After much debate and a controversial review, new rules for how miners report to the share market took effect this year. In this article TressCox Lawyers associate Rainbow Cheung breaks down the new changes and explains what's new.
The new edition of the JORC Code became effective on 20 December 2012 and will be mandatory from 1 December 2013. The revised JORC Code compliments the recent changes to Chapter 5 of the ASX Listing Rules which are also intended to take effect on 1 December 2013.
The changes impose an obligation on listed companies to report on a range of technical information. They are intended to 'raise the bar' on disclosure by mining and oil and gas companies.
What's new for miners?
Previously, the ASX Listing Rules only required compliance with the JORC Code in relation to reports relating to exploration results or mineral resources or ore reserves. Compliance with the JORC Code is now required even in relation to public announcements relating to exploration targets and production targets.
In order to encourage proper disclosure, the revised ASX Listing Rules require mining reports to address items in a checklist relating to the basis of reporting on an 'if not, why not' basis.
This includes information on sampling techniques, drilling techniques, quality and assay data and laboratory tests, and verification of sampling and assaying, and location of data points, data aggregation methods as well as detail on assumptions made (e.g. mining and metallurgical factors or assumptions, economic analysis and market assessments) and discussion of the relative accuracy of, or confidence in, estimates.
Further, cautionary statements and explanation of assumptions are required where a production target is based in whole or in part on inferred mineral resources or on an exploration target.
But these statements and explanations are not required if the production target is underpinned by ore reserves and/or measured mineral resources.
Periodic reporting for each drilling programme in line with an entity’s continuous disclosure obligations is now only required where the information is expected to have a material effect on the price or value of securities.
What's new for oil and gas?
Listed entities publicly reporting on oil and gas activities are now required to report in line with the Petroleum Resources Management System (“SPE-PRMS”). This includes:
- detailed prescriptions as to how to define a project;
- when particular terms such as “reserves” and “resources” may be used; and
- how resources must be classified based on the maturity of a project and the prospects of discovery and development.
Further the revised ASX Listing Rules now set out particular information that must be included when an entity first publicly reports reserves or resources. This includes details relating to:
- material economic assumptions used to calculate estimates;
- any operator interests in a project;
- the types of permits or licences held;
- analytical procedures used to estimate the reserves or resources;
- proposed extraction methods;
- estimated quantities to be recovered;
- details of any unconventional resources; and
- contingencies such as the development of technology.
There have been concerns raised about the need to disclose confidential or commercially sensitive information in addressing particular matters required under the revised ASX Listing Rules. One example is the disclosure of pricing in addressing material economic assumptions.
In such circumstances, an entity may provide an explanation of the methodology used to determine the assumptions rather than actual figures.
Historical and Foreign Estimates
The use of non-JORC compliant historical and foreign estimates in public reports has been an issue for IPO companies with a foreign asset or where a listed company needs to make disclosures relating to the acquisition of a foreign asset.
In the past, the ASX has granted waivers in particular circumstances. Under the revised ASX Listing Rules, reporting of non-JORC compliant historical and foreign estimates of mineralisation is now allowed subject to disclosure of particular matters. This includes:
- the source and date of the estimates;
- reliability by reference to the criteria in Table 1 of the JORC Code;
- to the extent known, a summary of work programs on which the estimates are based; and
- a summary of key assumptions, mining and processing parameters and methods used.
A cautionary statement is required as well as a statement by a competent person as to the accuracy of information on:
- whether the estimates use categories of mineralisation other than those defined in the JORC Code, and if so, an explanation of the differences; and
- the evaluation and/or exploration work that needs to be completed to verify the estimates in accordance with the JORC Code.
Further, where the entity has not subsequently verified and reported the estimates as mineral resources or ore reserves in accordance with the JORC Code, it must include each year in its annual report:
- a statement on the progress made in evaluating the previously reported historical estimates or foreign estimates; and
- the status of any further evaluation and/or exploration work required to verify the historical estimates or foreign estimates as mineral resources or ore reserves in accordance with the JORC Code.
Where 3 years have elapsed since the historical estimates or foreign estimates were initially reported, the entity must also explain why the estimates have not been verified and reported as mineral resources or ore reserves in accordance with the JORC Code.
Historical and foreign estimates may not be relied on in any economic analysis of the entity’s mineral resources or ore reserves holdings or as the basis of a production target.
The disclosures required in relation to competent persons have changed slightly.
A competent person’s consent is no longer required for subsequent references to exploration results, estimates of mineral resources or ore reserves. However, the original public report must be cross-referenced and the subsequent report must specify that:
- the entity is not aware of any new information or data that materially affects the information included; and
- that all material assumptions and technical parameters underpinning the estimates continue to apply and have not materially changed.
The revised ASX Listing Rules now also prescribe particular disclosures in a mining exploration entity’s annual report. This includes a reconciliation of the entity’s mineral resources and ore reserves holdings against the previous year.
Similarly, oil and gas companies will now be required to include an annual reserve statement in their annual report. The annual reserve statement must set out details relating to reserves and resources as well as a reconciliation of total 1P reserves and 2P reserves against the previous year with an explanation of any material changes.
The ASX and JORC are encouraging early adoption of the new rules during the transition period before they become mandatory for ASX listed entities on 1 December 2013. However, the ASX has noted that where an entity does adopt the new requirements during the transition period, they should be consistent in applying the new requirements going forward.
If you have concerns about how the ASX reporting changes affect you, get in touch with TressCox Lawyers.
Partner, Corporate & Commercial
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