Leo Malan
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15 independent expert’s reports on ASX mining transactions, checked against the rules

Leo Malan CA · · 3 min read

What I did

I took 15 independent expert’s reports on ASX mining transactions, dated in the last 12 months, from 11 expert firms, and checked each one against a checklist of 219 checks, built mainly from the Corporations Act, ASIC Regulatory Guides 111 and 112, APES 225 and the VALMIN Code. 117 to 165 of the checks apply to each report. I didn’t second-guess the opinion or the values. The only question was whether each report shows what the rules require, and whether its figures agree with each other. Each observation was confirmed at the page of the report before it counted.

Observations

Every one of the 15 missed at least one requirement. There were 310 observations in all: 17 graded High, 162 Medium and 131 Low, and 11 of the 15 reports had at least one High. The same nine issues recur, each in more than half of the reports. 13 of the 15 did not show a critical review of the geologist’s report. 13 did not show that the method and assumptions were reasonable. 13 had no written representation on the management information they relied on. 12 did not state whether the value assumes a going concern or a liquidation. And 13 were not internally consistent on figures or dates.

What it means

The issues that recur are things the rules ask a report to show: how the geologist’s report was reviewed, why the assumptions are reasonable, what management confirmed in writing, and which basis the value assumes. That is the gap a check before the report is lodged closes. See how a compliance review runs.

The figures

Figure 1: Every one of the 15 reports missed something the rules ask for. 15 of 15 reports missed at least one requirement; 11 of 15 had an observation graded High.
Figure 1. Every one of the 15 reports missed something the rules ask for.
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Figure 2: 219 checks in 13 areas, each observation confirmed at the page. Five steps: 21 sources inventoried, 405 mandatory provisions covered or excluded with a reason, 219 checks, 117 to 165 applied to each report, 310 observations.
Figure 2. 219 checks in 13 areas, each observation confirmed at the page.
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Figure 3: The same nine issues recur: each appears in more than half of the reports. Even the least common issue is observed in 8 of the 15 reports.
Figure 3. The same nine issues recur: each appears in more than half of the reports.
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Figure 4: 17 observations are graded High, in 11 of the 15 reports. 310 observations in all: 17 High, 162 Medium, 131 Low.
Figure 4. 17 observations are graded High, in 11 of the 15 reports.
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Figure 5: Most experts rely on the geologist’s valuation without showing they checked it. 13 of 15 reports did not critically review the geologist’s report.
Figure 5. Most experts rely on the geologist’s valuation without showing they checked it.
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Figure 6: The value rests on assumptions the report does not show to be reasonable. 13 of 15 reports did not show the method and assumptions were reasonable.
Figure 6. The value rests on assumptions the report does not show to be reasonable.
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Figure 7: Management’s numbers are relied on without management’s written confirmation. 13 of 15 reports had no written representation on management information.
Figure 7. Management’s numbers are relied on without management’s written confirmation.
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Figure 8: Ties between the expert and the parties are not fully disclosed. 12 of 15 reports did not fully disclose relationships or interests.
Figure 8. Ties between the expert and the parties are not fully disclosed.
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Figure 9: Figures disagree within the same report. 13 of 15 reports were not internally consistent on figures or dates.
Figure 9. Figures disagree within the same report.
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Figure 10: Most opinions do not say whether the value assumes a going concern or a liquidation. 12 of 15 reports did not state the premise of value.
Figure 10. Most opinions do not say whether the value assumes a going concern or a liquidation.
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Source: 15 independent expert’s reports on ASX mining transactions, dated in the last 12 months, from 11 expert firms; Leo Malan analysis. The examples in the figures are anonymised; no firm, company, project or person is named.

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