Reporting reserves and resources – Australian Securities and Investments Commission update on “Life of mine” statements

In brief

• ASIC has recently reminded market participants of the importance of ensuring production targets for mining projects have a reasonable basis and are based on an appropriate level of geological study.
• In a recent IPO, ASIC required the modification of a production target where a portion of the mine life was underpinned by geological estimates which had not been estimated or reported in accordance with the JORC Code, reducing the life of mine plan from 15 years to 6 years.
• The example serves as a reminder to market participants that life of mine statements are forward-looking in nature and must be based on reasonable grounds, meaning early-stage estimates of mineralisation which have not been reported as reserve or resource estimates in accordance with the JORC Code must not be included in life of mine statements which are published to investors.

Background

The Australasian Joint Ore Reserve Committee (JORC) is responsible for the development and ongoing update of the Australasian Code for Reporting of Exploration results, Minerals Resources and Ore Reserves (JORC Code). The JORC Code provides for the classification minerals exploration results, mineral resource estimates and ore reserve estimates according to levels of confidence, geological information and economic assessment.

In a recent IPO, ASIC required the modification of a production target where a portion of the mine life was underpinned by geological estimates which had not been estimated or reported in accordance with the JORC Code. The Independent Technical Specialist Report, which accompanied the IPO prospectus, included a life of mine plan of 15 years, of which only 6 years was underpinned by mineralisation that was defined in accordance with the JORC Code. ASIC required a replacement prospectus to be issued with a significantly reduced life of mine statement of 6 years.

Overview of reporting requirements under the ASX Listing Rules

Under the ASX Listing Rules, all exploration results, mineral resource estimates and ore reserve estimates must be reported in accordance with the JORC Code. Life of mine statements made by ASX listed entities must comply with the ASX Listing Rules for disclosing production targets (and related forecast financial information), which require those statements to be based on reserves and resources reported in accordance with the JORC Code. Production targets based on only exploration targets, or only exploration targets and inferred mineral resource estimates, are prohibited.

Internal mine plans and corporate strategies may contemplate future mining at depths (or within areas) which are prospective mineralisation, but outside the perimeter of a current JORC Code reserve or resource estimate. In these circumstances, mining companies must ensure that their public-facing life of mine statements are modified to ensure those life of mine statements do not exceed the period of mining which is underpinned by a current JORC Code reserve or resource estimate.

In addition, mining companies should be mindful of ASX Guidance Note 31 and ASIC Information Statement 214 in relation to reporting life of mine statements (and related forecast financial information) that include a significant proportion of mineral resource estimates in the inferred category. In particular:

• the proportion of inferred mineral resources should not be a determining factor in project viability; and
• the inferred mineral resources should not feature as a significant proportion early in the mine plan.

JORC Code reforms

As noted in our earlier article (click here), the JORC has been undertaking a public review and consultation in relation to updates to the JORC Code (which was last updated in 2012). Whilst this review and consultation process commenced in 2020, recent commentary indicated that the proposed draft updates to the JORC Code may be provided for public consultation during the course of this year.

Given consultation was sought in a range of areas (e.g. developments in ESG since the JORC Code was last amended in 2012, the relationship between the JORC Code and the ASX Listing Rules and general updates, clarifications and further guidance) and the significant growth in the critical minerals sector since the current version of the JORC Code was adopted in 2012 (including new mining and processing technologies, as well customer end-uses for minerals), the proposal to revise the JORC Code is a timely development.

Given the potential for the JORC Code review to result in substantive changes to the related ASX Listing Rules and ASX Guidance Notes (and potentially, updates to ASIC Information Statement 214), a transitional period between the finalisation of the code revisions and the revised provisions taking effect may be appropriate (as was the case for the 2012 update).