ABSTRACT
South Africa had its first democratic elections in 1994. This give rise to a new dimension in social, economic,
political and legal fraternities. As result, a number of new rules governing the extractive industry being
introduced over the last ten years. The regulatory environment, which affects the public reporting of exploration
information, mineral resources and mineral reserves, has undergone major changes. These include:-
· The impact of the effects of globalization on the mining industry since many large and small
operating mining companies have been listed in more than one country;
· Increased regulations introduced by the local JSE as revised listing requirements for
reporting and internal controls, not only over financial reporting, but also over the preparation
of supplementary information, including mineral resources and mineral reserves statements;
and
· Development of new international definitions and standards for the estimation and reporting
of exploration information, mineral resources and mineral reserves. This due to the
international competition for mineral exploration and development projects by global mining
companies, which have lead to proactive jurisdictions to establish regulatory regimes with
common fabric..
Mineral resource and mineral reserve classification methods, standards and reporting have undergone many
changes since the discovery and commercial exploration of minerals as early as the 18th century. To a certain
extent, even today there is still ongoing debate regarding the classification systems, definitions and the public
reporting of these assets for internal and external use. Over the years, different interpretation, understanding
and classification has led to confusion and misunderstanding which resulted in world class reporting scandals
including, but not limited to, Bre-X, Shell and Enron. These scandals have highlighted the necessity of
standardising the definitions, classification and reporting of mineral assets. The regulators and investors in the
mineral industry have also been awakened and have become biggest stakeholders in the development and
implementation of these rules in the industry. The concept of “competent person” was introduced and
accountability of reporting was moved to the individuals and directors that report these results into the public
domain.
In this research report the mineral resource and mineral reserve definitions and their developments, historical
developments in the minerals industry, current standards and their use in the public reporting of exploration
results and mineral assets in the South African context are considered and reviewed in some detail. Included in
this report were also areas of possible misconception in the interpretation of categorisation of mineral assets.
A practical case study on the Harmony proposal of a hostile take over bid on Goldfields was studied.
Information in the public domain on this potential transaction was reviewed during the study, facts were then
analysed and formed the basis of an independent opinion. It was concluded that the reporting of mineral assets
held by Harmony did not comply with the general reporting principles; hence the report was considered
misleading, confusing and materially inconsistent. Hence, in the author’s opinion, Harmony’s offer to Goldfields
shareholders was unfair and unreasonable. Given that Goldfields held quality assets compared to Harmony,
they should have offered a greater premium for these assets.To be clear and unambiguous, technical and financial information should be published on a comparable basis
by all companies operating in the same industry sector, making the same basic assumptions. Public disclosure
of mineral resources and mineral reserves is a logical step towards full disclosure of material information
because:-
1) mineral resources and mineral reserves are material to all investors;
2) residency or nationality of an investor should not determine what information is disclosed by a
company (need for internationally recognised standards); and
3) mineral resources and mineral reserves are required to be considered in impairment and
purchase price allocation in accordance with IFRS.
Lastly stakeholders in the mining industry should be reminded that the codes and rules are written for guidance
of professionals in pursuit of their professional work and it was recommended that large mining firms should
establish a mineral resource committee at board level to help and advise the board of directors in decision
making.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:wits/oai:wiredspace.wits.ac.za:10539/4514 |
| Date | 04 March 2008 |
| Creators | Njowa, Godknows |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | 22885949 bytes, application/pdf, application/pdf |
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