Updated regulations to allow U.S. mining and exploration companies to report mineral resources resources. Competent person requirements also feature in the new rules for the first time.
In October, the U.S. Securities and Exchange Commission (SEC) adopted a final rule that overhauls its existing disclosure requirements for mining company issuers. This represents the first major change since Guide 7 was adopted almost 30 years ago and brings the U.S. into line with countries following CRIRSCO reporting codes. U.S. companies will be required to begin to comply with the new rules in its first fiscal year beginning on or after Jan. 1, 2021.
Under the current SEC reporting rules, mining companies are not permitted to disclose mineral resources. In Canada, Australia, South Africa and other countries, companies have been required to disclose resources where it would be material information for investors.
Dual listed companies will benefit from decreased compliance costs. Previously, companies listed in the U.S.A. and a country following the CRIRSCO convention for mineral resource and ore reserve reporting were compelled to produce different annual reports and other public disclosure documents dealing with resources and reserves for different markets. U.S. exploration companies should find that the new rules assist with raising funds for exploration in the U.S.A. rather than having to resort to listing on overseas markets, including the TSX, TSX.V and ASX.
U.S. companies that are only subject to the SEC rules, may experience increased compliance costs because of the new requirement to disclose mineral resources and have statements of resources and reserves prepared by a qualified person. Canadian companies that are dual-listed in the US and Canada, have been allowed to comply with Canadian rules (NI 43-101) so are unlikely to be affected by the change.
The SEC announcement included some important provisions.
Geothermal energy is specifically excluded from the new rules.
A principles-based definition of materiality, consistent with Securities Act Rule 405 and Exchange Act Rule 12b-2, was adopted by the commission, whereby a matter is material if there is a substantial likelihood that a reasonable investor would attach importance to it in determining whether to buy or sell securities. The commission also proposed that a company should follow an approach requiring aggregation of all mining properties, regardless of size or type of commodity produced, when assessing the materiality of a registrant’s mining operations.
The commission also adopted a definition of mining operations that includes operations on all mining properties that:
- a company owns or in which it has, or it is probable that it will have, a direct or indirect economic interest;
- possesses, or lis likely to possess under a lease or other legal agreement, a right to sell or otherwise dispose of mineral products; or,
- has, or probably has, an associated royalty or similar right.
The commission also requires that companies materially disclose the basis for setting forward prices for commodities which form an essential component of asset valuation and, therefore, asset materiality. Companies may not exceed the average price for the preceding 24 months. Beyond this, however, qualified persons may use any reasonable and justifiable price, with transparent justification.
The new rules permit a mineral resources to be disclosed inclusive of mineral reserves, as long as mineral resources exclusive of reserves are also stated. This rule is more specific than current requirements of some other reporting codes, including the JORC Code (2012).
Inferred resources are also able to be used in economic analysis, as long as certain conditions are met.
The new rules adhere to the CRIRSCO convention where a public report about a company’s exploration results, mineral resources, and mineral reserves must be based on and fairly reflect information and supporting documentation prepared by a “competent” or “qualified person.” This is the first time that the commission has defined a role for competent persons which may be both individuals, or companies employing individuals responsible for preparing reports.
A “qualified person” is defined as a “mineral industry professional with at least five years of relevant experience in the type of mineralization and type of deposit under consideration and in the specific type of activity that person is undertaking”. Additionally, qualified persons must be “an eligible member or licensee in good standing of a recognised professional organisation at the time the technical report is prepared”. These requirements effectively mirror those of the JORC Code (2012).
The new rules allow multiple qualified persons to prepare a technical report provided the sections of the report for which individuals are responsible are clearly specified, signed dated and consented to by each individual.
Reports must include a consent statement from the qualified person, state whether the qualified person is an employee of the company and, if not an employee, what relationship or interests the qualified person may have in the company.
The rules specifically indemnify the qualified person from findings and conclusions regarding certain aspects of modifying factors discussed in technical reports that the qualified person specifically states were based on information provided by the company – another first and an important legal protection for individuals or groups acting as qualified persons.
A “recognised professional organisation” would have to be either recognised within the mining industry as a reputable professional association, or be a board authorised by U.S. federal, state or foreign statute to regulate professionals in the mining, geoscience, or related field.
Furthermore, the organization must:
- Admit eligible members primarily on the basis of their academic qualifications and experience;
- Establish and require compliance with professional standards of competence and ethics;
- Require or encourage continuing professional development;
- Have and apply disciplinary powers, including the power to suspend or expel a member regardless of where the member practices or resides; and,
- Provide a public list of members in good standing.
The commission has elected, however, to adopt a principles-based approach to professional organisation recognition rather than the approach adopted by existing CRIRSCO codes of publishing a list of Recognised Overseas Professional Organisations (ROPO) updated by organisations responsible for reporting standards in individual countries from time to time. AIG is considered to fully meet the commissions requirements of a recognised professional organisation, supported by it being recognised in all current jurisdictions where CRIRSCO template reporting codes are in use.
AIG welcomes the SEC announcement which brings the U.S.A. closer to countries with effective, transparent and material codes for exploration result, mineral resource and ore reserve reporting that provide informed investors with a basis for sound mineral asset investment decisions. The new rules also provide an opportunity for Australian geoscientists, experienced in the application of the JORC Code and Canada’s National Instrument NI 43-101, to share their knowledge and experience with their U.S. counterparts.
The SEC release announcing the new rules is available here.
A recent judgement in a case relating to a dispute between parties involved in a Western Australian iron ore project contained several important lessons for Competent Persons preparing statements of Exploration Results, Mineral Resource and Ore Reserve estimates. The judgement was handed down on 14th August, 2015 following hearings in the Federal Court of Australia during June 2015.
Technical reports tendered as evidence in the case were ruled to be inadmissible by the Judge hearing the case. Some of the shortcomings identified by the Judge have been addressed by the 2012 edition of the JORC Code(JORC 2012), largely through mandating the transparent and material assessment of all items included in Table 1 of the JORC Code and mandating the use of an “if not – why not” approach, which itself is an important means of ensuring transparency. The reporting of Exploration Potential has also been further clarified in JORC 2012.
Important lessons arising from the judgement for geoscientists acting as Competent Persons include:
- Any report presented to any company, publicly listed or private, has potential to be legally discoverable with the potential to be made public. The JORC Code, first and foremost, is a standard of best practice that AIG recommends members follow, rigorously, at all times.
- Maintenance of document control and versioning for announcements and reports of Exploration Results, Mineral Resources and Ore Reserves is critical:
- Where more than one person contributes to preparation of an announcement or report, all authors should be named, even through the responsibility for the document will rest with the nominated Competent Person(s);
- Reports issued in draft form should be clearly marked as drafts;
- All versions of a report should bear the date on which it was completed;
- Any updates to a report should bear a new version and date so that the chronology and process of preparing a report can be clearly and unambiguously established.
- Statements of Exploration Potential are forward-looking predictions of what a resource may become with exploration and evaluation, or a target that must be achieved for the explorer or developer of a project to consider it a viable future prospect. This differs markedly from Resource or Reserve estimates which are based on actual data. The guidelines for stating Exploration Potential in JORC 2012 need to be clearly followed. This includes clearly distinguishing Exploration Potential from Resources and Reserves, that extensive work is required to realise Exploration Potential and that statements of Exploration Potential are subject to considerable uncertainty.
- The work of others used in preparing report of Exploration Results, Mineral Resources and Ore Reserves must be reported in context. The assessed reliability of the data and the extent to which it was reviewed and relied upon in preparing any report must be transparently described.
It is worth noting that the situation regarding JORC compliance is currently somewhat different between Australia and New Zealand. New Zealand Petroleum and Minerals has taken the very significant step of requiring JORC 2012 compliance for all reports of Exploration Results, Mineral Resources and Ore Reserves by both companies and state owned corporations. This includes the requirement for reports to be prepared by a Competent Person. This effectively extends JORC compliance to all entities who hold prospecting, exploration and mining permits in New Zealand, not just publicly listed companies. AIG considers this an effective means of extending the benefits of JORC Code compliant reporting to New Zealand’s entire exploration and mining industry.
The AIG Complaints Committee reviewed the conduct of the Competent Person named in the documents relating to exploration results, resources and reserves and elected not to refer the matter to the Institute’s Ethics and Standards Committee. The Complaints Committee found no evidence of professional misconduct warranting further action.
Chairperson, Complaints Committee
21 November 2015
Invitation to Greenland Day in Perth
The Government of Greenland invites AIG members to participate in their annual Greenland Day, 9 December 2015 in Perth, at the University of Western Australia Club.
The program will include presentations from the Government of Greenland, the Geological Survey of Denmark and Greenland, the Centre for Exploration Targeting, Curtin University, and invited companies operating in Greenland on:
- Advanced projects and mineral potential in Greenland
- Exploration and mining in Greenland: infrastructure, logistics, application and approvals
- A window into Greenland’s geological post: a new geochronology database with implications for mineral exploration
- New understanding and mineral endowment of the Archaean, Palaeoproterozoic and Palaeogene of South-East Greenland
- A study of the ~1880 Ma orthomagmatic sulfide mineralization in the Ammassalik Intrusive Complex, South-East Greenland
- Sulfur and metal fertilization of the lower continental crust, with key examples from south east Greenland and north west Italy
- The Paleoproterozoic Karrat Group and Rinkian Belt: geology, Black Angel Zn-Pb deposit and other mineralization styles
- Results and observations from 5 years of joint MMR-GEUS resources assessments workshops
- Cu-Zn-W-Au-Ni- REE assessments in Greenland
- V-Ti potential in Greenland
- Invited company presentations
There will be opportunities to meet with the representatives from the Ministry of Mineral Resources including Head of the Geology Department, Chief Geologist, and Head of the Licensing Department, Government of Greenland.
Date: Wednesday 9 December, 2015
Where: UWA Club at the University Campus, Perth
When: 8.30am – 5pm followed by Sundowner
Catering: Morning tea, afternoon tea and light buffet lunch provided
The conference is expected to attract patrons including executives from mining and resource companies, potential partners, brokers, analysts, corporate advisors and Australian media. Please confirm your registration by completing the confirmation form and sending it to MMR Chief Geologist Henrik Stendal.
Some 58 attendees enjoyed the Mineral Resources: from Exploration Targets to Ore Reserves seminar presented by AIG’s Queensland Branch in Brisbane last week.
Some great presentations covered a wide range of issues faced by geoscientists involved in resource estimation, and, particularly, acting as a Competent Person in compliance with the JORC Code.
The seminar also provided a great networking opportunity and plenty of opportunities to discuss issues facing our profession.
The presentations from the seminar are now available for reference on the AIG web site.
A Geologist in Afghanistan – the adventures of a foolish geoscientist?
GPIC February talk, Tuesday 10th February 2015, presented by James Llorca FAIG, FAusIMM, FSEG, Team Leader – Component II Mineral & Capacity Development, USAID – MIDAS Project.
The talk is a presentation on the adventures of a possibly misguided geologist working in a war zone. It covers an overview of Afghanistan, its brief geology, prospectivity and the activities involved in conducting geological field work.
Also, it is understood that for the first time in GPIC history this talk will be delivered remotely. James’s talk will be something of an experiment: he will not be with us at the Basement on View. He will be giving his talk via Skype, from Kabul.
On the off-chance modern technology fails us on the night, bring an interesting rock – and we can discuss our disparate collection over our favourite drinkies.
About the Presenter
James is a qualified geologist with more than 30 years practical experience in both technical and management roles in the exploration and mining industry in Australia, Indonesia, the Philippines, China, Zambia, Africa and most recently, Afghanistan. This experience has resulted in highly developed technical skills in mineral exploration, geological interpretation and resource modelling in addition to JORC competency level resource estimations across various commodities. James also has significant experience in resource due diligence, technical exploration and mining appraisals, JORC and NI 43-101 compliance reviews.
James’ expertise in geological field mapping, mine geology, 3D orebody modelling, geostatistical analysis and estimation of resources and reserves, valuation and project management of natural resources has led him to his current role with MIDAS (Mining Investment and Development for Afghan Sustainability) which is a USAID funded project. His current role as Team Leader for Component Ii of the MIDAS Project is involved in Mineral Exploration and Capacity Development of the Afghanistan Geological Survey and the Ministry of Mines and Petroleum.
Download the talk flyer.