As of 1 April 2018, the Financial Services Board (“FSB“) has been replaced by the Financial Sector Conduct Authority (“FSCA“), as a step towards implementing a “Twin Peaks” model where:

  1. Market conduct regulation, including investment funds and investment managers, which will be the domain of the FSCA which replaces the FSB; and
  2. Regulation of financial institutions, including banks, which will be the domain of the Prudential Authority (“PRA“), housed in the South African Reserve Bank.

The FSCA’s key objectives will be to:

  • protect financial customers by promoting their fair treatment by financial institutions, providing financial education programs, and promoting financial literacy
  • enhance and support the efficiency and integrity of financial markets
  • assist in maintaining financial stability
  • support the overall policy objectives of financial inclusion and transformation of the financial sector.

It is in this field of regulatory compliance that the SSC developed a relationship with the original FSB with the objective of promoting SAMCODE compliance by minerals companies across all current (and future) registered stock exchanges in South Africa. The SSC will continue to maintain and reinforce such relationships with the FSCA, going forward.

Johannesburg Stock Exchange (JSE)

JSE BuildingThe JSE maintains two Reader’s Panels which review all Competent Persons Reports, Mineral Asset Valuation Reports and Qualified Reserve Evaluators Reports submitted to the JSE Limited. Such reports are reviewed for compliance with the JSE Listing Requirements that incorporate the relevant SAMCODES and any other code recognised by the JSE for secondary listings, if required. Members of the Reader’s Panels are appointed by the JSE, based on submissions through the SSC and are recognised experts in the commodity and deposit under consideration.

There are separate Readers Panels for Solid Minerals reporting according to SAMREC/SAMVAL and for Oil & Gas reporting according to SAMOG.

Solid Minerals

During 2018, the Solid Minerals Readers Panel was comprised of 18 professionals who have a combined 618 years’ experience in the minerals industry. During 2018, 11 Competent Persons Reports (CPRs) and nine Integrated Annual Reports (IARs) were reviewed. The CPRs covered alluvial and hard rock diamonds/gems, base metals, gold and uranium, chrome, manganese and coal & brick clay and aggregates. Of the 11 CPRs reviewed, two were withdrawn by the issuer after the submission, with no intention to re-submit; one was withdrawn at the insistence of the Panel and will be re-submitted.

The most significant issues raised by the Readers Panel in 2018 dealt with:

  • Improper estimation methodology leading to invalid Resource and Reserve estimates, LOMPs and valuation.
  • A Resource estimate that included commodities which were not included in the Prospecting Permit.
  • In valuations based on Comparable Transactions, where exact comparables were not possible, the limitations of the method and the metrics derived from the transactions were not disclosed.
  • Mere reproduction of a client’s forecasts and projections without any comment by the CP/CV on their Reasonableness to support continued operations. The CP/CV is expected to comment on the sufficiency of project capital or stay-in-business capital to sustain operation.

Continuing areas of non-compliance include:

  • Lack of capitalisation of Mineral Resources and Mineral Reserves
  • Omitting ‘Mineral’, ‘Coal’, and ‘Diamond’ and referring only to ‘Resources’ and ‘Reserves’.
  • Free and incorrect use of the terms; ‘ore’, ‘resources’ and ‘reserves’
  • Estimating Coal tons without coal qualities.
  • The Consulting Company was described as the Competent Person throughout the CPR.
  • Checklist cross-referencing was poorly done.
  • Certification of Competent Persons: on the signature page Competent Persons were described by their job titles with no reference to who was actually responsible for what in the CPR.
  • The Competent Persons placed reliance on the work carried out by third parties, it was not clear if the supporting data had been properly verified.
  • The CPR was described as a high-level review of the project.
  • The full titles of the SAMREC and SAMVAL Codes were frequently misquoted.
  • Evident lack of compliance with one or more of the principles of the SAMREC and SAMVAL Codes; Materiality, Transparency, Competence and Reasonableness.
  • Lack of a clear positive statement from the CP declaring competence in the commodity or deposit type that is the subject of the CPR.

Oil & Gas

During 2016/2017, no QRE documents were reviewed.