16/05/2018 - 15:42

Retractions spike highlights compliance, policing

16/05/2018 - 15:42


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There has been a big increase this year in the number of ASX-listed companies, primarily junior explorers in WA, forced to retract announcements.

Bryn Hardcastle believes there has been a change in tactics by the ASX. Photo: Attila Csaszar

There were just 21 retractions by companies on the Australian Securities Exchange for the entirety of 2017.

So far this year there have already been 20, with a large portion of those occurring over the past month.

Among the companies being forced to make retractions are a host of local junior explorers, including Draig Resources, Australian Vanadium, AVZ Minerals, King River Copper, Athena Resources, Crater Gold Mining and Neometals.

These companies have all run into trouble while reporting production targets, exploration targets or mineral resources at their respective projects.

The core problem is that the targets quoted are based on early stage studies and do not comply with the Joint Ore Reserves Committee (JORC) code, which provides a minimum standard for reporting of exploration results, mineral resources and ore reserves.

Bellanhouse Lawyers managing partner Bryn Hardcastle said the flurry of retractions in the past month was largely due to a change in the tactics employed by the ASX.

“There isn’t a change in the ASX’s interpretation of the requirements of disclosure of production targets,” he said

“But I think now what you’re seeing is the ASX immediately suspending companies when they see incorrect disclosure.

“What they’re doing now is suspending and then asking questions, rather than asking questions and allowing companies to fix it.

“I think the policing has undergone a change.”

This variation had led to an increase in retractions, according to Mr Hardcastle.

Jackson McDonald partner Will Moncrief said compliance was an ongoing battle for companies.

“The ASX closely monitors announcements and media articles about mining company exploration activity, and regularly requires companies to publish additional information or retract information which is in breach of the listing rules and or the JORC code,” he said.

“Compliance with the technical rules in this area is very difficult and a lot of care needs to be taken by companies to get it right.”

Mr Moncrief said listed mining companies had the strictest announcement and reporting regime of any sector.

“One area of challenge for mining companies is that their reporting requirements are specified in the JORC code, very detailed rules in chapter five of the listing rules, the Corporations Act and in other regulatory guidance issued by ASX and ASIC,” he said.

“Both ASX and ASIC take a strict view on compliance, but don’t always pick up every instance of wrongdoing – therefore companies can’t rely with any confidence on what others have done in the past.

An ASX spokesman admitted there had been a spike in retractions recently.

“(But) ASX wouldn’t describe it as resulting from a ‘crackdown’, rather the appropriate action for matters attracting ASX’s supervisory attention from our ongoing monitoring of continuous disclosure,” he said.

“Price-sensitive matters must first be given to ASX (and disclosed to the market) and, for mining and resources companies, disclosure must be compliant with the JORC code. 

“ASX will take action and use its supervisory tools, such as price queries, aware letters and retraction demands to remind companies publicly about their disclosure obligation to keep the market properly informed.”

The spokesman also said that not all retractions were instigated by the ASX.

“Sometimes companies do it themselves, if they are made aware of incorrect information,” he said.

“And the purpose will differ; there are retractions of financial forecasts and for JORC issues, and for other reasons too.”

One area where the ASX has changed its policy is the publication of research reports commissioned by listed companies.

Earlier this month, the ASX released a compliance update to restrict the use of such reports on the exchange’s announcement platform.

In the update, ASX said it had experienced a number of problems recently with listed entities commissioning reports containing information the company itself could not publish.

On May 2, for example, West Perth-based Skin Elements was forced to retract revenue projections used in a research report, for which the company paid $10,000, prepared by Gloucester & Portman Capital.

The organic skincare company has also deleted the report from its website.

The new compliance regulation states that listed companies, generally, should not lodge an announcement on the ASX platform regarding a research report about the entity.

The logic behind the policy shift is that any broker or analyst report should be based exclusively on information previously disclosed to the market.


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