Cost overruns are not new to engineering projects. It is a problem when the scale and frequency is high. Unfortunately, the mining industry has a reputation for cost overruns during project construction. Different people have estimated mining cost overruns to nearly 40%. This is significant because all the CRIRSCO standards require capital and operating cost accuracy of ±25% and ±15% for prefeasibility and final feasibility studies, respectively. The US Securities and Exchange Commission’s (SEC’s) Regulation S-K 1300, in addition to this, asks qualified persons (QPs) to state the accuracy of their cost estimates in technical report summaries filed with the Commission. In this post, I am going to share my thoughts on the causes of these cost overruns and the implications for QP liability in public reports.Continue reading “Implications of mining project cost overruns for QP liability”
When I teach my short course on the basics of Regulation S-K 1300 one of the discussion points that takes the most time is how S-K 1300 handles qualified person (QP) liability. Under S-K 1300, as with all the CRIRSCO standards, the QP is liable for misstating or omitting material facts. The Canadian National Instrument (NI) 43-101, section 6.4(2) and Item 3 of Form 43-101F1, allows QPs to disclaim certain items of the disclosure in the technical report if the QP is “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” so long as the QP provides certain disclosures. S-K 1300, on the other hand, only provides that the QP can disclaim certain items of disclosure that he/she received from the registrant.
Since the US Securities & Exchange Commission (SEC) passed its new mining property disclosure rules, I have heard many suggest that the SEC would prefer mining companies to use external professionals (i.e. consultants) as qualified persons (QPs) instead of their own employees. Such people cite the fact that the Commission, in the rules, allowed a third-party firm (i.e. a consulting company) to sign a technical report summary (TRS) and provide written consent on behalf of its employees who prepare the TRS. They point to the fact that the rules do not provide the same allowance for employees. This is simply not true and I will attempt to explain the Commission’s reasoning for arriving at this position in this post.Continue reading “Was the SEC Encouraging Companies to use External QPs in S-K 1300?”