Mining shares account for a fifth of Canada's equity market cap, but advisors should be cautious when recommending the sector, and not just because of the outlook for metals and minerals.
Canada's largest securities regulator has found a vast majority of Ontario mining companies are not up to compliance standards when it comes to technical filings.
In a new report, the Ontario Securities Commission has found “an unacceptable level of compliance” in filings by listed Ontario mining firms, with some 80% of reviewed filings being in some form of non-compliance and around 40% having at least one major non-compliance concern.
The OSC said it was "particularly concerned with the major non-compliance issues noted in the technical reports reviewed as these deficiencies may have a significant impact on investors."
Ontario mining firms occupy a sizable portion of Canadian equities. At end-2012, there were 457 Ontario mining issuers with a combined market cap of more than $181 billion, representing 21% of Ontario’s overall market cap. Approximately 41% of Ontario mining issuers are listed on the Toronto Stock Exchange (TSX) and these TSX-listed firms represent 98% of the market cap of all Ontario mining issuers.
"Technical reports are fundamental disclosure documents and ensuring compliance among mining issuers is critical," said Huston Loke, OSC director of corporate finance.