[Federal Register Volume 83, Number 246 (Wednesday, December 26, 2018)]
[Rules and Regulations]
[Pages 66344-66461]
[FR Doc No: 2018-26337]

Vol. 83

Wednesday,

No. 246

December 26, 2018

Part II

Securities and Exchange Commission

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17 CFR Parts 229, 230, 239, et al.

Modernization of Property Disclosures for Mining Registrants; Final
Rule

Federal Register / Vol. 83 , No. 246 / Wednesday, December 26, 2018 /
Rules and Regulations

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 229, 230, 239, and 249

[Release Nos. 33-10570; 34-84509; File No. S7-10-16]
RIN 3235-AL81

Modernization of Property Disclosures for Mining Registrants

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: We are adopting amendments to modernize the property
disclosure requirements for mining registrants, and related guidance,
currently set forth in Item 102 of Regulation S-K under the Securities
Act of 1933 and the Securities Exchange Act of 1934 and in Industry
Guide 7. The amendments are intended to provide investors with a more
comprehensive understanding of a registrant's mining properties, which
should help them make more informed investment decisions. The
amendments also will more closely align the Commission's disclosure
requirements and policies for mining properties with current industry
and global regulatory practices and standards. In addition, we are
rescinding Industry Guide 7 and relocating the Commission's mining
property disclosure requirements to a new subpart of Regulation S-K.

DATES: Effective date: The final rule amendments are effective February
25, 2019, except for the amendments to 17 CFR 229.801(g) and
229.802(g), which will be effective on January 1, 2021.
    Compliance date: Registrants engaged in mining operations must
comply with the final rule amendments for the first fiscal year
beginning on or after January 1, 2021. Industry Guide 7 will remain
effective until all registrants are required to comply with the final
rules, at which time Industry Guide 7 will be rescinded.

FOR FURTHER INFORMATION CONTACT: Elliot Staffin, Special Counsel, in
the Division of Corporation Finance, at<PHONE_NUMBER>, U.S. Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: We are amending 17 CFR 229.102 (``Item 102
of Regulation S-K'') under the Securities Act of 1933 (``Securities
Act'') \1\ and the Securities Exchange Act of 1934 (``Exchange
Act''),\2\ adding new exhibit (96) to 17 CFR 229.601(b) (``Item 601 of
Regulation S-K''), adding new 17 CFR part 229, subpart 229.1300
(``subpart 1300 of Regulation S-K''), amending 17 CFR 230.436 under the
Securities Act, amending Form 1-A,\3\ amending Form 20-F,\4\ and
rescinding 17 CFR 229.801(g) and 229.802(g) under the Securities Act
and Exchange Act.
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    \1\ 15 U.S.C. 77a et seq.
    \2\ 15 U.S.C. 78a et seq.
    \3\ 17 CFR 239.90.
    \4\ 17 CFR 249.220f.
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Table of Contents

I. Introduction
    A. Summary of, and Commenters' Principal Concerns Regarding, the
Commission's Proposed Revisions to the Current Mining Property
Disclosure Regime
    B. Summary of Principal Changes to the Final Rules
II. Final Mining Property Disclosure Rules
    A. Consolidation of the Mining Disclosure Requirements
    1. Rule Proposal
    2. Comments on the Rule Proposal
    3. Final Rules
    B. Overview of the Standard for Mining-Related Disclosure
    1. The Threshold Materiality Standard
    2. Treatment of Vertically-Integrated Companies
    3. Treatment of Multiple Property Ownership
    4. Treatment of Royalty Companies and Other Companies Holding
Economic Interests in Mining Properties
    5. Definitions of Exploration, Development and Production Stage
    C. Qualified Person and Responsibility for Disclosure
    1. The ``Qualified Person'' Requirement
    2. The Definition of ``Qualified Person''
    D. Treatment of Exploration Results
    1. Rule Proposal
    2. Comments on the Rule Proposal
    3. Final Rules
    E. Treatment of Mineral Resources
    1. The Mineral Resource Disclosure Requirement
    2. Definition of Mineral Resource
    3. Classification of Mineral Resources
    4. The Initial Assessment Requirement
    5. USGS Circular 831 and 891
    F. Treatment of Mineral Reserves
    1. The Framework for Determining Mineral Reserves
    2. The Type of Study Required To Support a Reserve Determination
    G. Specific Disclosure Requirements
    1. Requirements for Summary Disclosure
    2. Requirements for Individual Property Disclosure
    3. Requirements for Technical Report Summaries
    4. Requirements for Internal Controls Disclosure
    H. Conforming Changes to Certain Forms Not Subject to Regulation
S-K
    1. Form 20-F
    2. Form 1-A
    I. Transition Period and Compliance Date
III. Other Matters
IV. Economic Analysis
    A. Baseline
    1. Affected Parties
    2. Current Regulatory Framework and Market Practices
    B. Analysis of Potential Economic Effects
    1. Broad Economic Effects of the Final Rules and Impact on
Efficiency, Competition, and Capital Formation
    2. Consolidation of the Mining Disclosure Requirements
    3. The Standard for Mining-Related Disclosure
    4. Qualified Person and Responsibility for Disclosure
    5. Treatment of Exploration Results
    6. Treatment of Mineral Resources
    7. Treatment of Mineral Reserves
    8. Specific Disclosure Requirements
    9. Conforming Changes to Certain Forms Not Subject to Regulation
S-K
V. Paperwork Reduction Act
    A. Background
    B. Summary of Collection of Information Requirements
    C. Estimate of Potentially Affected Registrants
    D. Estimate of Reporting and Cost Burdens
VI. Final Regulatory Flexibility Act Analysis
    A. Need for, and Objectives of, the Final Rules
    B. Significant Issues Raised by Public Comments
    C. Small Entities Subject to the Final Rules
    D. Reporting, Recordkeeping, and Other Compliance Requirements
    E. Duplicative, Overlapping or Conflicting Federal Rules
    F. Agency Action To Minimize Effect on Small Entities
VII. Statutory Authority

I. Introduction

    On June 16, 2016, the Commission proposed revisions to its
disclosure requirements and related guidance under the Securities Act
and Exchange Act for properties owned or operated by mining companies
to provide investors with a more comprehensive understanding of a
registrant's mining properties to help them make more informed
investment decisions.\5\ The Commission also proposed to modernize its
disclosure requirements and policies for mining properties by more
closely aligning them with current industry and global regulatory
practices and standards.\6\ The Commission's disclosure requirements
are currently

found in Item 102 of Regulation S-K, and the related guidance appears
in Industry Guide 7.\7\
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    \5\ See Modernization of Property Disclosures for Mining
Registrants, Securities Act Release No. 33-10098 (June 16, 2016) [81
FR 41651] (``Proposing Release'').
    \6\ We proposed to modernize our disclosure requirements for
mining properties following a request by some industry participants
to revise Guide 7. See Petition for Rulemaking from Society for
Mining, Metallurgy and Exploration, Inc. to Elizabeth M. Murphy,
Secretary, U.S. Securities & Exchange Commission (Oct. 1, 2012),
(``SME Petition for Rulemaking''), http://www.sec.gov/rules/petitions/2012/petn4-654.pdf. In accordance with 17 CFR 201.192
(Rule 192 of the Commission's Rules of Practice), the Secretary of
the Commission will notify the petitioners of the action taken by
the Commission following the publication of this release in the
Federal Register.
    \7\ See U.S. Sec. & Exch. Comm'n. Industry Guide 7: Description
of Property By Issuers Engaged or to Be Engaged in Significant
Mining Operations (``Guide 7'').
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    We received over 60 comment letters on the proposed revisions \8\
primarily from participants in, or representatives of, the mining
industry, including mining companies,\9\ mining standards groups,\10\
mining consulting groups,\11\ professional and trade associations,\12\
law firms,\13\ mining royalty companies,\14\ and individual geologists
and mining engineers.\15\ We also received comments from several groups
expressing various environmental or sustainability concerns in
connection with the mining industry.\16\
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    \8\ See Comments on Proposed Rule: Modernization of Property
Disclosures for Mining Registrants, U.S. Sec. & Exch. Comm'n,
https://www.sec.gov/comments/s7-10-16/s71016.htm.
    \9\ See, e.g., letters from Alliance Resource Partners, L.P.
(Sept. 23, 2016) (``Alliance''); AngloGold Ashanti Limited (Aug. 22,
2016) (``AngloGold''); BHP Billiton (Sept. 23, 2016) (``BHP'');
Cloud Peak Energy Inc. (Sept. 22, 2016) (``Cloud Peak''); Coeur
Mining, Inc. (Aug. 19, 2016) (``Coeur''); Energy Fuels Inc. (Sept.
29, 2016) (``Energy Fuels''); Freeport-McMoRan Inc. (Sept. 23, 2016)
(``FCX''); Gold Resource Corporation (Aug. 26, 2016) (``Gold
Resource''); Newmont Mining Corporation (Sept. 26, 2016)
(``Newmont''); Northern Dynasty Minerals Ltd. (Aug. 15, 2016)
(``Northern Dynasty''); Randgold Resources Ltd. (Sept. 26, 2016)
(``Randgold''); Rio Tinto plc (Sept. 26, 2016) (``Rio Tinto''); Ur-
Energy Inc. (Sept. 26, 2016) (``Ur-Energy''); and Vale S.A. (Aug.
26, 2016) (``Vale'').
    \10\ See, e.g., letters from Australasian Institute of Mining
and Metallurgy (Sept. 26, 2016) (``AusIMM''); Canadian Institute of
Mining, Metallurgy and Petroleum (Aug. 26, 2016) (``CIM''); Comissao
Brasileira de Recursos e Reservas (Sept. 5, 2016) (``CBRR'');
Committee for Mineral Reserves International Reporting Standards
(Sept. 23, 2016) (``CRIRSCO''); Joint Ore Reserves Committee of
Australasia (Sept. 26, 2016) (``JORC''); SAMCODES Standards
Committee (Sept. 22, 2016) (``SAMCODES 1'') and (Sept. 26, 2016)
(``SAMCODES 2''); and Society for Mining, Metallurgy and
Exploration, Inc. (Aug. 4, 2016) (``SME 1'') and Aug. 25, 2016)
(``SME 2'').
    \11\ See, e.g., letters from Amec Foster Wheeler (Sept. 26,
2016) (``Amec''); CPM Group (Aug. 24, 2016) (``CPM''); Golder
Associates, Inc. (Sept. 26, 2016) (``Golder''); and SRK Consulting
(U.S.), Inc. (Aug. 19, 2016) (``SRK 1'') and Sept. 26, 2016 (``SRK
2'').
    \12\ See, e.g., letters from American Institute of Professional
Geologists (Aug. 22, 2016) (``AIPG''); Mining and Metallurgical
Society of America (Sept. 26, 2016) (``MMSA''); and National Mining
Association (Sept. 23, 2016) (``NMA 1'') and Sept. 29, 2017 (``NMA 2
and SME 3''). The latter letter from NMA was co-signed by SME and
was submitted at the meeting between representatives of the National
Mining Association and Ur-Energy and staff of the Commission's
Division of Corporation Finance on October 10, 2017. That letter is
available at: https://www.sec.gov/comments/s7-10-16/s71016-2633677-161226.pdf. See also letters from National Society of Professional
Engineers (Aug. 16, 2016) (``NSPE''); National Stone, Sand & Gravel
Association (Sept. 26, 2016) (``NSSGA 1'') and (Apr. 28, 2017)
(``NSSGA 2''); Prospectors & Developers Association of Canada (Oct.
12, 2016) (``PDAC''); and U.S. Chamber of Commerce (Sept. 26, 2016)
(``Chamber'').
    \13\ See, e.g., letters from Andrews Kurth Kenyon LLP (Sept. 26,
2016) (``Andrews Kurth''); Cleary Gottlieb Steen & Hamilton LLP
(Sept. 30, 2016) (``Cleary Gottlieb''); Crowell & Moring LLP (Sept.
16, 2016) (``Crowell and Moring''); Davis Polk & Wardwell LLP (Sept.
26, 2016) (``Davis Polk''); Dorsey & Whitney LLP (Sept. 26, 2016)
(``Dorsey & Whitney''); Shearman & Sterling LLP (Sept. 26, 2016)
(``Shearman & Sterling''); Sullivan & Cromwell LLP (Aug. 15, 2016)
(``Sullivan & Cromwell''); Troutman Sanders LLP (Sept. 26, 2016)
(``Troutman Sanders''); and Vinson & Elkins LLP (Sept. 26, 2016)
(``Vinson & Elkins'').
    \14\ See, e.g., letters from Natural Resource Partners L.P.
(Sept. 26, 2016) (``NRP''); and Royal Gold, Inc. (Sept. 26, 2016)
(``Royal Gold'').
    \15\ See, e.g., letters from Ted Eggleston, Ph.D. (Aug. 19,
2016) (``Eggleston''); Douglas H. Graves, P.E. (Sept. 21, 2016)
(``Graves''); Keith Laskowski (Aug. 26, 2016) (``Laskowski'');
Michael Moats (Aug. 31, 2016) (``Moats''); Dr. Pierre Mousset-Jones
(June 20, 2016) (``Mousset-Jones''); and Dana Willis, P.G. (Aug. 4,
2016) (``Willis'').
    \16\ See, e.g., letters from Carbon Tracker Initiative (Aug. 26,
2016) (``Carbon Tracker''); Center for Science in Public
Participation (Sept. 22, 2016) (``CSP\2\''); Columbia Water Center
(Sept. 26, 2016) (``Columbia Water''); Earthworks (and 21 other
environmental advocates) (Sept. 26, 2016) (``Earthworks et al.'');
Montana Trout Unlimited (Sept. 25, 2016) (``Montana Trout''); and
Sustainability Accounting Standards Board (Aug. 26, 2016)
(``SASB'').
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    Most commenters supported modernizing the Commission's property
disclosure requirements for mining registrants by more closely aligning
them with current industry and global regulatory practices and
standards,\17\ as embodied by the Committee for Reserves International
Reporting Standards (``CRIRSCO'').\18\ Numerous industry
commenters,\19\ however, expressed concern that the proposed rules
deviated, in certain respects, from the CRIRSCO standards \20\ or the
various international, CRIRSCO-based disclosure codes.
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    \17\ See, e.g., letters from Andrews Kurth, AngloGold, AusIMM,
CIM, CSP\2\, Cleary Gottlieb, Coeur, Columbia Water, CBRR, CRIRSCO,
Davis Polk, Dorsey & Whitney, Earthworks et al., Golder, Graves,
JORC, MMSA, Montana Trout, Newmont, PDAC, Randgold, Rio Tinto, SME
1, Chamber, Ur-Energy, Vale, and Willis.
    \18\ CRIRSCO is an international initiative to standardize
definitions for mineral resources, mineral reserves, and related
terms for public disclosure. CRIRSCO has representatives from
professional societies involved in developing mineral reporting
guidelines in Australasia (Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves (JORC)),
Brazil (Brazilian Commission for Mineral Resources and Reserves
(CBRR)), Canada (Canadian Institute of Mining Metallurgy and
Petroleum (CIM)), Chile (Minera Comision), Europe (Pan-European
Reserves and Resources Reporting Committee (PERC)), Indonesia (the
KCMI Joint Committee (KOMPERS)), Kazakhstan (Kazakhstan Association
for Public Reporting on Exploration Results, Mineral Resources and
Mineral Reserves (KAZRC)), Mongolia (Mongolian Professional
Institute of Geosciences and Mining (MPIGM)), Russia (National
Association for Subsoil Examination (NAEN)), South Africa (South
African Code for Reporting of Exploration Results, Mineral Resources
and Mineral Reserves (SAMREC)), and the USA (Society for Mining,
Metallurgy and Exploration, Inc. (SME)). CRIRSCO's website is
located at: http://www.crirsco.com.
    \19\ See, e.g., letters from Amec, AIPG, Andrews Kurth,
AngloGold, AusIMM, BHP, Chamber , CIM, Cleary & Gottlieb, Coeur,
CRIRSCO, Davis Polk, Dorsey & Whitney, Eggleston, Energy Fuels, FCX,
Gold Resource, Golder, Graves, JORC, Newmont, NMA 1, NMA 2 and SME
3, Northern Dynasty, NSSGA 1 and 2, PDAC, Randgold, Rio Tinto,
SAMCODES 1 and 2, Shearman & Sterling, SME 1, SRK 1, Ur-Energy,
Vale, and Willis.
    \20\ The CRIRSCO standards are found in its International
Reporting Template. See, e.g., Committee for Mineral Reserves
International Reporting Standards, CRIRSCO International Reporting
Template, cl. 18 (2013), http://www.crirsco.com/templates/international_reporting_template_november_2013.pdf.
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    As explained below, in a number of instances, we have revised the
proposed requirements in line with commenters' suggestions to be more
consistent with the CRIRSCO standards and improve the comparability of
mining property disclosures, which should help decrease, relative to
the proposed rules, the expected compliance costs and burden of the
final rules and enhance investor understanding of registrants' mining
operations. In other instances, we have not changed the proposed
requirements because we believe that those requirements are necessary
to protect investors. Overall, we believe that the final rules reflect
an appropriate consideration of the extent to which the final rules
promote efficiency, competition, and capital formation in addition to
the protection of investors.\21\ The final rules will modernize the
Commission's mining property disclosure regime by amending or removing
requirements that may have placed U.S. mining registrants at a
competitive disadvantage \22\ and by adding other requirements that
will help investors make more informed investment decisions about those
registrants.
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    \21\ See Section 2(b) of the Securities Act [15 U.S.C. 77b(b)]
and Section 3(f) of the Exchange Act [15 U.S.C. 78c(f)]. See also
infra Section IV.
    \22\ See, e.g., infra Section II.E.1.iii (discussing the
treatment of mineral resources).
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A. Summary of, and Commenters' Principal Concerns Regarding, the
Commission's Proposed Revisions to the Current Mining Property
Disclosure Regime

    In light of global developments in the mining industry's disclosure
standards and industry participants' concerns, we proposed to align the
Commission's disclosure rules for properties owned or operated by
mining companies with the CRIRSCO-based codes in several respects. For
example, we proposed to require a registrant with material mining
operations to disclose, in addition to its mineral reserves, mineral
resources that

have been determined based upon information and supporting
documentation by one or more qualified persons. We proposed to use the
CRIRSCO standards' classification scheme regarding mineral resources
and reserves, and proposed substantially similar definitions of many of
the technical terms used under the CRIRSCO-based codes, such as the
definition of the various categories of mineral resources and mineral
reserves, qualified person, pre-feasibility study, and feasibility
study. We also proposed to permit the qualified person to use the
results of either a pre-feasibility study or a final feasibility study
to support a determination of reserves in most situations.
    Further, we proposed to establish a single set of rules for mining
property disclosure by rescinding Guide 7, replacing it with a new
subpart of Regulation S-K, and amending Item 102 of Regulation S-K to
refer to the new subpart. The proposed mining property disclosure rules
would require a registrant with material mining operations to provide
both summary disclosure concerning its properties in the aggregate as
well as more detailed disclosure about individually material
properties.
    While most commenters supported the Commission's goal of
modernizing its mining property disclosure requirements in light of
global standards, numerous commenters expressed concern that the
proposed rules deviated from the CRIRSCO standards in several respects.
Their principal concerns included that:

     Requiring both mineral resource and reserve estimates
to be based on a price, which may not exceed the average price for
the preceding 24 months, except when a contract has defined the
price, would diverge from global industry practice, which permits
the qualified person to use any reasonable and justifiable price,
and which is typically a price based on forward-looking pricing
forecasts;
     The proposed summary and individual property disclosure
requirements are overly prescriptive, burdensome to meet, and do not
account for the diversity of operations within the mining industry;
     Prohibiting the use of inferred resources in a
quantitative assessment of resources would be inconsistent with the
CRIRSCO standards, and in particular Canadian mining disclosure
requirements, which permit the inclusion of inferred resources to
demonstrate the potential economic viability of a deposit;
     Requiring the use of a feasibility study, rather than a
pre-feasibility study, to support a determination of reserves in
high risk situations would run counter to the CRIRSCO-based codes,
which leave the decision of what type of technical report is
required to support the determination of reserves, including in high
risk situations, to the discretion and judgment of the competent or
qualified person;
     The proposed prohibition against disclaimers would be
contrary to the CRIRSCO-based codes, and in particular the Canadian
requirements, which permit disclaimers in certain circumstances;
     Prohibiting the use of historical estimates would be
contrary to the Canadian and Australian approaches, which allow such
use, and might preclude the consummation of some mergers,
acquisitions or business combinations because there would not be
enough time to verify an estimate provided by the target company;
     Requiring all applicable mining property disclosure
from a royalty, streaming, or other similar company would be
burdensome for such companies because they generally have no rights
beyond receiving royalties and lack access to the technical data and
other information available to the owner or operator, and which is
necessary to comply with the mining property disclosure
requirements; and
     The proposed rules could compel a registrant to
disclose its exploration results before they become material to
investors, which would run counter to the CRIRSCO-based codes.

    Many commenters maintained that, unless the Commission revised the
proposed rules, their adoption would result in mining registrants
incurring an unnecessarily heavy compliance burden, increase the costs
of compliance for mining registrants that also report in CRIRSCO-based
jurisdictions, and result in inconsistent disclosure that could cause
investor confusion and diminish comparability. Some commenters also
maintained that, if adopted, the proposed rules would continue to place
U.S. registrants at a significant competitive disadvantage and leave in
place significant barriers to entry for foreign mining companies that
would otherwise list or raise capital in the United States.
    We have carefully considered all of the comments received on the
proposed rules. As discussed below, the final rules reflect changes
from the rule proposal that were made in response to many of these
comments.

B. Summary of Principal Changes to the Final Rules

    The final rules include several revisions to more closely align the
Commission's mining property disclosure requirements with the CRIRSCO
standards and thereby help decrease, relative to the proposed rules,
the compliance burden and costs for the many registrants that are
subject to one or more of the CRIRSCO-based codes while still providing
important investor protections. For example, the final rules:

     Require a qualified person to use a price for each
commodity that provides a reasonable basis for establishing the
prospects of economic extraction when assessing mineral resources,
and that provides a reasonable basis for establishing that the
project is economically viable when determining mineral reserves,
which may be a historical or forward-looking price, as long as the
qualified person discloses and explains, with particularity, his or
her reasons for using the selected price, including the material
assumptions underlying the selection;
     Eliminate the proposed quantitative presumptions
regarding when a registrant's mining operations, and when a change
in previously reported estimates of mineral resources or mineral
reserves, are deemed to be material;
     Eliminate the proposed summary disclosure provision
requiring specific items of information in tabular format about a
registrant's top 20 properties and, instead, adopt a more
principles-based approach by requiring the registrant to provide
investors with an overview of its properties and mining operations;
     Reduce the number of summary and individual property
disclosure provisions requiring tables from seven, as proposed, to
two, and permit other required disclosure to be in either narrative
or tabular format;
     Permit, but not require, a registrant to file a
technical report summary to support its disclosure of exploration
results;
     Provide that a qualified person will not be subject to
expert liability under Section 11 of the Securities Act for findings
and conclusions regarding certain aspects of specified modifying
factors discussed in the technical report summary or other parts of
the registration statement that the qualified person has indicated
are based on information provided by the registrant;
     Permit a qualified person to determine mineral
resources and reserves at any specific point of reference, which
must be disclosed in the technical report summary, rather than at
three points of reference;
     Exclude geothermal energy from the definition of
mineral resource;
     Require a qualified person to apply relevant technical
and economic factors likely to influence the prospect of economic
extraction, rather than all modifying factors, when determining
mineral resources;
     Permit a qualified person in the technical report
summary to disclose mineral resources as including mineral reserves
as long as he or she also discloses mineral resources as excluding
mineral reserves; \23\
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    \23\ However, as proposed, the final rules prohibit a registrant
from including mineral reserves when disclosing mineral resource
estimates in a prospectus or other Commission filing.
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     Permit a qualified person to include inferred resources
in an economic analysis that the qualified person opts to include in
an initial assessment as long as certain conditions are met;
     Define mineral reserve to include diluting materials
and allowances for losses that may occur when the material is mined
or extracted;

     Permit a qualified person to conduct either a pre-
feasibility or final feasibility study to support a determination of
mineral reserves even in high risk situations;
     Permit the use of historical estimates of mineral
resources or reserves in Commission filings pertaining to mergers,
acquisitions, or business combinations if the registrant is unable
to update the estimate prior to the completion of the relevant
transaction, provided that the registrant discloses the source and
date of the estimate, and does not treat the estimate as a current
estimate; and
     Permit a registrant holding a royalty or similar
interest to omit any information required under the summary and
individual property disclosure provisions to which it lacks access
and which it cannot obtain without incurring an unreasonable burden
or expense.
    We also are clarifying our position on a few issues raised by
commenters that were not fully addressed in the Proposing Release.
For example:
     Multiple qualified persons may prepare a technical
report summary if certain conditions are met;
     If a qualified person is employed by a third-party
firm, that firm may sign the technical report summary and provide
the written consent required for an expert under the Securities Act;
     A registrant's disclosure of information regarding its
exploration activity and exploration results is voluntary until such
information becomes material to investors; and
     A registrant and its qualified person may disclose
exploration targets in Commission filings if accompanied by certain
specified cautionary and explanatory statements.

    In addition, we are adopting a two-year transition period so that a
registrant will not have to comply with the new rules until its first
fiscal year beginning on or after January 1, 2021, although a
registrant may voluntarily comply with the new rules prior to the
compliance date, subject to the Commission's completion of necessary
EDGAR reprogramming changes.

II. Final Mining Property Disclosure Rules

A. Consolidation of the Mining Disclosure Requirements

1. Rule Proposal
    The combination of the overlapping structure of the current
disclosure regime for mining registrants (in Item 102 of Regulation S-K
and Industry Guide 7) and the brevity of Guide 7, which has led to a
significant amount of staff interpretive guidance through the comment
process, may have created some regulatory uncertainty among mining
registrants, particularly new registrants.\24\ To help address this
uncertainty, we proposed to rescind Guide 7 and create new subpart 1300
of Regulation S-K that would govern disclosure for registrants with
mining operations. In addition, we proposed to amend Item 102 of
Regulation S-K to replace the instruction that directed issuers to the
information called for in Guide 7 with a new instruction requiring all
mining registrants to refer to and, if required, provide the disclosure
under new subpart 1300 of Regulation S-K. We also proposed to provide
the same instruction on Form 20-F \25\ and Form 1-A.\26\
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    \24\ See Proposing Release, supra note 5, at Section II.A.
    \25\ Foreign private issuers use Form 20-F to file their
Exchange Act registration statements and annual reports, and also
refer to Form 20-F when filing their Securities Act registration
statements on Forms F-1 and F-4. See 17 CFR 249.220f.
    \26\ Form 1-A is the offering statement used by issuers that are
eligible to engage in securities offerings under Regulation A. See
17 CFR 230.251-230.263.
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2. Comments on the Rule Proposal
    Many commenters stated that they supported the Commission's
proposal to rescind Guide 7 and replace it with a single set of
disclosure standards as long as those standards are consistent with the
CRIRSCO standards.\27\ Several commenters also reiterated that the
Commission's current disclosure regime for mining properties has caused
uncertainty for mining registrants.\28\ Two commenters, however, urged
the Commission to withdraw its proposal and, instead, make more modest
revisions to Guide 7 out of concern that the proposed rules were overly
prescriptive and deviated from the CRIRSCO standards in several key
respects.\29\
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    \27\ See letters from AIPG, Amec, AngloGold, BHP, CBRR, Coeur,
Eggleston, Golder, MMSA, Midas Gold Corp. (June 23, 2016)
(``Midas''), Randgold, Rio Tinto, SAMCODES 1 and 2, Ur-Energy, Vale
and Willis.
    \28\ See letters from Amec, BHP, Crowell & Moring, Eggleston,
Golder, Midas, Rio Tinto and SRK 1.
    \29\ See letter from NMA 2 and SME 3.
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    Regarding the content of the new mining property disclosure rules,
some commenters recommended that the Commission specifically
incorporate the CRIRSCO template by reference.\30\ Other commenters
requested that the Commission adopt Canada's legal instrument, NI-43-
101, establishing mining property disclosure requirements, or recognize
the use of Canada's Form 43-101F as the basis for a mining registrant's
technical reports.\31\ A few commenters stated that the Commission's
mining property disclosure rules should follow Australia's JORC or
South Africa's SAMCODES on the grounds that Canada's NI 43-101 is too
prescriptive.\32\
---------------------------------------------------------------------------

    \30\ See, e.g., letters from AIPG and Rio Tinto.
    \31\ See, e.g., letters from AIPG, Coeur, Gold Resource, Graves,
SME 1, SRK 1, and Willis.
    \32\ See, e.g., letters from JORC, Randgold, and SAMCODES 2.
---------------------------------------------------------------------------

3. Final Rules
    We are adopting final rules that will rescind Guide 7, as proposed,
and codify the Commission's mining property disclosure requirements in
new subpart 1300 of Regulation S-K.\33\ We are also amending Item 102
of Regulation S-K, as proposed, to state that registrants engaged in
mining operations must refer to and, if required, provide the
disclosure under subpart 1300 of Regulation S-K \34\ in addition to any
non-mining property disclosure required by Item 102.\35\ Having one
source for mining disclosure obligations should facilitate mining
registrants' compliance with their disclosure requirements by reducing
the complexity resulting from the existing disclosure structure.
Moreover, consolidating the mining property disclosure requirements
into Regulation S-K should eliminate the uncertainty noted by several
commenters concerning the Commission's current mining property
disclosure regime.\36\
---------------------------------------------------------------------------

    \33\ 17 CFR 229.1300 through 229.1305. Subpart 1300 will apply
to registration statements under the Securities Act and the Exchange
Act as well as to annual reports under the Exchange Act.
    \34\ Instruction 3 to Item 102 of Regulation S-K [17 CFR
229.102]. We are similarly amending Form 20-F and Form 1-A to
provide the same instruction and reference to Regulation S-K subpart
1300. See infra Section II.H.
    \35\ Registrants that have material non-mining operations will
continue to provide non-mining property disclosures under Item 102
of Regulation S-K.
    \36\ See supra note 28. For this reason, we continue to believe
that codification of our mining property disclosure requirements is
a better approach than revising Guide 7, as suggested by two
commenters. See letter from NMA 2 and SME 3. Moreover, we note that
the final rules are less prescriptive and conform more closely to
CRIRSCO standards than the proposed rules.
---------------------------------------------------------------------------

    Many commenters supported our proposal to consolidate the
Commission's mining property disclosure requirements under a single set
of rules as long as the final rules align with the CRIRSCO
standards.\37\ As discussed throughout this release, the final rules
include revisions that will substantially more closely align the
Commission's mining property disclosure requirements with the CRIRSCO
standards as compared to the proposed rules.\38\ The final rules also

emphasize transparency, materiality, and competence--the three
governing principles of the CRIRSCO standards.\39\ We therefore believe
that the final rules are responsive to commenters' overarching concern
that the Commission's mining property disclosure requirements be
substantially more consistent with current industry standards.
---------------------------------------------------------------------------

    \37\ See supra note 27.
    \38\ Some commenters noted that, although the proposed rules
differed from the CRIRSCO standards in certain respects, they did
generally align with the CRIRSCO standards in several other
respects. See, e.g., letter from AusIMM (``Most of the CRIRSCO
Standard definitions have been incorporated in the release as they
were in the 2014 SME Guide'').
    \39\ See CRIRSCO International Reporting Template, supra note
20, at cl. 3 (``The main principles governing the operation and
application of the Template are transparency, materiality and
competence. Transparency requires that the reader of a Public Report
is provided with sufficient information, the presentation of which
is clear and unambiguous, so as to understand the report and not to
be misled. Materiality requires that a Public Report contains all
the relevant information which investors and their professional
advisers would reasonably require, and reasonably expect to find in
a Public Report, for the purpose of making a reasoned and balanced
judgement regarding the Exploration Results, Mineral Resources or
Mineral Reserves being reported. Competence requires that the Public
Report be based on work that is the responsibility of suitably
qualified and experienced persons who are subject to an enforceable
professional code of ethics and rules of conduct'').
---------------------------------------------------------------------------

    We do not believe it would be appropriate, however, to incorporate
by reference or otherwise adopt in its entirety on a going forward
basis the CRIRSCO international template, Canada's NI 43-101, or
another specific CRIRSCO-based code or guide, as requested by some
commenters. Granting such a request would effectively bind the
Commission's rules both to current and future iterations and
interpretations of the CRIRSCO standards, codes or guides, over which
the Commission would have little to no control or influence. It also
would ignore the need to adopt mining property disclosure rules that
are consistent with the unique purposes and characteristics of the U.S.
federal securities laws.\40\
---------------------------------------------------------------------------

    \40\ See, e.g., consideration of the qualified person as an
expert under Section 11 of the Securities Act in Section II.C.1.
below.
---------------------------------------------------------------------------

B. Overview of the Standard for Mining-Related Disclosure

1. The Threshold Materiality Standard
i. Rule Proposal
    Item 102 of Regulation S-K currently requires registrants to
disclose information about principal mines, other materially important
physical properties, and significant mining operations. Guide 7 only
applies to registrants engaged or to be engaged in significant mining
operations. However, Guide 7 does not define ``significant'' mining
operations while Item 102 does not specify the particular quantitative
factors to be considered in determining the materiality of a mine.
    For registrants that have one or more principal mines or other
materially important properties but lack significant mining operations,
Item 102 requires less detailed information. For registrants that have
significant mining operations, Guide 7 calls for more extensive
disclosures. However, although both Item 102 and Guide 7 refer to
``significant'' mining operations, the staff historically has advised
registrants to apply a materiality standard in determining what
disclosures to provide, and has used 10% of a registrant's total assets
as the benchmark for determining the materiality of a registrant's
mining operations.
    In order to clarify the mining property disclosure standard, we
proposed that a registrant would be required to provide the disclosure
under new subpart 1300 of Regulation S-K if its mining operations are
material to its business or financial condition.\41\ The Commission
also proposed specific steps a registrant would have to take when
determining the materiality of its mining operations.\42\
---------------------------------------------------------------------------

    \41\ As proposed, the term ``material'' would have the same
meaning as under 17 CFR 230.405 [Securities Act Rule 405] and 17 CFR
240.12b-2 [Exchange Act Rule 12b-2].
    \42\ See Proposing Release, supra note 5, at Section II.B.1.
---------------------------------------------------------------------------

    The Commission further proposed that a registrant's mining
operations are presumed to be material if its mining assets constitute
10% or more of its total assets. The proposed rules also instructed,
however, that if a registrant's mining assets fall below the 10% total
assets threshold, it would need to consider if there are other factors,
quantitative or qualitative, which would render its mining operations
material.\43\
---------------------------------------------------------------------------

    \43\ See id.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Many commenters supported the Commission's proposal to require
disclosure if a registrant determines that its mining operations are
material to its business or financial condition.\44\ Some commenters
supported the proposed provision that a registrant's mining operations
are presumed to be material if they consist of 10% or more of its total
assets, but only if the provision is a presumption and not a bright
line test, and not exclusive of other factors.\45\
---------------------------------------------------------------------------

    \44\ See, e.g., letters from AngloGold, CBRR, CIM, Eggleston,
Midas, Rio Tinto, SRK 1 and Vale.
    \45\ See, e.g., letters from CBRR, Midas, and SRK 1.
---------------------------------------------------------------------------

    Some commenters supported using a quantitative measure for
determining the materiality of a registrant's mining operations for
purposes of the proposed rules, but recommended that the Commission
adopt the U.S. GAAP thresholds for segment reporting under Accounting
Standards Codification (``ASC'') 280,\46\ rather than the proposed 10%
asset metric.\47\ Those commenters preferred this particular U.S. GAAP
approach because of their concern that large companies may not meet the
proposed 10% asset test or because, in their view, the U.S. GAAP
approach is more suitable and equitable.\48\
---------------------------------------------------------------------------

    \46\ Accounting Standards Code (``ASC'') 280 requires an
enterprise to report separately information concerning an operating
segment if any of the following quantitative thresholds are met: (i)
Its reported revenue, including both sales to external customers and
intersegment sales or transfers, is 10% or more of the combined
revenue, internal and external, of all operating segments; (ii) the
absolute amount of its reported profit or loss is 10% or more of the
greater, in absolute amount, of either the combined reported profit
of all operating segments that did not report a loss, or the
combined reported loss of all operating segments that did report a
loss; or (iii) its assets are 10% or more of the combined assets of
all operating segments. Under ASC 280, information about operating
segments that do not meet any of the quantitative thresholds may
also be considered reportable, and separately disclosed, if
management believes that information about the segment would be
useful to readers of the financial statements. See ASC 280-10-50-12.
    \47\ See letters from Alliance, SAMCODES 1 and SME 1; see also
letter from JORC (stating that materiality should be determined
under GAAP without specifying the particular GAAP provision) and
letter from SRK 1 (stating that the actual and projected
expenditures, revenues and income as well as the amount of capital
raised or planned to be raised have a direct impact on materiality,
and that if any of those amounts comprise 10% or more of a
registrant's value, they should be considered material).
    \48\ See letters from JORC, SAMCODES 1, and SME 1.
---------------------------------------------------------------------------

    Other commenters recommended that the Commission avoid a specific
materiality test and instead adopt the approach taken in Canada's
Companion Policy 43-101CP.\49\ That approach requires an issuer to
``determine materiality in the context of the issuer's overall business
and financial condition taking into account qualitative and
quantitative factors, assessed in respect of the issuer as a whole.''
\50\ Another commenter \51\ opposed ``special materiality tests (such
as 10% of total assets)'' and advocated instead using the standards for
materiality established by the U.S. Supreme Court in TSC v. Northway
\52\ and Basic v. Levinson.\53\
---------------------------------------------------------------------------

    \49\ See letters from CIM, Eggleston, and Vale.
    \50\ National Instrument Companion Policy 43-101CP, pt. General
Guidance (4), https://www.bcsc.bc.ca/Securities_Law/Policies/Policy4/PDF/43-101CP__CP___February_25__2016/. That document then
lists several factors that are likely to support the conclusion that
a property is material. See id. at (5).
    \51\ See letter from Chamber.
    \52\ 426 U.S. 438 (1976).
    \53\ 485 U.S. 224 (1988).

---------------------------------------------------------------------------

    Several commenters specifically addressed the Commission's proposal
to require the aggregation of all mining properties, regardless of size
or type of commodity produced, when assessing the materiality of a
registrant's mining operations.\54\ A number of commenters generally
supported this proposal, with one noting that aggregation of the mining
properties represents the actual composition of the registrant's
value,\55\ and two others concurring so long as the aggregation
correlated to the segment disclosure mandated under the accounting
framework.\56\ Two commenters supported the aggregation of assets based
on shared infrastructure and product integration, but only if the
assets are in the same geographic region,\57\ with one also asserting
that very different commodities, such as coal and metalliferous metals,
should not be aggregated.\58\ Another commenter, however, opposed the
aggregation of assets because ``it does not allow investors to
determine the significance of a property, or understand that asset.''
\59\
---------------------------------------------------------------------------

    \54\ See letters from Alliance, Amec, AngloGold, CBRR,
Eggleston, Midas, Rio Tinto, and SRK 1.
    \55\ See letter from SRK 1; see also letter from CBRR.
    \56\ See letters from Alliance and AngloGold. Another commenter
stated that no commodity should be excluded, but suggested that only
commodities from material properties should be included in technical
reports although ``[n]on-material mines could be aggregated for
annual disclosures.'' Letter from Eggleston.
    \57\ See letter from Rio Tinto; see also letter from Amec
(opposing the aggregation of assets in different countries, and
recommending that the Commission follow the guidance in the Canadian
Companion Policy 43-101CP, which states that a property includes
multiple claims that are contiguous or in such close proximity that
any underlying mineral deposits would likely be developed using
common infrastructure).
    \58\ See letter from Amec.
    \59\ Letter from Midas.
---------------------------------------------------------------------------

    Several commenters addressed the Commission's proposal, as part of
the materiality determination, to require a registrant to include for
each property all related activities from exploration through
extraction to the first point of material external sale, including
processing, transportation and warehousing.\60\ One commenter supported
this proposal because it is required by Canada's NI43-101, is the
benchmark for mineral project reporting, and provides investors with
the information they need to understand the project.\61\ Another
commenter generally supported using the first point of material
external sale as the appropriate cut-off because this is generally
where a mining company loses control of the product.\62\
---------------------------------------------------------------------------

    \60\ See, e.g., letters from Amec, CBRR, Earthworks, Eggleston,
Midas and SRK.
    \61\ Letter from Midas.
    \62\ Letter from SRK 1. This commenter recommended that, ``for
companies that have significant downstream processing, there should
be a requirement to calculate the materiality based on the point in
the supply chain where that raw material would be purchased if the
company did not own the mining assets.'' Id. Another commenter
stated that exploration through the first point of external sale is
appropriate, but noted that not all properties will include all
activities. See letter from Eggleston. See also letter from CBRR
(stating that ``comprehensive, end-to-end reporting can assist the
investors with the relevant information in order to understand
mineral projects for exploration and development stage issuers''
but, for production stage registrants, ``the materiality criteria
should be applied and exploration results are not necessarily
relevant'').
---------------------------------------------------------------------------

    Another commenter, however, did not support the first point of
material external sale as the appropriate cut-off because it believed
that a registrant's materiality determination should account for costs
associated with mine reclamation on the grounds that reclamation
constitutes one of the greatest environmental and social liabilities
mining registrants should disclose to investors.\63\
---------------------------------------------------------------------------

    \63\ See letter from Earthworks. Two other commenters stressed
the importance of considering environmental and sustainability
factors in the materiality determination. See letters from CSP\2\
and Montana Trout.
---------------------------------------------------------------------------

iii. Final Rules
    We are adopting the proposed provision that a registrant must
provide the disclosure specified in subpart 1300 of Regulation S-K if
its mining operations are material to its business or financial
condition.\64\ We are also adopting the provision, as proposed, that
for purposes of subpart 1300, the term material has the same meaning as
under Securities Act Rule 405 or Exchange Act Rule 12b-2.\65\
Commenters generally supported basing the Commission's mining property
disclosure threshold on whether a registrant's mining operations are
material to its business or financial condition.\66\ Establishing
materiality as the threshold for disclosure is consistent with the
CRIRSCO standards, which lists materiality as one of the three
governing principles underlying those standards.\67\ Moreover, by
providing that materiality is to be determined pursuant to Securities
Act Rule 405 and Exchange Act Rule 12b-2, we are clarifying that,
although, as described below, a registrant must consider certain
factors when determining the materiality of its mining operations, the
ultimate governing considerations in this regard are the general
principles reflected in those rules.\68\
---------------------------------------------------------------------------

    \64\ 17 CFR 229.1301(b) [Item 1301(b) of Regulation S-K].
    \65\ Id; see also supra note 41 and accompanying text. Pursuant
to Securities Act Rule 405 and Exchange Act Rule 12b-2, a matter is
material if there is a substantial likelihood that a reasonable
investor would attach importance to it in determining whether to buy
or sell the securities registered. This definition is consistent
with the U.S. Supreme Court's holding in TSC Industries v. Northway,
Inc., 426 U.S. 438, 449 (1976), that a fact is material if there is
a substantial likelihood that the fact would have been viewed by a
reasonable investor as having significantly altered the ``total
mix'' of information made available.
    \66\ See, e.g., letters from AngloGold, CBRR, SRK 1, and Rio
Tinto.
    \67\ See CRIRSCO's International Reporting Template, supra note
20, at cl. 3.
    \68\ See supra note 65.
---------------------------------------------------------------------------

    In a change from the proposed rules, and as suggested by one
commenter,\69\ we are not including an instruction to the materiality
provision stating that a registrant's mining operations are presumed to
be material if they consist of 10% or more of its total assets. Even as
a presumption, we are concerned that such an instruction could become a
de facto threshold. We also believe that an assessment that takes into
consideration all relevant facts and circumstances will lead to better
materiality determinations. For similar reasons, we are not adopting a
quantitative measure of materiality based on the reportable segment
disclosure thresholds in U.S. GAAP. Rather than referring to a specific
U.S. GAAP provision, we believe it is appropriate to rely on a more
principles-based approach to the materiality provision.
---------------------------------------------------------------------------

    \69\ See letter from Chamber.
---------------------------------------------------------------------------

    Consistent with comments received,\70\ we are adopting the proposed
provision that, when determining whether its mining operations are
material, a registrant must:
---------------------------------------------------------------------------

    \70\ See supra note 44 and accompanying text.

     Consider both quantitative and qualitative factors,
assessed in the context of the registrant's overall business and
financial condition;
     Aggregate mining operations on all of its mining
properties, regardless of the stage of the mining property, and size
or type of commodity produced, including coal, metalliferous
minerals, industrial materials, and mineral brines; \71\ and
---------------------------------------------------------------------------

    \71\ As explained in Section II.E.1., below, we are removing
geothermal energy from the scope of these rules, and have therefore
eliminated geothermal energy from the list of commodities required
to be aggregated.
---------------------------------------------------------------------------

     Include, for each property, as applicable, all related
activities from exploration through extraction to the first point of
material external sale, including processing, transportation, and
warehousing.\72\
---------------------------------------------------------------------------

    \72\ See 17 CFR 229.1301(c) [Item 1301(c) of Regulation S-K].

---------------------------------------------------------------------------

    Although some commenters sought to exclude certain commodities or
properties in the aggregation process,\73\ we continue to believe, and
agree with those commenters who asserted, that the aggregation of all
mining properties, regardless of the mined commodity, is necessary to
gauge accurately the materiality of a registrant's mining
operations.\74\ For example, the exclusion from the aggregation process
of properties that a registrant believes are not individually material
\75\ would overlook and improperly remove from the scope of the mining
property disclosure rules a registrant that owns two or more
properties, neither of which is individually material, but which, when
considered in the aggregate and in the context of the registrant's
overall business, constitute material mining operations. Therefore, the
final rules require such a registrant to provide summary disclosure of
its overall mining operations,\76\ although it will not be subject to
the more extensive disclosure requirements for individual material
properties.
---------------------------------------------------------------------------

    \73\ See, e.g., letters from Amec and Eggleston.
    \74\ See, e.g., letters from CBRR and SRK 1.
    \75\ See letter from Eggleston.
    \76\ See infra Section II.G.1; see also 17 CFR 229.1301(d) [Item
1301(d) of Regulation S-K].
---------------------------------------------------------------------------

    Most commenters who addressed the issue supported requiring, as
part of the materiality determination, the inclusion for each property
of all related activities from exploration through extraction to the
first point of material external sale, including processing,
transportation, and warehousing.\77\ Such inclusion is consistent with
the ``end-to-end reporting'' required under the CRIRSCO-based
codes.\78\ In this regard, we are not adopting the suggestion of one
commenter to specify reclamation of the mine as the end point to be
considered in the materiality provision. Mine reclamation and closure
plans are important considerations that must be addressed by the
qualified person, under the CRIRSCO-based codes. However, those plans
are usually prepared as part of the assessment of technical and
economic factors relevant to the reasonable prospects of economic
extraction when determining mineral resources, or when applying all
applicable modifying factors to resources for the purpose of assessing
the economic viability of a project when determining mineral reserves.
Also, mine reclamation costs are included in capital and operating
costs during feasibility studies to estimate mineral reserves. The
final rules follow this approach \79\ and therefore do not specifically
include reclamation as the end point in the materiality determination.
However, we believe that mining properties that are at the reclamation
stage are still considered mining properties and should be included in
evaluations of the materiality of mining operations.
---------------------------------------------------------------------------

    \77\ See supra notes 61-62 and accompanying text.
    \78\ See, e.g., letter from Midas.
    \79\ See 17 CFR 229.601(b)(96)(iii)(B)(17) [Item
601(b)(96)(iii)(B)(17) of Regulation S-K], which requires the
qualified person to describe the factors pertaining to environmental
compliance, permitting, and local individuals or groups, which are
related to the project, including ``[m]ine closure plans, including
remediation and reclamation plans, and the associated costs.'' 17
CFR 229.601(b)(96)(iii)(B)(17)(v).
---------------------------------------------------------------------------

    Similar to a proposed instruction to the materiality provision, we
are adopting a provision stating that the term ``mining operations''
includes operations on all mining properties that a registrant:

     Owns or in which it has, or it is probable that it will
have, a direct or indirect economic interest;
     Operates, or it is probable that it will operate, under
a lease or other legal agreement that grants the registrant
ownership or similar rights that authorize it, as principal, to sell
or otherwise dispose of the mineral; or
 Has, or it is probable that it will have, an associated
royalty or similar right.\80\
---------------------------------------------------------------------------

    \80\ 17 CFR 229.1301(a) [Item 1301(a) of Regulation S-K].

    Commenters did not object to including within the definition
operations on mining properties that a registrant owns or operates
pursuant to a lease or other similar agreement. Moreover, although
several commenters objected to the scope of the proposed disclosure
required of royalty or other similar right holders, only a few
commenters recommended their complete exclusion from the proposed
rules.\81\
---------------------------------------------------------------------------

    \81\ See infra Section II.B.4.
---------------------------------------------------------------------------

2. Treatment of Vertically-Integrated Companies
i. Rule Proposal
    As noted in the Proposing Release, some companies have material
mining operations that are secondary to or in support of their main
non-mining business.\82\ For example, a metal manufacturer may operate
iron ore or coal mines to supply raw material for its primary business.
Yet neither Guide 7 nor Item 102 addresses whether or when a
vertically-integrated manufacturer \83\ is required to provide mining
disclosure.
---------------------------------------------------------------------------

    \82\ See Proposing Release, supra note 5, at Section II.B.1.i.
    \83\ A vertically-integrated manufacturer is a company that owns
part of its supply chain. In this context, it refers to a registrant
that has mining operations to supply raw material to its
manufacturing business.
---------------------------------------------------------------------------

    In order to clarify the treatment of vertically-integrated
manufacturers, the Commission explained that proposed new subpart 1300
of Regulation S-K would apply to all registrants with mining
operations, including vertically-integrated manufacturers.
Specifically, a mining operation owned by a registrant to support its
primary business could be material and require disclosure. The fact
that the registrant's primary business operation is something other
than minerals extraction would not be determinative of whether
disclosure would be required under the proposed subpart.\84\
---------------------------------------------------------------------------

    \84\ See Proposing Release, supra note 5, at Section II.B.1.i.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Most commenters that addressed the issue supported the Commission's
proposal to require vertically-integrated companies, such as
manufacturers, to provide the disclosure under proposed subpart 1300 of
Regulation S-K.\85\ One commenter agreed that the proposed rules should
apply to a vertically-integrated company if its mine is material, but
disagreed that the mine's providing a competitive advantage should be a
criterion for disclosure.\86\
---------------------------------------------------------------------------

    \85\ See letters from Amec, AngloGold, CBRR, Midas, Rio Tinto,
and SRK 1. AngloGold stated that ``[i]f the mining component of a
vertically-integrated company is material to its operations, such as
a secure source of supply, perceived cost advantage etc., then the
same disclosures as mining companies should be required in order to
provide a complete set of information to enable an investor to
determine an investment decision.''
    \86\ See letter from Eggleston.
---------------------------------------------------------------------------

iii. Final Rules
    As proposed, and consistent with comments received,\87\ new subpart
1300 of Regulation S-K will apply to all registrants with material
mining operations, including vertically-integrated manufacturers. Like
a company whose primary business is mining, such a vertically-
integrated company will be required to assess relevant quantitative and
qualitative factors to determine if its mining operations are material.
For example, the bauxite mining operations of an aluminum manufacturer,
whose primary business is manufacturing, not mining, could require
disclosure if its bauxite mining operations are material, even though
they are not the registrant's primary operations, or the primary source
of the registrant's revenues. Factors to be considered in such a
materiality determination could include if the manufacturer derives a

competitive advantage from, or substantially relies upon, its ability
to source that particular mineral from its mining operations.
---------------------------------------------------------------------------

    \87\ See supra note 85 and accompanying text.
---------------------------------------------------------------------------

    Requiring disclosure of mining operations by vertically-integrated
manufacturers is consistent with the disclosure currently provided in
Commission filings and should not significantly alter existing
disclosure practices. In addition, this treatment of vertically-
integrated companies is consistent with the CRIRSCO-based codes, which
require disclosure for material mining properties and do not provide
exemptions for vertically-integrated companies.
3. Treatment of Multiple Property Ownership
i. Rule Proposal
    As noted in the Proposing Release, it is common for registrants to
own multiple mining properties.\88\ In some instances, a registrant
will have multiple properties that all involve exploration,
development, or extraction of the same mineral. In other situations,
the registrant's operations will primarily involve exploration,
development, or extraction of one mineral from several properties, but
the registrant also will own one or more ancillary properties where it
explores, develops, or extracts small amounts (relative to the
predominant mineral) of a different mineral.
---------------------------------------------------------------------------

    \88\ See Proposing Release, supra note 5, at Section II.B.1.ii.
---------------------------------------------------------------------------

    The primary focus of the current rules and guidance is on
individually significant or material properties. Neither Item 102 nor
Guide 7 provides guidance concerning when or what disclosure is
required when a registrant owns multiple or ancillary mining
properties. To clarify the disclosure that is required in these
circumstances, we proposed that a registrant with multiple properties
would be required to consider all of its mining properties in the
aggregate, as noted above,\89\ as well as individually, regardless of
size or commodity produced, when assessing whether it must provide the
mining disclosure required by new subpart 1300 of Regulation S-K.\90\
We also proposed that a registrant with multiple properties, none of
which is individually material, but which in the aggregate constitute
material mining operations, would have to provide summary disclosure
concerning its combined mining activities rather than provide
disclosure for individual properties.\91\ We further proposed that, to
the extent that an individual property is material to its operations, a
registrant would be required to provide detailed disclosure about that
property. As proposed, such individual property disclosure would be in
addition to the required summary disclosure if the registrant owns two
or more individual properties.\92\ Finally, we explained that, under
the proposed rules, a registrant could be required to provide
disclosure for a particular property, depending on the facts and
circumstances, even if ancillary to the registrant's predominant
commodity.\93\
---------------------------------------------------------------------------

    \89\ See id. at Section II.B.1.i.
    \90\ See id. at Section II.B.1.ii.
    \91\ See id. at Section II.G.1.
    \92\ See id. at Section II.G.2.
    \93\ See id. at Section II.B.1.ii.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    As discussed above, commenters generally supported requiring a
registrant to consider all of its mining properties in the aggregate as
well as individually, regardless of size or commodity produced, when
assessing whether its mining properties are material, although some of
the commenters stated that there should be limits on such
aggregation.\94\ Commenters similarly generally supported the proposal
to require summary disclosure of their properties in the aggregate,\95\
although some commenters conditioned their support consistent with
their conditional support of the proposed disclosure threshold based on
materiality.\96\ The commenters that opposed the proposed summary
disclosure requirements did so largely because they viewed those
requirements as being ``out of line with current industry standards.''
\97\
---------------------------------------------------------------------------

    \94\ See supra notes 56-58 and accompanying text.
    \95\ See, e.g., letter from CBRR; see also letter from Vale
(stating that because under the CRIRSCO standards, a public report
should contain ``all the relevant information which investors and
their professional advisers would reasonably require, and reasonably
expect to find in a public report . . . it is appropriate to require
any registrant with economic interests in multiple mining
properties, none of which may be individually material, to provide
summary disclosure of its mining operations,'' but also stating that
qualified persons should be allowed ``to use their judgment to
determine the best presentation of summary disclosure, including
whether to aggregate interrelated mining operations or to group
mines and plants by geographic region or commodity'').
    \96\ See, e.g., letters from Alliance and AngloGold
(conditioning support of the proposed approach regarding multiple
properties as long as that approach aligns with a materiality
determination based on financial segment disclosure); see also
letter from Rio Tinto (similarly conditioning support as long as
aggregation of properties do not cross national or regional
boundaries).
    \97\ See, e.g., letter from SRK 1; see also letter from Midas
(stating that ``[o]nly material properties should require
disclosure, and then in a comprehensive technical report as in NI
43-101'').
---------------------------------------------------------------------------

iii. Final Rules
    We are adopting the proposed treatment of multiple property
ownership.\98\ In the event that none of a registrant's mining
properties is individually material, it will need to provide only
summary disclosure. If the registrant has individually material mining
properties, it must provide more detailed disclosure concerning those
properties in addition to summary disclosure.\99\ If a registrant has
only one mining property, following a determination that its mining
operations are material, the registrant will be required to provide
only the individual property disclosure.\100\
---------------------------------------------------------------------------

    \98\ 17 CFR 229.1301(d), which references 17 CFR 229.1303 [Item
1303 of Regulation S-K]. The latter provision sets forth the
specific requirements for summary disclosure.
    \99\ 17 CFR 229.1301(d), which references 17 CFR 229.1304 [Item
1304 of Regulation S-K]. The latter provision provides the specific
disclosure requirements for individually material properties.
    \100\ 17 CFR 229.1303(a)(2) [Item 1303(a)(2) of Regulation S-K].
---------------------------------------------------------------------------

    We also are adopting the proposed treatment of ancillary
properties, which, depending on the facts and circumstances, could give
rise to disclosure obligations. For example, a property on which a
registrant explores, develops or extracts a relatively small amount of
a particular mineral, compared to its predominant mineral, could be
material based upon the amount of actual and projected expenditures on
the property as compared to its expenditures on other properties.\101\
---------------------------------------------------------------------------

    \101\ Commenters did not oppose the proposed treatment of
ancillary properties.
---------------------------------------------------------------------------

    In response to the concern expressed by some commenters that the
proposed summary disclosure requirements were too prescriptive,\102\
and as discussed in greater detail below,\103\ we have significantly
revised the proposed summary disclosure requirements to make them less
prescriptive. For example, instead of the proposed requirement to
provide specific items of information concerning a registrant's top 20
properties (by asset value) in tabular format, the final rules take a
more principles-based approach and require the registrant to provide an
overview of its mining properties and operations in either narrative or
tabular format.\104\ When presenting the overview, the registrant
should include the amount and type of disclosure concerning its mining
properties that is material to an investor's understanding

of the registrant's properties and mining operations in the
aggregate.\105\
---------------------------------------------------------------------------

    \102\ See, e.g., letter from Vale; see also letter from Amec.
    \103\ See infra Section II.G.1.
    \104\ 17 CFR 229.1303(b)(2) [Item 1303(b)(2) of Regulation S-K].
    \105\  17 CFR 1303(b)(2)(iii) [Item 1303(b)(2)(iii) of
Regulation S-K].
---------------------------------------------------------------------------

    As discussed in greater detail below,\106\ we also have made the
disclosure requirements for individually material properties less
prescriptive and aligned them more closely with the CRIRSCO standards.
For example, among several other revisions, we have:
---------------------------------------------------------------------------

    \106\ See infra Section II.G.2.

     reduced the number of required tables from five to two;
\107\
     replaced the proposed requirement to present mineral
resource and reserve disclosure at three separate points of
reference with the requirement to present the disclosure at one
specific point of reference selected by the qualified person; \108\
and
     replaced the requirement to present mineral reserve
disclosure as net of diluting materials and allowances for losses
that may occur when the mineral resource is mined or extracted with
the requirement to disclose reserves as including such diluting
materials and allowances for losses.\109\

    \107\  17 CFR 229.1304(d)(1) [Item 1304(d)(1) of Regulation S-
K], which requires a summary of all mineral resources or reserves as
of the end of the most recently completed fiscal year presented in
two separate tables (one for resources, the other for reserves).
    \108\ See id.
    \109\ See the definition of mineral reserve in 17 CFR 229.1300
[Item 1300 of Regulation S-K].

    In light of these revisions, we believe the final rules concerning
summary and individual property disclosure will provide clear and
consistent standards for registrants to apply in determining the scope
of their disclosure obligations without unduly burdening registrants.
We also believe that the final rules will help ensure that investors
receive all material information about registrants' mining operations
and associated risks.
4. Treatment of Royalty Companies and Other Companies Holding Economic
Interests in Mining Properties
i. Rule Proposal
    As noted in the Proposing Release,\110\ some registrants are
royalty companies, which are companies that do not own or operate a
property, but rather own the right to receive payments, called a
royalty right, from the owner or operator of a property.\111\ In
addition, some registrants hold other economic interests, similar to
royalty rights, also without owning or operating a property.\112\
Because neither Item 102 nor Guide 7 addresses whether royalty or
similar companies must provide disclosure about the mining operations
and properties underlying their economic interest, the staff has
provided comments in the filing review process to help guide
registrants in determining whether and how such companies should
provide mining disclosure.
---------------------------------------------------------------------------

    \110\ See Proposing Release, supra note 5, at Section
II.B.1.iii.
    \111\ A royalty, in this context, is typically a payment to the
royalty right holder from the property owner or operator in return
for: (i) Providing upfront capital; (ii) paying part of amount due
landowners or mineral right holders; or (iii) converting a
participating interest in a joint venture into a royalty right. Such
payment is most often based on a percentage of the minerals,
revenues, or profits generated from the property.
    \112\ Examples include the right to purchase all or a portion of
minerals from a mine under a metal purchase agreement (a ``stream''
agreement) or a working interest in the underlying property.
---------------------------------------------------------------------------

    Consistent with prior staff comments, we proposed to require a
royalty company or other registrant holding a similar economic interest
to provide all applicable mining disclosure if the underlying mining
operations that generate the royalty or other payment are material to
the royalty or similar company's operations as a whole. As proposed,
and similar to a producing mining company (that owns or operates
properties), a royalty or similar company would have to assess both
quantitative and qualitative factors to determine whether the
underlying mining operations are material.\113\ Upon an affirmative
materiality determination, the proposed rules would require a royalty
or similar company to provide disclosure only for those underlying
properties, or portions of underlying properties, that generate the
registrant's royalties or similar payments, and only for the reserves
and production that generated its payments in the reporting
period.\114\
---------------------------------------------------------------------------

    \113\ See Proposing Release, supra note 5, at Section
II.B.1.iii.
    \114\ See id.
---------------------------------------------------------------------------

    The proposed rules would require a royalty or similar company to
describe the material properties that generate its royalties or similar
payments and file a technical report summary for each such property. As
proposed, such a registrant would not be required to submit a separate
technical report summary about a property covered by a current
technical report summary filed by the producing mining registrant. In
that situation, the royalty or similar company could incorporate by
reference \115\ the producing registrant's previously filed technical
report summary.\116\
---------------------------------------------------------------------------

    \115\ See 17 CFR 230.411, 17 CFR 240.12b-32, which permit any
document filed with the Commission under any act administered by the
Commission to be incorporated by reference as an exhibit to a
statement or report filed with the Commission by the same or any
other person, and require that the registrant clearly identify in
the reference the document from which the material is taken.
    \116\ See Proposing Release, supra note 5, at Section
II.B.1.iii.
---------------------------------------------------------------------------

    We based this approach to royalty and other similar companies on
our belief that investors in royalty and other similar companies need
information about the material mining properties that generate the
payments to the registrant, including mineral reserves and production,
to be able to assess the amounts, soundness, and sustainability of
future payments. We also recognized, however, that because a royalty or
other similar company may not have access to information about portions
of the mining property that do not contribute to the registrant's
revenue stream, it should not be required to disclose information
concerning the non-contributing portions.\117\
---------------------------------------------------------------------------

    \117\ See id.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Many commenters generally supported the Commission's proposal to
require a royalty company, or a company holding a similar economic
interest in another company's mining operations, to provide all
applicable mining disclosure if the underlying mining operations are
material to its operations as a whole.\118\ For example, one commenter
stated that, in principle, a royalty company should be required to
provide disclosures similar to those provided by the underlying mining
company, but noted that such a requirement could give rise to
difficulties when the royalty company is a registrant with the
Commission but the underlying mining company is not, and when the
property that is the subject of the royalty arrangement is not material
to the underlying mining company, but the royalty stream is material to
the royalty company.\119\ In those circumstances, the required
disclosure may not be readily available to the royalty company.\120\
---------------------------------------------------------------------------

    \118\ See letters from Amec, AngloGold, CBRR, Davis Polk, Dorsey
& Whitney, Eggleston, Midas, MMSA, Newmont, Rio Tinto, and SAMCODES
2.
    \119\ See letter from AngloGold.
    \120\ See id.
---------------------------------------------------------------------------

    Another commenter noted that the Commission's proposed disclosure
for royalty companies is consistent with current guidance as it would
only be required with respect to portions of the underlying mining
properties that contribute to the royalty company's revenue
stream.\121\ Like the previous commenter, this commenter stated that
the ability of royalty companies to comply with the proposed disclosure
obligations, even as circumscribed, may be limited by their inability
to access the requisite information and supporting documentation by the
underlying mining company's qualified

person. Moreover, even if the royalty company has access to appropriate
supporting documentation, this commenter stated that the operating
mining company's qualified person may be unwilling to consent to its
use by the royalty company for liability reasons. Accordingly, this
commenter recommended that the Commission clarify that the disclosure
obligations of a royalty company are limited to information that is
known or reasonably available to it.\122\
---------------------------------------------------------------------------

    \121\ See letter from Davis Polk.
    \122\ Id. Two other commenters made a similar recommendation.
See letters from Dorsey & Whitney and Newmont. Another commenter
urged the Commission to adopt special rules for royalty companies
that would recognize their potential inability to provide detailed
disclosure regarding the underlying property. This commenter stated
that, at a minimum, a royalty company should be able to rely on
information provided by the operator while disclaiming liability for
that information. See letter from MMSA.
---------------------------------------------------------------------------

    Regarding the proposed provision requiring a royalty company to
file a technical report summary if the owner or operator of the
underlying mining operations has not done so, one commenter supported
applying the proposed rules to royalty companies, but recommended that
the Commission provide a limited exemption similar to the exemption
under Canada's NI 43-101.\123\ Two other commenters stated that a
royalty company should be required to file summaries of current
technical reports by an operating company but only for material
properties.\124\ Those commenters also indicated that a royalty company
may not have access to all of the information required to complete a
technical report at the level of detail required by the owner of the
underlying mine. Therefore, one of the commenters recommended that the
Commission allow such a royalty company to prepare an abbreviated
report \125\ while the other commenter recommended that the royalty
company be permitted to reference the operating company's technical
reports.\126\
---------------------------------------------------------------------------

    \123\ See letter from Amec. Canada's NI 43-101 exempts a royalty
company from having to file a technical report if: The owner or
operator of the underlying mine is a reporting issuer in a Canadian
jurisdiction or is a producing issuer whose securities trade on a
specified exchange and that discloses mineral resources and reserves
under an acceptable foreign code; the owner or operator has
disclosed the scientific and technical information that is material
to the royalty company; and the royalty company identifies in its
disclosure document the source of the scientific and technical
information. See Canada's National Instrument (``NI'') 43-101
(``Standards of Disclosure for Mineral Projects''), NI 43-101 (2011)
34 OSCB 7043 pt. 9.2 (Can.), http://web.cim.org/standards/documents/Block484_Doc111.pdf. Canada's NI 43-101 also exempts a royalty
company from having to file a technical report or from complying
with disclosure items requiring data verification, inspection of
documents, or personal inspection of the property if the royalty
company has requested but has not received access to the necessary
data from the owner or operator and is not able to obtain the
necessary information from the public domain. See id. at pt. 9.2(2).
But see letter from SME 2 (stating that neither the Canadian
approach nor the Commission's incorporation by reference proposal is
workable because of ``the U.S securities law liability regime and
the litigation environment in the U.S.'').
    \124\ See letters from Eggleston and Rio Tinto.
    \125\ See letter from Eggleston.
    \126\ See letter from Rio Tinto.
---------------------------------------------------------------------------

    Numerous other commenters opposed the Commission's proposal to
require a royalty company to provide all applicable mining disclosure
if the underlying mining operations are material to the royalty
company.\127\ Most of these commenters stated that because royalty
holders generally have no executive or operational interest or other
participation in the mineral properties to which the royalties relate,
they typically have no access to the underlying mining operations or to
the extensive technical data and other information available to the
operator.\128\
    According to one of those commenters, because, typically, the
information a royalty holder is entitled to receive is limited to mill
production, marketing, and sales data that is used to confirm the
calculation of royalty payments, a royalty company generally lacks
sufficient information to prepare a current technical report
summary.\129\ That commenter further objected to the proposed provision
that would allow a royalty company to incorporate by reference a
technical report summary previously filed by the owner or operator of
the underlying property because it would impose potential Securities
Act or Exchange Act liability on the royalty company for a third
party's technical or other information regarding which the royalty
company lacked responsibility or the ability to review or verify.
According to the commenter, in order for a royalty company to verify a
technical report summary or provide a technical report summary of its
own, the royalty company would need to acquire extensive information
and access rights from the owner or operator of a mineral property,
which the commenter believed the owner or operator would not be willing
to provide due to the proprietary nature of much of the information.
Moreover, even if the owner or operator were willing to provide the
information, the royalty company would be required to re-negotiate its
royalty agreement, which would disadvantage a U.S. royalty company
compared to its foreign competitors.
---------------------------------------------------------------------------

    \127\ See letters from AIPG, Alliance, Crowell & Moring,
Laskowski, NRP, Royal Gold, SME 2, SRK 2, and Vinson & Elkins.
    \128\ See, e.g., letters from Crowell & Moring, NRP, Royal Gold,
SME 2, and Vinson & Elkins.
    \129\ See letter from SME 2; see also letter from NRP (``along
with royalty payments, the company receives only monthly production
reports and ``certain other limited economic and mining information
that enables NRP to evaluate its royalty business and make periodic
reports to its common unitholders'').
---------------------------------------------------------------------------

iii. Final Rules
    We continue to believe that investors in royalty, streaming, and
other registrants holding a similar economic interest in mining
operations need information about the material mining properties that
generate the payments to the registrant, including mineral reserves and
production, to be able to assess the amounts, soundness, and
sustainability of future payments. For the royalty or similar company
and its investors, the mining property underlying the royalty or
similar payments is the primary or only source of revenues and cash
flow. As such, we believe that royalty companies and other companies
holding similar economic interests should provide similar disclosure as
provided by registrants conducting the underlying mining operations.
    Accordingly, the final rules will require a royalty or other
similar company to provide applicable mining disclosure if the mining
operations that generate the royalty or other payment are material to
the royalty or similar company's operations as a whole, subject to that
information being known or reasonably available to the registrant.\130\
Thus, a royalty or similar company will have to assess both
quantitative and qualitative factors to determine whether the
underlying mining operations are material.\131\ Also as proposed, upon
an affirmative materiality determination, the final rules will require
a royalty or similar company to provide summary disclosure \132\ and
the disclosure required for individually material properties,\133\ but
only for those underlying properties, or portions of underlying
properties, that generate the registrant's royalties or similar

payments, and only for the reserves and production that generated its
payments in the reporting period.\134\
---------------------------------------------------------------------------

    \130\ 17 CFR 229.1301(a)(3) [Item 1301(a)(3) of Regulation S-K].
    \131\ 17 CFR 1301(c)(1) [Item 1301(c)(1) of Regulation S-K]. As
we noted in the Proposing Release, because a registrant with royalty
or other similar economic interests does not own or operate the
producing property, revenues are often a more relevant benchmark
than assets for determining materiality. See Proposing Release,
supra note 5, at Section II.B.1.iii.
    \132\ 17 CFR 229.1303(a)(1)(iii) [Item 1303(a)(1)(iii) of
Regulation S-K].
    \133\ 17 CFR 229.1304(a)(1)(iii) [Item 1304(a)(1)(iii) of
Regulation S-K].
    \134\ 17 CFR 229.1303(b)(2)(iv) [Item 1303(b)(2)(iv) of
Regulation S-K] and 17 CFR 229.1304(d)(3) [Item 1304(d)(3) of
Regulation S-K].
---------------------------------------------------------------------------

    In addition, as proposed, the final rules will also require the
royalty or similar company to file a technical report summary for each
material underlying property as an exhibit to the Commission
filing.\135\ However, as proposed, the final rules will not require a
royalty or similar company to submit a separate technical report
summary about a property that is covered by a current technical report
summary filed by the producing mining registrant. In that event, the
royalty or similar company should refer to the producing registrant's
previously filed technical report summary in its filing with the
Commission.\136\ The purpose of this provision is to inform an investor
or other interested party as to where to find detailed information
about the underlying property. In a change from the proposed rules,
such a reference will not be deemed to incorporate into the royalty
company's or other similar company's filing the technical report
summary previously filed by the mining registrant, absent an express
statement that the company intends to incorporate it by reference.\137\
We agree with commenters that it would not be appropriate to impose
potential liability under the Securities Act or Exchange Act on a
royalty company through the company's incorporation by reference of a
third party owner's technical report summary if the royalty company has
not been able to review and verify the information contained in the
summary because of its lack of access to such information under its
existing royalty agreement.\138\
---------------------------------------------------------------------------

    \135\ 17 CFR 229.1302(b)(2) [Item 1302(b)(2) of Regulation S-K].
    \136\ 17 CFR 229.1302(b)(3)(i) [Item 1302(b)(3)(i) of Regulation
S-K].
    \137\ Id.
    \138\ See, e.g., letter from SME 2.
---------------------------------------------------------------------------

    As mentioned by many commenters,\139\ we are cognizant that a
royalty or similar company may lack, and may have difficulty obtaining,
access to the information and supporting documentation required to
comply with the Commission's disclosure requirements concerning the
underlying mining properties. We therefore emphasize that what is true
generally for our public company disclosure requirements applies to a
royalty company's disclosure obligations regarding the underlying
mining properties as well. Specifically, the required information
concerning the underlying mining properties need be given only insofar
as it is known or reasonably available to the registrant.\140\ In order
to underscore this basic tenet, in a change from the proposed rules,
the final rules provide that a registrant that has a royalty,
streaming, or other similar right, but which lacks access to any of the
information about the underlying properties specified in either the
summary disclosure provision (Item 1303 of Regulation S-K) or the
individual property provision (Item 1304 of Regulation S-K) may omit
such information, provided that the registrant:

    \139\ See supra note 128 and accompanying text.
    \140\ This is consistent with 17 CFR 230.409 [Securities Act
Rule 409] and 17 CFR 240.12b-21 [Exchange Act Rule 12b-21], the
general rules governing the situation when required information is
unknown or not reasonably available.
---------------------------------------------------------------------------

     Specifies the information to which it lacks access;
     Explains that it does not have access to the required
information because:
    [cir] Obtaining the information would result in an unreasonable
effort or expense; or
    [cir] It requested the information from a person possessing
knowledge of the information, who is not affiliated with the royalty
company or similar registrant, and who denied the request; and
     Provides all required information that it does possess
or which it can acquire without unreasonable effort or expense.\141\
---------------------------------------------------------------------------

    \141\ 17 CFR 229.1303(a)(3) [Item 1303(a)(3) of Regulation S-K]
and 17 CFR 229.1304(a)(2) [Item 1304(a)(2) of Regulation S-K].

    The final rules further provide that a royalty company or similar
registrant is not required to file a technical report summary for an
underlying property if the registrant lacks access to the technical
report summary because of substantially similar reasons.\142\ For
example, if the underlying property holder is private, and denies
access to relevant information about the property, under the final
rules, the royalty company will not be obligated to prepare a technical
report summary. Overall, we believe that the adopted treatment of
royalty and other similar companies will provide investors with
information relevant to assessing investments in those companies
without unduly burdening registrants.
---------------------------------------------------------------------------

    \142\ 17 CFR 229.1302(b)(3)(ii) [Item 1302(b)(3)(ii) of
Regulation S-K] (conditioning omission of the technical report
summary on a lack of access because obtaining the information would
result in an unreasonable burden or expense; or because the
registrant requested the technical report summary from the owner,
operator, or other person possessing the technical report summary,
who is not affiliated with the registrant, and who denied the
request).
---------------------------------------------------------------------------

5. Definitions of Exploration, Development and Production Stage
i. Rule Proposal
    As noted in the Proposing Release,\143\ Guide 7 defines the stages
used to describe mining operations as ``exploration stage,'' \144\
``development stage,'' \145\ and ``production stage,'' \146\ but
applies these definitions to the registrant as a whole and not on a
property-by-property basis. As such, Guide 7 does not provide guidance
as to when and how the definitions of exploration, development, and
production stage apply to registrants that own properties in different
stages. To address this ambiguity and to help ensure that investors
receive disclosure that accurately reflects a registrant's operational
status, we proposed to revise the Guide 7 definitions so that they
apply to individual properties, as follows:
---------------------------------------------------------------------------

    \143\ See Proposing Release, supra note 5, at Section II.B.2.
    \144\ As defined by Guide 7, exploration stage ``includes all
issuers engaged in the search for mineral deposits (reserves) which
are not in either the development or production stage.'' Guide 7,
supra note 7, ] (a)(4)(i).
    \145\ As defined by Guide 7, development stage ``includes all
issuers engaged in the preparation of a determined commercially
minable deposit (reserves) for its extraction which are not in the
production stage.'' Guide 7, supra note 7, ] (a)(4)(ii).
    \146\ As defined by Guide 7, production stage ``includes all
registrants engaged in the exploitation of a mineral deposit
(reserve).'' Guide 7, supra note 7, ] (a)(4)(iii).

     An ``exploration stage property'' is a property that
has no mineral reserves disclosed;
     A ``development stage property'' is a property that has
mineral reserves disclosed, but with no material extraction; and
     A ``production stage property'' is a property with
material extraction of mineral reserves.\147\
---------------------------------------------------------------------------

    \147\ See Proposing Release, supra note 5, at Section II.B.2.

    We also proposed to revise the Guide 7 definitions as they apply to
issuers to recognize that issuers may have properties in differing
---------------------------------------------------------------------------
stages, as follows:

     An ``exploration stage issuer'' is one that has no
material property with mineral reserves;
     A ``development stage issuer'' is one that is engaged
in the preparation of mineral reserves for extraction on at least
one material property; and
     A ``production stage issuer'' is one that is engaged in
material extraction of mineral reserves on at least one material
property.\148\
---------------------------------------------------------------------------

    \148\ See id.

    We further proposed to specify that a registrant that does not have
reserves on any of its properties, even if it has mineral resources or
exploration results, or even if it is engaged in extraction

without first disclosing mineral reserves, cannot characterize itself
as a development or production stage company.\149\ Finally, we proposed
to require a company to identify an individual property with no mineral
reserves as an exploration stage property, even if it has other
properties in development or production.\150\
---------------------------------------------------------------------------

    \149\ As we noted in the Proposing Release, there are
registrants that start development or production without first
disclosing mineral reserves. Such practices increase the business'
risks due to the absence of the detailed technical and economic
analysis required to disclose reserves, thus increasing the degree
of uncertainty surrounding the quantities and quality of the mineral
to be extracted. See Proposing Release, supra note 5, at 29, n. 65.
    \150\ See Proposing Release, supra note 5, at Section II.B.2.
---------------------------------------------------------------------------

ii. Comments on the Rule Proposal
    Commenters expressed varying degrees of support for the
Commission's proposed definitions of exploration, development and
production stage as applied, respectively, to properties and
issuers.\151\ One commenter stated that both sets of definitions would
be operable for the company and supported the proposed restriction on
the use of the terms ``development and production stage companies.''
\152\
---------------------------------------------------------------------------

    \151\ See, e.g., letters from Alliance, AngloGold, CBRR, Midas,
Rio Tinto, SME 1, and SRK 1.
    \152\ See letter from AngloGold (supporting that a registrant
lacking mineral reserves on any of its properties, even if it has
mineral resources or exploration results, or even if it is engaged
in extraction without first disclosing mineral reserves, cannot
characterize itself as a development or production stage company).
---------------------------------------------------------------------------

    Another commenter supported the proposed definitions of exploration
stage and development stage properties, but stated that the definition
of production stage property should be revised to include ``current''
or ``on-going'' as opposed to past production.\153\ This commenter
further recommended that the Commission define a development stage
issuer as one having at least one development stage property comprising
more than 10% of the issuer's assets, and a production stage issuer as
having at least one producing mine comprising more than 10% of the
issuer's assets.\154\
---------------------------------------------------------------------------

    \153\ See letter from Midas.
    \154\ See id.
---------------------------------------------------------------------------

    While a third commenter generally found the two sets of definitions
to be adequate, it stated that at least one material property should be
enough to justify the production stage if it represents more than 50%
of the registrant's asset value.\155\ This commenter also believed that
if a registrant has disclosed mineral resources, it should be able to
characterize itself as a development stage company.\156\
---------------------------------------------------------------------------

    \155\ Letter from CBRR.
    \156\ See id.
---------------------------------------------------------------------------

    One commenter supported the proposed definitions of exploration,
development, and production stage issuers because they are
substantially similar to the Guide 7 definitions.\157\ The commenter
suggested that the proposed definitions as applied to issuers should be
used for accounting purposes only (i.e., for the purposes of financial
statement characterization), but did not think the proposed definitions
would be useful as applied to properties.\158\ In contrast, a different
commenter supported having a set of definitions of exploration,
development, and production stage applied to properties, but opposed
having a corresponding set of definitions applied to issuers.\159\
---------------------------------------------------------------------------

    \157\ See letter from SME 1.
    \158\ Id.
    \159\ See letter from SRK 1 (stating that ``[t]echnical
disclosure should be dictated by property stage and materiality''
and ``[a] company's production status should not impact disclosure
as there are many mining companies with immaterial small scale
production or reserves that would classify them as production stage
or development stage, but most of their value is in an exploration
stage project'').
---------------------------------------------------------------------------

    Two other commenters opposed the proposed definitions.\160\ One
believed that both sets of definitions were too prescriptive for the
mining industry and stated that because many mining operations have
portions that are in the exploration, development, and production
stages, it will be extremely difficult to attach a single label to a
property.\161\ In addition, that commenter did not believe it would be
useful to define an issuer based on the characteristics of all of its
mining properties, and further noted that a registrant is not required
to characterize itself as being a particular type of issuer under the
Canadian rules.\162\ The other commenter asserted that the proposed
sets of definitions were unnecessary, would add complexity and
confusion, and be of limited value to issuers and investors.\163\ A
third commenter strongly opposed the definition of production stage
because it depends on whether the company has mineral reserves and not
on whether it is in production.\164\
---------------------------------------------------------------------------

    \160\ See letters from Amec and Eggleston.
    \161\ See letter from Amec.
    \162\ See id.
    \163\ See letter from Eggleston.
    \164\ See letter from Energy Fuels. This commenter did not
address the proposed definitions of exploration stage and
development stage. The commenter described itself as the second
largest uranium producer in the United States, but said that it does
not currently own, and never has owned, any mineral reserves as
defined by Guide 7. Most of its production at its largest facility
has come from inferred mineral resources. The commenter stated that
not being able to refer to itself as a production stage company is
potentially misleading to investors.
---------------------------------------------------------------------------

iii. Final Rules
    We are adopting the definitions of ``exploration stage property,''
``development stage property,'' ``production stage property,''
``exploration stage issuer,'' ``development stage issuer,'' and
``production stage issuer,'' as proposed.\165\ Similar to a proposed
instruction, we are also adopting a provision stating that a registrant
must identify an individual property with no mineral reserves as an
exploration stage property, even if it has other properties in
development or production. The provision further states that a
registrant that does not have reserves on any of its properties, even
if it has mineral resources or exploration results, or even if it is
engaged in extraction without first disclosing mineral reserves, cannot
characterize itself as a development or production stage company.\166\
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    \165\ Definitions of specified terms used in subpart 1300 are
located in 17 CFR 229.1300.
    \166\ 17 CFR 229.1304(c)(1) [Item 1304(c)(1) of Regulation S-K].
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    We believe that these adopted definitions and related provision
will resolve the ambiguities in the Guide 7 definitions. Under the
definitions, a registrant will be able to characterize its properties
separately, but will be limited in when and how it can characterize its
operational stage. Specifically, a registrant will not be able to
characterize itself as a development stage issuer unless it is engaged
in the preparation of mineral reserves for extraction on at least one
material property. We believe this will benefit investors by providing
them with clearer, more accurate and consistent disclosure about the
type of company and level of risk involved. In particular, prohibiting
a registrant without any mineral reserves from characterizing itself as
a production or development stage issuer will help eliminate the
possibility that such a registrant, by definition a company in a higher
risk operational stage, will incorrectly characterize itself as being
in a lower risk stage, thereby potentially misleading or confusing
investors.
    We do not believe it would be appropriate to adopt definitions of
development stage issuer and production stage issuer that are based on
a specific quantitative measure (i.e., the development stage or
production stage property must comprise more than 10% of the issuer's
assets).\167\ We

believe the less prescriptive approach of the final rules, which bases
those definitions on the principle of materiality, is more consistent
with the adopted disclosure threshold of materiality, which requires
the consideration of both quantitative and qualitative factors, and is
therefore preferable to a bright-line test. For the same reasons, we do
not believe it would be appropriate to adopt a definition of a
production stage issuer specifying that one material property will
suffice provided that it represents more than 50% of the
registrant[acute]s asset value.\168\
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    \167\ See letter from Midas.
    \168\ See letter from CBRR.
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    We also do not believe it would be appropriate to define a
production stage issuer as an issuer that is in production even if it
has no mineral reserves,\169\ or to define a development stage issuer
as a company that has disclosed mineral resources, but not
reserves.\170\ We are concerned that such an approach would diminish
the real difference in risk between a mining project for which only
resources have been disclosed, and a more advanced project involving
the affirmative determination of reserves, which could lead to investor
confusion. Moreover, as a commenter noted, when applied to properties,
such an approach would run counter to the definitions of ``development
stage'' and ``production stage'' that are widely accepted in the
industry.\171\
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    \169\ See letter from Energy Fuels.
    \170\ See letter from CBRR.
    \171\ See letter from SRK 1.
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C. Qualified Person and Responsibility for Disclosure

1. The ``Qualified Person'' Requirement
i. Rule Proposal
    We proposed that every disclosure of mineral resources, mineral
reserves, and material exploration results reported in a registrant's
filed registration statements and reports must be based on, and
accurately reflect information and supporting documentation prepared
by, a ``qualified person,'' \172\ as defined by the proposed
rules.\173\ We proposed the qualified person \174\ requirement to align
the Commission's mining property disclosure rules with the CRIRSCO
standards and to remedy a perceived gap in the current reporting
regime.
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    \172\ See Proposing Release, supra note 5, at Section II.C.1.
The proposed provision specified that the qualified person
requirement would apply to the disclosure required by the proposed
summary disclosure provision (Item 1303) and the proposed individual
property disclosure provision (Item 1304).
    \173\ See infra Section II.C.2. for a discussion of the proposed
definition of qualified person.
    \174\ While we referred to the qualified person in the singular
throughout the Proposing Release, we noted that it is common for a
registrant to have more than one qualified person prepare a
technical report for a mining property or project. We also noted
that, as proposed, the registrant's responsibilities regarding the
qualified person would apply to each qualified person so engaged.
See Proposing Release, supra note 5, at 33, n. 74.
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    All of the CRIRSCO-based codes require any public report \175\
about a company's exploration results, mineral resources, and mineral
reserves to be based on and fairly reflect information and supporting
documentation prepared by a ``competent'' or ``qualified person.''
\176\ The purpose of this requirement is to ensure that a registrant's
public declaration of exploration results, mineral resources, and
mineral reserves is supported by the findings of a mineral industry
professional having the relevant level of expertise.\177\ In contrast,
neither Guide 7 nor Item 102 requires a registrant's disclosure of
mineral reserves to be based on the findings of an appropriately
experienced professional.\178\ While an author of a study or technical
report that forms the basis of mineral reserves disclosure in a
Securities Act registration statement must consent to the use of its
name as an expert,\179\ there is no requirement to use an expert for
reserves disclosure and, if one is used, there are no substantive
requirements for that expertise.
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    \175\ As used in the CRIRSCO-based codes, ``public report''
includes all communication by a company to investors on exploration
results, mineral resources, and mineral reserves. For example,
Australia's JORC Code defines public s report as: ``. . . reports
prepared for the purpose of informing investors or potential
investors and their advisers on Exploration Results, Mineral
Resources or Ore Reserves. They include, but are not limited to,
annual and quarterly company reports, press releases, information
memoranda, technical papers, website postings and public
presentations.'' Joint Ore Reserves Committee, the JORC Code, pt. 6
(2012), http://www.jorc.org/docs/JORC_code_2012.pdf.
    \176\ See, e.g., CRIRSCO International Reporting Template, supra
note 20, cl. 8; Canada's NI 43-101, supra note 123, at pt. 2.1; JORC
Code, supra note 175, at pt. 9.
    \177\ The competent or qualified person requirement supports the
``competence'' principle, one of the three governing principles that
underlie the CRIRSCO standards. See supra note 39. All of the
CRIRSCO-based codes define competence to mean that technical work
should be done by a professional with requisite expertise. See,
e.g., CRIRSCO International Reporting Template, supra note 20, at
cl. 3; JORC Code, supra note 175, at pt. 9; see also Society for
Mining, Metallurgy & Exploration, SME Guide for Reporting
Exploration Results, Mineral Resources and Mineral Reserves, pt. 3
(July 2017) (``SME Guide''), https://www.smenet.org/SME/media/Publications-Resources/SMEGuideReporting_082017.pdf.>
    \178\ Guide 7 only calls for disclosure of the name of the
person estimating the reserves and the nature of his or her
relationship to the registrant. See Guide 7, supra note 7, at ]
(b)(5)(ii). In addition, if a registrant supplementally provides a
copy of a technical report to staff, Guide 7 specifies that the copy
include the name of its author and the date of its preparation, if
known to the registrant. See Guide 7, supra note 7, at ] (c)(2).
    \179\ See 17 CFR 230.436 [Securities Act Rule 436]; see also 17
CFR 229.601(b)(23)(i) [Item 601(b)(23)(i) of Regulation S-K].
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    In connection with the qualified person requirement, we proposed
that the registrant must:

     Be responsible for determining that the person meets
the qualifications specified under the proposed subpart's definition
of ``qualified person'' and that the disclosure in the filing
accurately reflects the information provided by the qualified
person;
     Obtain a dated and signed technical report summary from
the qualified person, which identifies and summarizes for each
material property the information reviewed and conclusions reached
by the qualified person about the registrant's exploration results,
mineral resources or mineral reserves;
     File the technical report summary with respect to every
material mining property as an exhibit to the relevant registration
statement or other Commission filing when the registrant is
disclosing for the first time mineral reserves, mineral resources,
or material exploration results or when there is a material change
in the mineral reserves, mineral resources, or exploration results
from the last technical report filed for the property;
     Prior to filing the technical report summary as part of
a registration statement or report, obtain the written consent of
the qualified person to the use of the qualified person's name or
any quotation from, or summarization of the technical report
summary;
     Identify the qualified person who prepared the
technical report summary in the filed registration statement or
report; and
     State whether the qualified person is an employee of
the registrant, and if the qualified person is not an employee of
the registrant:
    [cir] Name the qualified person's employer;
    [cir] Disclose whether the qualified person or the qualified
person's employer is an affiliate of the registrant or another
entity that has an ownership, royalty or other interest in the
property that is the subject of the technical report summary; and
    [cir] If the qualified person or the qualified person's employer
is an affiliate, disclose the nature of the affiliation.\180\
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    \180\ See Proposing Release, supra note 5, at Section II.C.1.
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    In the Proposing Release, we explained that if the filing that
requires the technical report summary is a Securities Act registration
statement, the qualified person would be deemed an ``expert'' who must
provide his or her written consent as an exhibit to the filing pursuant
to Securities Act Rule 436.\181\ In such situations, the qualified

person would be subject to liability as an expert for any untrue
statement or omission of a material fact contained in the technical
report summary under Section 11 of the Securities Act.\182\
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    \181\ See id. A registrant would also have to file the written
consent as an exhibit to an Exchange Act registration statement or
report when the Exchange Act filing is automatically incorporated
into a previously filed Securities Act registration statement.
    \182\ 15 U.S.C. 77k(a)(4).
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ii. Comments on the Rule Proposal
    Numerous commenters supported the Commission's proposal that every
disclosure of mineral resources, mineral reserves and material
exploration results reported in a registrant's filed registration
statements and reports must be based on, and accurately reflect
information and supporting documentation prepared by, a ``qualified
person.'' \183\ One commenter stated that investors would benefit from
the qualified person requirement because it would provide the
appropriate level of assurance and disclosure about both a registrant's
operations and developing opportunities.\184\ Other commenters
maintained that the qualified person requirement would mitigate the
risks associated with including disclosure about a registrant's mineral
resource and exploration results in Commission filings.\185\ Some
commenters explained that the qualified person requirement would result
in more accurate and reliable reports, foster proper risk level
identification, and ensure that all aspects of industry standards are
being assessed and implemented, which would assist investors in
understanding each stage of a project.\186\ Other commenters emphasized
that adoption of the qualified person requirement would be a
significant step in aligning the Commission's rules with the CRIRSCO
standards and global industry practice.\187\
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    \183\ See letters from AIPG, Amec, AngloGold, BHP, CBRR,
Columbia Water, Earthworks, Eggleston, FCX, Gold Resource, Golder,
Midas, Mousset-Jones, Newmont, NSPE, Northern Dynasty, Rio Tinto,
SAMCODES 1, SME 1, SRK 1, Ur-Energy, Vale, and Willis.
    \184\ See letter from Rio Tinto.
    \185\ See, e.g., letters from AngloGold, BP, and Gold Resource.
    \186\ See, e.g., letters from CBRR, Eggleston, Midas, SRK 1, and
Willis.
    \187\ See, e.g., letters from AIPG and SME 1.
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    Many commenters also supported the Commission's proposal to make
the registrant responsible for determining that the qualified person
meets the qualifications specified under the new subpart's definition
of ``qualified person.'' \188\ One commenter stated that the
registrant, through its board of directors, is ultimately responsible
for the information disclosed by it and attributed to the qualified
person.\189\ A second commenter indicated that, in the case of a
qualified person employed by a registrant, the registrant is in the
best position to evaluate the qualified person's credentials and
determine if he or she meets the requisite qualifications.\190\ Other
commenters stated that the responsibility for determining who is a
qualified person should be a joint decision by the registrant and the
named qualified person since the qualified person is responsible for
preparing the technical report and knows what type of information he or
she is qualified to provide an opinion on.\191\ One commenter opposed
imposing the responsibility for verifying the qualifications of the
qualified person on the registrant because such verification would be
based on personal information not readily available to the public.\192\
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    \188\ See letters from AngloGold, CBRR, Eggleston, Gold
Resource, Golder, MMSA, Rio Tinto, SME 1, and Vale.
    \189\ See letter from AngloGold.
    \190\ See letter from Vale.
    \191\ See letters from Amec, Eggleston, and Rio Tinto.
    \192\ See letter from SRK 1.
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    Many commenters supported the Commission's proposal to require a
registrant to obtain a technical report summary for each material
property from the qualified person, which identifies and summarizes the
information reviewed and conclusions reached by the qualified person
about the registrant's exploration results, mineral resources, or
mineral reserves, before the registrant can disclose those results,
resources, or reserves in Commission filings.\193\ Two commenters noted
that the technical report summary proposal is a requirement under all
CRIRSCO codes,\194\ with one maintaining that the requirement would not
be a significant burden for issuers because many mining companies,
including U.S. registrants that are cross-listed, are already required
in CRIRSCO-based jurisdictions to prepare technical reports either for
public filing or for internal use.\195\ Another commenter stated that
the technical report summary requirement ensures that facts, forward-
looking statements and cautionary language considered to be material by
the qualified persons involved are fully disclosed and in full
context.\196\ A fourth commenter indicated that technical reports have
proven to be a useful method of providing transparency to the mining
industry and have enhanced the confidence of investors.\197\
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    \193\ See letters from AngloGold, CBRR, CSP\2\, Coeur,
Eggleston, Gold Resource, Golder, Northern Dynasty, Rio Tinto, SME
1, Vale, and Willis.
    \194\ See letters from Rio Tinto and SRK 1.
    \195\ See letter from SRK 1.
    \196\ See letter from Golder.
    \197\ See letter from Eggleston.
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    Some commenters recommended that our disclosure framework follow
the format of Canada's NI 43-101F1 so that technical report summaries
under the Commission's rules would be interchangeable with those filed
under the Canadian reporting regime.\198\ For similar reasons, some
commenters stated that the technical report summary should follow the
CRIRSCO Table 1 format of the registrant's home listing
jurisdiction.\199\
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    \198\ See letters from Coeur, Gold Resource, SME 1, and Willis.
    \199\ See, e.g., letters from AngloGold and Rio Tinto.
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    Several commenters expressly supported the filing of a summarized
technical report rather than an unabridged report.\200\ One commenter,
however, recommended requiring the filing of both the summarized
technical report and the full technical report \201\ while another
commenter stated that an unabridged technical report should be required
when a project advances to the development stage.\202\
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    \200\ See letters from CSP\2\, Eggleston, Gold Resource, Golder,
and SRK 1. On a related point, four commenters stated that the name
``technical report summary'' was confusing as it suggested that
there existed an unabridged technical report. See letters from
Coeur, Eggleston, Northern Dynasty, and SME 1.
    \201\ See letter from Columbia Water.
    \202\ Letter from CSP\2\.
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    Many commenters supported the Commission's proposal to require the
filing of a technical report summary for a material property when the
registrant first discloses mineral resources, mineral reserves, or
material exploration results, or when there is a material change in the
previously disclosed resources, reserves and exploration results.\203\
Commenters stated that a requirement imposing more frequent filing
would be unduly burdensome and costly.\204\
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    \203\ See letters from AngloGold, CBRR, CSP\2\, Eggleston,
Golder, Midas, Northern Dynasty, Rio Tinto, SRK 1, and Vale.
    \204\ See, e.g., letters from AngloGold, Golder, Midas, and SRK
1.
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    Some commenters stated that the proposed requirement to file a
technical report summary for material properties would be a significant
burden for smaller companies.\205\ A few of these commenters suggested
that the Commission could alleviate this burden by: Conforming the
technical report summary to Table 1 of the CRIRSCO

International Reporting Template; \206\ not requiring the filing of the
technical report summary more frequently than under the CRIRSCO-based