JORC changes: bonus or burden?

WILL it be an early Christmas present for cash-strapped miners or just another compliance burden? With Australia’s new JORC code only weeks away from implementation, all will be revealed. The Metal Detective, By Stephen Bell
JORC changes: bonus or burden? JORC changes: bonus or burden? JORC changes: bonus or burden? JORC changes: bonus or burden? JORC changes: bonus or burden?

Photo courtesy of Carpentaria

Stephen Bell

In his decades of reporting on the rocks patch, the Metal Detective has pored over thousands of company resource statements, production targets, feasibility studies and the like.

Some left him baffled as to how, after a couple of drill holes and a bit of number crunching, certain companies could seriously predict how much iron ore, gold or nickel “might be” present in the ground, or produced out of a hypothetical mine.

It seems to MD that the problem reached plague proportions during the recent boom, when some juniors spun off production scenarios on the basis of exploration targets or “scoping” studies that were little more than thought experiments.

Stuff like, “On the basis of the limited drilling to date, we believe that Project Sinkhole may support a 5Mtpa direct-shipping operation using simple beneficiation techniques and barges on the Swan River”

In this light, MD is tempted to applaud Australia’s new Joint Ore Reserves Committee code, released nearly a year ago, but finally due to take effect from December 1.

The latest revision, the first since 2004, emphasises transparency, materiality and competence for companies reporting their exploration results, mineral resources and ore reserves.

“The changes will keep Australia at the forefront of clarity and transparency in resources reporting that will support investor confidence,” said a spokesman from the Minerals Council of Australia, which helped design the changes alongside the AusIMM and the Australian Institute of Geoscientists.

Starting with an issues paper in 2011, the industry bodies worked with regulators the Australian Securities and Investments Commission and the Australian Securities Exchange to come up with the proposal after wide consultation.

But before we get too carried away with the holy grail of more clarity and credibility, MD is already hearing grumbles about the burden of complying with the regime.

“It is highly demanding in the amount of work required,” was one comment from a geologist inside a big mining group. “It will be a ridiculous burden in the extra amount of paperwork now required to prepare mineral reserve statements.”

Having to comply with JORC reporting at multiple mine sites is a problem that many small miners would love to have, of course.

But there is a perception inside some bigger outfits that the changes, which are partly designed to make small companies more credible to investors, will turn out to be just another challenging ream of red tape.

There is even a conspiracy theory that the reforms are being driven by ore reserve consultants, who are likely to generate a fair chunk of business out of the more rigorous reporting requirements.

The contentious bits include “Table 1”, which outlines the detailed information on geology, drilling and sampling techniques, location of data points, spacing, etc. that should be used to justify estimates or projections.

As far as MD can gather, Table 1 is central to the “if not, why not” tenor of the new code.

In other words, if the delegated Competent Person does not report the additional information prescribed under the code, they must justify why they are not providing it to investors.

Legal firm Corrs Chambers Westgarth points out that hiring a “competent” person to prepare a report does not guarantee the accuracy of its conclusions on resources or reserves.

In fact, there is still a substantial risk that Competent Persons do not estimate resources or reserves consistently.

“The 2012 Code attempts to address this issue by regulating who may be a Competent Person, but whether this really reduces the potential for inconsistency is questionable,” it says in an article on its website.

The legal firm believes that junior miners complying with the code may be in a better position to obtain debt finance when their reserves indicate real value.

“The JORC Code is clearly not a panacea for all the problems facing junior and mid cap miners in raising debt and equity financing, but it will help those with real jewels in their crowns to sparkle,” it said.

No doubt an organisation such as AMEC hopes this glass-half-full view of the rules proves accurate in the case of junior mining hopefuls.

As for compliance, AMEC CEO Simon Bennison has not heard any major grumbles from his members.

“Nobody wants more compliance than what they need,” he told MD.

“But the idea of this initiative is to make reporting as competitive as it can be without being overly burdensome,” he said.

Benison believes most of his members are on top of the changes.

But for any laggards out there, AMEC plans to host a JORC information seminar in Perth on December 11.