ASIC under fire for supposed disclosure rule changes

The Australian Securities and Investment Commission (ASIC)’s changes to disclosure rules for resource projects has received a backlash from mining industry groups and legal firms as they claim it will affect a company’s ability to properly inform investors.

Members of the Australasian Joint Ore Reserves Committee (JORC), including the Minerals Council of Australia (MCA), are aiming to engage with ASIC over the information sheet it released in April, arguing the guidelines will restrict what resource companies can reveal to the market about their project’s economic potential.

Executives of junior companies are concerned the changes could raise legal risks and affect a company’s ability to raise funds and advance projects.

ASIC claims it has not changed the law, saying the information provided in the note restated long held standards that ensured companies have ‘reasonable grounds’ for any projections.

The Association of Mining and Exploration Companies (AMEC)’s national policy manager Graham Short said they will send a letter to ASIC this week expressing their concerns about the note and to seek a meeting with all stakeholders, according to Fairfax media.

JORC and AMEC also held special meetings with their members to discuss these guidelines.

JORC has since approached ASIC about the guidelines and are also seeking a review. They said they were “concerned that there is a need for ASIC to take steps to ensure all stakeholders have a strong understanding of the intent and practical application of information sheet 214.”

The MCA has also expressed their concerns about the way ASIC interpreted the information on the note, saying, “it may have unintended consequences for minerals companies seeking funding in capital markets.”

Several lawyers and stockbrokers in Perth have also come together in regards to the supposed changes, preparing joint submissions on both the note and the ASX listing rules.

Eddie Rigg, managing director of broking house Argonaut, said, “The risk is it is forcing two levels of disclosure – one for the capital markets and one for the people who may want to invest.”

“We believe it is inherently undermining the integrity of the market.”

Sarah Turner, Gilbert and Tobin partner, said the firm was aware of companies that were prevented from releasing presentations to the ASX within the last two weeks.

“Some of the objections seem to relate to repetition of previously-released scoping study or pre-feasibility study (PFS) results,” she said.

“Many explorers are not in a position where they can demonstrate today a basis for future funding which satisfies regulators and this seems to be what is now being requested as a prerequisite to release. In many cases those scoping study and PFS results are integral to an ability to secure future funding.”

“There is a real danger of explorers finding themselves in a positions where they need to selectively disclose those results under confidentiality agreements in order to try to secure funding; this seems at odds with the principle that the market should be fully informed. As a consequence, directors are in a tight spot considering issues of insider trading, any foreign exchange requirements, and how they would cleanse the market.”

Managing director of Gascoyne Resources Mike Dubnar, said they had been forced to alter a planned market announcement as its projections were now considered “unreasonable”, despite releasing the information weeks earlier to the market in a PFS.

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