The Qualified Person: Who Signs Off on Mining Disclosure

Introduction

Near the end of almost every Canadian mining news release is a short paragraph: "The scientific and technical information in this release has been reviewed and approved by [a name], P.Geo., a qualified person as defined by NI 43-101." Most readers skip it. It is one of the more useful lines in the release.

This guide explains who a qualified person is, why the rules require one, what the relationship disclosure tells you, and when a company must use someone from outside. Resource categories and technical report contents are covered elsewhere, so they are only touched on here.

The qualified person is the professional who puts their name, and their licence, behind the technical facts.

Who Counts

National Instrument 43-101, the Canadian rule for disclosure about mineral projects, defines a qualified person as an individual who:

1. is an engineer or geoscientist with a university degree, or equivalent accreditation, in an area of geoscience or engineering related to mineral exploration or mining;
2. has at least five years of experience in mineral exploration, mine development or operation, or mineral project assessment, or a combination of these;
3. has experience relevant to the subject matter of the project and the report;
4. is in good standing with a professional association; and
5. if that association is in a foreign jurisdiction, holds a membership designation that meets additional tests set out in the instrument.

The third test is easy to overlook. A geologist with long experience in one commodity is not automatically qualified to sign off on a different kind of deposit, or on mine engineering. Technical reports often have several qualified persons, each responsible for the sections that match their expertise.

The Professional Association

NI 43-101 defines a professional association as a self-regulatory body of engineers or geoscientists that admits members on the basis of qualifications, experience and ethical fitness, requires compliance with its standards of competence and ethics, encourages or requires continuing professional development, and has disciplinary powers, including the power to suspend or expel a member.

In Canada these are the provincial and territorial associations of engineers and geoscientists. In British Columbia, for example, professional engineers and professional geoscientists are regulated under the Professional Governance Act and the Engineers and Geoscientists Regulation made under it. The designations P.Geo. (professional geoscientist) and P.Eng. (professional engineer) after a name signal registration with such a body.

That is what gives the system teeth. A qualified person who signs off on misleading technical disclosure is answerable to securities regulators and to their own professional body.

Why Every Release Names One

Section 3.1 of NI 43-101 says that when an issuer discloses scientific or technical information in writing about a mineral project on a material property, it must include the name and the relationship to the issuer of the qualified person who prepared or supervised the information, or who approved the disclosure.

The relationship is the part to read. Common versions include:

• An officer or director, such as the vice president of exploration.
• An employee or contract geologist working for the company.
• A consultant from an outside firm.
• An independent qualified person, where the company says so and the person meets the instrument's test.

None of these is improper. A company's own exploration head will often know the project best. But knowing whether the person approving the numbers is paid by the company, holds its shares or options, or sits on its board helps you weigh the disclosure.

Section 3.2 adds a related requirement: written disclosure must say whether a qualified person has verified the data disclosed, including sampling, analytical and test data, and describe how, or explain why not.

When Someone From Outside Is Required

For most news releases, a company insider can be the qualified person. Certain technical reports are different. Under section 5.3, specified technical reports must be prepared by or under the supervision of qualified persons who are independent of the issuer. These include, among other triggers:

• a report filed when a company first becomes a reporting issuer;
• a report supporting the first disclosure of mineral resources, mineral reserves or the results of a preliminary economic assessment on a material property; and
• a report supporting disclosure of a 100% or greater change in total resources or reserves on a material property.

Section 1.5 sets the test for independence: a qualified person is independent if there is no circumstance that, in the opinion of a reasonable person aware of all the relevant facts, could interfere with their judgment in preparing the report. The Companion Policy adds that the independent qualified persons must take overall responsibility for the report.

There is an exception for producers. A producing issuer whose securities trade on a specified exchange is not required to use an independent qualified person for some of these reports.

The Paper Trail

When a company files a technical report on SEDAR+, each responsible qualified person must sign a certificate and a consent. The certificate states, among other things, their qualifications and professional memberships, the date and duration of their most recent personal inspection of the property, the sections of the report they are responsible for, whether they meet the independence test, and any prior involvement with the property. The consent confirms they agree to the report being filed and that the document it supports fairly reflects the report.

The Companion Policy says a qualified person must visit the site and cannot delegate the personal inspection requirement. It also says the issuer and its directors and officers are responsible for retaining a suitable qualified person, and that regulators may ask questions where a qualified person's objectivity is in doubt.

What a Sign-Off Does Not Mean

A qualified person's approval means the technical information was prepared or reviewed by a licensed professional who takes responsibility for it. It does not mean:

• the project will become a mine;
• the company is well run or well financed;
• the shares are fairly priced; or
• the qualified person has no financial interest in the company, unless the release identifies them as an independent qualified person.

What to Check

• The name and designation. Look for P.Geo., P.Eng. or a recognized foreign designation.
• The relationship. Officer, employee, consultant or independent qualified person.
• The fit. Does the person's background match the commodity and the type of work?
• Data verification. The release should say whether and how the data was verified.
• For a technical report, the certificates. Read them on SEDAR+ for site visit dates, responsibilities and prior involvement.

This is general information, not advice. Read the filings and speak to your own adviser before making any decision.