Following a consultation process that commenced in 2011, the Australasian Joint Ore Reserves Committee (JORC) announced the release of a revised JORC Code on 6 February 2013. Despite the changes coming into effect in 2013, the new JORC Code is known as the 2012 Edition. The new JORC Code is accompanied by changes to the ASX Listing Rules, and in particular changes to Chapter 5 (along with the introduction of new Guidance Notes 31 and 32).
In the words of JORC’s Chairman, Peter Stoker, the changes are designed to ‘[lift] the minimum standard for a Public Report to include the release of much more of the material information about Exploration Results, about the estimation process for Mineral Resources and Ore Reserves and about the material factors that could impact upon the investors’ understanding of the minerals project’.
Both the 2012 Edition of the JORC Code and the new ASX Listing Rules come into effect on 1 December 2013, with the exception of the requirement that a preliminary (pre-feasibility) study or a feasibility study be completed to declare an ore reserve (which comes into effect on 1 December 2014). This is a significant new requirement discussed in more detail below.
The changes have been well publicised, but in brief the key changes include:
- Table 1 reporting – a company that publicly reports exploration results for the first time (or new exploration results) in relation to a material mining project must provide a separate report detailing all information that is material to understanding the exploration results, against certain sections of Table 1 in the new JORC Code. Similar rules apply in relation to the reporting of mineral resource and ore reserve estimates.
- Historical and foreign estimates – reports of historical estimates or foreign estimates of mineralisation in relation to a material mining project are not subject to the reporting requirements of the ASX Listing Rules, provided that (amongst other things) the company includes information about the source and date of the estimates and their relevance, materiality and reliability.
- Production targets – a company must not issue a public report containing or referring to a production target that is based solely on an exploration target or solely on a combination of inferred mineral resources and an exploration target, nor can it do so based solely or partly on historical estimates or foreign estimates of mineralisation. Generally, a public report containing a production target relating to the mineral resources and ore reserves holdings or a material mining project must include (amongst other things) all material assumptions on which the production target is based.
- Annual report requirements – a company must include a mineral resources and ore reserves statement in its annual report. Amongst other things, the statement must include a summary of the results of the company’s annual review of its ore reserves and mineral resources.
- Competent person consent – a market announcement containing exploration results or mineral resource or ore reserve estimates in relation to a material mining project must only be issued with the prior written consent of the competent person. This requirement only applies to the first time a company publicly reports those results or estimates, provided subsequent public reports cross refer to the first market announcement and the company confirms that it is not aware of any new information or data that materially affects the information included. In the case of mineral resource or ore reserve estimates, the company must confirm that all material assumptions and technical parameters underpinning the estimates continue to apply and have not materially changed. Note that this will only apply to mineral resource or ore reserve estimates that are themselves compliant with the new JORC Code.
Two other items that warrant particular note include the introduction of the preliminary feasibility study or feasibility study requirement and the applicable transitional arrangements.
Preliminary (pre-feasibility study) and feasibility study
The new ASX Listing Rule 5.9 requires a company publicly reporting estimates of probable and proved ore reserves in relation to a material mining project (for the first time or where materially changed from when those estimates were last reported) to include a summary of all information material to understanding the reported estimates of ore reserves in relation to (amongst other things) the material assumptions and the outcomes from the preliminary feasibility study or the feasibility study. Although not expressly stated in this Rule, it is a requirement of the new JORC Code that a company must conduct a preliminary feasibility study or feasibility study in order to report proved or probable ore reserves.
Importantly, the terms ‘preliminary feasibility study’ and ‘feasibility study’ are now given definitions in the 2012 Edition of the JORC Code. These definitions are as follows:
- ‘A Preliminary Feasibility Study (Pre-Feasibility Study) is a comprehensive study of a range of options for the technical and economic viability of a mineral project that has advanced to a stage where a preferred mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, is established and an effective method of mineral processing is determined. It includes a financial analysis based on reasonable assumptions on the Modifying Factors and the evaluation of any other relevant factors which are sufficient for a Competent Person, acting reasonably, to determine if all or part of the Mineral Resources may be converted to an Ore Reserve at the time of reporting. A Pre-Feasibility Study is at a lower confidence level than a Feasibility Study.’
- ‘A Feasibility Study is a comprehensive technical and economic study of the selected development option for a mineral project that includes appropriately detailed assessments of applicable Modifying Factors together with any other relevant operational factors and detailed financial analysis that are necessary to demonstrate at the time of reporting that extraction is reasonably justified (economically mineable). The results of the study may reasonably serve as the basis for a final decision by a proponent or financial institution to proceed with, or finance, the development of the project. The confidence level of the study will be higher than that of a Pre-Feasibility Study.’
The adoption of the requirement for a minimum standard of study for ore reserve estimates and the introduction of these definitions provide greater clarity on the requirements for reporting these estimates and are in line with comparable reporting standards. For some companies, this requirement will differ from its internal practices and will introduce a new level of formality to its study procedures. In particular, companies should note this requirement will apply to the conversion of any previous ore reserve estimates that were compliant with the 2004 JORC Code, and therefore must be satisfied if there is a material change to that previous ore reserve (such as in estimate tonnages or grade or quality of the mineralisation) that the company wishes to report as an ore reserve.
As a result of the introduction of the 2012 Edition of the JORC Code, there are now two current editions: the 2004 Edition and the 2012 Edition. From 1 December 2013, public reports must comply with the 2012 Edition and the new ASX Listing Rules, with the exception of the requirement that a pre-feasibility study or a feasibility study be completed to declare an ore reserve (which comes into effect on 1 December 2014).
Until then (that is, up to and including 30 November 2013), the minimum requirement is compliance with the 2004 Edition of the JORC Code and the current ASX Listing Rules, although companies can adopt the 2012 Edition and the new ASX Listing Rules earlier than 1 December 2013 (and indeed, this is encouraged by JORC and ASX). However, if companies take the early-adoption approach, they must comply with new arrangements in their entirety (with the exception of the requirement that a pre-feasibility study or a feasibility study be completed to declare an ore reserve, unless early-adopted also). Peter Stoker explained the reason for this: ‘Cherry-picking of parts of the new Code that Company favours, but not embracing it comprehensively for Public Reporting, is not acceptable’.