Minerals Consultants

54 April 2014

The 2012 JORC Code – what minerals consultants and stakeholders need to knowby Mark Noppe FAusIMM(CP), Principal Consultant, Xstract Mining Consultants

Minerals consultants acting as Competent Persons play a crucial role in implementing

and upholding the standards of the 2012 JORC Code, while their exposure to numerous projects and clients also allows them to be advocates, mentors and educators of other stakeholders in the mineral industry in the application of the Code. As such it is implicit that as advisors to industry stakeholders, consultants advocate for and uphold the designed intent of the Code.

There are some stakeholders who believe the 2012 JORC Code imposes significant – and even onerous – new requirements on those repor ting compared with the 2004 JORC Code.

However, as most informed Competent Persons would expect, the 2012 JORC Code is in fact little changed from the earlier version of the Code.

The recent updates are in effect clarifications to enhance reporting of material information supporting Public Reports and to better support and ensure the intent of the Code is upheld.

The Code, with the new updates ‘provide a minimum standard for Public Reporting, and to ensure that such reporting contains all information that investors and their professional advisers would reasonably require, and reasonably expect to find in the report, for the purpose of making a reasoned and balanced judgement regarding the Exploration Results, Mineral Resources or Ore Reserves being reported’.

Further, the governing principles of the JORC Code remain those of ‘Transparency, Materiality and Competence’. The Code is not only binding on companies listed on the Australian and New Zealand exchanges, but is also a mandatory

reporting standard for members of The AusIMM and the Australian Institute of Geoscientists (AIG).

The clarifications introduced in the 2012 Code were considered necessary to improve the application of the Code as it has been become more widely used and to avoid it being misused and misquoted.

The 2012 Code, like its predecessors, clearly states that it ‘sets out minimum standards, recommendations and guidelines for Public Reporting in Australasia of Exploration Results, Mineral Resources and Ore Reserves’.

Unfortunately, for those aiming to only meet – and not to exceed – the minimum reporting requirements there will be a few who may not even reach the minimum standard of reporting and therefore drag the reputation of our industry down.

The main changes for stakeholder’s attention include:

• ensuring complete repor ting transparency and to implement the ‘if not, why not’ principle in reporting against Table 1

• increased onus on Competent Persons to disclose any conflict of interest in reporting

• clarification of Exploration Target reporting

• at least a Pre-Feasibility Study be conducted prior to reporting Ore Reserves

• definitions of the terms: Scoping Study, Pre-Feasibility Study and Feasibility Study

• a clear statement that all the elements included in the metal equivalents calculation have a reasonable potential to be recovered and sold

• prohibition on the repor ting of in-situ or ‘in-ground’ values in a Public Report

• listed companies must review and repor t resources and reserves annually; further, companies must nominate a review date and show the effective date of each Mineral Resource and Ore Reserve

• companies are obliged to report material changes in resources and reserves

• clarification on the meaning of a ‘material change’, as well as the introduction of the term ‘a significant project’ and its reporting requirements.

In addition to the updates in the JORC Code, stakeholders should be familiar with the relevant updates in the Australian Securities Exchange listing rules and reporting requirements for resource companies, in par ticular relating to:

• Material Projects • Exploration Results (Listing Rule

5.7) • Mineral Resources (Listing Rule

5.8)

Minerals consultants acting as Competent Persons play a crucial role in implementing and upholding the standards of the 2012 JORC Code.

Minerals Consultants

56 April 2014

• Ore Reserves (Listing Rule 5.9) • Foreign and Historic Estimates

(Listing Rules 5.10 to 5.14) • Production Targets (Listing Rules

5.15 to 5.19).

The ‘if not, why not’ repor ting requirement, together with the explicit requirement of a Pre-Feasibility Study for reporting Ore Reserves, are seen by some as a significant increase to reporting requirements. This reaction is not really justified since in determining Ore Reserves the 2004 JORC Code already required appropriate studies of the Modifying Factors and a mine plan that was technically achievable and economically viable, but not necessarily at the level of a final Feasibility Study.

Fur ther, the Competent Persons already consider the relevant par ts of the Code’s Table 1 criteria when determining Exploration Results, Mineral Resources and Ore Reserves and so now, under the ‘if not, why not’ requirements, these assessments simply have to be repor ted as par t of the Public Repor t.

In terms of assisting stakeholders, minerals consultants can fur ther strengthen their public reports by considering the following:

• Would the vast majority of my Competent Person peers agree with my logic in defining, classifying and repor ting the Exploration Target, Exploration Results, Mineral

Resources and Ore Reserves? • Does the stage of project

development and level of confidence in the associated data and technical-economic studies support the reporting and is this clearly and correctly presented?

• Would my peers and informed stakeholders be able to appreciate the assumptions, factors and process followed in the reporting from the way in which the results are reported and supported?

• Are my assumptions for eventual economic extraction reasonable, realistic and transparent and have I adequately applied approximate mining parameters for reporting the Mineral Resources?

• Have I considered and used all representative data and if I have excluded data have I adequately considered the advantages and risks in doing so?

• Have I included a statement of the relative accuracy, precision and confidence in the estimates and provided a similar discussion regarding any of the input data and factors that may have a material impact on Mineral Resource or Ore Reserve viability?

• Have I adequately presented any remaining areas of uncertainty at the current study stage and how these will be addressed in future work and studies?

All stakeholders using or relying on the 2012 JORC Code should take the time to read and consider the entire Code so as to fully appreciate the context of the sections that may specifically relate to their efforts.

Mineral consultants and Competent Persons in particular have duty of care to fully comply with the Code. Further, Competent Persons should seek out peer review and guidance where they are at all uncertain when reporting under the Code to better ensure consistency and professionalism across the minerals industry. Such guidance can be found through the JORC and ASX websites or by contacting suitable experienced peers through for example The AusIMM Consultants Society register of consultants. n

Mineral consultants and Competent Persons in particular have duty of care to fully comply with the Code.

AMC—the business of mining

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The Business of Mining

The honest value of external benchmarking.

Large companies with many similar mines may conduct in-ternal benchmark programmes, but these fail to identify how the company performance com-pares to industry as a whole. For that you need cross-company benchmarking, which in turn requires an honest bro-ker. Few companies are willing to share internal cost and per-formance data with their com-petitors, but most will do so if the data has been made anony-mous.

At AMC we have been bench-marking mining operations for more than 20 years and have many large and small opera-tions in our database. Our role as the honest broker of choice has allowed us to build an un-paralleled resource of open pit and underground information. The statistics are available to any new participant, provided they are willing to contribute to the background data set.

At AMC we have a deep under-standing of the things that drive mine performance, and the data to back up our analysis. If you want more information, feel free to contact me, Peter McCarthy on pmc@amcconsultants.com or call one of our consultants in Adelaide, Brisbane, Melbourne, Perth, Vancouver, Toronto or Maidenhead (UK).

The honest value of external benchmarking.

Large companies with many similar mines may conduct internal benchmark programmes, but these fail to identify how the company performance compares to industry as a whole. For that you need crosscompany benchmarking, which in turn requires an honest broker. Few companies are willing to share internal cost and performance data with their competitors, but most will do so if the data has been made anonymous.

At AMC we have been benchmarking mining operations for more than 20 years and have many large and small operations in our database. Our role as the honest broker of choice has allowed us to build an unparalleled resource of open pit and underground information. The statistics are available to any new participant, provided they are willing to contribute to the background data set.

At AMC we have a deep understanding of the things that drive mine performance, and the data to back up our analysis. If you want more information, feel free to contact me, Peter McCarthy on pmc@amcconsultants.com or call one of our consultants in Adelaide, Brisbane, Melbourne, Perth, Vancouver, Toronto or Maidenhead (UK).