The JORC Code its practical application Peter Stoker Chairman JORC AMPLA Twilight Seminar Sydney, 3 June 2010

2. Peter Stoker is Chairman of the Joint Ore Reserves Committee (JORC) Peter is also a member of CRIRSCO (Committee for Mineral Reserves International Reporting Standards). While Peter Stoker is Chairman of JORC, the views presented are his own and should not be taken as necessarily representing those of the committee. You may have noticed that this disclaimer is in type face that is readable and you will observe that it is given the same prominence as the remainder of the presentation – Not small type face that is impossible to read and only on the screen for a millisecond Sorry did you miss that? Disclaimer

3. Outline How the JORC came about Its significance - ASX Listing Rules, ASIC’s view, professional bodies Key definitions: Mineral Resources, Ore Reserves and Competent Persons and what they mean Implications for resources companies - listed and unlisted JORC Competent Persons and competency / attribution statements Some reporting examples The relevance of JORC estimations to legal practitioners, principally with respect to disclosure obligations on listed resources companies - presented by David Holland & Guy Sanderson, Partners, Baker & McKenzie.

4. Windarra Nickel Mine Poseidon Nickel, Australia

5. Poseidon Nickel, AustraliaWhere it all began for JORC! “On October 1, 1969, Poseidon directors issued an 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.

6. Poseidon Boom – 1969 Report

7. Poseidon Boom & Bust – Share Price

8. Trevor Sykes in The Money Miners says: “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.”

9. At the time of reporting, Poseidon only had early stage, AAS assays that had been rounded down to the nearest whole percentage point. The actual assays were 11% lower, but the public was not given this information until five years later. As it turned out, the eventual recovered mine grade was about half that reported pre-mining, with dire consequences for the company. The consulting geologist, Burrill, was a substantial shareholder in the Poseidon.

10. Leading to……… The request from Melbourne Stock Exchange and Federal Government (Rae Commission) to AMIC (Minerals Council of Australia) to develop a mechanism to resolve the reporting issues. AMIC responded and AusIMM joined promptly ?? JORC. The Joint Ore Reserves Committee (JORC). JORC – the Committee. The JORC Code – the Code developed by JORC (the committee). First Code 1989. Code updated regularly since then.

11. Why have a JORC Code? The Code applies to Public Reports of Exploration Results, Mineral Resources or Ore Reserves, prepared for the purpose of informing investors or potential investors and their advisers So the JORC Code is a Code for Reporting for the benefit of investors Unfortunately many seem to think it is a Code for estimating resources and reserves and hence a Code of interest only to mining professionals It is a Code for Public Reporting and applies to all, particularly company secretaries, public relations staff and Board of Directors.

12. 12 The 2004 JORC Code

13. Relationship of The JORC Code with Regulatory Authorities Australasian Code for Reporting of Mineral Resources and Ore Reserves (The JORC Code) is Appendix 5A of the Australian Securities Exchange (ASX) Listing Rules, the only externally sourced information in the ASX Listing Rules This makes The JORC Code enforceable as Law by Australian Securities and Investments Commission (ASIC) There is an ASX representative on JORC JORC, a voluntary committee meets regularly with ASX and ASIC.

14. ASX Listing Rule 5.6 refers to The JORC Code (Appendix 5A)

15. Australian Reporting Environment

16. 16 JORC Code ASIC’s view ASIC regards compliance with the JORC Code as necessary to ensure that public statements in prospectuses, take over documents etc., meet the Corporations Law requirement for statements to have a reasonable basis. In Australia, regulatory responsibility for disclosure of Exploration Results, Mineral Resources and Ore Reserves also arises in connection with the broader Corporations Law requirements for proper disclosure to be made to shareholders and investors in connection with fundraisings, takeovers and other corporate activities, and under the Trade Practices Act 1974 (Further details available in Philips and also Livesley ).

17. 17 Professional Bodies Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code) prepared by the Joint Committee of The Australasian Institute of Mining and Metallurgy, the Australian Institute of Geoscientists and the Minerals Council of Australia (JORC) So JORCs parents include two professional bodies and an industry group. Both the professional bodies require observance of the Code where it is applicable and failure to observe the Code is a breach of the Code of Ethics of these bodies 24 Recognised Overseas Professional Bodies (ROPOs) have agreed to enforce the Code. The professional bodies require a complaint to act against a Competent Person.

18. The JORC Code – What it Does 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.

19. The JORC Code Does Not ….. Regulate the procedures used by Competent Persons to estimate and classify Mineral Resources and Ore Reserves: It is a Code for reporting Regulate companies’ internal classification or reporting systems. JORC does not deal with breaches of the Code: By companies (ASX). By individuals. These are dealt with under code of ethics of AIG and AusIMM or the relevant ROPO. ROPO Recognised Overseas Professional Organisation.

20. JORC Code - Principles based I had wondered how these words entered the vocabulary as the 3 components of the principles based code. I asked Pat Stephenson and Peter Stoker, who said these 3 principles came into use in the 1999 version of the JORC Code. Pat Norm and others always referred to the essence or spirit of the Code but on reviewing Valmin it clicked that these terms were used but also included Independence. So the 3 terms entered into the vocabulary and are now used across all the international Codes.I had wondered how these words entered the vocabulary as the 3 components of the principles based code. I asked Pat Stephenson and Peter Stoker, who said these 3 principles came into use in the 1999 version of the JORC Code. Pat Norm and others always referred to the essence or spirit of the Code but on reviewing Valmin it clicked that these terms were used but also included Independence. So the 3 terms entered into the vocabulary and are now used across all the international Codes.

21. Important Points about Mineral Resource and Ore Reserve Estimates Resource estimates are ESTIMATES, not calculations. New information or a different geological interpretation can materially change estimates. There is no single correct resource or reserve estimate for a given deposit. In fact… the only thing that is certain is that the estimate is not absolutely correct!

22. Relationship between Mineral Resources and Ore Reserves – Figure 1 (JORC Code)

23. What is a Mineral Resource? A Mineral Resource is an estimate of tonnage and grade for a mineralised body, based on sampling of that body. The estimate represents a realistic inventory that, under assumed and justifiable technical and economic conditions, might, in whole or in part, become economically extractable. Portions of a deposit that do not have reasonable prospects for eventual economic extraction are NOT Mineral Resources. Sub-divided, in order of increasing geological confidence, into: Inferred Mineral Resources (low level of confidence). Indicated Mineral Resources (reasonable level of confidence). Measured Mineral Resources (high level of confidence).

24. Mineral Resource Classification

25. Inferred Resources

26. What is an Ore Reserve? An Ore Reserve is the economically mineable part of Measured and Indicated Mineral Resources. 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 the application of realistically assumed ‘Modifying Factors’. These assessments demonstrate at the time of reporting that extraction could reasonably be justified. Sub-divided, in order of increasing confidence, into: Probable Ore Reserves. Proved Ore Reserves.

27. Modifying Factors The term ‘Modifying Factors’ is defined to include: Mining Metallurgical Economic Marketing Legal Environmental Social Governmental considerations

28. Ore Reserve Classification

29. What are Appropriate Assessments and Studies? Many companies develop a system where the level of study required by the company to satisfy conversion of a mineral resource to an ore reserve is specified – it is not specified in The JORC Code but is in some of the CRIRSCO family reporting standards. Guidance in Clause of the JORC Code indicates: “In order to achieve the required level of confidence in the Modifying Factors, appropriate studies will have been carried out prior to determination of the Ore Reserves. The studies will have determined a mine plan that is technically achievable and economically viable and from which the Ore Reserves can be derived. It may not be necessary for these studies to be at the level of a final feasibility study.”

30. What is a Competent Person? 10. A ‘Competent Person’ is a person who is a Member or Fellow of The Australasian Institute of Mining and Metallurgy, or of the Australian Institute of Geoscientists, or of a ‘Recognised Overseas Professional Organisation’ (‘ROPO’) included in a list promulgated from time to time. A ‘Competent Person’ must have a minimum of five years experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which that person is undertaking. If the Competent Person is preparing a report on Exploration Results, the relevant experience must be in exploration. If the Competent Person is estimating, or supervising the estimation of Mineral Resources, the relevant experience must be in the estimation, assessment and evaluation of Mineral Resources. If the Competent Person is estimating, or supervising the estimation of Ore Reserves, the relevant experience must be in the estimation, assessment, evaluation and economic extraction of Ore Reserves. 30

31. Am I a Competent Person? There is no register of Competent Persons it is a system of self declaration. The questions for the individual are: Do I belong to an appropriate professional organisation? (appropriate membership of the AusIMM, AIG or a ROPO) Do I have at least the required minimum relevant experience? (must have a minimum of five years experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which that person is undertaking) The key qualifier in the definition of a Competent Person is the word ‘relevant’. ‘Relevant’ also means that it is not always necessary for a person to have five years experience in each and every type of deposit in order to act as a Competent Person. 31

32. Am I a Competent Person? And on the question of relevant experience the question for the individual is: Am I satisfied in that I could face my peers and demonstrate competence (that is possess the required relevant experience) in the commodity, type of deposit and activity under consideration? If doubt exists, the person should either seek opinions from appropriately experienced colleagues or should decline to act as a Competent Person. Has been common to undertake such peer reviews within companies. 32

33. The public report must: name the Competent Person(s) and the Competent Person’s firm or employer; state that the public report is based on the documentation compiled by the Competent Person; obtain the prior written consent of the Competent Person(s) to the “form and context” in which the public report refers to the information in the documentation prepared by the Competent Person, and include a statement that this consent has been obtained; this is now facilitated by the existence of the Competent Person consent form Recent examples where this has not happened, note the written consent may be requested by ASX and placed on the Company Announcements Platform Competent Persons consent 33

34. Implications for resources companies - listed and unlisted Listed companies are obliged by the ASX Listing Rules (LR5.6) to report in accordance with the JORC Code (Appendix 5a) For both listed and unlisted companies when conducting any financial transaction, which falls under ASIC’s remit, ASIC regards compliance with the JORC Code as ensuring that public statements in prospectuses, take over documents etc., meet the Corporations Law requirement for statements to have a reasonable basis. For any public statement intended to inform investors or potential investors and their advisers, any member of the professional bodies, being responsible for the statement must comply with the JORC Code.

35. JORC Competent Persons and competency / attribution statements The Code requires in Clause 8 that: “The report shall be issued with the (prior) written consent of the Competent Person or Persons as to the form and context in which it appears”. Clause 8 provides a pro-forma for inclusion in the Public reports, while the JORC and ASX websites include a Competent Person’s consent from which facilitates seeking and providing this consent.

37. Apparent breaches by Companies - ASX  Earlier this year (14 May 2009) ASX released a “Review of Compliance with the JORC Code” which noted that 94% of announcements required no action by ASX Of the 6% that required action, the most common breach was a deficient or missing Competent Person statement. Other breaches included; insufficient information on Exploration Results - lack of drill hole information; exploration target statements reported incorrectly and combined or unspecified categories of Resources or Reserves, see: http://www.asx.com.au/about/pdf/mr_140509_jorc_code_review.pdf

38. Apparent breaches by Individuals – Professional Bodies AIG have run a complaints column in the AIG News for some time keeping people up to date with compliance. The AusIMM August Bulletin contained a series of articles on ethics, disciplinary procedures and cases and compliance. Note, examples of the Competent Persons not giving consent, and this being a defence in a subsequent ethics action Note the banning of one individual for committing fraud ROPOs have to report annually on any complaints lodged and actions taken.

40. Resolving the conflict between continuous disclosure and JORC compliance – an example Sinovus Mining Limited (ASX: SNV) on 16 June 2009 announced the acquisition of Sino Coal Limited an unlisted company The principal assets of Sino Coal are controlling interests in two coal mining projects in PRC, the XinYuan coal mine and the YangShang coal mine. The mines were owned and operated by Chinese companies with coal quantities reported according to the Chinese standards. Reporting information related to these mines is obviously material to Sinovus shareholders and needs to be included in the Independent Expert’s Report to shareholders. The company applied for and ASX granted a waiver WLC090376-001 from Listing Rule 5.6 (must report according to the JORC Code) under the conditions in ASX Companies Update 11/07 which deals with historical and foreign estimates: see page 8 of August Register of Waivers http://www.asx.com.au/supervision/pdf/waivers/200908a_listing_rule_waivers.pdf

41. Sinovus and Sino Coal The conditions of ASX Companies Update 11/07 are based on the materiality and transparency principles of the JORC Code Note that ASX generally only provide the waiver for a single disclosure, as it is not generally possible for a Competent Person to take responsibility for an estimate immediately

42. Reporting of Exploration Targets Clause 18 of The JORC Code allows the reporting of ‘exploration targets’ (separated from the clause on reporting of ‘Exploration Results’, but under the section heading Reporting of Exploration Results, hence is interpreted as being a report of Exploration Results and requiring a Competent Person sign off). There are numerous circumstances when a company may wish to refer to exploration targets (or an equivalent term). This approach is designed to facilitate responsible reporting by all explorers. What is an exploration target?

43. Clause 18 – Reporting of Exploration Targets “It is recognised that it is common practice for a company to comment on and discuss its exploration in terms of target size and type. Any such information relating to exploration targets must be expressed so that it cannot be misrepresented or misconstrued as an estimate of Mineral Resources or Ore Reserves. The terms Resource(s) or Reserve(s) 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 (1) a detailed explanation of the basis for the statement, and (2) 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.”

44. We are in a World Class Porphyry.. We are in a world class porphyry copper gold domain and we think our tenements have the potential to contain a significant deposit because…..

45. We Have Drilled Three Holes… We have drilled three holes, the results of which are consistent with our target which is ….

46. Reporting of Exploration Targets is Still Not Handled Well – Example BHPB issued a PowerPoint in late 2008 which included reference to the Yeelirrie uranium deposit in Western Australia. What is wrong with this announcement?

47. Reporting of Exploration Targets is Still Not Handled Well BHPB subsequently reissued the slide dealing with Yeelirrie Could you improve on the subsequent announcement?

49. Improved Reporting - O’Callaghan’s

50. O’Callaghans – comments This report covers the material information that is necessary for an investor or their professional advisor to make a reasoned and balanced judgement regarding the new release of a mineral resource estimate for the O’Callaghans tungsten deposit: geology estimation technique reconciliation with previous estimate.

51. Newcrest 2009 Concise Annual Report The Newcrest 2009 Concise Annual Report contains a narrative outlining the changes to the Mineral Resources and Ore Reserves and the important features of the 2008 Mineral Resources and Ore Reserves statements and the statements themselves.

53. Statement that Ore Reserves are a subset of the Mineral Resources

54. 2009 Concise Annual Report The tables (both Mineral Resources and Ore Reserves) generally comply with the JORC Code, the Competent Persons are named, and there is a Competent Persons’ statement as required by the Code. Clause 8 states: “The report shall be issued with the written consent of the Competent Person or Persons as to the form and context in which it appears”. While its guideline sets out the form of the required statement: “(Insert name of Competent Person) consents to the inclusion in the report of the matters based on his (or her) information in the form and context in which it appears”. However Newcrest has again reported with an unwarranted apparent precision with 4 significant figures for Cadia East Underground.

55. Newcrest 2009 Concise Annual Report Includes a reference to “more detailed information on the methods and parameters used to estimate the Mineral Resources and Ore Reserves” and notes that “is presented on our website at www.newcrest.com.au”. The two documents accessible from the website are: 2009 Resources and Reserves Statement and the 2009 Mineral Resources and Ore Reserves Explanatory Notes, the statement (issued 17 August), and the explanatory notes issued the same day.

56. An Example of Good Reporting of Ore Reserves Good Public Reporting of an ore reserve due to: Clear and concise summary All material information in the Explanatory Notes Might be argued there is too much information Note that Newcrest also have a two tiered reporting structure, see 2009 Annual Report example following.

58. Recent International Developments The IASB extractive activities research project, has recently issued a working draft of a discussion paper, now available at http://www.iasb.org/Current+Projects/IASB+Projects/Extractive+Activities/Summary.htm http://www.iasb.org/NR/rdonlyres/23F1424B-05E4-4BD1-AFD8-382125765D8E/0/ExtractivesDPworkingdraft10August2009.pdf Quote from draft: “2.66: The project team recommends that the CRIRSCO Template and PRMS definitions of reserves and resources are suitable for use in a future IFRS for extractive activities....” CRIRSCO in cooperation with GKZ is preparing a draft conversion from the Russian classification system into the CRIRSCO classification.

59. Acknowledgements

61. Public Reports There are examples of reports that may not appear to 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.

62. Companies Updates relevant to The JORC Code are now available (consolidated) with the Code on the JORC website Since 2004, after extensive discussion with JORC, ASX has issued four Companies Updates of relevance to interpreting the JORC Code and its use in Public Reporting. These ASX Companies Updates provide guidance on the application of The JORC Code: 05/04 non compliant reporting 03/07 metal equivalents, Inferred Resources reporting & Competent Person Consent Forms 11/07 Historical estimates 03/08 Inappropriateness of reporting in ground value A copy of these ASX Companies Updates has been appended to both versions of the Code and will automatically download with them from the JORC website. Readers of The JORC Code are advised to consult these Updates.

64. First Stage A “tidying up” of the 2004 JORC Code to incorporate appropriate matters from recent ASX Companies Updates 05/04, 03/07 and 03/08, but not 11/07 which deals with historical and foreign estimates, which is outside the current operation of The JORC Code Several other minor inconsistencies will be rectified at the same time. Exposure draft to be issued for comment, expected in this year, with a request comments be restricted to the matters amended. This version will be the “2004 JORC Code amended 2010”, which will probably be issued later in the year after approval by the parent bodies, ASX and ASIC. JORC does not envisage any material changes in this first stage.

65. Second Stage Immediately following the finalisation of the first stage, JORC will call for public submissions on matters relating to the JORC Code. JORC would also expect to consider matters arising from recent revisions to other international Codes (SAMREC 2007, PERC 2009 and the SME Guide 2007), as well as matters resulting from the current review of Canadian NI 43-101. JORC has established a number of sub-committees to undertake the initial review, and is facilitating the reconvening of the Coal Guidelines committee.