Flow-through tax incentives and the JORC Code

THE CONFERENCE CALLER: Before the recent Federal election the Coalition made a promise to introduce a flow through tax regime.

It’s not a new promise, after all Kevin Rudd gave the same undertaking during the 2007 election campaign, he just never got around to doing anything about it.

But, we have been assured this time it is definitely going to happen…probably, and at the Brisbane Mining 2013 Conference law firm McCullough Robertson partner Hayden Bentley provided some information about what the scheme is and what it will intend to achieve.
 
“We have heard all about this over the years from both sides of politics,” he told the audience.

The introduction for such a scheme has long been pushed by mining industry lobby groups such as the Association of Mining and Exploration Companies (AMEC).

AMEC has been pointing to the success a similar scheme has had over a number of years in Canada.

“Quite a number of years ago Canada introduced a similar flow through share scheme and I think at the time it was thought to be a temporary measure to boost exploration at the junior end of the market,” Bentley said.

“This scheme, that was meant to be a temporary arrangement, has been so successful it has now turned into a permanent feature of the Canadian landscape and the exploration industry.

Bentley said conversation he has had with his colleagues in Canada indicate it has been a great new source for companies to raise funding and to provide, perhaps a new group of investors that may be interested in investing in junior explorers – perhaps for the first time.

 

Bentley vacated the podium to make room for another McCullough Robertson partner Isaac West.

West used his time at the microphone to inform the crowd of the New JORC Code requirements and rules, which are due to come into effect on 1 December 2013.

There is one exception for this date for one of the new requirements, which is for a company to have a pre-feasibility study or feasibility study completed in order to declare an ore reserve.

This is not due to come into effect until 1 December 2014.

“The changes are generally aimed at enhancing disclosure of drilling results or estimates of resources or reserves,” West said.

“One of the key changes is the ’if not, why not?’ style of reporting.”

West explained this to mean there is a new appendix in the JORC Code, which includes a number of aspects required to be included when reporting a reserve or a resource.

Should a company not be intending to discuss any of these particular categories in its release to the Australian Securities Exchange, it will need to inform investors why it is not doing so.

“I think that is good, as it avoids people cherry-picking the information they’re wanting to release and it means there is a set criteria that people disclose that makes it easier to compare results of companies,” West said.

“That will, generally, enhance the disclosure.”

There will also be a change for the requirements of ‘Competent Persons’ with companies now having to make it very clear what conflicts of interest a company’s Competent Person may have.

“One of the good things, from an administrative point of view is that when you have a Competent Person sign off on a review or a resource statement, if you then want to use that statement in other publications or other reports, you don’t need to go and get the competent person’s sign-off again, provided you cross-reference your previous announcement, that you don’t have any new data and your material assumptions haven’t changed,” West said.