What is new in the JORC Code?

ASX Perth February 2006

Outline

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The JORC Code Introduction & Background Changes in 2004 JORC Code Other Codes and International Developments Current Topics of Interest Frequently Asked Questions Discussion.
February 2006

The JORC Code Introduction & Background

Introduction

Model for other national Mineral Resource and Ore Reserves Codes Major strengths

Incorporation of the JORC Code into the ASX Listing Rules in 1989 Periodic updating of the Code.

February 2006

Where it all started !
“On October 1, 1969, Poseidon directors issued a historic report to the Adelaide Stock Exchange before the start of trading. The statement began: ‘Further to the report of the recovery of nickel and copper sulphides on September 29, the directors of Poseidon NL announce that the assays received to date of the first completed drill hole PH2 at Windarra, WA, are as follows ……………
Trevor Sykes - The Money Miners.

February 2006

The Aftermath
“One disturbing feature of the boom-time geological statements is their misleading air of precision. Poseidon’s statement of 3.56 percent nickel looked like a fine calculation to one-hundredth of one percent. In fact, Poseidon had no basis on which to make such a calculation at the time and the actual assay of the core turned out to be substantially lower, although still of ore grade.” Trevor Sykes - The Money Miners.

February 2006

Leading to ……….
 Request from Melbourne Stock Exchange and Federal Government (Rae Commission) to AMIC (Minerals Council of Australia) to develop a code  AMIC responded and AusIMM joined promptly →→  Representation from:
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JORC

Australasian Institute of Mining and Metallurgy Minerals Council of Australia Australian Institute of Geoscientists Australian Stock Exchange Securities Institute of Australia Others as deemed appropriate.
February 2006

 Representation by invitation from:
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The JORC Code

Sets minimum standards for public reporting (in Australia & New Zealand) of Exploration Results, Mineral Resources and Ore Reserves Provides a mandatory system for classification of tonnage/grade estimates according to geological confidence and technical/economic considerations Requires Public Reports to be based on work undertaken by a Competent Person; describes the qualifications and type of experience required to be a Competent Person Provides extensive guidelines on the criteria to be considered when preparing reports on Exploration Results, Mineral Resources and Ore Reserves.
February 2006

The JORC Code Does Not …..
 Regulate the procedures used by Competent Persons to estimate and classify Mineral Resources and Ore Reserves  Regulate companies’ internal classification or reporting systems  Deal with breaches of the Code by
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Companies (ASX) Individuals, these are dealt with under code of ethics of AIG and AusIMM or the relevant ROPO.

February 2006

Principles of the JORC Code

Transparency

Clear and unambiguous presentation of information All the information reasonably required and expected Public reports based on work undertaken by Competent Persons.

Materiality

Competence

February 2006

JORC Stakeholders

February 2006

Current JORC Members
Chairman: Deputy Chairs: Mr Rob Behets (MCA) Mr Damian Dwyer (MCA) Mr Peter Forrestal (MCA) Mr Steve Hunt (AIG) Mr Warren Staude (SIA) Mr John Vann (AIG) Dr Bill Shaw (AIG) Mr Tim Goldsmith (AusIMM)(co-opted) Mr Don Larkin (AusIMM) (ex- officio) Secretariat: The AusIMM.
February 2006

Mr Peter Stoker (AusIMM) Mr Mark Adams (AusIMM) Ms Alice Clark (AusIMM) Mr John Dow (AusIMM) Mr Gerry Fahey (AIG) Mr Max Fowles (ASX) Mr Chris Roberts (AIG) Mr Pat Stephenson (AusIMM) Mr Gavin Yeates (MCA)

Changes in the 2004 JORC Code

Changes in 2004 JORC Code
 Recognised Overseas Professional Organisations  Naming of Competent Person (transfer from ASX listing rules)  Competent Person required for Exploration Results  Consolidation of Reporting of Exploration Results (transfer from ASX listing rules)  Reporting of Exploration Targets.
February 2006

Changes in 2004 JORC Code
    Encouragement to quantify risk/uncertainty Revised Diamond Reporting Revised Coal Reporting Introduction of Industrial Mineral Reporting guideline  New Appendix 1 – Generic Terms and Equivalents  Guideline on level of study expected for Ore Reserves.
February 2006

Recognised Overseas Professional Organisations (ROPOs)

1999 Code was unduly restrictive

Competent Persons must belong to AusIMM or AIG

ASX list of ROPO’s (currently 21) for overseas Competent Persons

Referenced in the 2004 Code.

February 2006

Recognised Overseas Professional Organisations (ROPO’s)

Canada

Similar system

South Africa

Currently implementing a ROPO system Ability to enforce Rules of Conduct or Codes of Ethics

Similar professional standards to AusIMM and AIG

The ROPO convention facilitates international reciprocity of Competent Persons.
February 2006

Current list of ROPO’s
 ROPO’s are currently accredited in
    Europe Canada United States South Africa

 Detailed list

 http://www.asx.com.au/professionals/pdf/ropo_letternovem

February 2006

Reporting of Exploration Results

1999 Code

Public Report on “exploration results” did not require the involvement of a Competent Person Requirement to involve a Competent Person for ‘Exploration Results’ introduced

2004 Code

This is where it all began!
February 2006

Reporting of Exploration Targets

1999 Code

No clear distinction between reporting of exploration results and exploration targets Clause 18 clarifies the reporting of ‘exploration targets’ ( separated from the clause on reporting of ‘Exploration Results’)

2004 Code

This approach is designed to facilitate responsible reporting by all explorers.
February 2006

Clause 18 - Reporting of Exploration Targets
It is common practice for a company to comment on and discuss its exploration in terms of target size and type Should not be misrepresented or misconstrued as an estimate of Mineral Resources or Ore Reserves The terms Resource and Reserve must not be used in this context Any statement referring to potential quantity and grade of the target must be expressed as ranges and must include
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a detailed explanation of the basis for the statement, and a proximate statement that the potential quantity and grade is conceptual in nature, that there has been insufficient exploration to define a Mineral Resource and that it is uncertain if further exploration will result in the determination of a Mineral Resource.

February 2006

Changes in 2004 JORC Code
Naming of Competent Person  1999 Code

The requirement for the Competent Person to be named was not in the Code - ASX listing rules only Transferred to Clause 8

2004 Code

The naming of the Competent Person has been a strong deterrent to public reporting by those who do not qualify as Competent Persons.
February 2006

Changes in 2004 JORC Code
Resource/Reserve risk and uncertainty

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Competent Persons are encouraged to quantify risk/uncertainty attaching to resource/reserve estimates (see Guidelines to Clauses 24 & 32 and Table 1) Not a mandatory requirement Reflecting mining project evaluation and increasingly common professional practice.

February 2006

Changes in 2004 JORC Code

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Clause 28 - Level of technical/economic study expected to have been carried out to convert Mineral Resources to Ore Reserves – achievable mine plan Requirements for reporting of Exploration Results transferred from ASX listing rules to Code The diamond and other gemstone reporting requirements consolidated and revised Guidelines for the reporting of Industrial Minerals introduced Modification of the coal clauses and recognition of the new Coal Guidelines.
February 2006

Changes in 2004 JORC Code
Consolidation of reporting of Exploration Results  1999 Code

ASX listing rules included additional requirements for reporting of exploration results Transferred to the Code and removed from the ASX Listing Rules to consolidate the requirements for reporting of Exploration Results.

2004 Code

February 2006

Other Codes and International Developments

Other Codes and International Developments

Further developments in Resource/Reserve reporting issues underway

Driven by international forces, principally overseas regulators

Australia has led the international negotiations through
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Success of the JORC Code Very successful CMMI/CRIRSCO initiative.

February 2006

Other Codes and International Developments

USA

SME Reserves Working Group Recommendations Concerning Estimation and Reporting of Mineral Resources and Mineral Reserves Aimed at resolving differences with SEC New JORC based codes SAMREC update underway.
February 2006

Chile & Peru

South Africa

Other Codes and International Developments

IASB
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Extractive Industries Accounting Standard Request to investigate alignment of the mineral and petroleum reporting codes Classification Framework revision recently completed International reporting template development.
February 2006

UN-ECE

CRIRSCO

Current Topics of Interest

Reporting Issues
 Reporting of Inferred Resources
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Submissions called from industry Quarter 4 2005 Subcommittee to report end Quarter 1 2006

 Lack of (or incorrect) statements regarding the Competent Person

Clause 8 is clear on Public Report requirements Terms such as "Probable Resources", "Geological Resources", "In situ Reserves", "Mining Reserves", “Mining Inventory”, "Possible Reserves" have no meaning under the Code and may not be used in public reports Such terms may be used in internal company reports if the company so wishes, although care should be taken not to create confusion since they are inconsistent with Code terminology. February 2006

 Use of incorrect terminology

Resource and Reserve Categorisation
 The Code does not allow statements in public reports which provide only total figures for Mineral Resources or Ore Reserves  Clause 25 - Mineral Resource estimates must be allocated to the defined categories of Measured, Indicated and Inferred  Clause 33 - Ore Reserve estimates must be allocated to the defined categories of Proved and Probable.

February 2006

Reporting of Only Contained Metal
 Clauses 25 and 33 do not allow the reporting of contained metal without also reporting Mineral Resource or Ore Reserve tonnages and grades  It is relevant to the potential investor to know whether a quoted quantity of contained metal is the product of a large tonnage of low grade material or of a small tonnage of high grade material  Quoting contained metal without also quoting grades can, particularly for Mineral Resources, result in a potential investor inferring a value for the deposit which is totally at variance with its true realisable value.
February 2006

Relationship between Mineral Resources and Ore Reserves
 Clause 34 requires that, where both Mineral Resources and Ore Reserves are reported, it is made clear whether the Mineral Resources are inclusive of, or additional to the Ore Reserves  Mineral Resources and Ore Reserves, being "apples" and "pears", should not be added together  Large differences between tonnages of Mineral Resources and Ore Reserves may be an indication that not all of the Resources meet the JORC Code requirement of “reasonable prospects for eventual economic extraction”.

February 2006

Reference to Assessment Criteria (Table 1)
 Clause 17 - Report of Exploration Results must include information on sampling of the mineralisation such as drilling/sampling density, drilling/sampling methodology, sample and assay quality, and so on  Clauses 26 and 35 - Reports of Mineral Resources and/or Ore Reserves must make mention of any assessment criteria for which inadequate or poor quality data materially affects estimation or classification of the resource or reserve.

February 2006

Historical or Overseas Resources
 These may seem difficult to report in accordance with the JORC Code  Continuous disclosure requirements may mean it is desirable to report information which cannot be reported in a timely manner in accordance with the JORC Code, e.g. an acquisition in Kazakhstan, or the acquisition of an older uranium resource.  The ASX Companies Update (05-04, 25 March 2004) requires companies to consult the ASX before making any announcement, with the common direction being to Clause 18  It is also possible to apply for a waiver from the Listing Rules to cover specific circumstances, for instance a prospectus.
February 2006

ASX Monitoring
 ASX have increased monitoring of company reports  Steps are underway to form a review panel to assist the ASX in this process.

February 2006

Frequently Asked Questions

Who polices the JORC Code?
 Companies must comply with ASX listing requirements  Competent Persons must conform to their institute Code of Ethics  JORC is an advisory body.

February 2006

Who polices the JORC Code?
 Many examples of reports that appear may not be in accordance with the JORC Code  ‘They should do something’ is the cry  But who is they and how do we know if they are doing something?  The most important they is you.  What should you do? Look on the JORC website for advice. But don’t expect someone else to do it for you. It is our industry and we all must ensure the standards are kept high.
February 2006

What is the expected confidence of Measured, Indicated and Inferred?
 It is accepted that publicly stated resources and reserves are estimates  The JORC Code is not prescriptive. It does not define the methodology to use, nor does it define the required accuracy or precision of estimates  The Competent Person has sufficient experience to know what is required, and it is his or her reputation that is on the line  Some guidance is provided in the definitions.

February 2006

Measured Resource

A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence. It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are spaced closely enough to confirm geological and grade continuity.

February 2006

Indicated Resource

An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed.
February 2006

Inferred Resource

An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain quality and reliability.

February 2006

Proved Reserve

A ‘Proved Ore Reserve’ is the economically mineable part of a Measured Mineral Resource. It includes diluting materials and allowances for losses which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified.

February 2006

Probable Reserve

A ‘Probable Ore Reserve’ is the economically mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource. It includes diluting materials and allowances for losses which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors These assessments demonstrate at the time of reporting that extraction could reasonably be justified.

February 2006

Conclusions
 JORC Code was born following a period of poor industry reporting standards  JORC Code continues to be the basis for International Codes  Reporting standards need to be maintained and improved  Increased monitoring activity is planned.
February 2006

Discussion

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