Mining and resources - Forward-looking statements
It is common for investors in mining and resources companies to put a lot of emphasis on 'forward-looking statements' when considering an investment. In mining, these predictive statements generally include:
- production targets (i.e. projections or forecasts of the amount of minerals to be extracted from mining tenements for periods that extend past the current and forthcoming year.)
- forecast financial information
- income-based discounted cash flow valuations.
Companies that publish forward-looking statements that do not comply with the legal requirements take legal and reputational risks, and so care is needed.
This information sheet (INFO 214) aims to give stakeholders a better understanding of the existing rules that apply to forward-looking statements, thereby improving compliance and reducing any risk of litigation or regulatory action.
This guidance explains the existing reference sources that apply to forward-looking statements and gives practical advice and examples of how to comply with the existing legal obligations. In particular, it covers:
ASIC uses all of the existing reference sources listed in the appendix to assess whether publicly available forward-looking statements comply with the law. This information sheet is based on, and should be read together with, the sources listed.
- See the Appendix for the short names used in this information sheet.
What are the existing obligations?
Under sections 670A(2), 728(2) and 769C of the Corporations Act and section 12BB(1) of the ASIC Act (together the 'legal requirements'), a statement about future matters must be based on reasonable grounds at the date the statement is made or it will be misleading.
The test for reasonable grounds is an objective one and depends on the facts of each case.
If you do not have reasonable grounds for a forward-looking statement, cautionary language, qualifications or disclaimers are not sufficient to prevent it from being misleading. See:
- RG 170.94
- ASC v McLeod  WASCA 101 at – (overturned by the High Court on unrelated grounds) and Digi-Tech (Australia) Ltd v Brand and Others  NSWCA 58 at  and –
- ASX FAQ 30 (PDF 303 KB)
An expert's disclaimer of liability (e.g. about forward-looking statements) defeats the purpose of an expert report, which is to give investors an assessment they can rely on. See:
Before making any disclosure, you first need to consider whether the statement is misleading and then, for forward-looking statements, also consider whether the statement has reasonable grounds.
The obligation to have reasonable grounds for forward-looking statements is a legal requirement separate to any industry code. However, because forward-looking statements – such as production targets, and forecast financial information or income-based cash flow valuations based on production targets – relate to exploration targets, exploration results, mineral resources or ore reserves, you must take into account the relevant professional and industry standards in assessing whether reasonable grounds exist. For mining and exploration reporting in Australia, the industry standard is the JORC Code (PDF 1.12 MB); and for technical expert reports, the VALMIN Code.
The JORC Code provides directors, shareholders, investors and their professional advisers with an internationally accepted standard to help assess and compare disclosure by different companies that is often highly technical. Disclosure under the JORC Code is governed by the principles of transparency, materiality and competence.
The materiality principle requires disclosure of 'all the relevant information that investors and their professional advisers would reasonably require, and reasonably expect to find in the report, for the purpose of making a reasoned and balanced judgement'.
The competence principle requires disclosure on exploration targets, exploration results, mineral resources and ore reserves to be 'based on, and fairly reflect, the information and supporting documentation prepared by a competent person'. A competent person 'must have a minimum of five years relevant experience' and be a member of an appropriate professional organisation, such as the Australasian Institute of Mining and Metallurgy (AusIMM), Australian Institute of Geoscientists (AIG) or a recognised professional organisation as published by ASX.
The JORC Code does not specify an amount, type or quality of exploration or other work required to be done before a competent person assesses and estimates a mineral resource or ore reserve.
Rather than taking a prescriptive approach, the JORC Code sets out relevant checklists (in Table 1) for public reporting under the code. These criteria should be addressed on an 'if not, why not' basis to 'ensure that it is clear to an investor whether items have been considered and deemed of low consequence or are not yet addressed or resolved'.
The preface to the VALMIN Code (2015 Edition) states, among other things, that the code 'provides a set of fundamental principles (competence, materiality and transparency), mandatory requirements and supporting recommendations accepted as representing good professional practice to assist in the preparation of relevant public reports on any technical assessment or valuation of mineral assets'.
ASX Listing Rules
If your company is listed on ASX, you must comply with the ASX Listing Rules.
ASX Listing Rule 5.6 requires public reports by listed mining companies to be prepared in accordance with the JORC Code.
You must also disclose to ASX all material assumptions on which a production target, or forecast financial information derived from a production target, is based.
Even if disclosure complies with ASX Listing Rules 5.15–5.19 and guidance, it must also be based on reasonable grounds existing at the date of disclosure or it will be taken to be misleading under the Corporations Act.
ASIC regulatory guides RG 111Content of expert reports, RG 112Independence of experts, RG 170Prospective financial information and RG 228Prospectuses: Effective disclosure for retail investors contain statements about ASIC's policy on forward-looking statements and the disclosure of assumptions on which those statements are based.
- See RG 111.74–RG 111.77 about the disclosure of material assumptions on which an expert report is based; and RG 111.100 about the disclosure of all information, including the matters set out in RG 111.100(a)–(g), that may be required for users of the report to assess the reasonableness of the methodology and assumptions used
- See RG 112.62 about expert reports containing details of methodologies and material assumptions on which the report is based
Companies listed on other securities exchanges and unlisted companies should also disclose underlying assumptions about forward-looking statements so that investors have the information they need to understand the basis on which the statements have been made.
Disclosure in documents lodged with ASIC needs to comply with the JORC Code and/or VALMIN Code, or it may be taken to be misleading. However, even if disclosure complies with these codes, it will not automatically comply with the legal requirements, or ASX Listing Rules 5.15–5.19 and guidance.
What is a forward-looking statement?
A forward-looking statement is a statement about a future matter and is not just a statement about your company's present intention.
For mining or exploration companies, production targets (i.e. projections or forecasts of the amount of minerals to be extracted from mining tenements for periods that extend past the current and forthcoming year), forecast financial information, and income-based valuations are forward-looking statements because they comprise, or are based on, statements about future matters.
The test for determining whether reasonable grounds exist is the same for each: see ASC v McLeod.
Production targets and forecast financial information have a predictive nature because:
- production targets predict future mineral production
- forecast financial information generally predicts capital and operational costs and attaches net present discounted dollar values.
You should therefore only make these statements if you have reasonable grounds for the underlying assumptions supporting the production target or forecast financial information.
Unforeseen macro-economic, micro-economic and certain company-specific factors (e.g. capital and operational expenditure, commodity prices and exchange rates) may result in outcomes that materially vary from a published production target or net present value. A variation in factors may have a significant impact on projects so that they either cease to be viable or do not go ahead unless additional funds are made available. The prospect of volatility does not in itself stop you from making forward-looking statements, as long as you have reasonable grounds to make the statement at the time.
Income-based discounted cash flow/net present value valuations (including those identified in Table 1 of RG 111) involve the use of forward-looking information such as predicted mineral production, capital costs, operational costs, commodity prices and exchange rates.
As set out in RG 111.98, a critical analysis of the forward-looking information used in applying a discounted cash flow methodology should be undertaken to ensure that this information is based on reasonable grounds.
What is an aspirational statement?
Aspirational statements do not have to be based on reasonable grounds because they are not predictive in nature.
Aspirational statements should be limited to high-level vision statements that do not refer, directly or by implication, to a production target or forecast financial information.
Examples of potential aspirational statements (hypothetical)
- X Ltd aims to be a global producer by [date].
- X Ltd aims to be a significant gold producer doubling production over the next five years.
Note: However, it should be clear that the statement is not referring to the company's existing mineral resources or advanced exploration targets based on existing exploration results.
- X Ltd aims to be a 500,000 plus ounces per annum gold producer in five years.
The information in this website and reports that relates to Exploration Targets, Exploration Results and Mineral Resources is based on information compiled by Mr. John Anderson who is a full time employee of the company. Mr. Anderson is a member of the Australasian Institute of Mining and Metallurgy.
Mr. Anderson has sufficient experience of relevance to the styles of mineralisation and the types of deposits under consideration, and to the activities undertaken, to qualify as Competent Persons as defined in the 2012 Edition of the Joint Ore Reserves Committee (JORC) Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr. Anderson consents to the inclusion in this report of the matters based on information in the form and context in which it appears.
Reference should be made to the individual announcements that are on the Company’s website: www.investres.com.au, in the section ‘News and Reports’ and lodged with the Australian Securities Exchange (“ASX”), for individual Competent Persons.