ASIC has released a public submission in response to
public issues papers released by ASX and JORC in relation to the
disclosure of production targets and statements as to future
matters implying economic viability of mineral
On 1 December 2011, ASIC released a public submission in
response to public issues papers released by ASX and JORC,
emphasising the need to balance ease of access to equity capital
markets (particularly by junior mining companies) with the need to
ensure market integrity. ASIC's submission focuses on concerns
with the latter.
The ASX and JORC issues papers discuss, amongst other things,
the disclosure of production targets and forward-looking statements
based on inferred mineral resources and exploration targets (which
are matters not currently addressed in the ASX Listing Rules or the
ASIC says that inferred mineral resources and exploration
targets are too uncertain to support reasonable grounds for
disclosing production targets and forward-looking information. ASIC
believes that such disclosure may be misleading, because production
targets and forward-looking financial information released by
resources companies imply that those targets / prospects will be
achieved (notwithstanding the underlying low level of geological
certainty of an inferred mineral resource and the conceptual nature
of an exploration target).
ASIC also says that while cautionary language plays an important
role in highlighting risks, it will not, of itself, affect the
requirement for there to be reasonable grounds for making
statements as to future matters that imply the economic viability
of resources projects (which ASIC suggests cannot be demonstrated
where companies only have inferred mineral resources and
The approach proffered by ASIC is more rigorous than the
proposed ASX disclosure regime set out in Option 5A of the ASX
issues paper. ASX's preferred approach permits the disclosure
of production targets and forward-looking financial information
based on inferred mineral resources and exploration targets, so
long as certain risk disclosures and cautionary statements are
included. ASIC has expressed concerns that this approach could lead
to the market being not fully informed and possibly investors being
ASIC contends that its proposed approach is more consistent with
the likes of Canada, South Africa and Europe, which all have more
rigorous disclosure requirements than that proposed in Option 5A of
the ASX issues paper.
In a move that is consistent with the Canadian approach, ASIC
considers it implicit in clause 8 of the JORC Code that
forward-looking statements implying economic viability, such as
production targets or scoping studies, should be consented to by a
Competent Person. ASIC also considers the independence of Competent
Persons in this context to be an issue that requires
Adopting ASIC's proposed approach on these matters would
certainly provide the market and investors with a greater level of
certainty around the disclosure of production targets and
forward-looking statements, and therefore seek to improve market
integrity and the existence of a "fully informed" market.
On the other hand, the changes would increase compliance costs (eg.
Competent Person fees), particularly if ASIC's suggestion of
independence is taken up, which in our view may have a
disproportionate effect on junior mining companies.
Going forward, companies should be mindful of ASIC's
position in respect of these issues when preparing offer documents
or making market announcements. ASIC has demonstrated a willingness
to apply this position, as previously raised in ASIC liaison
meetings, through its powers of market supervision and review of
disclosure documents for capital raisings.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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