Codes and standards - Standardising mineral reporting
Melanie Rutherford talks to Steven Henley about standardising mineral reporting around the world.
Tell me about your background in the industry.
I lived in Derby, near the Peak District with its lead-zinc mines, and often went to Cornwall on holiday, so from a young age I had an interest in mining history and mineral collecting. By the age of nine, I wanted to become a geologist. I studied for my undergraduate degree in Geology at the University of Nottingham, and then did a PhD on the geology and geochemistry of a mining district in north Cornwall. I spent 10 years developing computer applications for geological surveys in Australia and the UK, and, with a colleague in 1981, set up Datamine, one of the earliest mining software companies.
Datamine was hard work but a great deal of fun in the early years, and involved a lot of selling, customer support and tough negotiations, in addition to programming. Things got a little complicated in the early 1990s recession and, in 1993, after a boardroom coup, I found myself starting again from nothing. For the past 22 years I've been doing a variety of interesting things. In 1994, I won one of the first gold mining licences awarded to a foreign company in Russia for a client. I spent over a year in Perth at the Australian research organisation CSIRO, and more recently have advised the board of Petropavlovsk Plc on their exploration and development programme in the Russian far east for several years. And now, back in the Peak District, almost where I started, I am doing some new geological software development, and am involved in mining history by developing a research project with the Ecton Mine Educational Trust. Since 2006, I have also served as a member of the Pan-European Reserves and Resources Reporting Committee (PERC), including chairing the committee for a few years. PERC is one of the component committees of CRIRSCO, which coordinates standards for mineral reserves and resources reporting around the world.
Part of standardising mineral reporting has been the development of mining codes. Why were they important?
The original impetus was a series of scandals during and after the Poseidon nickel boom in Australia in the 1970s. The lack of standardisation or quality control on minerals reporting led to the development of the JORC Code in the 1980s and an enormous improvement in the standards of reporting. This was emulated around the world, including in the UK by the IMM Reserves Committee, whose own reporting code was published in 1991. There was movement towards international standardisation during the 1990s, with the formation of the international committee, which later became CRIRSCO.
Would you briefly explain the codes?
The terminology can be a bit confusing to the newcomer. There are currently eight national reporting organisations (NROs) that are members of CRIRSCO. Each of these has defined a code, a guide, or a standard – all of which mean much the same and have very similar contents. The different terms reflect their different legal status. For example, the JORC Code is written into Australian law in the stock exchange regulations. In the USA, the SME Guide is considered a guide because it is not even recognised as a standard by the SEC, though it is accepted by some stock exchanges outside the USA. In Europe, the PERC Standard is accepted but is not (yet) mandatory, as the European Securities and Markets Authority (ESMA) allows companies to use any of the CRIRSCO member codes/guides/standards.
The CRIRSCO template is a distillation of the best common features of all of the CRIRSCO-family codes and standards. The first edition was published in 2006 and an update was published in 2013.
What is common to all of these codes, guides, and standards are two things:
The classification and a set of identical definitions,
The underlying principles of transparency, materiality, and competence for public reporting. Competence is of particular importance, and public reports must be signed off by a professional geologist or engineer who has defined minimum qualifications, membership of an approved professional association, and substantial relevant experience.
What benefits do they offer the various parties involved?
The main purpose was and remains protection of investors and the general public against misrepresentation by minerals companies and, although it is difficult to quantify the benefits, there has not been a major minerals industry financial scandal since Bre-X in 1997. In countries where the stock exchange regulators actively monitor published reports, most significantly Australia and Canada, there are regular cases of (usually relatively minor) infractions that are the subject of disciplinary action against companies and individuals, but so far nothing even approaching the scale of Bre-X. In PERC, we believe that the European regulations are too lax and need to be strengthened a great deal to minimise the risks here, especially as a large proportion of the world's mining capital is now traded on the London Stock Exchange. Other parties also gain – the mining companies, through the discipline of having well-structured professional studies of their assets, which assists in their decision-making and financial planning, the profession itself, and the general public, through responsible consideration of all relevant factors in a mining project.
What role does CRIRSCO play within this?
CRIRSCO co-ordinates the continuing development and improvement of the various national rules, and encourages responsible reporting. CRIRSCO is itself a strategic partner (and part-funded by) the International Council on Mining and Metals, an organisation representing a number of global mining companies and regional mining associations, and whose main aims are to foster environmental and social responsibility in the industry.
What are the main issues that arise out of having more than one code?
Some in the industry are still confused, and seem to think there is something fundamentally different between, say, JORC and NI43-101. However, from last year all the codes and standards are using exactly the same set of definitions, and the minor differences among them are those that result from the requirements of different jurisdictions or guidelines for specific sectors of the industry that are important in particular regions – so PERC has detailed guidelines relating to industrial and construction minerals, for example, of particular importance in Europe.
In the early 2000s, there were some who hoped that the various reporting codes would converge to a single code, but for a number of reasons (notably the requirements of different regulators) this was impractical. The resulting system now, though, is perhaps better as the different NROs play a sort of leapfrog – new and useful features found in one code will often be introduced into updated versions of other codes a year or two later.
Are there any significant benefits/limitation of any one code?
As I said, there are minor differences among them. These tend to be quite marginal, but there are inevitably situations when a company would prefer a more lenient set of terms from one code than they find in another. In some jurisdictions, of course, the question does not arise. For example, on the Australian Stock Exchange, companies are allowed to use only JORC (though for a short overlap period they have been allowed to choose between JORC 2004 and JORC 2012). Ideally, this would be the situation everywhere. In Europe, at present, any of the CRIRSCO codes may be used, but PERC is lobbying for a level playing field by defining PERC as the reference standard – so companies may use any of the CRIRSCO codes or standards but must declare any material differences in interpretation with the requirements of the PERC Standard.
What issues affect potential revisions to a code?
Mostly, it is the continuing experience of the NRO members themselves and of the users (such as mining companies, consultants, and stock exchange regulators) in identifying loopholes, ambiguities, and areas that require new guidance. There are some areas that are of common concern to several NROs, and these tend to be discussed in detail at the annual CRIRSCO meetings, before new wording is developed to build into the individual codes. One of the recent areas of discussion, for example, concerned the introduction of a standard definition for reporting Exploration Targets. There needs to be some regulation for these, though a number of CRIRSCO members were opposed to the term being allowed at all. A definition was agreed, together with a common understanding of the need to include sufficient guidance to restrict use of the term. Each national standard has implemented the standard definition and its own guidance. At a future date, it is probable that consensus will be reached on which set of guidance is the most useful.
What challenges arise in aligning codes from different countries with the CRIRSCO template? How do you go about addressing these?
The main problems arise from trying to set up equivalences between systems that have different underlying principles. Russia is probably the most high-profile case, and the one on which most has been written. In the 20 years up to 2007, there were a large number of articles, published and unpublished, attempting to define a mapping between the Russian and western reporting systems. Almost all were wrong, because they failed to recognise the underlying principles of the two systems, and also because they tended to underplay the competence of the Russian geologists – and also very often the mapping was biased by a perception of political risk.
From 2007 to 2010, PERC (on behalf of CRIRSCO) worked closely with GKZ (the Russian State Commission on Reserves) to define a mapping between the GKZ reporting system and the CRIRSCO template. This worked from first principles. It recognised the highly prescriptive nature of the Russian system, but also mapped this to normal western practice for deposits of comparable types and sizes. The result was a comprehensive set of guidelines on conversion that recognised the mapping could not be applied automatically but requires verification. However, these guidelines were sufficiently robust that it then became possible for the Russian geologists to develop their own CRIRSCO-aligned reporting code within a further year, requiring very little assistance from PERC.
Can you briefly explain the differences between CRIRSCO and UNFC, and the benefits and shortcomings of each?
Very simply, CRIRSCO (and here I mean all of the CRIRSCO-aligned codes and standards) provides a full reporting system by which companies and other entities such as government agencies can publicly report estimates of mineral resources and reserves, with an assurance that these reports follow professional standards and are backed by the possibility of disciplinary action by professional organisations like IOM3. CRIRSCO deliberately restricts the range of what can be reported publicly to information for which there is sufficient supporting evidence. One of the great benefits of CRIRSCO is its simplicity. This is achieved partly through its very simple classification, and partly also through its reliance upon professional judgement.
UNFC-2009 is a classification. It says nothing about reporting, or about principles of transparency, materiality, and competence. Its purpose was to define a neutral framework by which minerals, oil and gas, and other energy sources could be reported using the same classification. It is a complex three-dimensional system in which only a few boxes match CRIRSCO categories and most boxes are rarely, if ever, used. It provides a means of reporting estimates of undiscovered, uneconomic, or unrecoverable material. These should never be reported by companies – and indeed most minerals companies would have no interest in reporting them. Perhaps they could sometimes be of use to governments in long-term forward planning.
In my personal view, there is no advantage in the use of UNFC, and a major disadvantage in that some of its advocates are trying to promote it around the world as a reporting standard, which it is not. CRIRSCO categories are fully mapped to corresponding UNFC categories and, for all public reporting, CRIRSCO is to be preferred.
What are the main challenges CRIRSCO currently faces?
Although there are now many countries aspiring to have their own CRIRSCO-aligned standards and to become members of the club, progress on their development tends to be quite slow. CRIRSCO itself consists of only 16 individuals (two representing each of the NROs), all volunteers, all with their own full-time day jobs. CRIRSCO's funding comes partly from ICMM and partly from its members and their employers, and is therefore not secure. The effort that CRIRSCO can devote to supporting these aspiring new members is therefore very limited.
Some very important countries have shown relatively little interest in CRIRSCO, and negotiations can take a long time with many false starts. Why is this important? Because in a global investment climate, it is crucial that company assets are reported using compatible systems and terminology, so that an investor can understand and compare what is on offer. Increasing membership of CRIRSCO, while a sign of success, will also impose its own challenge, that the cost of supporting the annual meeting will steadily increase as the membership grows.
What is CRIRSCO currently working on, and what is the likely impact of this?
The CRIRSCO 2013 Template was to some extent a stopgap measure, to include the agreed standard definitions. A major update of the Template needs to be produced, to build in many of the improvements from individual codes published since 2006. This will make life very much easier for developers of new codes (the aspiring members) and will also provide a convenient source of the best text for updating existing codes.
Do you see a time when there will be a single worldwide reporting standard?
As mentioned earlier, this was one of our hopes 10–15 years ago, but was soon recognised to be impracticable, (a) because of regulatory differences and (b) because of detailed differences in emphasis among different countries and regions. Many in CRIRSCO now do not even see it as a desirable or necessary objective. With new members joining CRIRSCO, the primary languages of many of the standards will also no longer be English (already we have Spanish and Russian), though there will be English language versions of all of them.