Production targets should be backed up by competent persons

Market confusion the likely outcome if changes aren’t made regarding the disclosure of production targets says ASIC.

According to ASIC’s recent public submission paper responding to issues papers from the ASX and JORC, the reporting of production targets and financial information based solely on Inferred Mineral Resources or exploration targets could lead the market to be misinformed, inferring that the target or prospect will be achieved when in fact a high level of uncertainty actually surrounds the underlying resource.

Currently neither the JORC Code nor the ASX Listing rules explicitly address this issue other than requiring that companies have ‘reasonable grounds’ for making the statement – reasonable grounds being based on completion of sufficient work measured against various modifying factors.

Looking at international equivalents, ASIC noted that unlike ASX’s Option 5A, the South African and European codes don’t allow production targets or statements about future matters implying economic viability based only on Inferred Mineral Resources – at least some Ore Reserves are required.

It is, however, allowed in Canada. Companies are required to make full disclosure by way of technical reports written and consented to by qualified people who generally are independent.

Based on this, ASIC’s response is that production targets and other forward-looking statements should be consented to by a Competent Person under the JORC Code – an issue that neither the ASX or JORC issues paper addressed.

If these changes are implemented companies will have greater certainty over the requirements attached to production level disclosure. An eradication of future unsupported production assumptions will inherently bolster market integrity. However feasibility issues of engaging a competent person and completing sufficient work may increase the compliance burden on junior miners.

For a full copy of the ASIC submissions paper go to:

http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/ASIC-submission-asx-jorc-published-1-December-2011.pdf/$file/ASIC-submission-asx-jorc-published-1-December-2011.pdf