This article appeared in the December 2011 edition of the Listed @ ASX newsletter.
Proposed changes will improve resource-company reporting and promote investor confidence. Diane Lewis, ASX senior policy analyst, regulatory and public policy, discusses the consultation process.
The Australian Securities Exchange is consulting with resources industry stakeholders about proposed changes to its disclosure rules for mining and oil & gas companies, including the rules set out in the Joint Ore Reserves Committee (JORC) Code in Appendix 5A of the ASX Listing Rules. Over a four-month consultation process, ASX will meet with resources sector bodies, companies, investors and regulators to ensure changes to ASX’s disclosure rules strengthen the sector’s standing in global capital markets.
• Comments on the consultation paper, ‘ASX Listing Review Issues Paper: Reserves and Resources Disclosure Rules for Mining and Oil & Gas Companies’, are due by January 27, 2012.
This is an important initiative for listed resource companies and investors. It aims to ensure that the reserves and reporting requirements for ASX-listed mining and energy companies are world class.
Improved disclosure rules will further support global and local investor confidence in Australia’s resource sector and provide a robust, practical reporting framework for companies during the mining boom.
Listed @ ASX spoke to Diane Lewis, ASX senior policy analyst, regulatory and public policy, about the proposed changes.
Listed @ ASX: Diane, why is ASX proposing to update its disclosure rules for mining and oil & gas companies?
Diane Lewis: There are three main reasons. First, ASX is an internationally recognised listing market for resources companies. About 45 per cent of all ASX-listed entities are mining or energy companies. Improved disclosure practices around areas such as exploration and production reporting will promote investor confidence and help ASX-listed resource companies compete in global markets for capital.
Second, the JORC Code, a key part of ASX’s disclosure rules, has not been updated since 2004. With Australia in the middle of a global mining boom and an unprecedented level of mining investment expected this decade, it is appropriate that ASX looks to update and strengthen the JORC Code and related Listing Rules for resource companies. We believe there is scope to improve transparency in relation to some key assumptions and key technical information around exploration and production, and their reporting. The number of instances where ASX has had to take action for breaches of the JORC Code would also suggest that some clarification of reporting requirements is warranted.
Some of the issues in the consultation paper respond to reporting issues that have emerged in the Australian market, and some are areas where Australian reporting requirements could be seen to be out of step with what has happened internationally in the past seven years.
Third, as a licensed market operator, ASX has an obligation to ensure it has appropriate reporting requirements for all ASX-listed entities. ASX has made a public commitment in this regard to conduct a review of its reporting requirements to “ensure the market is adequately informed in respect of exploration activities, and resource and reserves estimates by listed resource companies and any associated production forecasts”.
Listed @ ASX: How has consultation gone so far?
Diane Lewis: It’s been very busy. We have spoken to resources industry stakeholders around Australia and early feedback is broadly positive. I believe the industry is encouraged by the open approach we have taken to the consultation process.
Listed @ ASX: What have been the main concerns raised?
Diane Lewis: Three areas stand out. The first is that ASX is seeking to make wholesale changes to the JORC Code. That is not the case. While the proposed changes are important, ASX is not seeking to fundamentally alter the JORC Code. The thrust of the changes is about tightening some reporting rules in some key areas, rather than wholesale changes.
The second concern is about whether ASX is seeking to adopt the Canadian NI 34-101 approach to reserves and resources reporting. Again, that is not the case. With respect to the main reporting requirement under NI 43-101 – the requirement for a technical report – ASX has, in the consultation paper, effectively recommended against the adoption of such a requirement on the basis of the significant compliance costs involved.
The third concern is whether ASX will require lawyers to sign off on announcements and/or estimates from ASX-listed resource companies. Again, that is not the case.
Listed @ ASX: What are some of the specifics of the proposal?
Diane Lewis: The consultation paper examines six key areas. These include the disclosure of:
• Exploration results.
• Exploration targets.
• Key assumptions underpinning mineral resources and reserves.
• A pre-feasibility study requirement.
• Production targets.
• Annual reporting of mineral resources and reserves.
A common theme in these areas is that better transparency and more structure around reporting requirements would promote investor confidence. Readers should review the Consultation Paper for more detail on ASX’s views in these areas.
Listed @ ASX: What are the next steps in the consultation process?
Diane Lewis: ASX continues to meet with resources industry stakeholders, market participants and regulators, to gauge their feedback.
The next milestone is interested parties submitting their comments to ASX by January 27, 2012. Once submissions are received and reviewed, ASX will produce draft new reporting rules and engage in further consultation with relevant stakeholders regarding those rules.
The JORC Code will be maintained in ASX’s Listing Rules. Any changes to the JORC Code that may come out of this process will be subject to the JORC parent bodies’ approval. Other changes may be implemented through the introduction of supplementary reporting requirements in Chapter 5 of the Listing Rules (Chapter 5 currently sets out the requirements for reserves and resources reporting by ASX-listed mining, oil and gas companies).
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