Now Clarified: SEC’s Regulation S-K 1300’s Compliance Timeline

When the Securities & Exchange Commission (SEC) passed its new mining property disclosure rules (Regulation S-K 1300) it set January 1, 2021 as the compliance date. Specifically, the SEC required that companies with material mining operations “must comply with the final rule amendments for the first fiscal year beginning on or after January 1, 2021.” While the compliance date for a company’s annual report has been clear from the beginning, the implications for when a company needs to file a registration statement within its “first fiscal year beginning on or after January 1, 2021” that requires disclosures of exploration results, resources and reserves have not been that obvious. The SEC, in guidance issued in April 2019, clarified circumstances under which disclosures of exploration results, resources and reserves in registration statements prior to the first annual report that is S-K 1300 complaint do not have to comply with S-K 1300. In this post, I will do my best to explain this to mining professionals who are not attorneys.

Per the SEC’s final rule release, mining companies must comply with Regulation S-K 1300 “for the first fiscal year beginning on or after January 1, 2021.” Thus, for a company whose fiscal year ends on December 31, the first fiscal year that will begin on or after January 1, 2021, would be the fiscal year we just entered. Consequently, the annual report which will be filed in early 2022 for this fiscal year should comply with S-K 1300. For companies with fiscal years that end June 30, the first fiscal year that begins on or after January 1, 2021 would be the fiscal year that starts July 1, 2021. Thus, the annual report they file in the fall of 2022 would have to comply with S-K 1300. That is the easy part.

In addition to annual reports, mining companies also file registration statements when they issue new securities (initial public offerings and new securities from business combinations etc.). These registration statements, in many instances, also require statements of mineral resources and reserves as well as exploration results. So while companies are making plans to comply with S-K 1300 in annual reports that will be filed in 2022, what happens if the company needs to file a registration statement prior to when their annual report will be due? Would the exploration results and statements of mineral resources and reserves have to comply with S-K 1300? Or should they be aligned with the statements that will be filed this fiscal year (fiscal year 2020) in compliance with Industry Guide 7 (IG 7)? This is where there has been some confusion.

In the guidance I referred to earlier, the SEC made a distinction between registration statements that incorporate by reference the exploration results, resources and reserves filed earlier under IG 7 and those that do not. They clarified that if the registration statement incorporates earlier mining property disclosure prepared under IG 7, then the registration statement does not have to comply with S-K 1300. But those that do not incorporate such IG 7 disclosures would have to comply with S-K 1300.

Practically, this gives companies that are currently filing with the SEC a break, if they are to file registration statements this year (2021) prior to filing annual reports that comply with S-K 1300. This could arise if the company issues securities on the market or spins off subsidiaries. However, companies that do not have an obligation to file exploration results, resources or reserves now would have no IG 7 disclosure to incorporate by reference and would have to file S-K 1300 compliant disclosure, if they are to file registration statements. Thus, for new IPOs or mergers and acquisitions that need to state mining disclosures of a company that currently does not provide IG 7 disclosure, the disclosures have to comply with S-K 1300.

I hope this clarifies the compliance timeline for S-K 1300 and also highlights what could change in case of situations that requires a company to file a registration statement. There are many issues and instances that can be confusing. Your best bet is to read the full proposing and final adopting releases for S-K 1300 and keep up with guidance that the SEC is providing. You can also reach out to experts like Sphinx Mining Systems to help you get up to speed. Our upcoming short course on the S-K 1300 rules is a good resource for that.

If you have comments or questions, leave them below.

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