How the JORC Code affects mining finance

6th February 2020

How the JORC Code affects mining finance

As the mining sector continues on an upward trajectory, miners and explorers have an important imperative to assure investors and stakeholders that their Mineral Resource and Ore Reserve estimates can be trusted.

Mining is an inherently risky business; from the technical, environmental, social and economic uncertainties associated with advancing an exploration prospect to a viable project, to the operating, market and safety risks attached to a developed mine.

Since we cannot totally escape the risk and uncertainty related to minerals projects, as an industry we should improve our presentation of the upside and downside risks in the context of the project’s development path and maturity. More transparent, consistent and balanced views of technical confidence will better inform both internal and external stakeholders, particularly investors, about the expected risk in the project.

The JORC Code sets out the minimum standards, recommendations and guidelines for Public Reporting in Australasia of Exploration Results, Mineral Resources and Ore Reserves. However the JORC Code principles of Transparency and Materiality are subject to the interpretation of the Competent Person(s), which may introduce a degree of subjectivity in reporting, particularly the level of disclosure regarding supporting information.

It is fundamental that resources, reserves and technical study outcomes are reported unambiguously to transparently present the level of inherent technical uncertainty (or confidence) in a project, while conveying a balanced view of the opportunities a project presents. Reporting needs to consider various stakeholders who may rely on this information and present the data in the context of the changing risk profile associated with project development paths and project maturity.

The importance of completing a Feasibility Study to the required level of detail and placing the outcomes in the correct context of technical risk and confidence is highlighted by following anecdotes (cited in a presentation by Peter McCarthy to the Melbourne branch of the AusIMM titled “Why Pre-Feasibility Studies Fail”):

Some other areas where study outcomes fall short are as follow (source: the AusIMM Online Professional Certificate in JORC Code Reporting):  

Given that only a small percentage of financial investment globally finds its way into the minerals and mining sector, the industry needs to preserve and improve its risk perception in the eyes of investors.

Competent Persons should strive to better present the technical risk and uncertainty associated with resource projects in the context of project maturity to provide more consistent, and balanced views of confidence, risk and opportunities for both internal and external stakeholders relying on this reported information. The 2012 JORC Code provides extensive guidance on the topics to be assessed, however Competent Persons need to step up and deliver the increased transparency that those relying on the reported data require.

This article is an excerpt from “Reporting and converting resources to reserves – how confident are we?” by Mark Noppe (Managing Director, SRK Consulting Australasia), found in Mineral Resource and Ore Reserve Estimation – a Guide to Good Practice, Monograph 30 by the Australasian Institute of Mining and Metallurgy (AusIMM). Mark is also a facilitator in the AusIMM Online Professional Certificate in JORC Code Reporting, an interactive eight-week course delivered online for mining professionals responsible for public reporting, particularly aspiring and current Competent Persons. For more information on the course, and other AusIMM courses available on JORC Code Reporting, visit www.ausimm.com/courses.