National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – National Instrument 43-101 – Applicant granted relief from the requirements of Section 2.2 of NI 43-101 to permit the Filer to include disclosure of certain prior estimates in its initial public offering prospectus and its technical reports which prior estimates do not meet the definition of “historical estimate” as defined in Section 1.1 of NI 43-101.
Applicable Legislative Provisions
National Instrument 43-101 Standards of Disclosure for Mineral Projects, s. 2.2.
September 21, 2017
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
VM HOLDING S.A.
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) granting an exemption (the Exemption Sought) from the requirements of Section 2.2 of National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) to permit the Filer to include disclosure of certain prior estimates in its prospectus and its technical reports which prior estimates do not meet the definition of “historical estimate” as defined in Section 1.1 of NI 43-101 as the Filer owned the relevant properties at the relevant time when the applicable prior estimates were prepared.
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) the Filer has provided notice that Section 4.7(1) of Multilateral Instrument 11-102 – Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Northwest Territories, Yukon and Nunavut.
Furthermore, the principal regulator in the Jurisdiction has received a request from the Filer for a decision that the application and this decision be kept confidential and not be made public until the earlier of: (i) the date on which the Filer publicly discloses the granting of the Exemption Sought; (ii) the date on which the Filer obtains a receipt for a preliminary long form prospectus relating to the proposed initial public offering of the Filer (the IPO); (iii) the date on which the Filer advises the principal regulator that there is no longer any need for the application and this decision to remain confidential; and (iv) the date that is 90 days after the date of this decision (the Confidentiality Sought).
Terms defined in National Instrument 14-101 – Definitions have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
1. The Filer is a public limited liability company (société anonyme) organized under the laws of Luxembourg.
2. The registered office of the Filer is located at 26 28 rue Edward Steichen, L 2540 Luxembourg, Grand Duchy of Luxembourg.
3. The Filer is, and through its predecessor entities has been, a large scale, low cost integrated zinc producer with over 60 years of experience developing and operating mining assets in Latin America. Of relevance to this application are five mines that are owned and operated by the Filer, three located in the Central Andes of Peru and two located in the state of Minas Gerais in Brazil.
4. The Filer is, and through its predecessor entities has been for many years, a “producing issuer” for the purposes of NI 43-101.
5. The Filer is contemplating (i) a concurrent initial public offering of its common shares in the United States, and in each of the Jurisdictions and (ii) a concurrent listing of its common shares on the New York Stock Exchange and the Toronto Stock Exchange.
6. Following its IPO, in the Jurisdictions the Filer will be a “SEC foreign issuer” as such term is defined in National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Private Issuers, and in the United States the Filer will be a “foreign private issuer” within the meaning of Rule 405 under the Securities Exchange Act of 1934, as amended, of the United States of America.
7. The Filer is not currently a reporting issuer in any of the Jurisdictions.
8. Among other mining and development properties, the Filer owns and operates the following (each a “Property” and collectively the “Properties”):
a. the Cerro Lindo mine, Chavin District, Chincha Province, Peru;
b. the El Porvenir mine, Pasco, Peru;
c. the Atacocha mine, Pasco, Peru;
d. the Vazante mine, Minas Gerais State, Brazil; and
e. the Morro Agudo mine, Minas Gerais State, Brazil.
9. Each of the Properties is either a primarily underground mining operation or includes underground mining operations.
10. As prescribed by applicable prospectus form requirements and NI 43-101, the Filer intends to include in its Prospectus disclosure relating to each of the Properties, which will be supported by an independent technical report prepared in accordance with NI 43-101.
11. Mineral resource and ore reserve estimates (the “prior estimates”) for each of the Properties were prepared by staff of the Filer using the confidence categories set out in the 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, Joint Ore Reserves Committee (JORC) Code. The Filer will not be treating such prior estimates as current estimates.
12. In respect of the requirements under Section 2.2 of NI 43-101 relating to disclosure of information about a mineral resource or mineral reserve, Section 2.4 of NI 43-101 permits issuers to disclose a “historical estimate” using the original terminology provided the requirements of Subsections 2.4 (a) to (g) are satisfied.
13. Pursuant to Section 4.3 of NI 43-101, a technical report that is required to be filed under Part 4 of NI 43-101 must be filed in accordance with Form 43-101F1 – Technical Report (“Form 43-101F1”). Item 6(c) of Form 43-101F1 requires disclosure of any significant historical mineral resource and mineral reserve estimates in accordance with Section 2.4 of NI 43-101. Item 24 of Form 43-101 requires disclosure of additional information necessary to make the technical report understandable and not misleading.
14. A “historical estimate” is defined in Section 1.1 of NI 43-101 as an “estimate of the quantity, grade, or metal or mineral content of a deposit that an issuer has not verified as a current mineral resource or mineral reserve, and which was prepared before the issuer acquiring, or entering into an agreement to acquire, an interest in the property that contains the deposit”.
15. The prior estimates proposed to be disclosed by the Filer pertaining to Properties were not prepared prior to the Filer “acquiring, or entering into an agreement to acquire, an interest in the properties” but rather were prepared in all cases when the Properties were owned by the Filer.
16. The prior estimates meet the definition of historical estimate in Section 1.1 of NI 43-101 but for the ownership by the Issuer of the Properties at the time the historical estimates were prepared. Furthermore, the disclosure of the prior estimates will otherwise comply with the exemption under Section 2.4 of NI 43-101, as the prospectus and the technical reports will:
a. identify the source and date of the prior estimate, including any existing technical report;
b. comment on the relevance and reliability of the historical estimate;
c. to the extent known, provide the key assumptions, parameters, and methods used to prepare the prior estimate;
d. state whether the prior estimate uses categories other than the ones set out in Sections 1.2 and 1.3 of NI 43-101 and, if so, include an explanation of the differences;
e. include any more recent estimates or data available to the Filer;
f. comment on what work needs to be done to upgrade or verify the prior estimate as current mineral resources or mineral reserves; and
g. state with equal prominence that:
i. a qualified person has not done sufficient work to classify the prior estimate as current mineral resources or mineral reserves; and
ii. the Filer is not treating the prior estimate as current mineral resources or mineral reserves.
17. The Filer will include current estimates of mineral reserves and resources for the Properties in compliance with NI 43-101. However, given the geological nature (i.e., narrow vein or tabular bodies of mineralization) of the Properties and the practical and economic limitations associated with surface and underground drilling, both of which result in meaningful limitations on the total amount of mineral reserves and mineral resources that can practically be defined by the Filer, the Filer submits that its current estimates of mineral reserves and resources as estimated under NI 43-101 represent incomplete disclosure without the benefit of the historical context provided by the prior estimates. In this regard, the Filer considers the prior estimates to be useful disclosure for investors for the purpose of illustrating the Filer’s past ability to replenish and in some cases grow mineral reserves and mineral resources depleted through normal course mining activities over time, which replenishment is consistent with the Filer’s understanding and the understanding of the independent authors of the technical reports, of the geological nature of the mineralization underlying the Properties.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that disclosure relating to the prior estimates in the prospectus and the technical reports complies with Section 2.4 (a) through (g) of NI 43-101.
Furthermore, the decision of the principal regulator is that the Confidentiality Sought is granted.
Manager, Corporate Finance Branch
Ontario Securities Commission