13 Oct 2011

ASX proposes more onerous disclosure obligations for mining and oil & gas companies

by Heath Lewis, Rory Moriarty, Samy Mansour

ASX has released a consultation paper considering changes to resource and reserve disclosure obligations for listed mining and oil & gas companies.

Developments in international standards relating to the reporting of mineral and petroleum information, an increase in demand for Australian resources and the need for consistency and confidence in public reporting by mining and oil & gas companies are key drivers behind a consultation paper, Reserves and Resources Disclosure Rules for Mining and Oil & Gas Companies, released by the ASX on 5 October 2011.

The review of reserves and resources reporting contemplated by its consultation paper is being guided by a desire to achieve greater alignment and harmonisation with international best practice, with a view to reducing compliance costs arising from currently inconsistent reporting obligations for companies reporting in multiple jurisdictions.

It will be interesting to see how ASX proposes to balance that objective with its stated desire of achieving improvements without unduly increasing the compliance burden for affected companies. This challenge is likely to be particularly acute in the mineral exploration and mining sector where the general industry perception is that a system akin to Canada's prescriptive NI43-101 regime would introduce a significant layer of cost in respect of periodic and transactional reporting.

Mineral exploration and mining companies

The review will examine the following matters relating to exploration information, mineral resources, ore reserves and associated production targets:

  • the disclosure of key assumptions to support mineral resource and ore reserve estimates and the adequacy of the disclosure of exploration results, exploration targets and production targets;
  • whether the completion of, at least, a preliminary feasibility study should be required to support an initial ore reserve determination; and
  • whether listed entities should be required to report the results of their annual review of their mineral resources and ore reserves holdings and their aggregated mineral resources and ore reserves holdings, with a reconciliation of estimates from the previous year.

Oil & gas companies

In relation to petroleum reserves, petroleum resources and associated production targets, the review will examine:

  • the introduction of a new listing rule requiring the reporting of petroleum reserves and other petroleum resources in accordance with the "Petroleum Resources Management System" (SPE-PRMS), together with general reporting requirements to complement SPE-PRMS;
  • a possible requirement that company level reserves and other aggregated resources information be disclosed annually;
  • an update to the reporting requirements under Listing Rule 5.9 relating to the disclosure of exploration and drilling results to provide more meaningful information to assess the significance of reported results;
  • the disclosure of key assumptions to support initial estimates of reserves, contingent resources and prospective resources, and the adequacy of the disclosure of production targets and related financial information; and
  • the alignment of the Listing Rule requirements relating to the minimum qualifications and experience required to be recognised as a "qualified reserves and resources evaluator" with best practice standards.

What should you do now?

Listed mining and oil & gas companies should consider the issues and proposals set out in the consultation paper and how they may impact on their disclosure obligations. Companies should consider taking the opportunity to engage with the ASX directly or through their industry associations, given the potential significant impact on their reporting requirements and associated compliance costs. ASX plans to hold roundtable events and meetings with stakeholders and has requested comments by 27 January 2012.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.