The Listing Rules do not require a valuation report to be provided at the IPO stage. Valuation reports must however be included in the circular to shareholders where mineral or petroleum assets are acquired as part of a major acquisition.
Where a valuation is prepared it must be prepared by a "Competent Evaluator". In addition to meeting the requirements for a Competent Person, a Competent Evaluator must have:
(i) at least 10 years' relevant mining or petroleum experience;
(ii) at least 5 years' relevant experience in the assessment and/or valuation of mineral or petroleum assets or securities; and
(iii) hold all necessary licences.
Valuations must be prepared in accordance with one of the following Codes:
Additional Disclosures Requirements for Pre-production Stage Companies
A listing applicant which has not yet commenced production will be required to disclose in its listing document its plans to proceed to production with indicative dates and costs. These plans must be supported by a "Scoping Study" which is defined as a "preliminary evaluation of a mineral project, including an assessment of the economic viability of mineral resources ... [and which] should include forecast production schedules and cost estimates based on data under which the resources can be identified." The Scoping Study must be substantiated by the opinion of a Competent Person.
If exploration or extraction rights have not yet been obtained, any risks relevant to obtaining these rights must be prominently disclosed in the listing document.
If a mineral company is involved in the exploration for or extraction of resources, it must prominently disclose to investors that its resources may not ultimately be extracted at a profit.
The Competent Person's Report must have an effective date less than 6 months before the date of the listing document and the applicant's listing document must include a statement that no material changes have occurred since the date of the Competent Person's Report. If there are material changes, these must be prominently disclosed. The statement of no material changes may be made either by the Competent Person or the listing applicant.
A Competent Person's Report or Valuation Report may contain disclaimers of sections or topics outside their scope of expertise in which the Competent Person or Competent Evaluator relied upon other experts' opinions, but must not contain any disclaimers of the report in its entirety.
The Competent Person or Competent Evaluator must prominently disclose in the Competent Person's Report or Valuation Report the nature and details of all indemnities provided by the issuer. Indemnities for reliance placed on information provided by issuers and third party experts (for information outside the Competent Person's or Competent Evaluator's expertise) are generally acceptable. Indemnities for fraud and gross negligence are generally unacceptable.
A Competent Person must:
A "Recognized Professional Organisation" is a self-regulatory organisation of professional individuals in the mining or petroleum industry which admits individuals on the basis of their academic qualifications and experience, requires compliance with professional standards of competence and ethics established by the organisation and has disciplinary powers including the power to suspend or expel a member.
A Competent Person must be independent of the issuer, its directors, senior management and advisers. Specifically the Competent Person retained must:
Presentation of data
Data on resources and/or reserves presented in a listing document, a Competent Person's Report, a Valuation Report or annual report, must be presented in tables in a manner readily understandable to a non-technical person. All assumptions must be clearly disclosed and statements should include an estimate of volume, tonnage and grades.
Requirements for statements of mineral resources/reserves
Estimates of mineral reserves are required to be supported at least by a pre-feasibility study and estimates of mineral resources and reserves must be disclosed separately.
"Indicated Resources" and "Measured Resources" must only be included in economic analyses if the basis on which they are considered to be economically extractable is explained and they are appropriately discounted for the probabilities of their conversion to mineral reserves. All assumptions must be clearly stated. Valuations for "Inferred Resources" are not permitted.
The methods used to determine commodity prices used in pre-feasibility studies, feasibility studies and valuations of "Indicated Resources", "Measured Resources" and "Reserves" must be clearly explained together with all material assumptions and the basis on which those prices represent reasonable views. If a contract for future prices of mineral reserves exists, the contract price must be used.
For forecast valuations of reserves and profit forecasts, sensitivity analyses to higher and lower prices should be supplied and all assumptions must be clearly disclosed.
Requirements for statements of petroleum resources/reserves
Appendix 25 to the Main Board Listing Rules (Appendix 18 to the GEM Rules) sets out the information that must be included in a Competent Person's Report for mineral companies involved in the exploration for and/or extraction of petroleum resources and reserves.
The information disclosed on mineral resources, reserves and/or exploration results must be disclosed either under PRMS as modified by Listing Rules or under any other code which the Exchange accepts as providing a comparable standard of disclosure and sufficient assessment of the underlying assets.
The following additional requirements apply:
(i) if estimates of reserves are disclosed, the method and reason for choice of estimation must be disclosed (i.e. deterministic or probabilistic methods, as defined in PRMS). Where the probabilistic method is used, the underlying confidence levels applied must be stated;
(ii) if the net present values (NPVs) attributable to "Proved Reserves" and "Proved plus Probable Reserves" are disclosed, they should be presented on a post-tax basis at varying discount rates (including a reflection of the weighted average cost of capital or minimum acceptable rate of return that applies to the entity at the time of evaluation) or a fixed discount rate of 10%;
(iii) "Proved Reserves" and "Proved plus Probable Reserves" must be analysed separately and principal assumptions (including prices, costs, exchange rates and effective date) and the basis of the methodology should be clearly stated; and
(iv) if the NPVs attributable to "Reserves" are disclosed, they must be presented using a forecast price as a base case or using a constant price as a base case. The bases for the forecast case must be disclosed. The constant price is defined as the unweighted arithmetic average of the closing price on the first day of each month within the 12 months before the end of the reporting period, unless prices are defined by contractual arrangements. The basis on which the forecast price is considered reasonable must be disclosed and mineral companies must comply with the Listing Rules regarding the provision of sensitivity analyses;
(v) if estimated volumes of "Contingent Resources" or "Prospective Resources" are disclosed, relevant risk factors must be clearly stated;
(vi) economic values must not be attached to "Possible Reserves", "Contingent Resources" or "Prospective Resources"; and
(vii) where an estimate of future net revenue is disclosed, there must be prominent disclosure that the estimated values do not represent fair market value.