Summary

  • ASX and JORC have released exposure drafts for proposed amendments to Chapter 5 of the ASX Listing Rules and the JORC Code respectively.
  • Under the proposed amendments:
    • For both mining companies and oil and gas companies, there will be a significant increase in the scope of information that must be disclosed when reporting resources, reserves and exploration information (including a requirement to include an annual resources and reserves summary in their annual report).
    • For mining companies, a preliminary feasibility study will be a minimum requirement before mineral resources can be converted to reserves.
    • Oil and gas companies will now be required to report in accordance with the Society of Petroleum Engineers – Petroleum Resources Management System (SPE-PRMS).

Introduction

Since October 2011, both the ASX and JORC have been undertaking a review of the regime for disclosure of reserves, resources and exploration information which applies to mining and oil and gas companies. The review was triggered by a growing concern that disclosures were not consistent and therefore were not promoting an efficient market.

This review process has been progressed by the ASX and JORC as separate, concurrent reviews. Initially ASX and JORC disagreed as to whether the disclosure regime should become more prescriptive, or remain principles based, with JORC preferring the principles based approach.

On 18 September 2012, the ASX released a consultation paper including proposed changes to Chapter 5 of the Listing Rules, together with a draft of two new guidance notes – Guidance Note 31 “Reporting on Mining Activities” and Guidance Note 32 “Reporting on Oil and Gas Activities”. At the same time, JORC also released a draft of its updated JORC Code.  Importantly, it appears that the ASX and JORC have reconciled their differences and have broadly taken a consistent approach.

Submissions can be made in response to ASX and JORC’s proposed amendments and are due by 26 October 2012.

Key changes for mining companies

Mining companies listed on the ASX will be required to report in accordance with the revised Chapter 5 of the ASX Listing Rules and the updated JORC Code.

The updated JORC Code includes new requirements for:

  • A Competent Person to report on each of the key assumptions underpinning exploration results, mineral resources and reserves in Table 1 of the JORC Code on an ‘if not, why not’ basis (previously, it was left to the discretion of the Competent Person to determine which of these assumptions were sufficiently material to report on).
  • A preliminary feasibility study (now defined in the updated JORC Code) to be prepared before converting mineral resources to reserves.

The major proposed changes to the disclosure regime under Chapter 5 of the ASX Listing Rules for mining companies include:

  • ‘If not, why not’ system of reporting: Consistent with the changes to the JORC Code, when reporting initial or materially changed exploration results,  and estimates of mineral resources and reserves for ‘material mining projects’ (see below), a report detailing the material assumptions under Table 1 of the JORC Code must be prepared on an ‘if not, why not’ basis and form an annexure to the announced results.
  • Disclosure of exploration results: There will need to be specific drill-hole and intercept information included for material drill-holes on an ‘if not, why not’ basis.
  • Disclosures of estimates of mineral resources and reserves: There will be a requirement to include a summary of material technical information relating to mineral resources and reserves estimates for material mining projects within the body of the market announcement. There was some industry concern that the ASX may have proposed even more stringent requirements such as a requirement to release a full technical report detailing specific technical and scientific information to support the results which is the current Canadian requirement.
  • Historical and foreign estimates will now be able to be disclosed subject to including certain supporting information. The ASX has proposed to effectively codify the circumstances under which it would previously grant a waiver to allow disclosure of historical and foreign estimates.  
  • Production targets, ie production forecasts that extend beyond the current and forthcoming year, will not be able to be based solely on exploration targets or otherwise on historical or foreign estimates. Whilst ASX has not taken on board concerns raised in a previous submission by ASIC that production targets should also not be based on inferred mineral resources, the new ASX rules do require that when production targets are based on inferred mineral resources or exploration targets, a cautionary statement must be provided explaining the relative low level of geological confidence associated with these types of mineralisation and the uncertainty that the production target will be realised. There are also additional disclosure requirements which apply when releasing  production targets, but these do not apply to operating mines which are underpinned solely by reserves or a combination or reserves and measured resources.

Key changes for oil and gas companies

ASX will now require oil and gas companies to report in accordance with the SPE-PRMS. This will also coincide with the ASX adopting standardised petroleum resource definitions and classifications used in the SPE-PRMS, including: reserves, contingent resources and prospective resources. 

In addition to minimum reporting requirements under the ASX Listing Rules (which are designed to complement the SPE-PRMS), the major proposed changes to the disclosure regime for oil and gas companies include:

  • Disclosures of exploration and drilling information will no longer need to be released on a regular and structured basis but rather as and when required by the continuous disclosure rules – this will be the case where the drilling information will have a material effect on the price or value of the company’s securities. However, certain prescribed information will now be required in each disclosure.
  • Disclosures of reserves, contingent resources and prospective resources for ‘material oil and gas projects’ (see below) will require additional specific information to be contained within the body of the market announcement and the prior written consent of a ‘qualified petroleum reserves and resources evaluator’. If previously reported estimates have materially changed, disclosure will be required of how the new data or information has affected the previously reported estimates. 
  • ‘Qualified petroleum reserves and resources evaluator’: The qualifications to be a qualified petroleum reserves and resources evaluator have been raised in relation to academic qualifications, practical experience and professional associations.

Key changes for both mining and oil and gas companies

An annual resource and reserves statement will now be required to be included in the annual reports of both mining and oil and gas companies.

It is noted that mining and oil and gas companies will still be required to prepare quarterly cash flow reports in accordance with Appendix 5B of the Listing Rules.

Material mining and oil and gas projects

Many of the additional ASX disclosure and reporting requirements outlined above only apply in respect of ‘material mining projects’ or ‘material oil and gas projects’.

The Listing Rules define these terms by reference to whether the listed entity’s interest in the project is material in the context of their overall business operations or financial results.

The new Guidance Notes Numbers 31 ‘Reporting on Mining Activities’ and 32 ‘Reporting on Oil and Gas Activities’ also list a number of factors the ASX will consider to determine whether the project is material (including, amongst other things, the company’s market capitalisation and actual and expected expenditure on the project). 

Consequences

Industry can provide submissions on these exposure drafts to both the ASX and JORC up until 26 October 2012. Whilst there is no guarantee that these proposals will be implemented by the ASX or JORC in their current form, ASX listed mining and oil and gas companies should obviously follow the progress of these proposals with interest.

ASX has currently proposed a 12 month transition period to allow mining and oil and gas companies adequate time to adjust to the revised disclosure regime.