Although not called for by Guide 7, some registrants provide disclosure about their internal controls, including quality control and quality assurance measures, which they have put
mineral resources and mineral reserves. The staff has also requested, on a case by case basis, that registrants provide a brief description of the quality control and quality assurance protocols for sample preparation, controls, custody, assay precision and accuracy as they relate to
exploration programs.
We believe that disclosure about the internal controls that a registrant uses to help ensure the reliability of its disclosure of exploration results and estimates of mineral resources and mineral reserves would benefit investors. Accordingly, we are proposing to require that a registrant describe the internal controls390 that it uses in its exploration and mineral resource and reserve estimation efforts. As specified in the proposed rules, such disclosure should address quality control and quality assurance programs, verification of analytical procedures, and
comprehensive risk inherent in the estimation.391 Such disclosure would help investors evaluate whether the registrant has established acceptable levels of certainty and precision during
exploration and whether and how it has verified and validated the quality of the data used in its analysis. In addition, we note that this requirement is consistent with disclosure requirements in most foreign mining jurisdictions.392
A proposed instruction would state that a registrant must provide the required internal controls disclosure whether it is providing summary disclosure under proposed Item 1303,
390 Internal controls in this context refers to the internal controls used to ensure reliable disclosure of
exploration results and estimation of mineral resources and mineral reserves. It is not to be confused with internal control over financial reporting. In this regard, the Commission’s disclosure requirements for registrants engaged in oil and gas producing activities require similar disclosure of internal controls over estimation efforts. See Item 1202(a)(7) of Regulation S-K. (17 CFR 229.1202(a)(7)).
391
See proposed Item 1305 of Regulation S-K.
392 See JORC Table 1 checklist and NI 43-101 pt. 3.3, which call for disclosure of quality control and quality
assurance programs. The SME Petition also recognizes the need for and importance of appropriate internal and disclosure controls in the estimation of mineral reserves. See SME Petition for Rulemaking at 17.
individual property disclosure under proposed Item 1304, or under both items.393 Estimating mineral resources and reserves requires use of statistical techniques to estimate tonnages and grades based on data derived from laboratory analysis of representative samples. In any such scientific study, best practice requires the analyst to disclose the quality control and quality assurance techniques employed to ensure the data used in the analysis is reliable.394 We believe this same practice should apply when preparing and analyzing data for the purpose of individual property disclosure. We also believe an internal controls disclosure requirement is particularly important for a company with multiple properties in order to ensure that best practice is followed across all properties.
Moreover, all the CRIRSCO-based codes require the disclosure of quality control and quality assurance procedures as they relate to exploration results (data) and techniques and assumptions (analysis) used for mineral resource and reserve estimation.395 In addition, the listing rules of several of these jurisdictions specifically call for disclosure of the internal
controls relating to estimates of mineral resources and reserves.396 Our proposal is substantially similar to these internal control disclosure requirements and therefore should not significantly alter the disclosure practices of those registrants that are listed in these jurisdictions. For registrants that are not currently subject to an internal controls disclosure requirement, we
393 See the Instruction to proposed Item 1305 of Regulation S-K.
394 See S. C. Kazmierczak, “Laboratory Quality Control: Using Patient Data to Assess Analytical
Performance,” in Clinical Chemistry and Laboratory Medicine 617-627 (2003); see generallyM. J. Chandra, Statistical Quality Control (2001).
395 See, e.g., Canada’s NI 43-101 pt. 3.3 and 43-101F1 Item 11. See also JORC Table 1 and SAMREC Table
1 T3.
396 See, e.g., ASX Listing Rule 5.21.5 which requires registrants to disclose “[a] summary of the governance
arrangements and internal controls that the mining entity has put in place with respect to its estimates of mineral resources and ore reserves and the estimation process.”
believe investors would benefit from such disclosure, though we recognize that registrants may incur additional costs.
Request for Comment
116. Should we require registrants to describe the internal controls that they use to help ensure the reliability of their disclosure of exploration results and estimates of mineral resources and mineral reserves, as proposed? Should we require that such internal controls disclosure address quality control and quality assurance programs, verification of analytical procedures, and comprehensive risk inherent in the estimation, as
proposed? Are there other items, in addition to or in lieu of those proposed items, that should be included in such disclosure? Are there items that should be excluded from the proposed internal controls disclosure requirement? In each case, why or why not? 117. Should we require registrants to describe the internal controls that they use to help
ensure the reliability of their disclosure of exploration results and estimates of mineral resources and mineral reserves, as proposed? Should we require that such internal controls disclosure address quality control and quality assurance programs, verification of analytical procedures, and comprehensive risk inherent in the estimation, as
proposed? Are there other items, in addition to or in lieu of those proposed items, that should be included in such disclosure? Are there items that should be excluded from the proposed internal controls disclosure requirement? In each case, why or why not?