SME, with the assistance of the Michelle Shepston, partner at the law firm Davis Graham & Stubbs, LLP, filed a Petition for Rulemaking with the U.S. Securities and Exchange Commission to amend Industry Guide 7. Industry Guide 7 contains the SEC’s basic disclosure policy for mining companies. The full text of the Petition is available here.
Industry Guide 7 was cutting edge at the time of its adoption in 1981, but has become increasingly out-of-sync with mineral reporting and disclosure standards used in the rest of the world. Although the SEC modernized the oil and gas reporting rules in 2008, citing changes in the industry and the need for improved disclosure to investors, it has not updated Industry Guide 7 in the past 30 years. During this period, the mining industry has evolved and become increasingly globalized, with most large and many small mining companies listing their stock for trading and conducting operations in more than one country. Mineral reserve and resource information, whether contained in an SEC report, a press release, or an investor presentation, is instantly available around the world. U.S. mining companies have become increasingly frustrated by the growing disconnect between U.S. reporting standards and those of other jurisdictions.
SME and the mining industry have been working diligently with the SEC for over eight years to try to clarify and update Industry Guide 7 to no avail. The Petition represents a call to the SEC to move forward in the near-term to realign the U.S. reporting regime for mining companies, both for the protection of investors and for the removal of competitive harm to U.S. mining companies. Specifically, SME’s petition entreats the SEC to institute changes to Industry Guide 7 to address the following issues:
- Mining, as an increasingly international industry, has developed comprehensive, uniformly accepted and understood standards for the reporting of exploration results, mineral resources and mineral reserves. Industry Guide 7 is substantially different from these standards and hampers U.S. mining companies in communicating with their investors and in coordinating disclosures in multiple jurisdictions.
- Mining companies and investors around the world consider mineral resource estimates as material and fundamental information about a company and its projects. Industry Guide 7’s prohibition on the reporting of mineral resources as such in SEC reports limits the completeness and relevance of SEC reports for investors. The SEC’s practice of allowing disclosure of mineral resource estimates in press releases and on websites, with no guidance or standards as to how mineral resource information should be reported, creates confusion and fails to ensure the quality and reliability of the information provided.
- Industry Guide 7 discourages mining companies from listing in the U.S. This harms U.S. stock exchanges, financial markets, and the overall economy. In the current environment, reforming Industry Guide 7 would be a substantial step in supporting the U.S. mining industry and advancing economic growth and job creation in the U.S.