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The SEC has adopted new rules outlining how mining companies must disclose the mine safety information required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Under Section 1503 of the Dodd-Frank Act, mining companies are required to include information about mine safety and health in the quarterly and annual reports they file with the SEC. The Dodd-Frank Act disclosure requirements are based on the safety and health requirements that apply to mines under the Federal Mine Safety and Health Act of 1977, which is administered by the Mine Safety and Health Administration (MSHA).

In General

The new SEC rules, which take effect 30 days after publication in the Federal Register, specifically require those companies to provide mine-by-mine totals for the following:

  • Significant and substantial violations of mandatory health or safety standards under section 104 of the Mine Act for which the operator received a citation from MSHA
  • Orders under section 104(b) of the Mine Act
  • Citations and orders for unwarrantable failure of the mine operator to comply with section 104(d) of the Mine Act
  • Flagrant violations under section 110(b)(2) of the Mine Act
  • Imminent danger orders issued under section 107(a) of the Mine Act
  • The dollar value of proposed assessments from MSHA
  • Notices from MSHA of a pattern of violations or potential to have a pattern of violations under section 104(e) of the Mine Act
  • Pending legal actions before the Federal Mine Safety and Health Review Commission
  • Mining-related fatalities

The accompanying instructions specify that a mining company must report the total penalties assessed in the reporting period, even if the company is contesting an assessment. For legal actions, mining companies are instructed to report the number instituted and resolved during the reporting period, report the number pending on the last day of the reporting period, and categorize the actions based on the type of proceeding.

In addition, the Dodd-Frank Act added a requirement for U.S. companies to file a Form 8-K when they receive notice from MSHA of an imminent danger order under section 107(a) of the Mine Act; notice of a pattern of violations under section 104(e) of the Mine Act, or notice of the potential to have a pattern of such violations. The new SEC rules specify that the Form 8-K must be filed within four business days and include the type of notice received, the date it was received, and the name and location of the mine involved. The new rules specify that a late filing of the Form 8-K will not affect a company’s eligibility to use Form S-3 short-form registration.

Changes to Form 10-K and 10-Q

The SEC is amending Form 10-Q to add new Item 4 to Part II and Form 10-K to add new Item 4 to Part I, which would require the information required by new Items 104 and 601(b)(95) of Regulation S-K; Form 20-F to add new Item 16H; and Form 40-F to add new Paragraph (16) of General Instruction B. As discussed in more detail below, the disclosure is required to be provided in each periodic report.

As proposed, the amendments will require issuers that have matters to report in accordance with Section 1503(a) to include brief disclosure in Part II of Form 10-Q, Part I of Form 10-K and Forms 20-F and 40-F noting that they have mine safety violations or other regulatory matters to report in accordance with Section 1503(a), and that the required information is included in an exhibit to the filing. The exhibit would include the detailed disclosure about specific violations and regulatory matters required by Section 1503(a) as implemented in the SEC’s new rules. Many issuers have already implemented this approach in their periodic reports that contain the disclosure required under Section 1503(a). Consistent with the proposal, the final rule does not require disclosure in the body of the periodic report of certain information, such as all fatal accidents or receipt of notice that a mine has a pattern of violations.

The SEC does not believe it is necessary to require this additional disclosure in order to implement Section 1503; and, as noted in the proposing release, that in the event that mine safety matters raise concerns that should be addressed in other parts of a periodic report, such as risk factors, the business description, legal proceedings or management’s discussion and analysis, inclusion of this new disclosure would not obviate the need to discuss mine safety matters in accordance with other rules as appropriate.

The amended rules, as proposed, do not specify any particular presentation requirements for the new disclosure, but the SEC continues to encourage issuers to use tabular presentations whenever possible if to do so would facilitate investor understanding. Many issuers are currently providing the disclosure required by Section 1503(a) in tabular format in their periodic reports.  The SEC has provided an example of a possible tabular presentation that may encourage uniformity and comparability of disclosures.  However,  issuers are free to present the required information in any presentation they believe is appropriate for the disclosure.

Filed, Not Furnished

The final rules require the disclosure in each periodic report filed with the SEC, and such disclosure will be considered “filed,” not “furnished.”  Therefore, as is the case with other disclosure filed as part of a periodic report, Section 18 of the Exchange Act will apply and the disclosure is encompassed by the Exchange Act Rule 13a-14 and 15d-14 certifications. In addition, if the issuer files a Securities Act registration statement (such as Form S-3) that incorporates by reference its periodic reports, the disclosure included in Exchange Act reports in accordance with the new rules will be incorporated by reference.

Time Periods

The final rule requires each Form 10-Q to include the required disclosure for the quarter covered by the report. For each of Forms 20-F and 40-F, the disclosure is required for the issuer’s fiscal year. Similarly, in a change from the proposal, the final rule requires each Form 10-K to include disclosure of the information for the fiscal year only, not also for the fourth quarter.

Check frequently for updates on the Dodd-Frank Act and other important securities law matters.

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