12/10/2016 - 15:49

ASIC guidance draws mixed response

12/10/2016 - 15:49

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Advisers to mining and exploration companies have tentatively welcomed new guidance from the corporate regulator on forward-looking statements but believe more clarity is needed.

ASIC guidance draws mixed response

Advisers to mining and exploration companies have tentatively welcomed new guidance from the corporate regulator on forward-looking statements but believe more clarity is needed.

The Australia Securities and Investments Commission said it has made minor drafting changes to Information sheet 214, which relates to matters like production targets and financial forecasts based on production targets.

ASIC said its goal was to draw together and better explain the existing rules.

“The changes have been made in response to concerns and misunderstandings that arose at the time of INFO 214's original release in April,” ASIC said in a statement.

“We believe the revised guidance now provides companies with sufficient guidance and information to enable them to fully comply with their legal requirements.”

The earlier guidance led to several listed companies being forced to withdraw statements they had made to the ASX, in most cases based on scoping studies.

Several other companies told the market they had completed scoping studies and achieved positive results, but did not release any further information for fear of breaching the guidelines.

ASIC said today forward looking statements have always needed to be based on reasonable grounds, and that has not changed.

Crucially, it said production targets and forecast financial information can be published even if secured funding is not in place, but a company still needs to be able to demonstrate 'reasonable grounds' that it could obtain the requisite project finance as and when required.

It also explained that production targets and forecast financial information can be published based not only on ore reserves but also on mineral resource estimates, provided they have 'reasonable grounds' for that estimate.

Gilbert + Tobin partner Sarah Turner said she welcomed the changes.

“It clarified you don’t necessarily need secured funding to release production targets but you do need reasonable grounds and you need to disclose your assumptions,” she said.

Ms Turner said ASIC could have gone further in providing clarification.

“It remains to be seen what this means in practice.”

Jackson McDonald partner Will Moncrieff was more questioning, saying ASIC has clarified some matters but the guidance had not substantially changed.  

“On the troubling issue of disclosure of production targets and NPVs, INFO 214 makes clear that secured funding is not required, but leaves for companies to determine whether they have sufficient financial capacity to deliver a production target or financial outcome,” he said.

“Unfortunately companies looking for greater clarity as to what can and can’t be said at a time when project finance is still not assured are going to be a little disappointed.”

ASIC said a company that does not have reasonable grounds for forward-looking statements of this kind should still disclose relevant information of a technical nature (for example, from scoping studies) to ensure the market is properly informed of its prospects.

Commissioner John Price thanked the Joint Ore Reserves Committee, the VALMIN Committee, the Association of Mining and Exploration Companies and the Australian Securities Exchange for participating in discussions that have led to the revised guidance.

“ASIC recognises the importance of ensuring all in the industry have a shared understanding of the existing requirements for good disclosure, and this process has provided a valuable opportunity to enable that,” he said in a statement.

 

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