Snowden Group’s Rod Carlson explains that The Joint Ore Reserves Committee (JORC) and the Australian Stock Exchange (ASX) recently held a number of presentations on changes announced to the JORC code.  The information provided included the nature and impact of changes to the JORC Code and the ASX Chapter 5 rules that are going to be implemented in the near future.  The JORC code was last revised in 2004, and is undergoing some fundamental changes whilst remaining true to its roots of being a non-prescriptive reporting code.  This discussion is based on the presentations made in the exposure draft released by JORC for comment in October 2012.  The key principles of the JORC Code, Transparency, Materiality and Competence remain but with an increased emphasis on the Materiality and Transparency aspects.  The driver for these changes is to improve the disclosure standards in public reporting to better inform investors.  Key changes listed in the exposure draft include:

• The new premise added is that information relevant to Table 1 in the JORC code should be documented.  Any omissions must be justified and documented – “if not why not” reporting.  Transparency requires that the reader of a Public Report is provided with sufficient information, the presentation of which is clear and unambiguous, to understand the report and is not misled, either intentionally or by omission of Material information that is known to the Competent Person.
• The Competent Person (CP) must quantify the materiality of all Table 1 criteria to the deposit in question.  The Competent Person must not remain silent on any issue for which the presence or absence of comment could impact on the public perception or value of the mineral occurrence.
• The current requirement for obtaining release consent from the relevant Competent Person (CP) of any Mineral Resource or Ore Reserve statement made subsequent to the initial release is being relaxed.  As long as clear reference is made to the original release, and that the form and context of the statement does not vary from the original, a company does not have to gain the permission of the CP. Consent will still be required for reporting of annual statements of Mineral Resource and Ore Reserves for the company.

The proposed new regulations for Exploration Target statements will demand more consistent and transparent reporting. The company will be required to include information pertaining to the assumptions made in the development of the target size. Relevant information must be supplied to the reader as to why the Exploration Target is to be considered as a useful guide to future potential wealth.

One of the fundamental tests of a Mineral Resource is the likelihood of “reasonable prospects for eventual economic extraction”. The revised code will now require the CP to explain the basis for these assumptions.

Cut-off grades must now also take into account not only the style of mineralisation, but the anticipated mining and processing development pathways.

The proposed JORC code changes also now include descriptions of what a Scoping Study, Pre-Feasibility and Feasibility Study should entail. These descriptions bring the JORC Code in line with the Committee for Mineral Reserves International reporting standards (CRIRSCO) an international body formed in 1994 to standardise market-related reporting definitions for Mineral Resources and Ore Reserves.  There is also the provision that any quoted Ore Reserve can only be quoted with a minimum standard of a Pre-Feasibility Study having been completed.

The use of metal equivalent equations gets a tightening, with stricter requirements for reporting of individual grades, commodity prices, and assumed metallurgical recoveries (for each element).

Modifying factors (mining related issues that influence the amount and confidence in the conversion of Mineral Resources to Ore Reserves) such as mining style, geotechnical, metallurgical, dilution, ore loss, and recovery have also increased requirements, and infrastructure has been allotted a section within Table 1.  The Resource CP must now be cognisant of (and report) other mining factors that may affect the potential economic extraction of the resource.

ASX Chapter 5

The ASX has been working in conjunction with the JORC and has issued a consultation paper Reserves and Resources disclosure rules for Mining and Oil & Gas companies. The paper describes proposed changes in a number of disclosure areas including Chapter 5 (Additional reporting on mining and exploration activities) for example exploration results, initial and updated Resource and Reserve estimates, foreign and historical estimates and longer term production targets.

The ASX proposed changes include a requirement to attach a report to the public announcement of exploration results or for Maiden or significant changes in Resources and Reserves. The report should always include reference to the points outlined in Table 1 of the JORC Code. Including Section 1-sampling, Section 2-exploration results, Section 3-Mineral Resources, and Section 4-Ore Reserves

The current requirements for Competent Person approval for every public release will be mitigated. Initial announcements will still need the official consent form from the CP, but thereafter as long as the announcement refers to the original announcement, and that no changes in form and context have occurred, the Company is not required to run the documentation past the CP.  Time will tell what impact this change may have on the consistency and quality of reporting previous results.  There is some risk that, unknown to the CP, the context in which the announcement is put forward may not meet with the spirit of the code.  The community of CP’s will be watching to see how the proposed code changes impact this area of reporting compliance.

The use of historical and foreign estimates currently requires a written waiver to be quoted.  The revised rules have removed this requirement if the announcement follows strict guidelines of wording, and that the company is working towards a compliance with reporting the Resource in accordance with the JORC Code. No financial or production targets based on historical or foreign estimates can be disclosed in the public domain.

The ASX is proposing to introduce further reporting requirements for the application of future production and associated forecast financials where those projections are not underpinned by an operating mine and ore reserve or a combination of ore reserves and measured mineral resources

With respect to any production forecast that includes low confidence geological information published in Inferred resources or exploration target, the company must disclose the factors that lead it to believe that it has a reasonable basis for disclosing the production target.

The changes to the JORC Code will impact all companies lodging public documents relating to the reporting of Exploration Results, Mineral Resources and Ore Reserves. All CP’s will be required to understand and comply with the changes in a 12 month grace period to be given once the changes are finalised.