Public disclosure - Is it too much or too little?

Dr Michael Gipp
May 28, 2013

The last post by Dr Alistair Reed on the dangers of discussing public company datasets prompted Dr Michael Gipp to comment on his views on data disclosure on LinkedIn.
I thought this was an interesting discussion point so Michael is the guest post contributor today, and his original post on this issue is reproduced below.  Michael's view is that the drillhole information that is provided by companies may not help all investors equally because not all people are able to plot and compute resource volumes from the intercepts data.  I agree, but as I told Michael I think a solution is to disclose fully rather than partially as they do currently.

Michael replied:

"I agree with you that full disclosure is more desirable, but only if it is in a form that all participants can use equally. In its current state, full disclosure (dips, depths, azimuths) does not benefit the retail investor. A more clever form of disclosure could do so, and I would be in favour of such a development."

- Jun Cowan

More fun with NI 43-101

You wouldn't ordinarily think that more transparency in the reporting of exploration companies would be harmful to the investing public. Yet I think there is the potential of just such a counter-intuitive result from some of the new requirements in reporting according to the most recent updated requirements for NI 43-101 reporting.

According to section 3.3, article 2:
If an issuer discloses in writing sample, analytical or testing results on a property material to the issuer, the issuer must include in the written disclosure, with respect to the results being disclosed,
(a) the location and type of the samples;
(b) the location, azimuth, and dip of the drill holes and the depth of the sample intervals;   
Once again--intuitively speaking, additional disclosure can only benefit the public, right?

I'm not so sure it does in this case. What will the ordinary public do with the location, dip, azimuth, depth, and grades of the samples? This is information which, combined with the appropriate software, can be used to generate resource estimates--particularly if it is carried out by the geological help hired by a large financial institution, thus allowing that institution (and perhaps certain of its well-heeled clients) to front-run the investing public by estimating the resource before the company itself announces it. Does this protect the investing public? It seems to me that this is the exact opposite of protecting the investing public.

Companies need to present results to the market in a timely fashion. These results need to be accurate. But the totality of information offered above shouldn't be available to the market until the company releases a resource estimate. But some information about the spacing of the drillholes needs to be released so that investors can be reasonably sure that good results are not obtained by drilling many holes very close together, but are from holes that are reasonably spaced apart.

A general outline for a method that might work would be to report on the distances between each drillhole and its two (or three) nearest neighbours--the sum total all plotted as a histogram. If the drillholes are clustered together, that will be immediately apparent. It would also be immediately apparent if the drillholes are spaced out evenly over the area. The size of the area of investigation could be reported, thus allowing all investors the ability to assess the significance of the results without allowing any of them the ability to make a resource calculation.

Example plot of drillhole data from

Another approach might be something like this. The advantage of presenting the data this way are obvious--but at the same time there isn't enough there for sophisticated investors to front-run the market. My only objection would be to mandating that companies use a particular program.

When the company reports a resource, all the information about the drill collars can be reported, allowing the resource calculation to be verified.

Michael Gipp

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Disclaimer: The views expressed in the Orefind blog posts do not represent the views of any hardware or software manufacturers, or their staff.   The opinions and recommendations expressed are completely independent, and are based on the practical experience of Orefind staff. Orefind does not have any referral or financial arrangements with companies that are mentioned in our blog posts.

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