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From Securities Regulation Daily, October 31, 2018

SEC modernizes property disclosures for mining registrants

By Amy Leisinger, J.D.

The SEC has adopted amendments to certain rules and forms to modernize the property disclosure requirements for mining registrants. The amendments are intended to provide investors with a more comprehensive understanding of registrants’ mining properties and to align the mining disclosure requirements with current regulatory practices and standards. The amendments will rescind Industry Guide 7 and consolidate the Commission’s mining property disclosure requirements in a new subpart of Regulation S-K (Modernization of Property Disclosures for Mining RegistrantsRelease No. 33-10570, October 31, 2018).

"The final rules will modernize the Commission’s mining property disclosure regime by improving the quality and reliability of information provided to investors and by harmonizing disclosures with international standards, including removing the restriction on disclosure of mineral resource estimates that may have placed U.S. registrants and investors at a disadvantage," said SEC Chairman Jay Clayton.

Rules and guidance amended. The final rule amendments replace current rules and guidance permitting the disclosure of non-reserve estimates only in limited circumstances and require a registrant with material mining operations to disclose specified information in its SEC filings concerning its mineral resources and mineral reserves. The amendments also exclude geothermal energy from the definition of "mineral resource" and define "mineral reserve" to include diluting materials and allowances for losses that could occur upon extraction. Historical estimates of mineral resources or reserves pertaining to mergers, acquisitions, or business combinations may be used if the registrant is unable to timely update its estimates, so long as the source and date of each estimate is disclosed. Disclosure of information regarding exploration activity and exploration results is voluntary until such information becomes material to investors.

The amendments also require a registrant to obtain and file with the SEC a technical report summary from a mining expert (a "qualified person") that identifies the information reviewed and conclusions drawn regarding the registrant’s mineral resources or mineral reserves determined as to each material property. The qualified person must use a price for each commodity 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, and must disclose the reasons for using the selected price for establishing the estimates. The qualified person may determine mineral resources and reserves at any specific point of reference (to be disclosed in the technical report summary) and may include inferred resources in an economic analysis that the qualified person opts to include in an initial assessment if certain conditions are met. A qualified person will not be subject to expert liability for conclusions regarding aspects of specified modifying factors that the qualified person has indicated are based on information provided by the registrant.

An additional technical report summary must be obtained and filed when there is a material change in the mineral reserves or mineral resources from the last filing.

The final rules provide a two-year transition period so that a registrant will not be required to begin to comply with the new rules until its 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.

The amendments become effective 60 days after publication in the Federal Register.

The release is No. 33-10570.

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