Five days before last Christmas, the Australasian Joint Ore Reserves Committee (JORC) released the 2012 Edition of the JORC Code. After a fairly tough year, the industry could be forgiven for being more focused on summer holidays than the code’s impact on 2013 reporting.
With the transition period from the 2004 Edition finishing on November 30 and all ASX-listed companies needing to adhere to the latest JORC Code and ASX Listing rules from December 1, time is fast running out for listed entities, industry consultants, advisers and investors to understand the rules and their implications.
Both ASX and JORC have encouraged early voluntary adoption of the amended reporting framework, but will not allow “cherry picking” – if companies choose to comply with the new rules, they will be required to comply with them in their entirety.
Even for those companies that elect to wait until December, there is already evidence of tightened parameters around reporting – one need only look at the increasing number of corrective disclosures that have been made on the ASX since the start of May, particularly in relation to the release of scoping studies.
Overall, the enhanced disclosure obligations prescribed under the amended ASX Listing Rules and JORC Code provide more clarity for both investors and mining companies.
From an investors’ perspective, the amendments will result in the provision of more comprehensive information about a company’s mining activities. In particular, the emphasis placed on “if not, why not” disclosure in respect of the criteria in Table 1 of the JORC Code and the requirement for disclosure of material assumptions for production targets should significantly increase the quality of disclosure provided by mining companies.
From the listed companies’ perspective, while faced with additional reporting obligations, they will be operating in a more clear and consistent regime, with greater certainty as to their disclosure obligations.
The JORC Code and Listing Rule changes apply to material projects or material changes to projects.
This materiality of a project will generally be self-evident to companies, but some judgement may be required for those groups with a mix of projects or multiple business activities.
The amended Listing Rules require companies to provide additional information when disclosing exploration results and estimates of mineral resources and ore reserves, both the first time they are reported and in relation to any subsequent material changes.
Companies must now report against the prescribed criteria in Table 1 of the JORC Code on an “if not, why not” basis. Table 1 includes information on geology, drilling and sampling techniques, quality of assay data and laboratory tests, location of data points, data spacing, estimation methodology, cut-off grades and, in the case of ore reserves, outcomes of the preliminary feasibility study, as well as the details of any assumptions made. If a company determines that any of the prescribed criteria from Table 1 is not material to understanding the exploration results or estimates, it must include a clear explanation as to why that is the case.
There are a number of changes in relation to the reporting of ore reserves, mineral resources and production targets.
A company must complete a preliminary feasibility study (PFS) before reporting ore reserves. The PFS must determine that a mine plan is both technically achievable and financially viable in order to report ore reserves.
The amended Listing Rules clarify the circumstances in which production targets and associated financial information can be disclosed. Production targets cannot be derived from an exploration target, a combination of exploration target and inferred resource, or using a historical or foreign resource estimate.
Production targets can be disclosed from the combination of an ore reserve/mineral resource and an exploration target provided certain conditions are met and disclosures are made, including the material assumptions and the respective proportions of ore reserves, mineral resources and exploration potential underpinning the target. Only in exceptional circumstances can a production target be derived from an inferred resource.
In the past, the inability to use non-JORC compliant historical and foreign estimates has been an issue for companies seeking to conduct an IPO with, or trying to acquire, a foreign asset. To disclose historical or foreign estimates, the company had to apply for a waiver from ASX, provided it met certain criteria prescribed by ASX.
The revised Listing Rules now allow the reporting of historical and foreign estimates if the project is deemed to be material to the company, subject to the disclosure of particular matters and provided the information falls within the definition of “historical estimate” or “foreign estimate” in the Listing Rules. Examples that fall outside this scope include when the relevant exploration and evaluation programs are incomplete and a company is trying to report preliminary resources or when a company is trying to report reserves and the studies required under the 2012 JORC Code to allow the conversion of mineral resources to ore reserves have not yet been completed.
Any disclosure of historical or foreign estimates must include, amongst other things, the source and date of the estimates, key assumptions, any more recent relevant estimates or data available to the company, a proximate cautionary statement highlighting that the estimates are not reported in accordance with the JORC Code and that it is uncertain whether the estimates will be able to be reported as mineral resources or ore reserves in accordance with the JORC Code.
Those companies that have a mineral resource or ore reserve are now required to include this information in their annual report and include prescribed information, including historical comparisons.
The amended Listing Rules now provide for more streamlined competent person sign-offs. A competent person’s consent is no longer required for subsequent reporting of exploration results, estimates of mineral resources or estimates of ore reserves. Prior written consent from the competent person is only required for the original public report. Subsequent reports containing the same information may cross reference the original report, provided the subsequent report specifies that the company is not aware of any new information or data that materially affects the information included in the original report and, in the case of estimates, all material assumptions and technical parameters underpinning the estimates continue to apply and have not materially changed.
If there has been a material change to the estimates, or any of the assumptions or technical parameters underpinning the estimates, a new competent person sign-off will be required.
So, with the December 1 deadline for adopting the new rules less than six months away, listed companies should be ensuring their disclosure practices are being updated to comply with both the 2012 JORC Code and Listing Rules. The changes will ultimately bring more transparency and clarity to reporting by Australia’s listed miners and explorers which can only be a good thing.
Meredith Campion is an energy and resources partner in Allen & Overy’s Perth office. Campion practises corporate, commercial, and energy and resources law, while advising on takeovers, mergers, acquisitions, disposals, capital raisings and joint ventures. She has conducted comprehensive compliance and due diligence programs in those areas. Campion has considerable experience in offshore transactions, having advised on a number of AIM, LSE, TSX and JSE listings and offshore capital raisings. She also advises on acquisitions and raisings by foreign entities in Australia.