ASX announces new focus areas for exploration reporting
ASX announces new focus areas for exploration reporting
Explorers listed on the Australian Securities Exchange (ASX) should be aware of two recently published focus areas when announcing exploration results. These relate to ensuring balanced reporting in announcement headers and reporting metal equivalents in accordance with Clause 50 of the JORC Code 2012 Edition (JORC Code)).
In addition, the ASX reminds all listed entities to fully comply with the additional information requirements in annual reports (ASX Listing Rule 4.10.1 – 4.10.22), particularly the Listing Rule 4.10.7 disclosures (security holder distribution schedules). Entities must disclose the number of holders in each category, and the percentage of securities held in each category. A recent spot check of 100 annual reports by the ASX revealed that in 20% of the cases, the information regarding the percentage of securities held in each category was missing. The ASX encourages all listed entities to review how they present security distribution schedules in their annual reports and to ensure that the percentage is also disclosed.
Balanced reporting in announcement headers
Continuous disclosure announcements to the ASX must be made by ASX listed entities in the form of a written announcement with a suitable header. The content of an announcement header is key because it is used by brokers, analysts and investors to decide whether to read the full announcement and by the ASX to decide whether a trading halt is required.
Section 4.14 of ASX Guidance Note 8 Continuous Disclosure: Listing Rules 3.1-3.1B requires the announcement header to convey a fair and balanced perspective of what the announcement is about so as not to mislead readers as to its contents or significance. Entities should avoid ‘putting a spin’ on header announcements by only mentioning a small piece of positive news, where the content comprises mainly negative information. Similarly, announcement headers regarding forward-looking information that is speculative or highly qualified should not sensationalise the true character of the information it represents.
The ASX is concerned that some entities reporting exploration results highlight only the best/highest grade assay results in the announcement header, which is either not representative of the suite of assays, or is an anomalous result inconsistent with the suite of assays. This is not acceptable under the JORC Code which provides that:
- Reporting selected information such as isolated assays, isolated drill holes, assays of panned concentrates or supergene enriched soils or surface samples, without placing them in perspective is unacceptable (clause 19)
- Where comprehensive reporting of all exploration results is not practicable, representative reporting of both low and high grades and/or widths should be practiced in order to avoid misleading reporting of exploration results (section 2 of Table 1 of the JORC Code - in relation to ‘Balanced reporting’).
Where announcement headers for exploration results are not fair and balanced or potentially misleading, the ASX will likely reject them, require a retraction or correction, and even suspend trading in the entity’s securities until appropriate corrective action is taken by the entity.
Reporting metal equivalents – Clause 50 of the JORC Code
The ASX has also noted how entities reporting exploration results are increasingly using metal equivalents to report polymetallic exploration results in terms of a single equivalent grade of one major metal such as gold or copper. Metal equivalent grades are usually worked out by:
- Taking the in situ ‘value’ (the grade by the relevant commodity price) of each of the individual metals
- Adding these ‘values’ and calculating the grade of that same ‘value’ of the primary reported metal.
This type of reporting may be misleading unless the entity discloses additional details such as estimates of the metal recoverability. If an entity does not disclose the assumed metallurgical recovery information, a 100% metallurgical recovery is implied. The ASX has noted that in these instances, it may require the entity to set out its reasonable basis for assuming a 100% recovery rate. If it is unable to do so the ASX is likely to reject the announcement, require a retraction or correction, and may even suspend trading of the entity’s securities until appropriate corrective action is taken by the entity.
Clause 50 of the JORC Code requires a public report containing metal equivalent references to include, as a minimum, information about:
- Individual grades for all metals that are included in the metal equivalent calculation
- Actual assumed commodity prices for all metals (the actual price used to calculate the metal equivalent, not the spot price). Where the actual prices used are commercially sensitive, the entity must disclose sufficient information for investors to understand the methodology it has used to determine these prices (this can be done narratively)
- Assumed metallurgical recoveries for all metals, including the basis on which the assumed recoveries are derived (metallurgical test work, detailed mineralogy, similar deposits, etc.)
- A clear statement that it is the entity’s opinion that all the elements included in the metal equivalents calculation have a reasonable potential to be recovered and sold
- The calculation formula used.
Clause 50 also cautions against reporting metal equivalents if metallurgical recovery information is unavailable or cannot be estimated with reasonable confidence.