Reading an NI 43-101 report without a geology degree

Every serious claim a Canadian mining company makes about the size, grade, or economics of its project has to trace back to a document written under National Instrument 43-101. Press releases summarize. Investor decks spin. The technical report is where the qualified person signs their name to the numbers. If you own a junior, it is worth knowing how to read one.

What NI 43-101 is

NI 43-101, Standards of Disclosure for Mineral Projects, is a rule adopted by the Canadian Securities Administrators (CSA), the umbrella group of provincial and territorial regulators. It first took effect on February 1, 2001, and the current version dates from 2011 with later amendments. Its purpose is simple: when a company discloses scientific or technical information about a mineral project, that information has to meet professional standards and be backed by someone accountable.

The rule also requires companies to use the resource and reserve definitions set by the Canadian Institute of Mining, Metallurgy and Petroleum (CIM). That shared vocabulary is what lets you compare one company's "indicated resource" with another's.

The qualified person

A qualified person (QP) is an engineer or geoscientist with at least five years of relevant experience who is in good standing with a recognized professional association. "Relevant" matters: a QP should have worked on similar deposit types or similar kinds of work. The QP prepares or approves the technical disclosure and signs the report.

Two things to check. First, is the QP independent of the company? NI 43-101 requires an independent QP in a number of situations that commonly apply to juniors; the report should state whether its authors are independent. Second, does the QP's background fit the project? A report on a complex polymetallic deposit signed by someone whose career is all placer gold deserves a second look.

Resources vs reserves

This is the most important distinction in the report. CIM sorts mineralized material into categories by confidence.

The jump from resource to reserve happens when the QP applies "modifying factors": mining method, metallurgical recovery, costs, metal prices, permits, environmental and social conditions, and legal title. A large resource with no reserves means nobody has yet shown, to pre-feasibility standard, that it can be mined at a profit.

Why inferred tonnes are fenced off

Inferred material is too uncertain to support economic decisions. Under CIM and NI 43-101, it cannot be converted to reserves and must be left out of the economics of a pre-feasibility or feasibility study. The exception is the preliminary economic assessment (PEA). A PEA may include inferred resources, but the company must state plainly that the PEA is preliminary, that it uses inferred material too speculative to be classed as reserves, and that the results may never be achieved.

How the report is organized

Technical reports follow Form 43-101F1, which sets out 27 items. Not every item applies to an early-stage property; items 15 through 22 are mainly for advanced projects. The ones that matter most to an investor:

• Item 1, Summary: the whole report in a few pages.
• Item 4, Property Description and Location: ownership, claims, royalties, option payments still owed.
• Item 10, Drilling, and Item 11, Sample Preparation, Analyses and Security: how the data was gathered and protected.
• Item 12, Data Verification: what the QP checked personally.
• Item 13, Mineral Processing and Metallurgical Testing: whether the metal can actually be recovered.
• Item 14, Mineral Resource Estimates: the tonnes, grade, cut-off grade, and metal price assumptions.
• Items 21 and 22, Capital and Operating Costs and Economic Analysis: for advanced projects, the numbers behind NPV and IRR.
• Item 25, Interpretation and Conclusions, and Item 26, Recommendations: the QP's own view of risks and what work comes next.

What to read first

1. The summary, for the big picture.
2. The resource table in Item 14. Note the split between categories, the cut-off grade, and the metal price used.
3. Item 25. QPs often put their frankest comments about risk here.
4. Metallurgy. Recovery assumptions drive economics. Ask whether they rest on real test work or on analogies to other deposits.
5. Property and royalties. Check how much of the project the company actually owns, and what it still has to pay to earn its interest.

Red flags

• Metal price assumptions well above current prices, or a cut-off grade so low it inflates tonnes.
• A resource that is mostly inferred, presented in press releases as if it were firm.
• Little or no metallurgical testing behind high recovery assumptions.
• A QP who is not independent when independence would normally be expected, or whose experience does not match the deposit.
• An old report: a resource estimated at a much older price deck or before major new drilling.
• Marketing that cites "historical" estimates or results from neighboring properties to imply value on this one.

U.S.-listed issuers and S-K 1300

Mining companies that report to the SEC generally use Subpart 1300 of Regulation S-K, which applied from the first fiscal year beginning on or after January 1, 2021, and replaced the old Industry Guide 7. S-K 1300 uses the same inferred, indicated, and measured resource categories and the same probable and proven reserve categories. It has its own qualified person definition and requires a technical report summary filed as an exhibit when resources or reserves are first disclosed or materially change. Its equivalent of a PEA is called an initial assessment. Some Canadian companies that are also SEC registrants may report under the Canadian framework depending on how they file; check the filing itself.

You can find technical reports on SEDAR+ and, for SEC filers, on EDGAR. To understand what feeds the resource estimate, read our guide to drill results, and see how junior mining stocks work for where the report fits in a company's life.

Educational content only, not investment, tax or legal advice. The Stateside Report does not recommend buying or selling any security. Tax rules depend on your situation; confirm with a qualified tax professional. Full disclosures.