Australia: Revised disclosure rules for resources companies are coming

Last Updated: 10 October 2012
Article by Clive Cachia, Eric Fethers and Su Sze Ting

Background

On 18 September 2012, ASX released a consultation paper proposing amendments to the Listing Rules and Guidance Notes for reporting of reserves and resources by mining and oil & gas companies. For a copy of the consultation paper, please see here. ASX aims to ensure greater consistency in, and quality of, the public reporting of such resource assets.

These proposed amendments are a result of lengthy discussions with resource companies, the JORC, industry and investor groups, and ASIC. ASX also took into consideration the submissions which it received for the Issues Paper on Reserves and Resources Disclosure Rules for Mining and Oil & Gas Companies. Our earlier eAlert outlining the proposals in the Issues Paper as well as feedback on this can be found here.

In parallel with these proposed amendments, JORC simultaneously released an exposure draft of a revised and updated JORC Code, and which together with the Society of Petroleum Engineers -Petroleum Resources Management System (SPE-PRMS) for oil & gas companies, will underpin the new reporting requirements in the Listing Rules.

Reporting framework

Resources companies will be required to report in accordance with the reporting framework set out in the revised Listing Rules. Mining companies must report according to the JORC Code and oil & gas companies must report according to the SPE-PRMS.

Relevance to mining companies

The proposed changes will affect disclosures by mining companies in their public reports including market announcements. Some of the more material proposed changes for common types of disclosures are summarised below.

Type of disclosure Summary
1 Exploration results Requirement1 to disclose sampling techniques, data and specific drill hole and intercept information for material drill holes, on an "if not why not" basis against specified JORC Code criteria.
2 Exploration targets

Extension of JORC Code requirements to:

  • prohibit disclosing exploration targets tonnage and grade as a headline statement
  • include a description of the exploration activities and the timetable for achieving the target
  • confirm whether targets are based on actual, or yet to be completed, exploration programs.
3 Initial or updated mineral resource estimates Requirement¹ to disclose certain material information including geological information, sampling and drilling techniques, estimation methodology and mining and metallurgical methods, on an "if not, why not " basis against specified JORC Code criteria.
4 Additional detail on mineral resources

Extension of JORC Code requirements to disclose:

  • the basis on which there are reasonable prospects (ie. more likely than not) for eventual economic extraction
  • where untested practices are applied in the determination of reasonable prospects, justification by a competent person of proposed practices
  • where a mineral resource is reported at an average grade or above a cut-off grade that is not currently economic, the conditions under which it will become economic.
5 Ore reserves estimates Requirement to include a summary of all information material to the understanding of reported estimates, on an "if not why not" basis against specified JORC Code criteria.
The estimate of the ore reserve must be based on a pre-feasibility or feasibility study that demonstrates at the time of reporting, extraction could be reasonably justified. The key underlying assumptions and outcomes of the pre-feasibility or feasibility study must also be disclosed at the same time.
6 Disclosure of historical and foreign estimates

The prior obligation to obtain a waiver from the requirement to report in accordance with the JORC Code in order to report historical and foreign estimates of mineralisation has been replaced. Entities will now be able to make such disclosures provided that it contains:

  • reporting information accompanied by a statement by a competent person attesting to that information
  • a cautionary statement highlighting that the estimates are not reported in accordance with the JORC Code.
7 Production targets and forecast financial information

Companies will be prohibited from disclosing production targets and forecast financial information that are based solely on exploration targets, or based solely or partly on historical estimates or foreign estimates of mineralisation.
Other than where targets are underpinned by an operating mine or a combination of ore reserves and measured mineral resources, companies which disclose productions targets must also disclose supporting information such as:

  • material assumptions
  • competent person sign off
  • relevant proportions of each category of ore reserves (proved and probable), mineral resources (inferred, indicated and measured) and exploration targets which underpin the production target
  • prescribed proximate cautionary statements in respect of production targets underpinned by inferred mineral resources or exploration targets. Proximate means being in the same page and in the same, immediately preceding or following paragraph
  • where production targets are underpinned only by inferred mineral resources or by a combination of inferred mineral resources and exploration targets:
    • statement of factors indicating why the mining company believes disclosure is reasonable
    • the level of confidence for estimation of inferred mineral resources and the basis for that confidence
    • technical report by a competent person to support the production target
    • an expanded prescribed proximate cautionary statement relating to the low level of geological confidence associated with inferred mineral resources.

Forecast financial information based on such production targets must also include all material assumptions and if a "significant proportion" of the production target is based on an exploration target, the implications for the forecast financial information if that exploration target was not included.

8 Annual mineral resources and ore reserves statement

This statement to include:

  • a summary of an entity's review of ore reserves and mineral resources
  • a comparison of such holdings against those of the previous year and an explanation of material changes
  • a summary of the arrangements and internal controls governing its estimation process.
9 Reporting of in situ or in-ground values Extension of the JORC Code requirements to prohibit such reporting of in situ or in-ground values which are based on exploration results, mineral resources or deposit size, ie before all the modifying factors affecting the economic value of a deposit.

Relevance to oil & gas companies

There are also a range of proposed changes to the Listing Rules affecting disclosures by oil & gas companies in their public reports including market announcements. Some of the more material proposed changes for common types of disclosures are summarised below:

Type of disclosure Summary
1 General Requirement for all publicly reported petroleum resources to be classified and reported in accordance with most specific resource classes within SPE-PRMS together with additional general requirements for reporting of petroleum resources and reserves. This is intended to provide for greater consistency in reporting and to minimise disclosure misleading or confusing investors.
2 Exploration and drilling information Removing the requirement for regular reporting for each drilling programme with a company being required to only provide a progress update when the information is expected to have a material effect on a company's share price.
3 Petroleum reserves, contingent resources and prospective resources

Requirement2 to provide additional information to be disclosed when a company reports an initial, or materially updated, estimate of petroleum reserves, contingent resources or prospective resources for material oil and gas projects. The additional information includes material assumptions, details of operator interests, types of permits or licences held, and a brief description of the basis of the calculation of such reserves and resources. These estimates must be prepared by a qualified petroleum resources and reserves evaluator and must only be issued with their prior consent.
Where there are material changes to information set out in previous disclosures, oil & gas companies must formally announce:

  • an explanation of the new data and information
  • how the new data and information has affected prior estimates
  • the changes or additions to such prior disclosed information.
4 Annual reserves statement

Requirement for oil & gas companies to include an annual reserves statement in their annual reports which provides:

  • details of the company's total and aggregated 1P and 2P petroleum reserves (split out as developed and undeveloped and by product and geographical area) and contingent resources (if applicable)
  • a reconciliation of their reserves (and/or contingent resources) against the previous year's with an explanation of material changes
  • a summary of internal arrangements for their reserves and estimation process.

Transition period

ASX is proposing a 12 month transition period for companies to comply with these new reporting requirements.

Timing

The deadline for submissions on these amendments to the Listing Rules and the new guidance notes, and the exposure draft of the revised and updated JORC Code, is 26 October 2012. Middletons would be happy to assist you if you would like to lodge a submission.

Footnotes

1 Note: these are for "material mining projects" only. A "material mining project" defined as a mining project which "is, or likely to be, material in the context of the overall business operations or financial results" of the entity or its subsidiaries.
2 Materiality of a "material oil and gas projects" is defined on a similar basis to "material mining projects".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Middletons has been awarded a 2012 EOWA Employer of Choice for Women citation acknowledging our commitment to workplace diversity.

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