Independently Certified Industry‐Specific Disclosures to the Capital Market: The JORC Code in the Australian Mining Industry

52 Pages Posted: 22 Mar 2019

See all articles by Dean Katselas

Dean Katselas

Australian National University (ANU) - College of Business and Economics

Baljit K. Sidhu

UNSW Australia Business School, School of Accounting

Tom Smith

Macquarie University, Macquarie Business School

Chuan Yu

UNSW Australia Business School, School of Accounting

Date Written: March 2019

Abstract

We investigate compliance with the Australian JORC Code for reporting mineral resources and ore reserves, the quality of the disclosure, and its impact on the capital market. The compliance and quality assessment is conducted by two experienced geologists who find that while the overall reporting quality improved after the 2012 revisions to the Code, they disagree on the extent of improvement. This reflects the uncertainties involved and the difficulty in interpreting the reports. Both geologists agree that the greatest improvement is seen in early‐stage projects, consistent with the expectation that there are more uncertainties surrounding these, and the additional information disclosed under the 2012 JORC Code appears to assist in reducing the uncertainties to some extent. The capital markets study shows that JORC announcements have a significant impact on investors’ assessments of firm value, and that the announcement impact is higher after the 2012 revisions designed to strengthen the disclosure requirements. This is consistent with post‐2012 JORC reports conveying higher information content. There continues to be information leakage prior to announcement date. Further tests show a widening of bid–ask spreads in the post‐2012 period, suggestive of higher information asymmetry. While the probability of informed trading declines for large firms, it remains statistically unchanged for the rest of the sample. The findings reiterate the need for regulators and standard setters to be cognisant of unintended consequences of their decisions. The substantiation process under JORC involves a delay in the release of ‘news’, a ‘chilling’ effect with larger announcement effects.

Keywords: Capital market, Independently certified, JORC Code, Mineral resources, Mining, Ore reserves

Suggested Citation

Katselas, Dean and Sidhu, Baljit K. and Smith, Tom and Yu, Chuan, Independently Certified Industry‐Specific Disclosures to the Capital Market: The JORC Code in the Australian Mining Industry (March 2019). Abacus, Vol. 55, Issue 1, pp. 128-179, 2019, Available at SSRN: https://ssrn.com/abstract=3358532 or http://dx.doi.org/10.1111/abac.12153

Dean Katselas

Australian National University (ANU) - College of Business and Economics ( email )

Canberra
Australia

Baljit K. Sidhu

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia

Tom Smith (Contact Author)

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Chuan Yu

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia

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