Exploration and mining companies are subject to the regulatory environments in which they operate.
Companies operating in Australia and New Zealand (where Aurora Minerals has its tenements) are subject to the relevant laws in those jurisdictions. These include, in the case of the Western Australian tenements:
and in the case of New Zealand:
This Section identifies the areas the Directors regard as the major risks associated with an investment in the Company. Investors should be aware that an investment in the Company (and its subsidiaries) involves a number of risks, which may be higher than the risks associated with an investment in other companies. Intending investors should read the whole of this section; the Companies ASX Announcements; and this website in order to fully appreciate such matters and the manner in which the Company intends to operate, before any decision is made to trade in the Company’s securities.
There are general risks associated with investing in any form of business and with investing in the share market generally. There is also a range of specific risks associated with the Company's business and its involvement in the exploration and mining industry. These risk factors are largely beyond the control of the Company and its directors because of the nature of the activities of the Company. The following summary, which is not exhaustive, lists some of the major risk factors, of which potential investors need to be aware.
Exploration and mining companies throughout the world are subject to the inherent risks of the minerals industry.
The future viability and profitability of the Company as an exploration and mining company will depend on a number of factors, including:
Generally the grant or refusal of tenements is subject to ministerial discretion and there is no certainty that the tenements applied for will be granted.
Applications are also subject to additional processes and requirements under the Native Title Act.
No legal or equitable interest in or affecting an exploration licence application can be transferred or dealt with while it is at the application stage.
Following grant, no legal or equitable interest in or affecting a granted exploration licence can be transferred or otherwise dealt with during the first year of its term without the prior written consent of the relevant Western Australian Government minister ("Minister").
Investors should regard the securities of the Company as speculative because of the nature of the Company’s business. The Directors have identified factors that are most likely to affect the Company and the value of its securities, as presented below. However, this is not an exhaustive list and investors should seek professional advice for further clarification of the risks involved before deciding whether to trade in the Company’s securities.
The Company makes no representation with regards to a valuation of the tenements or permits or applications.
Mining and exploration are high risk endeavours although there may be the potential for high returns.
Exploration is costly and involves exacting techniques which must be applied over extended periods of time. All of the Company’s projects are at an exploration stage and the Company cannot foresee whether the planned exploration programmes will generate positive results. Furthermore, there is no guarantee that the Company’s exploration activities will succeed in the discovery of a commercially viable ore deposit.
Mining risks include the uncertainties associated with projected continuity of an ore deposit, fluctuations in grades and values of the product being mined, and unforeseen operational and technical problems.
Exploration and mining may be adversely affected or hampered by a variety of non-technical issues such as limitations on activities due to seasonal changes, industrial disputes, land claims, legal challenges associated with Native Title claimants, heritage and environmental matters and legislation, mining legislation and many other factors beyond the control of the Company, including many that are partly or wholly unforeseeable.
The cost of maintaining exploration and mining properties, which depends on the Company having access to sufficient development capital, poses another form of risk.
If exploration or mining programmes prove to be unsuccessful, this could result in a diminution of the value of the tenements which could have a negative impact on the Company's share price.
In respect to any of the Company’s tenements, in the event that
such a tenement may be relinquished either in total or in part thereof and/or the Company may withdraw from a joint venture or not exercise its option to acquire equity, even though a viable mineral deposit may be present.
The Company may also be exposed to risks associated with the financial or performance failure, default or litigation (actual or potential) by a participant in any of the joint ventures or other contractual relationships to which the Company is, or may become, a party.
Mining tenements in Western Australia are also subject to statutory requirements of certain other Acts including the Aboriginal Heritage Act 1972, Environmental Protection Act 1971, Rights in Water and Irrigation Act 1914 and Conservation and Land Management Act 1984.
Uranium mining in Australia is subject to extensive regulation by Commonwealth and State Governments in relation to exploration, development, production, exports, taxes and royalties, labour standards, occupational health, waste disposal, protection and rehabilitation of the environment, mine reclamation, mine safety, toxic and radioactive substances, native title and other matters. Accordingly, the approval processes for uranium mining are more rigorous than for the mining of other metals, due to the need to comply with such laws and regulations. Compliance with such laws and regulations will increase the costs of exploring, drilling, developing, constructing, operating and closing mines and other production facilities. Further, there is a risk that, should economic deposits be discovered, the necessary government approvals may not be granted, or may be significantly delayed.
Although Western Australia currently has no legislation that prohibits uranium mining, there is a State Government policy prohibiting uranium mining. All mining leases granted since 22 June 2002 have been issued subject to a condition prohibiting the mining of uranium. While this does not restrict the Company exploring and evaluating its uranium prospects, the development of any discovered uranium deposits will be contingent upon a change of Western Australia State Government policy in relation to uranium production. There can be no assurance that the policy will change in the future and this may adversely affect the long-term prospects of the Company.
Any application for a production tenement may be subject to the right to negotiate process under the Native Title Act in which case the grant of a valid tenement may require either the successful negotiation of an agreement with the native title claimants or holders or alternatively a successful application to the National Native Title Tribunal for a determination that the production tenement be granted. Compliance with the right to negotiate process can result in significant delays to the implementation of any project. Negotiated native title agreements may adversely impact on the economics of projects depending on the nature of any commercial terms agreed.
The Company has a large number of exploration licence applications. A significant number have been granted and the remainder are the subject of Native Title claimant objections
If there are no objections to an application, then grants can occur in approximately ten months from application. However delays of more than 12 months can occur if objections are lodged, under either the Mining Act or Native Title Act, and this applies to many of the Company’s tenements ( refer Solicitors Report and Risks Factors Sections in the Desert Energy Limited IPO prospectus located on the Aurora Minerals, ASX and Desert Energy websites).
Native title objections to the grant of a tenement are commonly avoided if an applicant and an affected native title claimant/holder sign a standard heritage agreement, which can help facilitate the future survey and protection of heritage sites in areas of ground disturbing activities.
Many claimants do not currently support this process and in the areas affected by their claims it is expected that delays in the granting of applications,and in conducting heritage surveys, may be experienced. A list of objections on some of the Desert Energy tenements is set out in the Solicitors Report (also refer Solicitors Report and Risk Factors in the Desert Energy Limited IPO prospectus located on the Aurora Minerals, ASX and Desert Energy websites)..
Commonwealth and State Legislation in Australia allow for the protection of sites of significance to Aboriginal custom and tradition. The Company proposes to carry out "clearance surveys” where appropriate prior to conducting any exploration work that would involve ground disturbing activities.
The Company’s tenements are likely to contain some such sites of significance which would need to be avoided when carrying out field programmes. It is possible that such areas where sacred sites exist may contain mineralisation or an economic resource which would therefore remain unexploited.
Following grant of the Company’s tenements a ground based aboriginal heritage survey must be completed prior to drilling and other ground disturbing exploration work and delays may be experienced in completing the heritage surveys.
No legal or equitable interest in or affecting an exploration licence application can be transferred or dealt with.
No legal or equitable interest in or affecting an exploration licence can be transferred or otherwise dealt with during the first year of its term without the prior written consent of the relevant Western Australian Government minister.
The Company’s projects are subject to stringent laws and regulations regarding environmental matters, which means there are potential liability risks and potential delays in gaining access for exploration or mining. The Company proposes to operate in accordance with applicable laws and conduct its programmes in a responsible manner with proper regard to the environment.
The approval processes for uranium mining are more rigorous than for the mining of other metals, as both Commonwealth and State Government legislation needs to be satisfied. There is a risk that, should economic deposits be discovered, the necessary government approvals may not be granted, or may be significantly delayed.
Exploration will reduce the cash reserves of the Company. The Company may be dependent on seeking development capital elsewhere, through equity raisings, debt, spin offs or joint venture financing, to support long term exploration and evaluation of its projects. In the event that an economic deposit is discovered, the ability to exploit such a deposit is likely to be subject to the Company’s ability to raise the necessary development finance through equity raisings, debt, spin offs or joint venture financings. The Company cannot provide any guarantees that such finance for exploration, or for mining will be available to the Company at such time in the future as it may require and this could lead to the loss of tenements.
There can be no guarantee that an active market in Securities will develop or that the price of Securities will increase. Moreover, there may be relatively few buyers or a relatively high number of sellers of the Securities on the ASX at any given time, which may increase not only the volatility of the market price of the Securities but also the prevailing price at which the Shareholders can sell their Securities. This may result in Shareholders receiving a market price for their Securities that is less than the price paid for their Securities.
The price of the Company’s shares quoted on the ASX is influenced by international and domestic factors or even on a day to day basis by individual investor’s decisions to buy or sell the Company’s securities.
Should these produce a negative effect on the share price, this may also affect the Company’s ability to raise development capital.
The Company’s projects were selected principally on the basis of their prospectivity for gold, uranium, base metals, iron ore and/or other minerals as perceived by the Company.
Therefore it would be reasonable to expect that the Company’s market appeal, and in the event it commences mining, its revenue will be affected by the price of such minerals.
Mineral and metal prices may fluctuate widely and are affected by numerous industry factors beyond the Company’s control.
These factors may include the demand for metals, forward selling by producers, central bank sales and purchases of gold and production cost levels in major gold and mineral producing regions.
Moreover, mineral prices are also affected by macro economic factors such as expectations regarding inflation, interest rates, currency exchange rates and global and regional demand and political and economic factors.
The Company’s project interests now extend to a variety of commodities and carry with them the risks associated with fluctuations in the price of such commodities.
The Company is involved in some exploration in New Zealand and is therefore exposed to fluctuations in the Australian Dollar/New Zealand Dollar exchange rate.
General economic conditions may affect inflation and interest rates, which in turn may impact upon the Company’s operating costs and financing. Other factors that may adversely affect the Company’s activities in Australia or overseas include changes in government policies, natural disasters, industrial disputes, and social unrest or war on a local or global scale. Some of these risks include:
Fluctuations in currency exchange rates can also affect the value of investor’s security holdings and needs to be considered.
Changes to tax legislation and regulation or their interpretation may adversely affect the value of an investment in securities and may affect Shareholders differently.
Changes in accounting standards or the interpretation of those accounting standards that occur after the date of this Prospectus may impact adversely on the Company’s reported financial performance.
Acts of terrorism or an outbreak of international hostilities may adversely affect the demand for the Company’s products. These, or an associated adverse change in sentiment with respect to the share market, could negatively impact on the value of an investment in the Company.
The above list of risk factors ought not to be taken as exhaustive of the risks faced by the Company or by investors in the Company. The above factors, and others not specifically referred to above, may in the future materially affect the financial performance of the Company and the value of the Company’s securities.
Therefore, the Company’s securities carry no guarantee with respect to the payment of dividends, returns of capital or the market value of those securities.
Potential investors should consider that investment in the Company is speculative and should consult their professional advisers before deciding whether to trade in the Company’s securities.
There are likely to be risks that the Directors and the Company and its advisors are unaware of or do not fully appreciate at any point in time. Over time or with the benefit of hindsight these sometimes become apparent. Such risks may be related to legislation, regulation, business conditions, land access, conflicts and disputes at a local or international level, data issues and a variety of other unforeseen eventualities.
Forward-Looking Statements are statements included herein, including regarding future ability to finance projects and other statements that express management's expectations or estimates regarding the timing of completion of various aspects of the projects' development or of our future performance, constitute "forward-looking statements".
The words "believe", "expect", "anticipate", "contemplate", "target", "plan", "intends", "continue", "budget", "estimate", "may", "will", "schedule", and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies.
In particular, the Company’s announcements and presentations include many such forward-looking statements and such forward- looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of Aurora Minerals to be materially different from its estimated future results, performance or achievements expressed or implied by those forward- looking statements and its forward-looking statements are not guarantees of future performance.
These risks, uncertainties and other factors are included in the Risks section of the Company’s website and 2006 Options Issue Prospectus available on the Aurora Minerals and ASX websites.
Aurora Minerals expressly disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, events or otherwise, except where required by law.
The Company has access to its New Zealand prospecting targets through mining titles issued under the Crown Minerals Act. These have a fixed term and which is subject to compliance with minimum work requirements. Extension of the term is not guaranteed.
Drilling and mining are subject to resource consent under the Resource Management Act 1991, designed to protect the natural and physical resources of New Zealand. Matters to be considered include the relationship of Maori, the indigenous people of New Zealand, with their ancestral lands, water, sites and treasured possessions. As a consequence, the ability to establish and maintain good working relationships with the local iwi (tribes) in the area of exploration or mining activity is very important.
Resource consents are administered by regional councils, in the case of water and air, and district councils, in the case of land use matters. Such consents may be granted for a fixed term. As such they may not always accord with the terms of a mining or exploration permit and may require renewal based on further negotiation. Conditions of grant may change on renewal.
The right for the Company to have access to privately owned land for drilling and mining must be negotiated with the landowner and the occupier of the land under the land access provisions of the Crown Minerals Act. If agreement cannot be reached, the Company may apply to the relevant government Minister to appoint an arbitrator, which the Minister may do if he determines there are sufficient public interest grounds. Whilst low-impact prospecting is possible on private land without written consent, land owned specifically by Maori people requires access consent for all levels of exploration.
Access to Crown Land for all forms of prospecting, drilling and mining must be negotiated with the responsible Minister. In some cases Crown Land, or Crown Land which has been sold to private citizens may become subject to Maori claims, pursuant to the Treaty of Waitangi. If successful such claims could result in the resumption of the land for a Maori claimant, though the Company believes that compensation would generally be payable to those affected, in such cases.
Consents are generally granted for a fixed term and may require renewal during the term of an exploration or mining privilege, which means reapplying for the relevant consent. There is always the risk that as an outcome of any such “consenting process” the activity may be denied consent, or as an outcome of the “re-consenting process” the relevant consenting authority deny consent renewal or impose different conditions.
Any areas which are Department of Conservation ("DoC") administered Crown land would require the agreement of DoC before any prospecting or other forms of exploration could occur, and before the grant of exploration or mining permits. The Company’s approach is to consult with the DoC and affected Maori groups before considering prospecting within the area, as it is important to respect both the cultural and environmental aspects given that this is a conservation area.
DoC administered crown land is governed by the Conservation Act (1987). There are various categories of conservation land from high level Specially Protected Areas through to Marginal Strips, and Stewardship Areas. Stewardship Areas may be sold under some circumstances subject to Ministerial approval and a public process.
Drilling or mining is subject to the provisions of the Resource Management Act 1991 and the Crown Minerals Act 1991 which require exploration or mining companies to have the consent of and to enter into access agreements with relevant stakeholders including landowners and land occupiers, third party owners of non-precious minerals and consultation with Maori before undertaking such activities.
Such agreements usually involve the payment of royalties and annual payments and a farm lease or buyout in the case of development which may require the approval of the New Zealand Overseas Investment Commission.
It is important to appreciate that the consent process is a time and capital consuming process. In addition, the current boom conditions prevailing throughout the Australasian mining industry have resulted in a shortage of experienced geological, land access and other industry personnel.