NI 43-101 Versus the Press Release: Detecting Selective Disclosure

National Instrument 43-101 exists because of Bre-X. It requires that scientific and technical disclosure about a mineral project be based on a report prepared by, or under the supervision of, a qualified person — an engineer or geoscientist with relevant experience and professional registration, who takes personal responsibility for the content.

The standard works. Outright fabrication is rare in Canadian mining disclosure. What NI 43-101 cannot prevent is emphasis, and emphasis is where retail investors lose money.

The resource and reserve hierarchy

Under the CIM definitions incorporated by NI 43-101, estimates are classified by confidence:

Mineral resources, in increasing order of geological confidence:
- Inferred. Estimated from limited sampling. Geological continuity is assumed, not demonstrated. Inferred material cannot be used in economic studies other than a preliminary economic assessment, and cannot be converted directly to reserves.
- Indicated. Sufficient sampling to assume geological and grade continuity with reasonable confidence.
- Measured. Confidence high enough for detailed mine planning.

Mineral reserves are the economically mineable part of a measured or indicated resource, demonstrated by at least a pre-feasibility study, with all modifying factors applied — mining method, metallurgical recovery, infrastructure, economics, permitting, legal, social and environmental. Only indicated resources can convert to probable reserves; only measured can convert to proven.

Two rules follow that a reader can apply immediately:

1. Resources are not reserves. A large resource with no reserves has not been demonstrated to be economically mineable by anyone.
2. An inferred-dominant resource is a hypothesis. Conversion rates from inferred to indicated vary enormously, and a substantial portion of inferred ounces routinely fails to survive infill drilling.

The techniques to recognise

Selective interval reporting. A release reports "12.4 g/t gold over 8.0 metres." The question is what the surrounding hole returned. A high-grade sub-interval inside a much longer low-grade intersection is a legitimate disclosure; presenting it without the parent interval is the technique. NI 43-101 requires that the basis for compositing be stated, so the answer is usually in the fine print beneath the table.

True width omission. A drill hole intersecting a steeply dipping structure at an oblique angle produces a downhole length far greater than the true thickness of the mineralisation. Disclosure must state whether widths are true or downhole. "True widths are not yet known" appearing consistently across many releases from a well-drilled project is a choice.

Cut-off grade shifts. A resource restated at a lower cut-off grade contains more tonnes at lower grade. Total contained ounces rise. Nothing in the ground changed. Compare cut-off grades between successive estimates before comparing ounce counts.

Metal price assumptions. Resource and reserve estimates use assumed long-term prices, which are disclosed. A resource expansion driven by a higher assumed price is a market call by the issuer, not a discovery.

Metal-equivalent grades. Combining copper, gold and silver into a single "copper-equivalent" figure requires price and recovery assumptions for each metal. If recoveries for the by-product metals are poor or unproven, the equivalent grade overstates the economics. The calculation must be disclosed — read it.

Adjacent-property references. A release describing a neighbouring producing mine is providing geological context, and NI 43-101 requires an explicit statement that the adjacent results are not necessarily indicative of the issuer's property. That mandatory sentence exists because the technique is effective.

Study types, in order of reliability

• Preliminary economic assessment. May include inferred resources. Accuracy typically stated in the range of ±35-50%. Genuinely preliminary.
• Pre-feasibility study. Reserves may be declared. Accuracy typically ±20-30%.
• Feasibility study. The basis for a construction decision and project financing. Accuracy typically ±10-15%.

Even feasibility studies overrun. The historical record of capital cost escalation between feasibility and commissioning is poor across the industry, and it is worse for first-time builders and for remote projects.

A reading procedure

1. Read the technical report summary on SEDAR+, not the press release.
2. Check the resource table: inferred versus indicated versus measured, with the cut-off grade and metal price assumption.
3. Confirm whether reserves exist, and which study supports them.
4. In drill releases, look for true widths and for the full parent interval around any highlighted intersection.
5. Identify the qualified person and check whether they are independent of the issuer.
6. Check the date of the most recent technical report against the claims being made today.

None of this requires geological training. It requires reading the document that the headline is summarising — which, in this sector, is where nearly all of the available edge sits.