Transcript Document

Johannesburg Branch SAIMM
ROGER DIXON CHAIRPERSON SSC
SAMREC/SAMVAL COMMITTEE
17 SEPTEMBER 2009
The South African Museum of Military History
Agenda
• Brief introduction to regulatory codes in SA
• Principles – competent person/valuator
• Current operating environment
• Some challenges
• International Activities
SAMREC CODE
THE SOUTH AFRICAN CODE FOR THE REPORTING
OF EXPLORATION RESULTS, MINERAL
RESOURCES AND MINERAL RESERVES
• FIRST PUBLISHED MARCH 2000
•2
ND
EDITION JULY 2007
MINIMUM STANDARDS FOR PUBLIC REPORTING
SAMVAL CODE
THE SOUTH AFRICAN CODE FOR THE
REPORTING OF MINERAL ASSET VALUATION
• Mineral Asset - Any right to explore or mine (or both)
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that has been granted or entity holding such property
or the securities of such an entity.
Published April 2008
The Code sets out a required minimum standard for
the Public Reporting of Mineral Asset Valuation.
Public Report
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Reports prepared for investors or
potential investors
Annual Reports
Quarterly Reports
Info Memos
Websites
Public Presentations
SENS
PRINCIPLES
Materiality: Relevant information for a reasoned
decision.
Transparency: The reader of a Public Report
must be provided with sufficient information, the
presentation of which is clear and unambiguous,
to understand the report and not be misled.
Competency: The Public Report is based on
work that is the responsibility of suitably qualified
and experienced persons who are subject to an
enforceable Professional Code of Ethics.
Framework for Reporting
EXPLORATION
RESULTS
Increasing
MINERAL
RESOURCES
MINERAL
RESERVES
level of
Reported as in situ
Reported as
geoscientif ic
mineralisation
mineable production
know ledge
estimates
estimates
and
conf idence
INFERRED
INDICATED
PROBABLE
MEASURED
PROVED
Consideration of mining, metallurgical, economic, marketing, legal,
environmental, social and governmental f actors
(the 'modif ying f actors')
Figure 1 Relationship between Exploration Results, Mineral Resources
and Mineral Reserves
Competent Person/Valuator
1. Membership of Professional Organization with
enforceable Code of Ethics
SAIMM
GSSA
SACNASP
ECSA
PLATO
SAICA
Competent Person/Valuator
2. Competent Person
Minimum 5 (five) years experience relevant to
style of mineralization and type of deposit and
to the activity undertaken
2.Competent Valuator
Sufficient relevant experience
Competent Person/Valuator
Team approach allowed but leader signs
off.
NB. Satisfied in own mind able to face peers
and demonstrate competence in the
commodity, type of deposit and situation.
Disciplinary Procedure
• Complaints in writing to SSC
• Ethics Committee decides whether
complaint is valid
• Referred to Professional Organization for
discipline
ROPOS
Recognised Overseas Professional
Organization
• Reciprocity
• Securities Exchange
JSE/SSC ROPOS
Australasian Institute of Mining and Metallurgy
Australian Institute of Geoscientists
Canadian Council of Professional Geoscientists
European Federation of Geologists
AusIMM
AIG
CCPG
EFG
The Geological Society
GS
Institute of Geologists of Ireland
IGI
Institute of Materials Minerals and Mining
IMMM
Mining and Metallurgical Society of America
MMSA
Society for Mining Metallurgy and Exploration
SME
Compliance Monitoring
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Codes incorporated into JSE Listing
Requirements – Section 12
• Strong links with JSE
• Readers Panel, experts in their field
• Remunerated by JSE
Prevention better than cure!
SAMREC AND SAMVAL CODES
Commodity Boom-Financial Crisis
The operating environment
Market Cap Resources
Value of the Global Resources Industry
1600
1400
Market Cap - US$(Bn)
1200
Industry - US$1,459 Bn
Top 5 Companies - US$474Bn
1000
800
600
400
200
0
Jun-01
Jun-02
Jun-03
Jun-04
Industry
Jun-05
Jun-06
Top 5 Mining Companies
Jun-07
Jan-09
Sep-09
Top ten September 2009
Top ten mining companies per Market Cap USD bn, Sep 2009
180
160
159.71
140
120
100.66
100
92.15
75.74
80
60
46.62
42.77
40
39.42
33.5
29.13
29.12
Goldcorp
NMDC
20
0
BHP Billiton
Vale
Rio Tinto
Shenhua
Suncor
Anglo
American
Xstrata
Barrick
Pre -feasibility
SAMCODE – Pre-feasibility Study
A comprehensive study of a range of options for the
viability of a mineral project that has advanced to a stage
where the preferred mining method, in the case of
underground or the pit configuration in the case of an open
pit has been established and where an effective method of
mineral processing has been determined.
It includes a financial analysis based on realistically
assumed assumptions of technical, engineering, operating,
economic factors and the evaluation of the other relevant
factors
Which are sufficient for a Competent Person, acting
reasonably, to determine if all or part of the Mineral
Resource may be classified as a Mineral Reserve.
The overall confidence of the study should be stated. A Prefeasibility Study is at a lower confidence level than a
Feasibility Study
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Feasibility Study
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A comprehensive design and costing study of the
selected option for the development of a mineral
project.
Realistically assumed geological, mining, metallurgical,
economic, marketing, legal, environmental, social,
governmental, engineering, operational and all the
other modifying factors,
Demonstrate at the time of reporting that extraction is
reasonably justified (economically mineable) and
the factors reasonably serve as the basis for a final
decision by a proponent or financial institution to
proceed with, or finance, the development of the
project.
The overall confidence of the study should be stated.
Reasonable?
• Commodity price volatility
• Fluctuating exchange rates
• Rampant escalation in selected areas
• Lack of technical capacity
• Cost over-runs
• Lack of infrastructure capacity
• Pressure from clients
Reasonable
What the majority of people consider to be
'reasonable' is that about which there is
agreement, if not among all, at least among a
substantial number of people; 'reasonable' for
most people, has nothing to do with reason, but
with consensus.“
[Erich Fromm]
Price volatility - platinum
Price volatility - copper
Price volatility - uranium
Cost over-runs
"The
huge Mmamabula project is in trouble," she
said, referring to rising construction, equipment
and project management costs.
"It was estimated originally at 6 (billion dollars)
two years ago, it went up to 9 and now is at $16
billion.“
Source: mineweb.com
Project schedule
Froneman stepped down as CEO at that stage, to
be replaced on an interim basis by Jean Nortier,
who was confirmed this week as CEO, just as
Dominion's "pre-commercial" uranium oxide
output projection for this year was again cut, this
time to 0.32m lbs, some 89% less than
Froneman's original projection of 2.8m lbs.
Source: mineweb.com
Project over-runs
LITIGATION!
Mmamabula energy project –
Revised estimate
A capex blow-out, which more than doubled the estimated project cost of NovaGold
initial
estimate
US$6bn
US$16bn
Resources'
Galore Creek
project, is the subject of a shareholder
class action lawsuit filed
against the Vancouver junior gold miner. The lawsuit was filed in the U.S. District Court for
the Southern District of New York on behalf of plaintiff Rudolph T. Textor and all purchasers
of securities of NovaGold Resources from October 25, 2006, through November 23, 2007.
Anvil Mining project –
estimate US$257m
initial
Galore Creek project – initial
estimate US$2.2bn
Revised
estimate
Source: mineweb.com
US$380m
Revised estimate
US$5bn
Litigation
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Contrary to the Defendants' representations, the Company
had failed to make reasonable estimates as to capital
expenditures necessary to mine Galore Creek, which were
underestimated by more than $3 billion.
The development of Galore Creek was not proceeding on
schedule and was a year and a half to two years behind
schedule;
The results of the Hatch Feasibility Study announced on
October 25, 2006 materially understated the capital costs
and construction schedule required to successfully mine
the Galore Creek site;
Defendants knew but failed to disclose that the Hatch
Feasibility Study was not a ‘Bankable Feasibility Study.'
Solution
• Compliant terminology
• Ensure all modifying factors are
covered
• Develop standards for levels of
study
• Confidence levels?
Above all TRANSPARENCY!!
www.crirsco.com
CRIRSCO
CRIRSCO MEMBERS
Australia:
JORC Code
Canada:
NI 43-101 + CIM Standards
Chile:
The Code for the certification of Exploration
Prospects Mineral Resources and Ore Reserves
Europe and UK:
PERC Code, The Reporting Code
South Africa:
SAMREC Code
United States:
SME Guide for Reporting Exploration
Information, Mineral Resources and Mineral
Reserves. SEC Industry Guide 7
Disconnects
• UKLA and CESA not linked to Professional Body
– Recognize several Reporting Codes
• SEC not linked
– Have moved on oil and gas
– Resources not recognized
– Competent Person not recognized
– Prescriptive on Prices
CRIRSCO
Potential new Members:
China
Indonesia
Mongolia
Peru
Philippines
Russia
CRIRSCO
CRIRSCO
• International reporting template
• Harmonising
reporting systems for both
solid minerals and hydrocarbons.
• Acceptance
by IASB of CRIRSCO
definitions.
• UNECE Classification Framework
Revision expected October 2009
WEBSITE
ALL SLIDES
WWW.SAMCODE.CO.ZA