Do NI 43-101 Disclosures Adequately Address Closure Liability?

When preparing technical reports following Form 43-101F, any discussion of mine closure risks and liabilities are traditionally limited to item 20, and minimally addressed in item 22; the section that includes the economic analysis of the project. As a result, projects focus economic analysis solely on the extractive development value of the resource, with closure costs and outcomes as an afterthought.

The longer the anticipated life of mine, the more closure costs are underestimated due to difficulties predicting future stakeholder expectations, changing regulations, unclear returning land use objectives, or discounting cash flow evaluations.  Ultimately though, the value of an asset cannot be defined by resource extraction alone; valuations also need to include long term reclamation, water and watershed management, geomorphic landform stability, and material management. Projects inadequately considering environmental risk can be left with closure plans requiring expensive water collection and treatment programs operating in perpetuity.

In a time when Environmental, Social, and Governance (ESG) performance has become a substantial driver of investment decisions, exploration companies and junior miners can position their projects above otherwise comparable peers by demonstrating effective integration of ESG principles. Early identification of closure risks, and the use of integrated closure planning to maximize cashflow, while addressing closure liabilities and optimizing closure outcomes can and should be used to demonstrate project value when attracting investors. NI 43-101 disclosures present an opportunity to demonstrate a comprehensive approach to planning for closure, and post-mining land use, and to demonstrate how ESG principles are integrated into the full mine lifecycle plan.

What is NI 43-101?

The National Instrument Standards of Disclosure for Mineral Projects (NI 43-101) governs the disclosure of scientific and technical information concerning mineral exploration, development, and production activities by mining issuers for a project (Canadian Securities Administrators, 2022, p. 1). NI 43-101 requires mining issuers to file technical reports to adequately inform individuals who may not have technical backgrounds or expertise in the mining industry and are looking to understand certain economics with regards to investment in a mining project (Canadian Securities Administrators, 2022, p. 1).

Potential Updates to NI 43-101

NI 43-101 was first adopted in 2001 and has undergone various revisions. In 2022, the Canadian Securities Administrators (CSA) published Consultation Paper 43-401, highlighting some proposed revisions to NI 43-101. One of the key topics under consideration is closely related to closure planning: Environmental and Social Disclosure.

Disclosure factors related to environmental and social considerations have remained largely unchanged since 2001 (Canadian Securities Administrators, 2022, p. 6). Item 20 of NI 43-101 technical reports include discussions around any legal, political, social, and environmental risks that could materially affect development of the asset (Canadian Securities Administrators, 2022, p. 6). Frequently, relevant environmental and social risk factors highlighted in this section focus on permitting or operation phases, with limited discussion around mine closure. When closure risk modifying factors are included, the discussion focuses on active closure and reclamation costs, with limited consideration to post-closure risk management. With this update, CSA could enhance the requirements around disclosure requirements in item 20 for post-closure risk management and returning land-use planning.

How NI 43-101 Could Better Address Closure Liability Through Integrated Mine Closure

Integrated mine closure combines reclamation expertise with strategic mine planning to minimize poor or underfunded closure outcomes. Integrated mine closure planning is the process of incorporating closure and returning land use objectives into Life of Mine planning to optimize project value through the whole mine lifecycle. When you examine NI 43-101 through the lens of integrated mine closure, there is an opportunity to better identify future closure and post-closure liability in NI 43-101 technical reports.

By incorporating additional disclosure requirements related to post-closure liability and returning land-use planning, it would help to integrate closure best practices and ESG principles into the full mine lifecycle valuation and ensure a project has the resiliency and capacity for adaptation over a long timeframe. These additions will allow investors to see potential closure liabilities projected beyond the life of mine and will preserve social value for future returning land uses.

How Okane Can Help

As leaders in integrated mine closure, we have over 25 years experience identifying, mitigating, and planning for closure risks. Our team of experienced engineers and mine planners can answer questions you may have as a potential investor on a project related to mine-closure cost estimate and potential post-closure liabilities. We can also help evaluate the potential returning land-use alternatives and identify opportunities in a mine plan to preserve optionality for future land uses.

If you would like to contact us or would like to schedule a meeting to connect about your mine closure needs, feel free to send us an email at info@okaneconsultants.com, or visit our website at www.okaneconsultants.com.

References

Canadian Securities Administrators. April 2022. CSA Consultation Paper, Consultation on National Instrument 43-101 Standards of Disclosure for Mineral Projects. Retrieved from https://www.osc.ca/sites/default/files/2022-04/ni_20220414_43-101_consulation.pdf