THE CHANGING ENVIRONMENT

 GRI and Sustainability

 IFRS/Valuation

 SOX

 Shareholder protection

 Strategy declaration

 Accounting issues

 Disclosure : production forecasts

 Managing price swings

 Skills

 Price cycles

 Business Intelligence

KEY ISSUES ON THE RADAR SCREEN

 SUSTAINABILITY REPORTING
Organisations are increasingly expected to report annually on the "triple bottom
line" of their social, economic and environmental performance. To be effective, a
company's sustainable development report should be responsive to the interests
of its stakeholders, should address those issues that are material to its core
business, and should inform the company's sustainability strategy.

Report at least annually on :

• social, transformation, ethical, safety, health and environmental policies
and practices
• HIV/AIDS policy and impact
• environmental management
• social investment
• human capital development

These issues have serious cost implications which impact on payability

UN Global Compact : Launched in 2000, over 3000 company members from 100
Countries. Aim to promote global corporate citizenship to realise a more sustainable
And inclusive global economy
Global Reporting Initiative: To establish a common approach to sustainability
Reporting, on economic, environmental and social performance.

GLOBAL REPORTING INITIATIVE (2002)

 SAMVAL, CIMVAL and VALMIN
 IVSC GN EI
 Purposes of Valuations
 Need for Valuations
 Public Reports
 Valuers vs Valuators
 Consolidations
 Risks in valuations
 CPRs per unit
 Registration
 Qualification
 Whose job is it anyway?

MINERAL ASSET VALUATION

 Shareholder value destruction
 Insider trading
 Money laundering
 Slush funds
 Remuneration issues: accounting disclosure
 Inflating eps and share price for personal gain
 The agency problem : management vs shareholders
 Illicit accounting
 Restatements and write-downs
 Transparency
 Murky standards

CORPORATE GOVERNANCE : THE

GLOBAL ISSUES (FRAUD)
 Regulation
 Codes and standards
 Class actions
 Capital withdrawal
 Legal action
 NAV destruction
 Redefinition of the purpose of business
 Definition of responsibilities

GLOBAL ANTIDOTES
 Reconciliation of production and planning
 QA/QC requirements

 Data info/gathering

 Modelling of data

 Interpreting of data

 Reporting

SOX ISSUES
 Incorrect/erroneous assumptions
 Lack of formally approved procedures
 Outdated procedures
 Incorrect applications
 Data input
 Transfer of info ( sample drilling, assay results etc)
 Source data in models (consistency, accuracy,)
 Errors in developing models
 Reviews
 Consistency of models
 Incorrect sampling, assaying.

SOX RISKS
 CP reviews
 CP sign offs

 Resource/Reserve Committee reviews and sign offs

 Internal reviews

 Approved policies

KEY CONTROLS REQUIRED

 Sampling
 Data capture
 QA/QC
 General IT
 Custom designed models/spreadsheets
 External reviews on procedures and compliance
 Internal peer reviews on procedures and compliance

PROCEDURES REQUIRED
 King II Report published in March 2002
 Global Conference on Sustainable Development in
August 2002 reaffirmed the “quadruple bottom line”
with Governance required on the 3 pillars of SD
 JSE Ltd incorporated key aspects of King II into
Listing Requirements in September 2003
 Is SOX contagious?.

LOCALLY….
KING II REQUIRES MRM TO HAVE
AND UNDERSTAND….
 A system for dynamic
identification of risk
 A system for the
quantification of risk
 A system for the mitigation of
risk
 A system for the control and
management of risk
 A register of key risks
 A system of internal audit.
 An annual report on the risk
management process and its
results.
 The overall risk strategy of
the company, through its
board
 The risk management system
that is used in the company
 The risk tolerance level of the
company
 The scope of the MRM process
of risk management.
TRANSLATING CORPORATE GOVERNANCE
INTO MRM

• Optimal planning of the Resource to ensure maximum Net Asset Value

• Establishment of Fair Market Value of the asset for financial reporting and
Competent Persons reports
• Establishing public statements of the Resources and Reserves
• Public reporting
• Ensuring security of information
• Establishing a complete risk assessment and management process
• Establishing and implementing an internal audit process
• Examining and developing appropriate remuneration systems
• Establishing controls on key performance indicators
• Establishing a Quality Assurance and Quality Control programme
• Ensuring transparency and communication of material changes
• Establishing professionalism and independence.
 THE MRM’S RESPONSIBILITIES
The Mineral Resource Manager must:
• Ensure that, at a minimum, shareholders expectations and debt repayment is
serviced by optimizing the extraction of the Resource such that the cost of capital
is exceeded
• Ensure that optimization of plans provides for the free cash flow necessary to
service the quadruple bottom line
• Interpret and implement those controls and systems that ensure good
corporate governance in the area of MRM
• Ensure compliance to national and international standards that are part of the
corporate governance of the company
•Produce risk registers and risk reports, in MRM, for the Board, on an annual
basis
• Establish a position of independence (internal audit).
VALUE AND RISK BASED PUBLIC
REPORTING : DESIRED POSITION
 Report on the drivers of real value
 Make these KPI’s
 Define and declare value adding
expenses
 Put market valuation on resources
and reserves
 Define sensitivities and base plans on
these ranges, to avoid sudden
impairments
 Quantitative risk assessments of all
value drivers
 Put monetary value to risks
 Establish confidence levels
 Engage the market : give them what
they want to know about
 Define growth strategies
 Divest from loss makers
 Corporate governance
 Constructively engage with institutional investors to
ensure mutual understanding of company objectives
 Understand the needs and expectations of
shareholders
 Report on items of material interest

 Increased transparency and accountability required

RELATIONS WITH SHAREHOLDERS AND

COMMUNICATION
 Board to appoint audit committee
 Majority of independent non-executive directors

 Majority of members to be financially literate

 Appoints external auditors

 Internal auditing processes

 Responsible for activities of auditing organisation

ACCOUNTING AND AUDITING

 ACCOUNTING ISSUES The extractive activities project is a comprehensive
research project that forms the first step towards the
development of an acceptable approach to resolving
accounting issues that are unique to upstream extractive
 Accounting for activities. The ultimate objective of this project is to
develop an International Financial Reporting Standard
inventories (IFRS) on accounting for extractive activities. This IFRS
will supersede IFRS 6 Exploration for and Evaluation of
 Impairments Mineral Resources, which the Board released in
December 2004 as an interim measure pending

 Goodwill completion of the comprehensive project.

Project scope
 Exploration expenses Upstream extractive activities cover all aspects of the
search for, finding, and extraction of minerals, oil and
 The IASB Extractive gas. The primary focus of the research project is to
consider financial reporting issues associated with
Industries project reserves and resources (including the exploration for
reserves and resources) – in particular whether and how
to define, recognise, measure and disclose reserves and
 Valuations for resources.

accounting purposes
WHAT DO THESE ISSUES MEAN FOR THE
MRM ORGANISATION?
 People
 Relationships

 Structures

 Reporting