On August 7, 2013, a panel of Commissioners of the British Columbia Securities Commission released its decision to dismiss allegations that (i) a Vancouver-based TSX Venture Exchange listed mining company, Canaco Resources Inc. (Canaco), its CEO and President and three of its directors had breached securities laws by not immediately press releasing new infill drill results and issuing a material change report; and (ii) that such officer and such directors had failed to act in the best interests of Canaco, and acted against the public interest, by issuing stock options to certain directors and employees prior to the public disclosure of such drill results.
The panel's approach was to seek to determine, in the first instance, whether the drill results in question were material in the context of Canaco. After reviewing applicable law relating to the test to be applied to determine materiality and also relying heavily on the expert reports of two professional geologists as to the nature of the drill results, the panel found that the new drill results would not reasonably have been expected to significantly affect the market price or value of Canaco's shares. Having determined that the new drill results were not material to Canaco, all allegations were dismissed.
Although the decision is of potential interest to all reporting issuers, it should be of particular interest to resource companies, because the heart of the decision was the application of materiality concepts to results of infill drilling by a junior exploration company.
During the relevant period (approximately September to December 2010), Canaco was focused on exploration drilling at its Magambazi gold deposit at its Handeni property in Tanzania, East Africa (Canaco has since changed its name to Orca Minerals and spun out its Tanzanian assets into a separate company). Its President and CEO was also its qualified person for the purposes of National Instrument 43-101 - Standards of Disclosure for Mineral Projects (NI 43-101) and had significant experience as a director and officer of exchange-listed companies. The three directors named in the allegations (two other directors were not named) were independent directors with many years of experience in the mining industry and one had significant public company experience. The drill hole assay results in question were from eight holes drilled in the fall of 2010, which formed part of Canaco's ongoing exploration program.