On 5 October 2011, the Australian Securities Exchange (ASX) released an issues paper on the ASX Listing Rules reporting requirements applicable to reserves and resources reported by listed mining and oil and gas companies. It is of particular importance for those operating in the mining industry as it could result in a regime change towards a more prescriptive form of disclosure for mineral projects, similar to the Canadian standards currently in operation.
Initially, the ASX was working alongside the Joint Ore Reserves Committee (JORC) of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia, which are the sponsors of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code) in the development of the issues paper, with the intention of producing joint proposals as between the ASX and JORC. The issues paper that was released, however, were proposals of the ASX alone. In fact, JORC has publicly stated it does not support the proposals and has called on the Australia mining industry to support an issues paper it released separately on 17 October 2011 to counter the proposals of the ASX.
Peter Stoker, Chairman of JORC, has raised concerns surrounding the prescriptive nature of the ASX proposals. Given that the JORC Code is used in other jurisdictions, Stoker's concern is that changes made in Australia could create a stand-alone domestic regulatory framework. Stoker also raised concerns surrounding the materiality standard used in the Canadian standards of disclosure which, he claims, could actually reduce the level of disclosure by Australian mining companies under the ASX proposals.
National Instrument 43-101: Canadian Standards of Disclosure for Mineral Projects
In Canada, the standards for disclosure for mineral projects are governed by the following:
- National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"), which sets out the mineral project disclosure and filing rules
- Companion Policy 43-101CP ("Companion Policy") to NI 43-101, which sets out how certain provisions of NI 43-101 will be interpreted and applied, and
- Form 43-101 Technical Report ("Technical Report"), which sets out specific requirements for the preparation and content of a Technical Report that must be filed with the securities regulators.
NI 43-101 and its related policies have recently been amended by Canadian regulators, after a lengthy consultation process, with amendments in force effective June 30, 2011. The new NI 43-101 is considered a more flexible rule for mining issuers but is still prescriptive when compared to the current JORC Code.
NI 43-101 applies to all companies listed in Canada with an interest in a mineral property. It requires such companies to file a Technical Report (prepared and filed in accordance with prescribed standards in respect of all properties "material to the Company" which include all material scientific and technical information). Materiality is a subjective standard used in Canadian securities laws to direct companies to disclose information publicly that is reasonably expected to have a significant effect on the market price or value of such companies' securities. Companies are required to file Technical Reports, approved by a "Qualified Person" (broadly similar to a "Competent Person" under the JORC Code) upon becoming a reporting issuer on all material properties, to support other formal disclosure documentation in specific circumstances, including significant transactions, capital raises, acquisitions and other prescribed circumstances with Canadian regulators to support any disclosure of resource estimates.
Through the prescribed Technical Report, and through the standards set out in NI 43-101 and its Companion Policy, Canadian issuers are required to:
- disclose such specific information as drill-hole and intercept information in exploration disclosure
- disclose specific exploration targets with prescribed cautionary statements for investors
- provide key assumptions and methods used in the estimation of mineral resources and mineral reserves
- conduct a pre-feasibility study prior to the conversion of mineral resources to mineral reserves, which includes an economic analysis of the potential viability of mineral resources as well as the technical viability of a mineral project, and
- produce estimates of mineral resources and mineral reserves to support its annual information form, which is required under the Toronto Stock Exchange rules to be filed annually by TSX issuers and completed on a voluntary basis by some TSX Venture issuers.
ASX Listing Rules Review Issues Paper Proposals
The ASX's stated intention to move towards standards similar to that of the Canadian standards described above is an attempt to reduce the potential for investors to receive misleading information on which to base investment decisions. The ASX has stated that its proposals will make it easier for mining companies to secure funding for future projects.
The key issues the ASX Listing Rules Review Issues Paper for Reserves and Resources Disclosure is considering are as follows:
- Disclosure of exploration results – the disclosure of specific drill-hole and intercept information when an issuer is reporting exploration results.
- Disclosure of exploration targets – a stricter application of the current requirement for proximate cautionary statements.
- Disclosure of key assumptions underpinning Mineral Resource and Ore Reserve estimates – a requirement for the key assumptions made and a summary of information relating to a prescribed subset of criteria to be disclosed to support the disclosure of initial, or materially changed, Mineral Resource and Ore Reserve estimates. Consideration is given to the introduction of a minimum reporting requirement for the disclosure of information relating to: geology, sampling techniques, quality of assay data and laboratory tests, drilling techniques, logging, data spacing and distribution, estimation and modelling techniques, cut-off parameters, mining factors or assumptions, metallurgical factors or assumptions, and cost and revenue factors.
- Defining the level of study underpinning an initial Ore Reserve estimate – the completion of a preliminary feasibility study, as a minimum, to support an initial Ore Reserve determination.
- Disclosure of production targets – when reporting a production target or forecast financial information derived from a production target, an issuer may be required to:
- disclose the key assumptions underpinning the production target
- disclose the key contingencies and risks in converting any Measured or Indicated Mineral Resources into an Ore Reserve or putting any Measured or Indicated Mineral Resources into production in order for the issuer to achieve the production target, and
- disclose the proportion of the production target based on Inferred Mineral Resources and/or an exploration target and include a proximate cautionary statement highlighting the low level of geological confidence of these estimates and the implications for realising the production target.
- Annual reporting and Reconciliation of Mineral Resources and Ore Reserves – issuers may be required to report the results of their annual review of their Mineral Resources and Ore Reserves and their aggregated Mineral Resources and Ore Reserves holdings, together with a reconciliation with the estimates from the previous year, in their annual report or a separate document released concurrently with, and cross-referenced in, the annual report.
The above proposals are similar to Canada's NI 43-101. The Australian Financial Review reported on October 12, 2011 that the aligning of the JORC Code with that of NI 43-101 has "...renewed speculation that the two exchanges could be pursuing a fresh tie-up" but, as of the date of this update, there has been no substantiation of such speculation.
ORC Code Review Issues Paper
The 2011 JORC Code review issues paper examines and provides background information on 10 key issues concerning the reporting of exploration results, mineral resources and ore reserves, and seeks submissions and comments from stakeholders and interested parties on the issues JORC identifies, as follows:
- Disclosure of exploration results – whether greater detail when reporting exploration results should be supplied to improve the ability of potential investors to assess the significance of those results.
- Disclosure of exploration targets – whether stricter guidance is required to ensure investors are fully informed as to exploration results.
- 'Reasonable prospects for eventual extraction' for the purpose of estimating Mineral Resources – whether a stricter application of this test would provide greater consistency in its interpretation and application by competent persons for the purpose of classifying and estimating mineral resources.
- Disclosure of key assumptions underpinning mineral resource and ore reserve estimates – whether additional disclosure requirements should be imposed when a company reports an initial, or materially upgraded, mineral resource or ore reserve to facilitate due diligence assessments by investors and their advisors.
- Minimal level of study required to support and initial ore reserve estimate and reporting – whether at least a pre-feasibility study should be completed to support an initial ore reserve determination to provide greater transparency with respect to the level of study required in converting a mineral resource to an ore reserve.
- Disclosure of production targets – whether key assumptions underpinning production targets and key contingencies and risks involved in achieving production targets should be included when reporting a production target or forecasting financial information derived from a production target.
- Annual reporting and reconciliation of mineral resources and ore reserves – whether an annual statement and reconciliation with estimates from previous years should be included, or cross-referenced in the company annual report.
- Accountability of Competent Persons – whether disclosure of a competent person's equity interests or options to acquire equity interests in the company should be required in the competent person statement (to show the full nature of a competent persons interests in the company) when a company discloses exploration results, mineral resources or ore reserves.
- Inclusion of relevant material from ASX companies updates issued in collaboration with JORC since the release of the 2004 JORC code – whether draft amendments to the 2004 JORC Code in the 2012 draft JORC Code reflecting the relevant material from ASX companies' updates and minor housekeeping issues should be included in the JORC Code.
- Adoption of proposed committee for mineral reserves international reporting standards (CRIRSCO) concise standard definitions – whether the proposed core standard definitions developed by CRIRSCO should be adopted in the JORC Code to provide greater international harmonisation in reporting standards.
There are similarities between the two issues papers. However the regime proposed in the ASX paper is more prescriptive than that proposed by JORC in the JORC paper. The JORC proposal also focuses more on accountability of competent persons, the 'reasonable prospects for eventual extraction' test and international reporting standards as key issues for stakeholders to consider.
Invitation to Comment
The ASX consultation paper includes an invitation to comment on the reporting issues and options presented for overhauling the public reporting of exploration information, resources and reserves, and production targets by listed mining and oil and gas companies by 27 January 2012. Following the receipt of responses, ASX will analyse feedback received and discuss with JORC and other professional bodies how to integrate revised JORC Code provisions into the ASX Listing Rules so as to produce a new disclosure framework. The proposed amendments will then be submitted for another round of stakeholder consultation before being submitted to the Australian Securities and Investments Commission ("ASIC") for its review and implementation.
The JORC issues paper invites comment on any matter related to the JORC Code and its operation, including in relation to the 10 issues outlined above. JORC will consider the feedback received and then draft proposed amendments to the JORC code. These amendments will then be subject to further public consultation. Submissions are due on the JORC issues paper by 16 December 2011.
Given the consultation process for the revised JORC Code will now occur in parallel with the ASX consultation on its issues paper, interested parties seeking to comment should submit comments to both the ASX and JORC.
We will provide further updates as developments occur. In the meantime, should you require any further information in relation to the proposed imposition of reporting requirements applicable to reserves and resources reported by listed mining companies, please contact us.
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