Are We Too Trusting of Public Information?

POSTED ON January 31, 2013 BY Gonzalo Tudela
CATEGORY Investing, Investor Relations, Mineral Exploration, Mining,

The British Columbia Securities Commission (BCSC) released its 2012 Mining Report this month. The purpose of the report is “to provide information to market participants on areas where they can improve their disclosure and on interpretative issues that have materialized during the past year.”

The BSCS outlined some of the most common problems when it comes to proper disclosure for investors. 2012 was a year where technical reports failed to perform with regards to disclosure compliance.

The numbers are actually quite surprising.

On average from 2009-2013, the data collected on BC mining companies listed on the TSX and TSX.V only met 65% compliance for required filings (1) and 50% for voluntary disclosure (2). The most important of these findings is how problematic the Preliminary Economic Assessments (PEAs) were, measured at ~30% compliant for required filings and <10% compliant for voluntary filings.

1 Required Filings includes news releases, technical reports, annual information forms (AIF) and management discussion and analysis (MD&A).
2 Voluntary Disclosure includes websites, investor relations materials, email promotions, corporate presentations and social media sites.

Basing an investment decision on non-compliant data adds a risk that is almost impossible to account for.

There was also an issue raised on reporting by qualified persons. The mineral resource estimates presented in technical reports were “lacking adequate or sufficiently transparent information on the key assumptions, parameters and methodologies” used in the calculations of those estimates.

Basically, the underlying issue for our industry is this.

Trusting that the factual data provided in a technical report meets the standards set by the BCSC is the only way capital markets can operate efficiently. When companies do not meet these standards, both investors and analysts may be basing their decisions on unsuitable data.

As a rule of thumb, it is always best to perform your due diligence using the accessible data provided on SEDAR.

Disclaimer: Disclaimer: As a CFA Level I Candidate, I am required to disclose the following: I am not qualified to be giving investment advice and this should not be taken as such. The contents of this article are an opinion drawn from material public information. I reserve the right to actively trade the companies named in this article without providing notice. I advise you to do your own due diligence and talk to a licensed investment advisor before buying or selling any security. All facts to be verified by the reader.

Gonzalo Tudela

tudela.gonzalo@gmail.com

Gonzalo Tudela

tudela.gonzalo@gmail.com

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Always do your own due diligence. We seek safe harbor.