THE AUSIMM'S VALMIN CODE (1998) - NOW AN
INTERNATIONAL GUIDE TO PROJECT ASSESSMENT AND
VALUATION BEST PRACTICEMICHAEL J LAWRENCE
FAusIMM, CPGeo, FAIG, FIMM, CEng, MMICA, Chairman VALMIN Committee, Council Representative VALMIN Committee since its
creation on 5 April 1991. AusIMM 1999 Past President, Managing Director & Chief Valuer, Minval Associates Pty Limited.

ABSTRACTThe VALMIN Code (1998) deals both with the issues to be addressed when technically assessing a mineralproperty and also those involved in its valuation (or appraisal, using the North American term). This Code isa revision, based upon the experience gained using the initial edition published in 1995. Its use for relevant
reports became mandatory only for members of The Australasian Institute of Mining and Metallurgy (AusIMM)
at that time, but its widespread acceptance by the market has meant that it is invariably used by professionals
writing all independent reports required by the Corporations Law as well as in other related circumstances. In
fact, the VALMIN Code has been accepted as a basis for the current development of similar codes in otheroverseas jurisdictions, eg Canada, USA and Indonesia. This adoption of a relatively standard approach toproject assessment and valuation will assist the global mobility of all mineral industry professionals andprovide the market with a reliable basis for making investment decisions.

INTRODUCTION[1]The Australasian Institute of Mining and Metallurgy's (AusIMM's) Mineral Valuation (VALMIN) Committee
has had the task of the creation and updating of a best practice code and guidelines dealing with thetechnical assessment and/or valuation of mineral assets and/or securities for inclusion in Independent
Expert/Specialist Reports that are required under the Corporations Law (Reports), since its formation in 1991.
The first edition, VALMIN Code (1995), was issued in June 1995 (after adoption by Council on 17 February1995) and it applied to all relevant Reports (ie those required under the Corporations Law), dated on or after
1 July 1995, that were prepared by AusIMM's Corporate and Company Members. See Lawrence (1995) for a
discussion of its use as an objective due diligence tool.
The most recent version, "Code and Guidelines for Technical Assessment and Valuation and/or Valuation of
Mineral and Petroleum Assets and Mineral and Petroleum Securities for Independent Expert Reports"(VALMIN Code, 1998) was approved by Council on 22 November 1997 and issued in February 1998
[2]
(together with an aide memoire to assist its interpretation).
It requires mandatory compliance with thisCode by all AusIMM Members for all relevant Reports issued on or after 1 April 1998. See Lawrence (1998c)
for a discussion of the revision; and Cole (1999) for a VALMIN compliance checklist.
The advantages of such codes and guidelines are that they ensure consistency, accountability andappropriate outcomes. Most importantly, they protect those on both sides of the transaction - the author andthe recipient of the data. They also provide an objective test of whether what has been done was reasonable,
allowing enforcement. If these codes and guidelines prove useful and acceptable in a world context, they arelikely to be adopted my many overseas mining countries, thus reinforcing the above comments. Their
adoption will also assist the global mobility of resource professionals, such as geologists, mining engineers,
metallurgists and environmental scientists from those countries.
Also, if a technical professional has accreditation or registration, such as AusIMM’s voluntary Chartered
Professional accreditation (CP) in the fields of geology (CPGeo), mining engineering (CPMin), metallurgy

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[2]

Representatives come from AusIMM assessment and valuation practitioner members, Mineral Industry Consultants Association(MICA), Australian Institute of Geoscientists (AIG), Australian Securities and Investments Commission (ASIC), Australian Stock
Exchange (ASX), Minerals Council of Australia (MCA), Petroleum Exploration Society of Australia (PESA), and Securities Institute ofAustralia (SIA).
See Lawrence (1998a).

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CP identifies those whose academic(CPMet), or environmental CP(Env), so much the better.
qualifications, cumulative and current training and experience, commitment to a high standard of ethicalconduct and to continuing professional development and education, are of a standard considered theminimum appropriate by the profession for practice in the technical area concerned. Because it is renewed
annually, CP is a flexible monitor (and indicator to an employer or client, peers, government and the wider
community), of a person’s current career status as a professional practitioner, ensuring that they retain
appropriate qualifications, experience, competence and repute. See Lawrence (1997) for a description of thedifferent approaches taken by the AusIMM, the Australian Institute of Geoscientists (AIG) and the Institutionof Engineers Australia (IEAust).
To be credible, such codes or guidelines and accreditation schemes must be able to be strictly enforced.
However, it is this author's view that regulators can devolve these tasks of guideline creation andenforcement to an appropriate professional body, where peer pressure really works.
However, it is a separate matter if the valuation methodology selected for use by the practitioner is misusedor misinterpreted through ignorance, incompetence or corruption. Two of the fundamental problems with thecurrent use of VALMIN in Australia are that there is either lack of transparency in the Report making
assessment of the valuations difficult; and there are illogical aspects to the practitioner's use of the selectedvaluation methodology.
Nevertheless, by carrying out a due diligence study in accordance with a set system of procedures monitoredby an appropriate supervisory mechanism, and by ensuring that its results are properly recorded anddocumented, all parties should be in a position to prove that they took reasonable precautions to ensurecompliance with the law. Hence, they can claim that any defect was either caused by a reasonable mistake;or was accepted by them when they reasonably relied on information supplied by another person, preferably
after independent verification; or was caused by the act or error of another person beyond their control.
Following current industry practice and following best practice codes and guidelines can demonstrate whatlevel of care has been taken.

RECENT CANADIAN DEVELOPMENTS - A CASE STUDYBACKGROUND[4]The Final Report of the Mining Standards Task Force (MSTF),
which was mandated by the Toronto Stock
Exchange (TSE) and Ontario Securities Commission (OSC) to propose reforms to the Canadian securities
surveillance system in the wake of the Busang/Bre-X debacle, was released on 2 February 1999. As an
active critic and contributor to its work (both in a private capacity and on behalf of the Institute), it is pleasing
to report that the MSTF has heeded the constructive submissions. Whilst the Canadian regulators have put
their own slant on the best way forward for the new millennium, it is gratifying to note that much of theirthinking has been influenced by the experiences of other jurisdictions, like Australia. Institute members will
see much of the VALMIN Code's philosophy in the MSTF's Final Recommendations. The Final Report isthus an improvement on its Interim Report (released in June 1998), for which credit must be given to the
MSTF.
The TSE/OSC MSTF has shown considerable courage and understanding of the problems in order torecommend some necessary, but difficult changes to the status quo to bring Canada up to world bestpractice. They, too, are to be congratulated for this, whether or not such changes were overdue. However,Canada can only fairly lay claim its position as the world leader in mineral exploration, development andmining finance, provided that all of the MSTF's Recommendations are adopted nationally into enforceable
legislation that is implemented without delay by all the parties concerned. See Spence (2000) for an outlineof the development of a Canadian analogue of the VALMIN Code by the Canadian Institute of Mining andMetallurgy (CIM). Lawrence (1998a, 1999a and 2000b) summarised the Australian experience with VALMIN
since 1995 as part of that Canadian process.

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[4]

The CPS Scheme is currently being modified to make it more accessible to members, eg a new category, CPMan, will be introduced
for those members with technical qualifications who now mainly operate in the financial and management sectors. However its
general character has not changed.
See Lawrence(1999b) for a fuller discussion of the recommendations of this Report.
M J LAWRENCE, 2000, The AusIMM’s VALMIN Code (1988), in MICA, The Codes Forum, Sydney.

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MSTF FINAL REPORT RECOMMENDATIONS• Formalisation in Canadian securities regulation of the Qualified Person (QP) concept. The QP is
responsible for technical matters and must be independent in certain specified circumstances. Note that
the QP is more analogous with the "Expert/Specialist" defined in the VALMIN Code rather than with the"Competent Person" concept that is used in the JORC Code. Note that the name of the QP must be
given, together with the person's relationship with the company in any relevant disclosure to the market.
• Establishment of best practice guidelines for the conduct of mineral exploration and development
programmes, and mining operations.
• Establishment of disclosure standards for reporting exploration results, resource and reserve estimates,[5]and mining activities.
For example, it is inappropriate to refer to the in situ value or gross value ofResources/Reserves; Resources must be clearly distinguished from Reserves in any document so that areader could not assume that they are the same thing; key economic parameters used in the definition ofReserves (or in feasibility studies) should be disclosed; visual estimates of quantity and grade ofmineralisation should not be reported; unless prepared according to National Instrument (NI) 43-101,
Resource estimates quoting tonnage and average grade of mineralisation may not be reported; whenpartial results of a drilling programme are released, the balance of the results should be disclosed as soon
as they are available irrespective of whether the results were positive or negative.
• The Australasian JORC Code is to be recognised by the Canadian securities regulatory authorities as a"acceptable reporting system", is very gratifying. However, it will be still necessary "if a reporting systemother than NI 43-101 is used, the company be required to include explanatory notes describing the[6]material differences between NI 43-101 and the reporting system used.”
Nevertheless, it is pleasing to
see that the Canadians will allow the reporting of Resources, whereas the US still clings to the mistaken
belief that reporting only Proven and Probable Reserves adequately informs investors.
• Also, the essential elements of the land tenure regime applicable to the mineral property should be
disclosed, along with details of any disputes over title or adverse claims.
• As soon as a company becomes aware that others have published information about its mineralproperties that is materially misleading, the company is under an obligation to take all such steps available
to correct such information or otherwise make it known that the company was not responsible forpublishing that information and that it does not necessarily agree with the information disclosed by otherparties.
• Establishment of accreditation and quality control standards for analytical laboratories.
• Establishment of standards of professionalism and supervision of mining analysts.
• Increased emphasis on sound corporate governance practices, regulatory oversight of the minerals
industry and the enforcement of securities laws.
• National uniformity in regulation throughout Canada, with the commitment of additional financial and otherresources to ensure the improved regulatory oversight and investigation, enforcement and prosecution of
securities law violations.

LESSONS FOR OTHER JURISDICTIONS (INCLUDING AUSTRALIA)
The author urges Australia's regulators (ie the Australian Stock Exchange [ASX] and Australian Securities[7]
and Investment Commission [ASIC]), to follow Canada's lead and for ASX to formally include the VALMIN[8]
Code in its Listing Rules, since it has already incorporated the JORC Code. Whilst the use of the VALMIN
Code is strongly supported by ASX/ASIC there is currently no legal requirement to use it. Only the AusIMM
makes it mandatory for its members to observe it in relevant circumstances.
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[6]
[7]
[8]

The TSE released disclosure standards for comment on 16 March 1999, requiring any comment by 16 April 1999. These disclosure
standards were identical to those appended to the Final Report of the MSTF.
MSTF Final Report, Part 5.4, pp 52-53.
ASIC is the Australian national analogue of OSC; ASX is the Australian national analogue of TSE.
JORC (1999). Australasian Code for Reporting of Mineral Resources and Ore Reserves (JORC Code), issued by the Joint Ore
Reserves Committee (JORC), comprising AusIMM, AIG and Minerals Council of Australia, September, 16p (AusIMM: Melbourne).
M J LAWRENCE, 2000, The AusIMM’s VALMIN Code (1988), in MICA, The Codes Forum, Sydney.

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The ASX must also adopt the US Gold Institute's methods of calculating and reporting gold production costs(as well as develop methods for other commodities as soon as possible with the help of AusIMM). This
makes Australia's system more directly comparable with the intended TSE/OSC scheme.
ASIC must move to require similar formal clarification of the role of securities firms and analysts (as proposedby the TSE/OSC), especially in the area of formal standards of professionalism and supervision of mining
analysts (see also above). They must be required to conform to the VALMIN Code and be required to
distinguish in their research reports between what is their opinion and what is data supplied by the company
and used uncritically by them. Companies, themselves, must be proactive in ensuring that they correct thedisclosure of any misleading information by others. Also, ASIC's market fraud units must be expanded insize, funding and scope to better coordinate between the various other regulatory surveillance, compliance,
investigation and prosecution bodies in respect of mineral companies and their associated advisers andpromoters. They must recruit relevantly trained and accredited technical professionals to assist in this work.
Similar comments apply to securities regulators and stock exchanges in other international jurisdictions (seebelow).

FACILITATION OF INTERNATIONAL OPERATIONS
According to the Canadian MSTF, "The objective of improved reporting to the investing public should takeprecedence over the particular requirements of one jurisdiction"; and "a foreign company be required to[9]report according to NI 43-101 or another acceptable reporting system".
These are eminently sensible andsupportable recommendations. In a practical sense, however, there are some issues which make it lesseasy to negotiate exactly comparable reciprocity between reporting systems in all international jurisdictions.
Take Australia, as an example, which has had a successful system in operation for some time. It relies onsupervision by AusIMM, for example, to ensure that the JORC Code's Competent Persons and the VALMIN
Code's Experts/Specialists are regulated in both technical and ethical contexts. For its part, AusIMM as thenational professional body representing all those professionals working in the minerals industry (mainly
geologists, mining engineers, metallurgists and environmentalists), has already successfully interfaced with
the national securities regulators (ASIC and ASX) for decades. Thus, AusIMM is always ready to negotiate
mutual recognition protocols with relevant national overseas professional bodies in appropriate disciplines, inCanada or Indonesia and elsewhere.
The problem for AusIMM is the difficulty in locating an equivalent national professional kindred body in that
foreign jurisdiction (assuming that a national jurisdictional interface exists within that country). AusIMM
cannot seek out and negotiate separate agreements with the numerous individual provincial or state bodies,often even separately representing geologists and engineers? For example, what is the gain for Australasianprofessionals if the Canadian registration bodies are unable to give the same freedom to work in theirjurisdictions? How could Australasian investors be better protected by subsuming their existing ethicalprotection in Australia and New Zealand (due to the current jurisdictional settings) by allowing non-AusIMM
member Canadian professionals to prepare ASIC/ASX required reports?
The future use of the VALMIN Code is likely elsewhere in foreign jurisdictions when they discover its
usefulness as a way to ensure adequate public disclosure of the assessment and/or valuation of mineralproperties. This has been the experience with the JORC Code, although it deals with the restricted (thoughvitally important) subject of the reporting of exploration results and Resources/Reserves.
USA, like Australia, is fortunate in already having a national securities regulator and national professional
geological and engineering bodies, with enforceable codes of ethics, that accredit/register members. Ellis(2000a) describes issues arising from using VALMIN in the US and Ellis (2000b) gives a good account of the
US patchwork of valuation regulations. The challenge for the Society for Mining, Metallurgy, and Exploration,
Inc (and other constituent Societies of The American Institute of Mining, Metallurgical, and Petroleum
Engineers, Inc; AIME) is to define its role as a coordination and integration facilitator for all exploration andmining industry professionals. Whilst the existing accreditation/registration processes are supplemented byvarious State registration schemes, the author strongly opposes the physical involvement of the statebureaucracy. The Australasian self-regulatory model, involving the relevant professional organisations is thepreferred approach in the author's experience.
It is noted that Indonesia plans to introduce accreditation of technical professionals (both Indonesian andexpatriate) partly in response to the Busang scandal, but also because it is timely to do so in a global context.
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MSTF Final Report, Part 5.3, pp 52-53.
M J LAWRENCE, 2000, The AusIMM’s VALMIN Code (1988), in MICA, The Codes Forum, Sydney.

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Hence, AusIMM is providing Bursa Efec Surabaya (Surabaya Stock Exchange), IMA (Indonesian Mining
Association) and PERHAPI (Association of Indonesian Mining Professionals) with information on its approachto accreditation/registration of its geologists, mining engineers, metallurgists and environmental
scientists/engineers, as well as advice on the benefits of their adoption of their own variant of the VALMIN
and JORC Codes. See Lawrence (1998d) and Lawrence (2000c and d)

CONCLUSIONSFor minerals industry businesses to survive in the next Millennium they must engage the community much
more than they did in the past. This is especially the case for the global exploration and mining companies.
The gaining of trust through transparency and the obvious support for professional and ethical behaviour fromthe top to the bottom of the organisation are the keys to success. Thus the need to follow best practicecodes and guidelines.
Professional institutes like AusIMM have a duty and responsibility to provide a self-regulatory framework forthe individuals who are (or will become) those executives directing these companies activities. The better the
self-regulation, the less governmental involvement (from the national, state/provincial or local level) will be[10]required to satisfy the demands of the increasingly influential and more legitimate "civil society".
Evidenceof one's commitment to fulfilment of relevant technical and social/moral obligations is membership of an
appropriate professional institute, because it sets appropriately high levels of education, experience andreputable behaviour as an entry requirement for membership; because it demands a minimum level ofContinuing Professional Development (CPD) and Continuing Professional Education (CPE) as a condition ofcontinuing membership; and because it requires compliance with various ethical and best practice codes ofprofessional behaviour.
Also, such professional institutes are the best bodies to forge multinational agreements on various
professional standards, especially appropriate levels of CPD/CPE to keep a members' knowledge level
current. This not only facilitates the global mobility of professionals but gives public confidence thatappropriate behaviour and standards are observed, irrespective of the jurisdiction.
It is through development of professional standards and guides to best practice in various areas affecting aprofessional's working life that AusIMM plays its part in ensuring the globalisation of the minerals industry isdone in a rational way and in the interests of the individual professional, the company and the community.

[10]

This is a term that describes the increasingly influential community-based organisations which claim to (and often do) represent
society's conscience, eg those that presently form the political pressure groups on the environment and sustainable development.
M J LAWRENCE, 2000, The AusIMM’s VALMIN Code (1988), in MICA, The Codes Forum, Sydney.

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REFERENCES
COLE, NH, 1999. The risks in Experts' Reports: a valuer's perspective (VALMIN Code compliance checklist),
in Proceedings of 23rd Annual Australian Mining and Petroleum Law Association Conference, Sydney, 28-30
July, 13p (AMPLA: Sydney).
ELLIS, TR, 2000a. Lessons learned about standards from applying both VALMIN and USPAP on a complex
appraisal project. Preprint of a paper presented to SME Annual Meeting Valuation Session, Salt Lake City,
USA, 28 February to 4 March, 7p (SME: Denver).
ELLIS, TR, 2000b. The US mineral property valuation patchwork of regulations and standards. Preprint of
paper presented to Mining Millennium 2000, Valuation 1 - Prospectors and Developers Association of
Canada/Canadian Bar Association Session - Validating the Valuation, Toronto, Canada, 5-10 March 2000,
15p (PDAC/CIM: Toronto).
LAWRENCE, MJ, 1995. The AusIMM's VALMIN Code - an objective due diligence tool, in Proceedings Mining
Indonesia '95, Jakarta, 23 November, 7p (IMA: Jakarta).
LAWRENCE, MJ, 1997. A comparison of Australian accreditation initiatives for geologists, mining engineers
metallurgists and environmental scientists, The AusIMM Bulletin, 2, March, pp 73-81.
LAWRENCE, MJ, 1998a. Australian project valuation: possible lessons for Canadian developers, inProspectors and Developers Association of Canada/Canadian Bar Association Mineral Property Valuation
and Investor Concerns Short Course, Toronto, 11 March, pp 69-96 (PDAC/CBA: Toronto).
LAWRENCE, 1998B. The VALMIN Code and Guidelines (1998): an Aide Memoire to assist in its interpretation,
The AusIMM Bulletin, 3, May, pp 80-83.
LAWRENCE, MJ 1998C. The revised VALMIN & Guidelines (1998), a Code for the technical assessment
and/or valuation of mineral assets and petroleum assets and mineral and petroleum securities for
Independent Expert Reports, in The Australasian Institute of Mining & Metallurgy Yearbook 1998-1999,
August, pp 76-79 (Australasian Institute of Mining and Metallurgy/Executive Media: Melbourne).
LAWRENCE, MJ, 1998D. Indonesian and international regulatory response to the Busang fraud, Proceedingsof Mining Indonesia '98, Indonesian Mining Investment Summit - tomorrows wealth, today's challenges, ,Jakarta, 3-5 December, 12p, Day 2 (IMA: Jakarta).
LAWRENCE, MJ, 1999A. Project valuation due diligence: advantages of the Australian System using
AusIMM's VALMIN Code (1998), in Prospectors and Developers Association of Canada Convention Australia - Validating the Valuation Session, Toronto, Canada, 16 March, 20p (PDAC: Toronto).
LAWRENCE 1999B. Comment on Final Report of TSE/OSC Mining Standards Task Force, The AusIMM
Bulletin, No 4, June, pp 40-42.
LAWRENCE, MJ, 2000A. DCF/NPV modelling: valuation practice or financial engineering?, Preprint of a paper
presented to SME Annual Meeting Valuation Session, Salt Lake City, USA, 28 February to 4 March, 15p(SME: Denver).
LAWRENCE, MJ, 2000B. The VALMIN Code (1998) - the Australian experience, Preprint of paper to bepresented to Prospectors and Developers Association of Canada/Canadian Institute of Mining and Metallurgy
Mining Millennium 2000, Valuation 1 Session - Toronto, Canada, 5-10 March, 13p (PDAC/IM: Toronto).
LAWRENCE, MJ, 2000C. Ethics, expert witnesses and professional best practice codes - an AusIMM
perspective, in Proceedings of Mining Indonesia '00, The Mining Challenges into the 3rd Millennium, Jakarta,
4-7 April, 15p (IMA: Jakarta).
LAWRENCE, MJ, 2000D. Ethics and AusIMM's best practice codes, Preprint, Proceedings of 1st International
Professional Geology Conference, Alicante, Spain, July, 12p (EGF/AIPG/CCPG: Spain).
LAWRENCE, MJ AND DEWAR, GJA, 1999. Mineral property valuation, or "What number did you have in mind?",in Proceedings PACRIM '99 Congress, Bali, Indonesia, 10-13 October, pp 13-27 (Australasian Institute of
Mining and Metallurgy: Melbourne).
SPENCE, K, 2000. An overview of valuation practices and the development of a Canadian Code for the
Valuation of Mineral Properties, Preprint of paper to be presented to Mining Millennium 2000, Valuation 1 Prospectors and Developers Association of Canada/Canadian Bar Association Session - Validating theValuation, Toronto, Canada, 5-10 March 2000, 20p (PDAC/CIM: Toronto).

M J LAWRENCE, 2000, The AusIMM’s VALMIN Code (1988), in MICA, The Codes Forum, Sydney.