The traps and pitfalls to be aware of when releasing exploration results

by Ivy Chen, Director and Principal at GeoReg Mining & Compliance

A company has spent thousands of dollars on mapping, sampling, and drilling and now has some exciting results it would like to share. How might the company go about achieving this, maintaining the momentum and excitement of the discovery, without falling foul of the regulators?

It is a bit of a minefield (pardon the pun). In most jurisdictions, the first consideration would be the legal framework of corporate law, and the requirement for public statements to have reasonable grounds. The basis for reasonable grounds, is then generally established by industry specific guidance. It seems simple, but as with any area of specialized knowledge, such as the minerals sector, the detail is important.

The main mining jurisdictions all apply a principles-based approach to public disclosure, the CRIRSCO template. This template derives from Australia’s JORC Code, which was the first to have been drafted, following the Poseidon Nickel Scandal in Australia in 1969. And from the CRIRSCO website:

‘CRIRSCO, which was formed in 1994 under the auspices of the Council of Mining and Metallurgical Institutes (CMMI), is a grouping of representatives of organizations that are responsible for developing mineral reporting codes and guidelines in Australasia (JORC), Brazil (CBRR), Canada (CIM), Chile (National Committee), Colombia (CCRR), Europe (PERC), India (NACRI), Indonesia (KOMBERS - KCMI), Kazakhstan (KAZRC), Mongolia (MPIGM), Russia (NAEN), South Africa (SAMREC), Turkey (UMREK) and the US (SME). The combined value of mining companies listed on the stock exchanges of these countries accounts for more than 80% of the listed capital of the mining industry.’

Table 1 of CRIRSCO (and JORC) summarizes the principles of public disclosure in the minerals space. Read the relevant Code applicable to the reporting jurisdiction and check the guidance. For ease of discussion, the remainder of this article will use the Australian context.

Firstly, what are reasonable grounds? Unfortunately, there is no single definitive answer; and ‘it depends’ is not what someone desperately trying to write a market announcement and head off a market suspension wants to hear. Reasonable grounds in our sector, generally start with reporting in accordance with the JORC1 and VALMIN Codes. Clauses 18 and 19 of the JORC Code outline disclosure of Exploration Results. ‘Exploration Results include data and information generated by mineral exploration program that might be of use to investors but which do not form part of a declaration of Mineral Resources or Ore Reserves.’ And ‘Public Reports of Exploration Results must contain sufficient information to allow a considered and balanced judgement of their significance… Public Reports of Exploration Results must not be presented so as to unreasonably imply that potentially economic mineralization has been discovered’.2

1 The JORC Code is currently under revision and an update is imminent.

Context is critical here. The disclosure needs to inform, but not mislead. And it is important to remember here that the intended audience is the investor. The JORC and VALMIN Codes are disclosure frameworks for discussing our discoveries, aimed at the people we hope will invest in our projects. We need to present the information clearly with a focus on what is material – what makes this particular result significant: and why it matters to a potential investor. Importantly, in language that does not require a geology degree to understand. We are not communicating with fellow geoscientists, we are telling investors (and possibly their expert advisers) about the merits of our projects and describing the risks and potential upside in a balanced way to allow them to make an informed investment decision.

When disclosing drilling results, provide enough context:3

• how the samples were collected, and how they were analyzed;

• what the typical background assay results might be;

• how many assays were collected that were nondescript, compared to the assays that are worth getting excited about.

Remember the investors: there is more than just the reporting Codes. This is where we the technical people must extend ourselves outside our comfort zones and consider that we are informing non-technical people. We are also interacting with the market, usually as part of a company that is listed on a stock exchange governed by listing rules and regulated by legislation. For this article, assume that it is the Australian Stock Exchange (ASX) listing rules; and the Australian Corporations Act, regulated by ASIC (the Australian Securities and Investments Commission) which regulates compa- ny and financial services and enforces laws to protect Australian consumers, investors, and creditors.

2 Note the use of bold in this article is purely for emphasis and does not reflect the same usage as applied in the JORC Code.

3 JORC Clause 18: ‘… Reports must include relevant information such as exploration context, type and method of sampling, relevant sample intervals and locations, distribution, dimensions and relative location of all relevant assay data, methods of analysis, data aggregation methods, land tenure status plus information on any of the other criteria listed in Table 1 that are material to an assessment’.

Exploration Targets are covered in the JORC Code (JORC Clause 17). Context is critical again here. The Exploration Target must (not should!) be expressed as a range of tonnes and a range of grades, and the basis or derivation of the target must be provided. And importantly, cautionary language must be included ‘… within the same paragraph as the first reference of the Exploration Target in the Public Report, stating that the potential quantity and grade is conceptual in nature, that there has been insufficient exploration to estimate a Mineral Resource and that it is uncertain if further exploration will result in the estimation of a Mineral Resource.’

The amount of work that has been done, and remains to be done, should be described. But ultimately, do not rely wholly on this article, please read JORC Clause 17, and then read it again. Always refer back to the JORC Code every time a public report is being prepared.

The ASX Listing Rules that are most pertinent to our sector when it comes to releasing Exploration Results are in Chapter 5 (ASX Ch 5 LR 5.7). These relate to material mining projects for the company, and when the company is an exploration junior almost every project will be a material mining project. Make sure that the five bullet points in ASX Ch. 5 LR 5.7.2 are addressed and included in the announcement, either as a table or in narrative form. Avoid Exploration Targets as headline statements. To remove any doubt, ASX Mining FAQ 20 clarifies that ASX interprets ‘headline statements’ broadly. It includes not just the title or heading to the report, but also any highlights, dot points or summary statements at the beginning of the report.

Conclusion

This rigor around the release of Exploration Results and Exploration Targets can sometimes seem over the top to us in the industry. After all, everyone knows how uncertain exploration is – we all know that it is a high-risk industry. But this is the perspective of highly-trained and experienced geoscientists, not that of the investor. We all agree to use these Codes and reporting frameworks so that we can retain the trust of our investors, to help the investors compare different projects, and select the ones that fit their risk profiles. Make sure that the appropriate jurisdictional guidance is used, and always keep in mind that while industry codes are helpful guidance, the law of that jurisdiction always takes precedence. A list of useful (but not definitive) documents for the main mining jurisdictions is below.

CRIRSCO Template (International):

• International Reporting Template for the Public Reporting of Exploration Targets, Exploration Results, Mineral Resources and Mineral Reserves, November 2019

Australia

• JORC Code 2012 (especially Clauses 17-19, Figure 1, Table 1 Sections 1 and 2)

• VALMIN Code 2015 (Section 5 Public Reports and Section 7 Technical Assessment)

• ASX Listing Rules Chapter 5, LR 5.7

• ASX Mining FAQ 15-21

• ASIC Information Sheet 214

Canada

• National Instrument 43-101, the national instrument for the Standards of Disclosure for Mineral Projects

• CIM Definition Standards for Mineral Resources & Mineral Reserves

• CIMVAL Code for the Valuation of Mineral Properties

• Overview: Toronto Stock Exchange and TSX Venture Exchange Technical Guide to Listing (see Appendix A: Listing Requirements For Mining Companies)

South Africa

• The South African Code for The Reporting of Exploration Results, Mineral Resources and Mineral Reserves (SAMREC Code)

• The South African Code for the Reporting of Mineral Asset Valuation (SAMVAL Code)

• JSE Limited Listings Requirements

Europe/UK

• PERC Standard for Reporting of Exploration Results, Mineral Resources and Mineral Reserves

• AIM Note for Mining and Oil & Gas Companies. C

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