Scoping studies results are essential to a junior resource and mining company’s ability to communicate with shareholders and raise initial finance to progress to more detailed studies.
According to ASIC’s Guidance Note 214, in order to report scoping study results, they should have “reasonable grounds” which are based on relevant professional and industry standards. The question the industry is struggling with is what these are.
The JORC Code (2012) sets minimum standards, recommendations and guidelines for reporting Ore Reserves, but is relatively silent on reporting the results of scoping studies.
If the intention of ASIC was simply to improve the quality of reporting of scoping studies, there could be a very simple solution. This would see the JORC Code setting the minimum standards for such studies; rather than having the ASX and ASIC policing this area.
The JORC Code could apply similar minimum standards, requirements and guidelines for public reporting of scoping study (and other production targets) results as those applied to Ore Reserves. The main changes would include the requirements:
- That the technical and economic assessment of the scoping study be prepared, or supervised, by a Competent Person with relevant experience in preparing Ore Reserves.
- That a scoping study results be based on classified Mineral Resources only, and not allow Exploration Target material to be included.
- That an initial scoping study report include the requirement to complete a JORC Table 1 Section 4. While the confidence in modifying factors may be low, the basis of each modifying factor, and the reason the Competent Person believes them to be appropriate, should be stated.
- That there is a clear definition for the mineralisation reported from a scoping study. Terms such as “production forecast”, “mineable resource” and “mining inventory” are in current use, but only serve to confuse stakeholders as there is no formal definition available in the JORC Code. It cannot be reported as being “ore”, as this implies the material has been classified as an Ore Reserve, which it has not. Neither can it be reported as a Mineral Resource, as the mineralisation has been modified by dilution, recovery, cut-off grade and other technical and economic modifying factors.
Such an adjustment would:
- Improve transparency, competency and materiality around scoping studies
- Provide additional information to investors to inform their decisions; and
- Enable junior mining companies to disclose material information to the market in a timely manner.
Perhaps a little too simple?