A New Chapter 5
Listed mining and oil & gas companies have less than three months remaining to prepare for compliance with the new Chapter 5 of the Listing Rules. The enhanced reporting regime will be enforced from 1 December 2013.
Mining companies need to be aware of their increased disclosure obligations when reporting exploration results, mineral resources, ore reserves and production targets. Guidance Note 31 provides guidance on reporting obligations for mining companies. Other key changes relate to the use of:
- the competent person statement
- foreign and historical resource estimates
- cautionary statements.
Oil & gas companies also have additional disclosure obligations, which were designed by the ASX to align with the industry sponsored Petroleum Resources Management System (SPE-PRMS). Guidance Note 32 provides guidance on reporting obligations for oil and gas activities.
Key Changes for Mining Companies
|Type of disclosure||Summary|
|1||Exploration results*||Requirement to disclose sampling and drilling techniques, specific drill hole and intercept information for material drill holes, and other information contained in Table 1 of JORC 2012 on an "if not why not" basis. This means that a Competent Person must either disclose the required information or justify why they are not disclosing.|
Extension of obligations to:
|3||Initial or updated mineral resource estimates||Requirement* to disclose certain material information including geological information, sampling and drilling techniques, estimation methodology, mining and metallurgical methods, and other information contained in relevant parts of Table 1 of JORC 2012 on an "if not, why not " basis.|
|4||Additional detail on mineral resources||
Extension of obligations to disclose:
|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 relevant parts of Table 1 of JORC 2012
including all information regarding material modifying
The estimate of the ore reserve must be based on a pre-feasibility or feasibility study (including a mine plan and detailed financial analysis) 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.
The requirement for such studies will become mandatory from 1 December 2014.
|6||Disclosure of historical and foreign estimates||
The prior obligation to obtain an ASX waiver in order to report historical and foreign estimates of mineralisation has been replaced. Companies will now be able to make such disclosures provided that it contains:
|7||Production targets and forecast financial information||
Companies will be prohibited from disclosing production targets and forecast financial information that are based solely:
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:
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||Competent person's consent||
The prior written consent of the competent person will continue to be required before exploration results or estimates of mineral resources or ore reserves are announced for the first time. However, subsequent references to those results or estimates will now no longer need competent person sign off, provided that the subsequent report:
|9||Annual mineral resources and ore reserves statement||
Statement in annual report to include:
|10||Reporting of in situ or in-ground values||Extension of obligations to prohibit reporting of in situ or in-ground financial valuations which are based on exploration results, mineral resources or deposit size, ie before all the modifying factors affecting the economic value of a deposit have been considered and applied.|
* Note: these are for "material mining projects" only. A "material mining project" defined as a mining project which "is, or is likely to be, material in the context of the overall business operations or financial results" of the company or its subsidiaries.
Key Changes For Oil & Gas Companies
|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 in which they can be reported, 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 misleading or confusing disclosure to 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||
Requirement 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 & 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:
|4||Annual reserves statement||
Requirement for oil & gas companies to include an annual reserves statement in their annual reports which provides:
|5||Estimates of petroleum reserves and contingent and prospective resources||
Requirement for all publicly reported estimates of petroleum reserves, contingent resources and prospective resources to include, among other things:
|6||Estimates of petroleum reserves||
In addition to the requirements set out in item 5 above, an entity reporting estimates of petroleum reserves must ensure that:
|7||Estimates of contingent resources||
In addition to the requirements set out in item 5 above, an entity reporting estimates of contingent resources must ensure that:
|8||Estimates of prospective resources||
In addition to the requirements set out in item 5 above, an entity reporting estimates of prospective resources must ensure that:
* Materiality of "material oil and gas projects" is defined on a similar basis to "material mining projects".
Changes Affecting Both Mining and Oil & Gas Companies
|Type of disclosure||Summary|
Producing entities must produce a quarterly report giving:
Exploration entities must report the above items, and in addition must report:
Cautionary statements in a prescribed form must be included in reports of estimates of prospective resources. They must be:
The cautionary statement must be included where the estimate first appears. Subsequent references to the estimate must cross-refer back to the cautionary statement.
The Transition to the New Reporting Regime
Both the ASX and the JORC committee encourage early adoption of JORC 2012 prior to the mandatory start date of 1 December 2013. Any adoption, however, requires adherence to all aspects of the new Chapter 5 of the Listing Rules and JORC 2012 – there can be no "cherry picking".
- annual reporting requirements kick in at the end of the financial year ending June 2014 (where the company hasn't adopted the new regime before June 2013)
- there will be a requirement for a pre-feasibility study or a feasibility study to be completed in order to declare an ore reserve, which will come into effect on 1 December 2014.
Under the new reporting regime, mining and oil & gas companies have to provide enough information for investors to understand their results or estimates, the processes used to arrive at those results or estimates and any assumptions underpinning their announcements.
Inclusion of Table 1 disclosures in reports of exploration results or estimates of mineral resources or ore reserves is not a simple addition to an announcement – it involves considerable complexity, takes time and will lead to much longer announcements.
Companies must ensure that statements made in the Table 1 disclosure, and all other disclosures, are accurate in all respects. As with all announcements of forward looking statements, the Australian Securities and Investments Commission (ASIC) will monitor announcements of mineral or petroleum resource or reserve estimates to ensure they have a reasonable basis.
Mining and oil & gas companies must be prepared to fully comply with these reporting obligations by 1 December 2013.
K&L Gates is happy to assist you manage this complex transition.
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.