Mineral codes come of age – reporting standards
Pat Stephenson, Regional Manager and Principal Geologist of Australian Mining Consultants (Canada) Ltd, Vancouver, Canada, and ex-Chairman of the Joint Ore Reserves Committee reports on changing reporting standards
Public reporting of exploration results, mineral resources and mineral (ore) reserves benefits from considerable international conformity of terminology and practices, thanks to the efforts of the national reserves committees of Australia, Canada, South Africa, UK/Western Europe, USA and Chile, and of the international umbrella organisation, the Committee for Mineral Reserves International Reporting Standards (CRIRSCO).
The Australasian Joint Ore Reserves Committee (JORC) Code and the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves are generally recognised as the earliest and most influential of the modern reporting standards. Canada enjoys a reputation as a capital market of choice for exploration and mining companies, while the USA is acknowledged as a highly influential global capital market where many of the major international mining and exploration companies have a single or dual listing. The draft of the UK/West European Standard, the Pan European Reporting Code (PERC) was launched last month at the Institute of Materials, Minerals and Mining (IOM3), and will be finalised by December. Other regulations also apply to the reporting of exploration results, and mineral resources and reserves in each country, for example the National Policy 51-201 and National Instrument (NI) 51-102 in Canada. Reporting companies and competent/qualified persons who sign-off exploration and reserve reports need to ensure they are familiar with all the requirements.
Standards of Disclosure for Mineral Projects (NI 43-101), together with Companion Policy 43-101CP and Form 43-101F1, sets out the required content of a NI 43-101 Technical Report. It was issued by the Canadian Securities Administrators (CSA) in 2001, replacing National Policies 2-A and 22. The Canadian Securities Administrators is a forum for the 13 Canadian provincial and territorial securities regulators to coordinate and harmonise their work overseeing of the country’s capital markets.
National Instruments have legal status, an important point for companies also listed in the USA. While CSA is primarily responsible for the development of NIs, it is up to each of the provincial/territorial regulators to adopt (or not) the Instrument. If taken on board enforcement is the responsibility of the regulator. All members of the CSA have adopted NI 43-101.
Stock exchange regulations require companies to comply with both listing rules and NIs. NI 43-101 incorporates by reference the 2005 Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves, developed by the CIM standing committee on reserve definitions.
These standards define and set guidelines for mineral resources and mineral reserves in Canada, including those applying to qualified persons. NI 43-101 also specifies a number of requirements and guidelines for qualified persons, who must belong to one of the provincial/territorial geological, geoscientific or engineering organisations, or to a Recognised Foreign Association (RFA) listed in the appendix to NI 43-101.
In addition to the Definition Standards, the CIM has published best practice recommendations for general and diamond exploration, and for estimation of mineral resources and reserves. NI 43-101 references these documents as guidance.
In Australia, there is only one securities regulator, the Australian Securities and Investment Commission (ASIC) and one national stock exchange, the Australian Securities Exchange (ASX). The JORC Code has been incorporated as an appendix to the listing rules of ASX since 1989 and of the New Zealand Stock Exchange since 1992, making compliance with the JORC Code compulsory for listed companies in both Australia and New Zealand.
The JORC Code is the responsibility of the JORC, established in 1971. It comprises representatives from The Australasian Institute of Mining and Metallurgy (AusIMM), the Australian Institute of Geoscientists (AIG) and the Mineral Council of Australia (MCA), with representation from ASX and the Financial Services Institute of Australasia.
While the ASIC oversees the operation of ASX and administers the Federal Corporations Act, stock exchange listing rules are not legally binding. However, ASIC can require listed companies to comply with ASX rules, giving them a degree of legal status in certain situations. A competent person must be a Member or Fellow of AusIMM, AIG or a Recognised Overseas Professional Organisation (ROPO) included in a list promulgated by ASX from time to time on advice from JORC. Recognised Overseas Professional Organisations are similar to Canada’s RFAs, but with more stringent recognition conditions. Both ROPOs and RFAs may be self-regulatory or statutory/semi-government organisations.
In the USA, the equivalent to the JORC Code and CIM Definitions Standards is the Society For Mining, Metallurgy and Exploration (SME) Guide for Reporting Exploration Results, Mineral Resources and Mineral Reserves, 2007 edition. However, public disclosure of exploration results and mineral resources/ reserves is regulated by the Division of Corporation Finance of the US Securities and Exchange Commission (SEC). The Commission does not recognise the Guide or similar JORC-style of reporting standards, instead it requires mining companies to comply with its Industry Guide 7 (Description of Property by Issuers Engaged or to Be Engaged in Significant Mining Operations) and the SEC staff interpretations of this Guide.
Industry Guide 7, published over 20 years ago and not updated, differs significantly from JORC-style standards in that it:
• Does not permit the reporting of mineral resources. Instead, any non-reserve material must be reported as other mineralised material (except when a company is required by foreign or state law to report mineral resources, which is why the distinction between NI 43-101 being part of law and the JORC Code/ASX listing rules not being part of law is important).
• Requires the use of commodity prices based on the average of the last three years or on a contract price if the commodity is sold under contract (this is an SEC staff requirement not specified in Industry Guide 7). In Australia and Canada, reasonable and supportable forward looking prices from managers may be used.
• Requires at least a feasibility study to have been undertaken to allow publication of mineral reserve estimates for new projects (also an SEC staff interpretation of the Guide). Canada requires at least a pre-feasibility study, while Australia demands an assessment to determine a mine plan that is technically achievable and economically viable in the opinion of the competent person.
• Does not recognise the competent/qualified person concept.
Industry Guide 7 is a short and relatively simple document. It therefore requires considerable interpretation to cover the variety of situations found in the mining industry. However, SEC staff have significantly altered their interpretations of the Guide over time to take into account other changes in the USA and international regulations. Unfortunately, these interpretations are usually not made public, thus compounding the problem for USA-listed companies.
In April 2005, SME, on behalf of a wide-ranging committee comprising USA and international representatives, submitted a comprehensive document entitled Recommendations Concerning Estimation and Reporting of Mineral Resources and Mineral Reserves, to SEC. The document aimed to bridge the gap between SEC and industry positions, making major recommendations in the reporting of mineral resources, use of commodity prices, the technical /economic study required to support mineral reserve estimates, recognition of the competent person concept and permitting/legal requirements. The 2007 SME Guide For Reporting Exploration Results, Mineral Resources, and Mineral Reserves incorporates these recommendations. Due to other priorities and the relatively low profile of the mining industry in the USA, SEC has yet to respond.
Prior to 2005, SME was not structured and did not have a class of member that could allow people to be recognised as belonging to a RFA or ROPO, as identified in Canada, Australia and South Africa. In 2005, the board of directors approved the establishment of the Registered Member, a category that has the necessary qualification/experience and is subject to ethical control. These members are now recognised in Australia and South Africa while they are awaiting approval in Canada.
The Pan-European Reserves and Resources Reporting Committee (PERC) was formed in 2006 to resume the work of the former Institute of Mining and Metallurgy (IMM) Reserves Committee, which had developed the original 1991 IMM Code, and to take responsibility for managing and updating the Reporting Code 2001, which with the encouragement of CRIRSCO, had been developed as a collective effort by the IMM Reserves Committee together with the European Federation of Geologists, the Geological Society of London, and the Institute of Geologists of Ireland. Members of PERC also represent key sectors of the minerals and financial communities.
The PERC Code 2008 has been updated to incorporate improvements in the international CRIRSCO ‘template’ as well as details specific to the European extractive industries (such as for industrial minerals, dimension stone and aggregates). It is a CRIRSCO-compliant Code and shares identical reserve and resource definitions with other Codes in the CRIRSCO family, such as JORC and CIM. The ‘exposure draft’ for consultation was launched on 17 June, with a six-month consultation process leading to the release of the final version in mid-December 2008.