The mining industry depends on financial investments that, in turn, depend on how well investors understand the risks involved in estimating mineral resources or ore reserves. Professional organizations in several different countries have published codes that set minimum standards for public reporting of mineral resources and ore reserves.
This article explores the similarities and differences between the major reporting codes for mineral resources worldwide. Understanding the different approaches as to how resources are defined will assist in the production of guidelines that investors can use to further their due diligence in determining in which project to invest.
At the beginning, most of the reporting codes for resources were derived or extracted from the Joint Ore Reserves Committee Code, the Australasian Code for Reporting of Identified Mineral Resources and Ore Reserves, established as a joint initiative of The AusIMM, the Minerals Council of Australia and the Australian Institute of Geoscientists through the JORC. The JORC Code was first published in 1989, with further updates in 1992, 1993, 1996, 1999 and 2004. From 1999 onwards, with JORC and its successive updates used as a model, there was a rapid increase in the development of new standards in other countries. Thus reporting standards became an international phenomenon without the existence of an explicit international standard.
When analyzing the major international reporting codes it is possible to find that any reference to “resources” was made exactly as in the JORC Code. The main reason for this was that the JORC Code was established earlier and it had been relatively reliable when compared to other codes. Since most codes are based on the JORC Code, the comparative analysis focuses on the two instrumental codes (NI43-101 and JORC Code) that vary in principle but to which most mining companies are aligned.
The exceptions were cases in which the U.S. Securities and Exchange Commission (SEC) had very limited requirements for public reporting for mining projects. However, it should be noted that, based on the principles of the SEC for mineral reporting, SEC Guide 7 is acceptable.
The Society for Mining, Metallurgy, and Exploration (SME) is continually trying to incorporate its standards into those of the SEC, but the two organizations’ objectives are fundamentally different. Although the SME code is somewhat similar to JORC and the other codes, the SEC only requires specific reserve statements, because its primary concern as an oversight agency is to protect investors from abuse and misinterpretation. Both the SEC and the Ontario Security Commission (OSC) require the use of an historical three-year average commodity price to generate reserves, while the SME suggests a forward-looking forecast.
Similarities
In principle, most codes are similar in terms of the required competency of the person responsible for preparing the public report, except for the Russian and Chinese Codes. Additionally, most of the definitions of resources are similar in principle. For instance, the Chilean Certification Code takes a portion of both the NI43-101 and JORC Codes, incorporating them into a document to create their reporting standards for resources. In this document, the person responsible for the preparation of the report is called “Qualified Competent Person,” which is derived from “Qualified Person” (NI43-101) and “Competent Person” (JORC Code).
The definition of “resource” is also very similar in the main international codes. It is generally recommended that mineral resources be reported exclusively of mineral reserves. In some cases, mineral resources are inclusive of mineral reserves (JORC) and, in other instances, mineral resources are reported additional to mineral reserves (SAMREC and SME). However, there are fundamental differences in how the different classes of resources are used in economic studies.
Differences
Language is and will remain a barrier to the creation of effective international standards, for it is not just the words that are used but the understanding of these words that is critical, particularly where principles-based reporting is concerned.
The differences in perspective between industry and government have become clear in recent years, as more discussion has taken place. Government systems, particularly those in the Former Soviet Union, for example, were never designed for international use or for commercial market application and there is an understandable difficulty in wholeheartedly embracing this purpose now.
These differences create an uneven playing field for investors, which makes it necessary to combine these disparities and specify the class of mineral resource to be used in economic studies to facilitate investor decision-making.
* Andrew J. Ramcharan is the Manager of Corporate Development at IAMGOLD Corporation.
Professor Peter Moser works at the University of Leoben, Austria.
Links and References:
Australian Institute of Geoscientists
How to Find and Evaluate Mining Companies for Investment Purposes
Mineral Resource Classification
U.S. Securities and Exchange Commission
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