The VALMIN Code - CIMThe VALMIN Committee, a joint committee of The Australasian Institute of Mining...

Code for theTechnical Assessment and Valuation

ofMineral and Petroleum Assets and Securities

forIndependent Expert Reports

~ The VALMIN Code ~2005 Edition

Prepared by:

The VALMIN Committee, a joint committee of The Australasian Institute ofMining and Metallurgy, the Australian Institute of Geoscientists and theMineral Industry Consultants Association with the participation of theAustralian Securities and Investment Commission, the Australian StockExchange Limited, the Minerals Council of Australia, the PetroleumExploration Society of Australia, the Securities Association of Australia andrepresentatives from the Australian finance sector.

Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (The VALMIN Code)

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The Australasian Institute of Mining and Metallurgy

“The VALMIN Code is binding on members of The AusIMM when preparing publicindependent expert reports required by the Corporations Act concerning mineral andpetroleum assets and securities.”

Australian Institute of Geoscientists

"The Australian Institute of Geoscientists supports the VALMIN Code and endorsesit as a statement of industry and professional best practice. The VALMIN Code isbinding on members of AIG when preparing public independent expert reportsas required by the Corporations Act covering mineral and petroleum assets andsecurities."

Australian Stock Exchange

“Australian Stock Exchange supports the issue of the Code and any serious breachesof which ASX is made aware will be brought to the attention of The AusIMM.”

Australian Securities & Investments Commission

“The Australian Securities & Investment Commission (ASIC) refers to the VALMINCode when reviewing mining and exploration prospectuses and takeover documents.ASIC regards the Code as indicative of best practice, and expects that when specialistmining terms used in the Code are contained in such documents that they will havethe same meaning as in the Code. Compliance with the Code does not relieve issuersand others involved in the preparation of prospectuses and takeover documents fromtheir broader disclosure obligations under the Corporations Act.”

Mineral Industry Consultants Association

To be advised by MICA.

Minerals Council of Australia

“The Minerals Council of Australia endorses the VALMIN Code as a statement ofindustry and professional good practice and recognises that companies and issuersand others involved in the preparation of prospectuses and takeover documents arerequired to comply with their disclosure obligations under the Corporations Act andwith any requirements under Australia's International Accounting and ReportingStandards.”

Securities Institute of Australia

Securities Institute of Australia supports the Code as indicative of best practice forindependent experts preparing valuations and assessments in relation to specialistmining reports.

COMPLIANCE WITH AND SUPPORT FOR THE VALMIN CODE


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TABLE OF CONTENTS — CODE

SUBJECT CLAUSE PAGE No.

Purpose of the Code C – 1 5

Preparation of the Code C – 2 5

Disclaimer C – 3 5

Terminology C – 4 5

Fundamental Principles C – 5 5

Obligations of Valuation Practitioners C – 6 – 10 5 – 6

Purposes of Reports C – 11 6

Applicability of Code C – 12 – 13 6

Types of Reports C – 14 6 – 7

Materiality C – 15 – 17 7

Competence C – 18 – 23 7

Independence C – 24 – 27 7 – 8

Transparency C – 28 – 31 8

Valuation Methodology C – 32 8

The Commissioning Entity C – 33 – 36 9

Experts and Specialists C – 37 – 41 9 – 10

Commissioning a Report C – 42 – 43 10

Intention of a Report C – 44 – 45 10 – 11

Declarations C – 46 – 48 11

Cost of a Report C – 49 11

Content of a Report C – 50 11

Data and Information C – 51 – 54 11 – 12

Referring to Existing Reports C – 55 – 57 12

Nature of Value C – 58 – 61 12

Illustrations C – 62 12

Administration C – 63 – 64 13

Site Inspections C – 65 – 66 13

Tenements C – 67 – 73 13 – 14

Mineralisation, Resources and Reserves C – 74 – 82 14 – 15

Mining and Ore Processing C – 83 – 88 15 – 16

Capital and Operating Costs C – 89 – 93 16

Completion and Commissioning C – 94 16

Revenue C – 95 – 96 16 – 17

Finance C – 97 – 100 17

Share Market and Economic Conditions C – 101 – 102 17

Risk C – 103 17


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DEFINITION OR ACRONYM NUMBER PAGE No.AAPG D – 1 19Advanced Exploration Areas D – 20 21AIG D – 2 19Asset D – 20 and 26 21 and 22ASIC D – 3 19ASX D – 4 19AusIMM D – 5 19Commissioning Entity D – 6 19Competence/Competent D – 7 19Corporations Act D – 8 19Development Projects D – 20 21Disclosure Document D – 9 19Expert and Specialists D – 10 19Exploration Areas D – 20 19Fair Market Value D – 43 23Fairness and Reasonableness Report D – 11 20General Mining or Petroleum Industry Experience D – 12 20Independent/Independence D – 13 20Independent Expert Report D – 14 20JORC Code D – 15 20Listing Rules D – 4 19Material/Materiality D – 16 20MCA D – 17 21MICA D – 18 21Mineral D – 19 21Mineral Assets D – 20 21Mineral Resources and Ore Reserves D – 21 21Mineral or Petroleum Securities D – 22 21Mining/Petroleum Industry D – 23 21Operating Mines D – 20 21Pre-Development Projects D – 20 21PESA D – 24 22Petroleum D – 25 22Petroleum Assets D – 26 22Professional Association D – 27 22Public Reports D – 28 22Report D – 42 23Reasonableness Test D – 29 22Risk D – 30 22Securities D – 31 22Senior Specialist D – 10 19SIA D – 32 22SPE D – 33 22Specialist D – 10 19Technical Assessments D – 34 22Technical Assessment Reports D – 35 23Technical Value D – 36 23Tenement D – 37 23Transparency/ Transparent D – 38 23Uncertainty D – 39 23Valuation D – 40 23Valuation Date D – 41 23Valuation Report D – 42 23Value D – 43 23Vendor Consideration Opinion D – 44 23WPC D – 45 23

DEFINITIONS and ACRONYMS


Note: Procedural and mandatory clauses and paragraphs are in normal typeface, except that the word “must” is in bold,discretionary clauses and paragraphs are in italics and those Definitions incorporated in the text of the Code are in bold.

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THE VALMIN CODE

PURPOSE OF THE CODE

1. The purpose of the VALMIN Code is to provide aset of fundamental principles and supportingrecommendations regarding good professionalpractice to assist those involved in the prepara-tion of Independent Expert ReportsD14 that arepublic and required for the assessment and/orvaluation of MineralD20 and PetroleumD26 Assetsand SecuritiesD31 so that the resulting Reports willbe reliable, thorough, understandable andinclude all the MaterialD16 information requiredby investors and their advisers when makinginvestment decisions.

PREPARATION OF THE CODE

2. The Code has been prepared by the VALMINCommittee, a joint committee of The AustralasianInstitute of Mining and Metallurgy (The AusIMM),the Australian Institute of Geoscientists (AIG) andthe Mineral Industry Consultants Association(MICA), with the participation of the AustralianSecurities and Investment Commission (ASIC),the Australian Stock Exchange Limited (ASX),the Minerals Council of Australia (MCA), thePetroleum Exploration Society of Australia (PESA),the Securities Institute of Australia (SIA) andrepresentatives from the Australian finance sector.

The VALMIN Committee has prepared two earlierversions of the Code, the first being issued on 17February 1995 (applicable from 1 July, 1995) andthe second on 22 November 1997 (applicablefrom 1 April, 1998).

DISCLAIMER

3. The VALMIN Code provides guidance onmatters that may be subject to the AustralianCorporations Act 2001D8, the associatedCorporations Regulations, other provisions ofAustralian law, the published policies andguidance of ASIC and the Listing RulesD4 of ASXor of other relevant recognised stock exchanges.

The Code applies in any particular circumstanceonly if, and to the extent that it is not inconsistentwith the law, ASIC policy and guidance or therequirements of the relevant recognised stockexchange.

The Code does not constitute legal advice anddoes not claim to consider all matters that may berelevant to the preparation of an IndependentExpert Report or the assessment and/or valuationof Mineral and Petroleum Assets and Securities.It is the responsibility of valuation practitionersto determine their legal obligations for eachassessment and/or valuation and for thepreparation of an Independent Expert Report andto seek legal advice when necessary.

TERMINOLOGY

4. The use of the word “must” in a paragraph of aclause denotes a mandatory VALMIN Coderequirement that must be complied with unless,in particular circumstances, to do so would bein breach of the law or the requirements of therelevant stock exchange.

The use of the word “should” in a paragraph ofa clause indicates that some discretion may beemployed with its application, depending onthe particular circumstances of a Report andproviding that the Code’s fundamental principlesare not transgressed.

Definitions of key terms are listed at the endof the Code. In order to assist users of theCode, some Definitions that are associated withthe Code’s fundamental principles are alsoincorporated in the text of the Code, printed inbold.

An initial or significant mention in the VALMINCode of a Definition or Acronym is indicated bysuperscript. For example, “ValuationD40” means thatthis term is defined in Definition number D40.

A word having a capital first letter generallyindicates that it is a defined term.

The singular includes the plural and vice versa.

FUNDAMENTAL PRINCIPLES

5. The fundamental principles that this Coderequires to be applied to the preparation of PublicIndependent Expert Reports are Materiality,Competence, Independence and Transparency asare described in detail in Clauses 15 to 31 andDefinitions D16, D7, D13 and D38 respectively.

OBLIGATIONS OF VALUATION PRACTITIONERS

6. Effective as from 29/4/2005, The AusIMM, asfrom 30/9/2005, the AIG and as from ??/??/2005,MICA expect mandatory application of thisversion of the VALMIN Code by their memberswhen involved in the preparation of PublicD28Independent Expert ReportsD14 required bylegislation such as the Corporations ActD8 or bythe Listing Rules of the ASX or of other recognisedStock Exchanges. The Code applies to Securitieswhere the Technical AssessmentD34 or theValuationD40 of underlying Mineral or PetroleumAssets is involved.

7. The VALMIN Code is recommended practice andshould be adhered to when assessing and valuingMineral and Petroleum Assets and Securities,regardless of where or for whom their TechnicalAssessments and/or Valuations are prepared orthe location of the Assets under consideration orwhether or not they are prepared by those who



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are members of Professional AssociationsD27having an enforceable code of ethics.

8. The Code is not binding for Technical Assessmentsand Valuations for capital raisings for unlistedcompanies where the Corporations Act does notrequire the issue of a disclosure document. Insuch cases, project proponents should conformwith the principles of the VALMIN Code or clearlyindicate the extent to which the assessment orvaluation does not.

9. Any departures from the VALMIN Code must notbe such as to affect Materially the Expert’s or aSpecialist’s Technical Assessment or Valuationand must be disclosed and justified in the Report.

10. Members of The AusIMM, AIG and MICA shouldunderstand that a complaint against themregarding a violation of the VALMIN Code maybe investigated by the ethics committee oftheir Professional AssociationD27 and that, ifsubstantiated, the results may be published in therelevant journal.

PURPOSES OF REPORTS

11. An “Independent Expert Report”D14 (Report) is areport as may be required by the CorporationsAct or the Listing Rules of ASX or otherrecognised stock exchanges and for any otherpurpose that may involve the TechnicalAssessment and/or Valuation of Mineral orPetroleum Assets and/or Securities. It must beprepared by an ExpertD10 who is Independent.The assistance of SpecialistsD10 who are alsoIndependent may be necessary, depending onwhether or not the Expert has expertise in allaspects of the Technical AssessmentD34 and/orValuationD40, and on the magnitude of the task.

APPLICABILITY OF THE CODE

12. The VALMIN Code applies to the TechnicalAssessment and/or Valuation of Mineral andPetroleum Assets and Securities for anyIndependent Expert Report intended for publicrelease and issued for a purpose regulated by theCorporations Act, Corporations Regulations,other provisions of Australian law, ASIC policy orby the Listing Rules of ASX and other recognisedstock exchanges. These purposes include:

(a) Disclosure DocumentsD9, such as a prospectus;

(b) compensation for compulsory acquisitions;

(c) protection of the rights of shareholders intransactions between associated parties;

(d) valuations involving acquisitions agreed to byshareholders;

(e) capital reductions;

(f) the valuation of a vendor’s consideration in apublic float;

(g) fairness and reasonableness reports relatingto the acquisition or disposal of assets.

Other purposes for which the VALMIN Code, inwhole or in part, should be followed areTechnical Assessments and Valuations involvedwith:

(h) the justification for raising debt or equityfinance from an outside party, when notexcluded by the provisions of Clause 8;

(i) facilitating negotiations between partners;(j) the assessment of Government charges and

taxes;(k) estate settlements;(l) internal corporate reports for directors;(m) reports and expert witness statements

provided for the purposes of litigation;(n) stamp duty assessments on the transfer of

Tenements;(o) stamp duty valuations.(p) assistance to receivers or managers engaged

in the disposal of assets.(q) reports for receivers and administrators.(r) valuations for tax assessments.(s) accounting and financial reporting.

13. The VALMIN Code is intended to apply primarilyto Technical Assessments and Valuationsprepared in accordance with Australian law,circumstances, practices and terminology. Itsfundamental principles and general approach tovaluation have subsequently been widely acceptedand have provided a basis for the preparation ofmineral asset valuation codes tailored to suit thelaws, circumstances and practices of SouthAfrica, Canada and the United States of America.

In addition to such “country specific codes”, aset of standards and guidelines for the valuationof “mineral (but not petroleum) properties,projects and assets” to be a supplement to theInternational Valuation Standards, is beingprepared by the International ValuationsStandards Committee.

The VALMIN Code is considered to be compatiblewith these codes in terms of fundamental principlesand general approach to the technical assessmentand valuation of mineral and petroleum assets.Nevertheless, Experts and Specialists preparingTechnical Assessments and Valuations likely to beapplied to Assets and Securities in countries otherthan Australia should be aware of and take noteof the content of relevant codes, other thanVALMIN.

TYPES OF REPORTS

14. Technical Assessment ReportsD35 involve theTechnical Assessment of elements such as geology,mining or petroleum engineering, metallurgy,environmental impacts, capital and operatingcosts and actual and/or projected production,that may contribute to the actual and/orpotential economic output from Mineral or



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Petroleum AssetsD20D26 as may be required toassess the economic benefit of those assets andthen to determine their Technical Value.

Valuation ReportsD42 express an opinion as to theValue of a Mineral or Petroleum Asset or of aMineral or Petroleum Security and its underlyingAssets.

Fairness and Reasonableness ReportsD11 evaluatethe fairness and reasonableness of a transactionexamined in a Report and express an opinion onwhether the transaction involved is fair and/orreasonable.

MATERIALITY

15. Materiality is the overriding principle indetermining whether or not information and datashould be used in an Independent Expert Report.The term applies to both the nature of the itemsassessed in a Report and to their influence on thequantum of a Valuation.

16. Material/MaterialityD16 means that:(a) the contents and conclusions of a Report;(b) any contributing assessment, calculation or

the like; and(c) data and information

are of such importance that their inclusionor omission from a Technical Assessment orValuation may result in a reader of the Reportreaching a different conclusion than wouldotherwise be the case.

17. The Expert or SpecialistsD10 must state the sourcesof all Material information and data used inpreparing a Report. Subject to any confidentialityor regulatory requirements and the need to obtainconsents, adequate references to the relevantpublished and unpublished reports and recordsused must be provided

It may also be necessary to cite reports, data andrecords that were either available or known andwere possibly Material but which were not used,and the reasons why they were not used.

COMPETENCE

18. “Competence/Competent”D7 means having rele-vant education, qualifications, experience, pro-fessional expertise and holding appropriatelicences (where required) so as to have a reputa-tion that gives authority to statements made inrelation to particular matters.

19. The Assessment and/or Valuation of Mineral orPetroleum Assets and Securities requires a highlevel of Competence in the relevant technicaland commercial disciplines. For example,Competence in geoscience, engineering,metallurgy, environmental assessment, finance,the law and commerce may all be required,

depending on the nature of the Report involved.Therefore, a Competent Expert or CompetentSpecialists must be involved in the preparation ofsuch Reports.

20. Experts and Specialists must be able todemonstrate to the Commissioning EntityD6 andthose entitled to receive a Report that they aresufficiently Competent to prepare and/orcontribute to the Report.

21. In order to ensure that a Report on Mineral orPetroleum Assets is competently prepared andauthoritative, the ExpertD10 must take overallprofessional responsibility for its preparation andcontents. In many circumstances, it is unlikelythat the Expert will be personally Competent inall areas required by the Report, in which case itis the Expert’s responsibility to ensure thatSpecialistsD10 are engaged to prepare and beresponsible for appropriate inputs to the Report.

See also Clause 37.

22. Only in exceptional circumstances, which mustbe described in the Report, may an Expert orSpecialist who is not a Competent geologist withappropriate exploration experience carry out aTechnical Assessment of Exploration Areas orAdvanced Exploration Areas. The Valuation ofsuch areas must not be undertaken without theinvolvement of such a geologist who must givewritten consent to the form and context in whichsuch a Technical Assessment is used in derivingthe Valuation. This consent must be included inthe Report.

23. Either the Expert or Specialists who participate inthe valuation of Mineral or Petroleum Securities(as opposed to the valuation of their relatedassets) or who provide a Vendor ConsiderationOpinion must hold appropriate licenses such as,for example, an Australian Financial ServicesLicence for those who value Australian securities

INDEPENDENCE

24. A Report will be an Independent Expert ReportD14only when the Expert and any contributingSpecialists are Independent of the CommissioningEntity and are perceived and acknowledged to beso by the Commissioning Entity.

‘Independent’ and ‘Independence’ means thatthe Expert and/or Specialists must be able tosatisfy any relevant legal tests of Independenceand must be, and be perceived to be, willing andable to undertake an impartial assessment orvaluation and to prepare an Independent ExpertReport that is free of bias. To this end, the Expertand/or Specialists and their immediate familiesmay not have a significant pecuniary orbeneficial interest in:

(a) the Commissioning Entity;



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(b) the owners or promoters (or partiesassociated with them) of any of the Mineralor Petroleum Assets or Securities that arethe subjects of the Technical Assessment/Valuation to be prepared;

(c) the offerer and target companies in the caseof takeover situations, or in

(d) any of the Mineral or Petroleum Assets orSecurities that are the subjects of theTechnical Assessment/Valuation; or

(e) the outcome of the Technical Assessment/Valuation.

25. In order to support a declaration of Independenceor to enable interested parties (such as theProfessional Associations of which the Expert orSpecialists may be members) to assess whether ornot they may be deemed to be Independent,Experts and Specialists must disclose any interestthat could be seen as being capable ofcompromising their Independence.

Such disclosures must be made as early aspossible to the Commissioning Entity; must beincluded in the Report; and will not absolve anExpert or Specialist from the requirement to beIndependent.

An Expert or Specialists having been previouslyengaged by the Commissioning Entity or an asso-ciated party to undertake a consulting or Valuationassignment, should not necessarily be consideredas being an impairment to their Independence,but such a circumstance should be assessedtaking into account the facts of the matter.

Experts and Specialists should declare any of theirpreviously undertaken Technical Assessments andValuations relating to the Mineral or PetroleumAssets being assessed or valued.

26. The basis of the considerations payable by theCommissioning Entity to an Expert or Specialistsfor the preparation of a Report should bedisclosed in the Report.

Fees, or the provision of further work to the Expertor Specialists must not be dependent on:

(a) the outcome of the Technical Assessment/Valuation, or

(b) the success or failure of the transaction forwhich the Independent Expert Report wasrequired.

27. The Expert and Specialists must maintain com-plete Independence from the CommissioningEntity and should avoid any situations that maybe interpreted as compromising theirIndependence.

TRANSPARENCY

28. “Transparency/Transparent”D38 literally means“easily seen through, clear and unmistakable,

free from affectation and disguise.” For thepurposes of the VALMIN Code, these qualitiesmust apply to the data and information usedas the basis of a Valuation or a TechnicalAssessment, including the assessment ofresources/reserves, mining, processing andmarketing issues, the valuation approachadopted and the methodology or methodologiesused, all of which must be clearly set out inthe Report.

29. A Report will demonstrate its Transparency if itconforms with the content requirements set out inClause 50 and if another Competent Expert orSpecialist could value the Mineral or PetroleumAssets or Securities concerned at approximatelythe same level and/or make similar TechnicalAssessments if they had access to the sameinformation and data and used the valuationapproach adopted and the valuation methodologyor methodologies as set out in the Report.

30. A Valuation or Technical Assessment should notbe provided unless a suitably objectiveReasonableness TestD29 has been applied, basedon facts and not on unsubstantiated opinion.

31. The valuation process must be as transparent,objective and rigorous as the data and otherMaterial information available to the Expert andSpecialists will allow. The outcome of anyValuation will depend on the interaction of anumber of key assumptions that the Expert andSpecialists will need to make, all of which mustbe reasonable and be disclosed in the Report.

All assumptions made regarding Material technicaland commercial parameters, the risks associatedwith those assumptions and the valuation methodsused must be set out clearly in the Report.

VALUATION METHOLOGY

32. Decisions as to the valuation methodology ormethodologies to be used are solely theresponsibility of the Expert or Specialist and mustnot be influenced by the Commissioning Entity.

The Expert and Specialist must make use ofvaluation methods suitable for the Mineral orPetroleum Assets or Securities under consideration.Selection of an appropriate valuation method willdepend on such factors as:

(a) the nature of the Valuation;(b) the development status of the Mineral or

Petroleum Assets and(c) the extent and reliability of available

information.

The Expert or Specialist should disclose anddiscuss in the Report the selected valuationmethod(s) used having regard to each of thesefactors so that another Expert could understandthe procedure used and, within reasonablebounds, arrive at a similar Valuation.



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It may also be desirable to discuss why aparticular valuation method has not been used.

If more than one valuation method is used and, inconsequence, different Valuations result, theExpert or Specialist should comment on how thevaluations compare and on the reason(s) forselecting the Value adopted.

(Valuation methodologies in common use aredescribed in papers in the public domain. Forexample, the MICA website, www.mica.org.auand other such websites are sources ofinformation on valuation methodologies.)

THE COMMISSIONING ENTITY

33. “A Commissioning Entity”D6 is the organisation,company or person that commissions a Report.

34. The Commissioning Entity should makereasonable enquiries in order to establish thatthe Expert and/or Specialists are Competent inthe field(s) in which they are to work and areexperienced in the type of Mineral or PetroleumAssets or Securities to be assessed or Valued.

35. Some of the information that a CommissioningEntity holds concerning the subject matter of aReport may be regarded as confidential andtherefore not appear in a public version of aReport, even though it may be taken into accountin the Technical Assessment and/or Valuation.

The Expert must request the CommissioningEntity to inform the Expert as to whether anyinformation is confidential and the Expert mustthen so inform the Specialists.

The Expert and Specialist(s) must be satisfied thatall relevant confidential information has beenmade available to them by the CommissioningEntity. The Expert or Specialist(s) must indicatein the Report the extent to which the TechnicalAssessment or Valuation is attributable toinformation regarded by the CommissioningEntity to be confidential and has been used by theExpert or Specialist, but is not disclosed in theReport.

36. The Commissioning Entity should present to theExpert and Specialists the results of any PublicIndependent Expert Reports it has commissionedwith respect to the valuation of the assets orsecurities in question that could reasonably beconsidered to be Material.

EXPERT AND SPECIALISTS

37. An ExpertD10 must take overall responsibility forthe physical preparation and contents of a Report.

An Expert may be either:

(a) an Independent individual who prepares andaccepts responsibility for a Report, or

(b) a Representative Expert who is the nominatedrepresentative of a legally constituted body.He or she supervises the preparation of aReport and accepts responsibility for it onbehalf of that body.

An “Independent individual” Expert must:

(a) be Competent in and have had at least tenyears of relevant and recent General Miningor Petroleum ExperienceD12 as may beappropriate;

(b) have had at least five years of relevant andrecent experience in the assessment and/orvaluation of Mineral or Petroleum Assets orSecurities, as may be appropriate;

(c) hold appropriate licences;

(d) be a member of an appropriate ProfessionalAssociation having an enforceable code ofethics.

A “Representative Expert” should preferablyhave the same length of experience and degreeof Competence as is required of an Independentindividual Expert. If this is not the case, he or shemust engage a “Senior Specialist” who:

(a) is Competent and has had at least ten yearsof relevant and recent experience in theMining or Petroleum Industries, as may beappropriate.

(b) has had at least five years of relevant andrecent experience in the the assessmentand/or valuation of Mineral or PetroleumAssets, as may be appropriate.

(c) holds the appropriate licences.

(d) is a member of an appropriate ProfessionalAssociation having an enforceable code ofethics.

“Specialists” are persons who may be retainedby the Expert to prepare sections of Reportsconcerning matters about which the Expert isnot personally Competent. Specialists mustaccept responsibility for the sections of thereports they prepare.

Specialists must be Independent and Competentin relevant technical, commercial or legal fieldsassociated with the Mining or PetroleumIndustries and have at least five years of relevantand recent experience in the fields on whichthey are to report.

Except in special circumstances that must beexplained in the Report, the Expert or the SeniorSpecialist must be members of appropriaterelevant recognised Professional Associationshaving enforceable codes of ethics such as TheAusIMM, AIG or MICA or their equivalents incountries other than Australia.

Experts and Senior Specialists must be familiarwith the VALMIN and JORC Codes, the



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requirements of the Corporations Act, the publicpolicies of ASIC, ASX and /or other recognisedstock exchanges and court decisions that may berelevant to the Valuation being prepared.

38. An Expert should declare to the CommissioningEntity and Specialists should declare to theExpert the name of the Professional Associationto which they may belong and provide a signeddeclaration that they are subject to its code ofethics. These declarations should be retained bythe Expert for inspection if required for a periodof seven years.

39. Experts and Specialists should obtain from theCommissioning Entity an indemnity under whichthey will be compensated for any liability:

(a) resulting from their reliance on informationprovided by the Commissioning Entity that isMaterially inaccurate or incomplete. (Suchan indemnity does not absolve Experts andSpecialists from critically examining theinformation provided); or

(b) relating to any consequential extension ofworkload through queries, questions orpublic hearings arising from the Report.

A Report should disclose the nature and Materialdetails of any such indemnity.

40. An Expert or Specialist should make writtenenquiries of the directors and/or management ofthe Commissioning Entity about prior relevanttechnical, valuation or similar assessment reports,particularly if it is considered that such informationhas not been sufficiently disclosed by theCommissioning Entity.

The Expert and/or Specialist(s) should interviewrelevant personnel and review the CommissioningEntity’s database, responses to enquiries, reports,and all other information and data relevant to theReport.

41. An Expert must not undertake or sign off on aReport unless the Commissioning Entity hasconfirmed in writing that:

(a) full, accurate and true disclosure of allMaterial information will be made to theExpert;

(b) all necessary access to the CommissioningEntity’s personnel and records will beassured; and

(c) the Independence of the Expert andSpecialist(s) will be respected.

COMMISSIONING A REPORT

42. The Expert and/or Specialists must enter into awritten agreement with the CommissioningEntity, which may be by an exchange of letters,specifying the terms governing the preparation ofa Report.

43. The written agreement should cover such mattersas:

(a) the scope and purpose of the Report;

(b) names, qualifications and relevant experi-ence of the Expert and Specialists;

(c) an acknowledgement of the Independenceand Competence of the Expert and Specialists;

(d) the Valuation DateD41 as agreed by theCommissioning Entity and the Expert;

(e) name(s) or title(s) of the subjects of the Reportand of the Mineral or Petroleum Assets orSecurities to be assessed or Valued;

(f) the basis for the cost of the Report whichshould be commensurate with the nature andcomplexity of the Valuation and must not becontingent upon the success or failure of anyproposal or transaction assessed in the Report.

(g) the right of the Expert to refuse to provide anopinion or report where it is impossible orimpractical to obtain sufficient accurate orreliable data or information;

(h) the Specialists to be engaged, the areas inwhich they are to contribute to the Reportand their terms of engagement;

(i) the right and obligation of the Expert andSpecialists to base findings on informationwithin their own knowledge or acquired asa result of their own investigations, as wellas on the information provided by theCommissioning Entity.

(i) advice on the extent to which the Expert andSpecialist(s) are obliged to conform with theVALMIN Code

(j) a programme for the progress and completionof the Report including the dates for thecompletion of such significant intermediateactivities as the provision of data andinformation by the Commissioning Entity; thereview of data and information by the Expertand Specialist(s); and the issuing of a draftof the Report to the Commissioning Entity;

(k) notification that the Expert and Specialistsmay (and may be required to) keep records ofdiscussions with the Commissioning Entity,a list of all documents to be referred to inthe Report, copies of all Material sourcedocuments and of their due diligence notes;

(l) the liability indemnity referred to in Clause39.

INTENTION OF A REPORT

44. The intention of a Report is to gather, summariseand interpret the MaterialD16 information relatedto the Mineral or Petroleum Assets or Securitiesunder consideration and to present clearly andaccurately that information along with theopinions of the ExpertD10 who is responsible forthe Report and the SpecialistsD10 who contributeto it.



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The outcome of a Valuation ReportD42 will usuallybe the Fair Market ValueD43 of a Mineral orPetroleum Asset or Security comprising a TechnicalValueD36 plus or minus, in some cases, a premiumor discount to account for such factors as market,strategic considerations or special circumstances.However, it should be recognised that someAssets, such as Exploration Areas may not have aTechnical Value.

45. The Expert should state in the Report its specificpurpose (and that of any subsidiary reports), itsterms of reference and if there are any limitationson its use for other purposes.

DECLARATIONS

46. The Expert or Specialists must declare in a Reportthat it has been prepared in accordance withthe VALMIN Code or, if it is not fully compliant,indicate those areas where it is not and explainwhy this is so.

47. A Report must state the names, qualifications,memberships of appropriate ProfessionalAssociations, relevant experience and, whereapplicable, appropriate licence details of theExpert and of each Specialist and must identifythe nature and contribution of each of them to theReport.

48. Where a Report is prepared within a corporationor firm, the name, the registered address and, ifregistered in Australia, the Australian BusinessNumber (ABN), Australian Registered BodyNumber (ARBN) or Australian Company Number(ACN) and, where relevant, the AustralianFinancial Services Licence (AFSL) Number of thecorporation or firm should be stated in it.

The name of the Expert responsible for the Reportmust be included in it and he or she mustpersonally sign the Report.

COST OF A REPORT

49. The cost of a Report will normally reflect thecomplexity of the Technical Assessment orValuation, the amount of data available and thespecific assessment or valuation difficultiesencountered.

Time and cost constraints must not be permittedto compromise fundamental compliance with therequirements of the Code. Any restrictions socaused to the depth of analysis or the extent ofdetail required must be recorded in the Report.

CONTENT OF A REPORT

50. A Report is likely to be used by readers havingdifferent interests and depths of technicalknowledge. For the sake of clarity, but recognisingthat the use of technical language is sometimesessential (in which case a glossary of terms maybe helpful), the Report should be written in plain

English and must contain all information whichthe Commissioning Entity and others likely to relyon the Report, including investors and theirprofessional advisers, would reasonably require,and reasonably expect to find in the Report, forthe purpose of making an informed decisionabout the subject of the Report. For example:

(a) information regarding the sources of dataused;

(b) a description of the relevant Mineral orPetroleum Assets, including their location,plant, equipment, infrastructure and owner-ship;

(c) an account of the Material history of theMineral or Petroleum Assets.

(d) sufficient information to allow experiencedinvestment analysts to understand how theTechnical Assessment and/or Valuation wasprepared, including details (summarised ifappropriate) of any financial model used andof sensitivities to variation

(e) sufficient information about the valuationmethod(s) used so that another Expert canunderstand the procedures used and replicatethe Valuation;

(f) a review of any other matters that areMaterial to the Report;

(g) a balanced, objective and concise statementof the Expert’s review and conclusions sothat an informed layman can have a clearunderstanding of the Mineral or PetroleumAssets or Securities concerned, their Value (ifapplicable) and of the attendant Risks;

(h) a concise summary setting out the key dataand important assumptions made and theconclusions drawn by the Expert and/orSpecialists, qualified if necessary accordingto the insufficient or inadequate informationprovisions of Clause 54.

DATA AND INFORMATION

51. Detailed technical information and data shouldbe included in the Report if their understandingis important to the Technical Assessment orValuation. Explanations of unusual or newtechnical processes and activities that may beMaterial to the understanding of the TechnicalAssessment or Valuation should be included,where commercial confidentiality considerationsallow. The use is encouraged of tables, maps,graphical presentations and a glossary of termsand acronyms.

52. Experts and Specialists must not rely uncriticallyon the data and other information provided,either by the Commissioning Entity or obtainedotherwise. They must undertake suitable checks,enquiries, analyses and verification procedures toestablish reasonable grounds for establishing thesoundness of the contents and conclusions of theReport.



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53. The data used must not have been renderedinvalid due to the passage of time and consequentchanges in such items as capital and operatingcost structures, exploration techniques, geologicalinterpretation and mining and metallurgicaltechnologies.

54. Where it is impossible or impracticable to obtainsufficiently accurate or reliable data or informationas the basis for a Technical Assessment or aValuation, this must be stated in the Report by theExpert or Specialist. In these circumstances, theExpert or Specialist would be under no obligationto express an opinion and/or provide a Valuation.

REFERRING TO EXISTING REPORTS

55. The Expert or Specialists should ensure thatsummaries of existing reports that have beenprepared by others are accurate and that anyquotations from them are in the form and contextintended by the original authors.

56. A Report must not include a report or quotationthat is the work of another person without his orher written (and not subsequently withdrawn)consent, unless such consent is either:

(a) not required by law or(b) the Report is within the public domain and

not subject to copyright or if (c) the circumstances are such that, in the

reasonable opinion of the Expert or Specialist,it would be impossible, impracticable orabnormally expensive to obtain such a consent.

57. The Expert or Specialist must not consent toreference being made to a Report prepared inaccordance with the VALMIN Code in anydocument required under the Corporations Act orthe Listing Rules of ASX or of another recognisedstock exchange, unless the Report is included aspart of that document, provided that, if making areference only to a Report is permitted by law, onrequest the Commissioning Entity must provide:

(a) a free of charge copy of the Report, or(b) advise a readily accessible source of the

Report such as an internet site available to thepublic where a dated version of the Reportcan be obtained or downloaded at no chargeor a location where a copy of the Report maybe viewed.

Such a Report must be current or be reasonablycapable of being relied upon or be required forreference by those to whom it has beenaddressed and by their advisers.

NATURE OF VALUE

58. In times of high commodity prices and/orbuoyant share market conditions or in the casesof a forced sale or liquidation, the Fair MarketValuesD43 ascribed to Mineral or Petroleum Assetsor Securities may be higher or lower than their

Technical ValuesD36 and be more likely to changewith time. A Report should take such factorsinto account, state the results of the principalvaluation method(s) used and disclose theamount of, and reasons for, the differencebetween the Fair Market and Technical Values.

As the Values of Mineral Assets and Securities arelikely to fluctuate over time, the Expert orSpecialist should ensure that the opinionsexpressed and the Valuation provided is consistentwith circumstances as at the Valuation DateD41.

A Valuation Report must state the nature of theValue(s) determined and their ValuationDate(s)D41.

59. To the extent that it may affect the Valuation andif the available data permits, a range (high/low)of values should be determined and stated,reflecting any uncertainties in the data and theinteraction of the various assumptions made.However, the range should not be so wide as torender the valuation meaningless.

Similarly, the Report should include a sensitivityanalysis showing the effects of changing the mostsignificant assumptions.

In all cases, a preferred Value should be identified.If there are cogent reasons for not doing so, theyshould be stated in the Report.

60. Where the Expert or Specialist considers that aMineral or Petroleum Asset (or a component of it)has no Value, or a Value that is immaterial to thetotal Valuation, or a negative Value, (that is, theAsset is a liability) this must be stated in theReport.

61. In order to provide a common reference groundfor comparing the valuations of different Assets, aseparate value should be determined on a “100%pre-tax, all-equity, not already financed” basis

ILLUSTRATIONS

62. A Report should include appropriate photographs,plans, diagrams, graphs and maps, including oneshowing the geographical location of the subjectof the Valuation in relation to a capital city ormajor town. If possible, this map should includea grid in Geocentric Datum of Australia (GDA)co-ordinates or its accepted equivalent in othercountries or in latitudes and longitudes. Heightsabove sea level should be expressed withreference to Australian Height Datum (AHD) orits accepted equivalent in other countries.

Maps in a Report should:

(a) be based on a standard series map of asuitable scale, if one is available.

(b) show a bar scale and a direction arrowpointing north, designated as either magnetic,true or grid north. If grid north is shown, it



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should be in relation to either true ormagnetic north.

(c) be readable and prepared so that no data islost or obscured if the document isreproduced in black and white instead ofin its original colour or if it has been reducedin size for printing

(d) be dated, carry the name of the persons orcompanies taking responsibility for theircontent and indicate the reports to whichthey apply. (This requirement also applies toplans and diagrams.)

(e) if showing exploration results, be at such ascale as to assist in the assessment ofsampling and other exploration procedures.

Graphs in a Report should include a graduatedscale that is sufficiently detailed for intermediatereadings to be taken with adequate accuracy.

ADMINISTRATION

63. A draft copy of a Report should be given to TheCommissioning Entity so that it can advise theExpert and Specialists as to any Materialinformation not taken into account, the accuracyof the facts, any comments it may have on theassumptions made and those parts of the Reportthat it regards as being confidential.

64. The Expert and Specialists should keepcontemporaneous records of discussions with theCommissioning Entity, a list of all documentsreferred to in the Report and copies of allMaterial source documents.

SITE INSPECTIONS

65. Where inspection of a Material Mineral orPetroleum Asset or TenementD37 is likely to revealinformation or data that is Material to a Report,the Expert, or, where relevant, the Specialist(s)must inspect it, providing it is practicable to doso.

If an inspection is not made, the Expert orSpecialist must be satisfied that there is sufficientcurrent information available to allow aninformed appraisal to be made without aninspection.

The decision whether or not to conduct such aninspection must be made by the Expert or aSpecialist and not by the Commissioning Entity

An inspection should be made after the latestsignificant activity with respect to the subjectmatter of the Report has taken place. It shouldinclude any workings or treatment facilitiessuch as a mine or process plant and associatedinfrastructure.

Where a Material Mineral Asset or Tenement hasnot been inspected, the Expert or Specialistshould state in the Report the reason(s) for non-inspection.

66. Inspection of Petroleum Exploration AreasD26would not normally be required, except wherethe Expert considers Material elements of thedatabase are incomplete, or require verification,or where the design, physical condition or per-formance of existing facilities are considered tobe Material to the Valuation.

TENEMENTS

67. The status of TenementsD37 is Material andrequires disclosure. Determination of the statusof Tenements is necessary and must be based ona recent independent inquiry, either by the Expertor a Specialist or on a recent report by either asolicitor or a tenement specialist who wouldqualify as being a “Specialist” as described inDefinition D10.

68. A Report should contain a list of all TenementsMaterial to the Report, prepared by or on behalfof the Expert or Specialist, unless that informationis provided in an accompanying report.

Subject to Materiality, relevance and whether ornot the information is provided elsewhere in theReport, the tenement list or an accompanyingdiscussion should deal with the following topics:

(a) Tenement type, reference name and/ornumber and area;

(b) whether the title has been formally granted;(c) any attached impediments to title such as

post granting approvals and permission;(d) whether an application or approval is

pending and whether the application issubject to challenges

(e) whether the Tenement document has beenissued and if it is in the possession of theholder;

(f) expiry and renewal dates (These can beprovided in an accompanying report);

(g) past Tenement expenditure, future expenditurecommitments, rents and rates;

(h) all Material obligations to Government(s) orto any other person or entity;

(i) ownership, including details of co-venturersand their interests;

(j) details of any indirect interests such asoverriding royalties;

(k) details of liabilities, liens and encumbrances,including those relating to reclamation andrehabilitation;

(l) in the case of a mining lease, whether or notthe Tenement has been subject to a cadastralsurvey;

(m) Native Title considerations;(n) any other Material information.

69. A Report should also list by title and location anycontiguous and geologically related Tenementsthat may have a Material bearing on the value ofthe Tenements under consideration.



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70. The attribution of Value to Tenements in excessof any Value separately assessed on the basis ofexisting operations, future developments and/ortheir associated resources/reserves should bejustified in detail. This especially applies toexploration tenements under application at thetime of preparing the Valuation.

71. A group of exploration Tenements havingexploration potential may have a “strategic”advantage or disadvantage and therefore have avalue different to the sum of the Values of theindividual Tenements. Where the Value of theaggregate is assessed to be higher or lower thanthe sum of the individual Values, the Expert orSpecialist should state both Values and explainthe reason for the difference.

72. Maps, plans or other graphic information shouldbe sufficient to illustrate the geology and otherpertinent features, including the location of theTenements under consideration. In particular, aTenement map should show local landmarks andTenement boundaries, dimensions, and locationrelative to nearby properties that may have a sig-nificant bearing on the potential of the Tenement.

(See Clause 62 for general advice on mappreparation.)

73. Where the potential of an exploration Tenementis based on the results of geophysical orgeochemical surveys, some form of graphicalinterpretation, maps or tables showing the resultsand interpretations of the surveys should beincluded in the Report.

MINERALISATION, RESOURCES AND RESERVES

74. The Expert or Specialist must comment on thequality and reasonableness of the resource and/orreserve estimates that may be provided, either bythe Commissioning Entity or by any other entitythat may have an interest in the outcome of avaluation and on the extent to which they havebeen reported in accordance with the currentversion of the JORC Code.

Where resource and reserve estimates are notconsidered to conform with the JORC Code, forexample, if they were prepared before the JORCCode became applicable or for resources/reserveslocated in countries where other or noresource/reserve codes may apply to the extentthat it is impracticable to report in accordancewith the JORC Code, the reasons for havingto base a Technical Assessment and/or Valuationon non-conforming resource and/or reserveestimates must be indicated in the Report. Anassessment of the quality of such estimates withrespect to JORC Code requirements must also beprovided.

75. All Material petroleum occurrences, resourcesand reserves within the boundaries of thetenements under consideration must be reviewed

and reported on in accordance with the“Petroleum Reserves Definitions” published in1997 by the Society of Petroleum Engineers(SPE) and the World Petroleum Congress (WPC)and the “Petroleum Resources Classification andDefinitions” published in 2000 by the SPE, theWPC and the American Association of PetroleumGeologists (AAPG), as may be amended fromtime to time.

76. Asset assessment data and information thatshould be reported include:(a) geophysical and geochemical data;(b) drill hole location, spacing, diameter, assay

intervals, collar location and elevation;(c) downhole survey method and data;(d) number of samples used to define assay

intervals;(e) drilling and sampling methods;(f) drill-sample recovery percentages (g) tonnage factors (specific gravities);(h) quality of geological sampling and assay

data;(i) assay laboratories and the analytical

techniques used;(j) geotechnical and hydro-geological factors

that may affect mining practices or the safetyof tailings dams and other structures;

(k) minor constituents of the ore likely toinfluence the viable exploitation of the depositbecause of metallurgical or environmentalconcerns;

(l) ore body geometry, depth of cover, thicknessand orientation

(m) assumptions made regarding mining cut-offgrades, dilution, recovery and tonnage/grade;

(n) ore tonnage/grade information, if possible fora range of cut-off grades;

(o) estimation methods and parameters andprocess plant recovery;

(p) marketability of product(s).

77. Any assay results included in a Report should beset out in a form considered to be most suitableby the Expert or Specialist. This could involvereporting all results, with sample widths or size inthe case of bulk samples, or stating the mean aswell as the weighted average assay of eachmineralised zone and indicating clearly themethod used to calculate these figures. Shouldrelatively high values be reported, their contextshould be discussed and any relevant supportingdata provided.

Samples used for assaying should be reliablyidentified as having been taken from specificlocations and as being uncontaminated. If anExpert or Specialist has not personally taken thesamples, the Report should state the steps takento confirm the authenticity of the samples, theadequacy of the sampling procedures used andthe reliability of the relevant reports.



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Wherever considered by the Expert or Specialistto be appropriate and Material to the Reportand the mineralisation being investigated, anyinadequacies in the quality of sampling andassaying should be discussed.

78. Where comparisons are made with geologicalsituations at known mineral or petroleumoccurrences, all relevant factors should bepresented. Where a causal relationship such ascontinuity of geological structures is claimed, theExpert or Specialist should clearly show how theclaimed continuity is considered relevant tothe Technical Assessment or Valuation of theMineral or Petroleum Asset or Tenement underconsideration. Where a comparison has beenmade and no causal relationship is claimed, thisshould be stated.

79. The absence of mineralisation on adjoining ornearby Tenements may be as important as itspresence. Therefore, the Expert or Specialistshould disclose and explain the presence orabsence of known mineralisation or explorationresults, where such disclosure is Material to anobjective Valuation of a Mineral Asset.

80. Where mineralisation or an indication ofpetroleum on a nearby property is noted in theReport, maps and/or sections should indicatethe relationship of its geology to that of anyTenement that is the subject of the Report.

81. Assessment criteria that should be reported withrespect to Petroleum Assets where specificallyrelevant include:

(a) well spacing;(b) seismic control;(c) well test results; (d) analyses; (e) drilling and sampling methods;(f) production information;(g) product quality and its relevance to the valua-

tion;(h) reserve estimation methods and assumptions.

82. When showing the location of petroleum wellson maps, standard industry well symbols shouldbe used to denote the well status and the natureof any hydrocarbon indications encountered.

MINING AND ORE PROCESSING

83. Existing and/or proposed mining and processplant practices should be reviewed to establishthe technical and economic feasibility of theoperation under consideration at its existingand/or proposed scales. Matters to be reviewedinclude:

(a) mining and ore treatment methods;(b) grade control, mining loss and dilution;(c) ground conditions;

(d) mineralogical and metallurgical factors likelyto affect process recovery;

(e) flow sheet design;(f) variability of the ore body’s physical and

chemical properties;(g) metallurgical recoveries;(h) labour sources, requirements and productivity;(i) operating practices;(j) equipment availability, utilisation and

performance;(k) the likely effects of hydrological and climatic

factors on construction and operating costs(l) the technologies employed or to be

employed;(m) recent mining and ore treatment trial data (for

proposed operations);(n) the anticipated time required to achieve

design throughput capacity;(o) marketability of products

84. A Report that deals with mining and oretreatment should include:

(a) tonnage and grade of ore or other materialmined or treated in appropriate timeincrements, both achieved and forecastedover at least the first or next five years ofoperation, depending on whether the asset isproposed or operating, or for its anticipatedlife;

(b) tonnage and grade of ore or other materialmined and contained metal, both achievedand forecast, reconciled, where practicable,with the categories of Mineral Resourcesand Ore Reserves, as defined in the currentversion of the JORC CodeD15;

(c) a description of plant, technology andoperating practices, together with actual orforecasted process plant recoveries from millfeed to marketable products;

(d) comprehensive reasons to support anyrecommendation to reopen any facilities thatare either on care and maintenance or havebeen abandoned.

85. Relevant prior performance in terms of:

(a) tonnage or volumes mined and/or processed;

(b) mineral and/or concentrate grade or coal andindustrial mineral quality measured againsttonnage and grade of depleted reserves; and

(c) concentrate production and quality

(d) production costs;

should be reconciled with proposed performanceestimates.

86. The Expert or Specialists should report anyenvironmental, land access, planning controls,restrictive zoning, Native Title or other land rightsand rehabilitation matters that may have an



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impact on a Technical Assessment or Valuation. Itis particularly important to identify those factorsthat could lead to delays in project development,curtailment of operations, higher cost of debt/equity or significant compensation payments.

87. A Report should disclose any Material existing orpotential, statutory, legal, technical, environmental,commercial or socio-political obstacles to futureexploration, development or production. Securityand sovereign risk issues should also beaddressed.

88. The Expert or Specialist should review and reportupon any special factors relating to employeerelations and/or work practices which may havean impact on a Technical Assessment or theValuation of the Mineral or Petroleum Assetsunder consideration.

CAPITAL AND OPERATING COSTS

89. To the extent that it may affect a TechnicalAssessment or Valuation, the Expert or Specialistshould review and report upon actual andforecast capital and operating costs for theeffective estimated productive life of the Mineralor Petroleum Assets being valued.

90. The basis for income tax and other taxes,royalties, cost escalation and exchange ratesused must be stated in the Report.

91. Cost estimates should take into account likelychanges with time in factors such as workpractices and productivity and be sufficientlydetailed to assess whether they are realistic andachievable.

Estimates of capital costs are likely to includethose of:

(a) feasibility and associated studies;(b) acquisition; (c) construction; (d) working capital;(e) sustaining capital;(f) eventual shutdown and site restoration;(g) contingency allowance.

Estimates of operating costs are likely to includethose of:

(a) workforce employment;(b) consumables;(c) power, water and other services;(d) on and off-site administration; (e) environmental protection and monitoring; (f) transport of workforce;(g) product marketing and transport; (h) taxes, royalties and other governmental

charges;(i) contingency allowance.

92. The Expert or Specialists should report theadequacy of, and obstacles to accessingappropriate services and infrastructure in order toestablish whether they are available or can bemade available, and at what likely cost. Suchservices and infrastructure include power, watersupply, transport, communications, work forceaccommodation, housing, medical servicesand waste and tailings treatment and/or disposalfacilities.

The Report should also review any access andterrain conditions that may affect the logisticsof exploration and development. In the case ofPetroleum Assets, distances to existing orproposed oil or gas pipelines or road haulageroutes should also be reported.

93. A Report should outline the forecast capital andoperating cost estimates that have been adopted,together with supporting data and date reference.

Capital and operating cost estimates should becompared with those of similar operationselsewhere, where available and if relevant.

Both capital and operating costs should be set outunder broad functional headings and, whereappropriate, in terms of some suitable unit such as“per ounce of gold produced” or “per tonne ofannual plant throughput”, not just as total capitaland total annual operating costs

COMPLETION AND COMMISSIONING

94. The Expert or Specialist should report uponthe likelihood of delays in completion orcommissioning of projects; major changes inoperating practices; or possible difficulties withnew or scaled up technologies, especially wheresuch factors may have a significant effect onthe technical or financial viability of the Mineralor Petroleum Assets under consideration.

REVENUE

95. A Report should assess the Asset’s revenuestream over an appropriate period and set out thebasis for price-related assumptions relating to itsproduct(s), such as those concerning:

(a) forecast product prices, smelter treatmentand refinery charges, having regard to longterm historical experience, current andforecast market conditions and the likelyquantity and quality of product;

(b) penalty components of the product;

(c) variation in product price;

(d) size, nature and location of markets;

(e) sales volumes;

(f) cost escalation;

(g) exchange rates;

(h) hedging or forward sales contracts.



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96. A reconciliation of the proposed productionvolume and product quality with likely marketopportunities and available resources and/orreserves should be incorporated in the Report.

FINANCE

97. Depending upon the scope of the Report, theExpert or Specialist should report upon liabilities,commitments and financial exposures such as:

(a) creditors;(b) provisions for superannuation, annual and

long service leave entitlements;(c) expenditure and commitments on explo-

ration Tenements;(d) under-insurance;(e) the cost of environmental rehabilitation,

especially if a property is to be abandoned;(f) security deposits;(g) income and capital gains taxes;(h) material agreements and contracts, including

development plans, sales contracts, jointventure agreements, project permits, andenvironmental and access requirements.

(i) redundancy commitments

98. The Valuation may be affected by the nature ofthe financing arrangements for a project. The Expertor Specialist should therefore review any suchcommitments made and the form of financing (forexample, gold loans and commodity pricehedging).

99. Depending upon the terms of reference of theReport, for some Mineral or Petroleum Assets theExpert or Specialists may need to assume anappropriate standard financing structure such asan all equity basis. For Development Projects andOperating Mines or Producing Fields, debt thathas been or will be drawn down should be takeninto account in the Valuation.

100. The basis for and nature of any consideration orbenefit payable to any vendor, promoter orprovider of seed capital, and of any conditionsinvolved, should be assessed and quantified in aValuation.

SHAREMARKET AND ECONOMIC CONDITIONS

101. General share market and economic conditionsmay influence the value of Mineral or PetroleumAssets or Securities and, in particular, theassessment of premiums or discounts. Specificshare market data may provide an indication ofthe Value of Mineral or Petroleum Assets andSecurities.

102. When determining any premium or discount tobe applied to a Technical ValueD36, the Expert orSpecialist should state whether and how marketand economic conditions have been taken intoaccount.

RISK

103. The report should include an evaluation of theRisksD30 likely to apply to the Assets underconsideration, including an analysis of theuncertainties inherent in the assumptions madeand the effects they may have on the Valuation.

Risks and uncertainty can arise with respect tothe availability and quality of data and otherinformation concerning:

(a) geology of mineral deposits and thedependant estimates of grade, resources andreserves;

(b) geological prospectivity and the possibilitythat further exploration may fail todemonstrate any economic mineralisation(in the case of projects without definedreserves;

(c) ore processing and the variability ofmetallurgical parameters such as recoveryrates, process plant availability and theability of new processes to be financed and tolive up to expectations;

(d) construction, including unforseen foundationconditions, weather and industrial disputes,all of which may affect both capital costs andcompletion date;

(e) production of marketable commodities interms of quality and price;

(f) “country risk” involving social, political,environmental, cultural and security factorswhich cannot be controlled by projectoperators;

(g) oil-in-place and recovery factors forPetroleum Assets.

As an indication of the risk profile of the subjectof the valuation, the Value of an Asset should, ifpossible, be expressed numerically as a range,together with the most likely figure.

(When assessing risk profiles, reference should bemade to Australian/New Zealand StandardAS/NZS 4360:1995 “Risk Management” forAssets located in these countries and to sourcesof risk management information such as theMinerals and Industry Risk ManagementGateway (MIRMgate) at www.mirmgate.com.)


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NOTES


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DEFINITIONS and ACRONYMS

D1. AAPG means the American Association ofPetroleum Geologists.

Advanced Exploration Areas – See D20, MineralAssets.

D2 AIG means the Australian Institute ofGeoscientists

Asset – See D20, Mineral Assets and D26,Petroleum Assets

D3 ASIC means Australian Securities andInvestments Commission

D4 ASX means the Australian Stock ExchangeLimited. ASX maintains an “official list” ofcompanies, the securities of which may betraded. Admission to the official list is gained bysatisfying the “ASX Listing Rules”. These rulesimpose strict requirements that must be compliedwith by entities admitted to the official list aswell as by entities seeking admission to ASX,some of which are relevant to the preparation ofIndependent Reports.

(ASX and the New Zealand Stock Exchange have,since 1989 and 1992 respectively, incorporatedthe JORC Code into their Listing Rules accordingto which a public report must be prepared inaccordance with the JORC Code if it includesa statement on exploration results, mineralresources or ore reserves.)

D5 AusIMM means The Australasian Institute ofMining and Metallurgy.

D6 A Commissioning Entity is the organisation,company or person that commissions a Report.

See also Clauses 33 to 36.

D7 Competence/Competent means having relevanteducation, qualifications, experience, professionalexpertise and holding appropriate licences(where required) so as to have a reputation thatgives authority to statements made in relation toparticular matters.


D8 The (Australian) Corporations Act 2001,(previously known as “Corporations Law” andnow commonly referred to as “the Act”) as maybe amended from time to time, is the legislationthat has the principal legal influence on thepreparation of Expert Reports and hence on thethemes of the VALMIN Code. The CorporationsAct takes precedence over any other pronounce-ments, including those of ASIC, ASX or theVALMIN Code.

Development Projects – See D20: Mineral Assets.

D9 A Disclosure Document for an offer of securitiesis, as defined in Section 9 of the CorporationsAct, a prospectus, a profile statement or an offerinformation statement.

D10 Expert and Specialists

An “Expert” may be either:

(a) an “Independent individual” who preparesand accepts responsibility for a Report, or

(b) a “Representative Expert” who is thenominated representative of a legallyconstituted body. He or she supervises thepreparation of a Report and acceptsresponsibility for it on behalf of that body.

An ”Independent individual Expert” must:

(a) be Competent in and have had at least tenyears of relevant and recent GeneralMining or Petroleum ExperienceD12 in theMining or Petroleum Industries, as may beappropriate;

(b) have had at least five years of relevant andrecent experience in the assessment and/orvaluation of Mineral or Petroleum Assets orSecurities, as may be appropriate;

(c) hold appropriate licences;

(d) be a member of an appropriate ProfessionalAssociation having an enforceable code ofethics.

A “Representative Expert” should preferablyhave the same length of experience and degree ofCompetence as is required of an Independentindividual Expert. If this is not the case, he or shemust engage a “Senior Specialist” who:

(a) is Competent and has had at least ten yearsof relevant and recent Experience in theMining or Petroleum Industries, as may beappropriate.

(b) has had at least five years of relevant andrecent Experience in the assessment and/orValuation of Mineral or Petroleum Assetsand Securities, as may be appropriate.

(c) holds the appropriate licences.(d) is a member of an appropriate Professional

Association having an enforceable code ofethics.

Specialists are persons who may be retained bythe Expert to prepare sections of Reportsconcerning matters about which the Expert is notpersonally Competent. Specialists must acceptresponsibility for the sections of the reports theyprepare.


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Specialists must be Independent and Competentin relevant technical, commercial or legal fieldsassociated with the Mining or PetroleumIndustries and have at least five years of relevantand recent experience in the fields on which theyare to report.

Except in special circumstances that must beexplained in the Report, the Expert or the SeniorSpecialist must be members of appropriaterecognised Professional Associations havingenforceable codes of ethics such as The AusIMM,AIG or MICA or their equivalents in countriesother than Australia.

See also Clause 37

Exploration Areas – See D20: Mineral Assets.

Fair Market Value – See D43: Value.

D11 A Fairness and Reasonableness Report evaluatesthe fairness and reasonableness of a transactionexamined in a Report and expresses an opinionon whether the transaction involved is fair and/orreasonable.

D12 General Mining or Petroleum IndustryExperience requires that Experts and Specialistshave had significant personal experience andinvolvement in:

(a) geology, when Reports apply to ExplorationAreas or Advanced Exploration Areas, or

(b) the technical discipline in which the Expertor Specialist is to be principally involved,together with sufficient knowledge of otherrelevant technical disciplines to enable themto supervise the work of other professionalswhen Reports apply to Pre-DevelopmentProjects, Development Projects, OperatingMines, Producing Fields or PetroleumProduction Facilities.

D13 Independent and Independence means that theExpert and/or Specialists must be able to satisfyany relevant legal tests of Independence and mustbe, and be perceived to be, willing and able toundertake an impartial assessment or valuationand to prepare an Independent Expert Report thatis free of bias. To this end, the Expert and/orSpecialists and their immediate families may nothave a significant pecuniary or beneficial interestin:

(a) the Commissioning Entity; or

(b) the owners or promoters (or parties associatedwith them) of any of the Mineral or PetroleumAssets or Securities that are the subjects ofthe Technical Assessment/Valuation to beprepared; or

(c) the offerer and target companies in the caseof takeover situations, or in

(d) any of the Mineral or Petroleum Assets orSecurities that are the subjects of theTechnical Assessment/Valuation; or

(e) the outcome of the Technical Assessment/Valuation.

As at April 2005, ASIC Policy Statement 75,“Independent expert reports to shareholders”,ASIC Practice Note 42 “Independence of experts’reports” and ASIC Practice Note 43 “Valuationreports and profit forecasts” were current andprovided instructions and guidance concerningthe Independence of Experts and the preparationof Reports and valuation statements required forpurposes regulated by the Corporations Act.

(At the above date, ASIC was reviewing its policyon Experts and proposing to issue two new policystatements covering Independence and qualityand content of Experts’ reports.)


D14 An Independent Expert Report (Report) is aPublic ReportD25 that may be required by theCorporations Act, the Listing Rules of ASX or ofother recognised stock exchanges or for any otherpurpose that may involve the TechnicalAssessment and/or Valuation of Mineral orPetroleum Assets and/or Securities. It must beprepared by an Expert who is Independent.The assistance of Specialists who are alsoIndependent may be necessary, depending onwhether or not the Expert has expertise in allaspects of the Technical Assessment and/orValuation, and on the magnitude of the task.

See also Clause 12.

D15 The JORC Code means the Australasian Code forReporting of Exploration Results, MineralResources and Ore Reserves, as may be amendedfrom time to time. This code sets out minimumstandards, recommendations and guidelines forthe public reporting in Australasia of explorationresults, mineral resources and ore reserves.

See D4 regarding the incorporation of the JORCCode in the Listing Rules of the ASX and the NewZealand Stock Exchange.

See also D21 – “Mineral Resources and OreReserves”.

Listing Rules – See D4 - “ASX”.

D16 Material/Materiality means that:

(a) the contents and conclusions of a Report;

(b) any contributing assessment, calculation orthe like; and

(c) data and information


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are of such importance that their inclusion oromission from a Technical Assessment orValuation may result in a reader of the Reportreaching a different conclusion than wouldotherwise be the case.

The determination of what is Material dependson both qualitative and quantitative factors.Something may be Material in the qualitativesense because of its very nature, such as, forexample, country risk.

In the case of quantitative issues, the Materialityof data can be assessed in terms of the extent towhich the omission or inclusion of an item couldlead to changes in total value of:

(This guidance is derived from the AustralianAccounting Standards Board AAS5 Materiality“useful benchmarks”.)

D17 MCA means the Minerals Council of Australia.

D18 MICA means the Mineral Industry ConsultantsAssociation (of Australia).

D19 A Mineral is any naturally occurring materialfound in or on the Earth’s crust that is useful toand/or has a value placed on it by humankind,excluding crude oil, natural gas, coal-basedmethane, tar sands and oil-shale which are clas-sified as Petroleum as defined in D25.

D20 Mineral Assets means all property includingbut not limited to real property, intellectualproperty, mining and exploration tenements heldor acquired in connection with the explorationof, the development of and the productionfrom those tenements together with all plant,equipment and infrastructure owned or acquiredfor the development, extraction and processing ofminerals in connection with those tenements.Most Mineral Assets can be classified as either:

Exploration Areas – properties wheremineralisation may or may not have beenidentified, but where a Mineral or PetroleumResource has not been identified.

Advanced Exploration Areas – propertieswhere considerable exploration has beenundertaken and specific targets have beenidentified that warrant further detailedevaluation, usually by drill testing, trenchingor some other form of detailed geological sam-pling. A resource estimate may or may nothave been made but sufficient work will havebeen undertaken on at least one prospectto provide both a good understanding ofthe type of mineralisation present andencouragement that further work will elevate

one or more of the prospects to the resourcecategory.

Pre-Development Projects – propertieswhere Mineral or Petroleum Resources havebeen identified and their extent estimated(possibly incompletely) but where a decisionto proceed with development has not beenmade. Properties at the early assessmentstage, properties for which a decision hasbeen made not to proceed with development,properties on care and maintenance andproperties held on retention titles are includedin this category if Mineral or PetroleumResources have been identified, even if nofurther Valuation, Technical Assessment,delineation or advanced exploration is beingundertaken.

Development Projects – properties for whicha decision has been made to proceed withconstruction and/or production, but whichare not yet commissioned or are not yetoperating at design levels.

Operating Mines – mineral properties,particularly mines and processing plantsthat, have been commissioned and are inproduction.

D21 Mineral Resources and Ore Reserves are definedin the current version of the Australasian Code forthe Reporting of Exploration Results, MineralResources and Ore Reserves (JORC Code).Theseterms must not be interpreted in any Material waywithout reference to the JORC Code (as may beamended from time to time) in its entirety. Theprincipal items defined in the edition of the JORCCode effective as from December, 2004 are:

(a) Exploration Results(b) Mineral Resource(c) Inferred Mineral Resource(d) Indicated Mineral Resource(a) Measured Mineral Resource(e) Ore Reserve (f) Probable Ore Reserve(g) Proved Ore Reserve

See also D15 – “JORC Code”.

D22 Mineral or Petroleum Securities means thoseSecurities issued by a body corporate or anunincorporated body whose business includesexploration for, development of, or extractionand processing of Minerals or Petroleum.

D23 Mining/Petroleum Industry means the businessof exploring for, extracting, processing andmarketing Minerals or Petroleum.

Operating Mines – See D20: Mineral Assets.

Pre-Development Projects – See D20: MineralAssets.

Less than five per cent

Between five and ten per cent

More than ten percent

Item is generally not Material

Item may be Material

Item is definitely Material.


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D24 PESA means the Petroleum Exploration Society ofAustralia

D25 Petroleum means any naturally occurringhydrocarbon, whether in a gaseous or liquid state,including coal-based methane, tar sands andoil-shale.

D26 Petroleum Assets means all property includingbut not limited to real property, intellectualproperty, production and exploration tenementsheld or acquired in connection with theexploration, development of and productionfrom those tenements together with all plant,equipment and infrastructure owned or acquiredfor the development, extraction and processing ofpetroleum in connection with those tenements.Most Petroleum Assets can be classified as:

Exploration Areas – See D20: Mineral Assets.

Advanced Exploration Areas – See D20: MineralAssets.

Pre-Development Projects – See D20: MineralAssets.

Producing Fields – oil/gas fields that have beendeveloped and are in production.

Petroleum Production Facilities – all the plantand equipment required for the production of oil,gas, carbon-based methane, tar sands or oil shalefrom a field.

D27 Professional Association means a self-regulatingbody such as one of engineers or geoscientists orof both that:

(a) has been given authority or recognition bystatute;

(b) admits members primarily on the basis oftheir academic qualifications and professionalexperience;

(c) requires compliance with professionalstandards of expertise and behavioraccording to a code of ethics establishedby the association; and

(d) has enforceable disciplinary powers,including that of suspension or expulsion ofa member, should its code of ethics bebreached.

D28 Public Reports include, but are not limited tocompany annual and quarterly and other reportsto ASX or other recognised stock exchanges or asmay be required by law. By way of guidance:

(a) If the report is likely to be sent to all, orsubstantially all the shareholders of acompany, it will be a Public Report.

(b) If the report is likely to be released to ASX or

another recognized stock exchange, it will bea Public Report.

(c) If the Commissioning Entity is not a listedcompany and the report is likely to be read byentities from which funds may be raisedunder the Corporations Act without the use ofa disclosure document, it is unlikely to be aPublic Report.

Report – See D42: Valuation Report.

D29 Reasonableness Test means an impartialassessment to determine if the overall valuationapproach used is ra

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