RE CANACO RESOURCES INC., 2013 BCSECCOM 310
This decision of a panel of the British Columbia Securities Commission (Panel) sheds some light on when drill results will be considered a "material change" requiring the issuance of a material change report. In this particular case, the Commission determined that the infill drilling results merely added to the understanding about the continuity of the deposit and were not material.
Canaco Resources Inc. (Canaco) had drilled approximately 100 drillholes at the Magambazi gold deposit in Tanzania. The drill hole assay results in question were from eight holes drilled in the Fall of 2010, and were disclosed in news releases dated December 6, 9, and 22, 2010. Canaco and its president were found to have known about the results by no later than November 29, 2010. The press releases that were ultimately issued by Canaco described some of the results as "spectacular" and "fantastic news."
The executive director alleged that Canaco and certain of its directors had contravened s. 85 of the Securities Act, R.S.B.C. 1996, c. 418 (Act) by failing to disclose the results immediately as a material change, and that the directors had failed to act in the best interests of Canaco and acted contrary to the public interest when they issued stock options with knowledge of the undisclosed drill results. To prove either set of allegations, the executive director needed to establish that the drill results would reasonably be expected to have a significant effect on the market price or value of Canaco's securities. As noted by the Panel, this was to be assessed objectively from the perspective of a reasonable investor.
In support of its position that the results were not material, Canaco relied upon two reports from expert geologists, who asserted that the infill holes did not expand on the known boundaries of the deposit or change Canaco's understanding of the continuity of the deposit. The Panel ultimately found this evidence relevant and determined that because the boundaries and quality of the deposit had already been disclosed, disclosing the results of the eight infill holes would not have significantly affected the market value or price of Canaco shares and were not a material change.
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