Uk Reserves Committee (Ukrec)
PAN-EUROPEAN RESERVES COMMITTEE (PERC)
formerly UK RESERVES COMMITTEE (UKREC)
MINUTES
SECOND MEETING, WEDNESDAY 3 MAY 2006, 2pm
BOARD ROOM, Ambrian Partners Limited
8 Angel Court, LONDON EC2R 7HP
Present
G.Riddler, K.Anderson, W.Gaskarth, S.Henley, D.Germiquet, J.Alvarez, R.Chase, E.Worthington, E.Bailey, R.Gordon, N.Weatherstone
and R.Knowles (AIM) invited speaker
1. Welcome and Introductions
Gordon Riddler introduced Ray Knowles from AIM and Kerr Anderson from the Irish Geological Institute. Ray Knowles was an invited speaker, to present and explain the AIM reserve reporting guidelines.
2. Agree the Agenda
The draft agenda was agreed without change.
3. AIM Guidance and LSE Requirements for Ore Reserves
Ray Knowles – Manager, AIM Regulation, London Stock Exchange outlined the background to the new AIM guidelines document. A summary of this presentation follows.
Previously there had been no sector-specific rules applying to the minerals industry. However, AIM is now a very attractive venue for small exploration companies. Many have made price sensitive statements to the market about their assets without rules governing these disclosures, and it was considered that this could lead to significant problems. AIM Regulation consulted some of the key members of the AIM community about the possible development of such rules. Over a period of 3-4 months in 2005 they monitored disclosures and found that many were poorly worded and possibly misleading. During a period of 2-3 months in 2005-6 they developed a draft framework which was issued to the market in March 2006. The purpose of this was not to replace LSE Chapter 19 or to set up a definitive rule book but rather to provide a set of guidelines.
One of the findings of AIM was that there was a tendency for CP reports to be pre-packaged before reaching the NOMAD, leaving little scope for modification. This was a potential problem because of the absence of a single recognised reporting standard: there were many variations according to geography and industry sector. It was decided in the guidelines to accept a limited number of the most prevalent standard codes in order to exclude the risk of an unknown 'standard', or a standard with limited recognition, being quoted.
They have received some feedback, principally on a few relatively minor points, and intend within 6-12 months to issue an updated and revised version which takes these into account.
He re-emphasised that the document is for guidance only, and is not a rule book. However, companies are expected to comply or to explain why they are not complying with the guidelines. The target audience is principally the smaller, growing, exploration companies. Measures which AIM Regulation is to take in parallel include
(a) to provide access for referrals to their own expert consultant at the LSE (whom he declined to name)
(b) update the disciplinary committee with this information (these guidelines) so that they can assess the merits of cases referred to them
(c) ad hoc checks on companies and NOMADs - who would be expected to have deep involvement in this process, including the technical details.
4. Feedback from Committee Members on AIM Guidelines and Discussion
A long discussion followed this presentation by Ray Knowles.
Stephen Henley - Could Ray Knowles make more explicit the difference between the guidelines as they apply to admission documentation and to on-going disclosures?
Ray Knowles - It is difficult to manage on-going disclosures in the same way. However, AIM wants to avoid speculation and irrational price movements. It is important to synchronise third-party announcements. Companies are expected to be careful and to rely on the NOMADs to monitor and police all disclosures.
Euan Worthington - How do the rules impact annual reports, which are often the main documentation that an investor relies upon?
Ray Knowles - Market practice should be to release the full text of all relevant documents. The same guidelines will apply, and statements will need the same degree of justification - if a company officer signs off a statement, a CP signoff will also be required where relevant. Of course, annual reports are in large part forward-looking documents so there could be some difficulties in a CP being asked to sign off a forecast.
Gordon Riddler - 43-101 has paragraphs to cover this situation. Could the AIM guidelines include some adaptation of these?
Ray Knowles - It is probably not necessary apart from the need to include some standard caveats ("health warning")
Euan Worthington - The annual report is a formal document and really needs some formal control to ensure that the NOMAD does its job competently.
Gordon Riddler - Perhaps good practice is better than prescription
Niall Weatherstone - Is there not a risk with a single LSE/AIM 'expert' that he/she may not be fully conversant with current industry practice?
Ray Knowles - The purpose of this expert is to answer specific questions. For broader issues the intention would be to consult more widely.
Gordon Riddler - now to professional issues. The CP is accredited by the professional institutions. We would like to nominate Euan Worthington to represent PERC on the AIM committee. This could perhaps be a reciprocal arrangement - perhaps AIM Regulation would like to nominate Ray Knowles to represent AIM on PERC.
Ray Knowles - I would be happy with these suggestions.
Dan Germiquet - We need to link back to the international reporting systems.
Niall Weatherstone - There should be a standard required wherever a company is listed, at the same level. For example, in Canada all exchanges are now aligned, and their required standards are now under the CRIRSCO umbrella. We also need reciprocal international recognition of CPs who are members of different professional bodies, as part of the same system. This will protect the interests of companies and shareholders.
Ray Knowles - we would be happy to participate in industry standards initiatives like this.
Gordon Riddler - the scope of CRIRSCO is broadening and all can contribute. This committee is already linked - Niall Weatherstone is joint chairman, with Pat Stephenson of the chairman of[NW1] JORC, and Gordon Riddler is also a member. The AIM 'standard' includes various CRIRSCO-compliant standards, ROPOs are defined. With a number of exploration companies migrating from the Dublin to London markets, this is a particularly significant question.
Kerr Anderson - With companies moving to AIM, the Dublin ESM is less significant now and IGI would be keen to be involved in this process.
Eddie Bailey - The definition of a CP should be tightened: specifically it should be a requirement that they have the chartered status (CEng or CGeol) plus 5 years relevant experience and currently working in a relevant field.
Ray Knowles - the guidelines effectively require the chartered status anyway.
Gordon Riddler - It is a relevant question, and important that each recognised professional institution has an equivalent to UK chartered status, whether 'professional engineer' or other wording - but a defined track record. This is a function of the institution. In a multidisciplinary project, some one person must sign it off in the capacity of CP, but all members of the team must be at CP level.
Niall Weatherstone - in Ssouth Africa the rules are very strict. A person can lose his/her job if they lose the chartered status. In the USA there is a recently established special category for CPs. Broadly the definitions seem to be OK. Professional institutions themselves must be responsible and will themselves lose reputation - and membership - if there are problems.
Richard Chase - It could be challenged that some claimed professional institutions are inappropriate (for example do not have the necessary codes of practice or disciplinary procedures, or appropriate qualifications/experience requirements), and there is a need for stricter controls. It is also important that there be a publicly accessible register of membership at the appropriate level.
Gordon Riddler - at present this is not generally the case, with the possible exception of Australasia.
Niall Weatherstone - one problem with this is that the professional bodies often do not have the resources to maintain such a register.
Dan Germiquet - in industrial minerals there is a focus also on added value. There is a different weighting of skills required of a competent person team and many may not have the appropriate chartered status because their skills are in fields where this is not available. I would suggest that in default of this the AIM guidelines should themselves include a code of ethics.
Gordon Riddler - another very simple example of this is that of the diamond valuer, whose expertise is based purely upon experience, and where chartered status is irrelevant.
Bill Gaskarth - the Geological Society offers professional qualifications - with the class of professional geologist being included in the Geologists Directory, where individuals themselves identify their claimed areas of CP expertise.
Eddie Bailey - however, signoff must be by someone who has chartered or equivalent status.
Gordon Riddler - the regulators need to know what level the claimed CPs have attained. For example lawyers have an expert witness register, and this might be a good model for AIM. Rreturning to the guidelines document, there is another point: the distinction between qualified Qualified Pperson and CP. 43-101 has QP, others have CP, broadly synonymous. AIM seems to have both, and this is confusing.
Ray Knowles - agreed. We need to clarify this.
Niall Weatherstone - we need to consolidate a list of points and send Ray Knowles a letter. In my view a CP could be in any field, not just reserves and resources; the definitions of CP and QP seem to be synonymous. The AIM guidelines are basically very gooda good effort especially considering the lack of co-ordination. There are probably just minor changes needed.
Ray Knowles - there is the possibility of involving this committee in a NOMAD seminar in June. Pperhaps someone from the committee could speak on the professions and professional involvement in the process.
Gordon Riddler - we will compile feedback. There are also links to the international accounting standards board and oil reserves and resources that are currently under discussion.
ACTION - ALL - email any points to Gordon Riddler
ACTION - Gordon Riddler - collate points and forward them to Ray Knowles
5. Notes on Initial Meeting, Thursday 2 March 2006
The notes were agreed as an accurate summary of the proceedings of the meeting.
6. Administrative Matters to Progress
6.1 Scope of Committee – UK or Western Europe (include Russia?)
and 6.2 Update Terms of Reference and Mandate
After lengthy discussion it was agreed that the scope of the committee should be extended to include all of Europe outside Russia (and those countries using the Russian reporting system).
The scope of the committee could include just the UK, or the UK plus continental Europe, with or without Russia. If confined to the UK, there would be a need for a corresponding European committee, and the interests of the two would probably overlap to a considerable extent. To have two separate reserves committees in Europe would probably not be justifiable. The possible inclusion of Russia was also considered, but after lengthy discussion was rejected (for now) because of the major differences between the Russian reporting system and the CRIRSCO template, which would tend to divert the committee from its principal purpose of fostering the development and use of the Reporting Code as a CRIRSCO-compliant code to be used in western European markets. This is a matter which Niall Weatherstone suggested should be discussed with Kirill Kavun. Hhe was aware the industry community in Russia were keen to converge with the UN and CRIRSCO standards, though because of their specific needs probably best to be direct members of CRIRSCO.
ACTION - Niall Weatherstone to raise the question with Kirill Kavun
Accordingly it was decided that the committee should have terms of reference initially defining its scope as Europe excluding Russia. As for the mandate, members of the committee would formally represent stakeholders: principally the ROPOs and the key minerals extraction sectors. The currently drafted terms of reference and mandate would need to be re-drafted to reflect these decisions.
ACTION Gordon Riddler to update the ToR and mandate documents
Niall Weatherstone raised the question - which is an international issue - of ownership of the national reporting organisations and of CRIRSCO. In his opinion these represent not merely the individual professional institutions but a broader group of stakeholders. It is an important question because each committee is the custodianhas ownership of its own reporting code, and CRIRSCO is custodian of the CRIRSCO Ttemplate the intention of which is to demonstrate compatibility amongst all of the subscribing National codes with which reporting codes are expected to comply. The way in which PERC would operate is that as a newly fledged NRO it would submit its credentials to CRIRSCO and apply for membership. However, it would have full local autonomy and would operate in whatever way it desired.
6.3 Consider and Agree Name and Acronym for Committee
It was agreed in view of the broader scope of the committee that it should be named the "Pan-European Reserves and Resources Reporting Committee", with the acronym "PERC".
6.4 Confirmation of Membership
It was agreed that the committee should continue with its present membership, plus Kerr Anderson who would represent the Irish Geological Institute, and other members from ROPOs and significant mineral sectors in European countries not yet represented would be invited to join as and when they expressed interest in participating. It was agreed that there ought to be a representative of the European Federation of Geologists, and the UK coal sector and British Geological Survey would also be represented (as proposed at the previous meeting, Bill Hatton would be invited). Juan Alvarez offered to contact the Swedish Mining Association to invite them to nominate a representative.
ACTIONS Gordon Riddler, Juan Alvarez
6.5 Funding/sponsorship
Discussion of this question was deferred to the next meeting
6.6 Communication – virtual, attend meetings, website
The members of the committee already use email extensively. However, discussion of the possibility of holding meetings remotely by email was not discussed at this meeting.
It was agreed that physical meetings should continue to be held about every 2-3 months or as frequently as business demanded, with the location being decided on a meeting-by-meeting basis. At present there is no clear need to find any location other than London, but in the future it is intended that meetings will be held in other European cities as appropriate.
It was decided that a web site would be developed, and Bill Gaskarth repeated his offer from the previous meeting that the Geological Society would be willing to host it. A domain name would need to be registered.
ACTION: Gordon Riddler/Steve Henley to register domain name
ACTION: Bill Gaskarth to start construction of web site
7. Current Issues
7.1 Russian System
Stephen Henley had received two documents in Russian from Kyrill Kavun in Moscow. One was the existing booklet on exploration procedures, the other was a draft of the new Russian reserves/resources reporting code. A further document, in English, was a commentary by Kirill Kavun on the draft UNFC Guidelines.
ACTION: Steve Henley, to distribute translation of the draft code, plus the UNFC commentary.
7.2 CRIRSCO
Current 'hot' issues include:-
(1) (Rre)structuring of CRIRSCO and formalisation of ToR, mandate, business plan, and hosting. One possibility is that it would be jointly owned 50% by the international representative body the International Council on Mining and Metals (ICMM), which represents major mining companies and affiliates, and which would enable it to have a well funded permanent secretariat in London. It would need a rolling budget, not ad hoc short-term funding. It would not be 100% owned by ICMM because this would compromise the essential independence of the organisation; the other 50% would be the representatives of the NROs.
(2) Aa forthcoming joint CRIRSCO/UN meeting in Johannesburg is intended to agree a two-part document for the UN - the first part would consist of the CRIRSCO template, and the second part would be the UN additions to reflect the needs for government reporting, mineral inventories, etc. and include terms such as 'pre-feasibility resource', 'reconnaissance resource', etc, beyond the scope of the CRIRSCO template. The meeting would also discuss a number of other matters. They would take opinion from an advisory panel on accounting standards - fair value or historical cost - for reporting R&R.
(3) Ccomments were requested on the Ttemplate. The Template will be reviewed after the publication of a new South African SAMREC Code later this year., and a South African working group was proposing a new draft of the CRIRSCO template
The CRIRSCO web site is now operated by the AusIMM under name and is to be re-launched within a few weeks.