowed to 
meet the qualified person definition.\317\
---------------------------------------------------------------------------

    \314\ See letters from Amec, AngloGold, CIM, CSP\2\, Earthworks, 
Eggleston, Golder, Midas, MMSA, Rio Tinto, SAMCODES 2, SME 1, SRK 1, 
Ur-Energy, and Vale.
    \315\ See, e.g., letters from AngloGold, Golder, Midas, and SME 
1.
    \316\ See letter from Rio Tinto.
    \317\ See letter from Alliance.
---------------------------------------------------------------------------

    Many commenters also generally supported the Commission's proposed 
definition of ``qualified person'' as an individual 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.\318\ Those commenters noted 
that the proposed five year minimum experience requirement is 
consistent with the minimum experience requirement under the CRIRSCO-
based codes.\319\ Other commenters recommended that the qualified 
person have at least seven years of postgraduate experience in the 
mineral industry with at least three years in positions of 
responsibility (defined as requiring independent judgment).\320\ Two 
commenters, however, stated that the provision requiring at least five 
years of relevant experience in the particular type of mineralization 
and deposit under consideration is too restrictive.\321\
---------------------------------------------------------------------------

    \318\ See letters from AIPG, AngloGold, AusIMM, BHP, CBRR, CIM, 
Coeur, Eggleston, FCX, Golder, JORC, Midas, MMSA, Rio Tinto, 
SAMCODES 1, SME 1, SRK 1, Vale, and Willis.
    \319\ See letters from CBRR, Eggleston, Midas, SAMCODES 1, and 
SRK 1.
    \320\ See letters from AIPG, Coeur, and SME 1. See also letter 
from MMSA (recommending requiring a minimum of 10 years of practical 
experience in geosciences including at least five years in positions 
of responsibility).
    \321\ See letters from Alliance and Amec. Amec preferred the 
definition of qualified person under NI 43-101, which requires a 
qualified person to have ``at least five years of experience in 
mineral exploration, mine development or operation or mineral 
project assessment, or any combination of these, that is relevant to 
his or her professional degree or area of practice'' as well as 
``experience relevant to the subject matter of the mineral project 
and the technical report.''
---------------------------------------------------------------------------

    Several commenters recommended adding an educational requirement to 
the definition (e.g., the attainment of a bachelor's or equivalent 
degree in an area of geoscience, metallurgy, or mining 
engineering).\322\ Two of those commenters stated that, alternatively, 
a university degree in civil or chemical engineering would qualify if 
the person also had the requisite post-graduate experience in the 
minerals industry.\323\ In contrast, three commenters opposed an 
educational requirement because the recognized professional 
organizations include such a requirement in their membership 
criteria.\324\
---------------------------------------------------------------------------

    \322\ See letters from AIPG, Alliance, Amec, CIM, Coeur, 
CRIRSCO, Graves, MMSA, Rio Tinto, SME 1, and Willis.
    \323\ See letters from Coeur and Willis. Another commenter 
stated that a qualified person should simply hold a university 
degree or equivalent accreditation relevant to his or her area of 
practice. Such a flexible definition would allow a non-geoscientist, 
such as a biochemist or botanist, to be accepted as a qualified 
person to undertake the specialized baseline studies supporting 
permit applications, particularly environmental permits. See letter 
from Amec.
    \324\ See letters from AusIMM, JORC, and SAMCODES 1. Another 
commenter, SRK 1, agreed that most professional organizations impose 
a minimum education requirement but suggested that the Commission 
could also provide for such a requirement in the definition of 
qualified person.
---------------------------------------------------------------------------

    A majority of commenters addressing the issue generally supported 
the Commission's proposal to require a qualified person to be an 
eligible member or licensee in good standing of a recognized 
professional organization at the time the technical report is

[[Page 66365]]

prepared.\325\ Several commenters generally agreed with the 
Commission's proposed criteria defining a ``recognized professional 
organization.'' \326\ One commenter suggested adding a requirement that 
the organization have ``one or more membership categories requiring 
attainment of a position of responsibility that requires the exercise 
of independent judgment and a favorable confidential peer evaluation of 
the individual's character, professional judgment, experience, and 
ethical fitness.'' \327\
---------------------------------------------------------------------------

    \325\ See letters from AIPG, Amec, AngloGold, AusIMM, BHP, CBRR, 
CIM, Coeur, CRIRSCO, Eggleston, Golder, JORC, Midas, MMSA, Mousset-
Jones, NSPE, Rio Tinto, SAMCODES 1, SME 1, SRK 1, Vale, and Willis.
    \326\ See, e.g., letters from AIPG, AngloGold, CBRR, CIM, Rio 
Tinto, and SRK 1.
    \327\ Letter from SME 1.
---------------------------------------------------------------------------

    Some commenters stated that the Commission should define a 
recognized professional organization as encouraging but not requiring 
continuing professional development.\328\ According to these 
commenters, a strict continuing professional development requirement is 
not necessary, particularly if the member is a full-time 
practitioner.\329\ Other commenters stressed the importance of 
requiring the recognized professional organization to have the 
jurisdiction to discipline the qualified person, no matter where the 
person resides or practices or where the deposit is located.\330\
---------------------------------------------------------------------------

    \328\ See letters from Amec, CBRR, Midas, Rio Tinto, SRK 1, and 
Vale.
    \329\ See, e.g., letters from Midas and SRK 1. MMSA, however, 
indicated that continuing professional development should be 
compulsory.
    \330\ See letters from Amec, Coeur, MMSA, and Willis.
---------------------------------------------------------------------------

    Most commenters that addressed the ``qualified person'' definition 
stated that the Commission should adopt and publish an approved list of 
``recognized professional organizations'' similar to the approach under 
the CRIRSCO-based codes.\331\ Commenters recommended that the 
Commission reference the list of approved organizations set forth in an 
Appendix to Canada's NI 43-101 CP (Companion Policy),\332\ the list of 
approved organizations maintained by the SME,\333\ or the approved 
organization list published by the Australian Securities Exchange 
(``ASX'').\334\ According to commenters, referencing such lists would 
not only help achieve a level of consistency with the CRIRSCO-based 
codes regarding which groups constitute recognized professional 
organizations, it also would lessen the Commission's administrative 
burden of having to verify and update the list of approved 
organizations.\335\
---------------------------------------------------------------------------

    \331\ See letters from AIPG, Amec, AusIMM, BHP, CBRR, CIM, 
CRIRSCO, Eggleston, Graves, JORC, Midas, SAMCODES 1, SME 1, SRK 1, 
and Vale.
    \332\ See letters from AIPG, CIM, Graves, SME 1, SRK 1, and 
Vale.
    \333\ See letters from AusIMM, CBRR, Graves, JORC, and SME 1.
    \334\ See letter from BHP.
    \335\ See, e.g., letters from AIPG, Graves, and SME 1.
---------------------------------------------------------------------------

    Two commenters, however, supported the Commission's proposed 
approach requiring an organization to meet specified factors before it 
could qualify as a recognized professional organization rather than 
using a list of approved organizations,\336\ preferring it as more 
flexible \337\ and as ``a better and more practical alternative.'' 
\338\
---------------------------------------------------------------------------

    \336\ See, e.g., letters from Alliance and Golder.
    \337\ See letter from Alliance.
    \338\ See letter from Golder.
---------------------------------------------------------------------------

iii. Final Rules
    We are adopting the definition of qualified person, as 
proposed.\339\ We are also adopting, as proposed, the specific criteria 
that qualify an organization to be a recognized professional 
organization.\340\
---------------------------------------------------------------------------

    \339\ See 17 CFR 229.1300.
    \340\ See id. For an organization to be a recognized 
professional organization, it must: Be either an organization 
recognized within the mining industry as a reputable professional 
association, or a board authorized by U.S. federal, state or foreign 
statute to regulate professionals in the mining, geoscience or 
related field; 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. With respect to 
the first requirement, one commenter opposed allowing a state board 
to authorize a recognized professional organization. See letter from 
Mousset-Jones. We continue to believe that this criterion is 
appropriate because, as one commenter noted, in the United States, 
it is typically a board authorized by state statute that regulates 
professionals in the mining, geoscience, engineering, geology or 
related field. See letter from NSPE.
---------------------------------------------------------------------------

    Adoption of the qualified person definition will align the 
Commission's rules with the CRIRSCO standards and, as commenters noted, 
help ensure that the qualified person assumes the appropriate personal 
responsibility for his or her findings and conclusions.\341\ Although 
some commenters recommended adding to the requirement,\342\ adoption of 
the ``at least five years of relevant experience'' requirement will 
provide further consistency with the CRIRSCO-based codes.\343\
---------------------------------------------------------------------------

    \341\ See supra note 315 and accompanying text.
    \342\ See letters from AIPG, Coeur, MMSA, and SME 1.
    \343\ See, e.g., letters from CBRR, Eggleston, Midas, SAMCODES 
1, and SRK 1.
---------------------------------------------------------------------------

    Similar to proposed instructions, we are adopting a definition of 
the term ``relevant experience'' for purposes of determining whether a 
party is a qualified person. This definition is substantially similar 
to guidance provided under the CRIRSCO-based codes. For that reason, 
most commenters that addressed the issue found the proposed 
instructions to be adequate.\344\ As one commenter explained, the 
proposed instructions ``are well aligned to established CRIRSCO 
template guidance.'' \345\
---------------------------------------------------------------------------

    \344\ See letters from AngloGold, CBRR, Eggleston, Midas, Rio 
Tinto, and SRK 1.
    \345\ Letter from Rio Tinto.
---------------------------------------------------------------------------

    This definition first provides that 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. 
For example, 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 technical and economic 
factors likely to influence the prospect of economic extraction. 
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.\346\
---------------------------------------------------------------------------

    \346\ See the definition of ``relevant experience'' in 17 CFR 
229.1300.
---------------------------------------------------------------------------

    This definition next provides that 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, or mineral brine). 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.\347\
---------------------------------------------------------------------------

    \347\ See paragraph (1) of the definition of ``relevant 
experience'' in 17 CFR 229.1300.
---------------------------------------------------------------------------

    This definition also explains 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

[[Page 66366]]

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.\348\
---------------------------------------------------------------------------

    \348\ See Note 1 to paragraph (1) of the definition of 
``relevant experience'' in 17 CFR 229.1300.
---------------------------------------------------------------------------

    This definition further provides that, 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 qualified person must have sufficient experience with 
the sampling and analytical techniques, as well as extraction and 
processing techniques, relevant to the mineral deposit under 
consideration. ``Sufficient experience'' in this context 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.\349\
---------------------------------------------------------------------------

    \349\ See paragraph (2) of the definition of ``relevant 
experience'' in 17 CFR 229.1300.
---------------------------------------------------------------------------

    Finally, this definition provides that, for a qualified person 
applying the modifying factors to convert mineral resources to mineral 
reserves, he or she must have both sufficient knowledge and experience 
in the application of these factors to the mineral deposit under 
consideration, as well as experience with the geology, geostatistics, 
mining, extraction, and processing that is applicable to the type of 
mineral and mining under consideration.\350\
---------------------------------------------------------------------------

    \350\ See paragraph (3) of the definition of ``relevant 
experience'' in 17 CFR 229.1300.
---------------------------------------------------------------------------

    These detailed provisions regarding the meaning of ``relevant 
experience'' will help assure that the qualified person has the 
appropriate level of experience for both the type of activity and type 
of mineral deposit involved to make accurate assessments about the 
registrant's exploration results, mineral resources, and mineral 
reserves. At the same time, we believe that the adopted definition of 
``qualified person,'' taken together with these related provisions, 
will 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 adopted definition of 
qualified person and related provisions should not significantly alter 
existing disclosure practices for registrants subject to those 
codes.\351\
---------------------------------------------------------------------------

    \351\ See, e.g., CIM Standing Committee on Reserve Definitions, 
CIM Definition Standards--For Mineral Resources and Mineral Reserves 
2 (2014) (``CIM Definition Standards''), https://mrmr.cim.org/media/1016/cim_definition_standards_20142.pdf; JORC Code, supra note 175, 
at pt. 11; SAMREC Code, supra note 267, at pt. 10; and SME Guide, 
supra note 177, at pt. 9.
---------------------------------------------------------------------------

    The final rules do not require a qualified person to have attained 
a specific minimum education level because, as several commenters 
noted, the recognized professional organizations typically address such 
a requirement in their membership criteria.\352\ Although one commenter 
suggested adding other criteria to the definition of ``recognized 
professional organization,'' \353\ we believe our less prescriptive 
approach, which establishes the minimum criteria that an organization 
must meet to be considered a recognized professional association, is 
the better approach. Consistent with the proposed rules, the final 
rules include requiring or encouraging continuing professional 
development as one of the defining criteria of a recognized 
professional organization. Like most commenters that addressed the 
issue,\354\ we agree that it is better to leave the treatment of 
continuing professional development to the professional organizations 
who are more knowledgeable about whether industry developments require 
additional training of their members.\355\
---------------------------------------------------------------------------

    \352\  See supra note 324 and accompanying text.
    \353\ See letter from SME 1.
    \354\ See letters from Amec, CBRR, Midas, Rio Tinto, SRK 1, and 
Vale.
    \355\ See, e.g., letter from Rio Tinto.
---------------------------------------------------------------------------

    We are not publishing an approved list of ``recognized professional 
organizations.'' We continue to believe that our principles-based 
approach, which some commenters preferred because of its 
flexibility,\356\ provides assurance that the qualified person has the 
appropriate level of professional expertise to support the disclosure 
of exploration results, mineral resources, or mineral reserves without 
unduly restricting the pool of eligible qualified persons. Although we 
acknowledge that the ``approved organization'' approach may be 
initially easier to apply, it could also become outdated as 
circumstances change, which could adversely affect the quality of 
disclosure.\357\
---------------------------------------------------------------------------

    \356\ See letters from Alliance and Golder.
    \357\ We also do not believe it would be appropriate to 
reference a specific approved list of recognized professional 
organizations adopted under one of the CRIRSCO-based codes, as 
suggested by some commenters. See supra notes 332-334. This would 
effectively bind the Commission's rules to a current and future 
standard adopted by a third-party entity over which the Commission 
would have little to no control or influence.
---------------------------------------------------------------------------

D. Treatment of Exploration Results

1. Rule Proposal
    Neither Guide 7 nor Item 102 addresses the disclosure of 
exploration results in Commission filings.\358\ In contrast, the 
CRIRSCO-based codes permit the disclosure of 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.\359\
---------------------------------------------------------------------------

    \358\ Accordingly, the staff does not currently request 
disclosure of exploration results. If a registrant voluntarily 
provides exploration results, the staff will review, and if 
appropriate, issue comments on, such disclosure.
    \359\ See, e.g., JORC Code, supra note 175, at pts. 18-19; 
SAMREC Code, supra note 267, at pt. 20; PERC Reporting Standard, 
supra note 302, at pt. 6; and SME Guide, supra note 177, at pts. 33-
34.
---------------------------------------------------------------------------

    We proposed to require that a registrant disclose its exploration 
activity and its material exploration results for each of its material 
properties for its most recently completed fiscal year.\360\ Similar to 
the CRIRSCO-based codes, we proposed 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. We 
further proposed an instruction explaining 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.\361\
---------------------------------------------------------------------------

    \360\ See Proposing Release, supra note 5, at Section II.D.
    \361\ See id.
---------------------------------------------------------------------------

    In addition, we proposed to prohibit the use of exploration 
results, by themselves, to derive estimates of tonnage, grade, and 
production rates, or in an assessment of economic viability because of 
the level of risk associated with exploration results.\362\ As we 
explained, 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 indicated that exploration results are insufficient to 
support disclosure of estimates of tonnage, grade, or other 
quantitative

[[Page 66367]]

estimates.\363\ As proposed, tonnage and grade estimates would 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.\364\
---------------------------------------------------------------------------

    \362\ See id.
    \363\ See id.
    \364\ See id. Similar restrictions on the use of exploration 
results exist under the CRIRSCO standards. See, e.g., CRIRSCO 
International Reporting Template, supra note 20, at cl. 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.''
---------------------------------------------------------------------------

2. Comments on the Rule Proposal
    Several commenters generally supported requiring the disclosure of 
material exploration results on material properties.\365\ One commenter 
stated that exploration results on material properties are the basis 
for valuing the property and, hence, should be disclosed in a technical 
report specific to the property in question.\366\ Another commenter 
stated that exploration results are ``important information for 
investors, particularly in respect of exploration or development 
companies, where exploration results might be all or a significant 
portion of the information on the company's properties.'' \367\ A third 
commenter stated that disclosure of material exploration results for 
material properties should be required for exploration stage 
registrants, but not for large production stage registrants, because 
the same level of exploration results might not be deemed 
material.\368\ A fourth commenter supported the required disclosure of 
material exploration results for material properties as long as the 
exploration information required to be disclosed is consistent with the 
CRIRSCO definitions.\369\
---------------------------------------------------------------------------

    \365\ See letters from BHP, Eggleston, Midas, Rio Tinto, and 
SAMCODES 2.
    \366\ See letter from Eggleston.
    \367\ Letter from Midas.
    \368\ See letter from Rio Tinto; see also letter from BHP 
(agreeing with the proposed material exploration results disclosure 
requirement because it is a common practice promoted in other 
jurisdictions for small to medium-sized listed companies to disclose 
material exploration results).
    \369\ See letter from SAMCODES 2.
---------------------------------------------------------------------------

    Many other commenters opposed requiring the disclosure of material 
exploration results on a registrant's material properties.\370\ Most of 
those commenters expressed concern that requiring the disclosure of 
material exploration results could compel the disclosure of 
commercially sensitive information and the potential violation of 
confidentiality agreements with joint venture partners and other mining 
operators (e.g., on adjacent properties).\371\ Several of those 
commenters asserted that compulsory disclosure of exploration results 
would be inconsistent with the CRIRSCO-based codes, which permit or 
encourage but do not require such disclosure.\372\ One of the 
commenters stated that, under the CRIRSCO standards, disclosure of 
exploration results is voluntary until such information becomes 
material to investors.\373\ Because the rule proposal would require the 
disclosure of material exploration results on a material property on a 
yearly basis, this commenter expressed concern that a registrant might 
be compelled to disclose its exploration results in most instances even 
before those exploration results would be considered material to 
investors.\374\ Other commenters expressed concern that investors would 
misconstrue the significance of exploration results.\375\ For example, 
one commenter stated that the disclosure of material exploration 
results ``is very likely to mislead investors into thinking that a 
property is more economically viable than it may actually be given the 
low level of certainty of exploration results.'' \376\
---------------------------------------------------------------------------

    \370\ See letters from Alliance, AngloGold, Cloud Peak, CIM, 
Cleary & Gottlieb, Coeur, Davis Polk, FCX, Gold Resource, Newmont, 
NMA 1, Royal Gold, SME 1, SRK 1, Vale, and Willis.
    \371\ See letters from Alliance, Cleary & Gottlieb, Cloud Peak, 
CIM, Davis Polk, FCX, Gold Resource, Newmont, NMA 1, Royal Gold, SME 
1, and Vale.
    \372\ See, e.g., letters from CIM, Cleary & Gottlieb, Gold 
Resource, SME 1, and Vale.
    \373\ See letter from SME 1.
    \374\ See id.
    \375\ See letters from Alliance, AngloGold, and SRK 1.
    \376\ Letter from Alliance.
---------------------------------------------------------------------------

    Because of the above concerns, most of the commenters that 
addressed the issue recommended that the Commission permit, but not 
require, the disclosure of material exploration results on material 
properties.\377\ In this regard, some commenters distinguished between 
exploration or development stage issuers, on the one hand, and 
production stage issuers, on the other.\378\ These commenters stated 
that because exploration results may be the only available information 
for certain exploration or development stage issuers, the disclosure of 
exploration results would be material for investors in these types of 
issuers. For production stage issuers, however, the disclosure of 
exploration results would generally result in immaterial information 
that would be costly and burdensome to prepare.
---------------------------------------------------------------------------

    \377\ See letters from AngloGold, Cleary & Gottlieb, Cloud Peak, 
CIM, Coeur, Davis Polk, FCX, Gold Resource, Newmont, Royal Gold, SME 
1, SRK 1, Vale, and Willis.
    \378\ See letters from Amec, Cleary & Gottlieb, and Vale. 
Another commenter agreed that exploration results ``may be all or a 
significant portion of the available information regarding the 
properties of an exploration or development-stage mining company,'' 
but nevertheless recommended the voluntary disclosure of exploration 
activity and exploration results, including by exploration or 
development stage companies. Letter from FCX.
---------------------------------------------------------------------------

    A number of commenters also opposed the Commission's proposed 
prohibition of the use of exploration results to derive estimates of 
tonnage and grade because, under the CRIRSCO standards, qualified 
persons and registrants are allowed to disclose exploration targets, 
which are quantitative estimates of the ranges of tonnage and grade of 
a mineral deposit, which is the target of exploration.\379\ These 
commenters recommended that the Commission permit the disclosure of 
exploration targets, as defined under the CRIRSCO standards,\380\ which 
would allow a registrant to provide a range of estimates of tonnage and 
grade, while also requiring the registrant to provide ``cautionary 
language of equal prominence that the potential quantity and grade is 
conceptual in nature, that there has been insufficient exploration to 
define the mineralization as a mineral resource and that it is 
uncertain if further exploration will result in the target delineated 
as a mineral resource.'' \381\
---------------------------------------------------------------------------

    \379\ Letter from CIM. See also letters from Amec, AngloGold, 
BHP, CBRR, Coeur, CRIRSCO, JORC, SAMCODES 1, SME 1, SRK 1, Vale, and 
Willis.
    \380\ Under the CRIRSCO standards, an exploration target is a 
statement or estimate of the exploration potential of a mineral 
deposit in a defined geological setting where the statement or 
estimate, quoted as a range of tons and a range of grade or quality, 
relates to mineralization for which there has been insufficient 
exploration to estimate mineral resources. CRIRSCO International 
Reporting Template, supra note 20, at cl. 17.
    \381\ Id.; see also letter from CIM.
---------------------------------------------------------------------------

    Commenters that addressed the proposed definition of exploration 
results had varied opinions. One commenter supported without 
elaboration the Commission's proposed definition of exploration 
results.\382\ Another commenter generally agreed with the proposed 
definition of exploration results, indicating that they ``are correctly 
defined as not forming part of a mineral resource or mineral reserve,'' 
but suggested adding to the definition information generated by 
``geophysical and geochemical surveys, remote sensing information, bulk 
sampling, test mining (not for commercial purposes).'' \383\
---------------------------------------------------------------------------

    \382\ See letter from AngloGold.
    \383\ Letter from Midas.
---------------------------------------------------------------------------

    A third commenter, however, opposed the proposed definition because 
it does not include all techniques typically employed by exploration 
geologists and therefore

[[Page 66368]]

recommended adding to the definition ``[a]ll industry standard 
activities of geologic exploration.'' \384\ A fourth commenter objected 
to the part of the proposed definition that excludes exploration 
results from forming part of a declaration of mineral resources or 
mineral reserves because exploration results are the basis of the 
mineral resource and mineral reserve estimates.\385\
---------------------------------------------------------------------------

    \384\ Letter from SRK 1.
    \385\ See letter from Amec. Because ``exploration results do not 
become something other than exploration results once a [m]ineral 
[r]esource or [m]ineral [r]eserve is declared,'' the commenter 
preferred the definition of ``exploration information'' under 
Canada's NI 43-101. That definition provides that exploration 
information ``means geological, geophysical, geochemical, sampling, 
drilling, trenching, analytical testing, assaying, mineralogical, 
metallurgical, and other similar information concerning a particular 
property that is derived from activities undertaken to locate, 
investigate, define, or delineate a mineral prospect or mineral 
deposit.'' Canada's NI 43-101, supra note 123, at pt. 1.1.
---------------------------------------------------------------------------

3. Final Rules
    We continue to believe that the disclosure of exploration results, 
to the extent that they are material, will provide investors with a 
more comprehensive picture of a registrant's mining operations and help 
them make more informed investment decisions. However, we also 
recognize the concern of commenters that, because we proposed to 
require annual disclosure of material exploration results on a material 
property, a registrant might misinterpret the requirement as compelling 
it to disclose its exploration results in most instances, even before 
those exploration results would be considered material to 
investors.\386\ Such a result would conflict with the approach under 
the CRIRSCO standards, pursuant to which ``the release of exploration 
results [is] optional, and an issuer is only required to provide full 
disclosure of exploration results when considered appropriate and 
material to the investor.'' \387\
---------------------------------------------------------------------------

    \386\ See, e.g., letter from SME 1.
    \387\ Id.
---------------------------------------------------------------------------

    The approach we are adopting regarding the disclosure of 
exploration results is substantially similar to the CRIRSCO approach. 
To make this clear, the final rules provide that if the registrant is 
disclosing exploration activity or exploration results for its most 
recently completed fiscal year, it must then provide the specified 
disclosure, as discussed below.\388\ This approach recognizes that the 
disclosure of exploration activity and exploration results is voluntary 
and largely within the discretion of the registrant until such activity 
and the concomitant results become material for investors. Once the 
exploration activity and related results become material, under the 
final rules they must be disclosed.\389\ When determining whether 
exploration results and related exploration activity are material, the 
registrant should consider all relevant facts and circumstances, such 
as the importance of the exploration results in assessing the value of 
a material property or in deciding whether to develop the property, and 
the particular stage of the property.\390\
---------------------------------------------------------------------------

    \388\ 17 CFR 229.1304(g)(1) and (2) [Item 1304(g)(1) and (2) of 
Regulation S-K].
    \389\ 17 CFR 229.1304(g)(4) [Item 1304(g)(4) of Regulation S-K], 
which states that a registrant must disclose exploration results and 
related exploration activity for a material property under this 
section if they are material to investors.
    \390\ See id.
---------------------------------------------------------------------------

    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 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.
    The registrant will be required to make a good faith determination 
regarding the materiality of its exploration activity and exploration 
results at the end of each completed fiscal year. In this regard, we 
are providing some guidance for a registrant's materiality 
determination regarding exploration results and related exploration 
activity.\391\ Because materiality is a facts-and-circumstances 
determination, what is material for one registrant may not be material 
for another. For example, as commenters have noted,\392\ investors may 
be more likely to find material the exploration activity and 
exploration results of an exploration-stage issuer since such 
information may comprise most, if not all, of the information regarding 
mining assets available for that registrant. In contrast, investors may 
be less likely to find material the exploration activity and 
exploration results of a production-stage issuer where the primary 
activity and investor interest are regarding the reserves being 
extracted and their economic value.
---------------------------------------------------------------------------

    \391\ See id.
    \392\ See supra note 378 and accompanying text.
---------------------------------------------------------------------------

    As previously noted, one factor to be considered when determining 
the materiality of a registrant's exploration activity and concomitant 
exploration results is the importance of that information in assessing 
the value of a material property or in deciding whether to develop the 
property.\393\ For example, exploration results that have significantly 
affected the registrant's analysis or estimates of the life of a 
material mining project would likely be considered material, thus 
triggering a disclosure obligation. In contrast, exploration results in 
the early stages of exploration activity may not rise to the level of 
material information if they do not affect the registrant's decision to 
develop the property. Similarly, an exploration result may not be 
material if the registrant has determined that other features of the 
property make the development of the property unlikely.
---------------------------------------------------------------------------

    \393\ See Proposing Release, supra note 5, at Section II.D.
---------------------------------------------------------------------------

    Requiring the disclosure of exploration results only when they have 
become material to investors will more closely align our disclosure 
rules with the CRIRSCO standards,\394\ which should help limit the 
final rules' compliance costs. Furthermore, although some commenters 
expressed concern that investors would misconstrue the significance of 
exploration results, we believe this risk will 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.
---------------------------------------------------------------------------

    \394\ See letter from SME 1.
---------------------------------------------------------------------------

    In a change from the proposed rules, if a registrant discloses 
exploration results, the final rules do not require the registrant to 
file a technical report summary to support such disclosure, even though 
the disclosure itself must still be based on information and supporting 
documentation by a qualified person.\395\ This elective treatment of 
technical report summaries for exploration results should also help 
limit compliance costs for the registrant and could reduce the 
potential for investor confusion regarding the significance of the 
disclosed results, about which some commenters expressed concern.\396\ 
Furthermore, making the technical report summary optional for 
exploration results should also mitigate the concern of some

[[Page 66369]]

commenters \397\ who believed that requiring the disclosure of 
exploration results would result in the disclosure of proprietary and 
commercially sensitive information. This is because such information is 
more likely to be found in the technical report summary's detailed 
disclosure requirements for exploration activity and exploration 
results (compared to the disclosure required in the narrative part of 
the Commission filing).
---------------------------------------------------------------------------

    \395\ See Item 1302(b)(1) of Regulation S-K.
    \396\ See supra note 375 and accompanying text.
    \397\ See letters of Alliance and FCX.
---------------------------------------------------------------------------

    We are adopting the definition of exploration results, as 
proposed.\398\ Although some commenters objected to the definition 
because it does not include all activities related to exploration 
programs,\399\ the specific activities mentioned are intended to be 
illustrative of exploration activities and are not meant to exclude 
other activities. In this regard, we note that the definition includes 
``other similar activities undertaken to locate, investigate, define or 
delineate a mineral prospect or mineral deposit.'' \400\ Moreover, the 
specific activities mentioned in the definition are substantially 
similar to the activities mentioned in the definition of ``exploration 
information'' under Canada's NI 43-101.\401\
---------------------------------------------------------------------------

    \398\ See the definition of ``exploration results'' in 17 CFR 
229.1300.
    \399\ See letters from Amec and SRK 1.
    \400\ See 17 CFR 229.1300.
    \401\ See supra note 385 and accompanying text.
---------------------------------------------------------------------------

    While some commenters objected to the definition of exploration 
results as referencing data and information ``that are not part of a 
disclosure of mineral resources or reserves,'' \402\ this part of the 
definition is consistent with the definition of exploration results 
under the CRIRSCO-based codes.\403\ This language is not meant to deny 
the connection between, and continuum of, exploration results, mineral 
resources and mineral reserves, which a successful mining project will 
reveal. Rather, it is meant to underscore the geologic and economic 
uncertainties underlying exploration results, compared to the levels of 
certainty required to arrive at estimates of mineral resources and 
reserves, which only additional work by the qualified person can 
resolve.
---------------------------------------------------------------------------

    \402\ See letters from Amec and Eggleston.
    \403\ See, e.g., JORC Code, supra note 175, at pt. 18; SAMREC 
Code, supra note 267, at pt. 20; PERC Reporting Standard, supra note 
302, at pt. 6; and SME Guide, supra note 177, at pt. 33.
---------------------------------------------------------------------------

    Because of the low level of certainty underlying exploration 
results, we are adopting the proposed restriction that a registrant 
must not use exploration results alone to derive estimates of tonnage, 
grade, and production rates, or in an assessment of economic viability. 
This restriction is generally consistent with the CRIRSCO standards 
\404\ although, as some commenters stated,\405\ those standards permit 
the disclosure of exploration targets, which are expressed as a range 
of tonnages and grades. Noting that the Proposing Release did not 
discuss exploration targets, these commenters requested that we 
specifically include exploration targets as a permitted item of 
disclosure under the Commission's rules.\406\
---------------------------------------------------------------------------

    \404\ See, e.g., CRIRSCO International Reporting Template, supra 
note 20, at cl. 18; and PERC Reporting Standard, supra note 302, at 
pt. 6.
    \405\ See supra note 379 and accompanying text.
    \406\ See, e.g., letters from CBRR, CIM, CRIRSCO, and SME 1.
---------------------------------------------------------------------------

    We recognize that, as commenters indicated, it is common practice 
for mining companies to discuss their exploration activities in terms 
of an exploration target.\407\ As one commenter noted, placing 
exploration results within the context of an exploration target helps 
determine the materiality of those results.\408\ Moreover, as several 
commenters indicated, exploration targets are typically discussed in a 
technical report summary, particularly where the targets are in 
proximity to mineral resources and reserves and, thus, may be material 
to investors.\409\
---------------------------------------------------------------------------

    \407\ See, e.g., letter from SME 1.
    \408\ See letter from AngloGold.
    \409\ See, e.g., letters from CIM, Coeur, SME 1, Vale, and 
Willis.
---------------------------------------------------------------------------

    Therefore, in response to commenters, the final rules provide that 
a registrant may disclose an exploration target for one or more of its 
properties that is based upon and accurately reflects information and 
supporting documentation of a qualified person.\410\ This change will 
also more closely align our rules with industry practice and global 
standards. The final rules also provide that a qualified person may 
include a discussion of an exploration target in a technical report 
summary.\411\ Further, similar to the definition under the CRIRSCO 
standards,\412\ the final rules define an exploration target to mean a 
statement or estimate of the exploration potential of a mineral deposit 
in a defined geological setting where the statement or estimate, quoted 
as a range of tonnage and a range of grade (or quality), relates to 
mineralization for which there has been insufficient exploration to 
estimate a mineral resource.\413\
---------------------------------------------------------------------------

    \410\ 17 CFR 229.1302(c)(1) [Item 1302(c)(1) of Regulation S-K]. 
See also 17 CFR 229.1304(g)(5) [Item 1304(g)(5) of Regulation S-K] 
(providing that a registrant may disclose an exploration target when 
discussing exploration results or exploration activity related to a 
material property as long as the disclosure is in compliance with 
the requirements of Sec.  229.1302(c)).
    \411\ See 17 CFR 229.1302(c)(1).
    \412\ See CRIRSCO International Reporting Template, supra note 
20, at cl. 17; see also JORC Code, supra note 175, at pt. 17; and 
SAMREC Code, supra note 270, at pt. 21.
    \413\ See the definition of ``exploration target'' in 17 CFR 
229.1300.
---------------------------------------------------------------------------

    However, we also recognize that the disclosure of exploration 
targets poses the potential for investor confusion in that an investor 
might misconstrue an exploration target as an estimate of a mineral 
resource or mineral reserve. Therefore, the final rules provide that 
any substantive disclosure of an exploration target must be provided in 
a separate section of the Commission filing or technical report summary 
that is clearly captioned as a discussion of an exploration target. 
That section must include a clear and prominent statement that:

     The ranges of potential tonnage and grade (or quality) 
of the exploration target are conceptual in nature;
     There has been insufficient exploration of the relevant 
property or properties to estimate a mineral resource;
     It is uncertain if further exploration will result in 
the estimation of a mineral resource; and
     The exploration target therefore does not represent, 
and should not be construed to be, an estimate of a mineral resource 
or mineral reserve.\414\
---------------------------------------------------------------------------

    \414\ 17 CFR 229.1302(c)(2) [Item 1302(c)(2) of Regulation S-K].

    This requirement is similar to the cautionary language required for 
the disclosure of an exploration target under the CRIRSCO-based 
codes.\415\ Several commenters recommended that we require such 
disclosure of cautionary statements in conjunction with the disclosure 
of exploration targets.\416\
---------------------------------------------------------------------------

    \415\ See, e.g., JORC Code, supra note 175, at pt. 17; and 
SAMREC Code, supra note 270, at pt. 22.
    \416\ See, e.g., letters from CBRR, CIM, and SME 1.
---------------------------------------------------------------------------

    The final rules further require that any such disclosure of an 
exploration target must also include:

     A detailed explanation of the basis for the exploration 
target, such as the conceptual geological model used to develop the 
target;
     An explanation of the process used to determine the 
ranges of tonnage and grade, which must be expressed as 
approximations;
     A statement clarifying whether the exploration target 
is based on actual exploration results or on one or more proposed 
exploration programs, which should include a description of the 
level of exploration activity already completed, the proposed 
exploration activities designed to test the validity of the 
exploration target, and the timeframe in which those activities are 
expected to be completed; and
     A statement that the ranges of tonnage and grade (or 
quality) of the exploration

[[Page 66370]]

target could change as the proposed exploration activities are 
completed.\417\
---------------------------------------------------------------------------

    \417\ 17 CFR 229.1302(c)(3) [Item 1302(c)(3) of Regulation S-K].

    These disclosure requirements will help investors understand the 
conceptual basis and limitations of an exploration target, which should 
help mitigate the potential for investor confusion about the target. 
These disclosure requirements are also similar to the requirements for 
exploration target disclosure under the CRIRSCO-based codes.\418\ 
Several commenters recommended that we require similar disclosure of 
explanatory statements in conjunction with the disclosure of 
exploration targets.\419\
---------------------------------------------------------------------------

    \418\ See, e.g., JORC Code, supra note 175, at pt. 17; and 
SAMREC Code, supra note 267, at pt. 22.
    \419\ See supra note 416 and accompanying text.
---------------------------------------------------------------------------

    We did not propose, and we are not requiring, the disclosure of 
exploration results by a registrant that has material mining operations 
in the aggregate but no individual properties that are material.\420\ 
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.
---------------------------------------------------------------------------

    \420\ 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 final rules, such a company would 
be required to provide summary disclosure concerning its mineral 
resources and mineral reserves. See infra Section II.G.1 and 17 CFR 
229.1303.
---------------------------------------------------------------------------

E. Treatment of Mineral Resources

1. The Mineral Resource Disclosure Requirement
i. Rule Proposal
    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.\421\ Most foreign mining codes require the 
disclosure of material mineral resources.\422\ In contrast, Item 102 
and Guide 7 preclude the disclosure of mineral resources in Commission 
filings except in certain instances.\423\ According to industry 
representatives, this restriction has limited the completeness and 
relevance of the disclosures in SEC filings, and has caused confusion 
among mining companies and their investors.\424\
---------------------------------------------------------------------------

    \421\ First, mining professionals use exploration results to 
determine if a mineral deposit is present. Next, they estimate 
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.
    \422\ See, e.g., JORC Code, supra note 175, at pts. 14 and 20; 
SAMREC Code, supra note 267, at pts. 3 and 24; SME Guide, supra note 
177, at pts. 17 and 35; and PERC Reporting Standard, supra note 302, 
at pts. 2.8 and 7.
    \423\ Both Guide 7 and Item 102 permit the disclosure of non-
reserve deposits, such as mineral resources, if such information is 
required to be disclosed by foreign or state law or if 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. 
See Instruction 3 to paragraph (b)(5) of Guide 7 and Instruction 5 
to Item 102 of Regulation S-K. Only Canada has adopted a mining 
disclosure code as a matter of law. Other foreign mining codes have 
been adopted as listing standards for foreign securities exchanges 
or as guidelines by foreign securities commissions. See Proposing 
Release, supra note 5, Section 5, note 14 and accompanying text.
    \424\ See SME Petition for Rulemaking, supra note 6, at 1-2.
---------------------------------------------------------------------------

    We proposed 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.\425\ As proposed, a 
registrant with material mining operations that has multiple properties 
would have to provide both summary disclosure about its mineral 
resources for all properties and more detailed disclosure concerning 
its mineral resources for each material property.\426\
---------------------------------------------------------------------------

    \425\ See Proposing Release, supra note 5, at Section II.E.
    \426\ See Proposing Release, supra note 5, at Sections II.G.1-2.
---------------------------------------------------------------------------

    Under the proposed rules, while a registrant could not disclose 
that it has determined that a mineral deposit constitutes a mineral 
resource or mineral reserve unless that determination is based upon 
information and supporting documentation \427\ prepared by a qualified 
person, 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 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.\428\
---------------------------------------------------------------------------

    \427\ For both the proposing and final rules, ``information and 
supporting documentation'' means an initial assessment for mineral 
resource determination and a preliminary or final feasibility study 
for mineral reserve determination, each as prepared by a qualified 
person or persons. See Proposing Release, supra note 5 and infra at 
Sections II.E.3. II.E.4., and II.F.2.
    \428\ Similarly, 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., Australian Security 
Exchange Listing Rules (July 2014), r 5.7, 5.8, 5.9 (``ASX Listing 
Rules''), https://www.asx.com.au/documents/rules/Chapter05.pdf 
(providing guidance for disclosure of exploration results, mineral 
resources and mineral reserves for ``material mining projects'').
---------------------------------------------------------------------------

    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 or if obtained and 
reported in the context of an acquisition, merger, or business 
combination. Since we proposed 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 or business 
transaction exception would no longer be necessary. Therefore, we also 
proposed to eliminate this exception.\429\
---------------------------------------------------------------------------

    \429\ See Proposing Release, supra note 5, at Sections II.E., 
VIII.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Numerous commenters supported the Commission's proposal to require 
a registrant with material mining operations to disclose determined 
mineral resources in addition to mineral reserves.\430\ For example, 
one commenter stated that the requirement would align the Commission's 
disclosure rules with the CRIRSCO standards, provide a level playing 
field for U.S. mining registrants, and provide investors with important 
information about the mining registrant and its assets.\431\
---------------------------------------------------------------------------

    \430\ See letters from Amec, AngloGold, BHP, CBRR, CIM, 
Eggleston, FCX, Gold Resource, Midas, Newmont, Northern Dynasty, Rio 
Tinto, SAMCODES 2, SRK 1, and Vale.
    \431\ See letter from Midas.
---------------------------------------------------------------------------

    Another commenter stated that shareholders and potential investors

[[Page 66371]]

should be made aware of a company's mineral resources because such 
resources are recognized internationally as assets of a mineral 
property and can materially change the valuation of the company.\432\ 
This commenter also stated that U.S. companies have been put at a 
disadvantage by not being able to disclose the potential value of their 
properties through the disclosure of mineral resources.\433\ A third 
commenter indicated that the ``resource component is useful to 
investors in understanding the potential asset life and forward 
development options still under development.'' \434\ Because of the 
widespread disclosure of mineral resources under the CRIRSCO-based 
codes, several commenters saw little to no risk to investors from the 
Commission's proposal to require a registrant with material mining 
operations to disclose mineral resources.\435\
---------------------------------------------------------------------------

    \432\ See letter from Northern Dynasty; see also letter from SRK 
1 (stating that disclosed mineral resources ``are an industry 
standard evaluation of a potential or actual mining property'' that 
``are commonly used by registrants and investors alike to evaluate 
and compare specific properties as to their potential economic 
value'').
    \433\ See letter from Northern Dynasty.
    \434\ Letter from Rio Tinto.
    \435\ See letters from AngloGold, Eggleston, Rio Tinto, and SRK 
1. Another commenter stated that it did not anticipate any risks 
from the required disclosure of mineral resources as long as the 
Commission adopted the CRIRSCO template and accompanying 
definitions. See letter from CBRR.
---------------------------------------------------------------------------

    One commenter acknowledged that there is a minor risk that 
investors could interpret mineral resources as mineral reserves (i.e., 
that they imply economic viability).\436\ This commenter, however, 
further stated that because of the widespread reporting of resources in 
CRIRSCO jurisdictions, most investors understand the difference between 
resources and reserves. Moreover, this commenter believed that the 
Commission could mitigate any risk from resource disclosure by 
requiring disclaimers as under Canada's NI 43-101, such as ``mineral 
resources are not mineral reserves and do not have demonstrated 
economic viability.'' \437\
---------------------------------------------------------------------------

    \436\ See letter from Midas.
    \437\ Id.
---------------------------------------------------------------------------

    A number of commenters in the industrial minerals or aggregates 
industry were critical of the proposed mineral resource disclosure 
requirement. One such commenter opposed a requirement to disclose 
mineral resource information on the grounds that because resources are 
marginally economic and of lower certainty, reporting resources ``could 
mislead investors with limited knowledge of the mining industry into 
believing that a mining operation has a larger number of future 
saleable tons than would likely be the case.'' \438\ Another commenter 
disagreed with the Commission's statement that mining companies and 
their investors consider mineral resource estimates to be material and 
fundamental information about a company and its projects. That 
commenter described the statement as an overgeneralization that does 
not apply to the aggregates business.\439\
---------------------------------------------------------------------------

    \438\ Letter from Alliance.
    \439\ See letter from NSSGA.
---------------------------------------------------------------------------

    Several commenters expressly supported the Commission's proposal to 
require any disclosure of mineral resources in Commission filings to be 
based on information and supporting documentation of a qualified 
person.\440\ Some of these commenters stated that they did not know of 
any circumstance that would justify the public disclosure of mineral 
resources without the determination and approval of a qualified 
person.\441\ One commenter, however, opposed the required disclosure of 
mineral resources even if supported by a qualified person's information 
and documentation.\442\ According to this commenter, the costs of 
preparing such disclosure may be significant whereas the benefits of 
such disclosure may be limited because of the inherent uncertainties in 
resource estimation. For this reason, this commenter recommended that 
the Commission make the disclosure of mineral resources optional even 
if supported by a qualified person.\443\
---------------------------------------------------------------------------

    \440\ See, e.g., letters from Amec, AngloGold, Eggleston, Gold 
Resource, Midas, Northern Dynasty, and SRK 1.
    \441\ See, e.g., letters from Eggleston, Midas, and SRK 1.
    \442\ See letter from Davis Polk.
    \443\ See id.
---------------------------------------------------------------------------

iii. Final Rules
    As proposed, the final rules provide that a registrant with 
material mining operations must disclose specified information in its 
Securities Act and Exchange Act filings concerning mineral resources 
that have been determined to exist based on information and supporting 
documentation from a qualified person.\444\ We continue to believe that 
requiring a mining registrant with material mining operations to 
disclose mineral resources in addition to mineral reserves will provide 
investors with 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; mining companies, including U.S. 
registrants, routinely disclose mineral resource information on their 
websites; and many mining company analysts consider mineral resource 
information as an important factor in their valuations and 
recommendations.\445\ Requiring the disclosure of mineral resources 
will also help 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. For 
these reasons, numerous commenters supported the required disclosure of 
determined mineral resources in Commission filings.\446\
---------------------------------------------------------------------------

    \444\ 17 CFR 229.1303(b)(3) [Item 1303(b)(3) of Regulation S-K] 
and 229.1304(d)(1) [Item 1304(d)(1) of Regulation S-K].
    \445\ See, e.g., SME Petition for Rulemaking, supra note6; 
letters from Northern Dynasty and SRK 1; CRIRSCO International 
Reporting Template, supra note 20, at cl. 21; and JORC Code, supra 
note 175, at pt. 20.
    \446\ See supra note 430.
---------------------------------------------------------------------------

    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 modest as most mining 
companies already assess mineral resources in order to determine 
reserves.\447\
---------------------------------------------------------------------------

    \447\ 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.''
---------------------------------------------------------------------------

    As some commenters noted, 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.\448\ As 
discussed below, however, we believe that this risk is limited by the 
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.
---------------------------------------------------------------------------

    \448\ See letters from Alliance and Midas.
---------------------------------------------------------------------------

    We also believe that there are important potential benefits to 
investors from the disclosure of mineral resources, including more 
comprehensive and potentially more accurate disclosure of mineral 
reserves. Given that mineral reserve estimates are based on estimates 
of mineral resources,

[[Page 66372]]

we believe that the required rigor surrounding the disclosure of 
mineral resources as well as the attendant scrutiny from the qualified 
person, particularly regarding mineral resource classification, is 
likely to lead to more reliable mineral reserves disclosure.\449\
---------------------------------------------------------------------------

    \449\ See, e.g., letter from Northern Dynasty (stating that 
because mineral resources, if rigorously estimated, can materially 
change the valuation of a company, shareholders and potential 
investors should be made aware of those assets).
---------------------------------------------------------------------------

    We recognize that some industry participants, such as those in the 
industrial minerals and aggregates business, view mineral resources as 
less important to their business than other mining registrants and 
therefore have opposed a requirement to disclose mineral 
resources.\450\ As previously explained, however, like the proposed 
rules, the final rules do not impose an affirmative obligation to 
determine mineral resources.\451\ If an aggregates or other mining 
company does not want to incur the expense of hiring a qualified person 
to determine the existence of mineral resources, it need not do so. In 
that case, however, the company would not be able to declare that it 
has mineral resources in a Commission filing.
---------------------------------------------------------------------------

    \450\ See supra notes 438-439 and accompanying text.
    \451\ See supra Section II.E.1.i.
---------------------------------------------------------------------------

    Once a registrant with material mining operations does determine 
that it has mineral resources, based on information and supporting 
documentation of a qualified person, then, because of their importance 
to the potential valuation of the company and to investors,\452\ we do 
not believe that the registrant should have the option, as one 
commenter suggested,\453\ of not disclosing the mineral resources in a 
Commission filing, or of otherwise being excepted from disclosing them. 
In this regard we note that the approach we are taking is consistent 
with the regulatory frameworks of the CRIRSCO-based codes, which, 
without exception, require disclosure of mineral resources (and mineral 
reserves) once the registrant has made the determination that it has 
them and they are material.\454\
---------------------------------------------------------------------------

    \452\ See, e.g., letter from Northern Dynasty.
    \453\ See letter from Davis Polk.
    \454\ See supra note 428 and accompanying text.
---------------------------------------------------------------------------

2. Definition of Mineral Resource
i. Rule Proposal
    We proposed to 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.\455\ We further proposed to 
define the term ``material of economic interest,'' as used in the 
definition of mineral resource, to include mineralization, including 
dumps and tailings,\456\ 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 resulting from oil and gas producing activities, as defined 
in Regulation S-X,\457\ gases (e.g., helium and carbon dioxide), or 
water.\458\
---------------------------------------------------------------------------

    \455\ See Proposing Release, supra note 5, at Section II.E.1.
    \456\ 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.
    \457\ See 17 CFR 210.4-10(a)(16)(i) [Rule 4-10(a)(16)(i) of 
Regulation S-X].
    \458\ See Proposing Release, supra note 5, at Section II.E.1.
---------------------------------------------------------------------------

    The proposed rules further specified 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.\459\ 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 likely to influence the 
prospect of economic extraction.\460\
---------------------------------------------------------------------------

    \459\ See id.
    \460\ See id.
---------------------------------------------------------------------------

    Similar to the CRIRSCO-based codes, we proposed to state in 
connection with the definition of mineral resource that it is not to be 
merely an inventory of all mineralization \461\ drilled or 
sampled.\462\ A mineral resource is instead a reasonable estimate of 
mineralization, taking into account relevant factors such as cut-off 
grade,\463\ 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.\464\
---------------------------------------------------------------------------

    \461\ The term ``inventory of mineralization'' means an estimate 
of the total quantity of mineralization based on the available 
evidence.
    \462\ See, e.g., CRIRSCO International Reporting Template, supra 
note 20, at cl. 21; JORC Code, supra note 175, at pt. 20; and SAMREC 
Code, supra note 267, at pt. 24.
    \463\ 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 the definition of cut-off grade in 17 CFR 
229.1300.
    \464\ See Proposing Release, supra note 5, at Section II.E.1.
---------------------------------------------------------------------------

    We further proposed to include within the definition of mineral 
resource non-solid matter, such as geothermal fields and mineral 
brines, in addition to mineralization, even though the CRIRSCO-based 
codes restrict mineral resources to solid matter.
ii. Comments on the Rule Proposal
    Several commenters generally supported the Commission's proposal to 
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.\465\ Some commenters supported the proposed 
definition because it is aligned or consistent with the CRIRSCO 
standards.\466\ Another commenter indicated the proposed definition was 
reasonable because it included the requirement that there are 
``reasonable prospects for economic extraction'' as under the CRIRSCO 
jurisdictions.\467\ In contrast, although agreeing that mineral 
resources must have reasonable prospects for their economic extraction, 
one commenter opposed the proposed definition on the grounds that a 
qualified person will not be able to assure that all modifying factors 
can be accommodated for eventual economic extraction.\468\
---------------------------------------------------------------------------

    \465\ See, e.g., letters from AngloGold, Eggleston, Midas, 
Northern Dynasty, and Rio Tinto.
    \466\ See letters from AngloGold, CBRR, and Rio Tinto.
    \467\ See letter from Midas.
    \468\ See letter from SRK 1.
---------------------------------------------------------------------------

    Several commenters recommended that the Commission revise the 
definition of mineral resource by requiring that there be reasonable 
prospects for eventual economic extraction, as under the CRIRSCO 
standards.\469\ As one commenter explained, under the proposed 
definition, ``there is an implication that a mineral resource has 
reasonable prospects for economic extraction today'' whereas ``[i]n 
many cases, mineral resources are identified that may not have 
reasonable prospects today, but with improved prices, technology, may 
be economic tomorrow.'' \470\ Some commenters

[[Page 66373]]

further recommended that the Commission provide interpretive guidance 
on the meaning of the term ``eventual.'' \471\
---------------------------------------------------------------------------

    \469\ See letters from Amec, AngloGold, BHP, Eggleston, Energy 
Fuels, Rio Tinto, and Vale.
    \470\ Letter from Eggleston; see also letter from Energy Fuels; 
letter from Vale (explaining that ``[t]he word ``eventual'' 
indicates timing for economic extraction, and timing may vary 
depending on the commodity or mineral'').
    \471\ See letters from SME 1 and Vale. 
---------------------------------------------------------------------------

    Several commenters supported the proposed definition's inclusion of 
dumps and tailings.\472\ One commenter explained that mine dumps and 
tailings are a significant source of metals and, in some cases, are the 
only identified mineral resource on a property.\473\ Another commenter 
stated that, in addition to dumps and tailings, the definition of 
mineral resource should specifically include ``slag heaps (dumps), 
stockpiles, heap or dump leach pads, and backfill materials.'' \474\
---------------------------------------------------------------------------

    \472\ See letters from Amec, AngloGold, Eggleston, Midas, 
Northern Dynasty, Rio Tinto, and SRK 1.
    \473\ See letter from Eggleston.
    \474\ Letter from Amec.
---------------------------------------------------------------------------

    Some commenters generally supported the proposed definition's 
inclusion of mineral brines.\475\ Two of those commenters conditioned 
their support on the Commission's adoption of significant additional 
guidance regarding mineral brines.\476\ Two commenters also supported 
the proposed inclusion of geothermal energy.\477\ One of the commenters 
conditioned support on the Commission's adoption of separate rules for 
geothermal energy with additional guidance.\478\
---------------------------------------------------------------------------

    \475\ See letters from Eggleston, Northern Dynasty, and Rio 
Tinto.
    \476\ See letters from Eggleston and Rio Tinto.
    \477\ See letters from Eggleston and Northern Dynasty.
    \478\ See letter from Eggleston.
---------------------------------------------------------------------------

    In contrast, several commenters expressly opposed the inclusion of 
mineral brines and geothermal energy in the definition of mineral 
resource.\479\ One commenter explained that extraction of mineral 
brines and geothermal energy ``requires the pumping of fluids rather 
than digging of solid materials'' and, like water and gases, which the 
proposed definition would exclude, involves scientific and engineering 
principles that are substantially different from those used to estimate 
solid mineral resources.\480\ Regarding geothermal energy, this 
commenter stated that there is no internationally accepted standard 
protocol to estimate and report the potential for geothermal 
energy.\481\
---------------------------------------------------------------------------

    \479\ See letters from Amec, CBRR, CRIRSCO, Davis Polk, SAMCODES 
2, SME 1, and SRK 1.
    \480\ See letter from SME 1; see also letter from Amec (stating 
that the definition of mineral resource should exclude mineral 
brines because ``[m]ineral brine reservoirs are dynamic systems, and 
the methodology for estimation of brine resources and brine reserves 
is significantly different to that used in Mineral Resource and 
Mineral Reserve estimates, since brine resource and brine reserve 
estimates also require temporal measurements of fluid flow and brine 
chemistry'').
    \481\ See letter from SME 1.
---------------------------------------------------------------------------

    Some commenters believed that disclosure of mineral brines should 
be regulated under the oil and natural gas rules.\482\ A few commenters 
recommended regulating disclosure of geothermal energy under its own 
set of rules.\483\
---------------------------------------------------------------------------

    \482\ See, e.g., letters from Rio Tinto and SRK 1; see also 
letter from SAMCODES 2 (stating that disclosure of both mineral 
brines and geothermal energy should be regulated under oil and 
natural gas rules).
    \483\ See letters from Amec and SRK 1; see also letter from MMSA 
(recommending the adoption of separate rules for both geothermal 
energy and mineral brines because ``these commodities do not closely 
correspond with solid minerals'').
---------------------------------------------------------------------------

    Several commenters supported the proposed exclusion of oil and gas 
resources resulting from oil and gas producing activities, as defined 
in Regulation S-X, gases (e.g., helium and carbon dioxide), and water 
from the definition of mineral resource.\484\ As one commenter 
explained, the above substances are not traditional or industry 
standard commodities considered as ``mining operations.'' \485\
---------------------------------------------------------------------------

    \484\ See letters from Amec, AngloGold, CBRR, Eggleston, Rio 
Tinto, and SRK 1.
    \485\ See letter from SRK 1.
---------------------------------------------------------------------------

    Many commenters supported requiring in the definition of mineral 
resource 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.\486\ Commenters noted that 
the proposed requirement is in alignment with CRIRSCO standards \487\ 
and is the current industry standard.\488\ One commenter stated that a 
qualified person should also consider non-geologic factors, such as 
processing, mining method costs, and economic evaluation, when 
determining the reasonable prospects for a mineral resource's economic 
extraction.\489\
---------------------------------------------------------------------------

    \486\ See letters from Amec, AngloGold, Eggleston, Midas, 
Northern Dynasty, Rio Tinto, and SRK 1.
    \487\ See letters from AngloGold, Eggleston, and Rio Tinto.
    \488\ See letter from SRK 1.
    \489\ See letter from CBRR.
---------------------------------------------------------------------------

iii. Final Rules
    We are adopting the definition of mineral resource, as proposed, to 
mean 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.\490\ As 
commenters noted, this definition is consistent with the requirement 
under the CRIRSCO-based codes that, in order for a deposit, in whole or 
part, to be determined to be a mineral resource, there must be 
reasonable prospects for its economic extraction.\491\
---------------------------------------------------------------------------

    \490\ See the definition of ``mineral resource'' in 17 CFR 
229.1300.
    \491\ See, e.g., letters from CBRR and Midas. See infra note 493 
and accompanying text for why we are not adopting the modifier 
``eventual'' as used in the CRIRSCO definition of mineral resource.
---------------------------------------------------------------------------

    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 provides an appropriate standard, and 
importantly, one that is more exacting than what we are requiring 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 reasonable 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 definition of 
mineral resources would significantly alter existing disclosure 
practices of registrants subject to these codes.\492\
---------------------------------------------------------------------------

    \492\ As discussed below, in a change from the proposed rules, 
the final rules require a qualified person to consider relevant 
technical and economic factors likely to influence the prospect of 
economic extraction, rather than applicable modifying factors, at 
the resource determination stage in order to more closely align the 
final rules with the CRIRSCO standards. See infra Section II.E.4.
---------------------------------------------------------------------------

    We are not modifying the proposed definition of mineral resource to 
mean that there must be reasonable prospects for its eventual economic 
extraction.\493\ Because a qualified person must consider relevant 
technical and economic factors likely to influence the prospect of 
economic extraction, including pricing for the resource that could be 
based on forward-looking price

[[Page 66374]]

forecasts,\494\ when determining whether mineral resources exist on a 
property, we believe it is clear from the definition of mineral 
resource that the reasonable prospects for economic extraction will 
occur over a timeline.
---------------------------------------------------------------------------

    \493\ See, e.g., letters from Eggleston and Vail.
    \494\ See infra Section II.E.4.
---------------------------------------------------------------------------

    To be clear, by requiring that there be reasonable prospects for a 
mineral resource's economic extraction, we do not mean that the 
extraction must occur immediately. Rather, we expect that it will occur 
over a temporal period, which will vary depending on the mineral or 
commodity being mined. As noted by the CRISCRO-based codes, for coal, 
iron ore, bauxite or other bulk minerals and commodities, it may be 
reasonable to consider economic extraction as occurring over a time 
period of 50 or more years when determining whether the deposit is a 
mineral resource. However, for smaller mineral deposits, it would 
likely be reasonable to consider economic extraction as occurring over 
a much shorter time period, for example, no more than 10-15 years.\495\ 
Under the final rules, the qualified person will choose the appropriate 
temporal period when determining whether mineral resources exist and, 
if the property is material, must explain its choice in the technical 
report summary.\496\
---------------------------------------------------------------------------

    \495\ See, e.g., JORC Code, supra note 175, at pt. 20; and SME 
Guide, supra note177, at pt. 35.
    \496\ See infra Section II.E.4.
---------------------------------------------------------------------------

    The final rules provide that the term ``material of economic 
interest,'' when used in the context of mineral resource determination, 
includes mineralization, including dumps and tailings, mineral brines, 
and other resources extracted on or within the earth's crust.\497\ Most 
commenters \498\ that addressed the issue supported including dumps and 
tailings within the definition because it reflects industry practice 
and is consistent with the CRIRSCO-based codes.\499\ The inclusion of 
dumps and tailings in the definition of mineral resource reflects the 
fact that, under certain circumstances, these byproducts from older 
mining operations possess value.
---------------------------------------------------------------------------

    \497\ See the definition of ``material of economic interest'' in 
17 CFR 229.1300.
    \498\ See supra note 472.
    \499\ See, e.g., JORC Code, supra note 175, at pt. 20; SAMREC 
Code, supra note 267, at pt. 24; PERC Reporting Standard, supra note 
302, at pt. 7.4; and SME Guide, supra note 177, at pt. 35.
---------------------------------------------------------------------------

    The final rules do not exclude mineral brines from the definition 
of mineral resource \500\ because we continue to believe that, by 
definition, extracting minerals, such as lithium, from mineral brines 
constitutes mining.\501\ While such extraction may involve the 
consideration and application of additional factors, the scientific and 
engineering principles used to characterize mineral brine and resources 
and reserves are substantially similar to those used to characterize 
solid mineral resources and reserves. We also note that, although the 
CRIRSCO-based codes define a mineral resource as ``solid material,'' at 
least one CRIRSCO-based jurisdiction has determined that disclosure 
regarding the mining of mineral brines should be regulated under the 
same set of rules governing mineral resources.\502\ Moreover, including 
minerals extracted from mineral brines within the definition will 
provide registrants with a workable, reasonable, and consistent 
framework for disclosure related to these activities while providing 
investors with useful and reliable information about the properties 
containing the mineral brines.\503\
---------------------------------------------------------------------------

    \500\ See supra note 479 and accompanying text.
    \501\ Mining can be defined as the ``[p]rocess of obtaining 
useful minerals from the earth's crust.'' Lewis & Clark, Elements of 
Mining 20 (1964).
    \502\ See Ontario Securities Commission (OSC), Mineral Brine 
Projects and National Instrument 43-101 Standards of Disclosure for 
Mineral Projects, Notice 43-704 (July 22, 2011) (``In our view 
mineral brine projects are mineral projects as defined in NI 43-
101'').
    \503\ See, e.g., OSC Notice 43-704 (``We also think that it is 
in the public interest for mineral brine projects to be subject to 
the requirements of NI 43-101. NI 43-101 provides a proper and 
rigorous disclosure framework for mineral projects hosted in a 
brine'').
---------------------------------------------------------------------------

    In a change from the proposed rules, the adopted definition of 
mineral resource does not include geothermal energy.\504\ We have been 
persuaded to exclude geothermal energy from the definition of mineral 
resource due to the lack of consensus regarding how to regulate the 
disclosure of geothermal energy resources.\505\
---------------------------------------------------------------------------

    \504\ See the definition of ``material of economic interest'' 
referenced in the definition of mineral resource in 17 CFR 229.1300.
    \505\ See, e.g., letter from SME 1. 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, which is favored by some U.S. industry groups. See, e.g., 
J.V. Lawless, M. Ward and G. Beardsmore, The Australian Code for 
Geothermal Reserves and Resources Reporting: Practical Experience, 
Proceedings of the World Geothermal Congress (2010).
---------------------------------------------------------------------------

    The adopted definition of mineral resource also excludes oil and 
gas resources resulting from oil and gas producing activities, as 
defined in Rule 4-10(a)(16)(i) of Regulation S-X,\506\ gases (e.g., 
helium and carbon dioxide), and water.\507\ Most commenters that 
addressed the issue supported the exclusion of oil and gas resources 
because their exclusion is consistent with industry practice.\508\ Also 
consistent with industry practice, we are excluding 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.
---------------------------------------------------------------------------

    \506\ 17 CFR 210.4-10(a)(16)(i).
    \507\ See the definition of ``material of economic interest'' 
referenced in the definition of mineral resource in 17 CFR 229.1300.
    \508\ See supra note 484.
---------------------------------------------------------------------------

    As proposed, the final rules provide that 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.\509\
---------------------------------------------------------------------------

    \509\ See the definition of ``mineral resource'' in 17 CFR 
229.1300; see also 17 CFR 229.1302(d)(1)(i)(A) [Item 
1302(d)(1)(i)(A) of Regulation S-K].
---------------------------------------------------------------------------

    Several commenters supported requiring in the definition of mineral 
resource 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.\510\ As commenters noted, 
this requirement is in alignment with CRIRSCO standards \511\ and is 
the current industry standard.\512\ Accordingly, its adoption should 
help promote uniformity in the disclosure of mineral resources. 
Although some commenters suggested that we expand the definition to 
include other specific factors to consider at the resource 
determination stage,\513\ we believe that such expansion would increase 
the prescriptive nature of subpart 1300 and could thereby increase the 
compliance burden of the final rules without providing significant 
additional benefits for investors.
---------------------------------------------------------------------------

    \510\ See letters from Amec, AngloGold, Eggleston, Midas, 
Northern Dynasty, Rio Tinto, and SRK 1.
    \511\ See letters from AngloGold, Eggleston, and Rio Tinto.
    \512\ See letter from SRK 1.
    \513\ See, e.g., letter from Amec.
---------------------------------------------------------------------------

3. Classification of Mineral Resources
i. Rule Proposal
    We proposed to adopt the CRIRSCO-based classification of mineral 
resources \514\ by requiring a registrant

[[Page 66375]]

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.\515\ We further proposed to define each of those 
subcategories of mineral resources.
---------------------------------------------------------------------------

    \514\ See, e.g., CRIRSCO International Reporting Template, supra 
note 20, at cl. 21; JORC Code, supra note 175, at pt. 20; SAMREC 
Code, supra note 267, at pt. 24; and PERC Reporting Standard, supra 
note 302, at pt. 7.2.
    \515\ See Proposing Release, supra note 5, at Section II.E.2.
---------------------------------------------------------------------------

a. Inferred Mineral Resources
    Similar to the CRIRSCO-based codes,\516\ we proposed 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.\517\ As the proposed rules 
explained, ``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 further provided 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.\518\ 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.\519\
---------------------------------------------------------------------------

    \516\ See, e.g., CRIRSCO International Reporting Template, supra 
note 20, at cl. 22; JORC Code, supra note 175, at pt. 21; SAMREC 
Code, supra note 267, at pt. 25; and PERC Reporting Standard, supra 
note 302, at pt. 7.5.
    \517\ See Proposing Release, supra note 5, at Section II.E.2.
    \518\ See id.
    \519\ See id.
---------------------------------------------------------------------------

    We further proposed to establish the level of certainty that a 
qualified person must strive to achieve when determining the existence 
of an inferred mineral resource. As proposed, 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. In addition, the qualified person should be 
able to defend the basis of this expectation before his or her 
peers.\520\
---------------------------------------------------------------------------

    \520\ See id.
---------------------------------------------------------------------------

b. Indicated and Measured Mineral Resources
    We proposed 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.\521\ As the proposed rules explained, ``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.\522\ We also 
proposed to explain that an indicated mineral resource has a lower 
level of confidence than that applicable to a measured mineral resource 
and may only be converted to a probable mineral reserve.\523\
---------------------------------------------------------------------------

    \521\ See id.
    \522\ See id.
    \523\ See id.
---------------------------------------------------------------------------

    We proposed 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.\524\ As the proposed rules explained, ``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.\525\ We also 
proposed to 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.\526\
---------------------------------------------------------------------------

    \524\ See id.
    \525\ See id.
    \526\ See id.
---------------------------------------------------------------------------

c. Considerations of Geologic Uncertainty
    We proposed to require that the qualified person quantify the 
uncertainty associated with each class of mineral resources by 
disclosing the uncertainty associated with the production estimates 
derived from each class of mineral resources.\527\ While a qualified 
person would be permitted to develop mineral resource estimates using 
any generally accepted method, including geostatistics, simulation, or 
inverse distance, under the proposed rules, he or she would also be 
required to estimate the uncertainty associated with each class of 
mineral resource, expressed in a prescribed format that depended upon 
the specific classification of the resource.
---------------------------------------------------------------------------

    \527\ We proposed to require this quantification of uncertainty 
in the ``initial assessment'' prepared by the qualified person. We 
proposed 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. See 
Proposing Release, supra note 5, at Section II.E.2. 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 initial assessment requirement in detail in Section II.E.4 
below.
---------------------------------------------------------------------------

    As we explained in the Proposing Release,\528\ for indicated and 
measured mineral resources, the qualified person would be required to 
provide the confidence limits of relative accuracy,\529\ at a specific 
confidence level, of the preliminarily estimated production quantities 
per period from the resource.\530\ This approach for reporting the 
level of uncertainty is consistent with what many have suggested in the 
mining engineering literature to be best practice.\531\ When proposing 
this approach, we did not impose 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 
recognized that the natural variability of geologic characteristics is 
different for different deposits.
---------------------------------------------------------------------------

    \528\ See Proposing Release, supra note 5, at Section II.E.2.
    \529\ 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.
    \530\ 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.
    \531\ 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).

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

[[Page 66376]]

    We further proposed that, 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. 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.
    Regarding inferred mineral resources, we proposed 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.\532\ As we explained, 
because inferred resources have such a low level of confidence, 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.\533\
---------------------------------------------------------------------------

    \532\ We proposed to require uncertainty estimates for inferred 
mineral resources to 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.'' See Proposing Release, supra note 5, at note 180 and 
accompanying text.
    \533\ 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.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Many commenters supported the Commission's proposal to require a 
registrant to classify its mineral resources into inferred, indicated, 
and measured mineral resources because such a requirement would be 
consistent with the CRIRSCO standards.\534\ Other commenters supported 
the classification requirement as long as the definitions of inferred, 
indicated and measured mineral resources are identical to those under 
the CRIRSCO-based codes.\535\
---------------------------------------------------------------------------

    \534\ See letters from Amec, AngloGold, BHP, CBRR, Eggleston, 
FCX, Midas, Rio Tinto, SAMCODES 2, SRK 1, and Vale.
    \535\ See, e.g., letters from Amec, CIM, Coeur, Northern 
Dynasty, and SAMCODES 2.
---------------------------------------------------------------------------

    One commenter saw little value in the classification of mineral 
resources. According to that commenter, ``[b]ecause resources are 
considered economically marginal and of lower certainty to begin with, 
dividing resources into low, middle, and high level of certainty offers 
little value'' and ``tends to give additional credibility to the 
resources as a whole that may not be warranted.'' \536\
---------------------------------------------------------------------------

    \536\ Letter from Alliance.
---------------------------------------------------------------------------

a. Inferred Mineral Resources
    Some commenters supported requiring a registrant with material 
mining operations to disclose inferred resources, despite limited 
geologic evidence underlying those resources, on the grounds that such 
a requirement is consistent with CRIRSCO \537\ or industry 
standards.\538\ Other commenters, however, recommended permitting 
rather than requiring the disclosure of inferred resources.\539\ 
According to one of those commenters, an optional approach is warranted 
because of the high level of geologic uncertainty associated with that 
class of mineral resource.\540\
---------------------------------------------------------------------------

    \537\ See, e.g., letters from AngloGold, Midas, and Rio Tinto.
    \538\ See letter from SRK 1.
    \539\ See letters from CBRR, Eggleston, and Gold Resource.
    \540\ See letter from Gold Resource.
---------------------------------------------------------------------------

    Several commenters supported defining ``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.\541\ Other commenters, however, objected to the proposed 
definition of inferred resource because it is not identical to the 
CRIRSCO definition.\542\ For example, one commenter objected to the 
proposed definition of ``limited geological evidence'' as evidence that 
is only sufficient to establish that geological and grade or quality 
continuity is more likely than not. Instead, that commenter recommended 
substituting the CRIRSCO definition of inferred mineral resource, which 
includes the requirement that ``[g]eologic evidence is sufficient to 
imply but not verify geological and grade or quality continuity.'' 
According to that commenter, by using the CRIRSCO definition, ``the 
assumptions underlying the estimates of inferred mineral resources are 
more clearly defined.'' \543\
---------------------------------------------------------------------------

    \541\ See, e.g., letters from AngloGold, Eggleston, Gold 
Resource, and Rio Tinto.
    \542\ See supra note 535.
    \543\ Letter from CIM.
---------------------------------------------------------------------------

    One commenter supported the Commission's proposed prohibition 
regarding the use of inferred resources in economic assessments of 
mining properties.\544\ This commenter indicated that using inferred 
resources in this way could mislead registrants and investors on the 
economic potential of the property.\545\
---------------------------------------------------------------------------

    \544\ See letter from Gold Resource.
    \545\ See id.
---------------------------------------------------------------------------

    Many other commenters opposed the Commission's proposal to prohibit 
the use of inferred resources to make a determination about the 
potential economic viability of extraction.\546\ Commenters stated that 
this prohibition would be inconsistent with the CRIRSCO-based codes, 
which permit the inclusion of inferred resources in a scoping study or 
a preliminary economic assessment (as permitted under Canada's NI 43-
101) as long as cautionary disclaimers regarding the geologically 
speculative nature of inferred resources and the corresponding high 
level of risk associated with them are provided.\547\ According to 
several of these commenters, adoption of this prohibition would place 
U.S. registrants at a significant disadvantage and deprive investors of 
information they have found relevant to their investment 
decisions.\548\
---------------------------------------------------------------------------

    \546\ See letters from Amec, AngloGold, BHP, CBRR, Coeur, 
CRIRSCO, Eggleston, Energy Fuels, JORC, Midas, MMSA, NMA, Northern 
Dynasty, Randgold, SAMCODES 2, SME 1, SRK 1, Ur-Energy, Vale, and 
Willis.
    \547\ See letters from Amec, Coeur, CRIRSCO, Eggleston, Energy 
Fuels, JORC, Midas, MMSA, NMA, Northern Dynasty, SME 1, SRK 1, Ur-
Energy, Vale and Willis.
    \548\ See letters from Coeur, NMA, Northern Dynasty, SME 1, Ur-
Energy, and Vale.
---------------------------------------------------------------------------

    Commenters generally agreed with the Commission's proposal to 
preclude the conversion of inferred resources into a mineral reserve 
because of the high level of geologic uncertainty associated with 
inferred resources.\549\ In response to our request for comment about 
whether we should require a registrant to use a legend or cautionary 
language when disclosing inferred resources, while commenters supported 
such use in a preliminary economic assessment or scoping study to warn 
of a high level of geologic uncertainty,\550\ a few commenters opposed 
the use of cautionary language in the reporting of inferred resources 
because such language is already captured in the

[[Page 66377]]

definition.\551\ Another commenter supported providing an appropriate 
cautionary statement to accompany the reporting of inferred resources, 
but asserted that a cautionary statement should be required for all 
mineral resource and mineral reserve statements because they are 
estimates based on various assumptions that may or may not be met at a 
particular time.\552\
---------------------------------------------------------------------------

    \549\ See letters from Amec, AngloGold, CBRR, Eggleston, Gold 
Resource, Rio Tinto, SAMCODES 1, SRK 1, and Vale.
    \550\ See, e.g., letters from CBRR, Coeur, Northern Dynasty, SRK 
1, and Vale.
    \551\ See letters from AngloGold and Rio Tinto. Another 
commenter opposed the use of cautionary statements regarding 
inferred resources because ``[r]equiring prescriptive statements is 
not beneficial to the industry.'' Letter from Amec.
    \552\ See letter from Eggleston.
---------------------------------------------------------------------------

b. Indicated and Measured Mineral Resources
    Several commenters supported the Commission's proposal 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.\553\ Those commenters stated 
that the proposed definition aligned with the CRIRSCO definition of 
indicated mineral resource.\554\ The commenters also supported the 
proposed definition of ``adequate geological evidence'' as evidence 
that is sufficient to establish geological and grade or quality 
continuity with reasonable certainty. Two of those commenters further 
agreed that the definition of ``adequate geologic evidence'' should 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.\555\
---------------------------------------------------------------------------

    \553\ See letters from AngloGold, CBRR, Midas, Northern Dynasty, 
and Rio Tinto.
    \554\ See, e.g., letters from CBRR, Midas, and Rio Tinto.
    \555\ See letters from AngloGold and Northern Dynasty.
---------------------------------------------------------------------------

    Other commenters urged the Commission to adopt verbatim the CRIRSCO 
definition of indicated mineral resource, which includes the provision 
that ``[g]eologic evidence is derived from adequately detailed and 
reliable exploration, sampling and testing and is sufficient to assume 
geological and grade or quality continuity between points of 
observation.'' \556\ Commenters stated that the CRIRSCO definition ``is 
more specific'' \557\ than the Commission's proposed definition and is 
the industry standard.\558\ In opposing the proposed definition of 
indicated mineral resource, one of those commenters further explained 
that a qualified person will not be able to assure that all modifying 
factors can be accommodated for eventual economic extractions.\559\
---------------------------------------------------------------------------

    \556\ See letters from Amec, CIM, Coeur, SRK 1, and Willis.
    \557\ See letter from Willis.
    \558\ See letters from SRK 1 and Willis.
    \559\ See letter from SRK 1.
---------------------------------------------------------------------------

    Some commenters supported the Commission's proposal 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.\560\ Those commenters 
further supported the proposed definition of ``conclusive geological 
evidence'' as evidence that is sufficient to test and confirm 
geological and grade or quality continuity, which 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.\561\ Those 
commenters stated that the proposed definition of measured mineral 
resource is consistent with the CRIRSCO standards.\562\
---------------------------------------------------------------------------

    \560\ See letters from AngloGold and CBRR.
    \561\ See id.
    \562\ See id.
---------------------------------------------------------------------------

    Other commenters recommended that the Commission adopt the CRIRSCO 
definition of measured mineral resource instead of the proposed 
definition.\563\ Commenters stated that the CRIRSCO definition is the 
industry standard,\564\ did not favor use of the term ``conclusive 
geological evidence'' because, in their view, it sets an unrealistic 
standard,\565\ and maintained that a qualified person would not be able 
to assure that all modifying factors could be accommodated for eventual 
economic extraction.\566\ One of the commenters recommended replacing 
the term ``conclusive'' with ``a high level of confidence.'' \567\
---------------------------------------------------------------------------

    \563\ See letters from Amec, Coeur, Northern Dynasty, Rio Tinto, 
and SRK 1.
    \564\ See letters from Coeur and SRK 1.
    \565\ See letters from Amec, Midas, Rio Tinto, and SRK 1.
    \566\ See id.
    \567\ See letter from SRK 1.
---------------------------------------------------------------------------

c. Considerations of Geologic Uncertainty
    Many commenters opposed the Commission's proposal to quantify the 
level of risk associated with indicated and measured mineral resources 
based on the confidence limits of relative accuracy at a particular 
confidence level for production estimates for periods of one year or 
less.\568\ While acknowledging that the use of confidence limits of 
relative accuracy is considered best practice in the industry, one 
commenter opposed mandating such a requirement because, depending on 
the deposit, a quantitative assessment of risk may not be necessary 
and, in any event, may not be available to the company.\569\ Instead, 
this commenter recommended relying on the application of the CRIRSCO 
definitions of inferred, indicated, and measured mineral resource, each 
of which requires a certain level of geological evidence, and requiring 
the qualified person to disclose the basis for the classification.\570\
---------------------------------------------------------------------------

    \568\ See letters from AIPG, Amec, AngloGold, BHP, CBRR, Cloud 
Peak, Eggleston, FCX, Gold Resource, JORC, Midas, MMSA, Northern 
Dynasty, NSSGA, Rio Tinto, SAMCODES 1 and 2, SRK 1, Ur-Energy, and 
Vale.
    \569\ See letter from SAMCODES 1.
    \570\ See id.
---------------------------------------------------------------------------

    A second commenter stated that qualitative risk assessments (e.g., 
low, medium, high) are more likely to provide investors with a sense of 
the risks inherent in mineral resource and reserve estimates than 
numerical risk assessments that inherently fail to account for the 
underlying geological uncertainties, estimates and 
interpretations.\571\ A third commenter stated that quantitative 
estimation of uncertainties is burdensome and, in most cases, the costs 
outweigh the benefits. That commenter recommended that the Commission 
follow CRIRSCO's approach, which encourages but does not require the 
quantitative estimation of uncertainties.\572\
---------------------------------------------------------------------------

    \571\ See letter from AIPG. Several other commenters recommended 
that the Commission permit a qualified person to provide a 
qualitative discussion of the uncertainties involved in resource 
determination in lieu of a quantitative assessment based on the 
confidence limits of relative accuracy. See letters from Cloud Peak, 
Gold Resource, Midas, Northern Dynasty, Rio Tinto, and SRK 1.
    \572\ See letter from Vale; see also letters from Eggleston and 
MMSA.
---------------------------------------------------------------------------

    Many commenters opposed the Commission's proposal to 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.\573\ Commenters stated that there is no 
realistic way to quantify such an estimate with any degree of 
accuracy,\574\ such a requirement would be impractical and burdensome 
for small mining companies,\575\ and such a

[[Page 66378]]

requirement is not imposed by other jurisdictions.\576\
---------------------------------------------------------------------------

    \573\ See letters from Amec, CBRR, Eggleston, Gold Resource, 
JORC, Midas, MMSA, Northern Dynasty, Rio Tinto, Royal Gold, SRK 1, 
Ur-Energy, and Vale.
    \574\ See, e.g., letters from Amec, Eggleston, Gold Resource, 
Northern Dynasty, SRK 1, and Vale.
    \575\ See letter from MMSA.
    \576\ See letter from Vale.
---------------------------------------------------------------------------

    Some commenters noted that, consistent with the CRIRSCO-based 
codes, the proposed definition of inferred mineral resource included 
the requirement that the qualified person have a reasonable expectation 
that the majority of inferred mineral resources could be upgraded to 
indicated or measured mineral resources with continued exploration. 
Those commenters suggested that this proposed requirement would act as 
a substitute for the proposed quantification in that, if the qualified 
person cannot meet this expectation with regard to part of a deposit, 
that part could not be classified as inferred resources.\577\
---------------------------------------------------------------------------

    \577\ See letters from Amec, Eggleston, Northern Dynasty, Rio 
Tinto, and Ur-Energy.
---------------------------------------------------------------------------

iii. Final Rules
    We are adopting the proposed requirement that a registrant with 
material mining operations classify its mineral resources into 
inferred, indicated, and measured mineral resources, in order of 
increasing confidence based on the level of underlying geological 
evidence.\578\ We believe this classification requirement will improve 
the accuracy of a registrant's mining disclosure in Commission 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 affects 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 final rules should 
require, and not merely allow, the classification of mineral 
resources.\579\
---------------------------------------------------------------------------

    \578\ See, e.g., 17 CFR 229.1302(d)(1)(iii)(A) [Item 
1302(d)(1)(iii)(A) of Regulation S-K]; 17 CFR 229.1303(b)(3); and 17 
CFR 229.1304(d)(1).
    \579\ Depending on the particular classes of resources that are 
determined (e.g., if most or all of the determined resources are 
inferred resources), a registrant should consider whether 
appropriate risk factor disclosure is needed to explain to investors 
the limitations and risks of the resource determination.
---------------------------------------------------------------------------

    As several commenters noted, requiring the classification of 
mineral resources into inferred, indicated, and measured mineral 
resources is consistent with the CRIRSCO standards and prevailing 
industry practice.\580\ Thus, adoption of this classification 
requirement will more closely align the Commission's mining property 
disclosure rules with global industry practice and promote uniformity 
in mining property disclosure.
---------------------------------------------------------------------------

    \580\ See letters from AngloGold, BHP, Eggleston, Midas, Rio 
Tinto, and SAMCODES 2.
---------------------------------------------------------------------------

a. Inferred Mineral Resources \581\
---------------------------------------------------------------------------

    \581\ See also Section II.E.4.c. below for our discussion 
concerning the inclusion of inferred mineral resources in a 
quantitative assessment of the potential economic viability of a 
deposit.
---------------------------------------------------------------------------

    We are adopting the definition of ``inferred mineral resource,'' 
largely as proposed.\582\ In a slight change from the proposed rules, 
the adopted definition of inferred mineral resource provides that the 
level of geological uncertainty associated with an inferred mineral 
resource is too high to apply relevant technical and economic factors 
likely to influence prospects of economic extraction in a manner useful 
for evaluation of economic viability.\583\ In response to commenters, 
the final rules use the term ``relevant technical and economic 
factors'' instead of ``modifying factors,'' as proposed, in order to 
more closely align the definition of inferred resources with that under 
the CRIRSCO-based codes.
---------------------------------------------------------------------------

    \582\ See the definition of ``inferred mineral resource'' in 17 
CFR 229.1300 to mean that part of a mineral resource for which 
quantity and grade or quality are estimated on the basis of limited 
geological evidence and sampling.
    \583\ See id. As proposed, the final rules also explain that, 
because 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, an 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. See id.
---------------------------------------------------------------------------

    As some commenters noted, the adopted definition of inferred 
mineral resource is generally consistent with the definition under the 
CRIRSCO-based codes.\584\ The central tenet under both definitions is 
that inferred mineral resources are estimates of quantity and grade or 
quality based on limited geological evidence and sampling.\585\ 
Although our definition of ``limited geological evidence'' differs 
slightly from the definition of geologic evidence in the CRIRSCO 
definition of inferred mineral resource,\586\ its meaning is 
substantially similar to the CRIRSCO definition.
---------------------------------------------------------------------------

    \584\ See supra note 541 and accompanying text.
    \585\ See, e.g., the CRIRSCO International Reporting Template, 
supra note 20, at cl. 22; JORC Code, supra note 175, at pt. 21; and 
SAMREC Code, supra note 267, at pt. 25.
    \586\ When used in the context of mineral resource 
determination, ``limited geological evidence'' means evidence that 
is only sufficient to establish that geological and grade or quality 
continuity is more likely than not. See the definition of ``limited 
geological evidence'' in 17 CFR 229.1300. Under CRIRSCO's definition 
of inferred mineral resource, the requisite evidence is defined to 
mean geologic evidence that is sufficient to imply but not verify 
geological and grade or quality continuity. See CRIRSCO 
International Reporting Template, supra note 20, at cl. 22. We 
believe our articulation of the requisite evidence is more 
appropriate because it provides a clearer description of the low 
level of evidence that may support a determination of inferred 
mineral resources.
---------------------------------------------------------------------------

    As commenters noted, it is consistent with the CRIRSCO standards to 
require the disclosure of inferred resources, which have been 
determined by a qualified person, in the Commission filings of a 
registrant with material mining operations.\587\ Although some 
commenters recommended that we permit rather than require the 
disclosure of inferred resources in Commission filings because they 
have the lowest level of geologic confidence,\588\ we believe that 
inferred mineral resources are nonetheless important to an investor's 
understanding of a registrant's mining operations because they may be 
converted into indicated or measured mineral resources with further 
exploration.
---------------------------------------------------------------------------

    \587\ See supra note 537 and accompanying text.
    \588\ See, e.g., letter from Gold Resource.
---------------------------------------------------------------------------

    Additionally, the definition of inferred mineral resource will 
reduce any potential investor misunderstanding of the nature of a 
registrant's mining operations by providing appropriate context for and 
limitations on the disclosure of inferred resources. First, the 
definition clearly highlights for investors that inferred mineral 
resources have the highest degree of uncertainty, allowing investors to 
take this factor into account when assessing a registrant's disclosure. 
Second, the definition prohibits a registrant from using inferred 
mineral resources as a basis to determine mineral reserves. Rather, 
inferred resources will first have to meet the definitional 
requirements of, and be converted into, measured or indicated mineral 
resources, before they will be eligible to be considered as potential 
mineral reserves under the final rules. This will 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.
b. Indicated and Measured Mineral Resources
    We are adopting the proposed definition of indicated mineral 
resource.\589\ This definition provides

[[Page 66379]]

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.\590\ The 
definition further explains that 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.\591\ 
As those commenters that supported the proposed definition noted,\592\ 
this definition of indicated mineral resource is consistent with the 
comparable definition and guidance under the CRIRSCO-based codes.\593\
---------------------------------------------------------------------------

    \589\ See 17 CFR 229.1300, which defines an 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. When used in the context of mineral resource 
determination, the term ``adequate geological evidence'' means 
evidence that is sufficient to establish geological and grade or 
quality continuity with reasonable certainty. See id.
    \590\ See id.
    \591\ See id.
    \592\ See supra note 553 and accompanying text.
    \593\ See, e.g., CRIRSCO International Reporting Template, supra 
note 20, at cl. 23; JORC Code, supra note 175, at pt. 22; and SAMREC 
Code, supra note 267, at pt. 27.
---------------------------------------------------------------------------

    We are also adopting the proposed definition of measured mineral 
resource.\594\ This definition provides 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.\595\ The adopted definition also 
explains that a measured mineral resource has a higher level of 
confidence than that applying 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.\596\
---------------------------------------------------------------------------

    \594\ See 17 CFR 229.1300, which defines a measured mineral 
resource to mean that part of a mineral resource for which quantity 
and grade or quality are estimated on the basis of conclusive 
geological evidence and sampling. When used in the context of 
mineral resource determination, the term ``conclusive geological 
evidence'' means evidence that is sufficient to test and confirm 
geological and grade or quality continuity. See the definition of 
``conclusive geological evidence'' in 17 CFR 229.1300.
    \595\ See the definition of ``measured mineral resource'' in 17 
CFR 229.1300.
    \596\ See id.
---------------------------------------------------------------------------

    Although some commenters opposed the use of the term ``conclusive 
evidence'' because they believed that it set an unrealistic 
standard,\597\ we believe the term is appropriate because, as other 
commenters noted,\598\ it is consistent with the CRIRSCO standards and 
conveys that the level of evidence is sufficiently high enough to 
enable a qualified person to conclude that he or she may proceed with 
detailed mine planning and final evaluation of the economic viability 
of the deposit using measured mineral resources. The term is not meant 
to convey that there is no uncertainty in the estimate. But rather, as 
is the case with the CRIRSCO-based codes, the term means there is no 
reasonable doubt, in the opinion of the qualified person estimating 
mineral resources, that the tonnage and grade of the deposit can be 
estimated to such accuracy that any variation from the estimate would 
have an insignificant effect on the potential economic viability.\599\
---------------------------------------------------------------------------

    \597\ See supra note 565 and accompanying text.
    \598\ See supra note 560 and accompanying text.
    \599\ See, e.g., JORC Code, supra note 175, at pt. 23 (stating 
that ``[m]ineralisation may be classified as a Measured Mineral 
Resource when the nature, quality, amount and distribution of data 
are such as to leave no reasonable doubt, in the opinion of the 
Competent Person determining the Mineral Resource, that the tonnage 
and grade of the mineralisation can be estimated to within close 
limits, and that any variation from the estimate would be unlikely 
to significantly affect potential economic viability'').
---------------------------------------------------------------------------

    Because the definitions of ``indicated mineral resource'' and 
``measured mineral resource'' are substantially similar to the 
corresponding CRIRSCO-based definitions, their adoption will more 
closely align the Commission's mining property disclosure requirements 
with the foreign mining code provisions, which would benefit both 
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 limit any potential additional costs imposed by the new 
requirement under the final rules 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,\600\ 
and should therefore benefit from their familiarity with the adopted 
definitions.
---------------------------------------------------------------------------

    \600\ As previously explained, 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. See supra note 447 
and accompanying text. 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 Code, 
supra note 175, at pt. 24; and SAMREC Code, supra note 267, at pt. 
29. This is consistent with the adopted definitions of mineral 
resource classifications.
---------------------------------------------------------------------------

c. Considerations of Geologic Uncertainty
    In a change from the proposed rules, the final rules do not require 
that the qualified person quantify and disclose the uncertainty 
associated with indicated and measured mineral resources in terms of 
the uncertainty associated with the production estimates derived from 
them by providing the confidence limits of relative accuracy, at a 
specific confidence level, of the preliminarily estimated production 
quantities per period from the resource.\601\ Although this approach 
for reporting the level of uncertainty is consistent with best practice 
in the industry,\602\ we acknowledge that, for the reasons several 
commenters stated, requiring this approach in all instances could be 
impractical or inappropriate, unduly burdensome, and costly for many 
registrants.\603\
---------------------------------------------------------------------------

    \601\ See 17 CFR 229.601(b)(96)(iii)(B)(11)(v) [Item 
601(b)(96)(iii)(B)(11)(v) of Regulation S-K].
    \602\ See supra note 531 and accompanying text.
    \603\ See, e.g., letters from CBRR, MMSA, Rio Tinto, and Vale.
---------------------------------------------------------------------------

    In lieu of a provision mandating a quantitative assessment of risk 
regarding indicated and measured mineral resources, we are requiring 
the qualified person to disclose the criteria used to classify a 
resource as indicated or measured and to justify the 
classification.\604\ This disclosure must include a discussion of the 
uncertainty in the indicated or measured mineral resource estimates, 
the sources of the uncertainty, and how those sources were considered 
in the estimates.\605\ This approach is consistent with commenters' 
suggestion that we permit a qualitative discussion of the uncertainties 
involved in resource determinations in lieu of a quantitative 
assessment.\606\ While the final rules do not require a qualified 
person 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 such confidence limit estimates, the final rules 
instruct that he or she should consider the limitations of these 
methods and adjust the estimates appropriately to reflect

[[Page 66380]]

sources of uncertainty that are not accounted for by these 
methods.\607\
---------------------------------------------------------------------------

    \604\ 17 CFR 229.601(b)(96)(iii)(B)(11)(iv) [Item 
601(b)(96)(iii)(B)(11)(iv) of Regulation S-K].
    \605\ See Item 601(b)(96)(iii)(B)(11)(v) of Regulation S-K.
    \606\ See supra notes 570-572 and accompanying text.
    \607\ See Item 601(b)(96)(iii)(B)(11)(v) of Regulation S-K. 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 should 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 will depend 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).
---------------------------------------------------------------------------

    The adopted approach is similar to the approach under the CRIRSCO-
based codes, which encourages but does not require a quantitative 
assessment of risk regarding indicated or measured mineral resource 
estimates, and leaves the decision whether to use estimates of 
confidence limits to the discretion of the qualified person.\608\ The 
qualified person may use estimates of confidence limits when assessing 
the level of uncertainty regarding his or her mineral resource 
estimates if he or she believes that such use would be practical and 
helpful. If, however, the qualified person determines that the use of 
estimates of confidence limits would be inappropriate or impractical, 
he or she may refrain from undertaking such a quantitative assessment 
of risk regarding his or her indicated or measured mineral resource 
estimates.
---------------------------------------------------------------------------

    \608\ See, e.g., JORC Code, supra note 175, at pt. 25 
(``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'').
---------------------------------------------------------------------------

    For similar reasons, the final rules do not require a qualified 
person to state the minimum percentage of inferred mineral resources he 
or she believes will be converted to indicated and measured mineral 
resources with further exploration. Many commenters objected to the 
proposed requirement because they believed that it would be impractical 
and burdensome.\609\ We have been persuaded that such a requirement may 
not be necessary because the final rules require the qualified person 
to have a reasonable expectation that the majority of inferred mineral 
resources could be upgraded to indicated or measured mineral resources 
with continued exploration.\610\ As some commenters suggested, this 
required expectation will act as a substitute for the proposed 
quantification in that, if the qualified person cannot meet this 
expectation with regard to part of a deposit, that part cannot be 
classified as inferred resources.\611\ Further, the provision requiring 
the qualified person to be able to defend the basis for his or her 
reasonable expectation before his or her peers \612\ will also help to 
dissuade the determination and disclosure of unreasonable inferred 
mineral resource estimates.
---------------------------------------------------------------------------

    \609\ See supra note 573 and accompanying text.
    \610\ 17 CFR 229.1302(d)(1)(iii)(B)(1) [Item 
1302(d)(1)(iii)(B)(1) of Regulation S-K].
    \611\ See supra note 577 and accompanying text.
    \612\ See Item 1302(d)(1)(iii)(B)(2) of Regulation S-K [Item 
1302(d)(1)(iii)(B)(2) of Regulation S-K].
---------------------------------------------------------------------------

    Similar to the approach adopted regarding indicated and measured 
resources, in lieu of a provision requiring a quantitative assessment 
of risk regarding inferred resources, we are requiring the qualified 
person to disclose the criteria used to classify a resource as inferred 
and to justify the classification.\613\ This disclosure must include a 
discussion of the uncertainty in the inferred resource estimates, the 
sources of the uncertainty, and how those sources were considered in 
the estimates. This approach is again consistent with commenters' 
suggestion that we permit a qualitative discussion of the uncertainties 
involved in resource determination. We believe that such a required 
qualitative discussion of the criteria used to classify and justify a 
deposit, in whole or part, as inferred resources would serve to inform 
investors about the reliability of the disclosure without unduly 
burdening registrants.
---------------------------------------------------------------------------

    \613\ See Item 601(b)(96)(iii)(B)(11)(iv) of Regulation S-K.
---------------------------------------------------------------------------

    Regardless of whether the qualified person provides a qualitative 
or quantitative assessment of risk, under the final rules the qualified 
person must adequately explain his or her reasons for classifying a 
mineral resource as inferred, indicated, or measured and that his or 
her classification is consistent with the definitions of inferred, 
indicated, and measured mineral resources. In this regard, the final 
rules require the qualified person to list all of the factors 
considered regarding the level of uncertainty and explain how those 
factors contributed to the final conclusion about the level of 
uncertainty underlying the resource estimates.\614\
---------------------------------------------------------------------------

    \614\ See Item 601(b)(96)(iii)(B)(11)(v) of Regulation S-K. In 
deciding between inferred and indicated mineral resources, the 
qualified person should note that our definitions provide that the 
level of geological uncertainty associated with inferred mineral 
resources is too high to apply relevant technical and economic 
factors likely to influence the prospect of economic extraction in a 
manner useful for evaluation of economic viability whereas the level 
of geological uncertainty associated with indicated mineral 
resources 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. Similarly, in 
deciding between indicated and measured mineral resources, the 
qualified person should note that our definitions provide 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 
whereas the level of geological uncertainty associated with measured 
mineral resources allows it to be used for ``detailed'' mine 
planning. This guidance is consistent with the CRIRSCO standards. 
See CRIRSCO International Reporting Template, supra note 20, at cl. 
25.
---------------------------------------------------------------------------

4. The Initial Assessment Requirement
i. Rule Proposal
    We proposed that a registrant's disclosure of mineral resources 
must be based upon a qualified person's ``initial assessment'' 
supporting the determination of mineral resources.\615\ We proposed to 
define an ``initial assessment'' as a preliminary \616\ 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.\617\ Also as 
proposed, an initial assessment is required for disclosure of mineral 
resources but cannot be used as the basis for disclosure of mineral 
reserves.\618\
---------------------------------------------------------------------------

    \615\ See Proposing Release, supra note 5, at Section II.E.3.
    \616\ As used in this context, the term ``preliminary'' refers 
to a less rigorous study than what is required for feasibility 
studies, as defined and discussed in Section II.G.2., below.
    \617\ See Proposing Release, supra note 5, at Section II.E.3.
    \618\ See id.
---------------------------------------------------------------------------

    As we explained in the Proposing Release, an initial assessment is 
not a scoping \619\ or conceptual study as

[[Page 66381]]

defined in some of the CRIRSCO-based codes \620\ or a preliminary 
economic assessment as defined in Canada's NI 43-101.\621\ 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.
---------------------------------------------------------------------------

    \619\ 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, 
supra note 175, at pt. 38 and SME Guide, supra, note 177, at pt. 50.
    \620\ See, e.g., JORC Code, supra note 175, at pt. 38 and SME 
Guide, supra note 177, Table 2, at 68-69 (providing requirements for 
scoping, pre-feasibility, and feasibility studies).
    \621\ See Canada's NI 43-101 supra note 123, at pt. 1.1 
(defining a preliminary economic assessment to mean ``a study, other 
than a pre-feasibility or feasibility study, that includes an 
economic analysis of the potential viability of mineral 
resources'').
---------------------------------------------------------------------------

    As proposed, 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.) As we explained in the Proposing Release, 
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.\622\
---------------------------------------------------------------------------

    \622\ See Proposing Release, supra note 5, at Section II.E.3.
---------------------------------------------------------------------------

a. Cut-Off Grade and Price Estimation
    We proposed instructions to the initial assessment requirement 
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 was that an initial 
assessment must include cut-off grade estimation, based on assumed unit 
costs for surface or underground operations and estimated mineral 
prices.\623\ As we explained, cut-off grade refers to the grade at 
which the destination of the material changes during mining. For 
purposes of the initial assessment, cut-off grade distinguishes between 
material that is going to the waste dump and material that is going to 
the processing plant (in surface mining) or between material that is 
not mined and material mined to be processed (in underground mining).
---------------------------------------------------------------------------

    \623\ See id.
---------------------------------------------------------------------------

    As part of the proposed initial assessment, the qualified person 
would need to assume the cost to mine a typical unit of the specific 
material involved. We did not propose 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.\624\ 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. As we 
explained, 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.\625\
---------------------------------------------------------------------------

    \624\ If the qualified person decides to include economic 
analysis in the initial assessment, then the proposed rules would 
require the inclusion of detailed cost estimates. See Proposing 
Release, supra note 5, at note 190 and accompanying text.
    \625\ See Proposing Release, supra note 5, at Section II.E.3.
---------------------------------------------------------------------------

    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. In addition, the qualified person 
must make and disclose an assumption about whether the deposit will be 
mined with underground or surface mining methods.\626\
---------------------------------------------------------------------------

    \626\ See id.
---------------------------------------------------------------------------

    When estimating mineral prices for the cut-off grade estimation, we 
proposed to 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.\627\ For purposes of consistency, we proposed that 
qualified persons use this same ceiling for all other commodity price 
estimates in the proposed mining disclosure for both mineral resources 
and reserves.\628\
---------------------------------------------------------------------------

    \627\ See id.
    \628\ See id.
---------------------------------------------------------------------------

    When explaining our reasons for proposing the 24-month trailing 
average price requirement, we stated our belief that the qualified 
person must use commodity price estimates that are reasonable and 
justifiable and represent long term \629\ market trends in mineral 
resource and reserve estimation. However, we also noted that 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.\630\
---------------------------------------------------------------------------

    \629\ ``Long term'' in this context refers to the life of the 
mine. See, e.g., David Humphreys, Pricing and Trading in Metals and 
Minerals, 1 SME Mining Engineering Handbook, 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'').
    \630\ 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 specific price 
model. See, e.g., JORC Code, supra note 175, 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 . . .''). Canada's NI 43-101 
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.'' Canada's NI 
43-101, supra note 123, at pt. 3.4(c). 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.'' CIM Estimation of 
Mineral Resources and Mineral Reserves Best Practice Guidelines 30 
(2003).
---------------------------------------------------------------------------

b. Qualitative Assessment of Factors and Permitted Assumptions
    A second proposed instruction requires the qualified person to 
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.\631\ We proposed to provide the minimum requirements for 
various factors that the qualified person must evaluate when preparing 
an initial assessment, pre-feasibility study, or feasibility study in a 
single 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. According to 
the proposed presentation, the modifying factors evaluative process 
becomes more exacting as mining property assessment progresses from 
mineral resource estimation to mineral reserve estimation.\632\
---------------------------------------------------------------------------

    \631\ See Proposing Release, supra note 5, at Section II.E.3 
(discussing Table 1).
    \632\ The modifying factors and requirements in proposed Table 1 
were modeled on accepted industry practice and supported by the 
relevant mining engineering literature. See, e.g., Richard L. 
Bullock, Mineral Property Feasibility Studies, 1 SME Mining 
Engineering Handbook, at 227-261.
---------------------------------------------------------------------------

    As proposed, at the initial assessment stage, a qualified person 
would be

[[Page 66382]]

---------------------------------------------------------------------------
required to evaluate, at a minimum, the following 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.

    Another proposed instruction to the initial assessment requirement 
refers the qualified person to proposed 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.\633\
---------------------------------------------------------------------------

    \633\ See Proposing Release, supra note 5, at Section II.E.3 
(discussing Table 1).
---------------------------------------------------------------------------

c. Optional Economic (Cash Flow) Analysis
    We explained in the Proposing Release that an initial assessment, 
the singular goal of which is to demonstrate reasonable prospects of 
economic extraction, not economic viability, need not contain the 
quantitative analysis required to demonstrate the economic feasibility 
of mining projects. To demonstrate such economic feasibility, 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 stated, however, that if the 
qualified person chose to demonstrate the economic potential of the 
mining property beyond the minimum requirements of an initial 
assessment by including a cash flow analysis, we believed such analysis 
could benefit investors, subject to appropriate restrictions.
    One proposed instruction to the initial assessment requirement 
addresses the option of providing cash 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.\634\ 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% \635\ and a 
contingency level of no greater than 25% of the direct estimate.\636\ 
The proposed instruction also provided that the qualified person must 
state the accuracy and contingency levels in the initial 
assessment.\637\
---------------------------------------------------------------------------

    \634\ See Proposing Release, supra note 5, at Section II.E.3.
    \635\ 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.
    \636\ 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,1 SME 
Mining Engineering Handbook, at 270. Thus, a contingency level of 
<=25% means the contingency cannot be more than 25% of the direct 
cost estimate.
    \637\ See Proposing Release, supra note 5, at Section II.E.3.
---------------------------------------------------------------------------

    We also proposed, 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. We based this prohibition on our belief that other 
quantitative measures of economic potential that omit cash flows could 
be potentially misleading.\638\
---------------------------------------------------------------------------

    \638\ See id.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Several commenters supported the Commission's proposal to 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, including that the qualified person consider 
applicable modifying factors and relevant operational factors at the 
resource evaluation stage.\639\ Many other commenters either offered 
only conditional support for or opposed the Commission's proposed 
initial assessment requirement because they believed it went beyond 
what is required under the CRIRSCO standards at the resource 
determination stage. For example, some commenters stated that, while 
there should be some form of documentation required by a qualified 
person to support the disclosure of mineral resources in Commission 
filings, it should be consistent with what is allowed under the 
CRIRSCO-based codes, and should not be termed ``an initial assessment'' 
in order to avoid investor confusion.\640\ One commenter recommended 
that the required initial assessment take the form of a ``conceptual 
study,'' as defined under the CRIRSCO standards, which would include 
the consideration of applicable modifying factors.\641\ Another 
commenter stated that the assessment of modifying factors as set forth 
in proposed Table 1 was overly prescriptive, but also agreed that the 
qualified person should ``apply the CRIRSCO principles for the 
qualitative assessment of modifying factors'' when determining mineral 
resources.\642\ In lieu of the proposed initial assessment requirement, 
that commenter, as well as others, recommended allowing a report that 
conforms to JORC Table 1 on an ``if not why not basis.'' \643\
---------------------------------------------------------------------------

    \639\ See letters from CBRR (recommending that the initial 
assessment include material risk analysis, but that more 
comprehensive risk analysis should not be required because the more 
detailed analysis would be expected in a separate report); Columbia, 
CSP\2\, Gold Resource (recommending that the initial assessment 
include a discussion of the material risks associated with the 
mineral resource determination); and Montana Trout.
    \640\ See, e.g., letters from AngloGold, BHP, JORC, and Rio 
Tinto.
    \641\ See letter from AngloGold.
    \642\ See letter from BHP. In contrast, five other commenters 
indicated that proposed Table 1 would be useful. See letters from 
AngloGold, Midas, MMSA, NSSGA, and Northern Dynasty.
    \643\ See letters from BHP, JORC, and Rio Tinto. Such a report 
requires an estimate of mineral resources to be supported by a 
discussion of factors enumerated in that table, and if certain 
factors have been omitted, there must be a reasonable explanation of 
why they have been excluded. As one commenter explained, such a 
report would entail a qualitative assessment of modifying factors as 
well as a discussion of the assumptions underlying cut-off 
estimates. See letter from Rio Tinto.
---------------------------------------------------------------------------

    In explaining its opposition to the proposed initial assessment 
requirement, one commenter maintained that, under CRIRSCO, at the 
resource determination stage, all that is required is that the 
qualified person demonstrate that there are reasonable prospects for 
eventual economic extraction. That commenter stated that it is best 
left to the discretion of the qualified person to determine the most 
appropriate methodology for identifying, estimating, and disclosing 
mineral resources.\644\
---------------------------------------------------------------------------

    \644\ See letter from Eggleston.
---------------------------------------------------------------------------

a. Cut-Off Grade and Price Estimation
    Most commenters that addressed the issue supported the proposed 
requirement that a qualified person's documentation in support of 
resource determination and disclosure include cut-off grade estimation 
based on assumed unit costs for surface or

[[Page 66383]]

underground operations.\645\ One commenter recommended requiring that, 
consistent with current industry practice, the determination of the 
cut-off grade include estimates of processing costs, metallurgical 
recovery, and general and administrative costs.\646\ Another commenter 
recommended using the term ``cut-off'' instead of ``cut-off grade'' 
because the criteria used may be grade, but could also be net smelter 
return or include quality or metallurgical characteristics.\647\
---------------------------------------------------------------------------

    \645\ See letters from AngloGold, CBRR, Eggleston, Golder, 
Midas, Northern Dynasty, and SRK 1. One commenter, however, opposed 
requiring an initial assessment using assumed unit costs for 
operations that would include pricing and other cash flow 
information on the grounds that this information is proprietary, 
commercially sensitive, and confidential. See letter from Alliance.
    \646\ See letter from SRK 1.
    \647\ See letter from Amec. The commenter also stated that a 
qualified person should be allowed to make the determination of 
assumed unit costs based on benchmarking to similar deposit types 
and types of operations in the particular jurisdiction.
---------------------------------------------------------------------------

    Many commenters opposed the proposed requirement that, when 
estimating mineral prices for the purpose of cut-off grade estimation 
or cash flow analysis for both mineral resource and reserve 
determination, 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. While commenters generally agreed that cut-off estimation 
should be based on estimated prices, most commenters that addressed the 
issue opposed the proposed 24-month trailing average pricing model on 
the grounds that it is unrealistic and inconsistent with pricing 
requirements, guidance, and practice under the CRIRSCO-based codes, 
which permit prices to be based on forward-looking pricing forecasts. 
Consequently, according to those commenters, compliance with the 
historical-based pricing requirement would be costly and unduly 
burdensome for companies dual-listed in the United States and one or 
more of the CRIRSCO jurisdictions.\648\
---------------------------------------------------------------------------

    \648\ See letters from AIPG, Alliance, Amec, AngloGold, BHP, 
CBRR, Chamber, CIM, Cleary & Gottlieb, Cloud Peak, Coeur, CRIRSCO, 
Davis Polk, Dorsey & Whitney, Eggleston, Energy Fuels, FCX, Golder, 
Graves, JORC, MMSA, Newmont, NMA 1, Northern Dynasty, PDAC, 
Randgold, Rio Tinto, Royal Gold, SAMCODES 1 and 2, Shearman & 
Sterling, SME 1, Ur-Energy, Vale, and Willis.
---------------------------------------------------------------------------

    According to those commenters, the prevailing industry practice in 
the CRIRSCO-based jurisdictions is to use forward-looking pricing 
forecasts when estimating mineral resources and reserves. The 
forecasted prices ``are typically based on consensus projections that 
are derived from an average of the short-term and an average of the 
long-term prices provided by numerous financial institutions that are 
independent of the companies that report mineral resources and 
reserves.'' \649\ Because most mining companies base their mineral 
resource and reserve estimates on these consensus prices, investors can 
then compare similar mineral projects in different parts of the world. 
The proposed required use of a two-year trailing average price would 
not allow for this comparability. The commenters claimed this would 
force unrealistically optimistic price assumptions in a declining 
market and unrealistically pessimistic prices in a rising market.\650\
---------------------------------------------------------------------------

    \649\ Letter from CIM.
    \650\ See id; see also letter from SME 1.
---------------------------------------------------------------------------

    One commenter estimated that the proposed 24-month pricing model, 
if adopted, would result in a 40 percent reduction in mineral resources 
reported to the Commission compared to other jurisdictions.\651\ 
Another commenter stated that the proposed historical pricing model 
would create timing concerns because registrants would not be able to 
conduct a rigorous reserve analysis between the end of the fiscal year 
and the filing deadline for Form 10-K annual reports. Accordingly, 
``registrants would be forced, as a practical matter, months before the 
end of the reporting period, to make a very conservative estimate of 
what the actual mandated ceiling price will be, which may lead to 
overly conservative reserve and resource estimates.'' \652\ One other 
commenter stated that the 24-month period is too short because pricing 
for coal can vary and fluctuate widely in a relatively short period of 
time and over multiple markets.\653\
---------------------------------------------------------------------------

    \651\ See letter from BHP.
    \652\ Letter from FCX.
    \653\ See letter from Alliance.
---------------------------------------------------------------------------

    Many commenters recommended that, in lieu of the 24-month trailing 
average price requirement, and consistent with the CRIRSCO-based codes, 
the Commission require that, when estimating prices for the purpose of 
both mineral resource and reserve disclosure, the qualified person use 
any reasonable and justifiable price, which is typically based on the 
qualified person's or management's view of long-term market trends, as 
long as the qualified person provides justification for, and discloses 
all material assumptions concerning the price used.\654\ Some 
commenters further noted that such a requirement would be consistent 
with certain financial reporting requirements for the mining industry 
under U.S. GAAP.\655\
---------------------------------------------------------------------------

    \654\ See, e.g., letters from AIPG, Amec, CBRR, Chamber , Cleary 
& Gottlieb, Cloud Peak, Davis Polk, Eggleston, Energy Fuels, FCX, 
JORC, Newmont, SAMCODES 1, Shearman & Sterling, SME 1, and Vale.
    \655\ See letter from AIPG (``U.S. GAAP requires that estimated 
future cash flows from mineral properties be used in determining the 
value of mining assets in a purchase price allocation and in testing 
mining assets for impairment. The estimated future cash flows are 
based on management's projections using projected sales prices 
reflecting the current and future forecasted prices. The forecasted 
prices should be consistent with the length of the mine life''). See 
also FCX, Newmont, SME 1, and Vale.
---------------------------------------------------------------------------

    In contrast, one commenter recommended using a 36-month average 
because the commenter believed it is less volatile and, therefore more 
appropriate than the proposed 24-month period.\656\ Another commenter 
also preferred the use of a 36-month period but only as a ``fallback 
position'' in the event that an issuer is not permitted to engage in 
forward-looking analysis of the price.\657\ One commenter recommended 
that the Commission adopt a 12-month trailing average price model for 
mineral resource and reserve determination and disclosure because it 
would reflect mineral resource and reserve estimates based on current 
market conditions.\658\
---------------------------------------------------------------------------

    \656\ See letter from Gold Resource.
    \657\ See letter from Eggleston.
    \658\ See letter from Andrews & Kurth.
---------------------------------------------------------------------------

    Most of the commenters that addressed the pricing issue opposed the 
Commission's proposal to require the use of the same pricing standard 
for both mineral resource and mineral reserve determination.\659\ Those 
commenters maintained that commodity prices used to estimate mineral 
resources are typically higher than the prices used to estimate mineral 
reserves because of the longer period it takes to effect commodity 
production from resources compared to reserves. According to 
commenters, using the same price standard for resources and reserves 
would result in an underestimation of a registrant's resources, which 
would put a U.S. registrant at a significant disadvantage relative to 
registrants not subject to the proposed rules.\660\ A few commenters 
recommended using a price estimate for resources determination that is 
a set

[[Page 66384]]

percentage (ranging from 5% to 20%) higher than the price used for 
reserve estimation.\661\
---------------------------------------------------------------------------

    \659\ See letters from Amec, AngloGold, BHP, CBRR, CIM, Coeur, 
Eggleston, Energy Fuels, FCX, Golder, JORC, Midas, MMSA, Newmont, 
NMA 1, Northern Dynasty, Randgold, Rio Tinto, Royal Gold, SAMCODES 
1, SME 1, SRK 1, Vale, and Willis.
    \660\ See, e.g., letter from Vale; see also letter from SME 1.
    \661\ See, e.g., letters from SRK 1, Eggleston and Newmont.
---------------------------------------------------------------------------

    An additional commenter believed that the research it conducts to 
estimate future commodity prices is sensitive intellectual property 
that is not required to be disclosed under the CRIRSCO template or 
JORC.\662\ This commenter suggested that the Commission permit a 
registrant to discuss the methodology used to estimate its pricing 
model without requiring disclosure of the price itself. Alternatively, 
this commenter requested that a registrant be allowed to compare its 
forward-looking pricing to that produced by an industry recognized 
expert and comment on whether there is a material difference between 
the forward-looking pricing models.\663\
---------------------------------------------------------------------------

    \662\ See letter from BHP.
    \663\ See id.
---------------------------------------------------------------------------

    One commenter requested that the Commission allow a registrant to 
keep its future price assumptions confidential when reporting resources 
and reserves if those assumptions are commercially sensitive.\664\ As 
conditions to keeping its price assumptions confidential, a registrant 
would have to disclose the methodology for estimating mineral resources 
and reserves, and state whether those resources and reserves would be 
extractable if commodity prices were not greater than a certain 
historical price. This commenter suggested using a 36-month average 
trailing price for this purpose rather than a 24-month average trailing 
price because it is less volatile.\665\
---------------------------------------------------------------------------

    \664\ See letter from Vale; see also letter from MMSA 
(requesting generally that the Commission allow for exemptions from 
the required disclosure ``to protect trade secrets, confidential 
information, product pricing, and marketing information that is 
vital for a company to maintain its competitive advantage or that 
could represent violations in anti-trust or other legislation in the 
country of operation'').
    \665\ See letter from Vale.
---------------------------------------------------------------------------

b. Qualitative Assessment of Factors and Permitted Assumptions
    One commenter opposed requiring the determination of mineral 
resources to include appropriate assessments of reasonably assumed 
modifying factors because it believed that the term ``modifying 
factors'' should be used exclusively when converting mineral resources 
to mineral reserves.\666\ That commenter recommended substituting the 
phrase ``technical and economic factors'' for ``modifying factors'' in 
order to be consistent with the CRIRSCO standards. That commenter also 
believed that the proposed initial assessment requirement may create an 
expectation of a much more detailed and formal evaluation of the 
technical and economic factors than what is currently industry-accepted 
practice.\667\ A second commenter similarly indicated that because 
consideration of all applicable modifying factors is only appropriate 
at the reserve determination stage, requiring an assessment of the 
modifying factors at the resource evaluation stage could confuse 
investors into mistakenly believing that resources are reserves.\668\
---------------------------------------------------------------------------

    \666\ See letter from Amec.
    \667\ See id.
    \668\ See letter from Eggleston; see also letter from Energy 
Fuels (opposing the proposed initial assessment requirement because 
it attempts to treat a mineral resource as a ``mineral reserve 
currently in the making,'' which would send the wrong message to 
investors); and SAMCODES 2 (stating that ``[i]t is good practice to 
undertake a high-level ``initial assessment'' to support the claim 
of reasonable prospects for economic extraction, but it is not 
necessary to have to disclose the process and modifying/operational 
factors that were applied.).
---------------------------------------------------------------------------

    Some commenters stressed the importance of considering 
environmental factors at the initial assessment stage.\669\ According 
to two of those commenters, such consideration should include whether 
the company's operations will generate acid-mine drainage, which often 
requires post-project collection and treatment of pollution in 
perpetuity and results in considerable environmental and financial 
liability.\670\ Another commenter recommended that the initial 
assessment discuss a mining project's water requirements and address 
how water availability for the region is predicted to change in the 
future, whether from increased incidents of drought, competing demands 
from nearby agricultural users, or groundwater drawdowns.\671\
---------------------------------------------------------------------------

    \669\ See letters from Columbia, CSP\2\, and Montana Trout.
    \670\ See letters from CSP\2\ and Montana Trout.
    \671\ See letter from Columbia.
---------------------------------------------------------------------------

c. Optional Economic (Cash Flow) Analysis
    Some commenters maintained that the Commission should align itself 
with Canada's NI 43-101 and permit the disclosure of an economic 
assessment of resources, with cash flow analysis, including permitting 
the use of inferred resources as long as appropriate disclaimers are 
given, in addition to requiring disclosure of material assumptions and 
qualitative assessment of relevant technical and economic factors 
likely to affect prospects of economic extraction, if a registrant 
discloses mineral resource estimates.\672\ Those commenters recommended 
that the Commission not use the term ``initial assessment'' and instead 
name the documentation to support a mineral resource estimate a 
``resource study'' and name the report describing economic potential of 
mineral resources either a scoping study or preliminary economic 
assessment.\673\ Commenters stated that, because inferred mineral 
resources are permitted to be included in economic analyses in 
preliminary economic assessments under Canada's NI 43-101 and in 
scoping studies under other CRIRSCO-based codes, U.S. registrants would 
be placed at a competitive disadvantage were the Commission to adopt 
the proposed prohibition of inferred mineral resources in economic 
assessments.\674\
---------------------------------------------------------------------------

    \672\ See, e.g., letters from Coeur, Midas, SME 1, and Willis.
    \673\ See letters from Coeur, SME 1, and Willis.
    \674\ See, e.g., letters from Coeur and SME 1.
---------------------------------------------------------------------------

iii. Final Rules
    We are adopting the proposed requirement that a registrant's 
disclosure of mineral resources be based upon a qualified person's 
``initial assessment'' supporting the determination of mineral 
resources.\675\ The final rules define an initial assessment, as 
proposed, to mean a preliminary technical and economic study of the 
economic potential of all or parts of mineralization to support the 
disclosure of mineral resources.\676\ However, in a change from the 
proposed rules, as a result of comments received, the final rules do 
not require the qualified person's initial assessment to include a 
qualitative evaluation of the modifying factors to establish the 
economic potential of the mining property or project. Rather, 
consistent with the suggestion of some commenters,\677\ the final rules 
provide that, at a minimum, the initial assessment must include the 
qualified person's qualitative evaluation of relevant technical and 
economic factors likely to influence the prospect of economic 
extraction to establish the economic potential of the mining property 
or project.\678\ To reflect this change, we have revised the proposed 
definition of initial assessment to provide that the initial assessment 
must include appropriate assessments of reasonably assumed technical 
and economic factors, together with any other relevant operational 
factors, that are necessary to demonstrate at the time

[[Page 66385]]

of reporting that there are reasonable prospects for economic 
extraction.\679\
---------------------------------------------------------------------------

    \675\ 17 CFR 229.1302(d)(1) [Item 1302(d)(1) of Regulation S-K].
    \676\ See the definition of ``initial assessment'' in 17 CFR 
229.1300.
    \677\ See, e.g., letter from Amec.
    \678\ See 17 CFR 229.1302(d)(1)(i)(B) [Item 1302(d)(1)(i)(B) of 
Regulation S-K].
    \679\ See 17 CFR 229.1300.
---------------------------------------------------------------------------

    This change is intended to address the concern of some commenters 
\680\ that the proposed initial assessment requirement would exceed 
what is required under the CRIRSCO standards because full consideration 
of the modifying factors is only required at the mineral reserve 
determination stage. The adopted initial assessment requirement will 
more closely align the Commission's mining property disclosure 
requirements with the CRIRSCO standards.\681\
---------------------------------------------------------------------------

    \680\ See, e.g., letters from Amec, Eggleston, and Northern 
Dynasty.
    \681\ See, e.g., letter from Amec; see also CRIRSCO 
International Reporting Template, supra note 175, at cl. 21 (``The 
term `reasonable prospects for eventual economic extraction' implies 
a judgement (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.'').
---------------------------------------------------------------------------

    At the same time, the adopted requirement will underscore that, at 
the resource determination stage, the qualified person must assess both 
the geologic characteristics of the deposit as well as the relevant 
technical and economic factors likely to influence the prospect of 
economic extraction in order to conclude that the parts of the mineral 
deposit he or she is determining to be mineral resources have 
reasonable prospects of economic extraction. While the relevant 
technical and economic factors to be considered at the resource 
determination stage are likely to be similar to the modifying factors 
applied at the reserve determination stage, because the final rules 
only require a qualitative assessment of the technical and economic 
factors at the resource determination stage, that assessment will be 
less thorough and less certain than the assessment of modifying factors 
required at the reserve determination stage. Accordingly, the final 
rules provide, as proposed, that an initial assessment cannot be used 
as the basis for disclosure of mineral reserves.\682\
---------------------------------------------------------------------------

    \682\ See the definition of ``initial assessment'' in 17 CFR 
229.1300.
---------------------------------------------------------------------------

    Although a commenter recommended that the format of the initial 
assessment conform to JORC Table 1's Checklist of Assessment and 
Reporting Criteria on an ``if not why not basis,'' \683\ we are 
adopting, substantially as proposed, a format for the initial 
assessment that more closely resembles the technical report format of 
Canada's NI 43-101F1. While there is substantial overlap in the items 
required to be considered and discussed under JORC Table 1 and Canada's 
NI 43-101F1, we believe that the presentation of disclosure 
requirements in the Canadian technical report format is clearer and 
more comprehensive and, as such, will help elicit better 
disclosure.\684\
---------------------------------------------------------------------------

    \683\ See letters from BHP, JORC, and Rio Tinto.
    \684\ See infra Section II.G.3. for a detailed discussion of the 
disclosure requirements for the technical report summary regarding 
mineral resources (in addition to those regarding mineral reserves 
and exploration results).
---------------------------------------------------------------------------

a. Cut-Off Grade and Price Estimation
    Similar to the proposed rules, the final rules require that a 
qualified person include in the initial assessment a cut-off grade 
\685\ estimation based on assumed unit costs for surface or underground 
operations and estimated mineral prices.\686\ We continue to 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.\687\ 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.
---------------------------------------------------------------------------

    \685\ The final rules define cut-off grade, as proposed, to mean 
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 that distinguishes material deemed to 
have no 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 deemed to have economic value (its ultimate 
destination during mining will be a processing facility). Other 
terms used in similar fashion as cut-off grade include net smelter 
return, pay limit, and break-even stripping ratio. 17 CFR 229.1300.
    \686\ See 17 CFR 229.1302(d)(2) [Item 1302(d)(2) of Regulation 
S-K].
    \687\ 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 JORC Code, supra note 
175, at 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 SME Guide, supra note 177, at pt. 35 (``. . 
.a Mineral Resource is not an inventory of all mineralization 
drilled or sampled, regardless of cut-off grade, likely mining 
dimensions, location, or continuity; rather it is a realistic 
estimate of mineralization which, under assumed and justifiable 
technical and economic conditions, might become economically 
extractable.'').
---------------------------------------------------------------------------

    In connection with the cut-off grade estimation requirement, the 
qualified person must make and disclose an assumption about whether the 
deposit will be mined with underground or surface mining methods.\688\ 
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 reasonable prospects of economic extraction.
---------------------------------------------------------------------------

    \688\ See Item 1302(d)(2) of Regulation S-K.
---------------------------------------------------------------------------

    In a change from the proposed rules, in response to comments 
received, we are not requiring that the qualified person 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, unless 
prices are defined by contractual arrangements. Consistent with the 
suggestion of numerous commenters, the final rules instead provide 
that, when estimating mineral prices, the qualified person must use a 
price for each commodity that provides a reasonable basis for 
establishing the prospects of economic extraction for mineral 
resources.\689\ In addition, the qualified person must disclose the 
price used and explain, with particularity, his or her reasons for 
using the selected price, including the material assumptions underlying 
the selection. This explanation must include disclosure of the time 
frame used to estimate the commodity price and unit costs for cut-off 
grade estimation and the reasons justifying the selection of that time 
frame.\690\ The selected price and all material assumptions underlying 
it must be current as of the end of the registrant's most recently 
completed fiscal year.\691\ Similar to the proposed rule, the qualified 
person may use a price set by contractual arrangement, provided that 
such price is reasonable, and the qualified person discloses that he or 
she is using a contractual price when disclosing the price used.\692\
---------------------------------------------------------------------------

    \689\ See id.
    \690\ See id.
    \691\ See id.
    \692\ See id.
---------------------------------------------------------------------------

    We believe that the adopted estimated pricing requirement will more 
closely align the Commission's disclosure rules to the ``any reasonable 
and justifiable price'' standard under the CRIRSCO-based codes and 
thereby address several concerns raised by commenters.\693\ First, 
under the final rules, a qualified person is able to use a price that 
is either a historical price or one based on forward-looking pricing 
forecasts. Because, according to commenters, most mining companies 
currently rely on consensus prices based on forward-looking pricing 
forecasts,\694\ the adopted estimated

[[Page 66386]]

pricing requirement will allow registrants to use the same prices for 
disclosing mineral resources in Commission filings as they do for their 
own internal management purposes and when reporting in CRIRSCO-based 
jurisdictions. This should help limit the compliance costs of the final 
rules.
---------------------------------------------------------------------------

    \693\ We are also adopting this estimated pricing standard for 
the determination and disclosure of mineral reserves. See infra 
Section II.F.2.
    \694\ See, e.g., letter from CIM.
---------------------------------------------------------------------------

    Second, the revised estimated pricing requirement permits a 
registrant to use a different price for mineral resource determination 
than it uses for reserve determination, and to vary the estimated price 
for different commodities, as long as those prices are reasonable and 
justifiable. Consequently, the determination and disclosure of a 
registrant's mineral resources should more accurately reflect the 
information guiding a registrant's business decisions because the 
qualified person has more flexibility in selecting the different prices 
for mineral resource and reserve estimation (as opposed to being 
limited to prices less than the 24-month trailing average).\695\
---------------------------------------------------------------------------

    \695\ See supra note 659 and accompanying text.
---------------------------------------------------------------------------

    Third, because the adopted estimated pricing requirement conforms 
to the CRIRSCO standards and global industry practice, it will help to 
promote uniformity and comparability regarding the disclosure of 
mineral resource and reserve estimates among mining registrants, which 
should benefit investors by enhancing their analysis and understanding 
of registrants' mining operations.\696\
---------------------------------------------------------------------------

    \696\ See, e.g., letter from CIM.
---------------------------------------------------------------------------

    We are not adopting a provision, as suggested by a few 
commenters,\697\ that would exempt the disclosure of the price, and 
related material assumptions, underlying mineral resource (or mineral 
reserve) estimates. Because of the important role that pricing 
considerations play in determining estimates of mineral resources (and 
mineral reserves), we believe that such an exemption could lead to the 
omission of information that is material to an investor's understanding 
of those estimates.
---------------------------------------------------------------------------

    \697\ See supra notes 662-664 and accompanying text.
---------------------------------------------------------------------------

b. Qualitative Assessment of Factors and Permitted Assumptions
    We are adopting a provision that specifies the relevant technical 
and economic factors likely to influence the reasonable prospect of 
economic extraction that, at a minimum, the qualified person must 
qualitatively assess.\698\ While the factors are identical to those in 
the proposed instruction, we have conformed that instruction to reflect 
the change in the definition of, and required disclosure concerning, 
the initial assessment. 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 an evaluation and discussion of infrastructure, mine 
design, processing, and environmental issues that could pose obstacles 
to the material's extraction.
---------------------------------------------------------------------------

    \698\ See 17 CFR 229.1302(d)(3) [Item 1302(d)(3) of Regulation 
S-K]. These factors include: site infrastructure; mine design and 
planning; processing plant; environmental compliance and permitting; 
and any other reasonably assumed technical and economic factors, 
including factors related to local individuals and groups, which are 
necessary to demonstrate reasonable prospects for economic 
extraction. See also Table 1 to paragraph (d) of Item 1302 of 
Regulation S-K.
---------------------------------------------------------------------------

    We are adopting another provision that refers the qualified person 
to Table 1 to paragraph (d) of Item 1302 for the assumptions permitted 
to be made when preparing the initial assessment as well as other 
technical studies.\699\ This table sets forth the minimum requirements 
for various factors that the qualified person must evaluate when 
preparing an initial assessment, pre-feasibility study, or feasibility 
study. It is substantially similar to the proposed Table 1 but has been 
conformed to reflect the change in the definition of, and required 
disclosure concerning, the initial assessment. We are presenting the 
minimum factors to be considered for each study in one table to 
facilitate a comparison of the evaluative factor requirement across the 
three key technical studies proposed to be used for mineral resource 
and reserve disclosure. As this presentation demonstrates, the 
evaluative process becomes more exacting as mining property assessment 
progresses from mineral resource estimation to mineral reserve 
estimation.
---------------------------------------------------------------------------

    \699\ See 17 CFR 229.1302(d)(1)(iv) [Item 1302(d)(1)(iv) of 
Regulation S-K].
---------------------------------------------------------------------------

    The assumptions permitted to be made in the initial assessment 
include those pertaining to 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. Allowing assumptions for a variety of factors at the 
resource determination stage is generally consistent with guidelines 
under the CRIRSCO-based codes.\700\ 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.
---------------------------------------------------------------------------

    \700\ See, e.g., SME Guide, supra note177, Table 1, at 44-67.
---------------------------------------------------------------------------

    We are not expanding the disclosure of environmental factors in 
connection with the initial assessment, as suggested by some 
commenters.\701\ As explained in greater detail below, we believe that 
the specified environmental factors required to be included in the 
technical report summary will likely cover the concerns raised by those 
commenters to the extent that they are material to investors.\702\
---------------------------------------------------------------------------

    \701\ See supra notes 669-671 and accompanying text.
    \702\ See infra Section II.G.3.
---------------------------------------------------------------------------

c. Optional Economic (Cash Flow) Analysis
    Similar to a proposed instruction, we are adopting a provision 
stating that a qualified person may include cash flow analysis in an 
initial assessment to demonstrate economic potential. If the qualified 
person includes cash flow analysis in the initial assessment, then the 
adopted provision imposes the same accuracy and contingency levels 
required for operating and capital cost estimates as under the proposed 
instruction.\703\ The qualified person must state the accuracy and 
contingency levels in the initial assessment. We believe that these 
accuracy and contingency requirements \704\ for operating and capital 
costs are appropriate because they are generally consistent with those 
accepted for scoping studies.\705\
---------------------------------------------------------------------------

    \703\ 17 CFR 229.1302(d)(4)(i) [Item 1302(d)(4)(i) of Regulation 
S-K], which requires operating and capital cost estimates to have an 
accuracy level of at least approximately 50 percent and 
a contingency level of no greater than 25 percent.
    \704\ We have included both accuracy and contingency 
requirements for operating and capital cost estimates in Table 1 to 
paragraph (d) of Item 1302 of Regulation S-K.
    \705\ See, e.g., SME Guide, supra note177, Table 2, at 68-69 
(providing accuracy and contingency ranges for capital and operating 
cost estimates in scoping, pre-feasibility, and feasibility 
studies).
---------------------------------------------------------------------------

    In a change from the proposed rules, the final rules will permit a 
qualified person to include inferred mineral resources in a cash flow 
analysis prepared as part of the initial assessment as long as the 
qualified person:

     States with equal prominence to the disclosure of 
mineral resource estimates that the assessment is preliminary in 
nature, it includes inferred mineral resources that are considered 
too speculative geologically to have modifying factors applied to 
them that would enable them to be categorized as mineral reserves, 
and there is no certainty

[[Page 66387]]

that this economic assessment will be realized;
     Discloses the percentage of the mineral resources used 
in the cash flow analysis that are classified as inferred resources; 
and
     Discloses, with equal prominence, the results of the 
economic analysis excluding inferred resources in addition to the 
results that include inferred resources.\706\
---------------------------------------------------------------------------

    \706\ 17 CFR 229.1302(d)(4)(ii) [Item 1302(d)(4)(ii) of 
Regulation S-K].

    These conditions are generally in line with the approach of 
Canada's NI 43-101, which permits the use of inferred resources in a 
preliminary economic assessment as long as cautionary language about 
such use is provided. We are adopting this change to address 
commenters' concern that, because inferred resources may be included in 
economic analyses in preliminary economic assessments under Canada's NI 
43-101 and in scoping studies under other CRIRSCO-based codes, U.S. 
registrants would be at a competitive disadvantage were we to adopt 
subpart 1300, as proposed.\707\ We believe that the above conditions 
will appropriately caution investors concerning the level of risk 
underlying such mineral resource estimates and provide them with 
additional information to help evaluate whether to invest on the basis 
of estimates that include inferred resources.
---------------------------------------------------------------------------

    \707\ See supra note 674 and accompanying text.
---------------------------------------------------------------------------

    As previously noted, an initial assessment is not required to have 
an economic analysis, and when it does not include such an analysis, 
its scope is narrower than that of a preliminary economic assessment 
under Canada's NI 43-101 or a scoping study under other CRIRSCO-based 
codes.\708\ But if a qualified person opts to provide an economic 
analysis, which includes inferred resources, in an initial assessment 
under the final rules, a U.S. registrant may use such an initial 
assessment for substantially similar purposes as a Canadian registrant 
uses a preliminary economic assessment or another non-U.S. registrant 
uses a scoping study in Australia, South Africa, or other foreign 
jurisdiction that has adopted a CRIRSCO-based code.
---------------------------------------------------------------------------

    \708\ See supra notes 619-621 and accompanying text.
---------------------------------------------------------------------------

    As previously discussed, we do not believe that other quantitative 
measures of economic potential that omit cash flows are appropriate, 
and we are concerned that they potentially could be misleading.\709\ 
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, to the extent a qualified person wants 
to include an economic analysis in an initial assessment, he or she 
must use a cash flow analysis.
---------------------------------------------------------------------------

    \709\ See Proposing Release, supra note 5, at Section II.E.3.
---------------------------------------------------------------------------

5. USGS Circular 831 and 891
i. Proposed Interpretation
    In the Proposing Release, we explained why we do not believe that 
it would be appropriate to permit the continued classification of 
mineral resources based on United States Geological Survey (``USGS'') 
Circulars 831 and 891 following adoption of subpart 1300 of Regulation 
S-K.\710\ 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,\711\ and were 
not intended to be the basis for public company disclosure to 
investors. While Circular 831 initially established a classification 
system for all mineral commodities, its classification scheme has been 
largely phased out for metal mining. It is still used in coal and some 
industrial minerals mining, while Circular 891 was specifically 
designed, and is still used, for resource or reserve classification of 
coal.\712\
---------------------------------------------------------------------------

    \710\ See Proposing Release, supra note 5, at Section II.E.4, 
which refers to USGS Circular 891 (stating that ``[i]n 1980, the 
[USGS and Bureau of Mines] published Circular 831, `Principles of 
the Mineral Resource Classification System of the U.S. Bureau of 
Mines and U.S. Geological Survey' (U.S. Geological Survey, 1980). 
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), http://pubs.usgs.gov/circ/1983/0891/report.pdf.
    \711\ See Proposing Release, Section II.E.4, which refers to 
USGS Circular 831 (stating that ``[t]he 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), 
http://pubs.usgs.gov/circ/1980/0831/report.pdf.
    \712\ See id.
---------------------------------------------------------------------------

    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.\713\ However, we indicated 
in the Proposing Release that we do not believe the use of USGS 
Circulars 831 and 891 for resource classification in Commission filings 
would be consistent with the proposed rules. As we explained, the 
primary criterion for the required mineral resource classification 
under the CRIRSCO standards, upon which the Commission's proposed rules 
are based, is the geologic confidence in the estimates based on the 
geologic evidence (limited, adequate, or conclusive).\714\ In addition, 
under the CRIRSCO standards and the Commission's proposed rules, all 
disclosed mineral resources must have reasonable prospects of economic 
extraction, which requires the qualified person to consider a variety 
of technical and economic factors, in addition to geologic evidence, 
when evaluating the economic potential of a deposit.\715\
---------------------------------------------------------------------------

    \713\ Guide 7 prohibits mineral resource disclosure and as such 
does not provide any guidance, or place any restrictions, on how to 
classify mineral resources.
    \714\ See supra Section II.E.3.
    \715\ See supra Sections II.E.2 and II.E.4.
---------------------------------------------------------------------------

    In contrast, the primary criterion in the Circulars' classification 
system is the extent to which tonnages fall within particular distances 
from a drill hole or outcrop.\716\ 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 indicated that we do not believe it should be the sole factor.\717\ 
We therefore solicited comment on the appropriateness of using 
Circulars 831 and 891 to classify mineral resources.\718\
---------------------------------------------------------------------------

    \716\ 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.
    \717\ 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, USGS Scientific 
Investigations Report 2014-5196 1 (2014) (concluding that an 
approach that involved establishing confidence limits ``should be 
considered realistic improvement[ ] over distance methods used for 
quantitative classification of uncertainty in coal resource, such as 
U.S. Geological Survey Circular 891'').
    \718\ See Proposing Release, supra note 5, at Section II.E.4.

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

[[Page 66388]]

ii. Comments on the Proposed Interpretation
    Numerous parties supported the Commission's position that use of 
USGS Circulars 831 and 891 to classify mineral resources would not be 
appropriate under the proposed rules.\719\ Some commenters stated that 
the Circulars are inconsistent with the CRIRSCO standards and were 
designed for a different purpose (i.e., government identification of 
mineral occurrences that may be of economic interest 25-50 years in the 
future.) \720\ For that reason, according to those commenters, allowing 
continued use of the Circulars to classify resources would lead to 
investor confusion and should never be permitted,\721\ even for 
coal.\722\
---------------------------------------------------------------------------

    \719\ See, e.g., letters from AIPG, Amec, AngloGold, BHP, CBRR, 
Eggleston, Gold Resource, Midas, Northern Dynasty, Rio Tinto, SME 1, 
and SRK 1.
    \720\ See, e.g., letters from AIPG and SME 1.
    \721\ See, e.g. letters from AIPG, Eggleston, and SME 1.
    \722\ See letters from AIPG and SME 1.
---------------------------------------------------------------------------

    One commenter opposed the use of Circulars 831 and 891 to classify 
mineral resources because they are not based on modern geostatistical 
methods that are now routinely applied and, thus, are outdated.\723\ 
Another commenter agreed that Circulars 831 and 891 are ``completely 
out of date and do not address many modern aspects of exploration, 
sampling, chain of custody, quality assessment/quality controls (`QA/
QC'), resource estimation methods, validation and reconciliation.'' 
\724\ One other commenter stated that the use of Circulars 831 and 891 
to classify mineral resources would not be appropriate because of the 
poor alignment with CRIRSCO, the lack of economic criteria, and the 
potential to cause inconsistent disclosure.\725\
---------------------------------------------------------------------------

    \723\ See letter from BHP.
    \724\ Letter from SRK 1.
    \725\ See letter from Rio Tinto.
---------------------------------------------------------------------------

    In contrast, a few commenters stated that the Commission should 
allow the use of the Circulars for coal deposits because they are still 
a valid tool in classifying coal deposits.\726\ As one of those 
commenters explained, because coal is a tabular deposit that is often 
relatively consistent over large areas, it lends itself to the type of 
evaluation provided by the Circulars.\727\
---------------------------------------------------------------------------

    \726\ See letters from Alliance, Cloud Peak, and NMA 1.
    \727\ See letter from Alliance.
---------------------------------------------------------------------------

iii. Final Interpretation
    Having considered the comments received, we are affirming our 
position that the use of USGS Circulars 831 and 891 for resource 
classification in Commission filings should not be permitted under the 
final rules. As we explained in the Proposing Release, those Circulars 
provide a method of classification that primarily relies on a single 
criterion--the extent to which tonnages fall within particular 
distances from a drill hole or outcrop.\728\ In contrast, the final 
rules, which provide a mineral resource classification scheme that is 
substantially similar to the CRIRSCO classification system, require a 
qualified person to assess the geologic confidence in the resource 
estimates based on the geologic evidence and, in addition, to consider 
a variety of relevant technical and economic factors likely to 
influence the prospect of economic extraction.\729\
---------------------------------------------------------------------------

    \728\ See Proposing Release, supra note 5, at Section II.E.4.
    \729\ See supra Sections II.E.2 through II.E.4.
---------------------------------------------------------------------------

    Consequently, we agree with commenters that the method used to 
classify mineral resources in Circulars 831 and 891 is inconsistent 
with the CRIRSCO standards and should not be permitted under new 
subpart 1300, even when classifying coal resources.\730\ Because, as 
commenters indicated, the USGS Circulars do not address many modern 
aspects of exploration, sampling, resource estimation methods, 
validation, and reconciliation,\731\ which are included under the 
CRIRSCO standards, we do not believe that the Circulars are the most 
appropriate method for purposes of public company disclosure to 
investors. Rather, we believe that the continued reliance on those 
Circulars to classify mineral resources would lead to inconsistencies 
with mineral resource estimates determined under the CRIRSCO standards 
and investor confusion. Accordingly, neither a registrant nor its 
qualified person may use Circulars 831 and 891 to classify mineral 
resources when providing the disclosure required under subpart 1300.
---------------------------------------------------------------------------

    \730\ See, e.g., letters from AIPG and SME 1.
    \731\ See, e.g., letters from BHP and SRK 1.
---------------------------------------------------------------------------

F. Treatment of Mineral Reserves

1. The Framework for Determining Mineral Reserves
i. Rule Proposal
    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.'' \732\ Guide 7 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'' to indicated and measured mineral resources.\733\
---------------------------------------------------------------------------

    \732\ Paragraph (a)(1) of Guide 7.
    \733\ See, e.g., CIM Definition Standards, supra note 351, at 5-
6; JORC Code, supra note 175, at pt. 29; SME Guide, supra note 177, 
at pt. 41; SAMREC Code, supra note 267, at pt. 35; and PERC 
Reporting Standard, supra note 302, at pt. 8.1.
---------------------------------------------------------------------------

    We proposed to revise the definition of mineral reserves to align 
it generally with the definition under the CRIRSCO-based codes by 
adopting the framework of applying modifying factors to indicated or 
measured mineral resources in order to convert them to mineral 
reserves.\734\ As part of this framework, we proposed definitions of 
``mineral reserves,'' ``probable mineral reserves,'' ``proven mineral 
reserves,'' and ``modifying factors.''
---------------------------------------------------------------------------

    \734\ See Proposing Release, supra note 5, at Section II.F.1.
---------------------------------------------------------------------------

    We proposed 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.\735\
---------------------------------------------------------------------------

    \735\ See id.
---------------------------------------------------------------------------

    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.\736\
---------------------------------------------------------------------------

    \736\ See id.
---------------------------------------------------------------------------

    As used in the proposed 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.\737\ As used 
in this proposed definition, ``investment and market assumptions'' 
includes all

[[Page 66389]]

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.\738\
---------------------------------------------------------------------------

    \737\ See id.
    \738\ See id.
---------------------------------------------------------------------------

    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 and 
the qualified person discloses that he or she is using a contractual 
price and discloses the contractual price used.\739\
---------------------------------------------------------------------------

    \739\ See id.
---------------------------------------------------------------------------

    The proposed rules used 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.\740\ Similar to the CRIRSCO classification 
scheme,\741\ we proposed to define ``probable mineral reserves'' as the 
economically mineable part of an indicated and, in some cases, a 
measured mineral resource.\742\
---------------------------------------------------------------------------

    \740\ See id.
    \741\ See, e.g., JORC Code, supra note 175, at pt. 30; CIM 
Definition Standards, supra note 351, at 6; SAMREC Code, supra note 
267, at pt. 36; and PERC Reporting Standard, supra note 302, at pt. 
8.11.
    \742\ See Proposing Release, supra note 5, at Section II.F.1.
---------------------------------------------------------------------------

    As we explained in the Proposing Release, 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.\743\ 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. As further required by the proposed rules, 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.\744\
---------------------------------------------------------------------------

    \743\ See id.
    \744\ See id.
---------------------------------------------------------------------------

    Similar to the CRIRSCO classification scheme,\745\ we proposed to 
define ``proven mineral reserves'' as the economically mineable part of 
a measured mineral resource.\746\ As the proposed rules explained, 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.\747\ In addition, as proposed, a proven mineral reserve can 
only result from conversion of a measured mineral resource.\748\
---------------------------------------------------------------------------

    \745\ See, e.g., JORC Code, supra note 175, at pt. 31; CIM 
Definition Standards, supra note 351, at 6; SAMREC Code, supra note 
267, at pt. 37; and PERC Reporting Standard, supra note 302, at pt. 
8.13.
    \746\ See Proposing Release, Section II.F.1.
    \747\ See id.
    \748\ See id.
---------------------------------------------------------------------------

    We proposed 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 prospects of mineral 
resources, or the economic viability of mineral reserves.\749\ 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.\750\ As proposed, 
these factors included, but were not restricted to, mining, energy 
recovery and conversion, processing, metallurgical, economic, 
marketing, legal, environmental, infrastructure, social, and 
governmental factors. We also proposed that the number, type, and 
specific characteristics of the applied modifying factors are a 
function of and depend upon the mineral, mine, property, or 
project.\751\
---------------------------------------------------------------------------

    \749\ See id.
    \750\ See, e.g., JORC Code, supra note 175, at pt. 12; CRIRSCO 
International Reporting Template, supra note 20, at cl. 12; SAMREC 
Code, supra note 267, at pt. 12; and PERC Reporting Standard, supra 
note 302, at pt. 4.3.
    \751\ See Proposing Release, supra note 5, at Section II.F.1.
---------------------------------------------------------------------------

    We proposed several instructions about the conversion of mineral 
resources into mineral reserves. For example, one instruction explained 
that, similar to the CRIRSCO framework,\752\ 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.\753\
---------------------------------------------------------------------------

    \752\ See, e.g., JORC Code, supra note 175, at pt. 32; CRIRSCO 
International Reporting Template, supra note 20, at cl. 33; SAMREC 
Code, supra note 267, at pt. 38, and PERC Reporting Standard, supra 
note 302, at pt. 8.15.
    \753\ See Proposing Release, supra note 5, at Section II.F.1.
---------------------------------------------------------------------------

    Another instruction stated 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.\754\ A third instruction 
explained 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.\755\ These proposed instructions are consistent with the 
CRIRSCO framework for conversion of mineral resources into mineral 
reserves.\756\
---------------------------------------------------------------------------

    \754\ See id.
    \755\ See id.
    \756\ See, e.g., JORC Code, supra note 175, at pt. 32; CRIRSCO 
International Reporting Template, supra note 20, at cl. 33; SAMREC 
Code, supra note 267, at pt. 38; and PERC Reporting Standard, supra 
note 302, at pt. 8.15.
---------------------------------------------------------------------------

    We proposed 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.\757\ We proposed a net estimate for 
reserves because the proposed rules would require disclosure of mineral 
reserves at three points of reference: In-situ,\758\ plant or mill 
feed, and saleable product.\759\ As we explained, estimates that are 
exclusive of diluting materials and mining losses would provide a

[[Page 66390]]

clearer picture of the efficiency of the processing method.\760\
---------------------------------------------------------------------------

    \757\ In this regard, we stated our belief that, because 
excluding diluting materials is a minor computational step in 
reserve estimation, the proposed net estimate for reserves measure 
would not impose a significant additional compliance burden for 
registrants. See Proposing Release, supra note 5, at Sections 
II.F.1.
    \758\ In-situ means ``in its original place.'' It is used in 
this context to refer to mineral reserves estimated as in-place 
tons.
    \759\ See Proposing Release, supra note 5, at Sections II.F.1-2.
    \760\ The efficiency of the processing method demonstrates how 
well the registrant converts the resource into saleable product. See 
Proposing Release, supra note 5, at Section II.F.1.
---------------------------------------------------------------------------

    Under the proposal, when discussing the analysis in the technical 
report summary, the qualified person would be required to disclose the 
assumptions made about prices, exchange rates, discount rate, sales 
volumes and costs necessary to determine the economic viability of the 
reserves.\761\
---------------------------------------------------------------------------

    \761\ See id.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Many commenters generally supported the Commission's proposal to 
adopt the CRIRSCO framework of applying modifying factors to indicated 
or measured mineral resources in order to convert them to mineral 
reserves.\762\ One commenter supported the Commission's proposed 
definition of ``mineral reserve'' as 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.\763\ Another commenter stated that the proposed 
definition of mineral reserve was acceptable, but the definition in the 
CIM Definition Standards, which does not use a net reserve concept, is 
substantially better and consistent with international usage.\764\ One 
other commenter preferred the CRIRSCO definition of mineral reserve, 
which includes dilution and allowances for losses, but stated that, 
alternatively, the Commission should permit a registrant to disclose 
its reserves both as inclusive of dilution and losses and as a net 
estimate.\765\
---------------------------------------------------------------------------

    \762\ See, e.g., letters from AngloGold, BHP, CBRR, Eggleston, 
Gold Resource, JORC, Midas, Northern Dynasty, Rio Tinto, SAMCODES 1 
and 2, and Vale.
    \763\ See letter from Midas.
    \764\ See letter from Eggleston.
    \765\ See letter from Energy Fuels.
---------------------------------------------------------------------------

    Many other commenters, however, strongly opposed the net reserve 
concept and urged the Commission to adopt the CRIRSCO definition of 
mineral reserve.\766\ Those commenters disagreed with the Commission's 
statement that the calculation of a net estimate would be ``relatively 
minor.'' \767\ Moreover, some commenters stated that, in addition to 
conflicting with the comparable definition under the CRIRSCO standards, 
the proposed definition of mineral reserve also is inconsistent with 
that part of the proposed definition that requires the application of 
the modifying factors to mineral resources in order to determine 
mineral reserves, and is therefore unrealistic.\768\ Because 
application of the modifying factors, which include operational and 
processing factors, necessarily involves dilution and allowances for 
losses, it is not possible to exclude them and satisfy the modifying 
factors prong of the mineral reserve definition.\769\
---------------------------------------------------------------------------

    \766\ See letters from Amec, AngloGold, BHP, CBRR, Coeur, FCX, 
Gold Resource, Golder, MMSA, NMA 1, Northern Dynasty, Randgold, Rio 
Tinto, Royal Gold, SAMCODES 1, SME 1, SRK 1, Vale, and Willis.
    \767\ See, e.g., letters from BHP, FCX, Golder, and MMSA.
    \768\ See, e.g., letters from BHP, CBRR, Randgold, and Rio 
Tinto.
    \769\ Some of the commenters made similar arguments when 
objecting to the proposed requirement to disclose mineral reserves 
as in-situ in addition to plant/mill feed and saleable product. See, 
e.g., letters from Amec, Rio Tinto, SME 1, and Vale. See infra 
Section II.G. for further discussion.
---------------------------------------------------------------------------

    Several commenters were generally supportive of the proposed 
definitions of probable and proven mineral reserve because they are 
consistent with the CRIRSCO definitions.\770\ Several commenters also 
generally supported the proposed definition of modifying factors.\771\ 
One commenter stated that the proposed definition is consistent with 
the CRIRSCO standards.\772\ Other commenters recommended adding other 
specified factors to the definition, such as decommissioning costs, 
reclamation costs, and assumptions for mining losses, among other 
things.\773\
---------------------------------------------------------------------------

    \770\ See letters from AngloGold, CBRR, Eggleston, Midas, 
Northern Dynasty, and SRK 1.
    \771\ See, e.g., letters from AngloGold, CBRR, Golder, Midas, 
and SRK 1.
    \772\ See letter from CBRR.
    \773\ See letters from SRK 1 and Golder. As previously 
discussed, some commenters objected to the application of the 
modifying factors at the mineral resource determination stage. See, 
e.g., letters from Amec and Eggleston. Those commenters requested 
that we remove from the definition of modifying factors their use to 
establish the economic prospects of mineral resources.
---------------------------------------------------------------------------

    Several commenters supported the Commission's proposal to include a 
life of mine plan disclosure requirement in the technical studies 
required to support a determination of mineral reserves.\774\ One 
commenter described the life of mine requirement as ``fundamental'' to 
determining whether a mine will be economically viable at the time of 
reporting.\775\ A second commenter stated that the proposed life of 
mine plan requirement is consistent with requirements in global 
jurisdictions.\776\
---------------------------------------------------------------------------

    \774\ See letters from Amec, CBRR, Eggleston, Gold Resource, 
Golder, Midas, Northern Dynasty, Rio Tinto, SAMCODES 2, and SRK 1.
    \775\ See letter from Eggleston.
    \776\ See letter from CBRR.
---------------------------------------------------------------------------

    One commenter, however, opposed a life of mine plan disclosure 
requirement because such a requirement would reveal commercially 
sensitive information and would be onerous on registrants with a large 
number of reserves.\777\ Another commenter objected to the proposed 
life of mine plan disclosure requirement on the grounds that, because 
coal mine plans often include areas not yet controlled by a company, 
disclosing mine life plans would allow competitors to interfere with 
the company's operations by acquiring strategic mineral rights already 
targeted by the company.\778\ That commenter also stated that, because 
life of mine plans are always subject to change, their disclosure could 
lead potential investors to assume incorrectly that mining is possible 
under all conditions.\779\
---------------------------------------------------------------------------

    \777\ See letter from BHP.
    \778\ See letter from Alliance.
    \779\ See id.
---------------------------------------------------------------------------

    Several commenters generally supported the proposed requirement 
that a qualified person conduct a discounted cash flow analysis to 
demonstrate economic viability.\780\ One commenter stated that 
discounted cash flows are the most widespread and industry accepted 
approach of evaluation and should be required.\781\ Another commenter 
stated that we should require a non-discounted cash flow analysis in 
addition to the industry standard discounted cash flow analysis.\782\
---------------------------------------------------------------------------

    \780\ See, e.g., letters from Amec, AngloGold, Eggleston, Midas, 
Northern Dynasty, Rio Tinto, and SRK 1.
    \781\ See letter from Midas; see also letter from Eggleston.
    \782\ See letter from SRK 1.
---------------------------------------------------------------------------

    In contrast, one commenter opposed the proposed discounted cash 
flow requirement because it ``is overly prescriptive compared to the 
CRIRSCO requirement to base reserves on studies that have determined a 
mine plan that is technically and economically achievable.'' \783\ 
Another commenter stated that annual cash flow forecasts should be 
omitted for operating mines ``as publication may affect a competitive 
advantage in labor or customer negotiations.'' \784\
---------------------------------------------------------------------------

    \783\ Letter from BHP.
    \784\ Letter from SME 1.
---------------------------------------------------------------------------

    Similar to comments received on the proposed pricing requirement 
for mineral resource estimates, many commenters objected to the 
proposed requirement that a qualified person use a 24-month trailing 
average price for the discounted cash flow analysis required for the 
determination of mineral reserves. Commenters maintained that the 
proposed historical pricing requirement would conflict with the 
industry practice of relying on forward-looking pricing forecasts and 
the

[[Page 66391]]

CRIRSCO guidance allowing the use of any reasonable and justifiable 
price.\785\
---------------------------------------------------------------------------

    \785\ See, e.g., letters from Amec, AngloGold, CBRR, CIM, 
Eggleston, JORC, NMA 1, Northern Dynasty, Randgold, Rio Tinto, SME 
1, and Vale.
---------------------------------------------------------------------------

iii. Final Rules
    We are revising the definition of mineral reserves (currently in 
Guide 7) by adopting the CRIRSCO framework of applying modifying 
factors to indicated or measured mineral resources in order to convert 
them to mineral reserves, as proposed. The adopted framework requires 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.\786\ The adopted 
framework includes a series of definitions that describe the 
relationship between the different classes of mineral resources and 
reserves and underscores the incremental nature of mineral resource and 
reserve determination.
---------------------------------------------------------------------------

    \786\ See Item 1302(e) of Regulation S-K [17 CFR 229.1302(e)].
---------------------------------------------------------------------------

    We are adopting the definition of mineral reserve largely as 
proposed.\787\ In a change from the proposed rules, the adopted 
definition of mineral reserve provides that a mineral reserve includes 
diluting materials and allowances for losses that may occur when the 
material is mined or extracted.\788\ We have been persuaded to remove 
the proposed net reserve concept from the definition of mineral reserve 
by commenters that maintained that such removal was necessary to make 
the definition consistent with the comparable CRIRSCO definition \789\ 
and to avoid internal inconsistencies.\790\ As commenters noted, the 
CRIRSCO standards and the final rules \791\ require the determination 
of mineral reserves to be based upon a qualified person's application 
of the modifying factors to indicated or measured mineral resources. 
The modifying factors include mining method, which is the source of 
dilution and mining losses, and mineral processing methods, which 
determine recovery factors. Because dilution and losses are realistic 
consequences of applying the modifying factors, we believe it is 
reasonable to include both diluting materials and allowances for losses 
in the definition of mineral reserve.\792\
---------------------------------------------------------------------------

    \787\ See 17 CFR 229.1300, which defines a mineral reserve as 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. The adopted 
definition further provides that a mineral reserve is the 
economically mineable part of a measured or indicated mineral 
resource.
    \788\ See id.
    \789\ See, e.g., CRIRSCO International Reporting Template, supra 
note 20, at cl. 30; JORC Code, supra note 175, at pt. 29; SAMREC 
Code, supra note 267, at pt. 35; and PERC Reporting Standard, supra 
note 302, at pt. 8.1.
    \790\ See supra note 768 and accompanying text.
    \791\ 17 CFR 229.1302(e)(2) [Item 1302(e)(2) of Regulation S-K] 
(providing in relevant part that the ``determination of probable or 
proven mineral reserves must be based on a qualified person's 
application of the modifying factors to indicated or measured 
mineral resources, which results in the qualified person's 
determination that part of the indicated or measured mineral 
resource is economically mineable'').
    \792\ In addition, removal of the net reserve concept from the 
definition of mineral reserve is consistent with our elimination of 
the requirement to disclose mineral reserves in-situ. See infra 
Section II.G.
---------------------------------------------------------------------------

    The final rules no longer define modifying factors to include 
factors used to establish the economic prospects of mineral resources. 
Instead, the adopted definition provides that modifying factors are the 
factors that a qualified person must apply to indicated and measured 
resources and then evaluate in order to establish the economic 
viability of mineral reserves.\793\ This change from the proposal is 
consistent with the change made to the initial assessment requirement, 
which no longer requires application of the modifying factors at the 
resource determination stage.\794\ Referencing the modifying factors 
solely in the context of mineral reserve determination will align the 
final rules with the CRIRSCO standards and avoid confusing registrants 
and investors about the level of analysis required at the resource 
determination stage.
---------------------------------------------------------------------------

    \793\ See the definition of ``modifying factors'' in 17 CFR 
229.1300.
    \794\ See supra Section II.E.4.
---------------------------------------------------------------------------

    Consistent with the proposed rules, the adopted definition of 
modifying factors provides that a qualified person must apply and 
evaluate modifying factors to convert measured and indicated mineral 
resources to proven and probable mineral reserves. Also largely as 
proposed, the adopted definition provides examples of the modifying 
factors, which include, but are not restricted to: Mining; processing; 
metallurgical; infrastructure; economic; marketing; legal; 
environmental compliance; plans, negotiations, or agreements with local 
individuals or groups; and governmental factors.\795\ Although some 
commenters suggested adding other specific factors to the list,\796\ we 
decline to do so because the adopted definition makes clear that the 
list of factors is not exclusive, and is consistent with the factors 
specified in the CRIRSCO definition of modifying factors.\797\
---------------------------------------------------------------------------

    \795\ See 17 CFR 229.1300. These factors are similar to the 
modifying factors under the CRIRSCO standards, which include 
``mining, processing, metallurgical, infrastructure, economic, 
marketing, legal, environmental, social, and governmental factors.'' 
CRIRSCO International Reporting Template, supra note 20, at cl. 12. 
Rather than refer to ``social'' or ``social-economic'' factors, as 
in the Proposing Release, the final rules refer more specifically to 
factors pertaining to local individuals or groups. Examples of such 
matters include consideration of: Limitations on a mining project 
that abuts a tribal burial ground; the potential need to relocate 
local individuals because of the scope of the mining project; and 
commitments to build a community center or local clinic. We believe 
this change will clarify the type of factors the qualified person 
may wish to consider in this area.
    \796\ See letters from Golder and SRK 1.
    \797\ See CRIRSCO International Reporting Template, supra note 
20, at cl. 12.
---------------------------------------------------------------------------

    The adopted definition of modifying factors further states, as 
proposed, that 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.\798\ 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, 
safety, environmental, reclamation, and permitting regulations) that 
are relevant to operating a mineral project using existing technology.
---------------------------------------------------------------------------

    \798\ See 17 CFR 229.1300.
---------------------------------------------------------------------------

    As proposed, the final rules provide that 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.\799\ The final rules define 
``probable mineral reserve'' to mean the economically mineable part of 
an indicated and, in some cases, a measured mineral resource.\800\ As 
the final rules explain, 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

[[Page 66392]]

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 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.\801\ The final rules further provide that 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.\802\
---------------------------------------------------------------------------

    \799\ See 17 CFR 229.1302(e)(2).
    \800\ See the definition of ``probable mineral reserve'' in 17 
CFR 229.1300.
    \801\ 17 CFR 229.1302(e)(2)(i) [Item 1302(e)(2)(i) of Regulation 
S-K].
    \802\ Id.
---------------------------------------------------------------------------

    The final rules define ``proven mineral reserve,'' as proposed, to 
mean the economically mineable part of a measured mineral 
resource.\803\ 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.\804\ Moreover, a proven mineral reserve can only 
result from conversion of a measured mineral resource.\805\ The adopted 
definitions of probable and proven mineral reserves are generally 
consistent with the comparable definitions under the CRIRSCO-based 
codes and, as such, were supported by several commenters.\806\
---------------------------------------------------------------------------

    \803\ See the definition of ``proven mineral reserve'' in 17 CFR 
229.1300.
    \804\ 17 CFR 229.1302(e)(2)(ii) [Item 1302(e)(2)(ii) of 
Regulation S-K].
    \805\ See the definition of ``proven mineral reserve'' in 17 CFR 
229.1300.
    \806\ See supra note 770 and accompanying text.
---------------------------------------------------------------------------

    As discussed below,\807\ 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 that 
discusses the qualified person's application of the modifying factors 
to indicated or measured mineral resources, and demonstrates that, at 
the time of reporting, extraction of the mineral reserve is 
economically viable under reasonable investment and market 
assumptions.\808\ As proposed, the final rules provide that the study 
must establish a life of mine plan that is technically achievable and 
economically viable, and which will be the basis of determining the 
mineral reserve.\809\ As commenters noted, establishing a life of mine 
plan is fundamental to determining the economic viability of a deposit 
and is consistent with global industry practice.\810\ Although some 
commenters expressed concern that requiring the disclosure of a life of 
mine plan could result in the disclosure of proprietary, commercially 
sensitive information,\811\ given the importance of the life of mine 
plan to determining the economic viability of a mining project, we 
believe that requiring disclosure of the life of mine plan is necessary 
to help an investor understand the basis of a registrant's mineral 
reserves estimate.
---------------------------------------------------------------------------

    \807\ See infra Section II.F.2.
    \808\ 17 CFR 229.1302(e)(1) and (3) [Item 1302(e)(1) and (3) of 
Regulation S-K].
    \809\ See Item 1302(e)(3) of Regulation S-K.
    \810\ See, e.g., letters from CBRR and Eggleston; see also supra 
note 774. In this regard, we note that the SME Guide expressly 
requires a life of mine plan in its technical study. See SME Guide, 
supra note 177, Table 1, at 54 (``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, e.g., JORC 
Code, supra note 175, at pt. 29 (stating 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'').
    \811\ See supra notes 777-778 and accompanying text.
---------------------------------------------------------------------------

    Consistent with numerous comments received,\812\ the final rules 
provide, as proposed, that when used in reference to a mineral reserve, 
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.\813\ Although one commenter disagreed,\814\ we believe the 
requirement to conduct a discounted cash flow or other similar analysis 
is consistent with industry practice \815\ and 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.\816\
---------------------------------------------------------------------------

    \812\ See supra note 780 and accompanying text.
    \813\ See the definition of ``economically viable'' in 17 CFR 
229.1300. Whether the investment and market assumptions are 
``reasonable'' will necessarily be a facts and circumstances 
determination based upon the relevant economic and market factors.
    \814\ See letter from BHP.
    \815\ See letters from Eggleston and Midas.
    \816\ See, e.g., SME Guide, supra note 177, at pt. 41 (``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 JORC Code, 
supra note 175, at pt. 29 (``The term `economically mineable' 
implies that extraction of the Ore Reserves has been demonstrated to 
be viable under reasonable financial assumptions'').
---------------------------------------------------------------------------

    The final rules further provide, as proposed, that the term 
``investment and market assumptions'' includes all assumptions made 
about the prices, exchange rates, interest and discount rates, sales 
volumes, and costs that are necessary and are used to determine the 
economic viability of the reserves.\817\ In a change from the proposed 
rules, however, and in response to comments received, the final rules 
do not require the qualified person to use a price that is no higher 
than the 24-month trailing average price. Instead, the qualified person 
must use a price for each commodity that provides a reasonable basis 
for establishing that the project is economically viable.\818\ The 
qualified person will be required to explain, with particularity, his 
or her reasons for selecting the price and the underlying material 
assumptions regarding the selection.\819\ We are adopting this change 
for the same reasons that we changed the pricing requirement for the 
cut-off estimation required for the determination of mineral 
resources.\820\
---------------------------------------------------------------------------

    \817\ See the definition of ``investment and market 
assumptions'' in 17 CFR 229.1300.
    \818\ 17 CFR 229.1302(e)(4) [Item 1302(e)(4) of Regulation S-K].
    \819\ See id.
    \820\ See supra Section II.E.4.iii.a.
---------------------------------------------------------------------------

    We believe that the adopted framework for mineral reserve 
determination and disclosure is preferable to 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, under the adopted framework, 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 relevant modifying factors 
have been evaluated, can be shown to be part of a viable mineral 
project.\821\ The adopted

[[Page 66393]]

framework requires the qualified person to disclose the specific 
mining, processing, metallurgical, environmental, economic, legal, and 
other applicable factors that he or she has evaluated in detail, and 
which has led the qualified person to conclude that extraction of the 
deposit is economically viable. We therefore believe that the adopted 
framework will promote clearer, more detailed, and more accurate 
disclosure about the economic viability of a registrant's mineral 
deposits, which should enhance an investor's understanding of the 
registrant's mining operations.
---------------------------------------------------------------------------

    \821\ In this regard, a qualified person will 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 sufficient 
to reclassify those resources as indicated or measured mineral 
resources. Similarly, a qualified person will 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.
---------------------------------------------------------------------------

    When considered as a whole, and in light of the significant changes 
made to the proposed rules discussed above, we believe that the adopted 
mineral reserve disclosure framework is substantially similar to the 
CRIRSCO framework. As such, its adoption should enhance consistency in 
mining disclosure across jurisdictions and thereby facilitate 
comparability of information for investors. It also should limit 
reporting costs for the numerous mining registrants that are dual-
listed and currently subject to different Commission and CRIRSCO-based 
disclosure requirements.
2. The Type of Study Required To Support a Reserve Determination
i. Rule Proposal
    Historically, the staff has requested a final feasibility study to 
support the disclosure of mineral reserves in a Commission filing. In 
contrast, the CRIRSCO-based codes have permitted either a pre-
feasibility study or a feasibility study in support of a determination 
of mineral reserves. To help align the Commission's mining property 
disclosure rules with the CRIRSCO standards, we proposed to permit 
either a preliminary feasibility study or a feasibility study to 
support the determination and disclosure of mineral reserves.\822\ We 
proposed to define a ``preliminary 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.\823\
---------------------------------------------------------------------------

    \822\ See Proposing Release, supra note 5, at Section II.F.2.
    \823\ See id.
---------------------------------------------------------------------------

    As proposed, 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.\824\ The 
study's financial analysis must have the level of detail necessary to 
demonstrate, at the time of reporting, that extraction is economically 
viable. In addition, as noted in the proposed definition of a pre-
feasibility study, 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.\825\
---------------------------------------------------------------------------

    \824\ See id.
    \825\ See id.
---------------------------------------------------------------------------

    We proposed to define a ``feasibility study'' \826\ 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.\827\ According to the proposed definition, 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. Thus, 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.\828\
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    \826\ As proposed, terms such as ``full, final, comprehensive, 
bankable, or definitive'' feasibility study are equivalent to a 
feasibility study. See id.
    \827\ See id.
    \828\ See id.
---------------------------------------------------------------------------

    Although the use of a pre-feasibility study could increase the 
uncertainty regarding a registrant's disclosure about mineral reserves, 
compared to a feasibility study, we proposed to allow either study to 
support the determination and disclosure of mineral reserves based on 
our belief that any such uncertainty would be reduced by the 
requirements included in the proposed definitions and corresponding 
proposed instructions. One such proposed requirement was that 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.\829\
---------------------------------------------------------------------------

    \829\ See id.
---------------------------------------------------------------------------

    Another proposed requirement was that 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 stated 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.\830\ 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.\831\ We also proposed to prohibit a qualified person from using 
inferred mineral resources in the pre-feasibility study's financial 
analysis.\832\
---------------------------------------------------------------------------

    \830\ See id.
    \831\ We proposed to define a ``preliminary market study'' to 
mean 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. See Proposing Release, supra note 5, at note 
264 and accompanying text.
    \832\ See Proposing Release, supra note 5, at Section II.F.2.
---------------------------------------------------------------------------

    In another instruction, we proposed to require the use of a final 
feasibility study in high risk situations.\833\ For example, as 
proposed, 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,

[[Page 66394]]

remoteness, and unique mineralization and recovery methods.\834\
---------------------------------------------------------------------------

    \833\ See id.
    \834\ See id.
---------------------------------------------------------------------------

    We proposed other instructions 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 explained 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.\835\ According to another proposed 
instruction, 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.\836\
---------------------------------------------------------------------------

    \835\ See id.
    \836\ See id. According to this proposed 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%.
---------------------------------------------------------------------------

    An additional proposed instruction addressed whether and when a 
registrant would be required to take additional steps to support its 
determination of mineral reserves. As that instruction explained, 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. However, 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.\837\ 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.
---------------------------------------------------------------------------

    \837\ See id.
---------------------------------------------------------------------------

    Another proposed instruction addressed 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. As proposed, a preliminary market study (for a pre-
feasibility study) or final market study (for a feasibility 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.
    Finally, pursuant to another proposed instruction, a pre-
feasibility study must identify sources of uncertainty that require 
further refinement in a final feasibility study.\838\ We proposed this 
requirement to elicit appropriate disclosure about the areas of risk 
present in the pre-feasibility study, which we believed would help 
investors in assessing the reliability of the study.
---------------------------------------------------------------------------

    \838\ See id.
---------------------------------------------------------------------------

    We proposed several instructions regarding the use of a feasibility 
study to support the determination and disclosure of mineral reserves. 
Pursuant to one instruction, a feasibility study must apply and 
describe all relevant modifying factors in a more detailed form and 
with more certainty than a pre-feasibility study.\839\
---------------------------------------------------------------------------

    \839\ See id.
---------------------------------------------------------------------------

    According to another instruction, a feasibility study must include 
an economic analysis that describes taxes, estimates revenues, and 
assesses economic viability by a detailed discounted cash flow 
analysis.\840\ In addition, in certain circumstances, the feasibility 
study must include an estimate of revenues based on at least a final 
market study \841\ or possible letters of intent to purchase.
---------------------------------------------------------------------------

    \840\ See id.
    \841\ We proposed to define a ``final market study'' to mean a 
comprehensive study to determine and support the existence of a 
readily accessible market for the mineral. Under the proposed rules, 
the study 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 also must provide 
justification for all assumptions, which must include all material 
contracts required to develop and sell the reserves. See Proposing 
Release, supra note 5, at note 286 and accompanying text.
---------------------------------------------------------------------------

    Pursuant to a third proposed instruction, operating and capital 
cost estimates in a feasibility study, at a minimum, must have an 
accuracy level of approximately 15% and a contingency range 
not exceeding 10%.\842\ As proposed, the qualified person must state 
the accuracy level and contingency range in the feasibility study.
---------------------------------------------------------------------------

    \842\ See id.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Most commenters that addressed the issue supported the Commission's 
proposal to permit either a pre-feasibility or feasibility study to 
provide the basis for determining and reporting mineral reserves.\843\ 
While commenters generally agreed with the proposed definitions of 
``pre-feasibility study'' and ``feasibility study,'' many commenters 
opposed the Commission's proposal to require the use of a feasibility 
study in high risk situations.\844\ Most of those commenters believed 
that the decision regarding whether to use a pre-feasibility or 
feasibility study should be left to the discretion and professional 
judgment of the qualified person.\845\ One commenter explained that, 
for a pre-feasibility study, under CRIRSCO guidance, the qualified 
person is required to assess and disclose relevant risks, including 
high risks. If the qualified person has therefore met all of the 
requirements for a pre-feasibility study, he or she should not need to 
justify the use of a pre-feasibility study to support mineral reserve 
estimates.\846\ A second commenter stated that ``with a high risk 
project, it is even more important to complete a pre-feasibility study 
prior to a feasibility study to help identify and mitigate the risks 
before proceeding to a feasibility study.'' \847\ After stating that 
qualified persons should be allowed to use their discretion as to 
whether the risk associated with a pre-feasibility study is too high to 
support a reserve, a third commenter noted that if the first pre-
feasibility study is inconclusive, it is common practice to not 
disclose mineral reserves until additional studies are completed and 
the development case is clear.\848\
---------------------------------------------------------------------------

    \843\ See letters from Amec, AngloGold, BHP, CBRR, CIM, 
Eggleston, Gold Resource, Golder, Midas, Northern Dynasty, Randgold, 
Rio Tinto, SAMCODES 2, SME 1, SRK 1, and Vale.
    \844\ See letters from Amec, AngloGold, Eggleston, Energy Fuels, 
Golder, Midas, Northern Dynasty, Rio Tinto, and SRK 1.
    \845\ See, e.g., letters from Amec, AngloGold, Eggleston, Energy 
Fuels, Rio Tinto, and SRK 1.
    \846\ See letter from Amec.
    \847\ Letter from SRK 1.
    \848\ See letter from Rio Tinto.
---------------------------------------------------------------------------

    In contrast, another commenter expressed its support for requiring 
a feasibility study for high risk situations where a proposed mining 
project has unique or particularly challenging conditions, such as when 
it is in close proximity to environmentally protected resources.\849\ 
One other commenter stated that, for ``greenfield projects (including 
new process routes for production expansion of existing operations)'' 
and other high risk situations, a feasibility study should

[[Page 66395]]

support the definition of mineral reserves.\850\
---------------------------------------------------------------------------

    \849\ See letter from Columbia. The commenter also recommended 
requiring a feasibility study to address: Design criteria for 
tailing dams, specifically the risk of failure; contingency and 
emergency plans for tailings dam failures; drought management plans; 
and remediation plans.
    \850\ See letter from CBRR.
---------------------------------------------------------------------------

    One commenter opposed requiring either a pre-feasibility study or 
feasibility study to support the determination and disclosure of 
reserves. According to that commenter, ``[f]or coal companies operating 
in well-defined coal fields, these types of formal studies are not 
typically conducted, as on-going operations provide all the feasibility 
information that is required.'' \851\ That commenter estimated that 
requiring either type of study would cost it several million dollars 
without providing a benefit. Moreover, according to that commenter, due 
to the competitive bidding nature of the coal industry, public 
disclosure of information contained in those studies would likely cause 
it competitive harm.\852\
---------------------------------------------------------------------------

    \851\ Letter from Alliance.
    \852\ See id.
---------------------------------------------------------------------------

    One commenter stated that the proposed accuracy and contingency 
levels for a pre-feasibility study are too rigid and do not reflect the 
diversity of mining project locations and mine project types.\853\ That 
commenter also was concerned with the level of detail required for 
certain items of the pre-feasibility study, such as environmental 
compliance and permitting requirements.
---------------------------------------------------------------------------

    \853\ See letter from Amec.
---------------------------------------------------------------------------

    Some commenters expressly supported the Commission's proposal to 
include definitions of preliminary and final market studies as part of 
the instructions for pre-feasibility and feasibility studies.\854\ One 
commenter stated that market studies should be required for non-freely 
traded commodities where there are barriers to market entry, but the 
Commission should not require disclosure of certain portions of the 
market studies if such disclosure would break confidentiality 
agreements or divulge planned market entry strategies that are 
proprietary to the company.\855\ Other commenters, however, opposed the 
proposed definitions on the grounds that they are vague,\856\ are not 
standard practice,\857\ or include strategic market decisions that can 
affect the market competition.\858\
---------------------------------------------------------------------------

    \854\ See letters from Amec, AngloGold, Eggleston, Golder, Rio 
Tinto, and SRK 1.
    \855\ See letter from Amec.
    \856\ See letter from Northern Dynasty.
    \857\ See letter from SAMCODES 2.
    \858\ See letter from CBRR.
---------------------------------------------------------------------------

    Some commenters objected to our inclusion of environmental 
compliance and permitting requirements or interests of agencies, non-
governmental organizations, communities and other stakeholders as 
required items to be covered under a pre-feasibility or feasibility 
study.\859\ These commenters stated that such inclusion would introduce 
an ``unworkable and inappropriate disclosure mandate'' and impose high 
direct and indirect costs. Other commenters advocated expanding the 
required disclosure of environmental and sustainability factors.\860\
---------------------------------------------------------------------------

    \859\ See, e.g., letters from NMA 2 and SME 1.
    \860\ See, e.g., letters from Columbia and SASB.
---------------------------------------------------------------------------

iii. Final Rules
    We are adopting the proposed requirement that a registrant's 
disclosure of mineral reserves must be based upon a qualified person's 
pre-feasibility study or feasibility study, which supports a 
determination of mineral reserves.\861\ 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.\862\ Moreover, 
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.\863\
---------------------------------------------------------------------------

    \861\ Item 1302(e)(1) of Regulation S-K.
    \862\ See id.
    \863\ See id., referencing 17 CFR 229.601(b)(96).
---------------------------------------------------------------------------

    Most commenters addressing the issue supported requiring either a 
pre-feasibility study or feasibility study to support a determination 
of mineral reserves.\864\ Although one commenter opposed requiring 
either type of study on the grounds that, because neither study is 
commonly undertaken in the coal industry, the proposed requirement 
would be costly and could result in competitive harm,\865\ we believe 
that, as evidenced by the widespread support from other commenters, the 
pre-feasibility or feasibility study requirement is consistent with 
current industry practice under the CRIRSCO standards. We also note 
that, as previously explained, the final rules do not require a mining 
company, such as a coal company, to hire a qualified person before it 
can develop and extract the mined commodity. However, once the company 
engages in public capital-raising, and seeks to classify and report its 
deposits as mineral reserves, then, consistent with the CRIRSCO 
standards, for the protection of investors, there must be a pre-
feasibility or feasibility study to support its disclosure of reserves 
in Commission filings.
---------------------------------------------------------------------------

    \864\ See supra note 843 and accompanying text.
    \865\ See letter from Alliance.
---------------------------------------------------------------------------

    We also are adopting the proposed definitions of preliminary 
feasibility study \866\ and feasibility study.\867\ Because these 
definitions are substantially similar to the comparable definitions 
under the CRIRSCO-based codes,\868\ many commenters supported their 
adoption.\869\ These definitions establish that, while both a pre-
feasibility and feasibility study are comprehensive technical and 
economic studies, which must include a financial analysis at a level of 
detail necessary to demonstrate, at the time of reporting, that 
extraction is economically viable, a pre-feasibility study is less 
comprehensive and results in a lower confidence level than a 
feasibility study. This is because of the key differences between a 
pre-feasibility study and a (final) feasibility study, which include 
that:

    \866\ See the definition of ``preliminary feasibility study'' in 
17 CFR 229.1300.
    \867\ See the definition of ``feasibility study'' in 17 CFR 
229.1300.
    \868\ See, e.g., CRIRSCO International Reporting Template, supra 
note 20, at cl. 38-39; JORC Code, supra note 175, at pts. 39-40; 
SAMREC Code, supra note 267, at pts. 46-47; and PERC Reporting 
Standard, supra note 302, at pts. 5.5-5.9.
    \869\ See, e.g., letters from AngloGold, BHP, CBRR, Rio Tinto, 
and SRK 1.
---------------------------------------------------------------------------

     A pre-feasibility study discusses a ``range of 
options'' for the technical and economic viability of a mineral 
project whereas a 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 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 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 benefits 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 also could significantly reduce a mining 
registrant's costs in connection

[[Page 66396]]

with the determination of mineral reserves.
    We also continue to believe that the adopted requirements in the 
definition of, and provisions regarding, a pre-feasibility study will 
limit any additional uncertainty caused by its use. For example, like a 
feasibility study, 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.\870\ Consistent with other adopted provisions that contain a 
pricing requirement, an adopted provision states that, for either type 
of study, a qualified person must use a price for each commodity that 
provides a reasonable basis for establishing that the project is 
economically viable.\871\ The qualified person must disclose the price 
used and explain, with particularity, his or her reasons for using the 
selected price, including the material assumptions underlying the 
selection. This explanation must include disclosure of the time frame 
used to estimate the price and costs and the reasons justifying the 
selection of that time frame.\872\ As with other adopted pricing 
provisions, for the pre-feasibility or feasibility study, the qualified 
person may use a price set by contractual arrangement, provided that 
such price is reasonable, and the qualified person discloses that he or 
she is using a contractual price when disclosing the price used.\873\
---------------------------------------------------------------------------

    \870\ 17 CFR 229.1302(e)(5) [Item 1302(e)(5) of Regulation S-K].
    \871\ 17 CFR 229.1302(e)(4) [Item 1302(e)(4) of Regulation S-K].
    \872\ See id.
    \873\ See id. Like the other adopted pricing provisions, this 
provision further states that the selected price and all material 
assumptions underlying it must be current as of the end of the 
registrant's most recently completed fiscal year. When discussing 
the analysis in the technical report summary, the qualified person 
will be required to disclose the assumptions made about prices, 
exchange rates, discount rate, sales volumes and costs necessary to 
determine the economic viability of the reserves.
---------------------------------------------------------------------------

    In addition, the economic analysis for a pre-feasibility study must 
describe in detail applicable taxes and provide an estimate of 
revenues.\874\ We believe that this 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.\875\
---------------------------------------------------------------------------

    \874\ See Item 1302(e)(5) of Regulation S-K.
    \875\ See, e.g., CIM Definition Standards, supra note 351, at 3 
(stating that the standard ``requires the completion of a 
Preliminary Feasibility Study as the minimum prerequisite for the 
conversion of Mineral Resources to Mineral Reserves''); see also CIM 
Estimation of Mineral Resources and Mineral Reserves Best Practice 
Guidelines 45 (2003) (in discussing work to determine the economic 
merits of a deposit, stating that ``[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'').
---------------------------------------------------------------------------

    Similar to a proposed instruction, the final rules require a 
qualified person to exclude inferred mineral resources from the pre-
feasibility study's demonstration of economic viability in support of a 
disclosure of a mineral reserve.\876\ Under the adopted framework, 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.\877\ This 
treatment of inferred resources is consistent with guidance under the 
CRIRSCO standards, which explains that, because confidence in the 
inferred resource estimate is usually not sufficient to allow the 
results of the application of technical and economic parameters to be 
used for detailed mine planning, there is no direct link from an 
inferred resource to any category of mineral reserves.\878\
---------------------------------------------------------------------------

    \876\ 17 CFR 229.1302(e)(6) [Item 1302(e)(6) of Regulation S-K].
    \877\ 17 CFR 229.1302(e)(15) [Item 1302(e)(15) of Regulation S-
K].
    \878\ See CRIRSCO International Reporting Template, supra note 
20, at cl. 22; see also JORC Code, supra note 175, at pt. 21 
(``Confidence in the estimate of Inferred Mineral Resources is not 
sufficient to allow the results of the application of technical and 
economic parameters to be used for detailed planning in Pre-
Feasibility (Clause 39) or Feasibility (Clause 40) Studies'').
---------------------------------------------------------------------------

    Similar to proposed instructions, we are adopting other 
requirements that relate to the conversion of indicated or measured 
mineral resources into mineral reserves.\879\ These requirements are 
consistent with the mineral resource classification scheme and mineral 
reserve disclosure framework under the CRIRSCO standards.\880\
---------------------------------------------------------------------------

    \879\ One provision states that 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. See 17 CFR 229.1302(e)(14) [Item 1302(e)(14) of Regulation 
S-K]. Another provision states that 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. See 17 CFR 229.1302(e)(13) [Item 1302(e)(13) of Regulation 
S-K].
    \880\ See, e.g., CRIRSCO International Reporting Template, supra 
note 20, at cl. 33; JORC Code, supra note 175, at pt. 32; SAMREC 
Code, supra note 267, at pt. 38; and PERC Reporting Standard, supra 
note 302, at pt. 8.15.
---------------------------------------------------------------------------

    Also similar to proposed instructions, we are adopting other 
provisions pertaining to the use of a pre-feasibility study. One such 
provision explains that factors to be considered in a pre-feasibility 
study are typically the same as those required for a feasibility study, 
but considered at a lower level of detail or at an earlier stage of 
development.\881\ The list of factors is not exclusive. For example, a 
pre-feasibility study must define, analyze, or otherwise address in 
detail, to the extent material:
---------------------------------------------------------------------------

    \881\ 17 CFR 229.1302(e)(7) [Item 1302(e)(7) 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 \882\ that have been conducted, the 
process flow sheet, equipment sizes, and general arrangement that 
have been completed, and the plant throughput;
---------------------------------------------------------------------------

    \882\ 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) (defining 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) (defining 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, 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, regarding the modifying factors sufficient to demonstrate 
that extraction is economically viable.\883\
---------------------------------------------------------------------------

    \883\ See Item 1302(e)(7) of Regulation S-K; see also Table 1 to 
paragraph (d) of Item 1302 of Regulation S-K.

    Some commenters objected to the inclusion of environmental 
compliance and permitting requirements or the interests of agencies, 
non-governmental organizations, communities, and other stakeholders as 
required items to be disclosed in a pre-feasibility (or feasibility) 
study.\884\ We believe that the inclusion of compliance, regulatory, 
and legal risks that are material to the

[[Page 66397]]

conclusions of the study is necessary because factors such as 
environmental regulatory compliance, the ability to obtain necessary 
permits, and other legal challenges can directly impact the economic 
viability of a mining project. We are adopting requirements for pre-
feasibility studies largely as proposed, but with modifications in 
order to simplify the description of the factors to be considered and 
to clarify that the pre-feasibility (or feasibility) factors must only 
be analyzed and discussed if they are material to the findings of the 
study.
---------------------------------------------------------------------------

    \884\ See supra note 859 and accompanying text.
---------------------------------------------------------------------------

    Another provision requires that operating and capital cost 
estimates in a pre-feasibility study, at a minimum, have an accuracy 
level of approximately 25% and a contingency range not 
exceeding 15%. The qualified person must state the accuracy level and 
contingency range in the pre-feasibility study.\885\
---------------------------------------------------------------------------

    \885\ 17 CFR 229.1302(e)(9) [Item 1302(e)(9) of Regulation S-K]; 
see also Table 1 to paragraph (d) of Item 1302 of Regulation S-K.
---------------------------------------------------------------------------

    A further provision requires the pre-feasibility study to identify 
sources of uncertainty that require further refinement in a final 
feasibility study, as proposed.\886\ This provision is consistent with 
the qualified person's duty to assess risk in a pre-feasibility study. 
As noted by one commenter, assessment of risk is intrinsic to 
completion of a pre-feasibility study, and material risks must be 
appropriately evaluated by the qualified person and disclosed by the 
registrant to protect investors.\887\
---------------------------------------------------------------------------

    \886\ 17 CFR 229.1302(e)(8) [Item 1302(e)(8) of Regulation S-K].
    \887\ See letter from Rio Tinto.
---------------------------------------------------------------------------

    As noted by commenters,\888\ these latter provisions (addressing 
the level at which the modifying factors are assessed, the appropriate 
accuracy level and contingency range for operating and capital costs, 
and sources of uncertainty) are generally consistent with current 
industry practice and comparable to requirements for the use of a pre-
feasibility study in the CRIRSCO-based jurisdictions.\889\ As such, the 
adopted provisions will cause a registrant's use of a pre-feasibility 
study in Commission filings to meet the industry established minimum 
level of detail and rigor sufficient to determine mineral reserves.
---------------------------------------------------------------------------

    \888\ See, e.g., letters from AngloGold, Eggleston, SAMCODES 2, 
and SRK 1.
    \889\ See, e.g., SME Guide, supra note 177, Tables 1-2.
---------------------------------------------------------------------------

    Similar to a proposed instruction, we are adopting a provision 
explaining that 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.\890\ This provision is similar to guidance 
provided under the CRIRSCO standards.\891\
---------------------------------------------------------------------------

    \890\ 17 CFR 229.1302(e)(3)(i) [Item 1302(e)(3)(i) of Regulation 
S-K].
    \891\ See, e.g., CRIRSCO International Reporting Template, supra 
note 20, at cl. 30; SME Guide, supra note 267, at pt. 41; JORC Code, 
supra note 175, at pt. 29; and PERC Reporting Standard, supra note 
302, at pt. 8.3.
---------------------------------------------------------------------------

    The provision further states that, in certain circumstances, the 
determination of mineral reserves may require the completion of at 
least a preliminary market study, in the context of a pre-feasibility 
study, or a final market study, 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.\892\ Although one commenter 
opposed the proposed requirement to obtain a preliminary or final 
market study on the grounds that it could compel the disclosure in the 
technical report summary of commercially sensitive information,\893\ 
the final rules do not require the disclosure of all of the details of 
a market study. As with exploration results, a registrant only has a 
duty to disclose the details that are material to investors.
---------------------------------------------------------------------------

    \892\ 17 CFR 229.1302(e)(3)(ii) [Item 1302(e)(3)(ii) of 
Regulation S-K].
    \893\ See letter from CBRR.
---------------------------------------------------------------------------

    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.\894\ Several commenters generally supported 
this requirement.\895\ We believe that this provision will 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.
---------------------------------------------------------------------------

    \894\ See Item 1302(e)(3)(ii) of Regulation S-K.
    \895\ See letters from Amec, AngloGold, Eggleston, Golder, Rio 
Tinto, and SRK 1.
---------------------------------------------------------------------------

    In a change from the proposed rules, we are not requiring the 
qualified person to justify the use of a pre-feasibility study in lieu 
of a feasibility study. We also are not requiring the use of a 
feasibility study in high risk situations. We are persuaded by 
commenters' view that, consistent with the CRIRSCO standards, it should 
be left to the discretion and professional judgment of the qualified 
person to determine the appropriate level of study required to support 
the determination of mineral reserves under the circumstances.\896\ We 
believe that the adopted disclosure requirements for a pre-feasibility 
study, taken as a whole, will help to mitigate any increased risk 
resulting from permitting the use of a pre-feasibility study to support 
the determination and disclosure of mineral reserves. If the qualified 
person satisfies those requirements, including conducting an assessment 
of material risks affecting the economic viability of the deposit, we 
do not believe additional disclosure concerning why he or she chose to 
conduct a pre-feasibility study is necessary. Moreover, in high risk 
situations, the qualified person will have to perform additional 
evaluative work to meet the level of certainty required for a pre-
feasibility study. If, in the judgment of the qualified person, that 
level of certainty has been met, we believe the pre-feasibility study 
should be permitted to support the determination of mineral reserves.
---------------------------------------------------------------------------

    \896\ See supra note 845 and accompanying text.
---------------------------------------------------------------------------

    Similar to a proposed instruction, we are adopting a provision 
requiring 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.\897\ The list of 
factors is not exclusive. Pursuant to that provision, a feasibility 
study must define, analyze, or otherwise address in detail, to the 
extent material:
---------------------------------------------------------------------------

    \897\ 17 CFR 229.1302(e)(10) [Item 1302(e)(10) of Regulation S-
K]; see also Table 1 to paragraph (d) of Item 1302 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;

[[Page 66398]]

     Completed detailed bench lab tests and a pilot plant 
test,\898\ if required, based on risk, in addition to final 
requirements for process flow sheet, equipment sizes, general 
arrangement, and the final plant throughput;
---------------------------------------------------------------------------

    \898\ See supra note 882 and accompanying text.
---------------------------------------------------------------------------

     The final identification and detailed analysis of 
environmental compliance and permitting requirements, 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.\899\
---------------------------------------------------------------------------

    \899\ See Item 1302(e)(10) of Regulation S-K; see also Table 1 
to paragraph (d) of Item 1302(d) of Regulation S-K.

    Similar to another proposed instruction, we are adopting a 
provision requiring a feasibility study to include an economic analysis 
that describes taxes in detail, estimates revenues, and assesses 
economic viability by a detailed discounted cash flow analysis.\900\ 
The qualified person must use a price for each commodity in the 
economic analysis that meets the requirements of the earlier described 
pricing provision.\901\ Thus, as long as the price provides a 
reasonable basis for establishing that the project is economically 
viable, and the qualified person explains, with particularity, his or 
her reasons for using the selected price, including the material 
assumptions regarding the selection, the price used may be either a 
historical price or one based on forward-looking pricing forecasts.
---------------------------------------------------------------------------

    \900\ 17 CFR 229.1302(e)(11) [Item 1302(e)(11) of Regulation S-
K].
    \901\ See Item 1302(e)(4) of Regulation S-K.
---------------------------------------------------------------------------

    Finally, similar to a proposed instruction, we are adopting a 
provision requiring that operating and capital cost estimates in a 
feasibility study, at a minimum, have an accuracy level of 
approximately 15 percent and a contingency range not 
exceeding 10 percent. The qualified person must state the accuracy 
level and contingency range in the feasibility study.\902\
---------------------------------------------------------------------------

    \902\ 17 CFR 229.1302(e)(12) [Item 1302(e)(12) of Regulation S-
K].
---------------------------------------------------------------------------

    These 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 Commission filings, which should 
benefit investors as well as registrants. As commenters noted,\903\ the 
requirements concerning the level of detail or stage of development for 
the evaluation of modifying factors, and those regarding the accuracy 
level and contingency range for operating and capital cost estimates, 
are generally comparable to those required for the use of a feasibility 
study to support mineral reserve estimates under the CRIRSCO-based 
codes.\904\ We believe aligning the Commission's disclosure 
requirements with international standards will benefit investors and 
registrants by promoting uniformity in mining disclosure standards. In 
addition, these requirements are generally consistent with current 
practices regarding the use of a feasibility study to support a 
determination and disclosure of mineral reserves.
---------------------------------------------------------------------------

    \903\ See, e.g., letters from Eggleston, SAMCODES 2, and SRK 1.
    \904\ See, e.g., SME Guide, supra note 177, Tables 1-2.
---------------------------------------------------------------------------

G. Specific Disclosure Requirements

1. Requirements for Summary Disclosure
i. Rule Proposal
    We proposed that registrants with material mining operations that 
own two or more mining properties must provide summary disclosure of 
their mining operations.\905\ We proposed the summary disclosure 
requirement based on our belief that investors would benefit from an 
overview of a registrant's mining operations in addition to a property 
by property description. We also believed that this proposed 
requirement would help foster more efficient and more effective 
disclosure, as a registrant would be able to provide summary disclosure 
about all of its properties where some or all are not individually 
material.\906\
---------------------------------------------------------------------------

    \905\ See Proposing Release, supra note 5, at Section II.G.1. 
The proposed provision specified that the registrant would be 
required to provide 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 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; and for which it has, or it is probable that it will have, 
an associated royalty or similar right.
    \906\ See id.
---------------------------------------------------------------------------

    As part of its summary disclosure, we proposed to require a 
registrant to include a map or maps showing the locations of all mining 
properties.\907\ The proposed map requirement would provide investors a 
point of reference to assess the geographic and socio-political risks 
associated with the registrant's mining operations.\908\
---------------------------------------------------------------------------

    \907\ See id.
    \908\ See id.
---------------------------------------------------------------------------

    We also proposed that the summary disclosure must include a 
presentation, in tabular form (Table 2 of the proposed rules), 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).\909\ For the purpose of determining 
the top 20 properties by asset value, we proposed to permit a 
registrant with interrelated mining operations to treat those 
operations as one mining property.\910\ As proposed, for each of the 
properties required to be included in the summary disclosure, a 
registrant would be required to identify the property, report the total 
production from the property for the three most recently completed 
fiscal years, and disclose the following information:
---------------------------------------------------------------------------

    \909\ See id.
    \910\ See id.

     The location of the property;
     The type and amount of ownership interest;
     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.\911\
---------------------------------------------------------------------------

    \911\ See id.

    We proposed this requirement to provide investors with an 
appropriately comprehensive and thorough understanding of a 
registrant's mining operations.
    We further proposed to require a registrant to provide a summary, 
in tabular form (Table 3 of the proposed rules), 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 percent or more of the registrant's mineral 
reserves or 10 percent or more of the registrant's combined measured 
and indicated mineral resources.\912\ The registrant would be required 
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 
resources.\913\ 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.
---------------------------------------------------------------------------

    \912\ See id.
    \913\ See id.
---------------------------------------------------------------------------

    The Commission also proposed several instructions to the proposed 
summary disclosure requirement that:

     Defined the term ``by geographic area'' to mean by 
individual country, regions of a country, state, groups of states, 
mining

[[Page 66399]]

district, or other political units, to the extent material to and 
necessary for an investor's understanding of a registrant's mining 
operations;
     Explained that all disclosure of mineral resources must 
be exclusive of mineral reserves;
     Required that 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;
     Required 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; and
     Required that the mineral resource and reserve 
estimates called for in Table 3 of the proposed rules must be in 
terms of saleable product.\914\
---------------------------------------------------------------------------

    \914\ See id.

    As proposed, for a registrant with mining operations that are, in 
the aggregate, material but for which no individual property is 
material, this summary disclosure would be the only mining disclosure 
required in the registrant's filings. For a registrant with individual 
properties that are material, we proposed additional, more detailed, 
disclosure about such properties.\915\ We proposed to exclude a 
registrant with only one mining property from the summary disclosure 
requirement because we did not see any benefit to requiring summary 
disclosure, in addition to individual disclosure, for a single material 
property.\916\
---------------------------------------------------------------------------

    \915\ See infra Section II.G.2.
    \916\ See Proposing Release, supra note 5, at Section II.G.1.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Several commenters offered conditional support for the Commission's 
summary disclosure proposal.\917\ One commenter supported the proposed 
summary disclosure requirement but recommended that the requirement 
apply to 80% of the registrant's mining properties based on asset value 
rather than the top 20 properties out of concern that the proposed 
requirement would be costly for registrants with numerous immaterial 
properties and only a few material properties.\918\
---------------------------------------------------------------------------

    \917\ See, e.g., letters from AngloGold, CBRR, Columbia, Davis 
Polk, Midas, Rio Tinto, and SRK 1.
    \918\ See id.
---------------------------------------------------------------------------

    A number of commenters supported the proposed summary disclosure 
requirements but stated that the requirement to disclose information 
about the top 20 properties by asset value should include only material 
properties.\919\ One of those commenters also suggested allowing 
certain information, such as the description of mineral rights and key 
permit conditions, to be disclosed in abbreviated form.\920\ That 
commenter also supported a version of the summary disclosure of mineral 
resources and reserves in tabular form because summary disclosure of 
mineral resource and mineral reserves in table form is industry 
practice and widely used.\921\ Another commenter recommended merging 
the two tables for summary disclosure into one, excluding geographic 
disclosure, and eliminating the map requirement for summary 
disclosure.\922\
---------------------------------------------------------------------------

    \919\ See letters from Alliance, CBRR, FCX, Midas, and SRK 1.
    \920\ See letter from Midas.
    \921\ See id.
    \922\ See letter from SRK 1.
---------------------------------------------------------------------------

    Many other commenters opposed the proposed summary disclosure 
requirements on the grounds that they were overly prescriptive, were 
inconsistent with CRIRSCO requirements, and/or would be burdensome in 
particular for U.S. registrants that are dual-listed in one of the 
CRIRSCO-based jurisdictions.\923\ Commenters that indicated the 
proposed tables were too prescriptive stated that their ``one-size-
fits-all'' approach reflected a lack of appreciation for the diversity 
of operations within the mining industry and the fact that many of the 
details required to be disclosed would not be comparable.\924\ Some 
commenters urged the Commission to delete all of the tables and allow 
the registrant and its qualified persons to determine the most 
appropriate format for presentation of the required disclosure items 
(whether in text summaries or in tables designed by the registrant or 
its qualified persons).\925\ Another commenter stated that summary 
disclosure and accompanying tables should be left to the discretion of 
the registrant as long as the disclosure follows an existing global 
standard, such as JORC, NI 43-101, or CRIRSCO.\926\ Some commenters 
further stated that the Commission should limit the tables to a list of 
material properties and statements of mineral resources and mineral 
reserves.\927\
---------------------------------------------------------------------------

    \923\ See letters from AIPG, Amec, BHP, Chamber, CIM, Cleary & 
Gottlieb, Cloud Peak, Coeur, Eggleston, Graves, Newmont, NMA 1, 
NSSGA, Royal Gold, SAMCODES 1, SME 1, Vale, and Willis.
    \924\ See letters from AIPG, Chamber, Cleary & Gottlieb, NMA 1, 
NSSGA, SAMCODES 1, and SME 1.
    \925\ See letters from AIPG, Graves, NMA 1, SME 1, and Vale. 
Similarly, most commenters that responded to our request for comment 
opposed requiring the summary disclosure to be formatted in XBRL on 
the grounds that the data required to be disclosed in those tables 
was largely specific to each registrant and would not benefit from 
presentation in a structured format. See letters from AIPG, 
Alliance, Amec, AngloGold, CBRR, Chamber, Eggleston, MMSA, Rio 
Tinto, and SME 1.
    \926\ See letter from Cloud Peak.
    \927\ See, e.g., letters from Coeur, SME 1, and Willis.
---------------------------------------------------------------------------

    One commenter indicated that disclosure of information on the top 
20 properties, by asset value, would not be useful for investors.\928\ 
That commenter stated that a technical report summary would provide 
more meaningful information in a context that would allow an investor 
to understand better the value of a project.
---------------------------------------------------------------------------

    \928\ See letter from Amec.
---------------------------------------------------------------------------

    Another commenter opposed the proposed summary disclosure 
requirement because it ``all but eliminates'' the discretion of the 
registrant and qualified person to determine the most suitable 
presentation of material information relating to each property. That 
commenter noted that other alternative bases for grouping operations 
other than by asset value, such as geographic region, commodity or 
reporting segment, may be more informative for investors.\929\ Other 
commenters stated that the disclosure required regarding the top 20 
properties by asset value was too complex to be put in a table.\930\
---------------------------------------------------------------------------

    \929\ See letter from Cleary & Gottlieb.
    \930\ See letters from AIPG, FCX, Newmont, and SME 1.
---------------------------------------------------------------------------

    Several commenters opposed the proposed tabular presentation of 
summary disclosure of mineral resources and reserves because they 
believed it conflicted with CRIRSCO requirements that resources and 
reserves should not be reported in the same table, and inferred 
resources should not be presented alongside indicated and measured 
resources, in order to avoid misleading investors that resource 
estimates are as economically feasible as reserve estimates.\931\ Some 
of the commenters, however, maintained that mineral resources should 
include reserves, as permitted under the CRIRSCO-based codes.\932\
---------------------------------------------------------------------------

    \931\ See letters from AIPG, BHP, CIM, Cleary & Gottlieb, SME 1, 
and Vale.
    \932\ See, e.g., letters from BHP 1 and SAMCODES 1.
---------------------------------------------------------------------------

    Many commenters opposed the proposed instruction requiring the 
mineral resource and reserve estimates in proposed Table 3 to be in 
terms of saleable product.\933\ Most of those commenters maintained 
that it is customary under the CRIRSCO-based

[[Page 66400]]

codes to disclose mineral resources on an in situ basis and that the 
proposed instruction would effectively define a mineral resource as a 
mineral reserve.\934\ Commenters further recommended requiring the 
disclosure of reserves on either a run of mine or plant/mill feed basis 
\935\ (for metals and some coal and industrial mines) \936\ or in terms 
of saleable product (if customary for some coal and industrial mines) 
and not on an in situ basis.\937\
---------------------------------------------------------------------------

    \933\ See letters from Amec, AngloGold, BHP, CIM, Eggleston, 
FCX, Newmont, Rio Tinto, SAMCODES 1, SME 1, and Vale.
    \934\ See letters from BHP, CIM, Eggleston, Newmont, Rio Tinto, 
and SME 1.
    \935\ ``Run of mine'' ore refers to ore in its unprocessed form 
(i.e., in the form mined), while plant/mill feed refers to the 
material that is fed to a processing plant. Both terms are used in 
the mining industry, in this context, to refer to material that is 
affected by mining dilution and losses but is yet to be processed.
    \936\ See letters from AngloGold, CIM, Golder, Newmont, SME 1, 
and Vale. See also letter from FCX (mineral reserves should either 
be disclosed as ``run-of-mine (plant/mill feed) ore tons, contained 
product before plant recovery and saleable product after plant 
recovery'').
    \937\ See letters from CRIRSCO, Golder, Rio Tinto, SME 1, and 
Vale.
---------------------------------------------------------------------------

    One commenter stated that, due to the nature of the aggregates 
industry, where products are relatively low-priced, mines are shallow, 
the costs of developing an aggregates quarry or underground mine are 
far less, and the risks are low compared to other types of mines, many 
of the proposed tabular disclosure items about reserves, resources and 
related data points appeared to be either immaterial to investors or to 
consist of proprietary information the disclosure of which would harm 
an aggregates company's competitive position.\938\
---------------------------------------------------------------------------

    \938\ See letter from NSSGA.
---------------------------------------------------------------------------

iii. Final Rules
    With some modification, we are adopting the proposed requirement 
that registrants with material mining operations, which own or 
otherwise have economic interests in two or more mining properties, 
provide summary disclosure of their mining operations.\939\ Many 
commenters agreed with our proposal to require summary disclosure even 
if they disagreed with one or more of the specific disclosure 
items.\940\ We continue to believe that, for registrants with material 
mining operations, requiring an overview of their mining operations, 
regardless of whether they have material individual properties, will be 
useful to investors and help foster more efficient and effective 
disclosure.
---------------------------------------------------------------------------

    \939\ 17 CFR 229.1303(a)(1) [Item 1303(a)(1) of Regulation S-K]. 
The registrant must 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 must 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 must provide summary 
disclosure for properties for which it has, or it is probable that 
it will have, an associated royalty or similar right, unless the 
registrant lacks access to the information about the underlying 
properties, as specified in Item 1303(b) of Regulation S-K, and the 
registrant meets the conditions for omitting the summary disclosure 
pursuant to Item 1303(a)(3) of Regulation S-K. See supra Section 
II.B.4.
    \940\ See, e.g., letters from AngloGold, CBRR, Columbia, Davis 
Polk, Midas, Rio Tinto and SRK 1.
---------------------------------------------------------------------------

    We recognize that many commenters opposed our proposal to require a 
presentation of summary disclosure, in tabular form, of certain 
specified information about the 20 properties with the largest asset 
values because they believed it to be overly prescriptive, inconsistent 
with CRIRSCO requirements, or burdensome in particular for U.S. 
registrants that are dual-listed in one of the CRIRSCO-based 
jurisdictions.\941\ To reduce the prescriptive nature of the summary 
disclosure requirement, consistent with commenters' suggestions, the 
final rules will permit a registrant to present an overview of its 
mining properties and operations in either narrative or tabular 
format.\942\
---------------------------------------------------------------------------

    \941\ See supra note 923 and accompanying text.
    \942\ See 17 CFR 229.1303(b)(2).
---------------------------------------------------------------------------

    In addition, in a change from the proposed rules, which required 
the disclosure of the total production from each of the registrant's 
top 20 properties by asset value for the three most recently completed 
fiscal years, the final rules require that the overview must include 
annual production on an aggregated basis \943\ for the registrant's 
mining properties during each of the three most recently completed 
fiscal years.\944\ Moreover, rather than require the disclosure of 
other specified information for each of a registrant's top 20 
properties by asset value, the final rules provide that the overview 
should include the following information for the registrant's mining 
properties considered in the aggregate, and only as relevant:
---------------------------------------------------------------------------

    \943\ In a change from the proposed rules, the final rules 
eliminate the proposed instruction that would permit a registrant 
with interrelated mining operations to treat those operations as one 
mining property for the purpose of providing summary disclosure. 
Since we are no longer requiring the disclosure of specified 
information for each of a registrant's top 20 properties, and are 
only requiring such disclosure in the aggregate, we no longer 
believe that instruction to be necessary.
    \944\ 17 CFR 229.1303(b)(2)(i) [Item 1303(b)(2)(i) of Regulation 
S-K].

     The location of the properties; \945\
---------------------------------------------------------------------------

    \945\ As proposed, the summary disclosure must include a map or 
maps showing the locations of all mining properties. See Item 
1303(b)(1) of Regulation S-K [17 CFR 229.1303(b)(1)]. We continue to 
believe the map requirement is an effective means of providing 
investors with a point of reference to assess the geographic and 
socio-political risks associated with the registrant's mining 
operations. 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 adopted map requirement, which is consistent with current 
practices, will help ensure that investors are provided with 
beneficial information without significantly impacting current 
disclosure practices.
---------------------------------------------------------------------------

     The type and amount of ownership interests;
     The identity of the operator or operators;
     Titles, mineral rights, leases or options and acreage 
involved;
     The stages of the properties (exploration, development, 
or production);
     Key permit conditions;
     Mine types and mineralization styles; and
     Processing plants and other available facilities.\946\
---------------------------------------------------------------------------

    \946\ 17 CFR 229.1303(b)(2)(ii) [Item 1303(b)(2)(ii) of 
Regulation S-K].

    The final rules also include a provision explaining that, when 
presenting the overview, the registrant should include the amount and 
type of disclosure concerning its mining properties that is material to 
an investor's understanding of the registrant's properties and mining 
operations in the aggregate.\947\ The provision further states that 
this disclosure will depend upon a registrant's specific facts and 
circumstances and may vary from registrant to registrant. Finally, this 
provision asks registrants to refer to, rather than duplicate, any 
disclosure concerning individually material properties provided in 
response to the individual disclosure requirements,\948\ discussed 
below.\949\
---------------------------------------------------------------------------

    \947\ 17 CFR 229.1303(b)(2)(iii) [Item 1303(b)(2)(iii) of 
Regulation S-K].
    \948\ See id.
    \949\ See infra Section II.G.2.
---------------------------------------------------------------------------

    We believe this more principles-based approach to eliciting summary 
disclosure on a registrant's mining operations addresses commenters' 
concerns while still providing a meaningful overview of registrants' 
mining operations, particularly for those registrants with no or only a 
few individually material properties. As previously explained, Guide 7 
currently calls for the disclosure of all of the above listed items of 
information.\950\ We note, for instance, that most registrants engaged 
in industrial minerals and aggregates mining have no or only a few 
individually material properties and currently provide disclosure 
similar to

[[Page 66401]]

summary disclosure called for by Guide 7.
---------------------------------------------------------------------------

    \950\ See Proposing Release, supra note 5, Section II.G.1.
---------------------------------------------------------------------------

    This more principles-based approach is also intended to address the 
concern of some commenters that the proposed rules established a ``one 
size fits all'' approach that did not account for the diversity of 
operations within the mining industry.\951\ By requiring a registrant 
to provide an overview of its mining operations that includes the 
suggested items of information, as relevant, tailored to its particular 
facts and circumstances,\952\ and presented in a manner of the 
registrant's choosing, we believe the final rules will elicit material 
information for investors without unduly burdening the registrant.
---------------------------------------------------------------------------

    \951\ See, e.g., letter from NMA 2.
    \952\ Another provision states that, as proposed, a registrant 
with 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. See Item 
1303(b)(2)(iv) of Regulation S-K. We continue to believe that 
registrants with a royalty or similar economic interest in mining 
properties, if they have access to such information, should only 
report the portion of production leading to their incomes to reduce 
the risk of confusing investors.
---------------------------------------------------------------------------

    As proposed, the final rules require a registrant 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,\953\ and for each property containing 10 percent or more of the 
registrant's mineral reserves or 10 percent or more of the registrant's 
combined measured and indicated mineral resources. The registrant will 
be required to provide this summary, including the amount and grade or 
quality, 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.\954\
---------------------------------------------------------------------------

    \953\ Similar to a proposed instruction, the final rules define 
``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. See 17 
CFR 229.1303(b)(3)(i) [Item 1303(b)(3)(i) of Regulation S-K]. We 
continue to believe this breakdown is necessary for investors to 
understand the source and associated socio-political risks of the 
registrant's mineral reserves and resources.
    \954\ See 17 CFR 229.1303(b)(3). As previously discussed, all 
mineral reserves and resources reported in the summary disclosure 
must be based on, and accurately reflect, information and supporting 
documentation prepared by a qualified person. See Item 1302(a) of 
Regulation S-K; see also Section II.C.1. for a discussion of the 
final rules' stipulations on the responsibilities of the qualified 
person and the registrant.
---------------------------------------------------------------------------

    We continue to believe that the summary disclosure of mineral 
resources and reserves is necessary to understand a registrant's 
material mining operations at fiscal year's end. For example, an 
understanding of the registrant's total mineral resources and reserves 
and where those mineral resources and reserves are located can enable 
investors to understand and evaluate the registrant's projected future 
earnings from its mining operations and its ability to replenish 
depleting mineral reserves, a well-established measure of financial 
performance in mining.\955\ The breakdown of the mineral resources and 
reserves by category and source (geographic area and property) also 
will provide investors with a measure of the associated risk.
---------------------------------------------------------------------------

    \955\ 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).
---------------------------------------------------------------------------

    Contrary to the concerns of some commenters,\956\ the final rules' 
requirement that a registrant provide a summary of its mineral 
resources and reserves does not impose an affirmative obligation to 
estimate mineral resources and reserves, as defined in these rules, on 
a mining property where the registrant has not estimated mineral 
resources and reserves. Registrants will have an obligation to disclose 
mineral resources and reserves in their summary disclosure only to the 
extent that they have already engaged a qualified person or persons to 
estimate such mineral resources and reserves.
---------------------------------------------------------------------------

    \956\ See, e.g., letter from NSSGA.
---------------------------------------------------------------------------

    In order to standardize the disclosure, facilitate a registrant's 
compliance with the disclosure requirements, and enhance investor 
understanding of this information, similar to our proposal, the final 
rules require that a registrant provide the summary of all mineral 
resources and reserves at the end of the most recently completed fiscal 
year in tabular format. However, we agree with those commenters that 
maintained that we should separate disclosure of mineral resources and 
reserves in order to reduce the potential for investor confusion.\957\ 
Accordingly, the final rules require registrants to use separate tables 
when reporting mineral resources and reserves, as required by Item 
1303(b)(3) of Regulation S-K. The disclosure should follow the format 
of the tables designated as Tables 1 and 2 to paragraph (b) of Item 
1303.
---------------------------------------------------------------------------

    \957\ See supra note 931 and accompanying text.
---------------------------------------------------------------------------

    Similar to a proposed instruction, we are adopting a provision 
requiring mineral resources, reported in the summary disclosure 
provided in Table 1 to paragraph (b) of Item 1303, to be exclusive of 
mineral reserves.\958\ We continue to believe that requiring the 
disclosure of mineral resources exclusive of reserves in the main 
disclosure document (as opposed to such disclosure in the technical 
report summary, which is attached as an exhibit to the Commission 
filing) will reduce the risk of investor confusion. In contrast, we 
believe that, because the technical report summary is more likely to be 
read by analysts or investors possessing a more sophisticated 
understanding of the mining industry and its current practices than the 
average retail investor, permitting mineral resources to include 
mineral reserves when disclosed in the technical report summary is less 
likely to cause confusion.\959\
---------------------------------------------------------------------------

    \958\ 17 CFR 229.1303(b)(3)(ii) [Item 1303(b)(3)(ii) of 
Regulation S-K].
    \959\ See infra Section II.G.3. for a discussion of the adopted 
provision that permits a qualified person to disclose resources 
inclusive of reserves in the technical report summary as long as he 
or she also discloses resources as excluding reserves.
---------------------------------------------------------------------------

    Similar to another proposed instruction, we are adopting a 
provision requiring that all disclosure of mineral resources and 
reserves be only for the portion of the resources or reserves 
attributable to the registrant's interest in the property.\960\ 
Commenters did not oppose this proposed instruction.\961\ For the 
reasons stated in the Proposing Release, we continue to believe that 
this provision is reasonable and would help reduce investor 
confusion.\962\
---------------------------------------------------------------------------

    \960\ 17 CFR 229.1303(b)(3)(iii) [Item 1303(b)(3)(iii) of 
Regulation S-K].
    \961\ Only one commenter addressed this proposed instruction. 
That commenter stated that, although it believed the decision to 
report mineral resources or mineral reserves on a 100% or other 
ownership basis should be at the discretion of the registrant, it 
considered ``that the information on the registrant's interest in 
the property is important information and should be included with 
the reporting of Mineral Resource and Mineral Reserve estimates.'' 
Letter from Amec.
    \962\ See Proposing Release, supra note 5, at Section II.G.1.
---------------------------------------------------------------------------

    As previously discussed, we are revising our approach to what is 
permitted regarding selecting an appropriate price to determine 
``prospects of economic extraction'' for mineral resources and 
``economic viability'' for mineral reserves.\963\ Consequently, the 
final rules provide that each mineral resource and reserve estimate 
must be based on a reasonable and justifiable price, selected by a 
qualified person, which provides a

[[Page 66402]]

reasonable basis for establishing the prospects of economic extraction 
for mineral resources, and is the basis for determining the economic 
viability of the deposit for mineral reserves.\964\ We believe this 
approach will further align the Commission's rules with the CRIRSCO 
requirements and help limit the compliance burden on registrants.
---------------------------------------------------------------------------

    \963\ See supra Sections II.E.4., II.F.2.
    \964\ 17 CFR 229.1303(b)(3)(iv) [Item 1303(b)(3)(iv) of 
Regulation S-K].
---------------------------------------------------------------------------

    Many commenters stated that requiring registrants to disclose 
mineral resources and reserves at a specific point of reference (in 
this case, as saleable product) is counter to the CRIRSCO-based codes 
and current industry practice, which permit the estimation of resources 
and reserves at a disclosed single point of reference selected by the 
qualified person.\965\ To help limit the compliance burden for 
registrants, especially those that are cross-listed in CRIRSCO-based 
jurisdictions, the final rules will permit a registrant and its 
qualified person(s) to disclose mineral resources and reserves at any 
point of reference as long as they disclose the selected point of 
reference. For summary disclosure, the final rules require that each 
mineral resource and reserve estimate in Tables 1 and 2 to paragraph 
(b) of Item 1303 be based on a specific point of reference selected by 
a qualified person. The registrant also must disclose the selected 
point of reference for each of these Tables 1 and 2.\966\
---------------------------------------------------------------------------

    \965\ See supra note 933 and accompanying text.
    \966\ 17 CFR 229.1303(b)(3)(v) [Item 1303(b)(3)(v) of Regulation 
S-K].
---------------------------------------------------------------------------

    Another provision stipulates, as proposed, that the registrant may 
modify the tabular formats in Tables 1 and 2 to paragraph (b) of Item 
1303 for ease of presentation or to add information.\967\ While we 
continue to believe that the tabular presentation of summary resources 
and reserves disclosure will standardize the disclosure and make it 
easier for investors to understand and assess investments in 
registrants engaged in material mining operations, we emphasize that 
the tables can be modified to fit a registrant's particular situation. 
Contrary to the views of several commenters,\968\ like the proposed 
rules, the final rules expressly provide, in recognition of the 
diversity in the mining sector, that registrants can modify the tables 
to fit their own particular facts and circumstances.
---------------------------------------------------------------------------

    \967\ 17 CFR 229.1303(b)(3)(vi) [Item 1303(b)(3)(vi) of 
Regulation S-K]. However, a registrant may not modify the tabular 
format to remove any of the required disclosure from the tables.
    \968\ See letters from AIPG, Chamber, Cleary & Gottlieb, NMA, 
NSSGA, SAMCODES 1, and SME 1.
---------------------------------------------------------------------------

    A final provision states that all material assumptions and 
information pertaining to the summary disclosure of a registrant's 
mineral resources and mineral reserves required by this section, 
including material assumptions related to price estimates, must be 
current as of the end of the registrant's most recently completed 
fiscal year.\969\ We believe this provision is a useful reminder that, 
although the qualified person is responsible for determining the 
mineral resource or reserve estimates included in the summary 
disclosure, the registrant bears the ultimate responsibility for 
ensuring that those estimates, and the material assumptions underlying 
them, remain current as of the date for which the mineral resource or 
reserve estimates have been disclosed.
---------------------------------------------------------------------------

    \969\ 17 CFR 229.1303(b)(3)(vii) [Item 1303(b)(3)(vii) of 
Regulation S-K].
---------------------------------------------------------------------------

2. Requirements for Individual Property Disclosure
i. Rule Proposal
    We proposed that a registrant with material mining operations 
provide, in addition to summary disclosure, more detailed information 
for each of its individual properties that is material to its business 
or financial condition.\970\ We made this proposal because of our 
belief that summary property disclosure alone would not provide all 
relevant information about the properties and assets that generate a 
mining registrant's revenues. We therefore proposed that, for each 
material individual property, a registrant would have to provide a 
brief description of the property, including:
---------------------------------------------------------------------------

    \970\ See Proposing Release, supra note 5, at Section II.G.2.

     The property's location, accurate to within one mile, 
using an easily recognizable coordinate system (e.g., latitude and 
longitude), including appropriate maps, with proper engineering 
detail (such as scale, orientation, and titles), which must be 
legible on the page when printed;
     Existing infrastructure, including roads, railroads, 
airports, towns, ports, sources of water, electricity, and 
personnel; and
     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.\971\
---------------------------------------------------------------------------

    \971\ See id.

    For each material property, the proposed rules also required a 
registrant to disclose a history of previous operations, a description 
of the condition and status of the property, 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.\972\
---------------------------------------------------------------------------

    \972\ See id.
---------------------------------------------------------------------------

    We also proposed to require several items of disclosure in tabular 
form, including a summary of the exploration activity for the most 
recently completed fiscal year (Table 4 of the proposed rules), a 
summary of material exploration results for the most recently completed 
fiscal year (Table 5 of the proposed rules), a summary of all mineral 
resources and reserves (if mineral resources or reserves have been 
determined) (Table 6 of the proposed rules), and a comparison 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 (Tables 7 and 8 of the proposed rules).\973\ A proposed 
instruction provided that registrants would be permitted to modify the 
tables for ease of presentation, to add information, or to combine two 
or more required tables throughout their disclosure.\974\
---------------------------------------------------------------------------

    \973\ See id.
    \974\ See id.
---------------------------------------------------------------------------

    We further proposed that, 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, it must provide a 
brief discussion of the material assumptions and criteria underlying 
the estimates and cite to the corresponding sections of the technical 
report summary, which would be filed as an exhibit.\975\ We similarly 
proposed that, 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 and cite 
to corresponding sections of the summary technical

[[Page 66403]]

report, which would be filed as an exhibit.\976\
---------------------------------------------------------------------------

    \975\ See id.
    \976\ See id.
---------------------------------------------------------------------------

    We proposed additional 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 
those proposed instructions were 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, according to one proposed instruction, 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. Pursuant to another proposed instruction, 
a change in exploration results that significantly alters the potential 
of the exploration target is considered material.
    Other proposed instructions would establish quantitative thresholds 
for presumed materiality of a change in estimates of mineral resources 
or reserves. For example, according to one proposed instruction, an 
annual change in total resources or reserves of 10 percent or more, 
excluding production as reported in Tables 7 and 8 of the proposed 
rules, is presumed to be material, and thus would need to be 
disclosed.\977\ According to another proposed instruction, a cumulative 
change in total resources or reserves of 30 percent or more in absolute 
terms, excluding production as reported in Tables 7 and 8 of the 
proposed rules, from the current filed technical report summary is 
presumed to be material. 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.\978\
---------------------------------------------------------------------------

    \977\ See id.
    \978\ See id.
---------------------------------------------------------------------------

    We also proposed an instruction that would require a registrant to 
consider 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, which supports 
the registrant's mining property disclosures.\979\
---------------------------------------------------------------------------

    \979\ See id.
---------------------------------------------------------------------------

    Finally, we proposed an instruction explaining 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.\980\
---------------------------------------------------------------------------

    \980\ See id.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Many of the comments on the proposed individual property disclosure 
requirements were substantially similar to the comments in response to 
the proposed summary disclosure provisions. While commenters 
acknowledged the importance of disclosure on individually material 
properties,\981\ many believed the proposed disclosure requirements 
were overly prescriptive and many were critical of one or more of the 
proposed tables.\982\ One commenter opposed Tables 4-8 altogether 
because of the level of detail required, which in the commenter's view 
would likely result in any useful information being obscured, and which 
would be overly burdensome for registrants to produce.\983\
---------------------------------------------------------------------------

    \981\ See, e.g., letters from Eggleston, Midas, and Rio Tinto.
    \982\ See letters from AIPG, Amec, AngloGold, BHP, CBRR, CIM, 
Cleary & Gottlieb, Coeur, Davis Polk, Eggleston, FCX, Gold Resource, 
Midas, MMSA, Newmont, NSSGA, Rio Tinto, SAMCODES 1, SME 1, SRK 1, 
Vale, and Willis.
    \983\ See letter from Amec.
---------------------------------------------------------------------------

    Another commenter stated that certain proposed provisions, which 
would require detailed information about leases, mining rights and 
encumbrances, would likely result in over-disclosure of information 
that is not material to investors.\984\ In addition, one commenter 
stated that the Commission should revise the individual property 
disclosure requirements in proposed Item 1304 to align it with the 
checklist content and format in CRIRSCO Template Table 1.\985\
---------------------------------------------------------------------------

    \984\ See letter from Newmont; see also letter from Amec 
(objecting to some of the proposed requirements as requesting 
unnecessary detail for an annual disclosure filing, including the 
requirement to provide: A summary of the exploration activity and 
material exploration results for the most recently completed year; a 
description of any significant encumbrances to the property; a 
description of the titles, claims, concessions, mineral rights, 
leases or options regarding the property; and a history of previous 
operations) and letter from Cleary & Gottlieb (objecting to the 
proposed requirement to disclose the age and physical condition of 
the property on the grounds that it would not be useful to investors 
and would be very burdensome to a company with significant mining 
operations).
    \985\ See letter from BHP.
---------------------------------------------------------------------------

    Several commenters opposed requiring the proposed tables for 
exploration activity and exploration results (Tables 4 and 5 of the 
proposed rules) on the grounds that they are inconsistent with CRIRSCO 
standards, are onerous to produce, and would result in disclosure that 
is potentially competitively harmful, or would not be meaningful to 
most investors.\986\ Some of the commenters opposed Tables 4 and 5 of 
the proposed rules because, in their view, the tables implied that 
drilling is the only form of exploration and ignored various other 
forms of data collection and analysis, such as geochemical and 
geophysical surveys, which are routinely used in exploration.\987\ 
Maintaining that it would be too difficult to include thousands of 
datum points regarding exploration into a single table, those 
commenters recommended that Tables 4 and 5 of the proposed rules either 
should be eliminated from the final rules \988\ or allowed either in 
narrative form or in company-designed tables.\989\
---------------------------------------------------------------------------

    \986\ See letters from Amec, AngloGold, Cleary & Gottlieb, FCX, 
Midas, MMSA, SME 1, SRK 1, and Vale.
    \987\ See, e.g., letters from NSSGA, SME 1, SRK 1, and Vale.
    \988\ See, e.g., letters from SRK 1 (recommending removal of 
proposed Table 5) and Vale (recommending removal of both proposed 
Tables 4 and 5).
    \989\ See, e.g., letter from and SME 1; see also letter from 
Cleary (recommending a principles-based approach generally to the 
information required to be disclosed in tabular format, which would 
allow a registrant and its qualified persons to exercise greater 
judgment in determining the most suitable format and content of 
material mining disclosure).
---------------------------------------------------------------------------

    While commenters generally supported the disclosure of mineral 
resources and reserves in tabular format,\990\ most commenters that 
addressed the issue were critical of Table 6 of the proposed rules in 
various respects. Several commenters opposed proposed Table 6 on the 
grounds that it would require the disclosure of mineral resources and 
reserves in the same table, as well as inferred resources alongside

[[Page 66404]]

indicated and measured mineral resources, which would be inconsistent 
with CRIRSCO standards.\991\ Commenters also opposed proposed Table 6 
because it would require the disclosure of mineral reserves net of 
allowances for dilution and losses, which would be contrary to industry 
practice under the CRIRSCO-based codes.\992\ For similar reasons, some 
commenters also opposed proposed Table 6 because it would require the 
disclosure of mineral resources as exclusive of mineral reserves.\993\ 
One of those commenters stated that a registrant should be permitted to 
disclose mineral resources as inclusive or exclusive of mineral 
reserves as long as it clearly explains the basis of its disclosed 
estimate.\994\
---------------------------------------------------------------------------

    \990\ See, e.g., letters from AngloGold, Eggleston, and Rio 
Tinto.
    \991\ See letters from AIPG, BHP, CBRR, CIM, and SME 1.
    \992\ See letters from BHP, CIM, Newmont, and SRK 1.
    \993\ See letters from AngloGold, BHP, and JORC.
    \994\ See letter from JORC.
---------------------------------------------------------------------------

    Numerous commenters also opposed proposed Table 6 because it would 
require the disclosure of mineral reserves on the basis of three points 
of reference.\995\ Commenters maintained that, to be consistent with 
the CRIRSCO-based codes, the Commission should only require the 
disclosure of mineral resources on an in situ basis \996\ and reserves 
on a run of mine \997\ or saleable product basis.\998\
---------------------------------------------------------------------------

    \995\ See letters from Amec, BHP, CIM, Eggleston, JORC, MMSA, 
Newmont, Randgold, Royal Gold, SME 1, and SRK 1.
    \996\ See, e.g., letters from Amec, CIM, Newmont, Randgold, and 
Rio Tinto.
    \997\ See, e.g., letters from CIM, Randgold, and SME 1.
    \998\ See, e.g., letters from MMSA, Randgold, and SME 1; see 
also letters from CBRR and FCX (recommending the reporting of 
reserves as run-of-mine (plant/mill feed) ore tons, contained 
product before plant recovery and saleable product after plant 
recovery).
---------------------------------------------------------------------------

    One commenter stated that proposed Table 6 incorrectly suggests 
that different types of mining projects are comparable, which is 
inconsistent with the diversity found in the mining industry.\999\ 
Another commenter opposed the overly prescriptive nature of Table 6 and 
recommended leaving its inclusion and format to the discretion of the 
qualified person.\1000\
---------------------------------------------------------------------------

    \999\ See letter from SME 1; see also letter from JORC 
(generally opposing all of the tables as being inconsistent with the 
diversity in the mining industry).
    \1000\ See letter from Vale.
---------------------------------------------------------------------------

    In addition, many commenters opposed Table 6 because it would 
require the determination and disclosure of mineral resources and 
reserves based on a 24-month trailing average price.\1001\ Some 
commenters further objected to the inclusion of the total cost or book 
value of a mining property and the commodity price in the case of 
commodities traded under contract, the terms of which are 
confidential.\1002\
---------------------------------------------------------------------------

    \1001\ See letters from AIPG, Alliance, AngloGold, BHP, CBRR, 
Chamber, CIM, Cleary & Gottlieb, Coeur, Davis Polk, Dorsey & 
Whitney, Eggleston, Gold Resource, Newmont, NMA 1, Northern Dynasty, 
Randgold, Rio Tinto, SAMCODES 1 and 2, Shearman & Sterling, SME 1, 
Vale, and Willis.
    \1002\ See, e.g., letter from BHP; see also letter from NSSGA 
(opposing the disclosure of a weighted contract price in Table 3 on 
similar grounds).
---------------------------------------------------------------------------

    One commenter supported the proposed reconciliation requirement in 
Tables 7 and 8 of the proposed rules because ``[r]econciliation between 
numbers on consecutive fiscal years is important to validate 
uncertainty assumptions and resource/reserve classification.'' \1003\ 
Other commenters either supported proposed Tables 7 and 8 with little 
to no discussion \1004\ or supported having a reconciliation 
requirement while disagreeing with various aspects of the proposed 
tabular format.\1005\ Some commenters objected to the high granularity 
of disclosure required in proposed Tables 7 and 8, which they stated 
would impose a significant reporting burden for a registrant with a 
large number of properties reported.\1006\ Noting that the mining 
industry has only formalized reconciliation reporting in the past 10 
years, and stating that obtaining accurate reconciliation has been 
difficult for a variety of reasons, other commenters recommended that 
the Commission make resource and reserve reconciliation 
voluntary.\1007\
---------------------------------------------------------------------------

    \1003\ Letter from CBRR.
    \1004\ See letter from Gold Resource.
    \1005\ See letter from AngloGold (supporting the proposed 
requirement for reconciliation, but also recommending leaving the 
``level of granularity in the reconciliation'' to the discretion of 
the qualified person); letter from Eggleston (stating that requiring 
a comparison of mineral resources and reserves would be useful, but 
also maintaining that a meaningful comparison of mineral reserves 
could not be obtained using the proposed table); and letter from SRK 
1 (stating that the proposed tables may provide useful information 
to a technically knowledgeable reader but may also create confusion 
for investors).
    \1006\ See letters from Amec, MMSA, and Rio Tinto.
    \1007\ Letters from AIPG and SME 1; see also letter from Vale 
(recommending that inclusion and format of Tables 7 and 8 be left to 
the discretion of the qualified person).
---------------------------------------------------------------------------

    Some commenters provided conditional support for the Commission's 
proposed requirement to provide a discussion of the material 
assumptions underlying a registrant's disclosure of mineral resources, 
mineral reserves, or material exploration results when first disclosing 
them or when disclosing material changes to the previously disclosed 
estimates and results.\1008\ One commenter stated that it supported the 
Commission's proposed requirement to provide a discussion of material 
assumptions as long as the Commission deemed the summaries prepared for 
CRIRSCO reporting (e.g., based on JORC Table 1) to be acceptable for 
Commission reporting purposes.\1009\
---------------------------------------------------------------------------

    \1008\ See, e.g., letters from AngloGold, CBRR, Eggleston, 
Midas, Rio Tinto, and SRK 1.
    \1009\ See letter from Rio Tinto.
---------------------------------------------------------------------------

    Another commenter supported the proposed disclosure requirement for 
material assumptions but opposed any prescriptive requirement, such as 
the proposed percentage thresholds that would trigger when a material 
change has occurred, relating to such disclosure.\1010\ A third 
commenter stated that, consistent with international practice, a 
detailed discussion of the material assumptions should be included in 
the technical report while a summary of material assumptions should 
occur in annual filings.\1011\ This commenter, however, stated that 
while the proposed instruction, providing that an annual change in 
total resources or reserves of 10% or more is presumed to be material, 
was reasonable, a change of 25% might be better.\1012\ A fourth 
commenter approved of the 30% cumulative change threshold while 
recommending a 15% threshold for an annual change.\1013\ A fifth 
commenter believed that the 10% threshold for defining a material 
change for both mineral resources and reserves was too narrow. That 
commenter recommended allowing the qualified person to determine when a 
material change has occurred.\1014\
---------------------------------------------------------------------------

    \1010\ See letter from AngloGold.
    \1011\ See letter from Eggleston.
    \1012\ See id.
    \1013\ See letter from CBRR.
    \1014\ See letter from Newmont. Another commenter suggested a 
25% materiality threshold for contained metal in reserves and a 50% 
threshold for contained metal in resources together with an 
``additional overriding qualitative obligation that any change the 
registrant deems a material change should be disclosed.'' Letter 
from Midas.
---------------------------------------------------------------------------

    In response to our request for comment, most commenters that 
addressed the issue opposed requiring presentation of Tables 4 through 
8 of the proposed rules in XBRL format.\1015\ Commenters primarily 
objected to such a requirement because it would be expensive \1016\ 
and, ``given the uniqueness of the information to the registrant,'' 
they did not feel there was any useful information that would benefit 
from being presented in a

[[Page 66405]]

structured format.\1017\ One commenter, however, supported requiring 
the presentation of proposed Tables 4 through 8 in XBRL because it 
would ``likely benefit investors and potential investors as well as 
align SEC reporting requirements with potential industry standards in 
the near future.'' \1018\
---------------------------------------------------------------------------

    \1015\ See, e.g., letters from AIPG, Alliance, Amec, AngloGold, 
CBRR, Chamber, Eggleston, MMSA, Rio Tinto, and SME 1.
    \1016\ See letter from SME 1.
    \1017\ Letter from AngloGold; see also letters from AIPG and SME 
1.
    \1018\ Letter from SRK 1.
---------------------------------------------------------------------------

    Some commenters recommended that, consistent with CRIRSCO 
standards, such as NI 43-101 \1019\ and JORC, but contrary to the 
Commission's proposal, the Commission allow a registrant and its 
qualified person(s) to use historical estimates of the quantity, grade 
or mineral content of a deposit that the registrant has not verified 
and that was prepared before the registrant acquired or entered into an 
agreement to acquire an interest in the property containing the 
deposit.\1020\ As two of those commenters explained, the inability to 
use historical estimates in a Commission filing could render a proposed 
acquisition a practical impossibility because there could be 
insufficient time to complete an independent estimate of the resources 
or reserves for the target property.\1021\
---------------------------------------------------------------------------

    \1019\ As one of the commenters explained, under Canada's NI 43-
101, the use of a historical estimate is contingent upon the 
registrant disclosing: The date and source of the historical 
estimate; the relevance and reliability of the historical estimate; 
the key assumptions, parameters and methods used to prepare the 
historical estimate if known; the work that needs to be done to 
upgrade or verify the historical estimate; and that the qualified 
person has not done sufficient work to classify the historical 
estimate as a current estimate and, therefore, the registrant is not 
treating the historical estimate as a current estimate of mineral 
resources or reserves. See letter from Coeur.
    \1020\ See letters from Amec, Coeur, Gold Resource, Newmont, and 
NMA 1.
    \1021\ See letters from Newmont and NMA 1.
---------------------------------------------------------------------------

iii. Final Rules

    With modifications, we are adopting the proposed requirement that a 
registrant with material mining operations must disclose certain 
information about each property that is material to its business or 
financial condition.\1022\ When determining the materiality of a 
property relative to its business or financial condition, a registrant 
must apply the same standards and other considerations to each 
individual property as required when determining whether its mining 
operations as a whole are material.\1023\ We continue to believe that, 
because summary property disclosure alone will not provide all relevant 
information about the properties and assets that generate a mining 
registrant's revenues, detailed disclosure regarding a registrant's 
individually material properties is necessary to provide investors with 
a comprehensive understanding of a registrant's mining operations.
---------------------------------------------------------------------------

    \1022\ 17 CFR 229.1304(a)(1) [Item 1304(a)(1) of Regulation S-
K].
    \1023\ See id. The 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. It also would have to provide 
individual disclosure for each material property 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 individual 
disclosure for each material property for which it has, or it is 
probable that it will have, an associated royalty or similar right, 
unless the registrant lacks access to the information about the 
underlying properties, as specified in Item 1304(b) of Regulation S-
K, and the registrant meets the conditions for omitting the 
individual property disclosure pursuant to Item 1304(a)(2) of 
Regulation S-K. See supra Section II.B.4.
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    As proposed, the final rules require a registrant to provide a 
brief description of each material property, including: the property's 
location; \1024\ existing infrastructure, including roads, railroads, 
airports, towns, ports, sources of water, electricity, and personnel; 
\1025\ and 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.\1026\
---------------------------------------------------------------------------

    \1024\ See Item 1304(b)(1)(i) of Regulation S-K [17 CFR 
229.1304(b)(1)(i)], which requires the description of the property's 
location to be accurate to within one mile, using an easily 
recognizable coordinate system, including appropriate maps, with 
proper engineering detail (such as scale, orientation, and titles) 
that must be legible on the page when printed. We continue to 
believe that this level of detail is similar to the level of detail 
required by the CRIRSCO-based codes. See, e.g., PERC Reporting 
Standard, supra note 302, 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''). See also SAMREC Code, supra note 267, Table 
1 (calling for a ``detailed topo-cadastral map'').
    \1025\ 17 CFR 229.1304(b)(1)(ii) [Item 1304(b)(1)(ii) of 
Regulation S-K].
    \1026\ Item 1304(b)(1)(iii) of Regulation S-K [17 CFR 
229.1304(b)(1)(iii)], which also requires a description of how such 
property rights were 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.
---------------------------------------------------------------------------

    Further, as proposed, the final rules will require registrants with 
individually material mining properties to provide, as relevant to each 
material property: 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; \1027\ the age, 
details as to modernization and physical condition of the equipment, 
facilities, infrastructure, and underground development; \1028\ the 
total cost for or book value of the property and its associated plant 
and equipment; \1029\ a brief history of previous operations, including 
the names of previous operators, insofar as known; \1030\ and 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.\1031\
---------------------------------------------------------------------------

    \1027\ Item 1304(b)(2)(i) of Regulation S-K [17 CFR 
229.1304(b)(2)(i)], which also requires the registrant to identify 
mines 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.
    \1028\ 17 CFR 229.1304(b)(2)(ii) [Item 1304(b)(2)(ii) of 
Regulation S-K].
    \1029\ 17 CFR 229.1304(b)(2)(iii) [Item 1304(b)(2)(iii) of 
Regulation S-K].
    \1030\ 17 CFR 229.1304(b)(2)(iv) [Item 1304(b)(2)(iv) of 
Regulation S-K].
    \1031\ 17 CFR 229.1304(b)(2)(v) [Item 1304(b)(2)(v) of 
Regulation S-K].
---------------------------------------------------------------------------

    Although several commenters opposed some of these individual 
disclosure requirements on the basis that they are too prescriptive and 
would be burdensome on registrants,\1032\ the above items of disclosure 
are substantially similar to items called for by Item 102 of Regulation 
S-K and Guide 7.\1033\ Also, these disclosures are

[[Page 66406]]

substantially similar to what is called for under CRIRSCO-based 
rules.\1034\ We continue to believe that these items elicit material 
information for investors.
---------------------------------------------------------------------------

    \1032\ See letters from Alliance, Amec, BHP, CBRR, FCX, Newmont, 
and SRK 1.
    \1033\ 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.
    \1034\ See, e.g., ASX Listing Rules 5.1 and 5.3, which call for 
similar disclosures including, as relevant to mining exploration or 
production entities, details of exploration activities, mining 
production and development activities, exploration, mining and 
development expenditures, and information on mining tenements.
---------------------------------------------------------------------------

    Similar to a proposed instruction, the final rules include a 
provision that establishes guidelines for classifying the current stage 
of a property as exploration, development, or production.\1035\ Also as 
proposed, a second provision advises registrants to include only 
geological information that is brief and relevant to property 
disclosure rather than an extensive description of regional 
geology.\1036\ We believe that this latter provision is consistent with 
the transparency principle under the CRIRSCO standards and will help 
investors better understand a registrant's mining operations.
---------------------------------------------------------------------------

    \1035\ See supra Section II.B.5.iii (discussing Item 1304(c)(1) 
of Regulation S-K).
    \1036\ 17 CFR 229.1304(c)(2) [Item 1304(c)(2) of Regulation S-
K].
---------------------------------------------------------------------------

    As proposed, we are adopting final rules that would require a 
registrant to disclose, if mineral resources or reserves have been 
determined, a summary of all mineral resources or reserves as of the 
end of the most recently completed fiscal year.\1037\ While we are 
still requiring the same disclosure, in response to those commenters 
who noted that reporting mineral resources and reserves together is 
counter to the principles of the CRIRSCO-based codes and could cause 
investor confusion, we are modifying the presentation of the 
disclosure.\1038\ Consequently, instead of one table (proposed Table 
6), the final rules require that, for each property, the registrant 
disclose in tabular format, as provided in Table 1 to paragraph (d) of 
Item 1304, for each class of mineral resources (measured, indicated, 
and inferred), together with total measured and indicated mineral 
resources, the estimated tonnages and grades (or quality, where 
appropriate), and in Table 2 to paragraph (d) of Item 1304, for each 
class of mineral reserves (proven and probable), together with total 
mineral reserves, the estimated tonnages, grades (or quality, where 
appropriate), cut-off grades and metallurgical recovery. Furthermore, 
consistent with our approach to summary disclosure and in light of 
commenters' concerns about requiring three points of reference, the 
disclosures in these Tables 1 and 2 will be based on a specific point 
of reference selected by a qualified person.\1039\ The registrant must 
disclose the selected point of reference for each of Tables 1 and 2 to 
paragraph (d) of Item 1304.\1040\
---------------------------------------------------------------------------

    \1037\ 17 CFR 229.1304(d)(1).
    \1038\ See supra note 991 and accompanying text.
    \1039\ See 17 CFR 229.1304(d)(1).
    \1040\ See id..
---------------------------------------------------------------------------

    Similar to a proposed instruction, we are adopting an instruction 
that would permit a registrant to modify the tabular formats in these 
Tables 1 and 2 for ease of presentation, to add information, or to 
combine two or more required tables.\1041\ This instruction is intended 
to provide registrants with the flexibility to organize the required 
data to fit their own particular circumstances. For example, depending 
on the number of individually material properties owned or operated, a 
registrant may decide to disclose mineral resources on separate 
properties all in one table or in multiple tables, and mineral reserves 
on separate properties all in one table or in multiple tables. The 
adopted instruction makes clear, however, that when combining tables, 
the registrant should not report mineral resources and reserves in the 
same table.\1042\
---------------------------------------------------------------------------

    \1041\ Instruction 1 to 17 CFR 229.1304(d)(1). As previously 
noted, a registrant may not modify the required tables to remove any 
of the required disclosure from the tables.
    \1042\ See id.
---------------------------------------------------------------------------

    Another provision states that all disclosure of mineral resources 
by the registrant must be exclusive of mineral reserves.\1043\ We are 
adopting this provision for the same reasons as our adoption of a 
substantially similar provision for summary disclosure.\1044\
---------------------------------------------------------------------------

    \1043\ 17 CFR 229.1304(d)(2) [Item 1304(d)(2) of Regulation S-
K].
    \1044\ See supra note 959 and accompanying text. As previously 
discussed, see supra Section II.B.4., a third instruction states 
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. See 17 CFR 229.1304(d)(3).
---------------------------------------------------------------------------

    We are adopting rules that, as proposed, will require a registrant 
to compare each material property's mineral resources and reserves as 
of the end of the last fiscal year with the mineral resources and 
reserves as of the end of the preceding fiscal year, and explain any 
material change between the two.\1045\ However, unlike our rule 
proposal, and in response to comments received about various challenges 
associated with providing this disclosure,\1046\ the final rules 
provide that the comparison may be in either narrative or tabular 
format. This will provide registrants greater flexibility in presenting 
their disclosure and should help limit the compliance burden for 
registrants, especially those with large numbers of reported 
properties. Like the proposed rules, the final rules specify that the 
comparison must disclose information concerning:
---------------------------------------------------------------------------

    \1045\ 17 CFR 229.1304(e) [Item 1304(e) of Regulation S-K].
    \1046\ See supra note 1005.

     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.\1047\
---------------------------------------------------------------------------

    \1047\ 17 CFR 229.1304(e)(1)-(4) [Items 1304(e)(1)-(4) of 
Regulation S-K].

    This comparative disclosure requirement will help investors 
understand the reasons for the year to year changes in a registrant's 
mineral resources and reserves, which should help them 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. Registrants, however, provide much of the 
disclosure required under the comparative disclosure provision pursuant 
to current disclosure practices.\1048\
---------------------------------------------------------------------------

    \1048\ See, e.g., letters from AngloGold, CBRR, and Eggleston.
---------------------------------------------------------------------------

    If the registrant has not previously disclosed mineral reserve or 
resource estimates in a Commission filing or is disclosing material 
changes to its previously disclosed mineral reserve or resource 
estimates, we are adopting rules, as proposed, requiring it to provide 
a brief discussion of the material assumptions and criteria underlying 
the estimates.\1049\ The material assumptions and criteria will depend 
on the specific facts and circumstances surrounding the particular 
property and the mineral resource and reserve estimates.\1050\ However, 
the disclosure of these assumptions and criteria must include all of 
the material information necessary

[[Page 66407]]

for investors reasonably to understand the disclosed mineral resources 
or reserves. In addition, the registrant must cite to corresponding 
sections of the technical report summary if one is filed as an exhibit 
pursuant to Item 1302(b).\1051\
---------------------------------------------------------------------------

    \1049\ 17 CFR 229.1304(f)(1) [Item 1304(f)(1) of Regulation S-
K].
    \1050\ 17 CFR 229.1304(f)(3) [Item 1304(f)(3) of Regulation S-
K].
    \1051\ See 17 CFR 229.1304(f)(1).
---------------------------------------------------------------------------

    As previously discussed, we have revised the proposed rules to 
state that, if a registrant is disclosing exploration activity and 
exploration results for any material property for its most recently 
completed fiscal year, it must provide summaries that include certain 
specified information.\1052\ For exploration activity, the summary must 
describe, for each material property as relevant, the sampling methods 
used, and, for each sampling method used, the number of samples, the 
total size or length of the samples, and the total number of 
assays.\1053\ For exploration results, the summary must identify, for 
each relevant material property, the hole, trench or other sample that 
generated the exploration results, describe the length, lithology, and 
key geologic properties of the exploration results, and include a brief 
discussion of the exploration results' context and relevance.\1054\ If 
the summary of exploration results only includes results from selected 
samples and intersections, it should be accompanied with a discussion 
of the context and justification for excluding other results.\1055\
---------------------------------------------------------------------------

    \1052\ See supra Section II.D.3.
    \1053\ 17 CFR 229.1304(g)(1) [Item 1304(g)(1) of Regulation S-
K].
    \1054\ 17 CFR 229.1304(g)(2) [Item 1304(g)(2) of Regulation S-
K].
    \1055\ See id.
---------------------------------------------------------------------------

    In a change from the proposed rules, in response to comments 
received, the final rules will permit registrants to provide the 
summaries of exploration activity and exploration results in narrative 
or tabular format.\1056\ We believe this change will address the 
concerns of commenters that opposed Tables 4 and 5 of the proposed 
rules because those tables suggested that drilling is the only form of 
exploration and because it would be too difficult to include thousands 
of datum points regarding exploration into a single table.\1057\ We 
agree that, as some commenters suggested, permitting registrants to 
provide disclosure on exploration activity and exploration results in 
narrative or tabular format will help limit the final rules' compliance 
burden while still providing important benefits to investors.\1058\
---------------------------------------------------------------------------

    \1056\ 17 CFR 229.1304(g)(3) [Item 1304(g)(3) of Regulation S-
K].
    \1057\ See, e.g., letters from Cleary & Gottlieb, NSSGA, SME 1, 
SRK 1, and Vale.
    \1058\ See letters from Cleary & Gottlieb and SME 1. Whether in 
narrative or tabular format (and, if in tabular format, whether the 
tables are similar to proposed Tables 4 and 5 or are tables designed 
by the registrant), the disclosure of exploration activity and 
material exploration results must be reasonably comprehensive and 
not omit material facts that may make the disclosure misleading.
---------------------------------------------------------------------------

    As previously noted, the final rules permit a registrant to 
disclose an exploration target when discussing exploration results or 
exploration activity related to a material property as long as the 
disclosure is accompanied by the cautionary and explanatory statements 
specified in Item 1302(c) of Regulation S-K.\1059\ Consistent with 
similar requirements under the CRIRSCO-based codes, the disclosure 
about an exploration target will help investors understand the 
significance of a registrant's disclosed exploration results and 
exploration activities, while the required accompanying statements will 
help investors understand the conceptual basis and limitations of the 
exploration target.\1060\
---------------------------------------------------------------------------

    \1059\ See 17 CFR 229.1304(g)(5).
    \1060\ See supra Section II.D.3.
---------------------------------------------------------------------------

    Similar to the disclosure requirement for mineral resources or 
mineral reserves, if the registrant has not previously disclosed 
exploration results in a filing with the Commission, or is disclosing 
material changes to its previously disclosed exploration results, the 
final rules require it to provide sufficient information to allow for 
an accurate understanding of the significance of the exploration 
results.\1061\ 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 disclosure concerning the 
registrant's exploration results not misleading. The registrant must 
cite to corresponding sections of the summary technical report if one 
is filed.\1062\
---------------------------------------------------------------------------

    \1061\ 17 CFR 229.1304(g)(6)(i) [Item 1304(g)(6)(i) of 
Regulation S-K].
    \1062\ See id.
---------------------------------------------------------------------------

    Similar to proposed instructions, we also are adopting individual 
property disclosure provisions applicable to registrants that have not 
previously disclosed mineral resource or reserve estimates or 
exploration results or that are disclosing a material change in 
previously disclosed mineral resource or reserve estimates or 
exploration results. Most of these provisions are designed to assist 
registrants in determining whether there has been a material change in 
estimates of mineral resources, mineral reserves, or exploration 
results. For example, a pair of provisions explains 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.\1063\ Another provision states that a 
change in exploration results that significantly alters the potential 
of the subject deposit is considered material.\1064\
---------------------------------------------------------------------------

    \1063\ 17 CFR 229.1304(f)(3) [Item 1304(f)(3) of Regulation S-
K]; and 17 CFR 229.1304(g)(6)(ii) [Item 1304(g)(6)(ii) of Regulation 
S-K].
    \1064\ 17 CFR 229.1304(g)(6)(iii) [Item 1304(g)(6)(iii) of 
Regulation S-K].
---------------------------------------------------------------------------

    In a change from the proposed rules, we are not providing 
quantitative guidance for what is presumed to be a material change in 
estimates of mineral resources or reserves. We have been persuaded by 
commenters that objected to the proposed quantitative guidance as being 
overly prescriptive.\1065\
---------------------------------------------------------------------------

    \1065\ See, e.g., letter from AngloGold.
---------------------------------------------------------------------------

    If material assumptions in the filed technical report summary are 
no longer valid, under current facts and circumstances, then using such 
a technical report summary to support disclosure of mineral resources 
or reserves can be misleading to investors. Consequently, we are 
adopting a provision, similar to a proposed instruction, that requires 
a filed technical report summary to be 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), as of the end of 
the registrant's most recently completed fiscal year.\1066\ 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 that supports the registrant's mining property 
disclosures.\1067\
---------------------------------------------------------------------------

    \1066\ 17 CFR 229.1304(f)(2) [Item 1304(f)(2) of Regulation S-
K].
    \1067\ See id.
---------------------------------------------------------------------------

    Finally, we are adopting a provision stating that a report 
containing one or more 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

[[Page 66408]]

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 
(i.e., a ``historical estimate''), is not considered current and cannot 
be filed in support of disclosure.\1068\
---------------------------------------------------------------------------

    \1068\ 17 CFR 229.1304(h) [Item 1304(h) of Regulation S-K].
---------------------------------------------------------------------------

    However, in a change from the proposed rules, and as a result of 
comments received, we are adopting a targeted accommodation that 
permits a registrant to include a historical estimate in a Commission 
filing that pertains to a merger, acquisition, or business combination 
if the registrant is unable to update the estimate prior to the 
completion of the relevant transaction. In that event, when referring 
to the estimate, the registrant must disclose the source and date of 
the estimate, and state that a qualified person has not done sufficient 
work to classify the estimate as a current estimate of mineral 
resources, mineral reserves, or exploration results, and that the 
registrant is not treating the estimate as a current estimate of 
mineral resources, mineral reserves, or exploration results.\1069\ 
These conditions are generally consistent with those required for the 
use of historical estimates under Canada's NI 43-101.\1070\ This change 
should address the concern of commenters that the proposed prohibition 
regarding the use of historical estimates could render some 
acquisitions or other similar business transactions a practical 
impossibility. At the same time, to mitigate any potential risk from 
the use of older information, the adopted provision requires that 
investors be provided with additional information to help them evaluate 
an investment in a registrant that has engaged in a merger or similar 
business transaction involving the use of a historical estimate.
---------------------------------------------------------------------------

    \1069\ See id.
    \1070\ See Canada's NI 43-101, supra note 123, at pt. 2.4.
---------------------------------------------------------------------------

    We believe these provisions will 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 exploration results. At the same 
time, the adopted provisions will help to ensure that investors are 
provided with current information about the registrant's mineral 
resources and reserves and exploration results.
    Like the proposed rules, the final rules do not require a 
registrant to format any of its disclosure about its individually 
material properties in XBRL. In light of the flexibility provided in 
the final rules for these disclosures, which will permit registrants to 
tailor the disclosures to their unique facts and circumstances, we 
believe that presentation in a structured format, such as XBRL, would 
impose additional burdens on registrants without providing substantial 
additional benefits for users of the information.\1071\ For similar 
reasons, we are not requiring registrants' summary disclosure to be 
formatted in XBRL.
---------------------------------------------------------------------------

    \1071\ See supra notes 1015-1017 and accompanying text.
---------------------------------------------------------------------------

3. Requirements for Technical Report Summaries
i. Rule Proposal
    We proposed rules that 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.\1072\ 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 summary.\1073\ The qualified person also would be 
required to sign and date the technical report summary.\1074\ We 
proposed this latter requirement to help ensure the reliability of the 
technical report summary.
---------------------------------------------------------------------------

    \1072\ See Proposing Release, Section II.G.3.
    \1073\ See id.
    \1074\ See id.
---------------------------------------------------------------------------

    We proposed specific requirements for the contents of the technical 
report summary to elicit scientific and technical information to 
support the determination and disclosure of mineral resources, mineral 
reserves, and material exploration results. The proposed requirements 
are similar in most respects to the items of information required for 
the summary report under Canada's NI 43-101.\1075\ They are also 
similar to the contents suggested in the mining engineering 
literature.\1076\ In the Proposing Release, we stated that 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.\1077\
---------------------------------------------------------------------------

    \1075\ See Canada's Form 43-101F1 (prescribing 27 sections for 
the technical report summary required for each material property 
pursuant to Canada's NI 43-101), http://web.cim.org/standards/documents/Block484_Doc111.pdf.
    \1076\ 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).
    \1077\ See Proposing Release, supra note 5, at Section II.G.
---------------------------------------------------------------------------

    We proposed that 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.\1078\ In addition, the proposed rules 
required the qualified person to draft the summary to conform, to the 
extent practicable, with plain English principles under the Securities 
Act and Exchange Act.\1079\ While the proposed requirements were 
designed primarily to help improve the readability of the technical 
report summary for the benefit of those investors who do not have a 
technical scientific or engineering background, they would also benefit 
more sophisticated investors to the extent that they result in a more 
readable and understandable document. They also are consistent with 
similar Canadian mining disclosure standards.\1080\
---------------------------------------------------------------------------

    \1078\ See id.
    \1079\ See 17 CFR 230.421 [Securities Act Rule 421] and 17 CFR 
240.13a-20 [Securities Exchange Act Rule 13a-20].
    \1080\ See Instruction 3 to Form 43-101F1 (``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 proposed that the technical report summary consist of some or 
all of 26 sections, depending upon the specific scope of the 
summary.\1081\ As proposed, a technical report summary that reports the 
results of a preliminary or final feasibility study would have to 
include all 26 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.\1082\
---------------------------------------------------------------------------

    \1081\ See Proposing Release, supra note 5, at Section II.G.3.
    \1082\ See id.
---------------------------------------------------------------------------

    Although the proposed sections were similar in most respects to the 
items of information required for the summary

[[Page 66409]]

report under Canada's NI 43-101,\1083\ there were a couple of notable 
differences. First, the proposed rules did 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.\1084\ Second, we proposed to include sections 
about hydrogeology and geotechnical data, including testing and 
analysis, which are not included in Canada's NI 43-101.
---------------------------------------------------------------------------

    \1083\ See supra note 1075 and accompanying text.
    \1084\ 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. 
See Item 3 of Canada's Form NI 43-101F1.
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ii. Comments on the Rule Proposal
    While acknowledging that the Commission's proposal to require 26 
specified sections in the technical report summary is similar to the 
content required under Canada's NI 43-101, numerous commenters urged 
the Commission to follow explicitly the content and format of Canada's 
Form 43-101F1 so that technical report summaries filed with the 
Commission would be interchangeable with technical reports prepared 
under Canada's NI 43-101.\1085\ One of those commenters also 
recommended that the Commission explicitly incorporate the Canadian 
form by reference, ``which would allow for regular updates without 
going through additional rulemaking.'' \1086\ Several other commenters, 
however, recommended that the technical report summary follow the 
format of CRIRSCO's Table 1 and the corresponding guidance in JORC or 
SAMREC rather than the format and guidance under Canada's NI43-101 
because they viewed the latter as being too prescriptive.\1087\ One of 
those commenters further recommended that the Commission adopt ``carve-
outs'' for commercially sensitive information.\1088\ Another commenter 
opposed the proposed technical report summary requirement as being too 
prescriptive and recommended that the Commission refer U.S. registrants 
to the 2014 SME Guide, which would be included as an appendix to the 
final rules.\1089\
---------------------------------------------------------------------------

    \1085\ See letters from AIPG, Amec, Coeur, Eggleston, Gold 
Resource, Northern Dynasty, SME 1, and Willis.
    \1086\ Letter from AIPG.
    \1087\ See letters from AngloGold, BHP, JORC, MMSA, Randgold, 
Rio Tinto, and SAMCODES 1.
    \1088\ See letter from BHP.
    \1089\ See letter from CRIRSCO.
---------------------------------------------------------------------------

    Two commenters opposed the technical report summary filing 
requirement on the grounds that it ``is a significant change to the 
current SEC rules and goes beyond most CRIRSCO-based disclosure 
regimes, other than Canada and Australia, which do not require filing 
of expert reports.'' \1090\ One of those commenters also believed that 
many of the required sections in the proposed technical report summary 
seemed designed to satisfy some unstated social or political goal 
rather than to provide material information to investors.\1091\ The 
other commenter stated that the proposed rules would require a 
registrant in the aggregates business to collect and report on data 
that management typically does not use in its own analysis of its 
business.\1092\ Because that commenter believed that many sections of 
the technical report summary would result in immaterial information to 
investors due to the nature of the aggregates industry, and because of 
its concern that some of the requested information, such as pricing, 
would place confidential business plan information into the public 
domain to the detriment of its competitive position, the commenter 
requested that the Commission exclude registrants in the aggregates 
business from having to comply with the technical report summary 
requirement.\1093\
---------------------------------------------------------------------------

    \1090\ See letters from Chamber and NSSGA.
    \1091\ See letter from Chamber.
    \1092\ See letter from NSSGA.
    \1093\ See id.
---------------------------------------------------------------------------

    One commenter who opposed the proposed technical report summary 
because of its differences with CRIRSCO-based disclosure requirements 
stated that ideally the Commission should adopt mining disclosure rules 
that are substantially the same as the CRIRSCO-based codes. As an 
alternative, however, that commenter recommended that the Commission 
adopt a ``reciprocal recognition'' approach that would allow foreign 
issuers to file their home country (CRIRSCO-based) reports in 
satisfaction of the U.S. rules and U.S. issuers to file U.S. compliant 
reports in satisfaction of foreign requirements.\1094\
---------------------------------------------------------------------------

    \1094\ See letter from PDAC.
---------------------------------------------------------------------------

    Several commenters recommended changing the name of the technical 
report summary to either ``summary technical report'' or just 
``technical report.'' \1095\ Commenters urged such a change in order to 
align the name of the required report with that required under the 
CRIRSCO-based codes and because the Commission's proposed name suggests 
that there is a full technical report when in many instances there is 
not.
---------------------------------------------------------------------------

    \1095\ See letters from AIPG, Coeur, Eggleston, Gold Resource, 
Midas, and SME 1.
---------------------------------------------------------------------------

    Some commenters generally approved of the proposed 26 sections of 
the technical report summary while suggesting modifications for certain 
sections. For example, one commenter stated that adding sections on 
hydrogeology and geotechnical would be appropriate for reserve 
determination but not for resource estimation because such information 
is typically not available.\1096\ Another commenter recommended 
excluding those sections when disclosing exploration results for the 
same reason.\1097\ A third commenter recommended excluding from the 
technical report summary detailed hydrogeology and geotechnical data as 
well as any other detailed technical data that most investors would not 
find meaningful.\1098\
---------------------------------------------------------------------------

    \1096\ See letter from Midas; see also letter from MMSA.
    \1097\ See letter from Eggleston; see also letter from SRK 1 
(recommending excluding those sections for both exploration results 
and resource estimation).
    \1098\ See letter from Andrews & Kurth; see also letter from 
Amec (recommending exclusion of hydrogeology and geotechnical 
sections in conjunction with recommendation to exclude mineral 
brines and geothermal energy from scope of rules).
---------------------------------------------------------------------------

    Another commenter, however, supported the inclusion of sections on 
hydrology and rock mechanics.\1099\ This commenter agreed with most of 
the topics included in the proposed technical report summary 
requirement, but opposed requiring annual cash flow forecasts and 
measures of economic viability, such as net present value, internal 
rate of return and payback period of capital, under ``results of the 
economic analysis'' on the grounds that such information is sensitive 
and should only be requested under specific situations and afforded 
confidential treatment.\1100\
---------------------------------------------------------------------------

    \1099\ See letter from CBRR.
    \1100\ Id.
---------------------------------------------------------------------------

    One commenter urged the Commission to adopt a technical report 
summary provision requiring ``detailed descriptions of infrastructure 
needs for mining projects, especially dams, tailings disposal, water 
and energy access.'' \1101\ That commenter also supported adoption of 
the technical report summary provision requiring descriptions of the 
environmental, permitting, and social or community factors related to 
the project, which the commenter indicated would include a description 
of ``social license to operate'' risks.\1102\
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    \1101\ Letter from Earthworks.
    \1102\ See Id.
---------------------------------------------------------------------------

    Another commenter disagreed with the proposed requirement that a

[[Page 66410]]

qualified person opine on whether all issues relating to all relevant 
modifying factors can be resolved with further work. The commenter 
further opposed the proposed provision requiring a qualified person to 
justify the use of a pre-feasibility study instead of a feasibility 
study. According to that commenter, because the CRIRSCO standards 
require a pre-feasibility study to be sufficient for a competent 
person, acting reasonably, to determine if all or part of a mineral 
resource may be converted to a mineral reserve at the time of 
reporting, no additional justification for use of a pre-feasibility 
should be required.\1103\
---------------------------------------------------------------------------

    \1103\ See letter from Amec.
---------------------------------------------------------------------------

    In response to our solicitation of comment regarding whether we 
should expand the disclosure required by the technical report summary, 
most commenters \1104\ that addressed the issue did not favor expanding 
the technical report summary provision that would require the qualified 
person to describe the environmental, permitting, and social or 
community factors related to the project.\1105\ One of those commenters 
objected to expanding the mining property disclosure requirements to 
include a more detailed discussion regarding sustainability and related 
issues on the grounds that it already discloses material environmental, 
social, and governance information for investors in its corporate 
social responsibility reports that it publishes annually on its web 
site.\1106\ The commenter further noted that, to the extent that 
sustainability issues present a material risk, a registrant would 
already have to disclose that risk in the Risk Factors section of its 
Exchange Act annual report.\1107\
---------------------------------------------------------------------------

    \1104\ See letters from Alliance, Amec, AngloGold, CRIRSCO, 
Eggleston, JORC, Midas, Newmont, NMA 1, Rio Tinto, SME 1, and SRK 1. 
See also letter from CBRR (stating that the proposed items are 
sufficient but suggesting that the Commission clarify that a 
registrant may add ``any other significant information that is 
relevant to the project'').
    \1105\ See, e.g., letter from Alliance (``We believe that 
requiring disclosure of issues related to environmental, permitting 
and social or community factors, such as how the registrant is going 
to manage greenhouse gases, workforce health, safety and well-being, 
within the technical report summary could require a qualified person 
to attempt to estimate amounts or impacts for which they have no 
expertise. . . . We believe that a qualified person should include 
in the technical report those amounts that can be readily determined 
based on the professional qualifications of the qualified person'').
    \1106\ See letter from Newmont.
    \1107\ See id.
---------------------------------------------------------------------------

    Some commenters, however, recommended that the Commission require a 
registrant and its qualified person(s) to consider sustainability 
factors when determining mineral resources and reserves.\1108\ For 
example, one commenter suggested that the Commission explicitly require 
a carbon budget analysis in the economic viability determination for 
proven reserves.\1109\ This commenter also recommended that the 
Commission: (i) Require the use of a spectrum of price forecasts and 
sensitivity analysis in assessing the economic recoverability of a coal 
deposit; and (ii) expand the definition of a qualified person to 
require an expertise in conducting a carbon budget analysis.\1110\
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    \1108\ See letters from Carbon Tracker, Columbia, CRIRSCO, 
CSP\2\, Earthworks, and SASB.
    \1109\ See letter from Carbon Tracker. Such a provision would 
require a qualified person, as part of his or her coal resource and 
reserve determinations, to consider, as a modifying factor, whether 
the reserve could be economically produced in a scenario in which 
demand is consistent with the climate change prevention goal of 
maintaining a global temperature increase of no greater than 2[deg] 
C on an annual basis.
    \1110\ See id.
---------------------------------------------------------------------------

    Another commenter urged the Commission to require the consideration 
of numerous sustainability topics when applying the modifying factors 
in mineral resource and reserve determinations.\1111\ Under this 
approach, for metals mining, a qualified person would have to consider 
greenhouse gas emissions, air quality, biodiversity impacts, community 
relations and rights of indigenous peoples, and workforce health, 
safety, and well-being together with energy management, water 
management, and waste and hazardous materials management. The commenter 
further recommended that the Commission explicitly require a qualified 
person to have relevant experience to assess and render judgment on any 
potential modifying factor.\1112\
---------------------------------------------------------------------------

    \1111\ See letter from SASB.
    \1112\ See id; see also letter from CSP\2\ (stressing the 
importance of identifying potential environmental liabilities in the 
technical report summary); letter from Columbia (recommending 
requiring in the technical report summary a detailed discussion of 
three particular areas of water-related risk: Water scarcity; 
tailings dam operation and extreme rainfall; and environmental 
performance); and letter from Earthworks (recommending requiring a 
registrant to disclose several additional material environmental and 
social risks associated with its mining operations, including: 
Externalized impacts resulting from a particular mining project that 
fall upon the local community rather than the mining company; risks 
resulting from a registrant's reliance on self-bonds and other 
corporate guarantees; the potential for acid mine drainage and heavy 
metal discharge as revealed by initial exploratory drilling; risks 
from litigation or permit challenges; and local, regional, and state 
government resolutions against a mining project).
---------------------------------------------------------------------------

    One commenter supported the consideration of climate, 
environmental, social, safety, and health modifying factors both in 
technical studies and company reports.\1113\ Noting that most companies 
address sustainability issues in detail in separate reports, the 
commenter recommended that sustainability information should only be 
provided in a technical report in summary form.\1114\ Another commenter 
noted that, although environmental and social matters have become 
``extremely important'' in the estimation of mineral resources and 
reserves, those matters are already part of the modifying factors 
required to be considered under the CRIRSCO framework.\1115\
---------------------------------------------------------------------------

    \1113\ See letter from CRIRSCO.
    \1114\ See id.
    \1115\ See letter from JORC.
---------------------------------------------------------------------------

    One commenter requested clarification of two instructions to the 
proposed technical report summary provision that requires a qualified 
person to 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. That commenter objected to the use of the term 
``successfully'' to qualify processing methods, plant designs, and 
other parameters that have not yet been used in a commercial production 
of the valuable product from the mineralization under consideration 
because he believed that the term was vague.\1116\ The commenter found 
the phrase ``successfully extract'' to be technically vague and 
questioned whether there is a particular scale at which extraction is 
successful and whether ``successful'' means economically profitable or 
technically demonstrated. The commenter recommended replacing 
``successfully extract'' with ``commercially'' or ``in production.'' 
The commenter also stated that ``[f]urther clarification is warranted 
to clarify if demonstration plants or pilot plant operations can be 
used to warrant a process method as `successful'.'' \1117\
---------------------------------------------------------------------------

    \1116\ See letter from Moats.
    \1117\ Id. Another commenter recommended substituting for 
proposed Instruction 2 to paragraph (b)(96)(iv)(B)(16) the 
following: ``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 it is the responsibility of the Qualified Person to assess the 
scale and type of testing that has been completed and the entirety 
of the metallurgical data to determine whether or not mineral 
resources or mineral reserves can be disclosed. Justifications for 
the disclosures must be fully reported and detailed.'' Letter from 
Newmont. That commenter suggested this revised instruction to avoid 
unnecessarily restricting the application of future processing 
methods or designs in delineating resource and reserve estimates.
---------------------------------------------------------------------------

    Some commenters urged the Commission to modify the proposed

[[Page 66411]]

technical report summary provision requiring a qualified person to 
describe the results of the economic analysis, including annual cash 
flow forecasts based on an annual production schedule for the life of 
the project. Those commenters requested that the Commission follow 
Canada's NI 43-101 by allowing producing registrants to omit annual 
cash flow forecasts unless a material expansion of existing production 
is planned on the grounds that detailed information regarding costs, 
production, and cash flow is confidential business information.\1118\
---------------------------------------------------------------------------

    \1118\ See letters from Amec, Newmont, SME 1, and Vale.
---------------------------------------------------------------------------

    Most commenters that addressed the issue agreed with the 
Commission's proposal 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.\1119\ One commenter, however, stated 
that technical reports must include sufficient data to demonstrate the 
viability of mineral resources and mineral reserves, questioned the 
point at which the number of data becomes ``large,'' and recommended 
that the Commission require the inclusion of as much summary data as 
practicable.\1120\ Another commenter stated that it is not necessary 
that large amounts of technical data, such as hydrologic and 
geotechnical information, be included as appendices in the technical 
report as long as the information is publicly available and accessible, 
and references to the information are provided.\1121\
---------------------------------------------------------------------------

    \1119\ See letters from Alliance, Amec, AngloGold, CBRR, Gold 
Resource, Midas, Northern Dynasty, Rio Tinto, and SRK 1.
    \1120\ See letter from Eggleston.
    \1121\ See letter from CSP\2\.
---------------------------------------------------------------------------

    Most commenters that addressed the issue also supported the 
Commission's proposal to require the public filing of the technical 
report summary as an exhibit to the Commission filing in which the 
registrant first discloses mineral resources, mineral reserves, or 
material exploration results or reports a material change to the 
previously disclosed estimates.\1122\ Some commenters, however, opposed 
the proposed public filing requirement of a technical report summary on 
the grounds that: Because currently only two jurisdictions (Canada and 
Australia) require the public filing of a technical report summary, the 
proposed requirement would result in an incremental reporting burden in 
the United States relative to most other jurisdictions; \1123\ or the 
technical report summary would require the inclusion of voluminous 
amounts of technical data, some of which would be competitively 
sensitive, and most of which would not be meaningful to investors, and 
which would be burdensome to produce.\1124\ In lieu of a technical 
report summary, one of those commenters suggested that the Commission 
allow registrants to prepare reports in accordance with the guidelines 
set forth in CRIRSCO Table 1 or JORC Table 1.\1125\
---------------------------------------------------------------------------

    \1122\ See letters from Amec, AngloGold, Carbon Tracker, 
Eggleston, Gold Resource, Midas, Northern Dynasty, Rio Tinto, SME 1, 
SRK 1, and Willis. Amec and Gold Resource supported the proposed 
filing requirement for mineral resources and reserves but not for 
material exploration results.
    \1123\ See letter from Davis Polk.
    \1124\ See letters from Alliance and FCX.
    \1125\ See letter from FCX.
---------------------------------------------------------------------------

iii. Final Rules
    Like the proposed rules, the final rules require a registrant 
disclosing information concerning its mineral resources or mineral 
reserves determined to be on a material property to file a technical 
report summary by one or more qualified persons to support such 
disclosure of mineral resources or reserves.\1126\ While the disclosure 
requirements for the technical report summary are based in particular 
on Canada's NI 43-101F1, they are substantially similar to the criteria 
specified in CRIRSCO's Table 1 and JORC's Table 1, which must be 
considered by the qualified or competent person when preparing reports 
on exploration results, mineral resources, or mineral reserves.\1127\
---------------------------------------------------------------------------

    \1126\ 17 CFR 229.601(b)(96)(i) [Item 601(b)(96)(i) of 
Regulation S-K].
    \1127\ There is substantial overlap in the substantive 
requirements under Canada's NI 43-101F1 and the criteria specified 
in CRIRSCO's Table 1 and JORC's Table 1. The primary difference 
between Canada's NI 43-101F1 and the latter two Tables is in the 
format and organization of the resulting report. The ``checklist'' 
format of the two Tables tends to result in more abbreviated 
reporting than the more formal requirements of Canada's NI 43-101F1.
---------------------------------------------------------------------------

    Many commenters supported the Commission's proposal to require a 
registrant to obtain a technical report summary from the qualified 
person for each material property when first reporting estimates of 
mineral resources or mineral reserves, or when reporting a material 
change in previously reported estimates.\1128\ As one commenter 
indicated, many mining companies, including U.S. registrants that are 
cross-listed, already prepare technical reports in CRIRSCO-based 
jurisdictions either for public filing or for internal use.\1129\ In 
addition to Canada and Australia, other foreign jurisdictions have 
adopted formal requirements for a technical report by a qualified or 
competent person, which are substantially similar to our final rule 
requirements.\1130\ This confirms our view that our technical report 
summary requirement is consistent with the CRIRSCO standards and will 
help promote comparability in the reporting by qualified persons.
---------------------------------------------------------------------------

    \1128\ See supra note 193 and accompanying text.
    \1129\ See letter from SRK 1.
    \1130\ For example, the South African SAMREC Code includes 
requirements for a competent person's report that are substantially 
similar to our final rule requirements and those under Canada's NI 
43-101F1 both in terms of content and organizational format. The 
SAMREC code recommends that all public disclosure of exploration 
results, mineral resources, and mineral reserves include a competent 
person's report or a reference to one. See SAMREC Code (2016), supra 
note 267, Appendix 1. The London Stock Exchange and its Alternative 
Investment Market also require a competent person's report from 
mining issuers as part of their initial listing requirements. These 
requirements are also similar to our final rule requirements. See 
London Stock Exchange, AIM Note for Mining and Oil & Gas Companies 
(June 2009).
---------------------------------------------------------------------------

    The final rules require that, for each material property, the 
qualified person(s) must identify and summarize the scientific and 
technical information and conclusions reached concerning initial 
assessments used to support disclosure of mineral resources, or 
concerning preliminary or final feasibility studies used to support 
disclosure of mineral reserves, in the technical report summary.\1131\ 
The 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, as applicable, exploration results, to the 
extent they are material to investors. Because these requirements are 
similar in most respects to the items of information required for the 
summary report under Canada's NI 43-101 \1132\ and the criteria 
specified in CRIRSCO Table 1 and JORC Table 1 as well as to the 
contents suggested in the mining engineering literature,\1133\ we 
continue to believe that the specified sections of the technical report 
summary will provide relevant and useful information to facilitate an 
investor's understanding of a registrant's mineral resources, mineral 
reserves, and material exploration results.
---------------------------------------------------------------------------

    \1131\ See Item 601(b)(96)(i) of Regulation S-K. As previously 
discussed, see supra Section II.C.1.iii., each qualified person who 
has prepared the technical report summary must sign and date the 
technical report summary. If more than one qualified person has 
prepared the technical report summary, the technical report summary 
must clearly delineate the section or sections of the summary 
prepared by each qualified person. See Item 1302(b)(1) of Regulation 
S-K. The qualified person's signature must comply with 17 CFR 
230.402(e) or 17 CFR 240.12b-11(d).
    \1132\ See supra note 1075 and accompanying text.
    \1133\ See supra note 1076 and accompanying text.

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[[Page 66412]]

    While we are adopting the technical report summary requirements 
largely as proposed,\1134\ in response to the concern of some 
commenters \1135\ that the proposed technical report summary 
requirement would impose an undue compliance burden on registrants, we 
have made a number of changes in the required content of the technical 
report summary. For example, the final rules clarify that the 
information specified under the various sections of the technical 
report summary is to be provided only to the extent that it is 
material.\1136\ This clarification recognizes that, due to the 
diversity of operations in the mining industry, some sections may 
require little to no disclosure for certain registrants because those 
sections are not material to an investor's understanding of their 
particular mining operations.
---------------------------------------------------------------------------

    \1134\ 17 CFR 229.601(b)(96)(iii)(B) [Item 601(b)(96)(iii)(B) of 
Regulation S-K], which is set forth in its entirety in Section VII, 
below. A technical report summary that reports the results of a 
preliminary or final feasibility study must include all of the 
information specified in these 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 these sections. See 17 CFR 229.601(b)(96)(iii)(A) [Item 
601(b)(96)(iii)(A) of Regulation S-K].
    \1135\ See, e.g., letters from Chamber and NSSGA.
    \1136\ See Item 601(b)(96)(iii)(B) of Regulation S-K.
---------------------------------------------------------------------------

    Other revisions to the required content of the technical report 
summary reflect changes to the proposed disclosure rules that have 
already been discussed in some detail. We believe these changes will 
help decrease the compliance burden of the technical report summary 
requirement, relative to the proposed requirement. For example, the 
final rules:

     No longer require the technical report summary to 
include a quantitative assessment of risk for resource 
determination; \1137\
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    \1137\ See 17 CFR 229.601(b)(96)(iii)(B)(11)(v).
---------------------------------------------------------------------------

     permit the qualified person to disclose mineral 
resource estimates that include mineral reserves; \1138\
---------------------------------------------------------------------------

    \1138\ See 17 CFR 229.601(b)(96)(iii)(B)(11)(ii) [Item 
601(b)(96)(iii)(B)(11)(ii) of Regulation S-K ]. The qualified person 
must also disclose mineral resource estimates that exclude the 
mineral reserves.
---------------------------------------------------------------------------

     permit the qualified person to use any reasonable and 
justifiable price when determining both mineral resource and reserve 
estimates; \1139\
---------------------------------------------------------------------------

    \1139\ See 17 CFR 229.601(b)(96)(iii)(B)(11)(iii) [Item 
601(b)(96) )(iii)(B)(11)(iii) of Regulation S-K]; and 17 CFR 
229.601(b)(96)(iii)(B)(12)(iii) [Item 601(b)(96) )(iii)(B)(12)(iii) 
of Regulation S-K ].
---------------------------------------------------------------------------

     permit the qualified person to estimate both mineral 
resources and mineral reserves at a single point of reference 
selected by the qualified person; \1140\
---------------------------------------------------------------------------

    \1140\ See 17 CFR 229.601(b)(96)(iii)(B)(11)(i) [Item 
601(b)(96)(iii)(B)(11)(i) of Regulation S-K]; and 17 CFR 
229.601(b)(96)(iii)(B)(12)(i) [Item 601(b)(96)(iii)(B)(12)(i) of 
Regulation S-K].
---------------------------------------------------------------------------

     permit the qualified person to include inferred 
resources in the technical report summary's economic analysis when 
determining and disclosing mineral resource estimates; \1141\ and
---------------------------------------------------------------------------

    \1141\ See 17 CFR 229.601(b)(96)(iii)(B)(19)(iv) [Item 
601(b)(96)(iii)(B)(19)(iv) of Regulation S-K].
---------------------------------------------------------------------------

     require the qualified person to provide information 
describing the underlying property in which a royalty company 
registrant holds an interest only to the extent known or reasonably 
available.\1142\
---------------------------------------------------------------------------

    \1142\ See 17 CFR 229.601(b)(96)(iii)(B)(3)(vii) [Item 
601(b)(96)(iii)(B)(3)(vii) of Regulation S-K].

    In addition, unlike the proposed rules, the final rules permit, but 
do not require, a registrant to file a technical report summary to 
support the disclosure of material exploration results.\1143\ We 
believe that this elective treatment will also help limit the final 
rules' compliance burden.
---------------------------------------------------------------------------

    \1143\ See Item 601(b)(96)(i) of Regulation S-K.
---------------------------------------------------------------------------

    In another change from the proposed rules, in response to comments 
received,\1144\ the final rules do not require separate sections about 
hydrogeology and geotechnical data, including testing and analysis. We 
have instead included the requirements for hydrogeology and 
geotechnical data, including testing and analysis, in the requirements 
for exploration data.\1145\ Consistent with the views of some 
commenters,\1146\ we continue to believe that disclosure regarding 
these two items, to the extent that they are material, is important and 
will benefit investors. Hydrogeology and geotechnical data are the 
basis for determining several design parameters that directly affect 
the safety of the designed mine. Moreover, these design parameters can 
affect the operating and capital costs and can, therefore, directly 
affect the economics of the mine (i.e., the determination of reserves). 
Detailed hydrogeology and geotechnical data will therefore provide 
insight into the adequacy and appropriateness of the mine's design 
parameters, which will allow investors and their advisors to evaluate 
fully the disclosed economic viability of the mine. Nevertheless, by 
moving the disclosure requirements for these two items in the section 
regarding exploration data, we believe that it will be easier for 
registrants to understand and comply with those requirements since they 
will be placed within their proper context.
---------------------------------------------------------------------------

    \1144\ See supra notes 1097-1098 and accompanying text.
    \1145\ 17 CFR 229.601(b)(96)(iii)(B)(7) [Item 
601(b)(96)(iii)(B)(7) of Regulation S-K].
    \1146\ See, e.g., letters from Midas and MMSA.
---------------------------------------------------------------------------

    In response to the commenter \1147\ who suggested that our 
instructions to the required disclosure on ``processing and recovery 
methods'' were vague because we used the term ``successfully'' to 
qualify processing methods, plant designs, and other parameters that 
have not yet been used in a commercial production of the valuable 
product from the mineralization under consideration, we are adopting an 
alternative provision.\1148\ This provision states that, if the 
processing method, plant design or other parameters have never been 
used to ``commercially'' 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.\1149\ Similarly, an instruction provides 
that, if the processing method, plant design, or other parameter has 
never been used to ``commercially'' 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, 
design, or other parameter.\1150\ We are also clarifying, in response 
to a commenter's concern,\1151\ that we consider a processing method or 
plant design that has been demonstrated to be effective in a 
demonstration or pilot plant to be adequate to meet the standard that 
it is no longer ``under development.'' Such a processing method, plant 
design, or other parameters resulting from the demonstration or pilot 
plant can, therefore, be the basis for disclosure of mineral resources 
or reserves.
---------------------------------------------------------------------------

    \1147\ See letter from Moats.
    \1148\ This provision is similar, although not identical, to the 
instruction suggested by another commenter. See letter from Newmont.
    \1149\ 17 CFR 229.601(b)(96)(iii)(B)(14)(iv) [Item 
601(b)(96)(iii)(B)(14)(iv) of Regulation S-K].
    \1150\ Instruction 1 to 17 CFR 229.601(b)(96)(iii)(B)(14) [Item 
601(b)(96)(iii)(B)(14) of Regulation S-K].
    \1151\ See letter from Amec.
---------------------------------------------------------------------------

    Consistent with comments received,\1152\ we are adopting final 
rules, as proposed, that restrict the technical report summary from 
including large amounts of technical or other project data, either in 
the report or as appendices to the report.\1153\ In addition, the 
qualified person must draft the summary to conform, to the extent 
practicable, with the plain English principles set forth under the 
Securities Act and Exchange Act.\1154\ These

[[Page 66413]]

requirements should help improve the readability of the technical 
report summary for the benefit of investors, particularly for those who 
lack a scientific background, but also for more sophisticated investors 
who may be familiar with the mining industry but who are not geologists 
or mining engineers. These requirements are consistent with similar 
Canadian mining disclosure standards \1155\ and also with the 
transparency principle under the CRIRSCO standards, which ``requires 
that the reader of a Public Report is provided with sufficient 
information, the presentation of which is clear and unambiguous, so as 
to understand the report and not to be misled.'' \1156\
---------------------------------------------------------------------------

    \1152\ See supra note 1119 and accompanying text.
    \1153\ 17 CFR 229.601(b)(96)(ii) [Item 601(b)(96)(ii) of 
Regulation S-K].
    \1154\ See id; see also Securities Act Rule 421 and Securities 
Exchange Act Rule 13a-20.
    \1155\ See Instruction 3 to Canada's Form 43-101F1.
    \1156\ CRIRSCO International Reporting Template, supra note 20, 
at cl. 3. Also as proposed, the final rules similarly require a 
registrant, when providing either summary or individual property 
disclosure: To use plain English principles, to the extent 
practicable; to not include detailed illustrations and technical 
reports, full feasibility studies, or other highly technical data, 
but to furnish such reports and other material supplementally to the 
staff upon request; and to 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. See 17 CFR 229.1301(d). The first two 
requirements are consistent with Securities Act Rule 421 and 
Exchange Act Rule 13a-20. The third requirement is consistent with 
current practice pursuant to Guide 7's guidance that an appropriate 
glossary should be included in a Commission filing if technical 
terms relating to geology, mining, or related matters, whose 
definition cannot readily be found in conventional dictionaries, are 
used. See paragraph (b)(6) of Guide 7.
---------------------------------------------------------------------------

    While we acknowledge the concerns of those commenters \1157\ that 
stated that we should use a different name, we continue to believe 
``technical report summary'' more accurately reflects the disclosure we 
are requiring. By using this name, we do not mean to imply that there 
necessarily exists, in all cases, a single compilation of all the 
technical information and documentation (a ``technical report'') from 
which the qualified person will summarize the information and prepare 
the technical report summary. However, we believe that, in all cases, 
there will be such information and documentation (even if there is no 
single compilation), which forms the basis of the qualified person's 
(or persons') determination that there exist exploration results, 
mineral resources, or mineral reserves. Because, in preparing the 
technical report summary, the qualified person must summarize such 
information, we believe the name is appropriate.
---------------------------------------------------------------------------

    \1157\ See supra note 1095 and accompanying text.
---------------------------------------------------------------------------

    We agree with those commenters that stated there is no need to 
expand the technical report summary provision to require the qualified 
person to describe in more detail the factors pertaining to 
environmental compliance, permitting, and local individuals or groups, 
which are related to the project. We do not believe it is necessary to 
prescribe more specific requirements about those factors because they 
are already required to be considered and disclosed by the qualified 
person as a technical or modifying factor.\1158\ As is current industry 
practice, the final rules require the qualified person to describe all 
relevant factors pertaining to environmental compliance, permitting, 
and local individuals or groups, which are material to establishing 
reasonable prospects of economic extraction for mineral resources and 
economic viability for mineral reserves.\1159\ The final rules require 
the technical report summary to 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, 
negotiations, and agreements with local individuals or groups; and mine 
closure plans, including remediation and reclamation plans, and the 
associated costs.\1160\ The technical report summary must also include 
the qualified person's opinion on the adequacy of current plans to 
address any issues related to environmental compliance, permitting, and 
local individuals or groups. We believe the scope of these technical 
report summary requirements is sufficient to address the environmental 
and sustainability issues of concern to investors. We also agree with 
those commenters that stated that requiring additional disclosure on 
these issues in a registrant's technical report summary would be overly 
prescriptive and could duplicate disclosure that the registrant may 
provide in its corporate social responsibility report.\1161\
---------------------------------------------------------------------------

    \1158\ See supra note 1104 and accompanying text.
    \1159\ See Item 601(b)(96)(iii)(B)(17) of Regulation S-K.
    \1160\ See id.
    \1161\ See, e.g., letter from CRIRSCO.
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    As proposed, the adopted rules require the qualified person to 
provide the results of the economic analysis in the technical report 
summary, which is filed as an exhibit to the registrant's 
disclosure.\1162\ This further aligns our rules with the transparency 
principle underlying the CRIRSCO-based codes by requiring public 
disclosure of the underlying technical and economic analysis that is 
the basis for a disclosure of mineral resources or reserves. We note 
that Canada's NI 43-101 and Australia's JORC require disclosure of 
investment decision criteria such as net present value (NPV) and 
internal rate of return (IRR) to support the disclosure of mineral 
resources and reserves.\1163\ Therefore, we believe this requirement 
should not impose an unduly high compliance burden, especially for 
those US registrants that are dual-listed in Canada or Australia.
---------------------------------------------------------------------------

    \1162\ 17 CFR 229.601(b)(96)(iii)(B)(19) [Item 
601(b)(96)(iii)(B)(19) of Regulation S-K].
    \1163\ See, e.g., Canada's NI 43-101 F1, Item 22 (requesting the 
qualified person to ``[p]rovide an economic analysis that includes . 
. . (c) a discussion of net present value (NPV), internal rate of 
return (IRR), and payback period of capital with imputed or actual 
interest''). See also JORC Code, supra note 175, Table 1, Section 4 
(requesting ``[t]he inputs to the economic analysis to produce the 
net present value (NPV) in the study, the source and confidence of 
these economic inputs including estimated inflation, discount rate, 
etc. NPV ranges and sensitivity to variations in the significant 
assumptions and inputs'').
---------------------------------------------------------------------------

    The final rules do not provide exemptions for any particular class 
of registrants because we believe investors in all registrants with 
material mining operations will benefit from the requirement to file a 
technical report summary. This is generally consistent with the 
approach taken in those CRIRSCO-based jurisdictions that require 
disclosure of technical report summaries.\1164\ Although some 
commenters requested that we permit producing registrants to omit cash 
flow forecasts under certain circumstances,\1165\ we decline to do so 
because we believe that such an exemption could result in the omission 
of material information, to the detriment of investors. Cash flow 
forecasts are essential to establishing whether portions of indicated 
and measured mineral resources can be mined economically (at a profit) 
and, thus, meet the definition of a mineral reserve. Without this 
information, investors will have no basis to know the level of 
confidence to associate with any mineral reserve determination, 
especially since registrants, through management, choose what economic 
criteria to apply to make the determination that the mining is 
economic.
---------------------------------------------------------------------------

    \1164\ For example, Canada's NI 43-101 and JORC provide no 
exemptions from the requirement to provide technical report 
summaries to support mining property disclosures. We also note that 
Canadian registrants are subject to a broader technical report 
summary requirement in NI 43-101, which requires all material 
properties to have a technical report regardless of whether the 
registrant is disclosing mineral resources and reserves or not.
    \1165\ See supra note 1118 and accompanying text.
---------------------------------------------------------------------------

    For similar reasons, we decline to exempt registrants from 
disclosing the qualified person's price assumption

[[Page 66414]]

used to determine whether portions of indicated and measured mineral 
resources can be mined economically, in the technical report summary. 
We note that CRIRSCO-based codes also consider the price assumption to 
be a material assumption that the registrant must disclose in the 
supporting documentation.\1166\
---------------------------------------------------------------------------

    \1166\ For example, both CRIRSCO Table 1 and JORC Table 1 
require disclosure of the price for mineral reserve disclosure under 
``revenue factors.''
---------------------------------------------------------------------------

    We also are not exempting registrants in the industrial minerals or 
aggregates industry from the technical report summary requirements, as 
requested by some commenters.\1167\ We note that industrial minerals or 
aggregates registrants are much less likely to ever have to provide 
technical report summaries since most have no individually material 
mining properties. If such a registrant has individually material 
properties, then we believe it is appropriate to provide a technical 
report summary as any disclosure of mineral resources and reserves on 
those properties will likely be material to investors. Also, since 
industrial minerals and aggregates registrants go through the same 
scientific and engineering analysis to estimate mineral resources and 
reserves, they should already generate much of the information we are 
requesting in the technical report summaries.
---------------------------------------------------------------------------

    \1167\ See letters from Alliance and NSSGA.
---------------------------------------------------------------------------

    The final rules also do not incorporate by reference or otherwise 
adopt on a going forward basis the technical report requirements in 
Canada's NI 43-101,\1168\ JORC,\1169\ or the SME Guide,\1170\ as 
suggested by some commenters. As previously mentioned, we believe that 
doing so would effectively bind the Commission's rules to current and 
future iterations and interpretations of these requirements, over which 
the Commission would have little to no control or influence.\1171\
---------------------------------------------------------------------------

    \1168\ See supra note 1085 and accompanying text.
    \1169\ See supra note 1087 and accompanying text.
    \1170\ See letter from NMA 2 and SME 3.
    \1171\ See supra Section II.C.2.
---------------------------------------------------------------------------

    We also are not adopting a ``reciprocal recognition'' approach that 
would allow non-U.S. foreign issuers to file their home country 
(CRIRSCO-based) reports in satisfaction of the Commission's rules, as 
suggested by some commenters.\1172\ We do not believe a reciprocal 
recognition approach is appropriate because, although we have more 
closely aligned our technical report summary requirements with the 
CRIRSCO standards and, in particular, with the Canadian technical 
report requirements, there are nevertheless important differences, such 
as the final rules' prohibition against disclaimers of liability for 
information provided by the qualified person based on the work of a 
third-party specialist who the qualified person has hired.\1173\ We 
believe these differences provide meaningful protection for investors.
---------------------------------------------------------------------------

    \1172\ See, e.g., letters from Dorsey & Whitney and PDAC.
    \1173\ Other differences include the final rules' requirement 
that a registrant disclose resource estimates exclusive of reserves 
and the inclusion of mineral brines in the definition of mineral 
resources.
---------------------------------------------------------------------------

4. Requirements for Internal Controls Disclosure
i. Rule Proposal
    We proposed to require that a registrant describe the internal 
controls \1174\ that it uses in its exploration and mineral resource 
and reserve estimation efforts. As proposed, such disclosure should 
address quality control and quality assurance programs, verification of 
analytical procedures, and comprehensive risk inherent in the 
estimation.\1175\ We proposed an instruction stating 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.\1176\
---------------------------------------------------------------------------

    \1174\ 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 
17 CFR 229.1202(a)(7) [Item 1202(a)(7) of Regulation S-K].
    \1175\ See Proposing Release, supra note 5, at Section II.G.4.
    \1176\ See id.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Most commenters that addressed the issue supported the proposal to 
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.\1177\ One 
commenter, however, opposed such a requirement, other than for mineral 
reserve estimates, indicating that this information should already be 
included as part of management's discussion of internal controls over 
financial reporting. According to that commenter, anything beyond that 
would create a significant burden on registrants and greatly outweigh 
any marginal benefit to investors.\1178\ A second commenter opposed an 
internal controls disclosure requirement as part of the Commission's 
revised mining property disclosure rules on the grounds that there 
should be a global alignment of minimum reporting requirements for 
mining registrants. According to that commenter, the proposed internal 
controls disclosure requirement would impose a greater disclosure 
requirement on registrants reporting under a CRIRSCO-based code, such 
as JORC or SAMREC.\1179\
---------------------------------------------------------------------------

    \1177\ See, e.g., letters from AngloGold, CBRR, Eggleston, Midas 
and Rio Tinto.
    \1178\ See letter from Alliance.
    \1179\ See letter from Randgold.
---------------------------------------------------------------------------

    One commenter suggested a more detailed framework for the 
disclosure of internal controls. This framework addressed the 
accountability of management in the assessment of exploration results 
and estimates of mineral resources and mineral reserves, the assessment 
of internal controls over the reporting of exploration results and 
estimates of mineral resources and reserves, and changes in internal 
controls over the reporting of exploration results and estimates of 
mineral resources and reserves.\1180\
---------------------------------------------------------------------------

    \1180\ See letter from AngloGold.
---------------------------------------------------------------------------

    Another commenter stated that it is common industry practice to 
have QA/QC programs when undertaking mineral exploration.\1181\ 
According to the commenter, however, the Commission's proposed internal 
control provision may have inappropriately included internal controls 
for corporate governance purposes. That commenter therefore requested 
that the Commission provide clear instructions regarding how the mining 
industry can achieve the objective of the internal controls 
requirement.\1182\
---------------------------------------------------------------------------

    \1181\ See letter from Amec.
    \1182\ See id.
---------------------------------------------------------------------------

iii. Final Rules
    We are adopting rules that, as proposed, require a registrant to 
describe the internal controls that it uses in its exploration and 
mineral resource and reserve estimation efforts, as proposed.\1183\ The 
final rules specify that such disclosure should address quality control 
and quality assurance programs, verification of analytical procedures, 
and comprehensive risk inherent in the estimation.\1184\ We

[[Page 66415]]

continue to believe that such internal controls disclosure would be 
beneficial to investors as it would help them 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 analyses. This requirement is 
consistent with disclosure requirements in most foreign mining 
jurisdictions. 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.\1185\ In addition, 
the listing rules of some of these jurisdictions specifically call for 
disclosure of the internal controls relating to estimates of mineral 
resources and reserves.\1186\
---------------------------------------------------------------------------

    \1183\ 17 CFR 229.1305(a) [Item 1305(a) of Regulation S-K].
    \1184\ See id. In this regard we are not adopting the detailed 
internal controls disclosure framework suggested by one commenter. 
See letter from AngloGold. While we recognize that some registrants 
may find it useful to model their internal controls disclosure along 
the lines suggested by this commenter, other registrants may 
reasonably conclude that a different or more abbreviated format is 
suitable for their mining operations.
    \1185\ See, e.g., JORC Code, supra note 175, Table 1; Canada's 
NI 43-101, supra note 123, at pt. 3.3; SAMREC Code, supra note 267, 
Table 1, at pt. 3.6. The SME Petition also recognized the need for 
and importance of appropriate internal and disclosure controls in 
the estimation of mineral reserves. See SME Petition for Rulemaking, 
supra note 6, at 17.
    \1186\ See, e.g., ASX Listing Rule 5.21.5 (requiring 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'').
---------------------------------------------------------------------------

    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. This current practice reinforces 
our belief that requiring internal controls disclosure by registrants 
regarding their exploration results and mineral resource and reserve 
estimates is appropriate and should not impose an undue burden.
    Another provision states that a registrant must provide the 
required internal controls disclosure whether it is providing summary 
disclosure under Item 1303, individual property disclosure under Item 
1304, or under both items.\1187\ 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.\1188\ We believe this same practice should apply when 
preparing and analyzing data for the purpose of individually material 
property disclosure as well as disclosure regarding properties that are 
only material in the aggregate. We also believe an internal controls 
disclosure requirement is particularly important for a company with 
multiple properties to ensure that best practice is followed across all 
properties.
---------------------------------------------------------------------------

    \1187\ See 17 CFR 229.1305(b) [Item 1305(b) of Regulation S-K].
    \1188\ See S. C. Kazmierczak, Laboratory Quality Control: Using 
Patient Data to Assess Analytical Performance, Clinical Chemistry 
and Laboratory Medicine 617-627 (2003); see generally M. J. Chandra, 
Statistical Quality Control (2001).
---------------------------------------------------------------------------

    In response to commenters,\1189\ we are clarifying that Item 1305 
requires disclosure of internal controls that the registrant has put in 
place to ensure that its exploration results and mineral resource and 
reserve estimates on its mining properties are reliable, and not for 
any other purpose. Given the similarity between our mining property 
internal controls requirement and those of other mining jurisdictions, 
our requirement 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, and for which providing such disclosure has not 
become current practice, we believe investors will benefit from such 
disclosure, though we recognize that registrants will incur additional 
costs.
---------------------------------------------------------------------------

    \1189\ See letters by FCX and Amec.
---------------------------------------------------------------------------

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

1. Form 20-F
i. Rule Proposal
    Foreign private issuers \1190\ use Form 20-F \1191\ as a 
registration statement under Section 12 of the Exchange Act \1192\ or 
as an annual or transition report filed under Section 13(a) \1193\ or 
15(d) of the Exchange Act.\1194\ Form 20-F also provides much of the 
substantive disclosure requirements for foreign private issuers filing 
Securities Act registration statements on Forms F-1,\1195\ F-3 \1196\ 
and F-4.\1197\
---------------------------------------------------------------------------

    \1190\ 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 and 17 CFR 240.3b-4(c) [Exchange 
Act Rule 3b-4(c)].
    \1191\ 17 CFR 249.220f.
    \1192\ 15 U.S.C. 78l.
    \1193\ 15 U.S.C. 78m(a).
    \1194\ 15 U.S.C. 78o(d).
    \1195\ 17 CFR 239.31.
    \1196\ 17 CFR 239.33.
    \1197\ 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.\1198\ 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 \1199\ rather than 
Item 102 of Regulation S-K. An instruction to Item 4 directs the 
registrant to ``[f]urnish the information specified in any industry 
guide listed in subpart 229.800 of Regulation S-K.'' \1200\ Thus, like 
domestic registrants, foreign private issuers currently provide the 
disclosures set forth in Guide 7.
---------------------------------------------------------------------------

    \1198\ See Securities Act Release No. 33-7745 (September 28, 
1999) [64 FR 53900].
    \1199\ 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.
    \1200\ Instruction 1 to Item 4 of Form 20-F.
---------------------------------------------------------------------------

    Because of our belief that the Commission's mining property 
disclosure rules should continue to apply to both foreign private 
issuers and domestic registrants, we proposed 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.\1201\ We further proposed to remove in 
their entirety the current instructions to Item 4.D of Form 20-F, 
which, among other matters, limit

[[Page 66416]]

the disclosure of estimates to proven and probable reserves.\1202\
---------------------------------------------------------------------------

    \1201\ See Proposing Release, supra note 5, at Section II.H.1.
    \1202\ 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 proposed 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.\1203\
---------------------------------------------------------------------------

    \1203\ See Proposing Release, Section II.H.1. 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 be required to file a 
technical report summary as an exhibit pursuant to proposed Item 
601(b)(96).
---------------------------------------------------------------------------

    As previously mentioned, we proposed to eliminate the ``foreign or 
state law'' exception under Item 102 and Guide 7 whereby Canadian 
registrants that report pursuant to Form 20-F and file registration 
statements on Forms F-1, F-3, and F-4 are currently permitted to 
provide mining disclosure that meets the requirements of Canada's NI 
43-101.\1204\ Thus, as proposed, 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'').\1205\
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    \1204\ See supra Section II.E.1.
    \1205\ 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.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Commenters that addressed the issue supported the Commission's 
proposal to amend Form 20-F to conform it to the disclosure 
requirements of proposed subpart 1300 and proposed Item 601(b)(96) of 
Regulation S-K so that foreign private issuers that use or refer to 
Form 20-F for their Commission filings would be subject to the same 
mining disclosure requirements as domestic mining registrants.\1206\ 
One commenter also approved of the proposal to preclude Canadian 
issuers, other than MJDS issuers, from providing reports pursuant to 
Canada's NI 43-101 in order to ensure comparability of reporting under 
the proposed rules.\1207\
---------------------------------------------------------------------------

    \1206\ See letters from Alliance, Amec, AngloGold, CBRR, 
Eggleston, Midas, Rio Tinto, SAMCODES 2, and SRK 1.
    \1207\ See letter from CBRR.
---------------------------------------------------------------------------

    Numerous commenters, however, recommended permitting Canadian 
registrants, including those that do not qualify for the MJDS, to 
continue providing mining disclosure that meets the requirements of 
Canada's NI 43-101.\1208\ As one commenter explained, ``the Foreign Law 
Exception should remain in place for Canadian foreign private issuers 
of all sizes as a recognition of the sufficiency of NI 43-101 for the 
protection of investors and the burdens of dual compliance for Canadian 
20-F Filers.'' \1209\
---------------------------------------------------------------------------

    \1208\ See letters from Amec, AngloGold, Dorsey & Whitney, 
Eggleston, Midas, SAMCODES 2, SME 1, SRK 1, and Troutman Sanders.
    \1209\ Letter from Troutman Sanders.
---------------------------------------------------------------------------

    Some commenters recommended allowing non-Canadian issuers to file 
the disclosure documents produced under their home country listing 
requirements as long as those requirements met CRIRSCO standards, such 
as JORC or SAMREC.\1210\ Some commenters stated that not permitting 
these issuers to file their CRIRSCO-based disclosure documents would be 
burdensome particularly if the Commission adopted the mining property 
disclosure requirements as proposed.\1211\
---------------------------------------------------------------------------

    \1210\ See letters from AngloGold, Midas, and Rio Tinto.
    \1211\ See, e.g., letters from Eggleston, Energy Fuels, and SME 
1.
---------------------------------------------------------------------------

iii. Final Rules
    We are adopting the proposed revisions to Form 20-F so that 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, will have to comply with the mining disclosure requirements of new 
subpart 1300 of Regulation S-K and the technical report summary 
requirements in Item 601(b)(96), as applicable. We continue to believe 
that, with the exception of MJDS registrants, foreign private issuers 
with material mining operations should be subject to the same mining 
property disclosure requirements as domestic registrants. This 
treatment will protect investors, who require information about the 
material mining operations of foreign registrants just as much as those 
of domestic registrants, and facilitate the comparison of mining 
property disclosure among most registrants.
    The final rules do not permit Canadian registrants that are not 
MJDS-eligible to continue to provide disclosure that meets the 
requirements of Canada's NI 43-101, nor do they permit non-Canadian 
registrants to file disclosure documents that meet the requirements of 
another CRIRSCO-based code to satisfy their U.S. reporting obligations, 
as recommended by some commenters. Commenters that made these 
recommendations were concerned about the significant differences 
between the CRIRSCO standards and the proposed rules, and the 
correspondingly significant compliance burden that a dual-listed 
registrant would incur if the Commission adopted those rules as 
proposed.\1212\ The final rules eliminate many of these differences, 
and are less prescriptive than the proposed rules in several 
respects.\1213\ For example, the final rules permit the registrant and 
its qualified person to use any reasonable and justifiable price when 
determining and disclosing estimates of mineral resources or mineral 
reserves. The final rules also permit a qualified person to prepare a 
pre-feasibility study for reserve determination, even in high risk 
situations, without being required to justify its use instead of a 
final feasibility study. We believe that these changes to the proposed 
rules, together with many others that we are adopting, will 
significantly limit the incremental burden of the final rules for dual-
listed issuers, and in particular for Canadian registrants. 
Furthermore, although most of the technical report summary requirements 
are based on the Canadian NI 43-101F1, there nevertheless are important 
differences between the Canadian technical report requirements and the 
final rules, such as the final rules' general prohibition against using 
disclaimers of liability. For these reasons, we do not believe it is 
necessary or appropriate to continue to permit Canadian issuers to 
prepare and submit their Commission filings in accordance with Canada's 
NI 43-101 under the ``foreign or state law'' exception or otherwise.
---------------------------------------------------------------------------

    \1212\ See, e.g., letters from Dorsey & Whitney, SME 1, and 
Troutman Sanders.
    \1213\ See supra Section I.B. for a summary of the principal 
changes to the proposed rules.
---------------------------------------------------------------------------

    We are not requiring MJDS registrants to comply with new subpart 
1300 because, as we explained in the Proposing Release,\1214\ the 
ability of

[[Page 66417]]

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. At least one 
commenter expressly approved of the Commission's proposal to permit 
MJDS filers to continue to meet their mining property disclosure 
obligations pursuant to Canada's NI 43-101.\1215\
---------------------------------------------------------------------------

    \1214\ See Proposing Release, supra note 5, at Section II.H.1.
    \1215\ See letter from Dorsey & Whitney.
---------------------------------------------------------------------------

2. Form 1-A
i. Rule Proposal
    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,\1216\ limiting the dollar amount of the offering 
\1217\ and, in certain instances, filing ongoing reports with the 
Commission.\1218\ Form 1-A is the offering statement used by issuers 
that are eligible to engage in securities offerings under Regulation 
A.\1219\
---------------------------------------------------------------------------

    \1216\ See 17 CFR 230.251(d) [Securities Act Rule 251(d)].
    \1217\ See 17 CFR 230.251(a) [Securities Act Rule 251(a)].
    \1218\ See 17 CFR 230.257 [Securities Act Rule 257].
    \1219\ 17 CFR 230.251-230.263.
---------------------------------------------------------------------------

    When the Commission amended Regulation A in 2015,\1220\ it updated 
Item 7 of Part II of Form 1-A concerning the required ``Description of 
Business'' disclosure by adding 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.\1221\
---------------------------------------------------------------------------

    \1220\ See Securities Act Release No. 33-9741 (March 25, 2015) 
[80 FR 21806] (``Regulation A Adopting Release'').
    \1221\ See Form 1-A, Part II, Item 7(c).
---------------------------------------------------------------------------

    Because this provision, however, only appears in Item 7(c) of Part 
II, which governs ``business'' disclosure, we proposed 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.\1222\ 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 proposed 
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.
---------------------------------------------------------------------------

    \1222\ See Proposing Release, supra note 5, at Section II.H.2. 
See also Item 8 of Part II to Form 1-A (Description of Property) 
(requiring 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''). We proposed to designate this current provision as 
paragraph (a) of Item 8.
---------------------------------------------------------------------------

    We also proposed 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 would require detailed 
descriptions of mining properties, we proposed to amend this 
instruction by excepting from its scope the disclosure required under 
the proposed rules, as referenced in paragraph (b) of Item 8.
    In order to require Regulation A issuers engaged in mining 
operations to be subject to the new subpart's technical report summary 
filing requirement, we proposed 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.\1223\
---------------------------------------------------------------------------

    \1223\ See Proposing Release, supra note 5, at Section II.H.2.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Several commenters addressed the Commission's proposal to amend 
Form 1-A to conform it to the disclosure requirements of proposed 
subpart 1300 and proposed Item 601(b)(96) of Regulation S-K so that 
Regulation A issuers engaged in mining operations would be subject to 
the same disclosure requirements as other issuers with mining 
operations.\1224\ One commenter stated that because Form 1-A filers are 
subject to the property disclosures outlined in Guide 7, it would be 
appropriate to subject them to the new mining property disclosure 
requirements.\1225\ Another commenter supported including Form 1-A 
filers within the scope of the new rules in order to align the mining 
property disclosure standards regardless of the type of 
registrant.\1226\ The other commenters supported the proposal without 
explanation.\1227\ No commenter opposed including Regulation A issuers 
within the scope of the new rules.
---------------------------------------------------------------------------

    \1224\ See letters from Alliance, AngloGold, CBRR, Midas, Rio 
Tinto, and SRK 1.
    \1225\ See letter from Alliance.
    \1226\ See letter from Rio Tinto.
    \1227\ See letters from AngloGold, CBRR, Midas, and SRK 1. One 
other commenter stated that he had no comment regarding the 
proposal. See letter from Eggleston.
---------------------------------------------------------------------------

iii. Final Rules
    We are adopting the proposed revisions to Form 1-A to require 
Regulation A issuers with material mining operations to comply with all 
of the disclosure requirements in subpart 1300 of Regulation S-K as 
well as the technical report summary requirements in Item 601(b)(96), 
as applicable. We continue to believe that investors in Regulation A 
offerings by issuers with material mining operations require the same 
information about those operations as investors in registered 
offerings. This treatment will also facilitate a comparison of mining 
property disclosure among issuers regardless of the type of issuer.

I. Transition Period and Compliance Date

    Several commenters requested that the Commission provide a 
transition period in order to give registrants ample time to prepare 
their Commission filings in compliance with the new mining property 
disclosure regime.\1228\ Several commenters recommended that the 
Commission provide a two-year transition period before the new regime 
would become mandatory.\1229\ Other commenters recommended a three-year 
transition period.\1230\ Commenters justified the need for a transition 
period based on the extensive changes to the current disclosure 
framework under Guide 7 \1231\ and because some registrants may not be 
subject to similar disclosure requirements under the CRIRSCO-based 
codes.\1232\ One of the commenters suggested that the Commission should 
permit registrants to comply earlier on a voluntary basis.\1233\
---------------------------------------------------------------------------

    \1228\ The Proposing Release did not specify a particular 
compliance date for the proposed rules.
    \1229\ See letters from Cleary & Gottlieb, FCX, SME 1, and Vale.
    \1230\ See letters from Davis Polk and NMA 1.
    \1231\ See letter from Vale.
    \1232\ See, e.g., letter from Davis Polk.
    \1233\ See id.
---------------------------------------------------------------------------

    Although we have made numerous changes to the proposed rules that 
will more closely align our mining property disclosure regime with the 
CRIRSCO standards, we are persuaded by commenters that adoption of an 
appropriate transition period would

[[Page 66418]]

help to ease the burden of complying with the final rules. We are 
therefore adopting a two-year transition period so that a registrant 
will not be required to comply with the new rules until the first 
fiscal year beginning on or after January 1, 2021. Thus, for a calendar 
year-end company, a registrant will be required to comply with the 
final rules when filing Securities Act and Exchange Act registration 
statements on or after this date and when filing its Form 10-K or Form 
20-F annual report for the fiscal year ended December 31, 2021.
    We believe this transition period will provide ample time for 
mining registrants that are not familiar with the CRIRSCO standards to 
comply with the new rules. If any registrant not subject to the CRIRSCO 
standards finds that it faces unique challenges meeting the new 
disclosure requirements, we encourage such registrant to contact the 
staff.
    The transition period also will help registrants that are currently 
subject to one or more of the CRIRSCO-based codes to comply with the 
few requirements under subpart 1300 that differ from the CRIRSCO 
standards (e.g., the general prohibition against using disclaimers of 
liability). At the same time, we do not believe this transition period 
will significantly delay the benefits of the final rules for investors.
    A registrant may decide that it would like to take advantage of the 
final rules (e.g., by disclosing mineral resources in a Commission 
filing) prior to the completion of the transition period. Once the 
Commission has completed EDGAR reprogramming made necessary by the 
final rules, we will permit registrants to comply with the new mining 
property disclosure rules prior to the compliance date as long as they 
abide by all of subpart 1300's requirements.\1234\ Until then, 
registrants should continue looking to Guide 7 for their mining 
property disclosures. Guide 7 will remain effective until all 
registrants are required to comply with the final rules, at which time 
Guide 7 will be rescinded.
---------------------------------------------------------------------------

    \1234\ Notice of EDGAR system readiness will be provided in a 
manner similar to notices of EDGAR Filer Manual updates.
---------------------------------------------------------------------------

III. Other Matters

    If any of the provisions of these rules, or the application thereof 
to any person or circumstance, is held to be invalid, such invalidity 
shall not affect other provisions or application of such provisions to 
other persons or circumstances that can be given effect without the 
invalid provision or application.

IV. Economic Analysis

    We are adopting amendments to modernize the property disclosure 
requirements for mining registrants, and related guidance, currently 
set forth in Item 102 of Regulation S-K and in Industry Guide 7. The 
discussion below addresses the economic effects of the final rules, 
including the likely costs and benefits of those rules, as well as the 
likely effect of the final rules on efficiency, competition, and 
capital formation.
    We are mindful of the costs imposed by, and the benefits obtained 
from, the rules we adopt. Securities Act Section 2(b) and Exchange Act 
Section 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.\1235\ Exchange Act Section 23(a)(2) requires us, 
when adopting 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.\1236\ 
We have considered the likely costs and benefits that will result from 
the final rules, as well as the potential effects on efficiency, 
competition, and capital formation.
---------------------------------------------------------------------------

    \1235\ 15 U.S.C. 77b(b) and 15 U.S.C. 78c(f).
    \1236\ 15 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------

    We also have analyzed the potential benefits and costs of 
reasonable alternatives to the final rules. The alternatives we 
consider below represent different approaches to achieving the goal of 
modernizing the Commission's mining property 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 
final rules' disclosure requirements, rather than against the baseline.
    The final rules are intended to modernize the Commission's mining 
property disclosure requirements by providing investors with a more 
comprehensive and accurate understanding of a registrant's mining 
properties, all of which should help investors make more informed 
investment decisions. This, in turn, will reduce the cost of capital 
and enhance capital formation. As suggested by several 
commenters,\1237\ the U.S. capital markets may be comparatively less 
attractive to potential mining registrants due, in part, to the 
Commission's current disclosure regime, with some commenters \1238\ 
citing the comparatively low amount of capital among mining companies 
in the U.S. markets. The final rules will also align more closely with 
industry practices and standards as reflected in CRIRSCO-based 
disclosure standards.
---------------------------------------------------------------------------

    \1237\ See letters from Coeur, Midas Gold, NMA, SME 1, SRK 1, 
and Ur-Energy.
    \1238\ See letters from SRK 1 and Royal Gold.
---------------------------------------------------------------------------

A. Baseline

    To assess the economic impact of the final rules, we consider, as 
part of our baseline, the current disclosure requirements and policies 
in Item 102 of Regulation S-K, Guide 7, Form 20-F, and Form 1-A, as 
well as current market practices. We also consider the disclosure 
standards of various CRIRSCO-based disclosure standards, because mining 
registrants compete in the international commodities and capital 
markets, making international disclosure standards an important 
benchmark for analysts and 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 final rules align the 
Commission's requirements with CRIRSCO-based disclosure standards, we 
expect their economic impact to be less for these registrants.
1. Affected Parties
    The final rules will primarily affect registrants with mining 
activities that are 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 final rules will 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 will include mining companies filing Form 1-A 
offering statements under Regulation A. Investors, analysts, and other 
users of

[[Page 66419]]

the information in annual reports, registration statements, and 
offering statements filed with the Commission also will be affected by 
the final rules. Finally, mining professionals, such as geologists and 
mining engineers, who provide services to registrants related to 
exploration and estimation of mineral resources and reserves will 
potentially be affected due to the qualified person requirement and 
related provisions.
    To estimate the number of current registrants that will potentially 
be affected by the final rules, we first identify those registrants as 
of December 2017 that filed annual reports or relevant registration 
statements at least once from January 2016 through December 2017. We 
then identify registrants with mining primary Standard Industrial 
Classification (``SIC'') codes.\1239\ 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 
267 (46 of which are registrants that do not have mining primary SIC 
codes), which includes one Regulation A issuer.
---------------------------------------------------------------------------

    \1239\ 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, 3330, 3334, and 6795.
---------------------------------------------------------------------------

    Among these registrants, we anticipate that the final rules will 
have a more significant effect on those mining registrants that are not 
currently reporting consistent with CRIRSCO-based disclosure standards. 
To estimate the number of registrants reporting consistent with 
CRIRSCO-based disclosure standards, we identify those registrants 
disclosing mining operations 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 267 registrants, we identify 107 registrants--70 
foreign private issuers and 37 U.S. registrants--that are potentially 
reporting mining operations according to CRIRSCO-based disclosure 
standards. Accordingly, we estimate that there are 160 identified 
registrants that report solely to the Commission and will therefore 
potentially be more affected by the final rules than registrants that 
currently report elsewhere according to CRIRSCO-based disclosure 
standards.
    Included among the 107 registrants that are potentially reporting 
mining operations according to CRIRSCO-based disclosure standards are 
85 registrants that are registered with one of the Canadian provincial 
securities administrators and therefore subject to the disclosure 
requirements of Canada's NI 43-101. Out of these registrants, 37 are 
U.S. domestic registrants and 48 are foreign private issuers (mainly 
companies incorporated in Canada). Among the 48 foreign private issuers 
registered in Canada, 10 voluntarily file with the Commission using 
domestic forms and 38 use the forms for foreign private issuers. 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 provisions in the final rules will more closely align our 
disclosure requirements with those in NI 43-101. As such, we estimate 
that the 38 Canadian registrants that are currently providing 
disclosure pursuant to NI 43-101 in their filings with the Commission 
will likely be the least affected by the final rules. In addition, we 
expect the 47 domestic registrants and foreign private issuers filing 
disclosures pursuant to NI 43-101 with Canadian securities 
administrators will be less affected than the remaining 22 foreign 
private issuers that are not Canadian registrants, but that are 
potentially reporting mining operations according to CRIRSCO-based 
disclosure standards.
    Among the 22 foreign private issuers that are potentially reporting 
mining operations according to CRIRSCO-based (but not Canadian) 
disclosure standards are 14 companies listed in foreign jurisdictions 
with CRIRSCO-based codes that require technical reports similar to our 
final rule requirements.\1240\ The degree of similarity of foreign 
jurisdictions' requirements to our final rule requirements should limit 
the degree to which foreign private issuers experience any increases in 
compliance costs. However, to the extent the requirements in these 
jurisdictions are less closely aligned with Canada's NI 43-101F1 
compared to the requirements for the technical report summary in the 
final rules, we expect that these foreign private issuers will be 
affected by the final rules more than Canadian registrants, as the 
final rules are quite similar to Canadian disclosure requirements. On 
the other hand, we expect these foreign private issuers to be affected 
by the final rules less than foreign private issuers listed in other 
non-Canadian jurisdictions that have adopted CRIRSCO-based standards, 
but do not have requirements for technical reports, as these foreign 
private issuers will be familiar with a technical report requirement.
---------------------------------------------------------------------------

    \1240\ Among these companies are four companies listed in 
Australia and reporting pursuant to JORC, six companies listed on 
the London Stock Exchange and reporting pursuant to PERC, and six 
companies listed in South Africa and reporting pursuant to SAMREC. 
For a discussion of the requirements for technical reports in these 
codes, see supra notes 1127 and 1130, and accompanying text.
---------------------------------------------------------------------------

    As discussed above, we believe that some domestic mining 
registrants are currently following certain of the CRIRSCO-based 
disclosure standards, such as those relating to the determination of 
mineral resources, for their own internal purposes, even if they are 
not currently permitted to disclose mineral resources in their 
Commission filings.\1241\ These registrants also will be less affected 
by the final rules. Based on the comments received, it appears that 
domestic registrants in the industrial minerals and aggregates sector 
of the mining industry currently are least likely to follow CRIRSCO 
standards, such as those relating to mineral resources.\1242\ 
Accordingly, we expect that registrants in the industrial minerals and 
aggregates sector will be more affected on average by the final rules. 
We estimate that 33 of the 267 registrants potentially affected by the 
final rules operate in the industrial minerals/aggregates industry. 
Five of those registrants may already be subject to the CRIRSCO 
standards.
---------------------------------------------------------------------------

    \1241\ See supra note 447 and accompanying text.
    \1242\ See supra notes 438-439 and accompanying text.
---------------------------------------------------------------------------

    We estimate that 43% of mining registrants (114 out of the 267 
registrants identified above) have $5 million or less in total assets. 
Exploration-stage issuers, by definition, have no disclosed mineral 
reserves and are therefore likely to be under the $5 million asset 
threshold. In contrast, development-stage and production-stage issuers, 
by definition, have mineral reserves on material properties and are 
therefore likely to have assets that will push them above the $5 
million threshold. Thus, it is likely that many of these smaller mining 
registrants are exploration-stage issuers. We expect that these smaller 
registrants may be comparatively more affected by the final rules 
compared to larger registrants. For example, the benefits of being able 
to disclose exploration targets and mineral resources may be relatively 
larger for these firms, as by definition they have no mineral reserves 
to disclose. In addition, although many of the disclosure requirements 
are qualified by a materiality standard, the effect of the final rules' 
compliance costs may be disproportionately larger for these

[[Page 66420]]

registrants to the extent such compliance costs have a fixed cost 
component.
    The final rules will also affect mining professionals, in 
particular those individuals who conduct the work that forms the basis 
for disclosure of exploration results, mineral resources, and mineral 
reserves. Commenters noted that many registrants already employ or hire 
professionals who meet the definition of a qualified person.\1243\ More 
generally, we estimate that there are currently a large number of 
professionals in the United States who would meet the definition of 
qualified person. For example, the Society for Mining, Metallurgy, and 
Exploration currently has 15,000 members around the world.\1244\ More 
than 800 of these members are registered with the organization and 
already meet the definition of a qualified person.\1245\ 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.\1246\ A significant fraction of these professionals likely meet 
the definition of qualified person, or could meet it after some 
professional development. For example, California alone had more than 
5,000 recorded licensed professional geologists as of November 
2014.\1247\ We note that these estimates largely exclude professionals 
who are active in foreign markets and who could also qualify. Although 
we do not have access to information that would allow us to estimate 
how many foreign professionals may qualify as qualified persons, we 
believe there will be a significant number of such professionals who 
meet the criteria because similar requirements are in place in 
jurisdictions, such as Canada and Australia, that together have more 
than 1,800 publicly-listed mining companies.\1248\
---------------------------------------------------------------------------

    \1243\ See letters from AIPG, Alliance, Amec, Davis Polk, 
Eggleston, FCX, Golder, Graves, JORC, Rio Tinto, Shearman & 
Sterling, SME 1, SRK 1, Vale, and Willis.
    \1244\ See the SME website at: https://www.smenet.org/about-sme/overview.
    \1245\ See the SME website at: http://www.smenet.org/membership/registered-member-directory.
    \1246\ 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).
    \1247\ See the website 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 he 
or she has five years' relevant experience in mining with respect to 
the type of mineralization under consideration, will likely meet the 
definition of a qualified person.
    \1248\ For statistics on the number of listed mining issuers in 
Canada, see https://www.tsx.com/listings/listing-with-us/sector-and-product-profiles/mining. For statistics on the number of listed 
mining issuers in Australia, see https://www.asx.com.au/documents/resources/00180_MetalsMiningSector_FactSheet_web.pdf.
---------------------------------------------------------------------------

2. Current Regulatory Framework and Market Practices
    As discussed above, we evaluate the economic effects of the final 
rules against the Commission's current disclosure requirements and 
policies. Below we highlight 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.\1249\
---------------------------------------------------------------------------

    \1249\ In addition, the current regulatory requirements impose 
Section 11 liability on the named person who prepares mineral 
reserve estimates. See supra note 278 and accompanying discussion.
---------------------------------------------------------------------------

i. Structure and Detail of Current Disclosure Framework
    The following aspects of the current disclosure regime can give 
rise to compliance burdens 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,\1250\ 
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 complexity and 
uncertainty for mining registrants.\1251\
---------------------------------------------------------------------------

    \1250\ See 17 CFR 249.220f.
    \1251\ See supra Section II.A. and note 36 and accompanying 
text.
---------------------------------------------------------------------------

     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 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 look to 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, such as the modifying factors 
the registrant should consider, to convert existing mineral deposits 
to reserves. By contrast, CRIRSCO-based disclosure 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 can be burdensome for 
mining registrants, especially new registrants. In this regard, some 
industry participants have raised concerns regarding the need to 
look to informal staff guidance to achieve compliance.\1252\
---------------------------------------------------------------------------

    \1252\ See supra note 28 and accompanying text.
---------------------------------------------------------------------------

ii. Scope of the Current Disclosure Requirements and Policies
    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.\1253\ Further, none of these 
provisions requires disclosure of mineral exploration results. By 
contrast, for mining companies providing disclosure in certain foreign 
jurisdictions, CRIRSCO-based codes require disclosure of material 
mineral resources in addition to material mineral reserves and require 
the disclosure of exploration results when they become material to 
investors.
---------------------------------------------------------------------------

    \1253\ 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. See supra note 
423 and accompanying text.
---------------------------------------------------------------------------

    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 mineral resources they possess but are 
not allowed to disclose. Omitting such information may increase 
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.\1254\ 
Moreover, because mining companies providing disclosure

[[Page 66421]]

consistent with CRIRSCO-based disclosure standards in foreign 
jurisdictions are required to disclose 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.\1255\
---------------------------------------------------------------------------

    \1254\ 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.
    \1255\ See supra note 34 and accompanying text.
---------------------------------------------------------------------------

    Currently, registrants can supplement, to some extent, the scope of 
their mining property disclosures in several ways. First, although 
there is no requirement to disclose exploration results, registrants 
can voluntarily disclose such information in their SEC filings. While 
voluntary disclosures can serve as a useful signaling device for 
investors, the value of voluntary disclosures may be limited in the 
absence of a requirement that ensures consistency and quality of the 
disclosures.
    Second, regarding the disclosure of mineral resources, Commission 
staff has periodically, on a case-by-case basis, not objected to 
disclosure of non-reserve mineral deposits in the form of ``mineralized 
material.'' \1256\ In practice, the mineral resources covered by the 
definition of ``mineralized material'' generally correspond with the 
indicated and measured mineral resource categories defined in CRIRSCO-
based disclosure standards. Commission staff previously 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. 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 disclosures.
---------------------------------------------------------------------------

    \1256\ See supra Section II.A.
---------------------------------------------------------------------------

    Further, under the exception for disclosure of mineral resources, 
if required by foreign or state law, issuers registered in Canada 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 registrants not also registered in 
Canada,\1257\ which in our estimates represent about 82% of the 
registrants potentially affected by the final rules.\1258\
---------------------------------------------------------------------------

    \1257\ See SME Petition for Rulemaking, supra note 6, at 14.
    \1258\ We do not include foreign private issuers that are 
registered in Canada but are voluntarily reporting on domestic forms 
in this estimate, as such registrants can transition to filing on 
Form 20-F instead of domestic forms if they perceive the burden of 
continuing to voluntarily file on domestic forms to be too large, 
for example due to competitive reasons.
---------------------------------------------------------------------------

    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 CRIRSCO-
based disclosure standards, some registrants have reported their 
mineral resources in press releases, on their website, or in their 
annual reports. Such disclosures, made outside of SEC filings, may 
present risks for investors who rely on them. 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 anti-fraud provisions of the federal securities laws). They also 
are not subject to staff review and comment, and may not be reported 
using commonly recognized standards.
iii. Role of Experts in Support of Disclosures of Mineral Reserves
    Guide 7 provides, and Form 20-F requires, that a registrant 
disclose the name of the person estimating mineral 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 
CRIRSCO-based disclosure standards, which require that disclosures of 
mineral reserves--as well as exploration targets, exploration results, 
and mineral resources--be based on information and supporting 
documentation prepared by a ``competent'' or ``qualified person.'' 
\1259\
---------------------------------------------------------------------------

    \1259\ 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 thereby becomes subject to expert 
liability under Section 11 of the Securities Act. See 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. CRIRSCO-based disclosure codes are based on the mutually 
reinforcing principles of transparency, materiality, and competence.
---------------------------------------------------------------------------

    In the absence of an expertise requirement, disclosures of 
exploration targets, exploration results, mineral resources, and 
mineral reserves may be viewed by investors as less credible.\1260\ An 
expertise requirement provides greater assurance that the information 
provided by the qualified person is accurate. 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 exploration targets, exploration results, mineral 
resources, and mineral reserves according to CRIRSCO-based disclosure 
standards.\1261\
---------------------------------------------------------------------------

    \1260\ See infra Section IV.B.4.i.
    \1261\ Under the current disclosure regime, registrants can 
choose to hire an expert with similar qualifications as those 
required by CRIRSCO-based disclosure standards and voluntarily 
disclose this fact to mitigate any competitive disadvantage.
---------------------------------------------------------------------------

B. Analysis of Potential Economic Effects

    In this section, we analyze the anticipated costs and benefits 
associated with the final rules against the baseline described above. 
We have attempted to quantify to the extent feasible the costs, 
benefits, and effects on efficiency, competition, and capital formation 
expected to result from the final rules. In many cases, however, we are 
unable to quantify the economic effects. Many of the relevant economic 
effects, such as the effects of disclosure on information asymmetries 
experienced by investors, are inherently difficult to quantify. In 
other cases, we lack the information necessary to provide reasonable 
estimates, including costs of incomplete convergence with CRIRSCO-based 
disclosure standards, benefits of disclosing mineral resources, or 
additional costs of hiring a qualified person subject to Section 11 
liability, because, to our knowledge, no such data are publicly 
available and commenters have not provided data to allow such 
quantification. To the extent commenters have provided data to allow 
quantification of the expected economic effects of the final rules, 
including cost estimates, we examine that data below.
1. Broad Economic Effects of the Final Rules and Impact on Efficiency, 
Competition, and Capital Formation
    We expect the final rules to increase the quality and availability 
of information about registrants' mining properties and thereby promote 
efficiency, competition, and capital formation. For example, the final 
rules require registrants with material mining

[[Page 66422]]

operations to disclose determined mineral reserves, mineral resources, 
and material exploration results. These requirements 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 uncertainty surrounding the 
disclosures. In turn, reduced information asymmetries and reduced 
uncertainty about the disclosures may help investors achieve a more 
efficient capital allocation while increasing demand for securities 
offerings, reducing the cost of capital, and enhancing capital 
formation for registrants.\1262\
---------------------------------------------------------------------------

    \1262\ 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 an 
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.
---------------------------------------------------------------------------

    In particular, we believe that the requirements for disclosure of 
material exploration results and mineral resources will 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, if any, 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 may only materialize to the extent 
smaller registrants are able to pay for the studies that are required 
to support disclosure in the first place. We anticipate that there may 
be 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 final rules, there may be exceptions. We expect that 
the adopted disclosure requirements may 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). Registrants may also bear costs to the 
extent that the disclosure requirements will result in the disclosure 
of commercially-sensitive information to competitors.\1263\ Therefore, 
despite the anticipated benefits from the final disclosure 
requirements, some registrants may, for certain expected lower-value 
exploration projects, find that these benefits do not outweigh the 
compliance and competitive costs and may not undertake the work 
necessary to disclose exploration targets or exploration results or to 
determine mineral reserves or mineral resources in accordance with the 
final rules. In such cases, this will reduce the information available 
to investors about a registrants' full range of projects and could have 
a negative impact on cost of capital and capital formation. However, 
this effect may be limited, in that expected lower-value projects are 
less likely to attract capital even if they were fully disclosed, 
whether voluntarily or not.
---------------------------------------------------------------------------

    \1263\ As discussed in supra Section II.D.3, we believe that the 
underlying documentation for exploration results is most likely to 
be associated with concerns about disclosing commercially sensitive 
information. To mitigate these concerns, the final rules make filing 
a technical report summary to support disclosure of material 
exploration results optional for registrants.
---------------------------------------------------------------------------

    The positive effects we expect on efficiency and capital formation 
from the final rules may be lower for registrants that currently report 
in foreign jurisdictions with CRIRSCO-based disclosure codes. These 
registrants to a large degree already provide the disclosures required 
by the final rules. This is particularly the case for Canadian 
registrants, who disclose information pursuant to NI 43-101 standards 
in their Forms 20-F under the ``foreign or state law'' exception.
    We expect the final rules to have certain 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 CRIRSCO-
based disclosure standards, the final rules will 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.\1264\ 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 final rules.
---------------------------------------------------------------------------

    \1264\ All else equal, the limited ability to provide valuable 
disclosure (e.g., the full range of mineral resources or exploration 
targets) decreases the attractiveness of the U.S. capital markets 
for mining registrants relative to jurisdictions in which fuller 
disclosure is possible (if not required, as in Canada).
---------------------------------------------------------------------------

    There could be an opposite effect in some cases. Among foreign 
private issuers, registrants not currently reporting in foreign 
jurisdictions with CRIRSCO-based disclosure 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 six 
(as of December 31, 2017) foreign private issuers that are not subject 
to CRIRSCO-based 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 in which to list, 
none of whose markets are as developed or robust as the U.S. or other 
financial markets that have such standards.
    Some aspects of the final rules that are different from CRIRSCO-
based disclosure standards, such as the imposition of Section 11 
liability for qualified persons, may discourage prospective registrants 
from conducting registered offerings in the United States to the extent 
registrants will incur additional costs related to this 
liability.\1265\ However, the final rules

[[Page 66423]]

provide for some limitations on qualified persons' individual Section 
11 liability with respect to when they rely on certain information 
outside their expertise provided by registrants, or when they are 
employed by third-party firms,\1266\ which should mitigate such 
effects. Overall, we expect that the alignment of our disclosure 
requirements with international practices, as embodied in CRIRSCO-based 
disclosure standards, will make U.S. capital markets more competitive, 
notwithstanding these differences.
---------------------------------------------------------------------------

    \1265\ Several commenters noted the increased costs that 
subjecting qualified persons to Section 11 liability would likely 
impose on registrants and the chilling effect it could have on 
qualified persons' willingness to provide the required supporting 
documentation. See letters from Alliance, Amec, Andrews Kurth, 
Chamber, Cloud Peak, Davis Polk, Eggleston, Energy Fuels, Gold 
Resource, FCX, MMSA, NMA, NSSGA 1, Rio Tinto, Shearman & Sterling, 
Ur-Energy, and Vale. See also note 230 and accompanying discussion. 
Commenters also noted that such costs could fall disproportionately 
on small registrants. See letters from Gold Resource and Shearman & 
Sterling.
    \1266\ See supra Section II.C.1.iii.
---------------------------------------------------------------------------

2. Consolidation of the Mining Disclosure Requirements
    The final rules consolidate the mining disclosure requirements and 
policies of Regulation S-K and Industry Guide 7 into new subpart 1300 
of Regulation S-K and rescind Industry Guide 7. Codifying the 
Commission's mining disclosure requirements in Regulation S-K will 
provide a single source for a mining registrant's disclosure 
obligations, eliminating the complexity and uncertainty associated with 
the fact that Guide 7 provides staff guidance and is not incorporated 
in Commission rules, such as in Regulation S-K, thus facilitating 
compliance and promoting more consistent disclosures to investors. The 
benefits of consolidation were confirmed by several commenters, who 
stated that the Commission's current disclosure regime for mining 
properties has caused compliance uncertainty for mining 
registrants.\1267\ In contrast, one commenter \1268\ noted that the 
status of Guide 7 was well understood by and presented little 
uncertainty for its members. For registrants in this category the 
benefits of reducing complexity and uncertainty by codifying and 
consolidating the Commission's mining disclosure requirements may be 
limited.
---------------------------------------------------------------------------

    \1267\ See supra note 28 and accompanying text.
    \1268\ See letter from NSSGA 1.
---------------------------------------------------------------------------

3. The Standard for Mining-Related Disclosure
i. Threshold Materiality Standard
    The final rules replace the multiple standards of materiality in 
the current rules with a single materiality standard for when a 
registrant must provide disclosure about its mining properties or 
operations.\1269\ In response to comments,\1270\ the final rules do not 
include an instruction stating that a registrant's mining operations 
are presumed to be material if they consist of 10% or more of its total 
assets and emphasize that registrants may consider other quantitative 
or qualitative factors to evaluate materiality. These clarifications 
should help avoid the potential costs to investors of disclosing 
immaterial information and the potential burden for registrants of 
creating different disclosures for different jurisdictions.
---------------------------------------------------------------------------

    \1269\ See supra Section II.B.1. The definition of ``material'' 
in the final rule is the same as under Securities Act Rule 405 and 
Exchange Act Rule 12b-2. Establishing materiality as the threshold 
for disclosure is also consistent with the disclosure standard under 
CRIRSCO-based disclosure standards.
    \1270\ See letters from Alliance, Amec, AngloGold, BHP, 
Eggleston, JORC, Rio Tinto, SAMCODES 1 and 2, SME 1, and SRK 1.
---------------------------------------------------------------------------

    The final rules will increase clarity in terms of the conditions 
under which registrants must provide disclosure and may facilitate 
compliance by more closely aligning the disclosure standard in the 
final rules with CRIRSCO-based disclosure standards. The final rules 
also will promote consistency in mining property disclosures, which may 
benefit investors' ability to compare and evaluate these disclosures 
over time and across registrants, thus fostering more efficient 
investment decisions.
ii. Treatment of Vertically-Integrated Companies
    New subpart 1300 of Regulation S-K will apply to all registrants 
with material mining operations, including vertically-integrated 
manufacturers.\1271\ Because requiring disclosure of mining operations 
by vertically-integrated manufacturers is consistent with the 
disclosure currently provided in Commission filings and under CRIRSCO-
based disclosure codes, we do not expect this requirement will impose 
new compliance costs on registrants. By including vertically-integrated 
manufacturers in the requirement to disclose material mining 
operations, the final rules will provide investors with material 
information about such operations that will help with investment 
decisions, regardless of whether the company's primary business is 
mining.\1272\
---------------------------------------------------------------------------

    \1271\ See supra Section II.B.2.iii.
    \1272\ See supra Section IV.B.1., regarding the broader economic 
benefits of disclosure.
---------------------------------------------------------------------------

iii. Treatment of Multiple Property Ownership
    We are adopting the proposed treatment of multiple property 
ownership and the proposed treatment of ancillary properties, which, 
depending on the facts and circumstances, could give rise to disclosure 
obligations under the final rules.\1273\ These provisions require a 
registrant to consider all of its mining properties in the aggregate, 
as well as individually, when assessing the materiality of its mining 
operations. These provisions should facilitate compliance for companies 
with multiple mining properties while eliciting material information 
for investors in appropriate circumstances. We also expect that the 
treatment of multiple property ownership will result in more efficient 
and more effective disclosure compared to current practice, as 
registrants will be able to provide summary disclosure about all of 
their mining properties where some or all of the properties are not 
individually material.
---------------------------------------------------------------------------

    \1273\ See supra Section II.B.3.
---------------------------------------------------------------------------

iv. Treatment of Royalty Companies
    Because the value of a royalty company or similar registrant 
derives from the underlying mining properties that generate payments to 
the registrant, the final rules require these registrants to provide 
disclosure of the material underlying mining properties, analogous to 
that of mining companies. While the final rules are consistent with 
prior disclosure practices, we expect that consistent application of 
this requirement will provide investors with information useful to 
making informed investment decisions.\1274\ To the extent the final 
rules will increase the quality and amount of disclosure by royalty 
companies and similar registrants about underlying material mining 
properties, we expect investors to benefit from access to more and 
higher quality information to aid their investment decisions. To the 
extent that royalty companies and similar registrants are able to omit 
information about underlying material mining properties that is not 
otherwise available, including not having to file a technical report 
summary, the benefits to investors will be limited.\1275\
---------------------------------------------------------------------------

    \1274\ See supra Section II.B.4.iii.
    \1275\ We have identified three mining royalty companies 
registered with the Commission as of December 31, 2017. Similarly, 
one commenter noted they were not aware of any ``primarily mining 
finance companies that participate in any mining or processing 
activities.'' See letter from Crowell & Moring.
---------------------------------------------------------------------------

    We expect all royalty companies and similar registrants will incur 
compliance costs related to assessment of access to required 
information about underlying mining properties and/or the materiality 
of the underlying properties. These compliance costs will be limited 
for those royalty companies that already have access to the information 
required to comply with the final rules. These compliance costs also 
will be limited for those royalty companies that do not

[[Page 66424]]

have access to such information, as the final rules require disclosure 
about underlying mining properties only insofar as the information is 
known or reasonably available to the registrant.\1276\
---------------------------------------------------------------------------

    \1276\ Id.
---------------------------------------------------------------------------

    In addition, we expect royalty companies and similar registrants 
that must provide disclosures and file technical report summaries about 
underlying material mining properties to incur additional compliance 
costs related to the preparation of those disclosures and reports. 
These will include both direct and indirect costs related to gathering 
the required information, potential payments to consultants, including 
qualified persons, and costs associated with reporting the required 
information in annual reports and registration statements filed with 
the Commission. One commenter asserted that for royalty interests, the 
costs of preparing the required disclosure for annual reports on Form 
10-K could exceed $500,000.\1277\ However, it is not clear whether this 
was a total cost or an incremental cost, or whether this was specific 
to royalty companies. In the instances where a material property is 
already covered by a technical report summary filed by the producing 
registrant, we expect these additional compliance costs to be 
substantially lower as the royalty company will be able to refer to the 
producing registrant's report. As noted above, compliance costs also 
will be limited to the extent the royalty company does not have access 
to such information and the information is not otherwise known or 
reasonably available to the registrant.
---------------------------------------------------------------------------

    \1277\ See letter from Royal Gold.
---------------------------------------------------------------------------

    Many commenters opposed the requirement for royalty companies to 
provide disclosure for underlying mining properties that are 
material,\1278\ but did not provide alternatives that would ensure that 
investors have access to relevant information about these properties. 
Excluding royalty companies from the final rules would eliminate the 
practical difficulties and compliance costs associated with providing 
disclosure about underlying mining properties. However, it also could 
leave investors in royalty and similar companies with less information 
about material mining properties than investors in other mining 
registrants and thereby undermine the goal of providing enhanced mining 
disclosure to the market generally. Some commenters noted that royalty 
and other similar companies are unlike other mining registrants, in 
that their revenue is based on royalty contracts and thus information 
about these contracts may be more relevant for investors in such 
companies.\1279\ However, the properties underlying the contracts are 
the source of the revenue stream defined by those contracts. Thus, as 
noted by other commenters,\1280\ royalty companies have an economic 
interest in such properties. Consequently, providing information about 
such properties' potential future production would enable investors in 
royalty and other similar companies to make more informed investment 
decisions.
---------------------------------------------------------------------------

    \1278\ See supra note 127 and accompanying text.
    \1279\ See letters from Crowell & Moring, NRP, Royal Gold, and 
SME 2.
    \1280\ See letters from Rio Tinto and SAMCODES 2.
---------------------------------------------------------------------------

v. Definitions of Exploration, Development, and Production Stage
    The definitions adopted in the final rules of ``exploration stage 
property,'' ``development stage property,'' and ``production stage 
property,'' as well as the definitions of ``exploration stage issuer,'' 
``development stage issuer,'' and ``production stage issuer'' will 
provide investors with clear, accurate, and consistent disclosure about 
the type of company and level of risk.\1281\ For example, because the 
classification at issuer level would be derived from the individual 
property classifications, the final rules would prevent a registrant 
without material reserves from characterizing itself as a development 
stage or production stage issuer, which is possible under the current 
classification scheme. By clarifying and codifying existing practices, 
the final rules will also benefit registrants by reducing regulatory 
uncertainty.
---------------------------------------------------------------------------

    \1281\ See 17 CFR 229.1304(c)(1).
---------------------------------------------------------------------------

    Because registrants already possess the information necessary to be 
able to classify properties at the individual property level and 
because the final classifications are consistent with prior disclosure 
practices, we do not expect these provisions to increase compliance 
costs for most registrants. However, because the final rules change how 
registrants can classify themselves at the issuer level, there may be 
some issuers that incur costs because they cannot continue to identify 
themselves as development or production stage issuers under the final 
rules. For example, some current production stage issuers (who under 
the new rules will not be able to classify themselves as such) may find 
it more costly to raise capital to the extent investors assign a higher 
risk to the company's mining operations based on the change in 
classification. Moreover, some current production stage issuers that 
are able to continue classifying themselves as such under the new rules 
may need to undertake additional work in order to do so (e.g., hiring a 
qualified person to make a determination about mineral resources and 
mineral reserves) and would therefore incur additional compliance 
costs.
4. Qualified Person and Responsibility for Disclosure
i. The ``Qualified Person'' Requirement
    We are adopting the proposed requirement that every disclosure of 
mineral resources, mineral reserves, and material exploration results 
be based on, and accurately reflect, information and supporting 
documentation prepared by a qualified person.\1282\ In a change from 
the proposed rules, the final rules will also permit the disclosure of 
exploration targets, with the same requirement that such disclosure be 
based on, and accurately reflect, information and supporting 
documentation prepared by a qualified person. We anticipate that the 
qualified person requirement, together with the technical report 
summary requirement, will benefit investors by enhancing the accuracy 
and transparency of disclosures. 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 helps ensure that estimates provided in 
disclosures are based on work consistent with current professional 
practice. This should, in turn, increase the reliability and 
informational value of the disclosures. Several commenters supported 
the qualified person requirement, citing similar benefits.\1283\ For 
example, one commenter noted that ``[e]xperience in consulting firms 
has shown that when individual members of the firm are specifically 
identified as qualified persons, the work undertaken by the members of 
the firm in preparing or reviewing technical reports is more careful.'' 
\1284\ Other commenters similarly expected the qualified person 
requirement to result in higher quality disclosure.\1285\ In addition, 
the written consent requirement will help ensure that the qualified 
person's findings and conclusions are accurately represented by the 
registrant and should further increase the reliability of the 
disclosures.
---------------------------------------------------------------------------

    \1282\ See supra Section II.C.1.
    \1283\ See note 183 and accompanying text.
    \1284\ See SME 1.
    \1285\ See letters from BHP, Eggleston, Rio Tinto, and SRK 1.
---------------------------------------------------------------------------

    Moreover, because the qualified person requirement in the final 
rules is

[[Page 66425]]

consistent with most foreign jurisdictions' mining disclosure 
requirements, it should improve comparability between U.S. registrants 
and foreign companies reporting in those other jurisdictions, which 
will further benefit investors. A qualified person requirement helps 
ensure that the individual preparing documentation to support mining 
property disclosures in Commission filings possesses certain 
professional credentials and relevant experience. Comparability should 
therefore be improved, because qualified persons engaged by registrants 
are likely to adhere to a common set of professional standards.
    These benefits to investors from the qualified person requirement 
will be accompanied by costs for mining registrants.\1286\ We expect 
the increase in compliance costs to be primarily related to search and 
hiring costs for qualified persons. Registrants that wish to disclose 
mineral resources and reserves, but are not currently employing or 
contracting with professionals meeting the definition of qualified 
person, will incur expenses to identify a pool of professionals who 
meet the definition of qualified person and are willing to provide 
their services. The costs for services of a qualified person may also 
be higher than the costs for services of the professionals currently 
hired by such registrants due to the level of expertise required under 
the final rules and the liability that professionals will face under 
the final rules. In this regard, one commenter noted that a qualified 
person likely commands a 15-25% salary premium over a non-qualified 
person,\1287\ although that premium does not appear to include any 
premium for accepting Section 11 liability.
---------------------------------------------------------------------------

    \1286\ Quantifying these costs is 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'' 
outside of the United States. 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) that would help us estimate the incremental cost of 
hiring a qualified person with the minimum level of expertise versus 
professionals who do not qualify as qualified persons.
    \1287\ See letter from SRK 1.
---------------------------------------------------------------------------

    Because the required disclosures derive from activities mining 
registrants already perform 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 required level of expertise, 
either as employees or as contractors.\1288\ In particular, this should 
be the case for registrants reporting consistent with CRIRSCO-based 
disclosure standards, as those standards already require a similarly 
defined ``qualified'' or ``competent'' person to support the 
disclosures.\1289\ To the extent registrants already engage 
professionals meeting the final qualified person requirement, they will 
not incur costs related to searching for qualified persons, as long as 
currently engaged professionals agree to act in the capacity of a 
qualified person to support disclosures.
---------------------------------------------------------------------------

    \1288\ This view was affirmed by several commenters. See supra 
note 1243.
    \1289\ See, e.g., letter from SRK 1.
---------------------------------------------------------------------------

    Even if registrants that are currently employing or contracting 
with professionals meeting the final definition of a qualified person 
do not incur additional costs associated with searching for and initial 
hiring of such a person, they may nevertheless experience an increase 
in compensation costs for these professionals. First, these 
professionals may demand increased compensation due to increased 
competition for the services of professionals meeting the definition of 
a qualified person. We expect an increase in competition for these 
services because registrants currently not hiring such professionals 
will need to do so under the final rules to support disclosures of 
mineral resources and reserves. Second, several commenters stated that 
subjecting qualified persons to Section 11 liability would likely 
reduce the willingness of individuals to serve in that role, which 
would, in turn, limit the available supply and increase the cost of 
hiring qualified persons. In a change from the proposed rules, the 
final rules provide that the qualified person will not be subject to 
Section 11 liability for any description of the procedures, findings, 
and conclusions reached about matters based on information provided by 
the registrant in certain required areas outside of the qualified 
person's experience and expertise, which will limit a qualified 
person's exposure to Section 11 liability.\1290\ Nevertheless, as a 
general matter, we expect mining professionals who are already engaged 
by registrants and who meet the definition of a qualified person would 
request additional compensation for the imposition of Section 11 
liability. However, given the nature of individual risk aversion and 
the sunk costs in professional development, as well as the additional 
factors of increased compensation and the ability to allocate potential 
liability between individuals and firms (as discussed below), it is 
difficult to reliably estimate the behavioral response of individuals 
and firms to the imposition of Section 11 liability.
---------------------------------------------------------------------------

    \1290\ See supra Section II.C.1.iii.
---------------------------------------------------------------------------

    Rather than exiting the market entirely, professionals who 
currently meet the definition of qualified person may be willing to 
accept Section 11 liability, but only for a reduced scope of work. For 
example, a technical report summary may involve the introduction of 
analyses that draw on the range of experience and educational 
backgrounds within the definition of qualified person under the final 
rules.\1291\ Due to liability concerns, a qualified person--who would 
be willing to assume responsibility for such items in a jurisdiction 
without Section 11 liability--may be willing to assume responsibility 
for only a subset of such items in Commission filings. In this case, 
the registrant would need to hire or engage a greater number of 
qualified persons to complete its technical report summary. For larger 
registrants, this may not be a significant issue because they are 
likely to already have access to multiple qualified persons. For 
smaller registrants, this may be more costly, especially, as noted by 
one commenter,\1292\ where the only qualified persons are executives of 
the firm or, as noted by another commenter,\1293\ where exploration and 
development companies with no production may not have qualified persons 
with specific experience on their staff. To the extent hiring of 
qualified persons to support disclosures becomes prohibitively costly 
for some registrants, for example, due to search costs or increased 
compensation demands in light of Section 11 liability, these 
registrants may choose to forgo making disclosure about mineral 
resources and reserves in their Commission filings, which would reduce 
the benefit of such disclosure for both investors and registrants.
---------------------------------------------------------------------------

    \1291\ See letters from MMSA and SASB. For similar reasons, 
commenters requested that limited disclaimers be permitted. See 
supra note 229. The final rules clarify that multiple qualified 
persons may expertize a technical report summary, allowing a 
qualified person to limit their liability to a scope of work with 
which he or she is comfortable applying his or her competence, 
education, and experience.
    \1292\ See letter from SME 1.
    \1293\ See letter from Eggleston.
---------------------------------------------------------------------------

    It is difficult to assess the likelihood of these potential 
negative outcomes, but we note that, based on the statistics reported 
above in Section IV.A.1., there are many professionals who potentially 
meet the definition of a qualified person in the United States alone, 
and

[[Page 66426]]

therefore, broadly speaking, we believe it is unlikely that there will 
not be a sufficient supply of qualified persons available to support 
disclosures for at least larger-scale material mining properties, where 
the benefits of disclosure for registrants likely outweigh any increase 
in costs of qualified persons due to Section 11 liability. Moreover, 
mining companies and mining consulting companies presently employ many 
professionals who already meet the definition of qualified 
person.\1294\ Nevertheless, because the mining industry is not 
homogeneous, there may be segments of the mining industry for which the 
supply of professionals meeting the qualified person requirement is 
more limited, thus making it more difficult or costly for these 
registrants to satisfy this requirement.
---------------------------------------------------------------------------

    \1294\ See supra note 1288 and accompanying discussion.
---------------------------------------------------------------------------

    Holding all else constant, the increased demand for qualified 
persons' services is likely to incentivize more professionals to become 
qualified, especially in areas in which the supply of qualified persons 
is currently more limited, although there could be a lag in the time 
required to obtain the relevant five years of experience. For smaller 
registrants, whose material properties will be relatively less valuable 
than the material properties of larger registrants, or registrants 
engaged in mining of certain minerals, for which there is a limited 
supply of professionals with the relevant experience, the potential 
negative effects of Section 11 liability may be more pronounced.
    Several additional factors may mitigate the costs of subjecting 
qualified persons to Section 11 liability. Requiring the registrant to 
obtain the qualified person's written consent is consistent with the 
Commission's longstanding approach to the use of an expert's report in 
Securities Act filings.\1295\ Because a mining registrant is currently 
required to file the written consent of the mining engineer, geologist, 
or other expert upon whom it has relied when filing a Securities Act 
registration statement, and such consent is already given today, the 
adopted written consent requirement may not impose a significant 
additional burden.
---------------------------------------------------------------------------

    \1295\ See supra note 268 and accompanying text.
---------------------------------------------------------------------------

    Additionally, in a change from the proposed rules, the final rules 
provide that a third-party firm comprising mining experts, such as 
professional geologists or mining engineers, may sign the technical 
report summary and provide the written consent instead of its employee, 
member, or other affiliated person who prepared the summary, and need 
not identify such individual.\1296\ Because the third-party firm will 
be treated as the mining expert subject to potential Section 11 
liability rather than the individual qualified person in these 
circumstances, this provision could further mitigate the costs of 
Section 11 liability for those individual professionals who are 
employed by third-party firms by shifting liability to an entity that 
is more equipped to bear it.
---------------------------------------------------------------------------

    \1296\ See supra Section II.C.1.iii.
---------------------------------------------------------------------------

    Furthermore, as noted above, the final rules provide that a 
qualified person will not be subject to Section 11 liability for 
certain information provided by the registrant upon which the qualified 
person relies.\1297\ Qualified persons likely would be most concerned 
about being subjected to Section 11 liability for information outside 
their expertise that has been provided by others. By limiting qualified 
persons' individual liability exposure in cases where such information 
has been proved by the registrant, this provision, when applicable, 
will serve to limit the costs of Section 11 liability. At the same 
time, the provision is not likely to come at the expense of reduced 
assurance of quality in mining disclosures, as the registrant who is 
providing the information will retain residual Section 11 liability for 
the information and therefore will be incentivized to exercise care its 
preparation.
---------------------------------------------------------------------------

    \1297\ See id.
---------------------------------------------------------------------------

    Although the final rules do not provide a complete exemption from 
Section 11 liability, it may be possible, as suggested by several 
commenters, to obtain insurance to protect against costs that could 
arise out of Section 11 litigation.\1298\ As commenters noted,\1299\ 
this would effectively impose an additional cost on registrants.\1300\ 
While insurance may reduce qualified persons' reluctance to accept 
liability, we do not have access to data or other information that 
would allow us to quantify how much registrants' costs will increase 
due to higher compensation or provision of insurance.
---------------------------------------------------------------------------

    \1298\ See letters from Chamber, Cleary Gottlieb, Energy Fuels, 
FCX, Gold Resource, MMSA, NSSGA 1, Rio Tinto, Shearman & Sterling, 
SME 1, and Vale.
    \1299\ See letters from Energy Fuels, FCX, MMSA, NSSGA 1, Rio 
Tinto, Shearman & Sterling, and Vale.
    \1300\ One commenter cited increases in liability insurance 
costs for registrants ``well into six figures.'' See letter from 
MMSA.
---------------------------------------------------------------------------

    Finally, the qualified persons will not be subject to strict 
liability. Under Section 11, a qualified person, as an expert, would 
have an affirmative defense against liability for misstatements or 
omissions made on the authority of another expert if the qualified 
person ``had no reasonable ground to believe and did not believe, at 
the time such part of the registration statement became effective, that 
the statements therein were untrue or that there was an omission to 
state a material fact required to be stated therein or necessary to 
make the statements therein not misleading, or that such part of the 
registration statement did not fairly represent the statement of the 
expert or was not a fair copy of or extract from the report or 
valuation of the expert.'' \1301\ This framework may mitigate the costs 
of subjecting qualified persons to Section 11 liability.
---------------------------------------------------------------------------

    \1301\ 15 U.S.C. 77k(a)(4).
---------------------------------------------------------------------------

    The final rules do not require the qualified person to be 
independent of the registrant. The absence of an independence 
requirement is consistent with CRIRSCO-based disclosure codes, with the 
exception of Canada, where the qualified person must be independent of 
the company for new registrants or, in cases of significant changes to 
existing disclosures, for established registrants.\1302\ Although there 
is some evidence that outside experts reduce information asymmetries 
about companies' valuations more than internal experts in related 
circumstances,\1303\ this benefit must 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.
---------------------------------------------------------------------------

    \1302\ See Canada's NI 43-101, supra note 123, at pt. 5.3.
    \1303\ 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.
---------------------------------------------------------------------------

    As an alternative we could have exempted qualified persons from 
Section 11 liability altogether. This would avoid the increased costs 
associated with potential liability while retaining the benefit to both 
registrants and investors of having qualified persons with relevant 
credentials and experience provide the basis for disclosure of 
exploration targets, exploration results, mineral resources, and 
mineral reserves. The experience of other jurisdictions using CRIRSCO-
based codes that do not impose Section

[[Page 66427]]

11-type liability (but may have some other source of liability) 
suggests that Section 11 liability is not necessary to obtain some 
benefit from having a qualified person. However, relative to the final 
rules, an outright exemption from Section 11 liability could reduce the 
incentives for qualified persons to perform a thorough analysis of the 
relevant properties and ensure that the disclosure in Commission 
filings is complete and accurate.\1304\ In this way, we expect that 
Section 11 liability will amplify the benefits of a qualified person 
requirement and, thus, enhance investor protection relative to an 
alternative that does not impose such liability, although we 
acknowledge that such liability will come at a cost to mining companies 
and investors in those companies.
---------------------------------------------------------------------------

    \1304\ An outright exemption from Section 11 liability would 
also be inconsistent with current requirements. See supra Section 
II.C.1.iii. and notes 278 and 279.
---------------------------------------------------------------------------

ii. The Definition of ``Qualified Person''
    We are adopting the proposed definition of a ``qualified person'' 
and related proposed criteria and provisions.\1305\ We believe this 
definition will help ensure that disclosure of mineral resources, 
mineral reserves, and material exploration results in Commission 
filings is based on work by professionals who have the qualifications 
necessary for the disclosure to be consistent with current professional 
practices and accurately reflects the information and supporting 
documentation.
---------------------------------------------------------------------------

    \1305\ See supra Section II.C.2.
---------------------------------------------------------------------------

    Providing a definition of qualified person will benefit investors 
by establishing common criteria for persons supporting disclosures of 
exploration results, mineral resources, and mineral reserves, thereby 
increasing the reliability and comparability of those disclosures for 
investors. As discussed above, however, the selection and hiring of 
qualified persons will impose costs on registrants. As noted above, 
these costs could be higher as a result of the level of expertise and 
other professional credentials required by the adopted definition. To 
the extent that professionals meeting all of the requirements are 
scarce, the cost of hiring such professionals will tend to increase, 
although this could draw more professionals into the field, thereby 
bringing costs back down.
    As an alternative, we could have added an educational requirement 
to the definition (e.g., the attainment of a bachelor's or equivalent 
degree in an area of geoscience, metallurgy, or mining engineering), as 
recommended by several commenters.\1306\ An educational requirement may 
help ensure subject matter expertise and increase the quality and 
credibility of the mining disclosures. However, because the recognized 
professional organizations typically address such a requirement in 
their membership criteria,\1307\ we believe the incremental benefit 
from adding such a requirement to the definition would be minimal as it 
would be largely redundant.
---------------------------------------------------------------------------

    \1306\ See supra note 322 and accompanying text.
    \1307\  See supra note 324 and accompanying text.
---------------------------------------------------------------------------

    As another alternative, we could have required that the qualified 
person be a member of an approved list of ``recognized professional 
organizations,'' similar to the approach under CRIRSCO-based standards. 
This was recommended by numerous commenters.\1308\ This alternative 
could provide more clarity for registrants about which organizations 
are considered to be ``recognized professional organizations,'' thereby 
facilitating compliance. However, as compared to the principles-based 
approach in the final rules, an approved list would be less flexible 
and could unduly restrict the pool of eligible qualified persons. In 
addition, a specific list of organizations risks becoming outdated over 
time as circumstances change, which could lead to deterioration in the 
credentials of qualified persons and a corresponding reduction in 
disclosure quality.
---------------------------------------------------------------------------

    \1308\ See supra note 331 and accompanying text.
---------------------------------------------------------------------------

5. Treatment of Exploration Results
    The final rules require a registrant to disclose exploration 
results and corresponding exploration activity if they are material to 
investors.\1309\ This approach aligns the Commission's disclosure 
requirements for exploration results with those in CRIRSCO-based 
disclosure standards in that the disclosure of exploration results and 
corresponding exploration activity is largely voluntary until they 
become material to investors. Compared to the proposed rules, the final 
rules provide additional guidance for registrants to help them 
determine when exploration results are material, which should 
facilitate compliance to the benefit of both registrants and investors.
---------------------------------------------------------------------------

    \1309\ See supra Section II.D.3.
---------------------------------------------------------------------------

    Because exploration results can guide a registrants' economic 
decision-making, such as internal decisions regarding whether to 
continue a project and enter into the determination of mineral 
resources and mineral reserves, we expect the disclosure of material 
exploration results to benefit investors by providing material 
information about registrants' mining operations and potential growth 
opportunities. Several commenters generally supported requiring the 
disclosure of material exploration results on material properties for 
similar reasons.\1310\ We expect that exploration results by smaller 
mining registrants are especially likely to be considered material to 
investors because such registrants tend to have a narrower range of 
mining operations and fewer individual projects. Investors in such 
companies are therefore especially likely to benefit from this aspect 
of the final rules.
---------------------------------------------------------------------------

    \1310\ See supra note 365 and accompanying text.
---------------------------------------------------------------------------

    Exploration results, by themselves, are inherently associated with 
some level of uncertainty. Thus, it may be difficult for investors to 
evaluate exploration results accurately. There is a risk that some 
investors may weigh this information inappropriately, which, in turn, 
could lead to inefficient investment decisions. The final rules 
mitigate potential costs to investors related to both the reliability 
of and the uncertainty associated with the disclosure of exploration 
results in several ways. First, the final rules only require disclosure 
of material exploration results, which should reduce the risk of 
investors having to assess and possibly misconstrue the significance of 
exploration results that inherently are of low informational value. 
Second, the final rules preclude the use of exploration results, by 
themselves, to derive estimates of tonnage, grade, and production 
rates, or in an assessment of economic viability, which should decrease 
the risk of conveying inaccurate information. As such, these provisions 
should reduce the potential for investors to incorrectly value any 
disclosed exploration results. Third, because the disclosure of 
exploration results must be based on the analysis of a qualified 
person, the accuracy and reliability of the disclosed exploration 
results should be enhanced and the comparability of disclosures across 
registrants may increase.
    In addition, the final rules will align the disclosure of 
exploration results in Commission filings with the requirements in 
CRIRSCO-based disclosure standards, which may further improve the 
comparability of the disclosed information relative to similar 
disclosures by mining companies in jurisdictions such as Canada and 
Australia, thereby improving the usefulness of this information for 
investors.
    Findings from an academic study suggest that disclosures of 
exploration

[[Page 66428]]

results can be valuable to investors in mining stocks. The study 
analyzes a sample of 1,260 exploration results announcements made by 
307 unique Australian mining companies over the 2005-2008 time period 
and documents an average abnormal stock return of 2.8% on the 
announcement day.\1311\ 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 the disclosed 
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 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 final 
requirements.\1312\ Because it is unclear to what extent the companies 
in the study were able to selectively disclose only positive 
exploration results, the results should mainly be viewed as evidence of 
exploration results having significant informational value, rather than 
implying that all exploration results would be met by positive stock 
market reactions.\1313\
---------------------------------------------------------------------------

    \1311\ 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.
    \1312\ See JORC Code supra note 175, at pts. 16-18.
    \1313\ We also note that the study does not provide results for 
different sub-sectors of the mining industry (e.g., aggregates and 
industrial materials) and therefore any inferences drawn may not be 
true across all types of mining companies.
---------------------------------------------------------------------------

    In terms of benefits to registrants, the final rules should help 
limit compliance costs by more closely aligning the Commission's 
disclosure requirements with CRIRSCO-based disclosure standards and may 
reduce regulatory uncertainty by directly addressing the treatment of 
material exploration results. As noted by one commenter, U.S. 
registrants will be on a more equal footing if they are ``able to 
disclose the potential value of their properties through the disclosure 
of exploration results.'' \1314\
---------------------------------------------------------------------------

    \1314\ See letter from Northern Dynasty.
---------------------------------------------------------------------------

    While a registrant is required to base disclosure of exploration 
results on information and supporting documentation provided by a 
qualified person, the final rules do not require a technical report 
summary for disclosure. A commenter noted that exploration results are 
the basis of valuation for small exploration-stage and even some 
development-stage issuers, so the ability to disclose exploration 
results without incurring the cost of a technical report summary could 
yield significant cost savings for such registrants.\1315\ Even larger 
registrants--regardless of production stage--may wish to disclose 
exploration results. In general, being able to disclose exploration 
results without a technical report summary constitutes a cost saving of 
the final rules relative to the proposed rules for any registrant. For 
example, one commenter estimated costs in Canada and Australia to range 
between $20,000 and $40,000 if a company has to hire a qualified person 
working for a third-party consulting firm to prepare a technical report 
in support of material exploration results.\1316\ Another commenter 
also noted that, although exploration results support the disclosure of 
mineral resources and mineral reserves, ``exploration results are the 
only non-speculative information that an exploration program has.'' 
\1317\ We believe maintaining the requirement for a qualified person to 
prepare the supporting documentation and analysis for material 
exploration results without requiring the filing of a technical report 
summary will promote meaningful disclosure without unduly burdening 
registrants.
---------------------------------------------------------------------------

    \1315\ See letter from Eggleston.
    \1316\ See letter from SRK 1.
    \1317\ See letter from Eggleston.
---------------------------------------------------------------------------

    Due to the lack of data, heterogeneity among registrants, and 
inability to know the precise tradeoffs faced by registrants, we are 
not able to quantify the costs and benefits associated with requiring 
registrants to disclose material exploration results. 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 may include the assessment of materiality, the 
costs of employing a qualified person to prepare the findings and 
conclusions, 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 and do not scale with the size of the 
project, the cost burden may be relatively larger for smaller 
registrants. We believe many registrants are already likely to engage 
professionals who meet the definition of qualified person to conduct 
exploration and to document and analyze exploration results, in which 
case the additional compliance costs will be associated mainly with 
producing required disclosures. In addition, the compliance costs 
should be substantially mitigated for registrants that already report 
according to CRIRSCO-based disclosure standards, as those standards 
have similar disclosure requirements for material exploration results. 
However, as Section 11 liability likely will lead professionals that 
meet the definition of qualified person to demand increased 
compensation for their services, costs also may increase for 
registrants currently employing such professionals for exploration 
activities, including those registrants that report in jurisdictions 
with CRIRSCO-based disclosure standards.\1318\
---------------------------------------------------------------------------

    \1318\ See supra Section IV.B.4.i.
---------------------------------------------------------------------------

    Several commenters expressed concern that requiring the disclosure 
of material exploration results could come at the cost of disclosing 
commercially sensitive information or potentially violating 
confidentiality agreements with joint venture partners and other mining 
operators.\1319\ We acknowledge that disclosure of material exploration 
results in this situation would impose costs for both registrants and 
their investors. However, the final rules do not require the filing of 
a technical report summary to support the disclosure of exploration 
results, which may help mitigate concerns about disclosure of 
commercially sensitive information. This is because such information is 
more likely to be found in the technical report summary's detailed 
disclosure requirements for exploration activity and exploration 
results (compared to the disclosure required in the narrative part of 
the Commission filing). We also note that the final requirement to 
disclose material exploration results does not impose an affirmative 
obligation to hire a qualified person to undertake the work necessary 
to make a determination about exploration results for purposes of 
disclosing such results in Commission filings.
---------------------------------------------------------------------------

    \1319\ See supra note 371 and accompanying text.
---------------------------------------------------------------------------

    A few commenters urged us to make disclosure of material 
exploration results (and mineral resources) optional in all 
cases.\1320\ Making disclosure of material exploration results (and 
mineral resources) optional in all cases would reduce the costs 
associated with developing the required documentation by a qualified 
person and any costs associated with disclosing commercially sensitive 
information, because registrants would only choose to disclose when it 
is economically beneficial to do so. However, making disclosure 
optional in all cases would

[[Page 66429]]

undercut the benefits of disclosure that the rules are intended to 
achieve and would not align with CRIRSCO-based disclosure standards. 
Under this alternative, investors could be deprived of material 
information developed by the registrant for its own decision-making, 
but that is not in the registrant's best interest to disclose. In 
addition, where a registrant also produces disclosure in a jurisdiction 
that adheres to CRIRSCO-based disclosure standards (and would thus 
disclose such information), there could be a lack of comparability and 
confusion among investors.
---------------------------------------------------------------------------

    \1320\ See letters from Davis Polk and Royal Gold.
---------------------------------------------------------------------------

    As noted above, the final rule will permit the disclosure of 
exploration targets in Commission filings. This change more closely 
aligns the final rule with CRIRSCO-based disclosure standards. 
Moreover, allowing registrants to disclose exploration targets provides 
registrants with a credible way to communicate value-relevant 
information that could be important for investors' decision making. 
This will put U.S. registrants on a more equal footing with other 
registrants who may be able to disclose exploration targets in other 
jurisdictions. In addition, as suggested by one commenter, exploration 
targets may reflect a significant portion of the value of the company 
for small registrants.\1321\ As such, permitting the disclosure of 
exploration targets in Commission filings could reduce registrants' 
cost of capital, especially for small registrants. Finally, registrants 
will be able to provide investors with information in their Commission 
filings that, due to the qualified person requirement, should be of 
higher quality and reliability than if this information is otherwise 
provided by the mining registrants outside Commission filings, such as 
on company websites.
---------------------------------------------------------------------------

    \1321\ See letter from Eggleston.
---------------------------------------------------------------------------

    Because exploration targets may have no or limited empirical basis, 
allowing the disclosure of exploration targets, even with cautionary 
language, could result in misleading or confusing disclosures, causing 
investors to misconstrue exploration targets as actual findings of 
exploration results or even mineral resources. However, industry and 
CRIRSCO definitions of exploration targets as well as the disclosure 
requirements in the final rules \1322\ mitigate this risk of investor 
confusion.
---------------------------------------------------------------------------

    \1322\ See supra Section II.D.3.
---------------------------------------------------------------------------

    As an alternative, we could have prohibited disclosure of 
exploration targets in Commission filings. We note that such a 
prohibition would not preclude a registrant from releasing the 
information about exploration targets in other media (e.g., websites, 
blog posts, newsletters, or analysts' discussions). Because exploration 
targets could still be communicated by registrants outside of 
Commission filings, the availability of such information without the 
assurances provided by a qualified person requirement and the other 
protections associated with Commission filings could put investors at 
risk of being misled. Moreover, the benefits from allowing the 
disclosure of exploration targets discussed above would be foregone.
6. Treatment of Mineral Resources
i. Mineral Resource Disclosure Requirement
    The final rules provide that a registrant with material mining 
operations must disclose specified information in its Securities Act 
and Exchange Act filings concerning mineral resources that have been 
determined based on information and supporting documentation from a 
qualified person.\1323\ Absent such information and supporting 
documentation, the registrant would not have determined mineral 
resources as defined in the final rules and, as such, would not be 
required or allowed to disclose mineral resources in a Commission 
filing. Because disclosure of mineral resources is currently precluded 
in Commission filings unless required pursuant to foreign or state law, 
this provision will expand the scope of the current disclosure regime, 
while aligning the Commission's mining disclosure requirements with 
those in foreign jurisdictions that adopt CRIRSCO-based disclosure 
standards. Industry participants have raised concerns regarding the 
adverse competitive effects potentially stemming from the inability of 
U.S. registrants to disclose mineral resources. 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.\1324\
---------------------------------------------------------------------------

    \1323\ See supra Section II.E.1.iii.
    \1324\ See supra Section II.E.1.ii.
---------------------------------------------------------------------------

    We expect the final rules will result in investors gaining access 
to additional useful information concerning a mining registrant's 
operations and prospects, which will help improve their investment 
decisions. Because mining registrants assess mineral resources in the 
course of developing mining projects, requiring information about 
mineral resources to be disclosed will significantly reduce information 
asymmetries between investors and registrants and should lower 
registrants' cost of capital, promote capital formation, and improve 
the efficiency of investors' capital allocation.
    As discussed above, allowing the disclosure of mineral resources is 
consistent with CRIRSCO-based disclosure standards. Closer alignment 
with international practice will enable U.S. registrants to provide 
disclosure that more closely matches that of Canadian mining 
registrants and non-U.S. mining companies that are subject to one or 
more of the other CRIRSCO-based mining disclosure codes. As such, the 
final rules will improve the ability of U.S. registrants to provide 
valuable information that analysts and investors are accustomed to 
receiving from non-U.S. companies, thus removing a competitive 
disadvantage and placing U.S. registrants on a more equal footing with 
non-U.S. registrants in terms of accessing capital markets. The ability 
to disclose mineral resources in Commission filings 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. The ability to disclose mineral resources may also 
improve the attractiveness of U.S. capital markets for mining companies 
more generally and encourage entry of new registrants, both domestic 
and foreign, in particular exploration and development stage companies 
that are not permitted to disclose mineral resources in filings with 
the Commission under the current rules.\1325\
---------------------------------------------------------------------------

    \1325\ Similar arguments were made by several commenters. See, 
e.g., letters from Rio Tinto, SME 1, and SRK 1.
---------------------------------------------------------------------------

    For registrants that currently disclose ``mineralized materials'' 
there should be a comparatively lower incremental reduction in 
information asymmetries. Nonetheless, we expect the final rules to 
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 will be clearer under 
the final rules since they are distinct and not aggregated as 
mineralized material. In addition, the final rules require a registrant 
with material mining operations to disclose inferred resources, which 
are not included in the definition of mineralized material. The 
requirement that disclosures must be supported by information and

[[Page 66430]]

documentation provided by a qualified person also will improve the 
quality and reliability of the disclosures compared to the current 
disclosures of mineralized material, which will benefit investors. To 
the extent the above expected improvement in disclosure to investors 
reduces information asymmetries, the efficiency of investment decisions 
will increase and registrants that currently disclose mineralized 
material may experience a reduction in the cost of capital.
    There is some empirical evidence suggesting that investors respond 
favorably to 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.\1326\ 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 abnormal returns. However, abnormal returns are significantly 
greater when a mining company announces mineral resources for the first 
time.\1327\ The authors suggest this may be the case because much of 
the existing information asymmetry is resolved at the time of the first 
announcement.
---------------------------------------------------------------------------

    \1326\ See supra note 1311 and accompanying text.
    \1327\ See supra note 1313 on the generalizability of the 
results.
---------------------------------------------------------------------------

    The final rules will generate compliance costs for registrants that 
are required to disclose mineral resources. The incremental compliance 
costs will be greater for registrants not currently disclosing 
mineralized material. These include incremental costs (above the 
registrant's regular mineral resource assessment practices) of an 
initial assessment when first determining mineral resources and when 
disclosing a material change to mineral resource estimates that have 
been previously reported.\1328\
---------------------------------------------------------------------------

    \1328\ See supra Section IV.B.4.i., for discussion of the 
additional search costs and compensation costs that registrants also 
may incur.
---------------------------------------------------------------------------

    The compliance costs associated with disclosure of mineral 
resources may 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 the final rules. 
In this regard, however, although all CRIRSCO-based disclosure codes 
require some type of documentation to support the determination and 
disclosure of mineral resources, most do not define a specific type of 
study. As such, the final requirement for an initial assessment 
(discussed further below) could result in increased burdens for these 
mining registrants to the extent that the initial assessment differs 
from registrants' prior practices for determining resources. To the 
extent industry practice in other jurisdictions is already largely 
consistent with CRIRSCO-based disclosure standards, whether or not such 
jurisdictions' disclosure codes are based on those standards, the 
marginal increase in costs to comply with the final rules is likely to 
be limited and to comprise a one-time switching cost to new disclosure 
formats and terminology, though this new terminology reflects current 
industry practice and usage.
ii. Definition of Mineral Resource
    We are adopting the definition of mineral resource, as proposed, to 
mean 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.\1329\ This 
definition generally aligns with the definition used in CRIRSCO-based 
disclosure standards and industry practice, and should therefore 
benefit investors by making the disclosure of mineral resources by U.S. 
mining registrants comparable to the disclosures in foreign 
jurisdictions.
---------------------------------------------------------------------------

    \1329\ See supra Section II.E.2.
---------------------------------------------------------------------------

    We do not expect the adopted definition of mineral resources to 
impose any significant compliance costs, by itself, on registrants who 
are currently estimating mineral resources based on a similar 
definition for internal purposes and for reporting in foreign 
jurisdictions with CRISCO-based mining disclosure requirements. To the 
extent that registrants do not currently estimate resources similar to 
the definition in the final rules, they may incur incremental costs 
from having to change their estimation practices to meet the specific 
definition of mineral resources in the final rules. We note that these 
costs would need to be incurred only insofar as such registrants desire 
to disclose mineral resources in Commission filings. Registrants that 
find the benefit of disclosing mineral resources does not exceed the 
costs of determining mineral resources according to the definition in 
the final rules have no obligation to do so. It is possible to engage 
in mineral production without disclosing mineral resources or mineral 
reserves. Such issuers, however, absent any other material mineral 
reserves, would be classified as exploration-stage issuers. Registrants 
that currently find disclosure of mineral reserves to be valuable will 
have to incur the cost of determining and disclosing mineral resources 
in order to disclose mineral reserves. We believe, however, that it is 
reasonable to expect a mining industry participant that wishes to 
monetize mineral material (that could be disclosed as a mineral 
resource) would choose to determine the value of the mineral material, 
especially if the company is currently estimating and disclosing 
mineral reserves.
    As an alternative to the final rules, we could have excluded 
mineral brines from the definition of mineral resource, as suggested by 
several commenters.\1330\ This would further align our definition with 
CRIRSCO-based standards, which define a mineral resource as ``solid 
material,'' and could reduce compliance costs for registrants 
extracting minerals brines, especially if they are also reporting in 
jurisdictions where mineral brines do not need to be included in 
disclosure of mineral resources. To the extent the industry practice 
regarding extracting mineral brines is different from the industry 
practice of extracting solid minerals, subjecting such firms to a 
disclosure regime developed for solid mineral extraction may increase 
compliance costs related to reporting. However, as discussed above, 
mineral brines are regulated under Canada's NI 43[dash]101 code by at 
least one Canadian provincial securities administrator,\1331\ which 
suggests it may not be outside industry practice to treat extraction of 
mineral brines in a similar way to extraction of solid minerals. In 
addition, the scientific and engineering principles used to 
characterize mineral brine and resources and reserves are substantially 
similar to those used to characterize solid mineral resources and 
reserves, and Guide 7 has been applied historically to registrants that 
own or operate mining properties containing mineral brines.\1332\ 
Therefore, excluding mineral brines from the definition of mineral 
resource could result in investors receiving less information about 
these resources than under the current disclosure framework.
---------------------------------------------------------------------------

    \1330\ See supra note 479 and accompanying text.
    \1331\ See supra note 502 and accompanying text.
    \1332\ See supra Section II.E.2.iii.
---------------------------------------------------------------------------

iii. Classification of Mineral Resources
    We are adopting the proposed requirement that a registrant with

[[Page 66431]]

material mining operations classify its mineral resources into 
inferred, indicated, and measured mineral resources, in order of 
increasing confidence based on the level of underlying geological 
evidence.\1333\ This more closely aligns the Commission's disclosure 
framework for mining registrants with CRIRSCO-based disclosure 
standards. We do not expect this requirement to result in significant 
compliance costs for registrants.
---------------------------------------------------------------------------

    \1333\ See supra Section II.E.3.
---------------------------------------------------------------------------

    Estimates of mineral resources are associated with a greater 
geological uncertainty than estimates of mineral reserves. As discussed 
above, geological uncertainty is a crucial factor in a registrant's 
determination of mineral resources.\1334\ As such, the classification 
of mineral resources in the final rules, which is based on the level of 
geological uncertainty, will benefit investors by helping them better 
assess the uncertainty surrounding mineral resource estimates.
---------------------------------------------------------------------------

    \1334\ See supra Section II.E.3.iii.
---------------------------------------------------------------------------

    The adopted definition of inferred mineral resource provides that 
the level of geological uncertainty associated with an inferred mineral 
resource is too high to apply relevant technical and economic factors 
likely to influence prospects of economic extraction in a manner useful 
for evaluation of economic viability.\1335\ This change from the 
proposal will make the adopted definition substantially similar to the 
definition under CRIRSCO-based disclosure standards, further increasing 
the comparability of registrants' mineral resource disclosures with 
those in foreign jurisdictions.
---------------------------------------------------------------------------

    \1335\ See id.
---------------------------------------------------------------------------

    Despite the low level of geological confidence in inferred 
resources, we believe investors' understanding of a registrant's mining 
operations will be increased by the required disclosure of inferred 
resources because these resources may be converted into indicated or 
measure mineral resources. However, such disclosure could lead to 
inefficient capital allocation decisions if investors overestimate the 
value of these resources. The risk that investors will overestimate the 
value of inferred resources is mitigated by the fact that the 
definition of inferred resources clearly indicates to investors that 
these are the mineral resources with the highest degree of geological 
uncertainty. Moreover, registrants are precluded from using inferred 
mineral resources as a direct basis for determining mineral reserves 
(they would first have to be converted into indicated or measured 
mineral resources). Therefore, registrants will have limited incentive 
to aggressively report inferred resources, because the likelihood that 
these mineral resources will ultimately be determined to be mineral 
reserves in the future is low.
    The final rules do not require that a qualified person quantify the 
minimum percentage of inferred mineral resources he or she believes 
will be converted to indicated and measured mineral resources with 
further exploration. The final rules also do not require the qualified 
person to disclose the uncertainty associated with indicated and 
measured mineral resources by providing the confidence limits of 
relative accuracy, at a specific confidence level, of the preliminarily 
estimated production quantities per period derived from these 
resources.\1336\ Although this approach for reporting the level of 
uncertainty is consistent with current practice in the industry,\1337\ 
several commenters indicated that it could be impractical or 
inappropriate, unduly burdensome, and costly for many 
registrants.\1338\ The less prescriptive approach we are adopting will 
avoid these potential costs. It will also mitigate potential 
misinterpretation of the information by investors, who--under the more 
prescriptive approach--might have misconstrued information to be more 
precise than it, in fact, is. In turn, investors may have made 
insufficiently informed decisions, leading to inefficient capital 
allocation. Additionally, the final rule will ensure greater 
consistency with CRIRSCO-based disclosure standards. As noted 
elsewhere, consistency with CRIRSCO-based disclosure standards reduces 
the compliance burden and costs associated with duplication of effort 
for registrants who are required to provide disclosure in multiple 
jurisdictions. Consistency also reduces the scope for investor 
confusion arising from differing standards of disclosure in different 
jurisdictions and the costs of gathering and processing information for 
investors.
---------------------------------------------------------------------------

    \1336\ See supra Section II.E.3.iii.c.
    \1337\ See supra note 531 and accompanying text, affirmed by SME 
1.
    \1338\ See, e .g., letters from CBRR, MMSA, Rio Tinto, SME 1, 
and Vale.
---------------------------------------------------------------------------

iv. Initial Assessment Requirement
    Mineral resource disclosures must be supported by an initial 
assessment by a qualified person. This assessment, at a minimum, must 
include a qualitative evaluation of technical and economic factors to 
establish the economic potential of the mining property or 
project.\1339\ Compared to the proposed rule, which required the 
application of modifying factors, the final rule is closer to CRIRSCO-
based disclosure codes. The initial assessment requirement--by 
supporting the disclosure of mineral resources--yields the benefits 
noted above from permitting the disclosure of mineral resources and 
serves to improve the accuracy and reliability of the mineral resource 
estimates for investors.\1340\ The term ``initial assessment'' varies 
from the term ``resource report,'' as is commonly used in jurisdictions 
adhering to CRIRSCO-based disclosure standards. As noted by some 
commenters,\1341\ this variation, in addition to other minor 
differences, could create uncertainty for registrants. However, given 
that the final rules are in much greater alignment with CRIRSCO-based 
disclosure standards, we do not expect these differences to result in 
significant additional compliance burdens for the majority of 
registrants reporting in jurisdictions adhering to CRIRSCO-based 
disclosure standards.
---------------------------------------------------------------------------

    \1339\ See supra Section II.E.4.
    \1340\ See supra Section IV.B.6.i.
    \1341\ See letters from AngloGold, BHP, Eggleston, MMSA, and SRK 
1.
---------------------------------------------------------------------------

    However, some registrants may face duplication costs or additional 
compliance costs to the extent that the different requirements are not 
interchangeable or do impose additional requirements. For example, 
since the final rules require qualified persons who choose to include 
inferred mineral resources in cash flow analysis in an initial 
assessment to disclose the results of the analysis with and without 
inferred mineral resources,\1342\ which is not required by Canada's NI 
43-101, a registrant that is dual-listed in Canada may be required to 
conduct the extra analysis and produce further documentation to comply 
with both disclosure standards. In these situations, there could be a 
cost to investors in terms of processing information, as investors may 
be unsure of how to reconcile and interpret differences. However, if 
the differences (e.g., analysis with and without inferred resources) in 
the final rules vis-[agrave]-vis CRIRSCO-based disclosure standards 
enhance the quality of disclosure, then investors will benefit.
---------------------------------------------------------------------------

    \1342\ See Item 1302(d)(4)(ii) of Regulation S-K.
---------------------------------------------------------------------------

    An alternative suggested by some commenters is to not define 
``initial assessment,'' but instead adopt the standard used in CRIRSCO-
based codes to make determinations of mineral resources. It is 
difficult to assess whether this alternative would result in lower 
costs for registrants since CRIRSCO-based disclosure standards do

[[Page 66432]]

not prescribe the specific requirements that a technical report must 
satisfy to support a determination of resources. For registrants not 
disclosing under CRIRSCO-based disclosure codes, there is likely to be 
no significant difference in the additional costs between adopting the 
final rules or simply adopting CRIRSCO-based disclosure standards. 
However, for registrants that already provide disclosure of resources 
in jurisdictions that conform to CRIRSCO-based disclosure standards, 
there may be lower compliance costs under this alternative to the 
extent the initial assessment requirement is different from the type of 
study the registrants currently conduct to determine and support 
disclosure of mineral resources.
    In a change from the proposed rules in response to comments 
received, we are not requiring that the qualified person 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, unless 
prices are defined by contractual arrangements.\1343\ The final rules 
instead provide that, when estimating mineral prices, the qualified 
person must use a price assumption that is current as of the end of the 
registrant's most recently completed fiscal year for each commodity 
that provides a reasonable basis for establishing the prospects of 
economic extraction for mineral resources.\1344\ Similar to the 
proposed rules, the qualified person may use a price set by contractual 
arrangement, provided that such price is reasonable, and that the use 
of such a contractual price is disclosed.\1345\
---------------------------------------------------------------------------

    \1343\ See supra Section II.E.4.iii.
    \1344\ See Item 1302(d)(2) of Regulation S-K.
    \1345\ See id. We are also adopting this estimated pricing 
methodology for the determination and disclosure of mineral 
reserves. See infra Section II.F.
---------------------------------------------------------------------------

    Providing greater flexibility in the methodology used for 
estimating prices will bring the Commission's requirements closer to 
global industry practice as well as the practice that registrants use 
for economic decision-making.\1346\ In this regard, the final rules 
will allow registrants to use the same prices for disclosing mineral 
resources in Commission filings as they do for their own internal 
management purposes and when reporting in CRIRSCO-based jurisdictions, 
which should significantly limit the compliance costs of the final 
rules while allowing the qualified person to exercise professional 
judgment commensurate and consistent with the regulatory intent of the 
qualified person requirement. A potential cost of the increased 
flexibility of the final rules is that registrants may use this 
discretion to select overly optimistic prices, which the proposed rules 
restricted through a ceiling price feature. Overly optimistic prices 
may mislead investors about the actual prospects of the mining 
operations by inflating the value of the estimated mineral resources. 
Any tendency for registrants to select overly optimistic prices in an 
attempt to inflate estimates is mitigated under the final rules by the 
requirement that the qualified person disclose the price used and 
explain his or her reasons for selecting the particular price, 
including the material assumptions underlying the selection.
---------------------------------------------------------------------------

    \1346\ See supra note 651.
---------------------------------------------------------------------------

    An alternative to the final rule 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 price risk 
associated with the estimated mineral resources and reserves and could, 
therefore, lead to more informed investment decisions. However, because 
a sensitivity analysis would require registrants to calculate at least 
three estimates of resources and reserves (the base prices, as well as 
one price each above and below the base price, respectively), 
compliance costs would be higher than under the final rules. 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.
    Another alternative would be to use a ceiling price model as in the 
proposed rules, but 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. The higher volatility of this alternative 
ceiling price may create even 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.
7. Treatment of Mineral Reserves
i. Framework for Determining Mineral Reserves
    We are revising, as proposed, the definition of mineral reserves to 
align it with CRIRSCO-based disclosure standards by requiring that a 
qualified person apply defined modifying factors to indicated and 
measured mineral resources in order to convert them to mineral 
reserves.\1347\ The adopted framework requires 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. The final rules require 
disclosure of reserves to be based on the work of a qualified 
person.\1348\ Because the adopted treatment of mineral reserves is 
consistent with established practices in the mining industry, we do not 
expect a significant increase in compliance costs for most registrants 
beyond the potential cost increases related to the qualified person 
requirement and the filing of the technical report summary, as 
discussed above.
---------------------------------------------------------------------------

    \1347\ See supra Section II.F.1.iii.
    \1348\ See id.
---------------------------------------------------------------------------

    In a change from the proposed rules, the adopted definition of 
mineral reserve provides that a mineral reserve includes diluting 
materials and allowances for losses that may occur when the material is 
mined or extracted.\1349\ In response to commenters' concerns, we have 
adopted this change to make the definition consistent with the 
comparable definition in CRIRSCO-based disclosure standards, and to 
remove an inconsistency in the proposed rules.\1350\ By removing this 
inconsistency and more closely aligning with CRIRSCO-based disclosure 
codes, the final rules will facilitate compliance and avoid potential 
confusion for registrants and investors.
---------------------------------------------------------------------------

    \1349\ See the definition of mineral reserve in 17 CFR 229.1300.
    \1350\ See supra note 768 and accompanying text.
---------------------------------------------------------------------------

    In another change to the proposed rules, as a result of comments 
received, the final rules no longer define modifying factors to include 
factors used to establish the economic prospects of mineral resources. 
Instead, the adopted definition provides that modifying factors are the 
factors that a qualified person must consider applying to indicated and 
measured resources and then evaluate in order to establish the economic 
viability of mineral

[[Page 66433]]

reserves.\1351\ This change is consistent with the change made to the 
initial assessment requirement, which no longer requires application of 
the modifying factors at the resource determination stage.\1352\ 
Referencing modifying factors solely in the context of mineral reserve 
determination aligns the final rules with CRIRSCO-based disclosure 
standards, which will benefit registrants and investors by clarifying 
the level of analysis required at the resource determination stage.
---------------------------------------------------------------------------

    \1351\ See the definition of modifying factors in 17 CFR 
229.1300.
    \1352\ See supra Section II.E.4.
---------------------------------------------------------------------------

    In response to comments received, the final rules no longer require 
the qualified person to use a price that is no higher than the 24-month 
trailing average price, as proposed. Instead, the qualified person must 
use a price for each commodity that provides a reasonable basis for 
establishing that the project is economically viable. The qualified 
person will be required to explain his or her reasons for selecting the 
price and the underlying material assumptions regarding the 
selection.\1353\ We expect the same economic effects related to the 
final pricing requirement for mineral reserves estimation as those 
discussed in relation to the final pricing requirement for mineral 
resources estimation.\1354\
---------------------------------------------------------------------------

    \1353\ See supra Section II.F.2.
    \1354\ See supra Section IV.B.6.iv.
---------------------------------------------------------------------------

    In addition, because of this change from the proposed rules, the 
final rules will fully allow the use of different prices for estimation 
of mineral resources and mineral reserves by not imposing a price 
ceiling, which would otherwise require the prices to be the same when 
the ceiling is binding. As noted by commenters,\1355\ the use of 
different prices for resources and reserves is a common industry 
practice. A registrant develops prices and other financial inputs that 
align with its expected operational schedule. The timeframes for 
development of resources can differ significantly compared to those for 
reserves. For these reasons, the removal of a price ceiling will 
benefit registrants by giving the qualified person more flexibility 
than under the proposed rules to use different prices for estimation of 
resources and reserves.
---------------------------------------------------------------------------

    \1355\ See letters from AIPG, Alliance, Amec, AngloGold, BHP, 
CBRR, CRIRSCO, Eggleston, MMSA, Rio Tinto, SAMCODES 1, SME 1, SRK 1, 
Vale, and Willis.
---------------------------------------------------------------------------

ii. The Type of Study Required To Support a Reserve Determination
    The final rules permit registrants to disclose mineral reserves 
based on a pre-feasibility study rather than a feasibility study as 
required by current practice. In a change from the proposed rules, we 
are not requiring the qualified person to justify the use of a pre-
feasibility study in lieu of a feasibility study.\1356\ In addition, we 
are not requiring the use of a feasibility study in high-risk 
situations as required by the proposed rules. Under the final rules, 
the qualified person will determine the appropriate level of study 
required to support the determination of mineral reserves under the 
circumstances based on his or her professional judgment.\1357\
---------------------------------------------------------------------------

    \1356\ See supra Section II.F.2.
    \1357\ See supra note 845 and accompanying text.
---------------------------------------------------------------------------

    Pre-feasibility studies, while adequate for disclosure of mineral 
reserves, require less time to produce 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.\1358\ One commenter, a professional mining 
consulting company, provided cost estimates for a third-party qualified 
person producing and filing technical reports in support of disclosure 
of reserves in Canada and Australia.\1359\ For technical reports based 
on a pre-feasibility study the estimated cost range is $200,000-
$500,000, whereas for technical reports based on a feasibility study, 
this commenter estimated the cost range to be $500,000-
$1,500,000.\1360\ Another commenter, a large multinational foreign 
private issuer, stated that: ``For major projects, Pre-Feasibility 
Studies can cost around 30 to 50% of the cost of Feasibility Studies.'' 
\1361\ These estimates suggest that a pre-feasibility study will be 
significantly less costly than a feasibility study, but also that there 
is significant variability in the relative cost of pre-feasibility 
studies compared to feasibility studies.
---------------------------------------------------------------------------

    \1358\ See Richard L. Bullock, ``Mineral Property Feasibility 
Studies,'' in 1 SME Mining Engineering Handbook, at 227-261.
    \1359\ See letter from SRK 1.
    \1360\ These cost estimates are from a single comment letter, 
and we lack other data by which we can evaluate or verify these 
estimates. However, we use these cost estimates to generally 
illustrate the potential magnitude of the aggregate cost savings to 
all mining registrants from the permitted use of pre-feasibility 
studies. For example, assuming the 267 current mining registrants on 
average determines reserves on one property per year, if they use a 
feasibility study, the aggregate cost would be $267 million at the 
mid-range value of the estimated cost of a feasibility study (267 x 
$1,000,000). If they instead use a pre-feasibility study, the 
aggregate cost would be $97.5 million at the mid-range value of the 
estimated cost of a pre-feasibility study (267 x $350,000), which 
would represent aggregate cost savings of approximately $170 million 
relative to completing a feasibility study.
    \1361\ See letter from Rio Tinto.
---------------------------------------------------------------------------

    Allowing pre-feasibility studies may be especially beneficial for 
registrants that already have studies meeting the pre-feasibility 
standard, but not the feasibility standard. The lower cost may also 
benefit smaller registrants more to the extent they are likely to be 
more capital constrained than larger registrants and to the extent 
feasibility studies are associated with greater fixed costs. Allowing 
the use of pre-feasibility studies may therefore facilitate disclosures 
of mineral reserves by smaller registrants, which should be beneficial 
both to the registrants and investors.
    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 standards 
already allow the use of pre-feasibility studies, allowing their use 
under the final rules will place U.S and non-Canadian foreign 
registrants on an equal footing with Canadian registrants availing 
themselves of the ``foreign or state law'' exception and with other 
mining companies reporting only in jurisdictions using CRIRSCO-based 
disclosure standards. Thus, allowing the use of a pre-feasibility study 
will allow U.S. and non-Canadian foreign registrants to avoid producing 
studies that they find unnecessary and, consequently, to avoid 
compliance costs that could place them at a competitive disadvantage. 
The final rules allow a qualified person to exercise the same 
discretion as qualified persons in other jurisdictions, thus providing 
a level of rigor appropriate for internal economic decision making and 
for investors. Finally, the detailed requirements for feasibility 
studies should facilitate compliance, while increasing consistency in 
disclosures where feasibility studies are used to determine mineral 
reserves.
    A pre-feasibility study is typically associated with a lower 
confidence level than a feasibility study. Therefore, allowing the use 
of pre-feasibility studies may lead to higher uncertainty associated 
with mineral reserve disclosures. The greater uncertainty associated 
with the lower level of rigor of a pre-feasibility study vis-[agrave]-
vis a feasibility study may lead to less accurate or less complete 
information being disclosed to investors, thus decreasing investors' 
ability to make efficient investment decisions. However, we note that 
the registrant has incentives to choose the level of rigor that is 
appropriate for its own economic

[[Page 66434]]

decision making, and that is needed to attract investors and lower its 
cost of capital. We expect that registrants will balance the benefits 
(including the reduced costs of capital) of a feasibility study against 
the incremental cost of producing such a study (vis-[agrave]-vis a pre-
feasibility study). Therefore, we expect some registrants will still 
find it beneficial to conduct feasibility studies in support of 
determination of mineral reserves, just as mining companies in other 
jurisdictions using CRIRSCO-based disclosure rules sometimes choose 
feasibility studies to support mineral reserve determination.
    Moreover, several aspects of the final rules mitigate the risk 
resulting from permitting the use of a pre-feasibility study to support 
the determination and disclosure of mineral reserves.\1362\ For 
example, 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. 
This will help limit the uncertainty of mineral reserve estimates based 
on a pre-feasibility study. Another example is the provision that 
requires that the pre-feasibility study identify sources of uncertainty 
that require further refinement in a final feasibility study. The 
disclosure of these sources of uncertainty will help investors assess 
the risk of the mineral reserve estimates based on a pre-feasibility 
study. A third example is the requirement that the qualified person 
will have to perform additional evaluative work in high-risk situations 
to meet the level of certainty required for a pre-feasibility 
study.\1363\
---------------------------------------------------------------------------

    \1362\ See supra II.F.2.iii.
    \1363\ See supra II.F.2.iii.
---------------------------------------------------------------------------

    Similar to the proposal, the final rules provide that a pre-
feasibility or feasibility study must define, analyze, or otherwise 
address in detail, to the extent material, various factors such as 
environmental regulatory compliance, the ability to obtain necessary 
permits, and other legal challenges that can directly impact the 
economic viability of a mining project. Some commenters objected to 
this aspect of the proposed rules, with one commenter urging the 
Commission to remove these factors due to the potential for duplication 
or imposition of new, burdensome requirements.\1364\ Another commenter 
noted that there are other regulatory agencies for such concerns,\1365\ 
while other commenters observed that the factors are outside of the 
expertise of most qualified persons.\1366\ Because registrants may 
already incorporate some of these concerns into the permitting process 
with state, federal, and other regulators, analyzing such items would, 
as noted above, impose a duplication cost. However, as suggested by 
commenters concerned with duplication, consideration of these factors 
is already part of industry practice. Moreover, investors may benefit 
from the discussion and analysis of these factors, as they become 
better informed about relevant constraints that face the registrant and 
that may decrease or eliminate the value of a registrant's project. 
This, in turn, would allow investors to incorporate this non-
operational, but value-relevant, information into their decision 
making, thereby reducing information asymmetries between investors and 
registrants. In addition, modifications to this requirement, such as 
adding a materiality qualifier and simplifying and clarifying the 
description of the factors, will help mitigate any additional costs for 
registrants.
---------------------------------------------------------------------------

    \1364\ See letter from NMA 2.
    \1365\ See letter from SME 1.
    \1366\ See letters from AIPG, Amec, CIM, Davis Polk, Energy 
Fuels, FCX, NMA 2, SASB, SME 1, and Ur-Energy.
---------------------------------------------------------------------------

    As noted by several commenters,\1367\ some mining sectors are not 
as complex as others, allowing them to make reserve (or resource) 
determinations with more focus on modifying factors that ``may be 
significantly more critical than geoscientific knowledge of the deposit 
in determining mineral resources and mineral reserves.'' \1368\ One 
coal mining company, in particular, objected to the requirement for 
either a pre-feasibility or feasibility study for reserve determination 
on the grounds that it would cost ``several million dollars'' without 
providing a benefit \1369\ and also asserted that public disclosure of 
information contained in those studies would likely cause it 
competitive harm.\1370\ To address concerns that certain registrants' 
practices do not meet industry standards for mineral reserves 
determination, one alternative to the final rules, as suggested by one 
commenter \1371\ would be to allow reliance on on-going operations or 
other internally developed analyses, which may be less rigorous than 
the final rules' requirements to support a mineral reserves 
determination for certain less complex operations (e.g., coal and 
certain industrial minerals such as aggregates). Such an alternative 
would impose no additional costs on these registrants. To the extent 
that such an accommodation would not diminish the value of information 
that investors receive vis-[agrave]-vis the requirements of the final 
rules, investors will not experience a reduction in benefits compared 
to the baseline. However, this alternative could come at a cost of the 
decreased rigor relative to that contained in a pre-feasibility or 
feasibility study that meets the requirements of the final rules. This 
lack of rigor may deprive investors of information that would better 
inform their investment decisions. Moreover, any such accommodations 
would dilute the harmonization efforts of the new rules.
---------------------------------------------------------------------------

    \1367\ See letters from AIPG, Alliance, NSSGA 1, and NSSGA 2.
    \1368\ See letter from AIPG.
    \1369\ See supra note 851 and accompanying text.
    \1370\ See supra note 852 and accompanying text.
    \1371\ See letter from Alliance. The commenter states that 
``coal companies operating in well-defined coal fields'' do not 
conduct ``formal studies'' because ``on-going operations provide all 
the feasibility information that is required.'' In such cases, it 
appears that the information required for a feasibility study (not 
to mention a pre-feasibility study) is already available. Moreover, 
the commenter acknowledges that ``coal companies have sufficient 
technical expertise on staff,'' ``the majority of reserve estimate 
reports prepared for the coal industry meet all the qualifications 
outlined in the proposal to define a qualified person,'' and ``A 
very large number of qualified persons are available to perform this 
work [resource and reserve determination under USGS Circulars 831 
and 891],'' suggesting that coal companies already employ qualified 
persons who could readily prepare a pre-feasibility or feasibility 
study with extant information.
---------------------------------------------------------------------------

8. Specific Disclosure Requirements
i. Requirements for Summary Disclosure
    Guide 7 does not explicitly address what disclosure should be 
provided when a registrant has multiple mining properties. The final 
rules require that registrants that own or otherwise have economic 
interest in multiple mining properties provide summary disclosure of 
their mining operations.\1372\
---------------------------------------------------------------------------

    \1372\ See supra Section II.G.1.
---------------------------------------------------------------------------

    We expect that, for registrants with material mining operations, 
requiring an overview of their mining operations, regardless of whether 
they have material individual properties, will be useful to investors 
and help foster more efficient and effective disclosure. The 
information required to be disclosed aligns with what most registrants 
already provide in their SEC filings, but the requirement will ensure 
that the summary information is provided by all registrants, thereby 
incrementally improving comparability across registrants. We believe 
the summary disclosure requirement will in particular be beneficial to 
investors in the cases where no individual mining property is material 
to the registrants but the mining operations in aggregate are material. 
In these cases, the summary disclosure requirement will

[[Page 66435]]

help ensure that investors are provided with at least an overview of 
the registrant's mining operations that can help them make investment 
decisions.
    More specifically, we believe that the summary disclosure of 
mineral resources and mineral reserves operations at fiscal year's end 
will provide investors with information that is relevant for their 
valuation of registrants' mining operations.\1373\ For example, the 
required breakdown of the mineral resources and reserves by category 
and source (geographic area and property) will provide investors with 
information helpful for assessing the risk of mining operations. In a 
change from the proposed rules, and consistent with some commenters' 
suggestion,\1374\ the final rules require registrants to use separate 
tables when reporting mineral resources and reserves. This change will 
increase the clarity of the presented information about mineral 
resources and reserves while reducing the potential for confusion among 
investors.
---------------------------------------------------------------------------

    \1373\ See supra note 955 and accompanying discussion.
    .
    \1374\ See supra note 931 and accompanying text.
---------------------------------------------------------------------------

    The summary disclosure requirement will increase costs for 
registrants, albeit to a varying degree. Given that the requirement for 
summary disclosure in the final rules largely aligns with what most 
registrants already provide in their SEC filings, we expect any 
increase in costs to be limited for such registrants. For registrants 
that do not already provide summary disclosure, whether reporting 
pursuant to Guide 7 or under any of the CRIRSCO-based codes, there 
could be additional costs to comply with the summary disclosure 
requirements.
    Based on the concern of some commenters that the proposed summary 
disclosure requirements were too prescriptive,\1375\ the final rules 
have been revised to be more flexible and provide for discretion in 
choice of format for disclosure. For example, instead of requiring a 
presentation in tabular form of certain specified information about the 
20 properties with the largest asset values, the final rules will 
permit a registrant to present an overview of its mining properties and 
operations in either narrative or tabular format.\1376\ The less 
prescriptive nature of this requirement should reduce the reporting 
burden for registrants and could also result in more useful information 
being disclosed to investors as registrants can tailor the disclosure 
more to their own specific circumstances. This change will also align 
the summary disclosure requirements in the final rules more closely 
with the CRIRSCO-based disclosure standards.\1377\
---------------------------------------------------------------------------

    \1375\ See, e.g., supra note 923 and accompanying text.
    \1376\ See supra Section II.G.1.iii.
    \1377\ See id.
---------------------------------------------------------------------------

    A more prescriptive approach, such as in the proposed rules, which 
may have relatively increased comparability, would have reduced each 
registrant's ability to capture the specific circumstances of their 
operations in the disclosure, and could have imposed additional costs 
to registrants in preparing supplemental clarifying disclosure. As 
several commenters indicated, due to the diversity of operations in the 
mining industry, much of the required data will be specific to each 
registrant.\1378\
---------------------------------------------------------------------------

    \1378\ See supra note 925 and accompanying text.
---------------------------------------------------------------------------

    An alternative to the proposed summary requirements would be to 
also require the disclosure required in Tables 1 and 2 to paragraph (b) 
of Item 1303 to be made available in a structured data format, such as 
XBRL. When registrants provide disclosure items in a structured data 
format, investors and other data users (e.g., analysts) can easily 
retrieve and use the information reported by registrants and perform 
comparisons. Because the final rules permit tailoring of the 
disclosures in Tables 1 and 2 to paragraph (b) of Item 1303 to 
registrants' unique facts and circumstances and provide filers with 
some flexibility in how to report the required information, the 
usefulness of requiring the data in these tables to be made available 
in the XBRL format will be decreased. As discussed above, several 
commenters indicated that much of the required data would be specific 
to each registrant.\1379\ For these reasons we believe such a 
requirement would provide limited benefit to investors while increasing 
the compliance burden on registrants.
---------------------------------------------------------------------------

    \1379\ Id.
---------------------------------------------------------------------------

ii. Requirements for Individual Property Disclosure
    We are adopting, with some modifications, the proposed requirement 
that a registrant with material mining operations must disclose certain 
information about each property that is material to its business or 
financial condition.\1380\ The items required to be disclosed for 
material individual properties are substantially similar to items 
called for by Item 102 of Regulation S-K and Guide 7.\1381\ Also, these 
disclosures are substantially similar to what is called for under 
CRIRSCO-based disclosure standards.\1382\ However, we expect the 
individual disclosure requirements in the final rules will increase the 
amount and type of individual property information that registrants 
disclose. Much of this new information will be a direct consequence of 
the requirements in the final rules to disclose material exploration 
results and mineral resources. Another new item of information will be 
the required comparison of a registrant's mineral resources and mineral 
reserves as of the end of the last fiscal year against the mineral 
resources and mineral reserves as of the end of the preceding fiscal 
year, with an explanation of any change between the two.\1383\
---------------------------------------------------------------------------

    \1380\ See supra Section I.G.2
    \1381\ See supra note 1033
    \1382\ See supra note 1034.
    \1383\ See supra Section II.G.2.iii.
---------------------------------------------------------------------------

    The requirement for individual property disclosure in the final 
rules will benefit investors by providing more consistency in mining 
registrants' disclosures and increasing the amount of information about 
registrants' material mining properties available to investors, thereby 
improving their ability to assess the value and risk of these 
properties. By helping investors gain a more comprehensive 
understanding of a registrant's mining operations beyond the 
information provided in the summary disclosure, investors should be 
able to better assess the value and the risk associated with a 
registrant's material mining properties. In a change from the proposed 
rules, and for the same reasons as the corresponding change to the 
summary disclosure requirement, the final rules require registrants to 
use separate tables when reporting mineral resources and mineral 
reserves for material properties. As in the case of summary disclosure, 
we believe this change will reduce the potential for confusion among 
investors.
    We expect that the individual property disclosure requirement will 
result in additional compliance costs for registrants to the extent 
they do not currently disclose substantially similar information. In 
particular, because the required year-over-year comparison of a 
registrant's mineral resources and reserves is not required by Guide 7, 
we expect registrants that are not currently complying with foreign 
codes requiring such disclosure to incur additional compliance costs 
related to this requirement. We expect the incremental compliance costs 
associated with property disclosure in Commission filings will be the 
largest the first time registrants prepare the disclosure and then may 
decline over time because companies should only incur the costs

[[Page 66436]]

to update their systems and procedures to collect and format the 
required information once, and thereafter will only have to update the 
reported information.
    Based on the concern of some commenters that the proposed 
individual property disclosure requirements were too 
prescriptive,\1384\ the final rules have been revised to be more 
flexible and provide for discretion in choice of format for disclosure. 
In particular, the removal of the requirement for tabular formats for 
several of the required disclosures, including the year-over-year 
comparison of mineral resources and mineral reserves, will reduce 
compliance costs for registrants relative to the proposed rules, while 
still eliciting useful information for investors.\1385\ The individual 
property disclosure requirement in the final rules is also more closely 
aligned with the CRIRSCO-based disclosure standards than the proposed 
rules, which should help limit the burden for registrants that are 
subject to one or more of the other CRIRSCO-based mining disclosure 
codes. For example, as with the summary disclosure requirement, the 
final rules provide that a qualified person must base each mineral 
resource and mineral reserve estimate on a reasonable and justifiable 
price, which will allow registrants to use the same prices for 
disclosing mineral resources and mineral reserves in Commission filings 
as they do for their own internal management purposes and when 
reporting in CRIRSCO-based jurisdictions.
---------------------------------------------------------------------------

    \1384\ See supra note 982 and accompanying text.
    \1385\ See supra Section II.G.2.iii.
---------------------------------------------------------------------------

    In a change from the proposed rule, and as a result of comments 
received, a provision relating to the individual property disclosure 
requirement permits a registrant to include historical 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, a current mineral reserve, or current exploration 
results, in a filing pertaining to mergers, acquisitions, or business 
combinations if the registrant is unable to update the estimate prior 
to completion of the relevant transaction.\1386\ In such an instance, 
the registrant must disclose the source and date of the estimate, state 
that a qualified person has not done sufficient work to classify the 
estimate as a current estimate of mineral resources or mineral 
reserves, and state that the registrant is not treating the estimate as 
a current estimate of mineral resources or mineral reserves.\1387\ 
Without this provision, certain value increasing acquisitions or other 
similar business transactions will be more difficult to complete, which 
could hamper the growth opportunities of registrants and impose an 
undue burden. However, permitting the use of historical estimates may 
increase the potential risk to investors because they will have to rely 
on information that is not current. To mitigate this risk, in the event 
historical estimates are permitted, the adopted provision will require 
that investors receive additional information to help them evaluate an 
investment in a registrant that has engaged in a merger or similar 
business transaction involving the use of a historical estimate.\1388\
---------------------------------------------------------------------------

    \1386\ See Item 1304(h) of Regulation S-K
    \1387\ See id.
    \1388\ See supra note 1069 and accompanying text.
---------------------------------------------------------------------------

    Similar to the summary disclosure requirement, we could have, as an 
alternative, required the disclosures in Tables 1 and 2 to paragraph 
(d)(1) of Item 1304 to be made available in XBRL format. In light of 
the flexibility provided in the final rules for the disclosures in 
Tables 1 and 2 to paragraph (d)(1) of Item 1304, for similar reasons as 
those discussed above in the case of the summary disclosure 
requirement, we believe requiring this data to be presented in a 
structured format would provide limited benefits to investors while 
increasing the compliance burden on registrants. Several commenters 
opposed an XBRL requirement due to the cost burden and limited benefits 
for users of the information.\1389\
---------------------------------------------------------------------------

    \1389\ See supra notes 1015-1017 and accompanying text.
---------------------------------------------------------------------------

iii. Requirements for Technical Report Summaries
    The final rules require a registrant disclosing information 
concerning its mineral resources or mineral reserves determined to be 
on a material property to file a technical report summary by one or 
more qualified persons to support such disclosure of mineral resources 
or mineral reserves.\1390\ However, as previously discussed, unlike the 
proposed rules, the final rules permit, but do not require, a 
registrant to file a technical report summary to support the disclosure 
of material exploration results.\1391\
---------------------------------------------------------------------------

    \1390\ See supra Section II.G.3.
    \1391\ See id.
---------------------------------------------------------------------------

    Requiring registrants to file a technical report summary in support 
of disclosure of mineral resources or mineral reserves will enhance the 
transparency and credibility of the disclosures and also provide 
investors and analysts with technical details to allow them to improve 
their own individual assessments of the value of the mining 
properties.\1392\ These benefits should be especially pronounced in 
conjunction with the disclosure of mineral resources, which are 
typically associated with a higher degree of uncertainty compared to 
estimates of mineral reserves.
---------------------------------------------------------------------------

    \1392\ See supra notes 445, 959, and 1262 along with the 
accompanying discussions. See also, Kenneth A. Fox, ``The usefulness 
of NI 43-101 technical reports for financial analysts'' (2017), 
Resources Policy, Volume 51, pp. 225-233.
---------------------------------------------------------------------------

    We expect that registrants will experience an increase in 
compliance costs related to the preparation of the technical report 
summaries for material mining properties. Even registrants that 
currently produce technical documentation and reports in compliance 
with similar requirements in other jurisdictions will likely incur 
additional costs to conform the reports to the specific requirements in 
the final rules. In this regard, the final rules seek 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, mineral resources or mineral reserves. 
We also note that the technical report summary requirement may be 
relatively more burdensome for smaller registrants, as suggested by 
commenters,\1393\ due to the fixed cost in preparing a technical report 
summary and because smaller registrants are likely to have a higher 
fraction of mining properties classified as material to the extent they 
have fewer mining properties than larger registrants. However, in 
response to such concerns, the final rules do not require the filing of 
technical report summaries when disclosing material exploration 
results. To the extent that smaller registrants are more likely to be 
engaged in exploration activities, this change in the final rules will 
help limit the regulatory burden for smaller registrants in particular. 
Nevertheless, smaller registrants conducting mining operations beyond 
exploration may still incur relatively larger compliance costs.
---------------------------------------------------------------------------

    \1393\ See supra note 205 and accompanying text.
---------------------------------------------------------------------------

    The technical report summary requirement is similar to the 
corresponding requirements in CRIRSCO-based disclosure standards, which 
generally should mitigate the incremental impact of the final rules on 
registrants currently reporting in jurisdictions that use these codes. 
However, some of the differences may

[[Page 66437]]

be economically important. For example, although jurisdictions adopting 
CRIRSCO-based disclosure standards require that a company's mineral 
resources and mineral reserves be based on and fairly reflect 
information and supporting documentation prepared by a ``competent'' or 
``qualified'' person, only some jurisdictions require the filing of a 
technical report to support such disclosure.\1394\ Accordingly, we 
expect that the final technical report summary requirement will impose 
incremental compliance costs for registrants currently reporting in 
foreign jurisdictions without requirements to file technical reports 
that may approach the magnitude of the incremental costs for 
registrants not reporting in foreign jurisdictions. At the same time, 
these registrants may experience higher incremental benefits (as 
identified above) in connection with the requirement to file technical 
report summaries, since that information will not necessarily be 
disclosed elsewhere.
---------------------------------------------------------------------------

    \1394\ See supra Section IV.A.1. We estimate that 99 out of the 
267 identified mining registrants (approximately 37%) also report in 
foreign jurisdictions that require the filing of a technical report 
as of December 31, 2017.
---------------------------------------------------------------------------

    One commenter estimated that the cost of hiring a third-party 
qualified person to prepare a technical report in support of resource 
estimates would range from $40,000 to $80,000.\1395\ Another commenter 
estimated that the cost of preparing a technical report summary will 
typically require 300 to 500 hours at a cost of over $100,000 ``when 
all the information is already available to the QP.'' \1396\ This 
suggests the estimate is the incremental cost associated with the 
reporting requirement alone. It is not clear to what extent this 
estimate varies with property or company size, type of mining 
operations, or whether a company is already providing similar 
disclosures, for example on NI 43-101F1.
---------------------------------------------------------------------------

    \1396\ See letter from MMSA. This estimate was provided in 
response to a question about the costs associated with producing and 
filing technical reports in Canada or Australia, and may not include 
the costs of a study like the initial assessment required under the 
final rules. As discussed above, to the extent these costs are also 
representative of the costs of a qualified person preparing a 
technical report summary in support of disclosure of mineral 
resource estimates under the final rules, we expect registrants that 
are reporting consistent with CRIRSCO-based disclosure standards to 
already incur these costs, and therefore will only incur limited 
additional costs in terms of conforming the reports to the specific 
requirements in the final rules.
---------------------------------------------------------------------------

    As an alternative to the final rule, and in line with some 
commenters' views,\1397\ we could have omitted the requirement to file 
a technical report summary, which would reduce expected compliance 
costs and be consistent with the majority of CRIRSCO-based disclosure 
codes, although it would not be consistent with major markets for 
mining companies such as Canada, Australia, and South Africa. 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. Any benefit from the increased 
accountability that comes with liability for filing the information 
with the Commission also would be foregone under this alternative. 
Another alternative would be not to require the preparation of a 
technical report summary to support disclosure of mineral reserve and 
mineral resource estimates in Commission filings. This alternative 
would further reduce compliance costs relative to the proposed rules. 
However, it also could reduce consistency in the required disclosures 
and increase the uncertainty about the quality of mineral resources 
estimates, given that the level of confidence is lower for mineral 
resource estimates than for mineral reserves estimates.
---------------------------------------------------------------------------

    \1397\ See supra note 1090 and accompanying text.
---------------------------------------------------------------------------

iv. Requirements for Internal Controls Disclosure
    The final rules require a registrant to describe the internal 
controls that it uses in the disclosure of its exploration results and 
in its estimates of mineral resources and mineral reserves.\1398\ This 
requirement aligns the Commission's disclosure regime with the 
requirements of CRIRSCO-based disclosure standards.
---------------------------------------------------------------------------

    \1398\ See supra Section II.G.4.
---------------------------------------------------------------------------

    We expect disclosure of the internal controls that a registrant 
uses to improve 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 mineral reserves, which 
may help improve investment decisions. We also expect the requirement 
will increase compliance costs for registrants. However, registrants 
already disclosing internal controls in jurisdictions using CRIRSCO-
based disclosure standards or currently voluntarily providing similar 
disclosures in their SEC filings should not face substantial additional 
compliance burdens.
9. Conforming Changes to Certain Forms Not Subject to Regulation S-K
i. Form 20-F
    We are adopting conforming changes to Form 20-F that are intended 
to ensure consistency in mining disclosures across both domestic 
registrants and foreign private issuers (excluding Canadian Form 40-F 
filers).\1399\ The changes may 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 Industry Guide 7.\1400\ The final rules eliminate 
this exception, which may benefit investors by increasing comparability 
across all registrants.
---------------------------------------------------------------------------

    \1399\ See supra Section II.H.1.
    \1400\ As previously mentioned, Instruction 1 to Item 4 of Form 
20-F directs a registrant to furnish the information specified in 
Industry Guide 7. See supra note 1200 and accompanying text.
---------------------------------------------------------------------------

    Compliance costs for affected registrants may increase to the 
extent that, as discussed previously, the final disclosure requirements 
differ from NI 43-101. We do not generally expect these costs to be 
significant given that the adopted disclosure requirements are based on 
the NI 43[dash]101 requirements.
ii. Form 1-A
    We are adopting conforming changes to Form 1-A that will require 
Regulation A issuers with material mining operations to comply with the 
mining disclosure requirements in subpart 1300 of Regulation S-K.\1401\ 
Thus, these issuers will incur the benefits and costs of these 
requirements, as previously discussed. Because Regulation A issuers are 
typically smaller companies, the economic considerations discussed 
above with respect to smaller companies may apply to this group of 
issuers. In general, we expect that the final rules may benefit 
Regulation A issuers, given that smaller companies typically experience 
a higher degree of information asymmetry between the company and 
investors, which may increase capital costs and reduce access to 
financing. In particular, we believe the new ability to disclose 
mineral resources provided by the requirements in the final rules may 
be beneficial to Regulation A issuers, given that smaller companies are 
more likely to be exploration stage issuers.
---------------------------------------------------------------------------

    \1401\ See supra Section II.H.2.
---------------------------------------------------------------------------

    Nevertheless, the expected increase in compliance costs from the 
adopted mining disclosure requirements may be of particular importance 
for mining issuers that are likely to consider Regulation A offerings. 
If these costs are perceived to be too high, such issuers may choose to 
pursue alternative methods of financing, such as raising capital in 
private offerings pursuant to Regulation D or another exemption

[[Page 66438]]

under the Securities Act. To the extent these alternative methods of 
financing are less efficient or provide fewer investor protections than 
Regulation A offerings, there could be adverse consequences for both 
issuers and investors. Under the final rules, mining issuers may avoid 
the costs associated with the prescribed technical reports by forgoing 
disclosure of exploration results, mineral resources, and mineral 
reserves, as defined, which may mitigate any negative effect of 
increased compliance costs on the propensity to use a Regulation A 
offering. However, foregoing these disclosures may put such issuers at 
a competitive disadvantage relative to their peers that are raising 
capital with the benefit of these disclosures. In addition, in response 
to concerns about compliance costs, we have adopted several provisions 
that we believe will help limit the overall compliance burden for all 
issuers, including smaller companies.\1402\ Overall, considering that 
we have identified only one Regulation A issuer that currently provides 
disclosure about its mining operations, we do not expect the Form 1-A 
conforming amendments to have a significant economic impact on 
Regulation A offering practices.
---------------------------------------------------------------------------

    \1402\ See infra Section VI.F. for examples of adopted 
provisions that we expect will help limit the overall compliance 
burden for registrants.
---------------------------------------------------------------------------

    One alternative to the conforming amendments 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. However, under this 
alternative, the benefits from providing mining disclosure, as 
discussed above, would be foregone for Tier 1 issuers. We note that the 
sole Regulation A issuer that currently provides disclosure about its 
mining operations conducted a Tier 2 offering and would not be affected 
by this alternative. Another alternative would be to require disclosure 
only of the information in the summary disclosure requirement discussed 
in Section II.G.1., above, including for issuers that only own one 
material mining property. This would lower compliance costs, but would 
also reduce the information available to investors about material 
mining properties.

V. Paperwork Reduction Act

A. Background

    Certain provisions of the proposed rules contain ``collection of 
information'' requirements within the meaning of the Paperwork 
Reduction Act of 1995 (``PRA'').\1403\ The Commission published a 
notice requesting comment on the collection of information requirements 
in the Proposing Release, and submitted the proposed rules to the 
Office of Management and Budget (``OMB'') for review in accordance with 
the PRA.\1404\ While several commenters provided comments on the 
possible costs of the proposed rules, only a few commenters 
specifically addressed our PRA analysis and provided their own 
compliance estimates.\1405\ We discuss these comments below. Where 
appropriate, we have revised our burden estimates in part after 
considering these comments as well as differences between the proposed 
and final rules.
---------------------------------------------------------------------------

    \1403\ 44 U.S.C. 3501 et seq.
    \1404\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
    \1405\ See, e.g., letters from BHP and SRK 1.
---------------------------------------------------------------------------

    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. The titles for the collections of 
information are:

     ``Regulation S-K'' (OMB Control No. 3235-007); \1406\
---------------------------------------------------------------------------

    \1406\ 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. For similar reasons, we assign a one hour burden to 
the Industry Guides.
---------------------------------------------------------------------------

     ``Form S-1'' (OMB Control No. 3235-0065);
     ``Form S-4'' (OMB Control No. 3235-0324);
     ``Form F-1'' (OMB Control No. 3235-0258);
     ``Form F-4'' (OMB Control No. 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);
     Regulation A (Form 1-A) (OMB Control No. 3235-0286); 
and
     Industry Guide 7 (OMB Control No. 3235-0069).

    We adopted Regulation S-K and these forms pursuant to the 
Securities Act and/or the Exchange Act. Regulation S-K and the forms, 
other than Form 1-A, set forth the disclosure requirements for 
registration statements and annual reports 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. Compliance with the final rules is mandatory. Responses to 
the information collections will not be kept confidential, and there 
will be no mandatory retention period for the information disclosed.

B. Summary of Collection of Information Requirements

    Similar to the proposed rules, a principal purpose of the final 
rules is to modernize the Commission's disclosure requirements and 
policies for mining properties by more closely aligning them with 
current industry and global regulatory requirements under the CRIRSCO 
standards. Like the proposed rules, the final rules require a 
registrant with material mining operations to:

     Disclose its determined mineral resources, mineral 
reserves and 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,\1407\ and in Regulation A offering 
statements filed on Form 1-A;
---------------------------------------------------------------------------

    \1407\ 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 rule amendments will 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.
---------------------------------------------------------------------------

     base its disclosure regarding mineral resources, 
mineral reserves and exploration results in Commission filings on 
information and supporting documentation by a qualified person; and
     file as an exhibit to its Securities Act registration 
statement, Exchange Act registration statement or report, or Form 1-
A offering statement, in certain circumstances, 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 Commission 
form.\1408\
---------------------------------------------------------------------------

    \1408\ A registrant with one or more material mining properties 
must file the technical report summary when it first reports mineral 
resources or mineral reserves or when it reports a material change 
in a prior disclosure of resources or reserves. When disclosing 
exploration results, a registrant may elect, but is not required, to 
file a supporting technical report summary.


[[Page 66439]]


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

    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.\1409\ In 
addition, the existing regime permits, but does not require, the 
disclosure of 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 or to 
file a technical report.
---------------------------------------------------------------------------

    \1409\ Because only Canada has adopted its mining code as a 
matter of law, the disclosure of non-reserves in Commission filings 
has been limited to Canadian registrants.
---------------------------------------------------------------------------

    Accordingly, we expect the final rules to increase the reporting 
and cost burdens for each collection of information. Because the 
additional requirements imposed by the final rules will be similar to 
requirements under the CRIRSCO-based mining codes, 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 final rules' requirements and 
those under the CRIRSCO-based codes, we expect there will be some 
increase in reporting and cost burdens even for those registrants 
already subject to foreign mining code requirements.\1410\
---------------------------------------------------------------------------

    \1410\ For example, unlike most of the CRIRSCO-based codes, the 
final rules require a particular type of technical study, an 
``initial assessment,'' to support the disclosure of mineral 
resources in Commission filings. Only Canada's NI 43-101 and 
Australia's JORC impose a technical report requirement. See supra 
Section II.E.4. In addition, unlike the CRIRSCO-based codes, the 
final rules prohibit a qualified person from disclaiming liability 
for work performed by other experts upon whom the qualified person 
has relied. See supra Section II.C.1.
---------------------------------------------------------------------------

C. Estimate of Potentially Affected Registrants

    We estimate the number of registrants potentially affected by the 
final rules to be 267.\1411\ Of these registrants, we estimate that 107 
are already subject to the disclosure requirements under one or more of 
the CRIRSCO-based codes and 160 are subject to only the Commission's 
disclosure requirements. We therefore expect that 107 registrants will 
likely incur a smaller increase in reporting and cost burdens to comply 
with the final rules' requirements \1412\ compared with the 160 
registrants that will bear the full paperwork burden of the final 
rules.
---------------------------------------------------------------------------

    \1411\ 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 2016 through December 2017. In 
contrast, we estimated that 345 registrants would be affected by the 
proposed rules based on the number of registrants with mining 
operations that filed Commission forms from January 2014 through 
December 2015.
    \1412\ 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 final rules.

                                             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
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Affected Registrants Subject to              4           2           1           1           0          40          58           1         107
 CRIRSCO Requirements.......................
Number of Affected Registrants Not Subject            14           3           1           0           4         129           9           0         160
 to CRIRSCO Requirements....................
                                             -----------------------------------------------------------------------------------------------------------
    Total Number of Affected Registrants....          18           5           2           1           4         169          67           1         267
--------------------------------------------------------------------------------------------------------------------------------------------------------

D. Estimate of Reporting and Cost Burdens

    After considering the comments received, as discussed below, we 
have estimated the reporting and cost burdens of the final rules by 
estimating the average number of hours it will take a registrant to 
prepare, review and file the disclosure required by the final rules for 
each collection of information. In deriving our estimates, we recognize 
that the burdens will 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 will be substantially the same for each collection of 
information since the final rules will require substantially the same 
disclosure for a Securities Act registration statement or Regulation A 
offering statement as they will for an Exchange Act registration 
statement or report. The sole difference between the final 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 will be required to obtain and 
file as an exhibit the written consent of each qualified person whose 
information and supporting documentation provides the basis for the 
disclosure required under the final rules.\1413\ To account for this 
difference, we have allocated one additional hour to the reporting 
burdens estimated for the Securities Act registration statement forms 
and Regulation A's Form 1-A.
---------------------------------------------------------------------------

    \1413\ A Securities Act registrant must file the written consent 
of an expert upon which it has relied pursuant to Securities Act 
Rule 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 have based our estimated burden hours and costs under the final 
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).

[[Page 66440]]

    In addition, we have considered the views of commenters that 
addressed our PRA estimates for the proposed rules. One commenter is a 
global mining consulting firm that provides disclosure support for a 
wide range of mining companies reporting under Canada's NI 43-101 and 
Australia's JORC.\1414\ That commenter indicated that, while our PRA 
estimates may be appropriate for larger registrants and those 
registrants that already follow the CRIRSCO standards, they are likely 
to be low for registrants that do not follow the CRIRSCO standards. The 
commenter estimated that the latter group of registrants would likely 
incur a compliance burden that is two to four times the PRA burden 
estimated for the proposed rules.\1415\
---------------------------------------------------------------------------

    \1414\ See letter from SRK 1.
    \1415\ See id. Another commenter more generally indicated that 
we had significantly underestimated the PRA burdens for the proposed 
rules but did not provide alternative estimates of its own. See 
letter from NSSGA.
---------------------------------------------------------------------------

    The second commenter is a large global mining company with mineral 
assets that encompass over 200 individual mineral resource and mineral 
reserve models, which are currently summarized into supporting 
technical documentation of approximately 20 separate qualified persons' 
reports.\1416\ That commenter stated that we had significantly 
underestimated the incremental burden for the Form 20-F annual report, 
which we estimated would increase by 40 burden hours for registrants 
subject to the CRIRSCO standards. According to the commenter, the 
proposed rules would likely result in an increase of 12 FTE \1417\ in 
the first year of compliance, which would eventually diminish to 7 FTE 
in subsequent years.
---------------------------------------------------------------------------

    \1416\ See letter from BHP.
    \1417\ FTE stands for ``full-time equivalent,'' which is the 
number of hours worked by one employee on a full-time basis.
---------------------------------------------------------------------------

    When estimating the incremental effects of the proposed rules, the 
second commenter focused primarily on how the proposed rules' 24-month 
trailing average pricing standard would affect its mineral resource and 
mineral reserve estimates.\1418\ As previously discussed, we are not 
adopting the proposed pricing requirement and instead have substituted 
a pricing requirement that is substantially similar to the ``any 
reasonable and justifiable'' pricing standard under the CRIRSCO-based 
codes.\1419\ We also note that, in several other respects, the final 
rules are more closely aligned to the CRIRSCO standards than were the 
proposed rules.\1420\
---------------------------------------------------------------------------

    \1418\ See id.
    \1419\ See, e.g., supra Sections II.E.4., II.F.2., II.G.1.-2.
    \1420\ For example, similar to the CRIRSCO-based codes, the 
final rules permit: The inclusion of inferred mineral resources in a 
quantitative assessment of a deposit's potential economic viability 
(see supra Section II.E.4.); the use of historical estimates in the 
context of a merger, acquisition or business combination if certain 
conditions are met (see supra Section II.G.2.); the inclusion of 
diluting materials and allowances for losses when disclosing mineral 
reserve estimates (see supra Section II.F.1.); and the use of a pre-
feasibility study, rather than a feasibility study, without 
requiring a justification for such use, even in high risk situations 
(see supra Section II.F.2.).
---------------------------------------------------------------------------

    Because of the differences between the proposed and final rules, 
and because the second commenter's incremental burden estimates are 
those of a registrant that is significantly larger than many of the 
Commission's current mining registrants,\1421\ we are adopting the same 
incremental burden and cost estimates for CRIRSCO-compliant issuers 
under the final rules as under the proposed rules, which as noted by 
the first commenter, may be appropriate for these issuers.\1422\ We 
have not reduced the incremental burden and cost estimates of the final 
rules for such issuers, despite the increased symmetry between the 
final rules and the CRIRSCO standards, because we recognize that there 
are still differences between our rules and those standards, the impact 
of which will be experienced differently by various registrants, 
depending on their size and type of mining operation. We believe that, 
on average, the incremental burden and cost estimates of the final 
rules will be sufficient to account, for example, for a CRIRSCO-
compliant issuer's adjustment to the general prohibition against 
disclaimers of liability by a qualified person in a technical report 
summary.
---------------------------------------------------------------------------

    \1421\ In this regard, based on the staff's review of Securities 
Act and Exchange Act filings made by registrants with mining 
operations from January 2016 through December 2017, we estimate that 
approximately 114 of the 267 registrants may be considered small 
entities.
    \1422\ See letter from SRK 1.
---------------------------------------------------------------------------

    For registrants that are not currently subject to the CRIRSCO 
standards, we are following the suggestion of the first commenter and 
increasing our incremental burden and cost estimates.\1423\ As 
commenters have noted,\1424\ many registrants in this second category 
may already be adhering to some of the CRIRSCO standards because they 
have become accepted industry practice, such as by hiring a qualified 
person to determine mineral resources in order to eventually be able to 
determine mineral reserves. However, other registrants, such as those 
in the industrial minerals and aggregates industry,\1425\ may not be 
complying with any of CRIRSCO's requirements. To the extent that 
registrants in this latter group intend to engage in public capital-
raising, they will incur additional compliance costs and burdens. We 
believe that our increased incremental burden and cost estimates will 
on average account for these additional compliance costs and burdens.
---------------------------------------------------------------------------

    \1423\ We are doubling our previous incremental burden and cost 
estimates, which is within the range suggested by the first 
commenter. See letter from SRK 1.
    \1424\ See, e.g., letters from Eggleston and SRK 1.
    \1425\ The staff has estimated that 33 of the 267 registrants 
potentially affected by the final rules operate in the industrial 
minerals/aggregates industry. Five of those registrants may already 
be subject to the CRIRSCO standards.
---------------------------------------------------------------------------

    We estimate that the final rules will cause a registrant that is 
not already subject to the CRIRSCO standards to incur an increase of 
191 hours in the reporting burden for each Securities Act registration 
statement (Forms S-1, S-4, F-1, and F-4) and Form 1-A offering 
statement, and an increase of 190 hours in the reporting burden for 
each Exchange Act registration statement or annual report (Forms 10, 
10-K and 20-F).\1426\ For a registrant that is subject to the CRIRSCO 
standard, we estimate that the final rules will 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.\1427\
---------------------------------------------------------------------------

    \1426\ This is in comparison to the proposed estimates of an 
increase of 96 and 95 reporting burdens, respectively.
    \1427\ 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 100 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 
final 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.\1428\ 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

[[Page 66441]]

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.
---------------------------------------------------------------------------

    \1428\ 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 burden hours for 
each form under the final 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 
standards.\1429\ 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 by first estimating the incremental professional 
costs as a weighted average of the incremental professional costs 
estimated to be incurred by registrants subject to, 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.\1430\
---------------------------------------------------------------------------

    \1429\ 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 4 = 41 total 
incremental hours for CRIRSCO filers. 191 hours x 0.25 = 47.75 
internal burden hours for non-CRIRSCO filers; 47.75 hours x 14 = 
668.5 total incremental burden hours for non-CRIRSCO filers. 41 
hours + 668.5 hours = 709.5 total internal hours. 709.5 hours/18 = 
39.42 avg. incremental burden hours.
    \1430\ 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 4 = 123 total 
outside hours for CRIRSCO filers. 191 hours x 0.75 = 143.25 outside 
hours for non-CRIRSCO filers; 143.25 hours x 14 = 2,005.5 total 
outside hours for non-CRIRSCO filers. 123 hours + 2005.5 hours = 
2,128.5 total outside hours. 2128.5 hours x $400 = $851,400 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 final rules is 21,753 burden hours. We further 
estimate that the resulting total incremental professional costs for 
all forms under the final rules is $5,181,900.\1431\
---------------------------------------------------------------------------

    \1431\ 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 Final Rules
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Number of                    Total incremental    Incremental   Total incremental
                                                                        annual        Hour burden   registrant burden   professional      professional
                                                                       responses     per response        hours *            costs           costs *
                                                                               (A)             (B)    (C) = (A) x (B)             (D)    (E) = (A) x (D)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form S-1..........................................................              18           39.42                710         $47,300           $851,400
Form S-4..........................................................               5           32.75                164          39,300            196,500
Form F-1..........................................................               2              29                 58          34,800             69,600
Form F-4..........................................................               1           10.25                 10          12,300             12,300
Form 10...........................................................               4            47.5                190          57,000            228,000
Form 10-K.........................................................             169          115.87             19,582      15,449.704          2,611,000
Form 20-F.........................................................              67           15.04              1,008       18,044.78          1,209,000
Regulation A (Form 1-A)...........................................               1           30.75                 31           4,100              4,100
                                                                   -------------------------------------------------------------------------------------
    Total.........................................................             267  ..............             21,753  ..............          5,181,900
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounded to nearest whole number.

    We have determined the estimated total burden of complying with the 
final 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 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 final rules, the estimated 
annual burden for all forms will increase to 15,551,483 hours, compared 
to the current annual estimate of 15,529,730 hours. We further estimate 
that the final rules will result in estimated annual professional costs 
for all forms of $3,409,023,661, compared to the current annual 
estimate of $3,403,841,761.

                                                               PRA Table 3--Estimated Total Burden and Costs Under the Final Rules
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Revised     Current    Increase     Revised      Current      Increase in       Revised
                                        Current annual responses                        annual      burden     in burden    burden    professional   professional    professional
                                                                                       responses     hours       hours       hours        costs          costs           costs
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Form S-1           901..............................................................         901     150,998         710     151,708  $181,197,300        $851,400    $182,048,700
Form S-4           551..............................................................         551     565,079         164     565,243  678,094,704          196,500     678,291,204
Form F-1           63...............................................................          63      26,980          58      27,038  $32,375,700          $69,600     $32,445,300
Form F-4           39...............................................................          39      14,245          10      14,255   17,093,700           12,300      17,106,000
 Form 10           216..............................................................         216      11,774         190      11,964   14,128,888          228,000      14,356,888
Form 10-K          8,137............................................................       8,137  14,217,344      19,582  14,236,926  1,896,280,86       2,611,000   1,898,891,869
                                                                                                                                                9
Form 20-F          725..............................................................         725     480,226       1,008     481,234  576,270,600        1,209,000     577,479,600
Reg. A (Form 1-A)  112..............................................................         112      63,084          31      63,115    8,400,000            4,100       8,404,100
                  ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Total........  10,744...........................................................      10,744  15,529,730      21,753  15,551,483  3,403,841,76       5,181,900   3,409,023,661
                                                                                                                                                1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 66442]]

VI. Final Regulatory Flexibility Act Analysis

    This Final Regulatory Flexibility Act Analysis (``FRFA'') has been 
prepared in accordance with the Regulatory Flexibility Act.\1432\ It 
relates to rule and form amendments that we are adopting today to 
revise the mining property disclosure requirements for registrants 
engaged in mining operations. An Initial Regulatory Flexibility 
Analysis (``IRFA'') was prepared in accordance with the Regulatory 
Flexibility Act and included in the Proposing Release.
---------------------------------------------------------------------------

    \1432\ 5 U.S.C. 603.
---------------------------------------------------------------------------

A. Need for, and Objectives of, the Final Rules

    The Commission's mining property disclosure requirements and 
policies have not been updated since 1982. In the ensuing decades, 
mining has become an increasingly globalized industry, and several 
foreign mining disclosure codes have been adopted based on the CRIRSCO 
standards that significantly differ from the Commission's mining 
disclosure requirements and guidance. The rule and form amendments that 
we are adopting are intended to modernize the Commission's mining 
property disclosure requirements and policies by more closely aligning 
them with current industry and global regulatory practices and 
disclosure requirements, as embodied in the CRIRSCO standards. In so 
doing, the final amendments will provide investors with a more 
comprehensive understanding of a registrant's mining operations, which 
should help them make more informed investment decisions.\1433\
---------------------------------------------------------------------------

    \1433\ The need for, and objectives of, the final rules are 
discussed in more detail throughout this release, particularly in 
Sections I and II, supra.
---------------------------------------------------------------------------

B. Significant Issues Raised by Public Comments

    In the Proposing Release, we requested comment on every aspect of 
the IRFA. We received one comment letter that specifically addressed 
the IRFA.\1434\ That commenter stated that it would be a disservice to 
investors if the Commission were to reduce or streamline the disclosure 
requirements for small entities that are funded entirely by outside 
investment. That commenter also stated that, because there are only a 
few small mining companies that currently use U.S. exchanges for their 
primary listing, the impact on small entities from the proposed 
amendments would be limited, but could vary depending on the final 
disclosure requirements. According to the commenter, if the Commission 
adopted the amendments as proposed, small entities would have little 
interest in listing on U.S. exchanges as they would find more 
attractive the current disclosure requirements under foreign 
jurisdictions, such as Canada's NI 43-101 or Australia's JORC. However, 
the commenter also indicated that, if the Commission were to adopt 
amendments that aligned with Canada's NI 43-101, there would be a 
significant number of small entities that would choose to list in the 
United States. We have considered these comments when revising the 
proposed amendments to more closely align with CRIRSCO's standards, 
including Canada's NI 43-101.
---------------------------------------------------------------------------

    \1434\ See letter from SRK 1.
---------------------------------------------------------------------------

    Although not specifically addressing the IRFA, other commenters 
indicated that the proposed rules would impose the greatest 
proportionate compliance burden on small entities. For example, one 
commenter stated that, because the proposed rules would require the 
disclosure of voluminous amounts of information, they would discourage 
many companies from seeking or maintaining a public listing, and that 
this effect would be most acute for smaller companies that lack the 
internal resources to compile and report on all the proposed required 
information.\1435\ This commenter further stated that smaller companies 
would be placed at a significant competitive disadvantage if they were 
required to disclose sensitive operational information to larger 
competitors.\1436\
---------------------------------------------------------------------------

    \1435\ See, e.g. letter from NSSGA.
    \1436\ See id.
---------------------------------------------------------------------------

    Other commenters stated that the proposed requirement to obtain a 
technical report summary for material mining properties would be 
especially burdensome for smaller entities, but that the Commission 
could alleviate this burden by adopting certain measures, such as by 
not requiring the filing of the technical report summary more 
frequently than under the CRIRSCO-based codes, not requiring the 
disclosure of exploration results, or minimizing the required use of an 
independent qualified person.\1437\ Another commenter maintained that 
the proposed requirement to quantify the percentage of inferred mineral 
resources that would likely be converted to indicated mineral resources 
would be difficult for smaller entities to meet.\1438\ As discussed 
below, we have considered all of these comments when evaluating 
alternatives to, and revising, the proposed rules.\1439\
---------------------------------------------------------------------------

    \1437\ See, e.g., letters from AngloGold, Eggleston and Gold 
Resource.
    \1438\ See letter from MMSA.
    \1439\ See infra Section VI.F.
---------------------------------------------------------------------------

C. Small Entities Subject to the Final Rules

    The final rules will affect small entities that have material 
mining operations, and which file registration statements under Section 
6 of the Securities Act \1440\ 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.\1441\ From staff review of 
Securities Act and Exchange Act filings made by registrants with mining 
operations from January 2016 through December 2017, we estimate that 
there are approximately 114 issuers that may be considered small 
entities.\1442\ One of those small entities was a filer of a Form 1-A 
offering statement.
---------------------------------------------------------------------------

    \1440\ 15 U.S.C. 77f.
    \1441\ See 17 CFR 230.157 [Securities Act Rule 157]; and 17 CFR 
240.0-10(a) [Exchange Act Rule 0-10(a)].
    \1442\ See supra Section IV.A.1. for a discussion of how the 
staff estimated the number of registrants, including small entities, 
that will be subject to the final rules.
---------------------------------------------------------------------------

D. Reporting, Recordkeeping, and Other Compliance Requirements

    As described in greater detail above, the final rules will enhance 
the Securities Act and Exchange Act disclosure requirements of 
registrants, including small entities, with material mining operations 
by requiring:

     The disclosure of estimates and other information about 
determined mineral resources and exploration results that are 
material to investors in addition to mineral reserves;
     the disclosure of exploration results, mineral 
resources and mineral reserves in Commission 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 Commission 
filings.

    The final rules also will codify certain existing disclosure 
policies for registrants with material mining operations, including 
small entities. The same mining disclosure requirements will apply to 
both U.S. and foreign registrants.\1443\ The professional skills

[[Page 66443]]

necessary to comply with the final rules include legal, accounting, and 
information technology skills. In addition, the final rules require the 
involvement of qualified persons with certain specified credentials and 
relevant experience.\1444\
---------------------------------------------------------------------------

    \1443\ The final rules are discussed in detail in Section II, 
supra. We discuss the economic impact, including the estimated 
compliance costs and burdens, of the final rules in Section IV 
(Economic Analysis) and Section V (Paperwork Reduction Act), supra.
    \1444\ See supra Section II.C.
---------------------------------------------------------------------------

E. Duplicative, Overlapping or Conflicting Federal Rules

    As noted above, the final rules will generally establish new mining 
disclosure requirements that we believe will not duplicate or overlap 
with other federal rules. The final rules will consolidate and codify 
all of the Commission's mining property disclosure requirements and 
policies, which currently exist in Item 102 of Regulation S-K and in 
Guide 7, the status and overlapping structure of which has caused some 
uncertainty for mining registrants.\1445\ We believe that this 
consolidation and codification will 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. The final rules also will more closely align our mining 
property disclosure requirements with global industry practices and 
standards, which should also mitigate a registrant's, including a small 
entity's, reporting burden to the extent that it is already subject to 
one or more of the CRIRSCO-based codes. We do not believe that the 
final rules will conflict with other federal rules.
---------------------------------------------------------------------------

    \1445\ See supra note 28 and accompanying text.
---------------------------------------------------------------------------

F. Agency Action To Minimize Effect on Small Entities

    The Regulatory Flexibility Act directs us to consider significant 
alternatives that would accomplish the stated objectives, while 
minimizing any significant adverse impact on small entities. In 
connection with adopting the final rules, we considered, as 
alternatives: Establishing different compliance or reporting 
requirements that take into account the resources available to smaller 
entities; exempting smaller entities from coverage of the disclosure 
requirements, or any part thereof; clarifying, consolidating, or 
simplifying the disclosure requirements for small entities; and using 
performance standards rather than design standards.
    Neither the current mining disclosure requirements nor the final 
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 or incomplete 
disclosure concerning those entities' mineral resources, mineral 
reserves and exploration results, to the detriment of investors.\1446\ 
Moreover, as noted above, a primary goal of the final rules is 
generally to align the Commission's mining disclosure regime with the 
standards that have developed under the CRIRSCO-based codes so that 
investors will have a more complete understanding of a registrant's 
mining operations and be able to make more informed investment 
decisions. The CRIRSCO-based codes do not provide an exemption for 
small entities or otherwise treat such entities 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.
---------------------------------------------------------------------------

    \1446\ In this regard, only one commenter directly addressed the 
IRFA and whether we should adopt alternatives to the proposed rules, 
including exempting or treating differently small entities. That 
commenter opposed such alternative treatment for small entities, 
stating that such alternative treatment would be a disservice to 
investors. See letter from SRK 1.
---------------------------------------------------------------------------

    We also note that, because a significant percentage of mining 
registrants (approximately 43% based on the staff's most recent review 
of Commission filings) \1447\ are small entities, exempting them from 
the final rules will effectively disapply the Commission's mining 
disclosure regime to a large segment of the companies for which such 
disclosure would be potentially beneficial. By exempting small entities 
from the final rules, we would be creating a significant gap in the 
transparency of registrants' disclosure concerning their mining 
properties, which would defeat one of the primary purposes of the final 
rules.
---------------------------------------------------------------------------

    \1447\ See supra Section IV.A.1.
---------------------------------------------------------------------------

    In accordance with the Regulatory Flexibility Act, and in response 
to commenters' concerns described above, we have considered and adopted 
alternatives to several of the proposed disclosure requirements, which 
we believe will limit the compliance burden for registrants, including 
small entities. For example, the final rules:

     Clarify that a registrant is not required to disclose 
exploration results until they become material to investors;
     do not require the filing of a technical report summary 
to support the disclosure of exploration results;
     limit the required filing of a technical report summary 
that supports the disclosure of determined mineral resources and 
reserves to when the registrant first discloses resource or reserve 
estimates, or when it discloses a material change in the previously 
disclosed estimates;
     eliminate the proposed requirement to quantify the 
level of risk concerning mineral resources, including inferred 
mineral resources;
     reduce the number of required tables from seven to two, 
and permit most of the required disclosure concerning material 
mining properties and mineral resources, mineral reserves, and 
exploration results to be disclosed in either narrative or tabular 
format;
     permit the use of a pre-feasibility study instead of a 
final feasibility study without requiring justification for such 
use, and even when used for high-risk situations; and
     align our mining property disclosure requirements with 
the CRIRSCO standards in many significant respects, such as by 
adopting a reasonable and justifiable price standard for the 
determination and disclosure of mineral resources and mineral 
reserves, which could include a forward-looking price, instead of 
the proposed 24-month trailing average price requirement.

    We believe that all of the above revisions to the proposed rules 
will limit the final rules' compliance burden for registrants, 
including small entities.\1448\ We also believe that certain of these 
changes, in particular those regarding the disclosure of exploration 
results, will reduce the final rules' potential for the disclosure of 
proprietary, commercially sensitive information for registrants, 
including small entities.
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    \1448\ Under the final rules, the qualified person is not 
required to be independent of the registrant. As commenters noted, 
this approach should also help to limit the compliance burden for 
registrants, including small entities. See supra note 1437 and 
accompanying text.
---------------------------------------------------------------------------

    As noted above, the final rules will consolidate and codify the 
Commission's mining property 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 final rules because, based on our past experience, we believe the 
final rules will be more beneficial to investors if there are specific 
disclosure requirements that are uniform for all registrants with 
material mining operations. Nevertheless, we have made revisions to the 
proposed rules to make the disclosure requirements less prescriptive 
and provide more flexibility in how the required information is 
presented, which should help ease the compliance burden associated with 
these requirements.

[[Page 66444]]

VII. Statutory Authority

    We are adopting 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 Part 229, 17 CFR Part 230, 17 CFR Part 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 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, 78mm, 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 (2010); and sec. 
102(c), Pub. L. 112-106, 126 Stat. 310 (2012).


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 as ``Instruction 1 to Item 
102:'', ``Instruction 2 to Item 102:'', ``Instruction 3 to Item 102:'', 
and ``Instruction 4 to Item 102:'';
0
d. Revising newly redesignated Instruction 3 to Item 102;
0
e. Removing Instructions 5 and 7 to Item 102; and
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 Sec. Sec.  
229.1300 through 229.1305 (subpart 1300 of Regulation S-K), in addition 
to any disclosure required by this section.
* * * * *

0
3. Amend Sec.  229.601 by:
0
a. In the exhibit table in paragraph (a), adding entry (96) and 
footnote 7; and
0
b. Adding paragraph (b)(96).
    The additions read as follows:


Sec.  229.601   (Item 601) Exhibits.

    (a) * * *

                                                                      Exhibit Table
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                            Securities Act Forms                                                          Exchange Act Forms
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 S-4                                   F-4           8-K
                                 S-1     S-3    SF-1    SF-3     \1\     S-8    S-11     F-1    F-3    \1\     10    \2\    10-D   10-Q   10-K   ABS-EE
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                                                      * * * * * * *
(96) Technical report summary  X       X       ......  ......  X       ......  ......  X       X      X      X      .....  .....  .....  X      ........
 \7\.
 
                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
 * * * * * * *
\7\ If required pursuant to Sec.   229.1302 (Item 1302 of Regulation S-K).

    (b) * * *
    (96) Technical report summary. (i) A registrant that, pursuant to 
Sec. Sec.  229.1300 through 229.1305 (subpart 229.1300 of Regulation S-
K), discloses information concerning its mineral resources or mineral 
reserves must file a technical report summary by one or more qualified 
persons that, for each material property, identifies and summarizes the 
scientific and technical information and conclusions reached concerning 
an initial assessment used to support disclosure of mineral resources, 
or concerning a preliminary or final feasibility study used to support 
disclosure of mineral reserves. At its election, a registrant may also 
file a technical report summary from a qualified person that identifies 
and summarizes the information reviewed and conclusions reached by the 
qualified person about the registrant's exploration results. Please 
refer to Sec.  229.1302(b) (Item 1302(b) of Regulation S-K) for when a 
registrant must file the technical report summary as an exhibit to its 
Securities Act registration statement or Exchange Act registration 
statement or report.
    (ii) 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 Sec.  230.421 or Sec.  240.13a-20 of this chapter.
    (iii)(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)(iii)(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)(iii)(B)(1) through (11) and (20) through (25) of 
this section, and may also include the information specified in 
paragraph (b)(96)(iii)(B)(19) of this section. A technical report 
summary that reports exploration results must, at a minimum, provide 
the information specified in paragraphs (b)(96)(iii)(B)(1) through (9) 
and (20) through (25) of this section.
    (B) A qualified person must include the following information in 
the technical report summary, as required by paragraph (b)(96)(iii)(A) 
of this section, to the extent the information is material.
    (1) Executive summary. Briefly summarize the most significant 
information in the technical report

[[Page 66445]]

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, including whether the technical report 
summary's purpose was to report mineral resources, mineral reserves, or 
exploration results;
    (iii) The sources of information and data contained in the 
technical report summary or used in its preparation, with citations if 
applicable;
    (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; and
    (v) That the technical report summary updates a previously filed 
technical report summary, identified by name and date, when applicable.
    (3) Property description. (i) Describe 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) Disclose the area of the property.
    (iii) Disclose 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) Describe 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) Describe any significant encumbrances to the property, 
including current and future permitting requirements and associated 
timelines, permit conditions, and violations and fines.
    (vi) Disclose any other significant factors and risks that may 
affect access, title, or the right or ability to perform work on the 
property.
    (vii) If the registrant holds a royalty or similar interest in the 
property, except as provided under Sec. Sec.  229.1303(a)(3) and 
229.1304(a)(2), the information in paragraph (b)(96)(iii)(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 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. (i) Describe 
briefly the regional, local, and property geology and 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.
    (ii) 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 the exploration 
program.
    (iii) The qualified person must include at least one stratigraphic 
column and one cross-section of the local geology to meet the 
requirements of paragraph (b)(96)(iii)(B)(6) of this section.
    (7) 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: The 
procedures and parameters relating to the surveys and investigations; 
the sampling methods and sample quality, including whether the samples 
are representative, and any factors that may have resulted in sample 
biases; the location, number, type, nature, and spacing or density of 
samples collected, and the size of the area covered; and the 
significant results of and the qualified person's interpretation of the 
exploration information.
    (ii) For drilling, describe: The type and extent of drilling 
including the procedures followed; any drilling, sampling, or recovery 
factors that could materially affect the accuracy and reliability of 
the results; and the material results and interpretation of the 
drilling results. For a technical report summary to support disclosure 
of exploration results, the qualified person must provide information 
on all samples or drill holes to meet the requirements of this 
paragraph. If some information is excluded, the qualified person must 
identify the omitted information and explain why that information is 
not material.
    (iii) For characterization of hydrogeology, describe: The nature 
and quality of the sampling methods used to acquire data on surface and 
groundwater parameters; the type and appropriateness of laboratory 
techniques used to test for groundwater flow parameters such as 
permeability, and include discussions of the quality control and 
quality assurance procedures; results of laboratory testing and the 
qualified person's interpretation, including any material assumptions, 
which must include descriptions of permeable zones or aquifers, flow 
rates, in-situ saturation, recharge rates and water balance; and the 
groundwater models used to characterize aquifers, including material 
assumptions used in the modeling.
    (iv) For geotechnical data, testing and analysis, describe: 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, including discussions of 
the quality control and quality assurance procedures; and results of 
laboratory testing and the qualified person's interpretation, including 
any material assumptions.
    (v) Reports must include a plan view of the property showing 
locations of all drill holes and other samples.

[[Page 66446]]

    (vi) The technical report summary must include a description of 
data concerning drilling, hydrogeology, or geotechnical data only to 
the extent such data is relevant and available.
    Instruction 1 to paragraph (b)(96)(iii)(B)(7): The technical report 
summary must comply with all disclosure standards for exploration 
results under Sec. Sec.  229.1300 through 229.1305 (subpart 229.1300 of 
Regulation S-K).
    Instruction 2 to paragraph (b)(96)(iii)(B)(7): 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)(iii)(B)(7)(ii) of this section by providing sampling (including 
drilling) plans, representative plans, and cross-sections of results.
    Instruction 3 to paragraph (b)(96)(iii)(B)(7): If disclosing an 
exploration target, provide such disclosure in a subsection of the 
Exploration section of the technical report summary that is clearly 
captioned as a discussion of an exploration target. That section must 
include all of the disclosure required under Sec.  229.1302(c).
    (8) 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;
    (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;
    (iv) The adequacy of sample preparation, security, and analytical 
procedures, in the opinion of the qualified person; and
    (v) If the analytical procedures used are not part of conventional 
industry practice, a justification by the qualified person for why he 
or she believes the procedure is appropriate in this instance.
    (9) 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.
    (10) 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 registrant, 
whether the laboratories are certified by any standards association and 
the particulars of such certification;
    (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; and
    (v) The adequacy of the data for the purposes used in the technical 
report summary, in the opinion of the qualified person. 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) 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. The technical report summary 
must include mineral resource estimates at a specific point of 
reference selected by the qualified person. The selected point of 
reference must be disclosed in the technical report summary;
    (ii) Provide the qualified person's estimates of mineral resources 
for all commodities, including estimates of quantities, grade or 
quality, cut-off grades, and metallurgical or processing recoveries. 
Unless otherwise stated, cut-off grades also refer to net smelter 
returns, pay limits, and other similar terms. 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. If the qualified person chooses to 
disclose mineral resources inclusive of mineral reserves, he or she 
must also clearly state the mineral resources exclusive of mineral 
reserves in the technical report summary;
    (iii) Include the qualified person's estimates of cut-off grades 
based on assumed costs for surface or underground operations and 
commodity prices that provide a reasonable basis for establishing the 
prospects of economic extraction for mineral resources. The qualified 
person must disclose the price used for each commodity and explain, 
with particularity, his or her reasons for using the selected price, 
including the material assumptions underlying the selection. This 
explanation must include disclosure of the time frame used to estimate 
the commodity price and unit costs for cut-off grade estimation and the 
reasons justifying the selection of that time frame. The qualified 
person may use a price set by contractual arrangement, provided that 
such price is reasonable, and the qualified person discloses that he or 
she is using a contractual price when disclosing the price used;
    (iv) Provide the qualified person's classification of mineral 
resources into inferred, indicated, and measured mineral resources in 
accordance with Sec.  229.1302(d)(1)(iii)(A) (Item 1302(d)(1)(iii)(A) 
of Regulation S-K). The qualified person must disclose the criteria 
used to classify a resource as inferred, indicated, or measured and 
must justify the classification;
    (v) Discuss the uncertainty in the estimates of inferred, 
indicated, and measured mineral resources, and explain the sources of 
uncertainty and how they were considered in the uncertainty estimates. 
The qualified person must consider all sources of 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 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 underlying the 
resource estimates. 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

[[Page 66447]]

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;
    (vi) When reporting the grade or quality for a multiple commodity 
mineral resource as metal or mineral equivalent, disclose 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; and
    (vii) Provide the qualified person's opinion on whether all issues 
relating to all relevant technical and economic factors likely to 
influence the prospect of economic extraction can be resolved with 
further work.
    Instruction 1 to paragraph (b)(96)(iii)(B)(11): The technical 
report summary must comply with all disclosure standards for mineral 
resources under Sec. Sec.  229.1300 through 229.1305 (subpart 229.1300 
of Regulation S-K).
    Instruction 2 to paragraph(b)(96)(iii)(B)(11): Sections 229.1303 
and 229.1304 (Items 1303 and 1304 of Regulation S-K) 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.
    (12) 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. The technical report summary must include 
mineral reserve estimates at a specific point of reference selected by 
the qualified person. The qualified person must disclose the selected 
point of reference in the technical report summary;
    (ii) Provide the qualified person's estimates of mineral reserves 
for all commodities, including estimates of quantities, grade or 
quality, cut-off grades, and metallurgical or processing recoveries. 
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;
    (iii) Include the qualified person's estimates of cut-off grades 
based on detailed cut-off grade analysis that includes a long term 
price that provides a reasonable basis for establishing that the 
project is economically viable. The qualified person must disclose the 
price used for each commodity and explain, with particularity, his or 
her reasons for using the selected price, including the material 
assumptions underlying the selection. This explanation must include 
disclosure of the time frame used to estimate the price and costs and 
the reasons justifying the selection of that time frame. The qualified 
person may use a price set by contractual arrangement, provided that 
such price is reasonable, and the qualified person discloses that he or 
she is using a contractual price when disclosing the price used;
    (iv) Provide the qualified person's classification of mineral 
reserves into probable and proven mineral reserves in accordance with 
Sec.  229.1302(e)(2) (Item 1302(e)(2) of Regulation S-K);
    (v) When reporting the grade or quality for a multiple commodity 
mineral reserve as metal or mineral equivalent, disclose 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; and
    (vi) 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.
    Instruction 1 to paragraph (b)(96)(iii)(B)(12): The technical 
report summary must comply with all disclosure standards for mineral 
reserves under Sec. Sec.  229.1300 through 1305 (subpart 229.1300 of 
Regulation S-K).
    (13) 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;
    (iv) Required mining equipment fleet and machinery, and personnel; 
and
    (v) At least one map of the final mine outline.
    (14) 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;
    (iii) Current or projected requirements for energy, water, process 
materials, and personnel; and
    (iv) If the processing method, plant design, or other parameter has 
never been used to commercially extract the valuable product from such 
mineralization, a justification by the qualified person for why he or 
she believes the approach will be successful in this instance.
    Instruction 1 to paragraph (b)(96)(iii)(B)(14): If the processing 
method, plant design, or other parameter has never been used to 
commercially 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, design, or other parameter.
    (15) 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. 
Include at least one map showing the layout of the infrastructure.
    (16) 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 the same terms, rates or 
charges as could be obtained had the contract been negotiated at arm's 
length with an unaffiliated third party.

[[Page 66448]]

    (17) Environmental studies, permitting, and plans, negotiations, or 
agreements with local individuals or groups. Describe the factors 
pertaining to environmental compliance, permitting, and local 
individuals or groups, which are 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 after mine 
closure;
    (iii) Project permitting requirements, the status of any permit 
applications, and any known requirements to post performance or 
reclamation bonds;
    (iv) Plans, negotiations, or agreements with local individuals or 
groups;
    (v) Mine closure plans, including remediation and reclamation 
plans, and the associated costs;
    (vi) The qualified person's opinion on the adequacy of current 
plans to address any issues related to environmental compliance, 
permitting, and local individuals or groups; and
    (vii) Descriptions of any commitments to ensure local procurement 
and hiring.
    (18) Capital and operating costs. (i) 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.
    (ii) 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 analysis, 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 (Item 1302 of Regulation S-
K).
    (19) Economic analysis. (i) Describe the key assumptions, 
parameters, and methods used to demonstrate economic viability, and 
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.
    (ii) Disclose the 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.
    (iii) Include 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.
    (iv) The qualified person may, but is not required to, include an 
economic analysis in an initial assessment. 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. The qualified person may 
include inferred mineral resources in the economic analysis only if he 
or she satisfies the conditions set forth in Sec.  229.1302(d)(4)(ii) 
(Item 1302(d)(4)(ii) of Regulation S-K).
    (20) 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 summary; and
    (iv) The technical report summary clearly distinguishes between the 
information from the adjacent property and the information from the 
property that is the subject of the technical report summary.
    (21) 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 Sec. Sec.  229.1300 
through 229.1305 (subpart 229.1300 of Regulation S-K).
    (22) 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.
    (23) 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.
    (24) References. Include a list of all references cited in the 
technical report summary in sufficient detail so that a reader can 
locate each reference.
    (25) Reliance on information provided by the registrant. If relying 
on information provided by the registrant for matters discussed in the 
technical report summary, as permitted under Sec.  229.1302(f), provide 
the disclosure required pursuant to Sec.  229.1302(f)(2).
* * * * *


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.
229.1300 (Item 1300) Definitions.
229.1301 (Item 1301) General instructions.
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.  229.1300   (Item 1300) Definitions.

    As used in this subpart, these terms have the following meanings:
    Adequate geological evidence, when used in the context of mineral 
resource determination, means evidence that is sufficient to establish 
geological and grade or quality continuity with reasonable certainty.
    Conclusive geological evidence, when used in the context of mineral 
resource determination, means evidence that is sufficient to test and 
confirm geological and grade or quality continuity.
    Cut-off grade is the grade (i.e., the concentration of metal or 
mineral in rock) that determines the destination of the material during 
mining. For purposes of establishing ``prospects of economic 
extraction,'' the cut-off grade is the grade that distinguishes 
material

[[Page 66449]]

deemed to have no 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 deemed to have economic value (its ultimate 
destination during mining will be a processing facility). Other terms 
used in similar fashion as cut-off grade include net smelter return, 
pay limit, and break-even stripping ratio.
    Development stage issuer is an issuer that is engaged in the 
preparation of mineral reserves for extraction on at least one material 
property.
    Development stage property is a property that has mineral reserves 
disclosed, pursuant to this subpart, but no material extraction.
    Economically viable, when used in the context of mineral reserve 
determination, 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.
    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.
    Exploration stage issuer is an issuer that has no material property 
with mineral reserves disclosed.
    Exploration stage property is a property that has no mineral 
reserves disclosed.
    Exploration target is a statement or estimate of the exploration 
potential of a mineral deposit in a defined geological setting where 
the statement or estimate, quoted as a range of tonnage and a range of 
grade (or quality), relates to mineralization for which there has been 
insufficient exploration to estimate a mineral resource.
    Feasibility study 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.
    (1) 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.
    (2) The confidence level in the results of a feasibility study is 
higher than the confidence level in the results of a pre-feasibility 
study. Terms such as full, final, comprehensive, bankable, or 
definitive feasibility study are equivalent to a feasibility study.
    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 assumptions concerning the material 
contracts required to develop and sell the mineral reserves.
    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. 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. Because an indicated mineral resource has a 
lower level of confidence than the level of confidence of a measured 
mineral resource, an indicated mineral resource may only be converted 
to a probable mineral reserve.
    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. The level of geological 
uncertainty associated with an inferred mineral resource is too high to 
apply relevant technical and economic factors likely to influence the 
prospects of economic extraction in a manner useful for evaluation of 
economic viability. Because 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, an 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.
    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 technical and economic 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. An initial assessment is required for disclosure 
of mineral resources but cannot be used as the basis for disclosure of 
mineral reserves.
    Investment and market assumptions, when used in the context of 
mineral reserve determination, includes all assumptions made about the 
prices, exchange rates, interest and discount rates, sales volumes, and 
costs that are necessary to determine the economic viability of the 
mineral reserves. The qualified person must use a price for each 
commodity that provides a reasonable basis for establishing that the 
project is economically viable.
    Limited geological evidence, when used in the context of mineral 
resource determination, means evidence that is only sufficient to 
establish that geological and grade or quality continuity are more 
likely than not.
    Material has the same meaning as under Sec.  230.405 or Sec.  
240.12b-2 of this chapter.
    Material of economic interest, when used in the context of mineral 
resource determination, includes mineralization, including dumps and 
tailings, mineral brines, and other resources extracted on or within 
the earth's crust. It does not include oil and gas resources resulting 
from oil and gas producing activities, as defined in Sec.  210.4-
10(a)(16)(i) of this chapter, gases (e.g., helium and carbon dioxide), 
geothermal fields, and water.
    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. 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

[[Page 66450]]

support detailed mine planning and final evaluation of the economic 
viability of the deposit. Because a measured mineral resource has a 
higher level of confidence than the level of confidence of either an 
indicated mineral resource or an inferred mineral resource, a measured 
mineral resource may be converted to a proven mineral reserve or to a 
probable mineral reserve.
    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, which includes diluting materials and 
allowances for losses that may occur when the material is mined or 
extracted.
    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. 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.
    Modifying factors are the factors that a qualified person must 
apply to indicated and measured mineral resources and then evaluate in 
order to establish 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; 
processing; metallurgical; infrastructure; economic; marketing; legal; 
environmental compliance; plans, negotiations, or agreements with local 
individuals or groups; 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.
    Preliminary feasibility study (or 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.
    (1) 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.
    (2) 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.
    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.
    Probable mineral reserve is the economically mineable part of an 
indicated and, in some cases, a measured mineral resource.
    Production stage issuer is an issuer that is engaged in material 
extraction of mineral reserves on at least one material property.
    Production stage property is a property with material extraction of 
mineral reserves.
    Proven mineral reserve is the economically mineable part of a 
measured mineral resource and can only result from conversion of a 
measured mineral resource.
    Qualified person is an individual who is:
    (1) 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
    (2) 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:
    (i) Be either:
    (A) An organization recognized within the mining industry as a 
reputable professional association; or
    (B) A board authorized by U.S. federal, state or foreign statute to 
regulate professionals in the mining, geoscience or related field;
    (ii) Admit eligible members primarily on the basis of their 
academic qualifications and experience;
    (iii) Establish and require compliance with professional standards 
of competence and ethics;
    (iv) Require or encourage continuing professional development;
    (v) Have and apply disciplinary powers, including the power to 
suspend or expel a member regardless of where the member practices or 
resides; and
    (vi) Provide a public list of members in good standing.
    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 technical and economic 
factors likely to influence the prospect of economic extraction. 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.
    (1) 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, or mineral brine). 
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

[[Page 66451]]

experience for estimating mineral resources for vein-gold 
mineralization, whereas experience in a low grade disseminated gold 
deposit likely would not be relevant.
    Note 1 to paragraph (1) of the definition of relevant experience: 
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.
    (2) 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.
    (3) 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.  229.1301   (Item 1301) General instructions.

    (a) As used in this section, the term mining operations includes 
operations on all mining properties that a registrant:
    (1) Owns or in which it has, or it is probable that it will have, a 
direct or indirect economic interest;
    (2) 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
    (3) Has, or it is probable that it will have, an associated royalty 
or similar right.
    (b) A registrant must provide the disclosure specified in this 
subpart if its mining operations are material to its business or 
financial condition.
    (c) 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, 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.
    (d) 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 Sec. Sec.  230.421 and 240.13a-20 of this 
chapter, to enhance the readability of the disclosure for investors.


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

    (a)(1) A registrant's disclosure of exploration results, mineral 
resources, or mineral reserves, as required by Sec. Sec.  229.1303 and 
229.1304, must be based on and accurately reflect information and 
supporting documentation prepared by a qualified person, as defined in 
Sec.  229.1300. As used in this section, the term information includes 
the findings and conclusions of a qualified person relating to 
exploration results or estimates of mineral resources or mineral 
reserves.
    (2) The registrant is responsible for determining that the person 
meets the qualifications specified under the definition of qualified 
person in Sec.  229.1300, and that the disclosure in the registrant's 
filing accurately reflects the information provided by the qualified 
person.
    (3) If a registrant has relied on more than one qualified person to 
prepare the information and documentation supporting its disclosure of 
exploration results, mineral resources, or mineral reserves, the 
registrant's responsibilities as specified in this paragraph (a) 
pertain to each qualified person.
    (b)(1) The registrant must obtain a dated and signed technical 
report summary from the qualified person that, 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 or mineral reserves determined to be on each material 
property. At its election, the registrant may also obtain a dated and 
signed technical report summary from the qualified person that, 
pursuant to Sec.  229.601(b)(96), identifies and summarizes the 
information reviewed and conclusions reached by the qualified person 
about the registrant's exploration results.
    (i) Except as provided in paragraph (b)(1)(ii) of this section, if 
more than one qualified person has prepared the technical report 
summary, each qualified person must date and sign the technical report 
summary. The qualified person's signature must comply with Sec.  
230.402(e) or Sec.  240.12b-11(d) of this chapter. The technical report 
summary must also clearly delineate the section or sections of the 
summary prepared by each qualified person.
    (ii) A third-party firm comprising mining experts, such as 
professional geologists or mining engineers, may date and sign the 
technical report summary instead of, and without naming, its employee, 
member or other affiliated person who prepared the technical report 
summary.
    (2)(i) The registrant must file the technical report summary as an 
exhibit to the relevant registration statement or other Commission 
filing when disclosing for the first time mineral reserves or mineral 
resources or when there is a material change in the mineral reserves or 
mineral resources from the

[[Page 66452]]

last technical report summary filed for the property.
    (ii) If a registrant files a technical report summary to support 
the disclosure of exploration results, it must also file a technical 
report summary when there is a material change in the exploration 
results from the last technical report summary filed for the property. 
In each instance, the registrant must file the technical report summary 
as an exhibit to the relevant Commission filing.
    (3)(i) A registrant that has a royalty, streaming, or other similar 
right is not required to submit a separate technical report summary for 
a property that is covered by a current technical report summary filed 
by the producing mining registrant. In that situation, the registrant 
holding the royalty, streaming, or other similar right should refer to 
the producing registrant's previously filed technical report summary in 
its filing with the Commission. Such a reference will not be deemed to 
incorporate by reference, pursuant to Sec.  230.411 or Sec.  240.12b-23 
of this chapter, the previously filed technical report summary into the 
royalty company's or other similar company's filing absent an express 
statement to so incorporate by reference the previously filed technical 
report summary.
    (ii) A registrant that has a royalty, streaming, or other similar 
right is not required to file a technical report summary for an 
underlying property if the registrant lacks access to the technical 
report summary because:
    (A) Obtaining the information would result in an unreasonable 
burden or expense; or
    (B) It requested the technical report summary from the owner, 
operator, or other person possessing the technical report summary, who 
is not affiliated with the registrant, and who denied the request.
    (4)(i) The registrant must obtain the written consent of the 
qualified person to the use of the qualified person's name, or any 
quotation from, or summarization of, the technical report summary in 
the relevant registration statement or report, and to the filing of the 
technical report summary as an exhibit to the registration statement or 
report.
    (ii) Except as provided in paragraph (b)(4)(iii) of this section, 
if more than one qualified person has prepared the technical report 
summary, the registrant must obtain the written consent required by 
this section from each qualified person pertaining to the particular 
section or sections of the technical report summary prepared by each 
qualified person.
    (iii) If, pursuant to paragraph (b)(1)(ii) of this section, a 
third-party firm has signed the technical report summary, the third-
party firm must provide the written consent. If a qualified person is 
an employee or person affiliated with the registrant, the qualified 
person must provide the written consent on an individual basis.
    (iv) 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. For Exchange Act 
reports, the registrant is not required to file the written consent 
obtained from the qualified person, but should retain the written 
consent for as long as it is relying on the qualified person's 
information and supporting documentation for its current estimates 
regarding mineral resources, mineral reserves, or exploration results.
    (5) The registrant must state in the filed registration statement 
or report whether each qualified person who prepared the technical 
report summary 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 affiliated with 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 
affiliated, describe the nature of the affiliation. As used in this 
section, affiliate or affiliated has the same meaning as in Sec.  
230.405 or Sec.  240.12b-2 of this chapter.
    (6)(i) A qualified person may include in the technical report 
summary information and documentation provided by a third-party 
specialist who is not a qualified person, as defined in Sec.  229.1300, 
such as an attorney, appraiser, and economic or environmental 
consultant, upon which the qualified person has relied in preparing the 
technical report summary.
    (ii) The qualified person may not disclaim responsibility for any 
information or documentation prepared by a third-party specialist upon 
which the qualified person has relied, or any part of the technical 
report summary based upon or related to that information and 
documentation.
    (iii) A registrant is not required to file a written consent of any 
third-party specialist upon which a qualified person has relied 
pursuant to paragraph (b)(6)(i) of this section.
    (c)(1) A registrant may disclose an exploration target, as defined 
in Sec.  229.1300, for one or more of its properties that is based upon 
and accurately reflects information and supporting documentation of a 
qualified person. The qualified person may include a discussion of an 
exploration target in a technical report summary.
    (2) Any disclosure of an exploration target must appear in a 
separate section of the Commission filing or technical report summary 
that is clearly captioned as a discussion of an exploration target. 
That section must include a clear and prominent statement that:
    (i) The ranges of potential tonnage and grade (or quality) of the 
exploration target are conceptual in nature;
    (ii) There has been insufficient exploration of the relevant 
property or properties to estimate a mineral resource;
    (iii) It is uncertain if further exploration will result in the 
estimation of a mineral resource; and
    (iv) The exploration target therefore does not represent, and 
should not be construed to be, an estimate of a mineral resource or 
mineral reserve.
    (3) Any disclosure of an exploration target must also include:
    (i) A detailed explanation of the basis for the exploration target, 
such as the conceptual geological model used to develop the target;
    (ii) An explanation of the process used to determine the ranges of 
tonnage and grade, which must be expressed as approximations;
    (iii) A statement clarifying whether the exploration target is 
based on actual exploration results or on one or more proposed 
exploration programs, which should include a description of the level 
of exploration activity already completed, the proposed exploration 
activities designed to test the validity of the exploration target, and 
the time frame in which those activities are expected to be completed; 
and
    (iv) A statement that the ranges of tonnage and grade (or quality) 
of the exploration target could change as the proposed exploration 
activities are completed.
    (d)(1) A registrant's disclosure of mineral resources under this 
subpart must be based upon a qualified person's initial assessment, as 
defined in Sec.  229.1300, which includes and supports the qualified 
person's determination of mineral resources.
    (i) When determining the existence of a mineral resource, a 
qualified person must:
    (A) Be able to estimate or interpret the location, quantity, grade 
or quality continuity, and other geological characteristics of the 
mineral resource

[[Page 66453]]

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 his or her initial 
assessment. At a minimum, the initial assessment must include the 
qualified person's qualitative evaluation of relevant technical and 
economic factors likely to influence the prospect of economic 
extraction to establish the economic potential of the mining property 
or project.
    (ii) For a material property, 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).
    (iii)(A) When determining mineral resources, a qualified person 
must subdivide mineral resources, in order of increasing geological 
confidence, into inferred, indicated, and measured mineral resources.
    (B) For inferred mineral resources, a qualified person:
    (1) 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
    (2) Should be able to defend the basis of this expectation before 
his or her peers.
    (iv) The qualified person should refer to Table 1 to paragraph (d) 
of this section for the assumptions permitted to be made when preparing 
the initial assessment.
    (2) 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 price for each 
commodity that provides a reasonable basis for establishing the 
prospects of economic extraction for mineral resources. The qualified 
person must disclose the price used and explain, with particularity, 
his or her reasons for using the selected price, including the material 
assumptions underlying the selection. This explanation must include 
disclosure of the time frame used to estimate the commodity price and 
unit costs for cut-off grade estimation and the reasons justifying the 
selection of that time frame. The qualified person may use a price set 
by contractual arrangement, provided that such price is reasonable, and 
the qualified person discloses that he or she is using a contractual 
price when disclosing the price used. The selected price required by 
this section and all material assumptions underlying it must be current 
as of the end of the registrant's most recently completed fiscal year.
    (3) The qualified person must provide a qualitative assessment of 
all relevant technical and economic factors likely to influence the 
prospect of economic extraction 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 to paragraph 
(d) of this section, those factors include, but are not limited to, to 
the extent material:
    (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 technical and economic factors, 
including plans, negotiations, or agreements with local individuals or 
groups, which are necessary to demonstrate reasonable prospects for 
economic extraction.
    (4)(i) A qualified person may include cash flow analysis in an 
initial assessment to demonstrate economic potential. 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 to paragraph (d) of this 
section. The qualified person must state the accuracy and contingency 
levels in the initial assessment.
    (ii) If providing an economic analysis in the initial assessment, a 
qualified person may include inferred mineral resources in the economic 
analysis, provided that the qualified person:
    (A) States with equal prominence to the disclosure of mineral 
resource estimates that the assessment is preliminary in nature, it 
includes inferred mineral resources that are considered too speculative 
geologically to have modifying factors applied to them that would 
enable them to be categorized as mineral reserves, and there is no 
certainty that this economic assessment will be realized;
    (B) Discloses the percentage of the mineral resources used in the 
cash flow analysis that was classified as inferred mineral resources; 
and
    (C) Discloses, with equal prominence, the results of the economic 
analysis excluding inferred mineral resources in addition to the 
results that include inferred mineral resources.

        Table 1 to Paragraph (d)--Summary Description of Relevant Factors Evaluated in Technical Studies
----------------------------------------------------------------------------------------------------------------
                                                               Preliminary feasibility
           Factors \1\                 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. Source of
                                    plant area required,       (power, water, etc.)      all required utilities
                                    type of power supply,      required for              (power, water, etc.)
                                    site access roads, and     development and           for development and
                                    camp/town site, if         production defined with   production finalized.
                                    required.                  initial designs           Camp/Town site
                                                               suitable for cost         finalized.
                                                               estimates. Camp/Town
                                                               site finalized.
Mine design & 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 66454]]

 
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 &         List of required permits   Identification and        Identification and
 permitting.                        & agencies drawn.          detailed analysis of      detailed analysis of
                                    Determine if significant   environmental             environmental
                                    obstacles exist to         compliance and            compliance and
                                    obtaining permits.         permitting                permitting requirements
                                    Identify pre-mining land   requirements. Detailed    finalized. Completed
                                    uses. Assess               baseline studies with     baseline studies with
                                    requirements for           preliminary impact        final impact assessment
                                    baseline studies. Assume   assessment (internal).    (internal). Tailings
                                    post-mining land uses.     Detailed tailings         disposal, reclamation,
                                    Assume tailings            disposal, reclamation,    and mitigation plans
                                    disposal, reclamation,     and mitigation plans.     finalized.
                                    and mitigation plans.
Other relevant factors \2\.......  Appropriate assessments    Reasonable assumptions,   Detailed assessments of
                                    of other reasonably        based on appropriate      modifying factors
                                    assumed technical and      testing, on the           necessary to
                                    economic factors           modifying factors         demonstrate that
                                    necessary to demonstrate   sufficient to             extraction is
                                    reasonable prospects for   demonstrate that          economically viable.
                                    economic extraction.       extraction is
                                                               economically viable.
Capital costs....................  Optional.\3\ If included:  Accuracy: 25%.                minus>15%.
                                    minus>50%..               Contingency: <=15%......  Contingency: <=10%.
                                   Contingency: <=25%.......
Operating costs..................  Optional.\3\ If included:  Accuracy: 25%.                minus>15%.
                                    minus>50%..               Contingency: <=15%......  Contingency: <=10%.
                                   Contingency: <=25%.......
Economic analysis \4\............  Optional. 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\ When applied in an initial assessment, these factors pertain to the relevant technical and economic factors
  likely to influence the prospect of economic extraction. When applied in a preliminary or final feasibility
  study, these factors pertain to the modifying factors, as defined in this subpart.
\2\ The relevant technical and economic factors to be applied in an initial assessment, and the modifying
  factors to be applied in a pre-feasibility or final feasibility study, include, but are not limited to, the
  factors listed in this table. The number, type, and specific characteristics of the applicable factors will be
  a function of and depend upon the particular mineral, mine, property, or project.
\3\ Initial assessment, as defined in this subpart, does not require a cash flow analysis or operating and
  capital cost estimates. The qualified person may include a cash flow analysis at his or her discretion.
\4\ An 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. An economic analysis, if included, may be based only on measured and indicated
  mineral resources, or also may include inferred resources if additional conditions are met.

    (e)(1) A registrant's disclosure of mineral reserves under this 
subpart must be based upon a qualified person's preliminary feasibility 
(pre-feasibility) study or feasibility study, each as defined in Sec.  
229.1300, which includes and supports the qualified person's 
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. For a material property, 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).
    (2) When determining mineral reserves, a qualified person must 
subdivide mineral reserves, in order of increasing confidence, into 
probable mineral reserves and proven mineral reserves, as defined in 
Sec.  229.1300. The determination of probable or proven mineral 
reserves must be based on a qualified person's application of the 
modifying factors to indicated or measured mineral resources, which 
results in the qualified person's determination that part of the 
indicated or measured mineral resource is economically mineable.
    (i) 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 modifying 
factors at the time when the qualified person converts a measured 
mineral resource to a probable mineral reserve. 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.
    (ii) 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.

[[Page 66455]]

    (3) The pre-feasibility study or feasibility study, which supports 
the qualified person's determination of mineral reserves, 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.
    (i) 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.
    (ii) In certain circumstances, the determination of mineral 
reserves may require the completion of at least a preliminary market 
study, as defined in Sec.  229.1300, in the context of a pre-
feasibility study, or a final market study, as defined in Sec.  
229.1300, 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.
    (4) For both a pre-feasibility and feasibility study, a qualified 
person must use a price for each commodity that provides a reasonable 
basis for establishing that the project is economically viable. The 
qualified person must disclose the price used and explain, with 
particularity, his or her reasons for using the selected price, 
including the material assumptions underlying the selection. This 
explanation must include disclosure of the time frame used to estimate 
the price and costs and the reasons justifying the selection of that 
time frame. The qualified person may use a price set by contractual 
arrangement, provided that such price is reasonable, and the qualified 
person discloses that he or she is using a contractual price when 
disclosing the price used. The selected price required by this section 
and all material assumptions underlying it must be current as of the 
end of the registrant's most recently completed fiscal year.
    (5) 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. The qualified person must use a price for each 
commodity in the economic analysis that meets the requirements of 
paragraph (e)(4) of this section. As discussed in paragraph (e)(3) of 
this section, in certain situations, estimates of revenues must be 
based on at least a preliminary market study.
    (6) 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.
    (7) Factors to be considered in a pre-feasibility study are 
typically the same as those required for a final feasibility study, but 
considered at a lower level of detail or at an earlier stage of 
development. The list of factors is not exclusive. For example, as 
provided in Table 1 to paragraph (d) of this section, a pre-feasibility 
study must define, analyze or otherwise address in detail, to the 
extent material:
    (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, the 
baseline studies, and the plans for tailings disposal, reclamation, and 
mitigation, together with an analysis establishing that permitting is 
possible; and
    (v) Any other reasonable assumptions, based on appropriate testing, 
on the modifying factors sufficient to demonstrate that extraction is 
economically viable.
    (8) A pre-feasibility study must also identify sources of 
uncertainty that require further refinement in a final feasibility 
study.
    (9) 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 section. The qualified person must state the accuracy 
level and contingency range in the pre-feasibility study.
    (10) 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. The list of 
factors is not exclusive. For example, as provided in Table 1 to 
paragraph (d) of this section, a feasibility study must define, 
analyze, or otherwise address in detail, to the extent material:
    (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, and the 
completion of baseline studies and finalized plans for tailings 
disposal, reclamation, and mitigation; and
    (v) The final assessments of other modifying factors necessary to 
demonstrate that extraction is economically viable.
    (11) 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. The 
qualified person must use a price for each commodity in the economic 
analysis that meets the requirements of paragraph (e)(4) of this 
section. As discussed in paragraph (e)(3) of this section, in certain 
situations, estimates of revenues must be based on

[[Page 66456]]

a final market study or letters of intent to purchase.
    (12) 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 section. The qualified person must state the accuracy 
level and contingency range in the feasibility study.
    (13) 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.
    (14) 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.
    (15) 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.
    (f)(1) The qualified person may indicate in the technical report 
summary that the qualified person has relied on information provided by 
the registrant in preparing its findings and conclusions regarding the 
following aspects of modifying factors:
    (i) Macroeconomic trends, data, and assumptions, and interest 
rates;
    (ii) Marketing information and plans within the control of the 
registrant;
    (iii) Legal matters outside the expertise of the qualified person, 
such as statutory and regulatory interpretations affecting the mine 
plan;
    (iv) Environmental matters outside the expertise of the qualified 
person;
    (v) Accommodations the registrant commits or plans to provide to 
local individuals or groups in connection with its mine plans; and
    (vi) Governmental factors outside the expertise of the qualified 
person.
    (2) In a separately captioned section of the technical report 
summary entitled ``Reliance on Information Provided by the 
Registrant,'' the qualified person must:
    (i) Identify the categories of information provided by the 
registrant;
    (ii) Identify the particular portions of the technical report 
summary that were prepared in reliance on information provided by the 
registrant pursuant to paragraph (f)(1) of this section, and the extent 
of that reliance; and
    (iii) Disclose why the qualified person considers it reasonable to 
rely upon the registrant for any of the information specified in 
paragraph (f)(1) of this section.
    (3) Notwithstanding the provisions of Sec.  230.436(a) and (b) of 
this chapter, any description in the technical report summary or other 
part of the registration statement of the procedures, findings, and 
conclusions reached about matters identified by the qualified person as 
having been based on information provided by the registrant pursuant to 
this section shall not be considered a part of the registration 
statement prepared or certified by the qualified person within the 
meaning of Sections 7 and 11 of the Securities Act.


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.
    (3) A registrant that has a royalty, streaming or other similar 
right, but which lacks access to any of the information specified in 
paragraph (b) of this section about the underlying properties, may omit 
such information, provided that the registrant:
    (i) Specifies the information to which it lacks access;
    (ii) Explains that it does not have access to the required 
information because:
    (A) Obtaining the information would result in an unreasonable 
burden or expense; or
    (B) It requested the information from a person possessing knowledge 
of the information, who is not affiliated with the royalty company or 
similar registrant, and who denied the request; and
    (iii) Provides all required information that it does possess or 
which it can acquire without incurring an unreasonable burden or 
expense.
    (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) An overview of the registrant's mining properties and 
operations. This overview may be presented in narrative or tabular 
format.
    (i) The overview must include aggregate annual production for the 
properties during each of the three most recently completed fiscal 
years preceding the filing.
    (ii) The overview should include, as relevant, the following items 
of information for the mining properties considered in the aggregate:
    (A) The location of the properties;
    (B) The type and amount of ownership interests;
    (C) The identity of the operator or operators;
    (D) Titles, mineral rights, leases or options and acreage involved;
    (E) The stages of the properties (exploration, development or 
production);
    (F) Key permit conditions;
    (G) Mine types and mineralization styles; and
    (H) Processing plants and other available facilities.
    (iii) When presenting the overview, the registrant should include 
the amount and type of disclosure concerning its mining properties that 
is material to an investor's understanding of the registrant's 
properties and mining operations in the aggregate. This disclosure will 
depend upon a registrant's specific facts and circumstances and may 
vary from registrant to registrant. A registrant should refer to, 
rather than duplicate, any disclosure concerning individually material 
properties provided in response to Sec.  229.1304.
    (iv) 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.
    (3) A summary of all mineral resources and mineral reserves, as 
determined by the qualified person, 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 combined measured 
and indicated mineral resources or containing 10% or more of the 
registrant's mineral reserves. This

[[Page 66457]]

summary must be provided for each class of mineral resources (inferred, 
indicated, and measured), together with total measured and indicated 
mineral resources, and each class of mineral reserves (probable and 
proven), together with total mineral reserves, using the format in 
Table 1 to paragraph (b) of this section for mineral resources, and the 
format in Table 2 to paragraph (b) of this section for mineral 
reserves.
    (i) 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.
    (ii) All disclosure of mineral resources by the registrant must be 
exclusive of mineral reserves.
    (iii) 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.
    (iv) Each mineral resource and reserve estimate must be based on a 
reasonable and justifiable price selected by a qualified person 
pursuant to Sec.  229.1302(d) or (e), which provides a reasonable basis 
for establishing the prospects of economic extraction for mineral 
resources, and is the expected price for mineral reserves.
    (v) Each mineral resource and reserve estimate called for in Tables 
1 and 2 to paragraph (b) of this section must be based on a specific 
point of reference selected by a qualified person. The registrant must 
disclose the selected point of reference for each of Tables 1 and 2 to 
paragraph (b) of this section.
    (vi) The registrant may modify the tabular formats in Tables 1 and 
2 to paragraph (b) of this section for ease of presentation or to add 
information.
    (vii) All material assumptions and information pertaining to the 
summary disclosure of a registrant's mineral resources and mineral 
reserves required by this section, including material assumptions 
related to price estimates, must be current as of the end of the 
registrant's most recently completed fiscal year.

                                         Table 1 to Paragraph (b)--Summary Mineral Resources at End of the Fiscal Year Ended [Date] Based on [Price] \1\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Measured mineral  resources            Indicated mineral  resources       Measured + indicated mineral resources        Inferred mineral  resources
                                 ---------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Amount         Grades/qualities         Amount         Grades/qualities         Amount         Grades/qualities         Amount         Grades/qualities
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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\The registrant must use a reasonable and justifiable price for each commodity, which it must disclose, together with the time frame and point of reference used, when estimating mineral
  resources for this Table 1.


                     Table 2 to Paragraph (b)--Summary Mineral Reserves at End of the Fiscal Year Ended [Date] Based on [Price] \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                         Proven mineral  reserves               Probable mineral  reserves                Total mineral  reserves
                                 -----------------------------------------------------------------------------------------------------------------------
                                        Amount         Grades/qualities         Amount         Grades/qualities         Amount         Grades/qualities
--------------------------------------------------------------------------------------------------------------------------------------------------------
Commodity A:
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 66458]]

 
    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\ The registrant must use a reasonable and justifiable price for each commodity, which it must disclose, together with the time frame and point of
  reference used, when estimating mineral reserves for this Table 2.

Sec.  229.1304   (Item 1304) Individual property disclosure.

    (a)(1) A registrant must disclose the information specified in 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(c) 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.
    (2) A registrant that has a royalty, streaming or other similar 
right, but which lacks access to any of the information specified in 
this section about the underlying property or properties, may omit such 
information, provided that the registrant:
    (i) Specifies the information to which it lacks access;
    (ii) Explains that it does not have access to the required 
information because:
    (A) Obtaining the information would result in an unreasonable 
burden or expense; or
    (B) It requested the information from a person possessing knowledge 
of the information, who is not affiliated with the with the royalty 
company or similar registrant, and who denied the request; and
    (iii) Provides all required information that it does possess or 
which it can acquire without incurring an unreasonable burden or 
expense.
    (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) Except as provided in paragraph (a)(2) of this section, 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 section, including, for 
example, the documents under which the owner or operator holds or 
operates the property,

[[Page 66459]]

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) 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;
    (iii) The total cost for or book value of the property and its 
associated plant and equipment;
    (iv) A brief history of previous operations, including the names of 
previous operators, insofar as known; and
    (v) 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.
    (c) When providing the disclosure required by paragraph (b) of this 
section:
    (1) 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.
    (2) A registrant should not include extensive description of 
regional geology. Rather, it should include geological information that 
is brief and relevant to property disclosure.
    (d)(1) If mineral resources or reserves have been determined, the 
registrant must provide a summary of all mineral resources or reserves 
as of the end of the most recently completed fiscal year, which, for 
each property, discloses in tabular form, as provided in Table 1 to 
paragraph (d)(1) of this section for each class of mineral resources 
(measured, indicated, and inferred), together with total measured and 
indicated mineral resources, the estimated tonnages and grades (or 
quality, where appropriate), and as provided in Table 2 to paragraph 
(d)(1) of this section for each class of mineral reserves (proven and 
probable), together with total mineral reserves, the estimated 
tonnages, grades (or quality, where appropriate), cut-off grades, and 
metallurgical recovery, based on a specific point of reference selected 
by a qualified person pursuant to Sec.  229.601(b)(96). The registrant 
must disclose the selected point of reference for each of Tables 1 and 
2 to paragraph (d)(1) of this section.

Table 1 to Paragraph (D)(1)--[Individual Property Name]--Summary of [Commodity/Commodities] Mineral Resources at
                          the End of the Fiscal Year Ended [Date] Based on [Price] \1\
----------------------------------------------------------------------------------------------------------------
                                        Resources
                     ----------------------------------------------     Cut-off grades         Metallurgical
                              Amount           Grades/ qualities                                  recovery
----------------------------------------------------------------------------------------------------------------
Measured mineral      .....................  .....................  .....................  .....................
 resources
Indicated mineral     .....................  .....................  .....................  .....................
 resources
Measured + Indicated  .....................  .....................  .....................  .....................
 mineral resources
Inferred mineral      .....................  .....................  .....................  .....................
 resources
----------------------------------------------------------------------------------------------------------------
\1\ The registrant must use a reasonable and justifiable price, which it must disclose, together with the time
  frame and point of reference used, when estimating mineral resources for this Table 1.


 Table 2 to Paragraph (D)(1)--[Individual Property Name]--Summary of [Commodity/Commodities] Mineral Reserves at
                          the End of the Fiscal Year Ended [Date] Based on [Price] \1\
----------------------------------------------------------------------------------------------------------------
                                                                                               Metallurgical
                              Amount           Grades/ qualities        Cut-off grades            recovery
----------------------------------------------------------------------------------------------------------------
Proven mineral        .....................  .....................  .....................  .....................
 reserves
Probable mineral      .....................  .....................  .....................  .....................
 reserves
                     -------------------------------------------------------------------------------------------
    Total mineral     .....................  .....................  .....................  .....................
     reserves
----------------------------------------------------------------------------------------------------------------
\1\ The registrant must use a reasonable and justifiable price for each commodity, which it must disclose,
  together with the time frame and point of reference used, when estimating mineral reserves for this Table 2.

    Instruction 1 to paragraph (d)(1): The registrant may modify the 
tabular formats in Tables 1 and 2 to paragraph (d)(1) of this section 
for ease of presentation, to add information, or to combine two or more 
required tables. When combining tables, the registrant should not 
report mineral resources and reserves in the same table.
    (2) All disclosure of mineral resources by the registrant must be 
exclusive of mineral reserves.
    (3) A registrant with only a royalty or similar interest should 
provide only the portion of the resources or reserves that are subject 
to the royalty or similar agreement.
    (e) Compare the property's mineral resources and reserves as of the 
end of the last fiscal year with the mineral resources and reserves as 
of the end of

[[Page 66460]]

the preceding fiscal year, and explain any material change between the 
two. The comparison, which may be in either narrative or tabular 
format, must disclose information concerning:
    (1) The mineral resources or reserves at the end of the last two 
fiscal years;
    (2) 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;
    (3) 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
    (4) 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.
    (f)(1) 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 corresponding 
sections of the technical report summary, which must be filed as an 
exhibit pursuant to Sec.  229.1302(b).
    (2) All material assumptions and information pertaining to the 
disclosure of a registrant's mineral resources and mineral reserves 
required by paragraphs (d), (e), and (f) of this section, including 
material assumptions relating to all modifying factors, price 
estimates, and scientific and technical information (e.g., sampling 
data, estimation assumptions and methods), must be current as of the 
end of the registrant's most recently completed fiscal year. 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 technical report summary from 
a qualified person, in compliance with Sec.  229.601(b)(96) (Item 
601(b)(96) of Regulation S-K), that supports the registrant's mining 
property disclosures.
    (3) Regarding the disclosure required by paragraphs (e) and (f) of 
this section, whether a change in mineral resources or mineral reserves 
is material is based on all facts and circumstances, both quantitative 
and qualitative.
    (g)(1) If disclosing exploration activity for any material property 
specified in paragraph (a) of this section for the most recently 
completed fiscal year, provide a summary that describes the sampling 
methods used, and, for each sampling method used, disclose the number 
of samples, the total size or length of the samples, and the total 
number of assays.
    (2) If disclosing exploration results for any material property 
specified in paragraph (a) of this section for the most recently 
completed fiscal year, provide a summary that, for each property, 
identifies the hole, trench or other sample that generated the 
exploration results, describes the length, lithology, and key geologic 
properties of the exploration results, and includes a brief discussion 
of the exploration results' context and relevance. If the summary only 
includes results from selected samples and intersections, it should be 
accompanied with a discussion of the context and justification for 
excluding other results.
    (3) The information disclosed under this paragraph (g) may be 
presented in either narrative or tabular format.
    (4) A registrant must disclose exploration results and related 
exploration activity for a material property under this section if they 
are material to investors. When determining whether exploration results 
and related exploration activity are material, the registrant should 
consider all relevant facts and circumstances, such as the importance 
of the exploration results in assessing the value of a material 
property or in deciding whether to develop the property, and the 
particular stage of the property.
    (5) A registrant may disclose an exploration target when discussing 
exploration results or exploration activity related to a material 
property as long as the disclosure is in compliance with the 
requirements of Sec.  229.1302(c).
    (6)(i) If the registrant is disclosing exploration results, but has 
not previously disclosed such 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. The registrant 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. If electing to file a 
technical report summary, the registrant must cite corresponding 
sections of the technical report summary, which must be filed as an 
exhibit pursuant to Sec.  229.1302(b).
    (ii) Whether a change in exploration results is material is based 
on all facts and circumstances, both quantitative and qualitative.
    (iii) A change in exploration results that significantly alters the 
potential of the subject deposit is considered material.
    (h) A report containing one or more 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 estimate of mineral 
resources, mineral reserves, 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. 
Notwithstanding this prohibition, a registrant may include such an 
estimate in a Commission filing that pertains to a merger, acquisition, 
or business combination if the registrant is unable to update the 
estimate prior to the completion of the relevant transaction. In that 
event, when referring to the estimate, the registrant must disclose the 
source and date of the estimate, and state that a qualified person has 
not done sufficient work to classify the estimate as a current estimate 
of mineral resources, mineral reserves, or exploration results and that 
the registrant is not treating the estimate as a current estimate of 
mineral resources, mineral reserves, or exploration results.


Sec.  229.1305   (Item 1305) Internal controls disclosure.

    (a) 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.
    (b) 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.

[[Page 66461]]

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

0
7. The general authority citation for part 230 continues to read in 
part as follows:

    Authority: 15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h, 
77j, 77r, 77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o-
7 note, 78t, 78w, 78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29, 80a-
30, and 80a-37, and Public Law 112-106, sec. 201(a), sec. 401, 126 
Stat. 313 (2012), unless otherwise noted.
* * * * *

0
8. Amend Sec.  230.436 by adding paragraph (h) to read as follows:


Sec.  230.436  Consents required in special cases.

* * * * *
    (h) Notwithstanding the provisions of paragraphs (a) and (b) of 
this section, any description about matters identified by a qualified 
person pursuant to Sec.  229.1302(f) of this chapter shall not be 
considered a part of the registration statement prepared or certified 
by the qualified person within the meaning of Sections 7 and 11 of the 
Securities Act.

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

0
9. The general 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. 107, Public Law 112-106, 126 
Stat. 312, unless otherwise noted.
* * * * *

0
10. 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, D.C. 20549

FORM 1-A

REGULATION A OFFERING STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

PART II--INFORMATION REQUIRED IN OFFERING CIRCULAR

* * * * *

OFFERING CIRCULAR

* * * * *

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.  229.1300 through 1305), 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
11. 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), Public Law 111-203, 124 
Stat. 1904; Sec. 102(a)(3), Public Law 112-106, 126 Stat. 309 
(2012); Sec. 107, Public Law 112-106, 126 Stat. 313 (2012), and Sec. 
72001, Public Law 114-94, 129 Stat. 1312 (2015), 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, Public Law 107-204, 116 Stat. 745.
* * * * *

0
12. 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, D.C. 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.  229.1300 through 1305 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: October 31, 2018.
Brent J. Fields,
Secretary.
[FR Doc. 2018-26337 Filed 12-21-18; 8:45 am]
 BILLING CODE 8011-01-P