National Instrument (NI) 43-101 is a Canadian mineral resource classification scheme used to disclose information about mineral properties. Foreign and domestic companies listing on stock exchanges overseen by the Canadian Securities Administration (CSA) are required to abide by the NI 43-101 rules and guidelines for displaying information related to mineral properties.
The reports were originated after the Bre-X Minerals Ltd. scandal in the 1990s involving inflated mineral resource estimates. After reaching a market capitalization of around $6.4 billion (adjusted for inflation), the company's fraud began to unravel when its geologist Michael de Guzman died in an accident and it was then determined that ore samples had been salted with gold dust.
The NI 43-101 Requirements
NI 43-101 reports have a number of core requirements designed to protect investors. The most basic requirement is a "qualified person" that must vouch for the report. But other requirements include standardized feasibility studies and sample preparation and analysis. And finally, the technical report itself and any data referenced from it must be used in proper ways.
According to industry guidelines, a "qualified person" is an individual who is an engineer or geoscientist with at least five years of experience in mineral exploration, relevant experience to the subject matter, and a member in good standing of a professional association. The "qualified person" must sign-off on the report and is ultimately liable for any errors or omissions.
Feasibility studies must also be conducted that analyze the viability of a mineral project that has advanced to a stage where the mining method or pit configuration has been established and an effective method of mineral processing has been determined. These studies include financial analysis, as well as economic, social and other relevant factors.
Understanding NI 43-101 Language
There are two primary concepts that are important to understand for investors when referencing NI 43-101 reports defined by the CIM—mineral resources and mineral reserves. Each of these terms is divided into subcategories based on the quality and amount of work done to verify the amount of minerals available and the economic viability of extracting them.
A mineral resource is defined as a concentration or occurrence of minerals in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. There are three different types of mineral resource classifications:
- Inferred Mineral Resource - The part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity.
- Indicated Mineral Resource - The part of a mineral resource for which quantity, grade, quality, etc., can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of economic viability.
- Measured Mineral Resource - The part of a mineral resource for which quantity, grade or quality, etc., are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical parameters to support production planning and evaluation of economic viability.
Mineral reserves are defined as the economically mineable part of a measured or indicated mineral resource demonstrated by at least a preliminary feasibility study. There are two different types of mineral reserve classifications:
- Probable Mineral Reserve - The economically mineable part of an indicated and, in some cases, a measured mineral resource demonstrated by at least a preliminary feasibility study.
- Proven Mineral Reserve - The economically mineable part of a measured mineral resource demonstrated by at least a preliminary feasibility study.
Reading NI 43-101 Reports
Investors can find NI 43-101 reports via Canada's SEDAR tool, which provides electronic access to filings made by companies regulated under the CSA. Simply, select the NI 43-101 report from the drop-down list of filing types on the company search page. The filing itself will be provided in Adobe PDF format or, in some cases, in a text or XRBL format.
The NI 43-101 report itself usually contains several key sections:
- Executive Summary - A summary of the entire report from a high level, including an overview of each section without as much analytical detail.
- Introduction - The purpose, source of information, qualified persons, terms of reference, units of measure and other related information.
- Property Description - The location, legal agreements, environmental liability and operational permits for the mineral property.
- Exploration & Drilling - Data from rock samples, surface geochemistry, geophysical surveys, and other reports, as well as drilling procedures and results.
- Sample Preparation & Analysis - Review of drilling campaigns, sample chains of custody, preparation and assay procedures, and the actual sampling study results.
- Mineral Resource & Reserve Estimates - Grade estimates, resource optimization, mineral resource classifications, and other data.
- Market Studies & Economic Analysis - Data that supports the economic feasibility of the development and production of mining, including any relevant models.
- Conclusions & Recommendations - Overview of the data and conclusions that can be made from it, along with a recommendation of how to proceed.