CESR Publishes Its Consultation Paper Regarding Mineral Companies Disclosure Regime
13 May 2010
On April 23, 2010, the Committee of European Securities Regulators (CESR) published a consultation paper (the "Consultation Paper") setting out CESR's proposals to reform its guidance relating to mineral companies listed on EU regulated securities markets.1 The Consultation Paper seeks comment on those proposals from market participants.
The incumbent prospectus disclosure regime for mineral companies consists of: (i) Article 5 of EC Directive 2003/71/EC (the "Prospectus Directive") that contains the requirement to disclose information necessary to enable investors to make an informed assessment of the issuer and the securities to be issued; (ii) Article 23 of Commission Regulation (EC) No 809/2004 (the "PD Regulation") which gives competent authorities of the member states of the EU powers to require additional information for certain specialist issuers, including mineral companies; and (iii) CESR's recommendations for the consistent implementation of the PD Regulation (the "CESR Recommendations").
The CESR Recommendations were designed to facilitate consistency among the competent authorities of the member states of the EU when applying Article 23 of the PD Regulation. Specifically, Sections 131-133 of the CESR Recommendations impose additional disclosure requirements for mineral companies, including: (i) disclosure of reserves in the prospectus; and (ii) for an issuer that has not been a mineral company for at least three years, also a mineral expert's report plus some additional financial information. The CESR Recommendations do not set out a professional code according to which either the reserves disclosure or the mineral expert's report must be presented, requiring instead that the content is agreed with the competent authority concerned. The UK Listing Authority (the "UKLA") has exercised its discretion under Article 23 of the PD Regulation by adding a requirement that a mineral expert's report (although not disclosure of reserves in the prospectus) be prepared in accordance with the codes adopted by certain professional bodies.
The Consultation Paper, which notably does not apply to wholesale debt, suggests that: (i) the presentation of reserves and resources in all prospectuses should follow one of the internationally recognised mineral standards acceptable to CESR;2 and (ii) that a mineral expert's report prepared in accordance with such a standard should be required in all cases, regardless of the issuer's track record, except for listed issuers who have published such a report in the past and complied with certain on-going reporting obligations. By restricting this proposal to securities other than wholesale debt CESR acknowledges the differences between the retail and wholesale debt markets. However, it seeks market participants' views on whether wholesale debt should be excluded from such disclosure requirements. If the feedback received indicates that wholesale debt should be subject to the same requirements this position may be reversed.
The market participants should be aware that the UKLA has recently indicated that it may go beyond the new CESR proposals and require one of the internationally recognised standards to apply to presentation of reserves and resources in all prospectuses, including those relating to wholesale debt. At the time of writing it is uncertain whether and when the UKLA will adopt this policy.
The deadline for responses to the Consultation Paper is July 15, 2010. Market participants are encouraged to make their views known to CESR, to avoid changes to the CESR Recommendations that may be unwelcome, including in particular whether or not the proposed amendments should affect wholesale debt.