The Dodd-Frank Wall Street Reform and Consumer Act recently signed into law by the President contains three new disclosure requirements applicable to mining and natural resource extraction companies. A discussion of these provisions, one of which will require new disclosures in the near term, is below.
New Disclosures Regarding Coal or Other Mine Safety
Health and Safety Disclosure in Periodic Exchange Act Reports. Section 1503 of the Act requires public companies that operate a “coal or other mine” to include certain specified disclosures regarding health and safety violations that may have previously been considered immaterial in their periodic reports filed under the Securities Exchange Act. “Coal or other mine” is defined by reference to section 3 of the Federal Mine Safety and Health Act of 1977 and generally includes areas of land from which minerals are extracted in non-liquid form, or if in liquid form, are extracted with workers underground.
Form 8-K Requirement. Section 1503 also requires operators of coal or other mines to file a Current Report on Form 8-K disclosing the receipt of certain notices or orders of mine safety violations or a pattern of such violations.
Implementation Issues. Section 1503 does not indicate the Item number a Form 8-K required by the Section should be filed under and when the Form 8-K deadline applies (Form 8-K contains a filing deadline of 4 business days from the “event” for many but not all items). In addition, although Section 1503 contains a subsection entitled “Effective Date” which says that Section 1503 will take effect 30 days after enactment of the Act (August 20, 2011), the text of Section 1503 that describes the disclosure and Form 8-K requirements indicates that these requirements take effect immediately. To date the SEC staff has recognized this ambiguity but declined to provide guidance indicating that these requirements take effect 30 days after enactment rather than immediately. The staff did indicate that in light of this ambiguity, the safest course of action is to comply with these new disclosure requirements immediately.
See the text of Section 1503
Future Rulemaking to Require Disclosure of Government Payments by Resource Extraction Companies
Section 1504 of the Act requires the SEC to issue final rules, by April 17, 2011, that require “resource extraction issuers” (i.e., public companies that engage in commercial development of oil, natural gas or minerals) to make certain disclosures in their annual report about payments made to the U.S. or foreign governments. Specifically, the future rules will require disclosure of payments made by the resource extraction issuer to the U.S. or a foreign government for the purpose of the commercial development of oil, natural gas, or minerals, including—
(i) the type and total amount of such payments made for each project of the resource extraction issuer relating to the commercial development of oil, natural gas, or minerals; and
(ii) the type and total amount of such payments made to each government.
The information must be provided in interactive data format and the SEC must make a compilation of the information available online.
We expect the SEC’s rulemaking in this area will provide more detail on the required disclosures and an opportunity to comment. Issuers subject to these new rules will likely have at least one annual reporting cycle to comply with these new rules once the SEC issues them.
See the text of Section 1504
Future Rulemaking to Require Disclosure of Use of Conflict Minerals Originating in the Democratic Republic of Congo
Section 1502 of the Act requires the SEC to issue final rules by April 17, 2011 requiring public companies to disclose the use of “conflict minerals” originating in the Democratic Republic of Congo or an adjoining country if used in production or a product manufactured by the company. “Conflict minerals” are defined as columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives, or any other mineral or its derivatives determined by the Secretary of State to be financing conflict in the Democratic Republic of Congo or an adjoining country with armed groups. Like the new disclosures relating to government payments by natural resource extractors, we expect the SEC’s rulemaking in this area will clarify these disclosure requirements and provide an opportunity to comment.
See the text of Section 1502
We will be monitoring SEC guidance and rulemaking relating to Sections 1502, 1503 and 1504 and plan to provide additional updates as this rulemaking progresses.