Reading a technical report
A technical report often runs to several hundred pages, but the code fixes its structure. Knowing where to look saves days of due diligence.
The structure of an NI 43-101 report
Form 43-101F1 sets 27 items. The ones that matter most to a financier:
| Item | Content | What to check |
|---|---|---|
| 1 | Summary | Headline numbers and recommendations |
| 4 | Property description and location | Tenure, expiry dates, existing royalties |
| 10 to 12 | Drilling, sampling, data verification | Spacing and quality control of assays (QA/QC) |
| 13 | Mineral processing and metallurgical testing | Representative samples, recovery |
| 14 and 15 | Resource and reserve estimates | Categories, cut-off grade, price used |
| 16 and 17 | Mining and recovery methods | Dilution, strip ratio, process flowsheet |
| 20 | Environment, permitting, social | Missing permits, tailings, communities |
| 21 | Capital and operating costs | Contingency, comparison with peers |
| 22 | Economic analysis | Price, rate, NPV, IRR, sensitivities |
The JORC Table 1
In Australia the logic is “if not, why not”. Table 1 lists criteria to comment on in five sections: sampling techniques and data, exploration results, resource estimation, reserve estimation, and a section for diamonds and gemstones. A criterion answered vaguely is a signal.
An analyst’s reading order
- The economic analysis: which price, which rate, which NPV, which sensitivities.
- The price assumptions, against market consensus.
- Resources: share of inferred, drill spacing, cut-off grade.
- Reserves: dilution, losses, recovery assumed.
- Metallurgy: how many tests, and how representative.
- Capex: level of engineering and contingency, often around 10 to 20% of direct costs depending on the stage.
- Permits and social licence: what is still needed, and how long it will take.
A report has a date. Prices, costs and exchange rates may have moved since publication. Published NPVs often use prices above consensus: always rerun them on your own price deck.
Key takeaways
- Item 22 gives the conclusion; items 13 to 17 tell you whether it holds.
- Weak assay quality control undermines the whole estimate.
- The person who signs carries professional liability.
Check your understanding
1. Which NI 43-101 item holds the economic analysis?
- Item 1
- Item 14
- Item 22
- Item 26
Answer: Item 22. Item 22; items 13 to 17 tell you whether it holds.
2. What does QA/QC check?
- The tax regime
- The reliability of assay results
- The permits
- The share register
Answer: The reliability of assay results. Blanks, standards and duplicates test the assays.
3. Why rerun a report’s NPV on your own price deck?
- Reports are never audited
- Prices and costs may have moved since the report date
- NI 43-101 forbids NPVs
- To avoid paying the QP
Answer: Prices and costs may have moved since the report date. A report is dated; markets move.