On 23 March 2011, the European Securities and Markets Authority (ESMA) published the long-awaited update of its recommendations on the consistent implementation of the European Commission's Regulation on Prospectuses as they impact upon mineral companies. This update follows a CESR (the predecessor to ESMA) consultation document published on 23 April 2010 (see our April 2010 E-Bulletin article: CESR consults on prospectus requirements for mining and oil & gas companies) and a subsequent period of consultation that ended on 15 July 2010.
Generally, the approach proposed in the April 2010 consultation document has been followed in the updated guidance. However, a number of significant changes have been made, as follows:
- in cases where the proceeds of an issue are to be used to fund exploration and / or development activities, the proposal that the prospectus include management-prepared projections in respect of those activities has been dropped
- in cases where a competent person's report must be included in a prospectus, the minimum content of that report (as set out in the guidance) is now recommended and not prescribed
- the proposals that a competent person's report be included in a prospectus (i) where new assets have been / are being acquired which constitute a significant gross change, (ii) where there has been a material first time declaration of new reserves, or (iii) where there has been a significant (100%) change in reserves have been dropped. The proposed requirement for a competent person's report in significant acquisition situations has been replaced with a requirement to extend disclosures in respect of the issuer's existing resources / reserves to the target's assets
- issuers may omit items required by the updated guidance where third country securities laws prohibit disclosure of those items.
This updated guidance (in particular, the clarification of when a competent person's report will be required and the removal of the previous requirement (in certain circumstances) to include an estimated cash flow and associated independent accountant's report) is welcome in that it aligns the regulatory regime more closely with the expectations of market participants and issuers. For AIM-traded issuers, the super-equivalent requirements of the June 2009 AIM Note for Mining and Oil & Gas Companies will however continue to apply.
ESMA has also published a feedback statement in respect of the consultation exercise that preceded the updated guidance. That feedback statement sets out ESMA's rationale for any changes that were made to the proposals set out in the April 2010 consultation paper.