Some Welcomed Recognition for Exploration Mining Companies

by K&L Gates LLP
Contact

As market sentiment and investor confidence in Australia's extractive industries remains subdued, recent initiatives from governments and regulators demonstrate, at least, an acknowledgment of the issues faced by mineral exploration companies and a desire to improve conditions.

In this Legal Insight, we explore some of these initiatives and how they may assist market participants.

JORC Code 2012 – A Year on

Australian Securities Exchange (ASX), Australian Securities and Investment Commission (ASIC) and the Joint Ore Reserves Committee (JORC) have recently provided useful tips for mining companies in preparing their announcements in compliance with ASX Listing Rule 5 and JORC Code 2012. This guidance is drawn from their experience with companies' compliance since the mandatory commencement of JORC Code 2012 in December 2013. It seeks to remove some of the uncertainties faced by mining companies in complying with their revised disclosure obligations. A summary of the guidance is set out below.

Table 1 of the JORC Code 2012

Table 1 of the JORC Code 2012 sets out a checklist of assessment and reporting criteria which must be addressed and included in public announcements of exploration results, mineral resources and ore reserves.
Each criterion in Table 1 must be addressed. Even if a criterion in Table 1 is not relevant, it must be completed on a 'if not, why not' basis.

JORC Code 2012 does not support partial publication of a Table 1 section. For example: 

  • if a mining company previously published Section 1 (Sampling Techniques and Data) and Section 2 (Reporting of Exploration Results) in an announcement, and if that mining company releases an announcement with mineral resources for the first time (which requires Section 3 to be published), that updated announcement must include Sections 1, 2 and 3
  • if a mining company is reporting results on a follow-on program, the mining company should republish the full relevant sections of Table 1 in their announcement even though the mining company can note that none of the criterion in Table 1 has changed since its last publication
  • if a mining company is releasing a maiden JORC Code 2012 Ore Reserve based on a JORC 2004 resource, the announcement of the Ore Reserve requires a full update of sections 1 to 3 criteria as well as section 4 
  • the regulators consider that an investor should not have to pull multiple updates to piece together the full picture.

Competent Person Sign Off

The relevant consent of the competent person must be included in an announcement. If exploration results are being announced for the first time, the consent of the competent person relating to the exploration results must be included in the announcement.

For exploration targets, the streamlined procedure for the consent of a competent person in ASX Listing Rule 5.23 cannot be utilised. Every announcement containing an exploration target (even if that exploration target has previously been announced) must contain the consent of a competent person.

A competent person's consent must also be refreshed each year for the annual reporting of the Mineral Resources and Ore Reserves even if a company's Mineral Resources and Ore Reserves have not changed.

Exploration Targets

Mining companies should now be cognisant of the requirements in clause 17 of the JORC Code 2012 for exploration targets. Common issues with the announcements of exploration targets are:

  • an exploration target must be expressed as a range and cannot be a 'headline statement' in an announcement
  • there must be a detailed explanation on the basis of the exploration target ie what is the exploration activity which has been completed for the exploration target? 
  • a clarification statement of the conceptual nature of the exploration target must be included in the same paragraph containing the first reference to the exploration target. A presentation containing a slide with an exploration target must include a cautionary statement in the slide with the first reference to that exploration target.

Production Targets

Mining companies must ensure that they comply with the requirements of ASX Listing Rules 5.15 – 5.19 for any announcements relating to production targets. In particular, mining companies need to be careful to distinguish between aspirational statements and production targets. ASX also emphasised that a production target is the responsibility of the board of a mining company, not the competent person. The board must be satisfied that there is a reasonable basis for any production target which is announced and include a description of the exploration work that has been done and an assessment of relevant modifying factors.

Exploration Development Incentive

In recognition of the challenges faced by mining companies in raising funds, the Federal Government has recently introduced the Exploration Development Incentive scheme for 'greenfield' mineral exploration. On 10 October 2014, Treasury released the exposure draft legislation for the Exploration Development Incentive scheme.

This measure is intended to enable small mineral exploration companies with no taxable income to provide exploration credits to their Australian shareholders as a refundable tax offset.

The new measures, if enacted, will apply to exploration expenditure incurred by 'eligible companies' from 1 July 2014. The allocated aggregate AUD100 million for the Exploration Development Incentive scheme will be made available to eligible companies as follows:

  • 2015-16 year: AUD25 million
  • 2016-17 year: AUD35 million
  • 2017-18 year: AUD40 million

To be an eligible company, the exploration company must be a disclosing entity (under the Corporations Act) which has not carried on mining operations in an income year. An entity 'connected with' or an 'affiliate of' the exploration company must not have carried out any mining operations. For more details, please see our earlier Legal Insight here.

Initiatives by State Governments

Various state governments have also implemented initiatives aimed at encouraging mineral exploration in Australia. Most of these initiatives relate to identifying and obtaining new mining information through applying new ideas and technologies.

Currently funded initiatives include subsidised drilling programs, regional geophysical surveys, mapping and geochemistry programs, creating databases and virtual core libraries and core data, and collaborative projects with research organisations.

For example, the New South Wales government has implemented and invested AUD2 million in the New Frontier Cooperative Drilling Program which provides grants to mineral exploration companies to assist private exploration drilling programs for minerals and encourage exploration, which will hopefully lead to new scientific and economic discoveries. The program will provide funding up to 50% of direct drilling costs for each individual project, with a cap of AUD200,000 for each approved project.

Winding Back Taxation Laws on Options

The Federal Government has also announced that it intends to unwind the changes to the taxation of employee share schemes which were introduced in 2009 by the former Labor Government. The media release announces that this change will apply to all companies effective from 1 July 2015.

Under the announced unwinding of taxation laws on employee option schemes, employees who receive discounted options will be taxed at the time of exercise, rather than issue, of the options. The change to the taxation treatment of employee share options will benefit junior mining companies who provide, or would like to provide, non-cash based remuneration to its workforce as an incentive to grow the value of the enterprise whilst maintaining cash flow for exploration endeavours.

 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© K&L Gates LLP | Attorney Advertising

Written by:

K&L Gates LLP
Contact
more
less

K&L Gates LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.