SA Mines and Energy Journal : Dec09-Jan10
An important lesson regarding disclosure of positive drilling results In a decision welcomed by junior ASX listed mining companies around the country, the Supreme Court of Western Australia earlier this year overturned findings that Jubilee Mines NL (Jubilee) breached its continuous disclosure obligations by failing to release positive drilling results to the market. The Court reversed orders requiring Jubilee to pay approximately $3 million in compensation to one of its shareholders who sold shares in Jubilee and missed out on share price gains after the drilling results were eventually released. The Court repeated the well known obligation of listed companies to disclose information about the company that would have a material effect on the price or value of its shares. However, of particular interest in the Jubilee case was clarification by the Court that immediate disclosure of positive exploration results may not always be required. The Court found that Jubilee was only required to release the positive drilling results once it had formed an intention to do something with them. The case arose out of a letter sent to Jubilee by Western Mining Corporation (WMC) in early August 1994. WMC told Jubilee that it had accidentally drilled on the eastern portion of Jubilee's "McFarlane's Find" tenement and had discovered a potential low grade nickel deposit. At the time, Jubilee was not financially able to do anything with the drilling data provided by WMC, and in any case was focused on exploration for gold rather nickel. The drilling data was not released to the market. By early 1996 the landscape for Jubilee had significantly changed, with a new substantial shareholder and financier nominating two board members with significant experience in exploration for nickel. Among others, these factors led to Jubilee shifting its focus from gold exploration to exploration for nickel. In June 1996 Jubilee told the market about the drilling results provided by WMC, and advised that it intended to undertake further drilling for nickel. Following that market release, Jubilee's share price increased by approximately 9%. The plaintiff, Mr Riley, sued Jubilee arguing that he had lost the opportunity to benefit from the 9% increase in Jubilee's share price because Jubilee failed to tell the market about the WMC letter when it was received in August 1994. Mr Riley was a former managing director of Jubilee but had ceased his involvement as a director or executive by the end of 1993. He sold all of his Jubilee shares during the period January 1994 to June 1995. The Court's decision to overturn the original award of approximately $3 million is an important lesson for ASX listed junior exploration companies, in that it clarifies that what must be released to the market is "information" and not merely data. In Jubilee's case, that meant if its intention to undertake further work on the "McFarlane's Find" tenement was relevant to whether WMC's positive drilling results would have a material effect on the price of Jubilee's shares, then Jubilee would be under no obligation to disclose the results until the relevant intention was formed. Peter Kupniewski, Partner, DMAW Lawyers DMAW51432/SM&EJ www.dmawlawyers.com.au In law, attention to detail, and you, is critical. Our clients in mining and energy like Beach Petroleum, Ramelius Resources and Flinders Mines enjoy that level of service. If you are looking for the attention you deserve call us on (08) 8210 2222.