Junior miners revolt against ASIC’s rules

The junior resources sector is preparing a revolt against ASIC rules that restrict financial forecasts.

The junior resources sector is preparing a revolt against the Australian Securities and Investments Commission, with the industry preparing to appeal directly to federal Resources Minister Josh Frydenberg for intervention over the regulator’s latest rule changes.

The Association of Mining and Exploration Companies, the peak body representing smaller resources players, will go directly to Canberra following the July election to argue against new ASIC restrictions on forward-looking statements.

ASIC last month released new guidelines that restrict what junior exploration companies can say about the economic potential of their discoveries.

The crackdown has angered AMEC and a number of junior explorers, with the industry arguing that the changes will create a less transparent market and make it even harder to secure funding.

AMEC’s national policy manager Graham Short told The Australian that the association would raise the issue with the next government’s resources minister.

“It’s fair to say we will be looking to escalate our concerns to a high level,” Mr Short said.

“Unfortunately we’ve now got an election process which has come into that, which has put some of those actions on the back burner, but once we know what the outcome of the election is then we can pick it up and raise it at a ministerial level.”

The new ASIC guidelines are particularly onerous on the amount of financial detail that companies can disclose from their earliest economic modelling.

A scoping study is usually the first step taken by a company in assessing whether a deposit offers sufficient economic promise to justify further work, but the new ASIC guidelines restrict the ability of companies to share those economic findings with their investors.

Under the rules, companies are restricted from disclosing project economics to their investors if the company does not have “reasonable grounds” to believe they have funding in place for the project’s development.

That restriction has been seen within the industry as a Catch-22 situation, given the release of the economic potential is a crucial stepping stone in raising both money and market capitalisation.

Mr Short said AMEC had been providing feedback to ASIC on the proposed changes for almost two years, but its suggestions appeared to have been ignored.

“There’s overwhelming concern from our membership base,” he said.

Trevor Hart, the chief financial officer and company secretary of base metals explorer Venturex Resources, said the changes were likely to add another layer of complexity and cost while also hurting market transparency.

Rather than release economic data themselves, as is restricted under the new guidelines, companies will instead pay independent research houses for analyst reports that will be able to make and release those calculations.

“The first thing people want to know before they invest is how much money a project could make,” Mr Hart said.

“You’d never know, but at least (prior to the new guidelines) you could say, ‘Under these parameters it will make X’.”

ASX-listed Energia Minerals was one of the first companies to feel the effect of the new changes, with the company limited to a single-page release when it finished its scoping study over its Gorno zinc project in Italy. There was none of the economic data or production parameters typically associated with a scoping study, only a brief statement that the study had confirmed Energia’s belief in the “competitive advantages” of Gorno and warranted the start of a definitive feasibility study.

Mike Young, the managing director of uranium hopeful Vimy Resources and the former head of miner BC Iron, said he was contemplating leaving the ASX for the Toronto Stock Exchange as a result of the changes.

He said the new rules would concentrate power in the hands of sophisticated investors and larger corporates at the expense of retail investors.

“They’ve created a barrier to trade,” Mr Young said.

He noted that under the new rules, BC Iron would never have been able to announce the results of its scoping study over the Nullagine iron ore project, which became a successful mine.