8 July, 2013

Legal News & Analysis – Asia Pacific – Australia – Regulatory & Compliance

Summary

• New reserves and resources reporting regime for listed mining companies.
• New requirements underpinned by the JORC Code.
• Transitional period until 1 December 2013.

On 8 November 2012, ASX received regulatory approval to introduce new Listing Rules to enhance disclosure of reserves and resources by ASX-listed mining exploration and production companies. The new requirements come into effect on 1 December 2013.

The new reporting requirements follow on from the ASX Consultation Paper released in October 2011 ‘ASX Listing Rules Review Issues Paper: Reserves and Resources Disclosure Rules for Mining and Oil & Gas Companies’ and feedback received from 122 written submissions and 54 roundtables and consultation meetings. 

In parallel to the ASX initiative, JORC has prepared a revised and updated JORC Code (Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves), which underpins the new requirements in the ASX Listing Rules.

Reporting in accordance with JORC and additional requirements for material projects

Under the new Listing Rules, mining companies are required to report in accordance with the JORC Code (other than historical or foreign estimates of mineralisation) with new requirements for the disclosure of additional information triggered in relation to the reporting of:

• exploration results for material projects of the company
• initial (or materially changed) estimates of ore reserves and mineral resources for material projects of the company, and
• historical or foreign estimates for material projects of the company. 

All public reports of exploration results or estimates of ore reserves and mineral resources for material projects must include, on an ‘if not, why not’ basis, a report based on the relevant sections of Table 1 of the JORC Code.

In addition, prior written consent from a competent person for the disclosure of the estimates and the supporting information is required the first time the estimates (or materially changed estimates) are reported to the market. ASX has streamlined the competent person sign off process for subsequent disclosures of the same material.

New reporting requirements for production targets

New requirements apply to the public reporting of longer term projections (greater than 2 years) of future production and associated forecast financial information for the company as a whole or for material projects. Disclosing production targets and associated forecast financial information based on historical and foreign estimates of mineralisation and solely on an exploration target is prohibited.

The supporting information underpinning the production target and associated forecast financial information required to be disclosed includes:

• material assumptions (other than commercially sensitive economic assumptions)
• relevant proportions of each of the categories of mineral resources (inferred, indicated or measured) and ore reserves (probable or proved), and
• exploration potential.

More onerous disclosure requirements for production targets and associated forecast financial information based on an inferred mineral resources and an exploration target apply.

Annual reporting requirements

The existing quarterly reporting regime for reserves and resources reporting remains and in addition ASX has introduced a requirement to include a statement in the annual report which must include:

• a summary of the results of the company’s annual review of its mineral resources and ore reserves
• the company’s mineral resources and ore reserves holdings as at the company’s end of financial year balance date (or such other appropriate disclosed date)
• a comparison with the previous year’s holdings including an explanation of any material changes from year to year
• an explanation of the progress made in evaluating historical or foreign estimates of mineralisation so that they can be reported under the JORC Code, or if after 3 years, why those estimates have not been verified and reported in accordance with the JORC Code and what the company’s intention is with regard to verifying those estimates, and
• a summary of the governance arrangements and internal controls that have been put in place with respect to its mineral resources and ore reserves or petroleum reserves (as applicable) and the estimation process.

Transitional Period

During the period until 1 December 2013, ASX are encouraging companies to ‘opt-in’ to the new regime. However companies cannot ‘cherry-pick’ the requirements or obligations that will apply to their reserves and resources disclosures. This means that if a company wishes to take advantage of provisions in the new regime, such as the streamlining of competent person sign off for disclosures where there has been no material change to estimates of reserves or resources, the other aspects of the new regime, such as compliance with the new reserves and resources statement in the annual report, will also need to be taken on.

For further information, please contact:

David Gray, Partner, Herbert Smith Freehills

[email protected]