Information can be considered potentially misleading if it is incomplete, deliberately withheld, or exaggerated in a way that prevents investors from making informed decisions. Such disclosures undermine transparency and can mislead the public about the true nature of a company’s operations or prospects. Common errors that lead to this type of misleading information include:
EBITA vs IFRS vs GAAP vs NON-GAAP. Distinction must be made when disclosing these financial matrices. Which one is an acceptable disclosure to the regulators in Canada?
NON-GAAP, although it is similar to GAAP, makes an adjustment for one-time company expenses involving acquisition and restructuring, so the company financial report does not appear to be outlandish. If you are not using NON-GAAP, then you must use a matrix that is comparable to a NON-GAAP matrix, otherwise it will be seen as potentially misleading information.
Combining sample intervals and assays, and subsequently multiplying to each other (g*m) and calling it a metal factor. A metal factor appears to give abnormally high metal value and as such, is inappropriate as it may be potentially misleading to investing public.
Preliminary Economic Assessment (PEA) study includes inferred resources in the analysis. PEA analysis can only be disclosed if it is accompanied by cautionary language.
Disclosure of metal equivalents such as Aueq, Cueq, Zneq, etc., without including the parameters used in the equivalent grade calculation. Disclosure must include the individual metals and market prices, the formula used which shows metal recovery and smelter and treatment rate if available. The absence of metal recovery rate, smelter rate or treatment rate overestimates the metal equivalent grade.
Calling your property an extension of nearby mine that you do not currently own.
Referring to materially dated technical reports and treating the mineral resources as current. You must bear in mind the economics in the technical report may quickly become out of date, requiring update.
Including figures with mineral resources and reserves belonging to advance exploration projects and operating mines near your property. This implies that you will get similar results and as such, may be potentially misleading.
Promoting your project with statement or phrases that are contrary to your current stage of development is also potentially misleading. Calling your project shovel-ready when the status of project is not currently at the feasibility level.
Comparing two projects that are of similar deposit type or mineralization style, regardless of where they are in the world, is misleading. No two occurrences of a particular deposit type are identical. Size, grade, mineralogy, economics, accessibility, etc., can differ significantly from deposit to another. As such, comparing these deposits is misleading.
You may be challenged if your disclosure speculates on favorable parameters, such as metal price, not included in your current study.
This is not an exhaustive list of what may be considered potentially misleading to the public. One must always consider if the information to be shared, is truthful and complete. Depending how egregious the statements are, you may receive a letter from the securities regulator.
One of the ways to prevent a protracted exchange with the securities regulator, in which legal counsel may be required, is to be aware of the information you include in all technical disclosure to the public, and to continuously monitor the content.