27 Sep 2012
ASX releases proposed Listing Rule changes - revised disclosure regime for resources companies
by Brett Cohen, Heath Lewis, Liz Humphry
Listed mining and oil & gas companies should now consider putting in place the proper systems to ensure they can meet these new disclosure requirements.
After much public consultation and comment, ASX has released a consultation paper setting out the proposed Listing Rule changes and guidance notes to create robust new regulations governing the reporting of reserves and resources by listed mining and oil and gas companies. In parallel with this, JORC has prepared and released a revised and updated JORC Code.
In previous Insights we have taken you through the various stages of comment and public consultation of ASX's push for more consistent and transparent reporting standards designed to bring Australian disclosure rules for mining and oil & gas companies in line with international standards.
ASX has stated that the new reporting requirements seek to ensure that sufficient information relating to exploration activities and the material assumptions and technical parameters underpinning reserves and resources estimates are disclosed to enable investors and their advisors to make informed investment decisions.
The consultation paper contains the proposed changes to Chapter 5 of the Listing Rules, as well draft Guidance Note 31 "Reporting on mining activities" and draft Guidance Note 32 "Reporting on oil and gas activities".
The process is now in the final stage before the new Listing Rules are implemented. Submissions on the new ASX disclosure regulations will close on 26 October 2012.
Mining exploration and mining companies
Under the new disclosure regime, mining companies will be required to report in accordance with a revised JORC Code (a version of the revised JORC Code has been released for consultation) and will need to disclose additional information which is described in more detail below.
The proposed revisions to the JORC Code include updated requirements for reporting exploration targets and a new requirement for a preliminary feasibility study (at a minimum) to be prepared to support a maiden ore reserve.
The key additional proposed reporting requirements to be included in Chapter 5 of the Listing Rules include:
when reporting results for the first time (or reporting a material change to previously announced results) on a material mining project, mining companies must annex to that announcement a report based on Table 1 of the JORC Code reporting, on an "if not, why not" basis, against each of the key criteria and assumptions listed in that table. The announcement itself must then capture the material information contained;
exploration reports must be accompanied by a table setting out specific drill-hole and intercept information on an "if not, why not" basis;
mining companies will now be able to report historical or foreign resource or reserve estimates (which previously required an ASX waiver) subject to certain conditions; and
mining companies must provide all underlying material assumptions for longer term projections of future production and cautionary statements (which are to have equal prominence as the projection) where a proportion of those production targets includes exploration targets or inferred mineral resources (instead of solely being based on ore reserves). We've already reported on ASIC's objections to production targets based on inferred mineral resources and exploration targets
(as they are too uncertain and not a reasonable basis for production targets). Companies should still be mindful of ASIC's position on this matter, as it has demonstrated a willingness to apply its position through its powers of market supervision and disclosure document review.
Oil & gas companies
Oil & gas companies will be required to report in accordance with the Society of Petroleum Engineers – Petroleum Resources Management System (SPE-PRMS). Companies must also provide additional information when disclosing reserve estimates, contingent resources and prospective resources (being material assumptions and the basis on which those estimates were made). ASX has prescribed a list of key disclosure requirements in each instance.
In addition to the prescribed material assumptions and details, the key additional proposed reporting requirements to be included in Chapter 5 of the Listing Rules include:
general reporting requirements that will promote the use of standardised terminology and provide a consistent framework for the classification of petroleum reserves and resources;
removal of the requirement for oil & gas companies to have a structured reporting regime for each drilling program. Instead reporting on the progress of a drilling program will now only be required under a company's continuous disclosure obligations (ie. when the company expect the information to have a material effect on the price or value of its securities). When a company does report on drilling progress, ASX has again prescribed a list of required information;
when reporting reserve estimates, contingent resources and prospective resources for material projects that have materially changed from when those estimates were previously reported, companies will be required to provide an explanation on how new data and information has affected those estimates;
a company reporting on prospective resources must include a cautionary statement which is to have equal prominence as the reported estimate; and
the minimum professional qualifications and experience required to be recognised as a "qualified reserves and resources evaluator" have been updated with best practice standards.
Both mining and oil & gas companies will be required to include annual resources and reserve statements in their annual report.
Commercially sensitive information
ASX recognises that some of this additional information now required may be commercially sensitive and cannot be disclosed. In such cases, the company should explain why the information is considered commercially sensitive and then disclose sufficient information for investors to understand the methodology to determine these factors and assumptions (eg. in narrative rather than numerical form, where the numbers are commercially sensitive).
However, ASX does warn companies to be careful not to claim that information is commercially sensitive when it is not so.
What should you do?
Although no definite date has been provided by ASX as to when these Listing Rule changes will be implemented and it is proposing an additional 12 month transition period following implementation, listed mining and oil & gas companies should now consider putting in place the proper systems to ensure they can meet these new disclosure requirements.
Listed mining and oil & gas companies undertaking capital raising before the new Listing Rules and Guidance Notes are implemented should also bear in mind the new disclosure regulations when reporting on reserves and resources in any disclosure documents.
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