The amended requirements do not represent a major change from the current requirements, but rather include changes to update and clarify the CSA's position on certain mineral disclosure issues, in part to reflect practical developments under the current requirements over the past three years. Most notably, the amended requirements:

• change the independence test for qualified persons;
• introduce new exemptions for foreign issuers; and
• lift the technical report requirement in connection with an offering memorandum prepared for a private placement to an accredited investor.

In addition, the companion policy has been largely overhauled, with some helpful new guidance on a range of issues.

Current NI 43-101 Regime Remains the Same

Under the Amended Rule, the NI 43-101 regime remains the same and basic pillars of the Current Rule remain in place, including:

• the prohibition against disclosure of mineral reserves and resources other than under the five specified categories; and
• the requirement to prepare and file a technical report prepared by an independent qualified person (a "QP") to support written disclosure on mineral projects on material properties.

The proposed changes affect some of the more detailed provisions that flow from these requirements.

Proposed Changes

Independence Test for QPs

The Amended Rule proposes to change the test applied to determine the independence of a QP. The Current Rule applies a "bright line" test and states the specific factors to be applied, while the Amended Rule applies a "subjective test." Determining a potential QP's independence will now be a question of whether a reasonable person would consider the presence of any existing or anticipated arrangement, understanding, employment or other relationship to be an influence on the QP's judgement. The amended companion policy provides a list of relationships, as examples, that will negate a QP's independence. It could be that this new independence test, similar to the independence test in the current National Instrument 52-110 (Audit Committees), may see some further refinement in light of the fact that the CSA has just published amendments to the NI 52-110 test, providing more bright-line tests to establish what will and will not constitute independence.

Technical Reports - Obligation

The proposed changes include a modification of the list of items that will trigger the technical report requirement. While a technical report will continue to be required in support of an "offering memorandum" in general, a technical report will no longer be required in support of an offering memorandum delivered to "accredited investors" (as defined in Ontario Securities Commission Rule 45-501 - Exempt Distributions). In practical terms this may not always negate the preparation of technical reports in these situations, given that current technical reports are often required by the market in connection with financing transactions.

Technical Reports - Contents

The Amended Rule has introduced only minor changes. One, however, is of particular note: in response to the increasing number and expansive nature of QP and engineering firm disclaimers in technical reports, the CSA has included in the form's instructions a new general prohibition against disclaimers other than those specifically allowed.

New Exemptions Introduced

• Foreign Issuers

The Amended Rule contains a full exemption from the rule for so-called "Foreign Issuers," being issuers

• that are incorporated or organized under the laws of a foreign jurisdiction;
• whose securities trade primarily (or who have applied for their securities to trade primarily) on one of: the New York Stock Exchange, the Nasdaq National Market, the London Stock Exchange, the Australian Stock Exchange or the Johannesburg Stock Exchange;
• that are subject to the securities laws of the US, UK, Australia or South Africa and are in compliance with applicable continuous disclosure requirements;
• that have less than 10% of their total number of equity securities (including underlying securities) owned directly or indirectly by Canadian residents, calculated on a fully diluted basis; and
• that include in any disclosure made in a Canadian jurisdiction a statement that such disclosure is not 43-101 compliant and there is no technical report to be filed to support the issuer's disclosure.

This new exemption will be of fundamental importance to foreign issuers in connection with a Canadian tranche of a private placement and also in the context of international mergers and acquisitions transactions.

• Personal Inspections of Mineral Projects

The Amended Rule also contains a narrow technical exemption for personal inspections of mineral properties. This area has been the subject of several relief applications under NI 43-101. An exemption well now be available where the following test is satisfied:

• it is a "grassroots exploration property" (as defined in the Amended Rule);
• extreme seasonal weather conditions are prohibiting access or obtaining meaningful information; and
• the issuer discloses all of the above; and provided that the issuer files a current updated report as soon as practicable after the QP can complete a personal inspection.

Mineral Project - Royalties and Similar Interests

The Amended Rule proposes to change the definition of "mineral project," adding royalty interests, net profits interests and similar interests in a mineral project to the definition. This is a formalization of what is now fairly established practice - if a royalty interest held by an issuer in another issuer's mineral project is material to the issuer holding the interest, that issuer has all the same obligations under NI 43-101 as does an issuer with a direct interest in a mineral project. The CSA have specifically invited comment on this proposed change to the Current Rule and it may see some refinement before the Amended Rule is finalized.

Foreign Codes

Under the Current Rule, Australia's JORC Code is an acceptable standard for reporting mineral reserves and resources (provided that a reconciliation of any differences is provided). The Amended Rule adds the South African Code for Reporting of Mineral Resources and Mineral Reserves (the SAMREC Code) and the U.S. Securities and Exchange Commission's Industry Guide 7 ("Guide 7") as acceptable standards (similarly, with a reconciliation to NI 43-101 categories). We find the acceptance of Guide 7 categories a surprising change, given the substantial differences between the Guide 7 regime and NI 43-101. We would expect that if this remains in the final Amended Rule, the reconciliation requirement will likely present an additional disclosure challenge for issuers relying on disclosure made in accordance with Guide 7 categories.

Technical Report Obligation in Connection with Annual MD&A

Another minor proposed change relates to the triggering of the technical report obligation. Under the current requirements, a technical report is required to support information in an issuer's annual information form. However, under the new continuous disclosure rule (National Instrument 51-102), "venture issuers" as defined in NI 51-102 are not required to file AIFs. To close this potential gap, the Amended Rule provides that a technical report will be required to support information in an issuer's annual management's discussion and analysis (MD&A) such that if a venture issuer might otherwise have been exempt on the basis that it had no AIF filing obligation, it will no longer be exempt on this basis.

Current Personal Inspections

The requirement relating to personal inspections has been changed from a "personal inspection" to a "current personal inspection." However, the Amended Rule does not require that a visit must be made within a specified period of time of the technical report date. Rather, the Amended Rule provides that a personal inspection will be current as long as there has not been a material change on the property since the visit, which may have occurred a considerable time prior to the date of the technical report.

Companion Policy

The companion policy has been substantially rewritten and expands on several other subjects, including preliminary assessments and disclosure of historical results, and provides updated guidance on the reporting of coal resources and reserves and diamond exploration results. In addition, the test as to when a project is "material" to an issuer will no longer be the 10% of book value test, but is now based on a more subjective determination as to materiality in light of the circumstances.