ASIC and mining industry square off over disclosure reporting changes
The mining industry is up in arms over what it says are unfair changes to reporting regulations that the corporate watchdog ASIC is pursuing.
It claims that proposed changes will severely crimp the ability of miners, especially smaller operators and exploration companies, to raise money.
The Australian Securities and Investment Commission (ASIC) recently released an information sheet, IS 214, in relation to guidelines for the type of information companies can release to the market.
The Association of Mining and Exploration Companies (AMEC) described the guidelines as a major departure from what companies have traditionally been able to disclose to the ASX.
Policy manager Graham Short said the treatment of routine documents like forward looking statements, which may outline production and financial targets, have been changed.
“There’s a couple of clauses that have been introduced into guidance material issued by ASIC, which prevent companies from releasing important material information to shareholders, and the market, at crucial funding times in the overall mine cycle,” he said.
“This is information that’s [disclosed] in the very early stages of a project, where a company does scoping studies and, or wishes, to release preliminary results.
“The guidance material now indicates these should not be disclosed.
We’ll end up with a situation where the market is misinformed, or ill-informed
Graham Short, policy manager, AMEC
“We’ll end up with a situation where the market is misinformed, or ill informed.”
Mr Short refutes ASIC claims that it has not made any changes to existing regulations.
“They would argue they haven’t made a change, mainly because the actual law remains the same, and the principle law behind this is the Corporations Act,” he said.
“That Act requires companies and directors to have reasonable grounds on which they make any forward looking statements to the market so that the market integrity is maintained. That’s reasonable.
“However there is this other JORC process that is working in tandem with the Corporations Act, which has worked for many, many years, and has worked very successfully.
“To the point where it’s made the Australian Stock Exchange is one of the most well regarded in the world.”
JORC stands for the Joint Ore Reserve Committee.
It sets the official criteria that companies need to meet in order to declare to the market they reasonably expect to have a certain amount of mineral, oil or gas resources in their tenement.
For example, using the results of a drilling program, they may report to the ASX they have 50,000 ounces of gold or 150 tonnes of coal or iron ore.
Concerns that investors will miss out on market information
Chris Cairns is the chairman of the Australian Miners and Prospectors Hall of fame, and CEO of junior gold mining company Stavely Resources.
He contends that although ASIC says it has not changed the reporting requirements, it has changed its interpretation of what is allowable to be released to the market.
Mr Cairns said this would make it harder for companies to raise investment funds in tranches.
ASIC is making a decision that mums and dads are not smart enough to make their own investment decisions.
Chris Cairns, CEO, Stavely Resources
“When I was involved in [gold company] Integra Mining, we made a couple of discoveries and put out scoping studies and prefeasibility studies out to the market,” he said.
“That was exactly the process that both the JORC code and the ASX listing rules envisage, in terms of the evolution of a company.
“We ended up raising $100 million to develop the project and the company was taken over for $400 million.
“And it was the early stage reporting of scoping studies that allowed us to raise those funds; it’s absolutely critical for accessing capital markets.”
In a statement, ASIC denied it had made any changes to the existing reporting requirements.
It said it required all companies, including mining companies, to have a reasonable basis for any forecasts and not to be misleading.
It stated that it was taking steps to ensure those “at the coal face” understood there had been no changes made.