10 September 2013
Practice Group:
Energy, Infrastructure
and Resources
Mining and Metals
Revised Disclosure Rules for Resources
Companies: Time to Transition
By Clive Cachia and Eric Fethers
A New Chapter 5
Listed mining and oil & gas companies have less than three months remaining to prepare for
compliance with the new Chapter 5 of the Listing Rules. The enhanced reporting regime will be
enforced from 1 December 2013.
Mining companies need to be aware of their increased disclosure obligations when reporting
exploration results, mineral resources, ore reserves and production targets. Guidance Note 31 provides
guidance on reporting obligations for mining companies. Other key changes relate to the use of:
• the competent person statement
• foreign and historical resource estimates
• cautionary statements.
Oil & gas companies also have additional disclosure obligations, which were designed by the ASX to
align with the industry sponsored Petroleum Resources Management System (SPE-PRMS). Guidance
Note 32 provides guidance on reporting obligations for oil and gas activities.
Key Changes for Mining Companies
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Type of
disclosure
Exploration
results*
Exploration
targets
Summary
Requirement to disclose sampling and drilling techniques, specific drill hole and
intercept information for material drill holes, and other information contained in
Table 1 of JORC 2012 on an "if not why not" basis. This means that a
Competent Person must either disclose the required information or justify why
they are not disclosing.
Extension of obligations to:
• prohibit disclosing exploration tonnage and grade targets as a headline
statement
• require such tonnages and grades to be expressed as a range
• include a description of the exploration activities and the timetable for
achieving the target
• confirm whether targets are based on actual, or yet to be completed,
exploration programs
• not report targets which are based solely on an exploration target or solely or
partly on historical or foreign estimates of mineralisation.
Revised Disclosure Rules for Resources
Companies: Time to Transition
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Initial or
updated
mineral
resource
estimates
Additional
detail on
mineral
resources
Requirement∗ to disclose certain material information including geological
information, sampling and drilling techniques, estimation methodology, mining
and metallurgical methods, and other information contained in relevant parts of
Table 1 of JORC 2012 on an "if not, why not " basis.
Extension of obligations to disclose:
• the basis on which there are reasonable prospects (ie. more likely than not)
for eventual economic extraction
• where untested practices are applied in the determination of reasonable
prospects, justification by a competent person of proposed practices
• where a mineral resource is reported at an average grade or above a cut-off
grade that is not currently economic, the conditions under which it will
become economic.
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Ore reserves
estimates∗
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Disclosure of
historical and
foreign
estimates
Requirement to include a summary of all information material to the
understanding of reported estimates, on an "if not why not" basis against
relevant parts of Table 1 of JORC 2012 including all information regarding
material modifying factors.
The estimate of the ore reserve must be based on a pre-feasibility or feasibility
study (including a mine plan and detailed financial analysis) that demonstrates
at the time of reporting, extraction could be reasonably justified. The key
underlying assumptions and outcomes of the pre-feasibility or feasibility study
must also be disclosed at the same time.
The requirement for such studies will become mandatory from 1 December
2014.
The prior obligation to obtain an ASX waiver in order to report historical and
foreign estimates of mineralisation has been replaced. Companies will now be
able to make such disclosures provided that it contains:
• reporting information accompanied by a statement by a competent person
attesting to that information
• a cautionary statement highlighting that the estimates are not reported in
accordance with JORC 2012.
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Production
targets and
forecast
financial
information
Companies will be prohibited from disclosing production targets and forecast
financial information that are based:
• solely on exploration targets, or
• solely on a combination of inferred mineral resources and exploration
targets, or
• solely or partly on historical estimates or foreign estimates of mineralisation
(other than qualifying foreign estimates).
Other than where targets are underpinned by an operating mine or a
∗
Note: these are for "material mining projects" only. A "material mining project" defined as a mining project which "is, or is
likely to be, material in the context of the overall business operations or financial results" of the company or its subsidiaries.
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Revised Disclosure Rules for Resources
Companies: Time to Transition
combination of ore reserves and measured mineral resources, companies which
disclose productions targets must also disclose supporting information such as:
• material assumptions
• competent person sign off
• relevant proportions of each category of ore reserves (proved and probable),
mineral resources (inferred, indicated and measured) and exploration targets
which underpin the production target
• prescribed proximate cautionary statements in respect of production targets
underpinned by inferred mineral resources or exploration targets. Proximate
means being in the same page and in the same, immediately preceding or
following paragraph
• where production targets are underpinned solely by inferred mineral
resources:
o a statement of factors indicating why the mining company believes
disclosure is reasonable
o the level of confidence for estimation of inferred mineral resources and
the basis for that confidence
o a technical report by a competent person to support the production target
o an expanded prescribed proximate cautionary statement relating to the
low level of geological confidence associated with inferred mineral
resources.
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Competent
person's
consent
Forecast financial information based on such production targets must also
include all material assumptions and if a "significant proportion" of the
production target is based on an exploration target, the implications for the
forecast financial information if that exploration target was not included.
The prior written consent of the competent person will continue to be required
before exploration results or estimates of mineral resources or ore reserves are
announced for the first time. However, subsequent references to those results or
estimates will now no longer need competent person sign off, provided that the
subsequent report:
• cross-references the earlier announcement
• the company confirms that:
o it is not aware of any new information that materially affects the
information
o where the report concerns mineral resource or ore reserve estimates, that
all material assumptions and technical parameters underpinning the
estimate continue to apply.
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Revised Disclosure Rules for Resources
Companies: Time to Transition
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Annual
mineral
resources and
ore reserves
statement
Statement in annual report to include:
• a summary of the company's review of ore reserves and mineral resources
• a comparison of such holdings against those of the previous year and an
explanation of material changes
• a summary of the arrangements and internal controls governing its
estimation process.
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Reporting of
in situ or inground values
Extension of obligations to prohibit reporting of in situ or in-ground financial
valuations which are based on exploration results, mineral resources or deposit
size, ie before all the modifying factors affecting the economic value of a
deposit have been considered and applied.
Key Changes For Oil & Gas Companies
Type of
disclosure
Summary
1
General
2
Exploration
and drilling
information
Petroleum
reserves,
contingent
resources and
prospective
resources
Requirement for all publicly reported petroleum resources to be classified and
reported in accordance with most specific resource classes within SPE-PRMS
in which they can be reported, together with additional general requirements
for reporting of petroleum resources and reserves.
This is intended to provide for greater consistency in reporting and to
minimise misleading or confusing disclosure to investors.
Removing the requirement for regular reporting for each drilling programme,
with a company being required to only provide a progress update when the
information is expected to have a material effect on a company's share price.
Requirement to provide additional information to be disclosed when a
company reports an initial, or materially updated, estimate of petroleum
reserves, contingent resources or prospective resources for material oil & gas
projects∗. The additional information includes material assumptions, details
of operator interests, types of permits or licences held, and a brief description
of the basis of the calculation of such reserves and resources. These estimates
must be prepared by a qualified petroleum resources and reserves evaluator
and must only be issued with their prior consent.
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Where there are material changes to information set out in previous
disclosures, oil & gas companies must formally announce:
• an explanation of the new data and information
• how the new data and information has affected prior estimates
• the changes or additions to such prior disclosed information.
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∗
Annual
reserves
statement
Requirement for oil & gas companies to include an annual reserves statement
in their annual reports which provides:
• details of the company's total and aggregated 1P and 2P petroleum
Materiality of "material oil and gas projects" is defined on a similar basis to "material mining projects".
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Revised Disclosure Rules for Resources
Companies: Time to Transition
reserves (split out as developed and undeveloped and by product and
geographical area) and contingent resources (if applicable)
• a reconciliation of their reserves (and/or contingent resources) against the
previous year's with an explanation of material changes
• a summary of the arrangements and internal controls governing the
estimation process.
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Estimates of
petroleum
reserves and
contingent
and
prospective
resources
Requirement for all publicly reported estimates of petroleum reserves,
contingent resources and prospective resources to include, among other
things:
• the evaluation date (the date the estimates are reported)
• the SPE-PRMS classification of reported petroleum resources
• if total petroleum initially-in-place, total resource base, estimated ultimate
recovery, remaining recoverable resources or hydrocarbon endowment is
being disclosed, disclosure of:
o a petroleum reserve, contingent resource and prospective resource
estimates
o whether and how each of the resource classes were adjusted for risk.
• the estimates being reported according to the entity's economic interest in
the petroleum resource net of royalties (and not in relation to pure service
contracts)
• disclosure of whether the deterministic or probabilistic method was used
in preparing the estimates
• the conversion factor for gas to oil (where estimates are reported in BOE)
and oil to gas (where estimates are reported in McfGEs).
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Estimates of
petroleum
reserves
In addition to the requirements set out in item 5 above, an entity reporting
estimates of petroleum reserves must ensure that:
• it has a high degree of confidence in the commercial producibility of the
reservoir
• reported "reserves" include only commercially recoverable quantities of
petroleum
• petroleum reserves are categorised into relevant SPE-PRMS sub
categories reflecting the degree of uncertainty in the estimates
• the report discloses the portion of petroleum reserve estimates that will be
consumed as fuel in production and lease plant operations
• the report discloses the reference point used to measure and assess the
estimates
• a mean estimate is not disclosed
• if estimates are aggregated, the method of aggregation of estimates is
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Revised Disclosure Rules for Resources
Companies: Time to Transition
disclosed
• if the estimate is reported beyond the field, property or project level, the
estimates must be aggregated by arithmetic summation by category
beyond that level of reporting, and a cautionary note must be included that
aggregated estimates may be conservative or optimistic estimates "due to
the portfolio effects of arithmetic summation"
• an explanation of how the petroleum reserves replacement ratio was
calculated, if reported.
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Estimates of
contingent
resources
In addition to the requirements set out in item 5 above, an entity reporting
estimates of contingent resources must ensure that:
• a mean estimate is not disclosed
• if estimates are aggregated, the method of aggregation of estimates is
disclosed
• if the estimate is reported beyond the field, property or project level, the
estimates must be aggregated by arithmetic summation by category
beyond that level of reporting, and a cautionary note must be included that
aggregated estimates may be conservative or optimistic estimates "due to
the portfolio effects of arithmetic summation".
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Estimates of
prospective
resources
In addition to the requirements set out in item 5 above, an entity reporting
estimates of prospective resources must ensure that:
• if the estimate is reported beyond the field, property or project level, the
estimates must be aggregated by arithmetic summation by category
beyond that level of reporting, and a cautionary note must be included that
aggregated estimates may be conservative or optimistic estimates "due to
the portfolio effects of arithmetic summation"
• a cautionary statement is included, noting the discovery and development
risks associated with the estimates and that further exploration and
evaluation is required.
Changes Affecting Both Mining and Oil & Gas Companies
1
Type of
disclosure
Summary
Quarterly
reporting
Producing entities must produce a quarterly report giving:
• details of exploration activities
• details of production and development activities
• a summary of the expenditure incurred in these activities.
Exploration entities must report the above items, and in addition must report:
• details of all their tenements and beneficial interests in farm-in and farm-out
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Revised Disclosure Rules for Resources
Companies: Time to Transition
agreements
• a quarterly cash flow statement in a prescribed form.
2
Cautionary
statements
Cautionary statements in a prescribed form must be included in reports of
estimates of prospective resources. They must be:
• as prominent as the reported estimate (same font, size, and colour)
• proximate to the reported estimate (same paragraph; if estimate is in a
heading, cautionary statement must be included in the heading).
The cautionary statement must be included where the estimate first appears.
Subsequent references to the estimate must cross-refer back to the cautionary
statement.
The Transition to the New Reporting Regime
Both the ASX and the JORC committee encourage early adoption of JORC 2012 prior to the mandatory
start date of 1 December 2013. Any adoption, however, requires adherence to all aspects of the new
Chapter 5 of the Listing Rules and JORC 2012 – there can be no "cherry picking".
Note that:
• annual reporting requirements kick in at the end of the financial year ending June 2014 (where the
company hasn't adopted the new regime before June 2013)
• there will be a requirement for a pre-feasibility study or a feasibility study to be completed in order
to declare an ore reserve, which will come into effect on 1 December 2014.
Conclusion
Under the new reporting regime, mining and oil & gas companies have to provide enough information
for investors to understand their results or estimates, the processes used to arrive at those results or
estimates and any assumptions underpinning their announcements.
Inclusion of Table 1 disclosures in reports of exploration results or estimates of mineral resources or
ore reserves is not a simple addition to an announcement – it involves considerable complexity, takes
time and will lead to much longer announcements.
Companies must ensure that statements made in the Table 1 disclosure, and all other disclosures, are
accurate in all respects. As with all announcements of forward looking statements, the Australian
Securities and Investments Commission (ASIC) will monitor announcements of mineral or petroleum
resource or reserve estimates to ensure they have a reasonable basis.
Mining and oil & gas companies must be prepared to fully comply with these reporting obligations by 1
December 2013.
K&L Gates is happy to assist you manage this complex transition.
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Revised Disclosure Rules for Resources
Companies: Time to Transition
Authors:
Clive Cachia
clive.cachia@klgates.com
+61 2 9513 2515
Eric Fethers
eric.fethers@klgates.com
+61 8 9216 0922
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Revised Disclosure Rules for Resources
Companies: Time to Transition
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