On 23 April 2010, CESR published a consultation paper to amend its recommendations for the consistent implementation of the European Commission’s Regulation on Prospectuses no 809/2004 (CESR Recommendations) regarding mineral companies. The proposed amendments seek to create “clear harmonised prospectus disclosure standards for mineral companies in the EU, ensuring in the process that disclosure meets existing international standards”.


The existing recommendations for disclosures by mineral companies in prospectuses are set out in paragraphs 131 to 133 of the CESR Recommendations. Paragraph 132 sets out certain information that a mineral company (defined in paragraph 131) should disclose in any prospectus it issues. A company that has not been a mineral company for at least the three preceding years must also include further information set out in paragraph 133. This includes a mineral expert’s report, also called a competent persons report (CPR) and other requirements.  


CESR has made proposed amendments to paragraphs 131 to 133 of the CESR Recommendations as it has recognised there are several difficulties with the current provisions. CESR acknowledges that the existing EU provisions are “slight” compared to other markets with significant mineral sectors and do not address many of the key issues addressed in securities regulations in other jurisdictions. It also states that the existing provisions lack clarity compared to regulatory standards in other markets and that giving member states the responsibility of specifying the content and the reporting standard of the CPR is contrary to the harmonising principle of the Prospectus Directive.  

The proposed amendments aim to:  

  1. establish which companies and securities are within the scope of the Recommendations;  
  2. clarify when a CPR should be required in a prospectus;  
  3. set out the basic disclosure requirements for all prospectuses;  
  4. clarify which reporting and valuation standards may be used;  
  5. provide CPR content requirements and competence and independence provisions for experts; and  
  6. replace the requirement for a cash flow forecast.  

Proposed changes  

  • Which companies and securities are in scope: Exploration-only companies would be included but prospectuses for wholesale debt would be excluded.  
  • Definitions:  The consultation paper proposes replacing the ‘principal activity’ test with a clear test that defines mineral companies as ‘companies with material mineral projects’. Basic disclosure requirements for all prospectuses in scope:  The existing disclosure requirements are mostly unchanged. The amended provisions include a new clarification that resources and reserves figures should be presented separately. There are additional disclosure requirements when the proceeds of the offering are being used to fund exploration and/or development costs. Any inconsistency between the information disclosed and information already in the public domain should be explained.  
  • Replacement of cash flow funding statement The CESR consultation paper proposes to replace the existing provision with a new requirement to expand the use of proceeds section of the prospectus where new funds are being raised to fund exploration and/or the development of mineral resources. The provisions require management prepared information but no requirement for an external expert opinion.  
  • CPRs:  A CPR would be required when a company is first admitted to trading (regardless of how long it has been a mineral company) but not thereafter in normal circumstances. CPRs should also be provided where the prospectus sets out proposals to acquire significant new projects or where there has been other material changes in the company’s resource base that are significant enough to merit a CPR.

It is however proposed to waive the need for a CPR if the issuer has been regularly reporting and publishing details of its resources, reserves and results/prospects in accordance with one of the specified reporting standards for the exemption to apply.  

The CESR consultation paper proposes new rules on preparing CPRs. These include requirements as to the qualifications of the expert, the age of the report, acceptable reporting and valuation standards and specific content.  

Consultation period  

The consultation period closes on 15 July 2010