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ESMA Publishes Update of CESR Recommendations Regarding Mineral Companies Disclosure Regime

18 April 2011

On 23 March 2011, the European Securities and Markets Authority (ESMA), which is a successor body to the Committee of European Securities Regulators (CESR) introduced in January 2011, published its update of the CESR recommendations relating to disclosure by mineral companies when preparing a prospectus for a public offer or for the admission of securities to trading on an EU regulated securities market (the "Updated Recommendations").1 The Updated Recommendations follow a period of consultation with market participants and was the subject of a CESR consultation paper dated 23 April 2010. The aim of the consultation and subsequent Updated Recommendations was to enhance the clarity of paragraphs 131-133 of the previous CESR recommendations which deal with the content of disclosure in mineral company prospectuses.

One of the most fundamental changes in the Updated Recommendations is a requirement that mineral company prospectuses prepared in respect of a public offer or the admission to trading of shares, debt securities with a denomination of less than EUR 50,000, depository receipts issued over shares with a denomination of less than EUR 50,000 or derivative securities with a denomination of less than EUR 50,000, will be required to include a Competent Persons Report ("CPR"). Previously, CPR was only required where the issuer had not been operating as a mineral company for the preceding three-years. The Updated Recommendations exempt issuers from including a CPR where they are:

  • already admitted to trading on a Regulated Market, equivalent overseas market or appropriate multi-lateral trading facility;
  • they have already published a CPR measuring mineral resources, and where applicable, reserves and exploration results/prospects in accordance with a recognized reporting standard (see below); and
  • have continued to report and publish annually, details of mineral resources and if applicable, reserves and exploration results and prospects, in accordance with a recognized reporting standard.

The Updated Recommendations confirm that the CPR must be dated not more than 6 months from the date of the prospectus and that the issuer should affirm in the prospectus that no material changes have occurred since the date of the CPR, the omission of which would make the CPR misleading. The Updated Recommendations maintain the current position with respect to issuers of wholesale debt securities who are excluded from the requirement to include a CPR.3

The Updated Recommendations also expand the definition of "Mineral Companies" to include all companies with material mineral projects. Materiality of mineral projects is to be determined having regard to all the company’s mineral projects relative to the issuer and its group taken as a whole. The previous CESR recommendations only applied to companies whose principal activity was or was planned to be the extraction of mineral resources. It is notable that the new definition includes companies that are engaged in exploration-only and not necessarily extraction.

It is notable that the Updated Recommendations also abolish the previous cash-flow projection requirement. This required that companies that had not been trading as mineral companies for at least three years, provide a two-year cash flow projection with a confirmation by an independent auditor or accountant.

The Updated Recommendations include a new requirement that where a mineral company discloses in its prospectus an acquisition of reserves and/or resources and the acquisition constitutes a "significant gross change,"4  the issuer must disclose specified information on the assets being acquired. The new assets must be clearly segmented from the existing assets.5

The Updated Recommendations include a list of recognized reporting and valuation standards. These are broadly in line with the Petroleum Resources Management System or the Combined Reserves International Reporting Standards. The Updated Recommendations also include suggested CPR content requirements.

Previous indications that the United Kingdom Listing Authority (“UKLA”) may go beyond the CESR recommendations and require certain internationally recognized standards to apply to the presentation of reserves and resources in all prospectuses, including for securities with denominations of  EUR 50,000 or more, has not been adopted. The UKLA has indicated that they do not currently intend to adopt such a policy.


1 The ESMA update can be found here.

2 Directive 2010/73/EU (the “Directive”) amending the Prospectus Directive 2003/71/EC and the Transparency Directive 2004/109/EC entered into force on 31 December 2010 and EEA Member States are required to implement the Directive into national law by 1 July 2012. The Directive inter alia increases the minimum denomination required to qualify as “wholesale debt” and benefit from the wholesale disclosure regime and exemptions under the Prospectus Directive and Transparency Directive from EUR 50,000 to EUR 100,000. When implemented the thresholds in the Updated Recommendations will consequently increase from EUR 50,000 to EUR 100,000. 

3 Wholesale debt constitutes debt securities with denominations of EUR 50,000 or above or the equivalent in another currency.

4 A Significant Gross Change is defined by reference to the 9th Recital of Regulation EC 809/2004 as a variation of more than 25 per cent relative to one or more indicators of size of the issuer’s business, in the situation of an issuer due to a particular transaction.

5 Mineral Companies admitted to listing on the UK Official List should consider this requirement in conjunction with the requirement of Listing Rule 13.4.6 which requires the inclusion of a CPR in a Class 1 Circular relating to the acquisition or disposal of mineral resources.