Thundelarra Ltd v Richmond [No 2] - [2013] WASC 392

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: THUNDELARRA LTD -v- RICHMOND [No 2] [2013] WASC 392

CORAM: EDELMAN J

HEARD: 14, 15 & 17 OCTOBER 2013

DELIVERED : 29 OCTOBER 2013

FILE NO/S: CIV 2515 of 2012

BETWEEN: THUNDELARRA LTD
Plaintiff
AND
WILLIAM ROBERT RICHMOND
First Defendant
KALLENIA MINES PTY LTD
Second Defendant

Catchwords:

Contract - Construction of contract terms - Irrelevance of pre-contractual negotiations - Operation of Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves - Relevance of expert evidence

Legislation:

Nil

Result:

Specific performance ordered
Declarations made

Category: B

Representation:

Counsel:

Plaintiff:     Mr S Penglis
First Defendant             :     In person
Second Defendant         :     In person (Mr W R Richmond)

Solicitors:

Plaintiff:     Herbert Smith Freehills
First Defendant             :     In person
Second Defendant         :     In person

Cases referred to in judgment:

Able Demolitions and Excavations Pty Ltd v Wilson [2012] WASC 61
Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101
Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253
Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] AC 1101
Donyette Pty Ltd v Toplodge Nominees Pty Ltd [No 2] [2011] WASC 141
Eastern Metropolitan Regional Council v Four Seasons Constructions Pty Ltd [2000] WASC 178; (2000) 22 WAR 372
Hammond v Vam Ltd [1972] 2 NSWLR 16
HPM Pty Ltd v Fear [2002] WASCA 249
John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1
McCourt v Cranston [2012] WASCA 60
Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571
Mineralogy Pty Ltd v Sino Iron Pty Ltd [2013] WASC 194
Miorada v Miorada [2005] WASC 105
Netglory Ltd v Caratti [2013] WASC 364
Re Hoffman [2004] WASCA 238; (2004) 187 FLR 263
Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323
Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429
Vincent Nominees Pty Ltd v Western Australian Planning Commission [2012] WASC 28

Table of Contents

Introduction
Glossary of terms used in these reasons
The mining licences held by Mr Richmond and Kallenia Mines
The Agreement between Thundelarra and the defendants
Events subsequent to the Agreement
The matters in issue
Issue 1: The proper construction of 'define[d] a JORC compliant resource'

The competing constructions
Mr Richmond's first submission
Mr Richmond's second submission
Thundelarra's submission
The evidence of pre‑contractual negotiations and surrounding circumstances

Issue 2: Did Thundelarra 'define a JORC compliant resource' in Red Bore?

Application of the proper construction
The focus on the Runge Report
The expert evidence generally
The two experts called by the defendants: Mr Jones and Mr Procter
The quality assurance and quality control procedures adopted during the geological assessment stage

(1) Mr Jones' conclusion should be rejected because his premise was wrong
(2) Mr Jones' conclusion should be rejected because it is incorrect

The conclusion that there is a Mineral Resource

The substance of Mr Jones' criticisms
The level of analysis of reasonable prospects of eventual economic extraction
Were there reasonable prospects of eventual economic extraction?

Conclusion
Annexure 1: Reporting of Mineral Resources JORC Code provisions

Annexure 2: Reporting of Ore Reserve JORC Code provisions
Annexure 3: JORC Code Table 1 Check List of Assessment and Reporting Criteria

EDELMAN J:

Introduction

This trial involved short questions of legal construction accompanied by substantial expert evidence. The primary issue of construction in the case is the meaning of the following words in a contract between the parties: 'define a JORC compliant resource'. The primary issue for the experts was whether Thundelarra had defined a JORC compliant resource.
The reference to 'JORC' in the contract between the parties is a reference to the JORC Code, the full title of which is the 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. It is common ground that it was the 2004 edition of the JORC Code that applied in 2010 when the parties entered the contract and that was in force in 2012 when Thundelarra says that it defined a JORC compliant resource.
The proper construction of the words of the contract which refer to Thundelarra 'defin[ing] a JORC compliant resource' requires a determination of a Mineral Resource, in accordance with the JORC Code, and which is adopted by Thundelarra. This was satisfied by the determination of a Mineral Resource in a report (the Runge Report) including by Mr Stevenson (a Competent Person as defined and required by the JORC Code) and the adoption of that determination by Thundelarra in an Australian Securities Exchange release.
In any event, the alternative (incorrect) construction proposed by Mr Richmond was also satisfied. That alternative construction required Thundelarra to prove, independently of the assessment of any particular Competent Person, that there was a Mineral Resource within the meaning of the JORC Code.
Substantial evidence was given by five experts concurrently. That evidence concerned matters of geology, mining and engineering. I had concerns only about the evidence of one expert, Mr Jones, who was called to give evidence by the defendants. But even Mr Jones ultimately accepted in his oral evidence that, apart from his concerns about quality assessment and quality control and whether there were reasonable prospects for eventual economic extraction, the conclusion in the Runge Report that there was an 'Indicated' Mineral Resource 'was within the spectrum of [the] reasonable'.[1]
[1] ts 253 (Mr Jones).
My reasons are divided into the following sections:
1.Glossary of terms used [7] ‑ [18].
2.The Mining Licences held by Mr Richmond and Kallenia Mines [19] – [25].
3.The Agreement between Thundelarra and the defendants [26] ‑ [47].
4.Matters subsequent to the Agreement [48] ‑ [57].
5.The matters in issue [58] ‑ [60].
6.Issue 1: The proper construction of 'define[d] a JORC compliant resource' [61] ‑ [137].
7.Issue 2: Did Thundelarra define a JORC compliant resource in Red Bore [138] ‑ [200].
8.The conclusion that there is a Mineral Resource [201] ‑ [229].
9.Conclusion [230] ‑ [240].

Glossary of terms used in these reasons

The expert evidence given in this trial was of a highly technical nature. These reasons adopt much of the language used by the experts. It is useful to begin with an alphabetical glossary of some of the terms used in these reasons. I have footnoted the sources from which these definitions are derived in whole or in part.
'Blanks' means zero grade samples that are inserted in sample batches to determine if there is sample contamination or mix ups with sample numbering.[2]
[2] Exhibit E/5 (First Report of Mr Jones) page 3 (tb 196).
The terms 'Cut‑off grade' and 'Product specifications' mean the lowest grade, or quality, of mineralised material that qualifies as economically mineable and available in a given deposit. This grade or quality may be defined on the basis of economic evaluation, or on physical or chemical attributes that define an acceptable product specification.[3]
[3] Exhibit 1/2 (JORC Code 2004) page 20 (tb 26).
'Duplicates' means repeated assays of the original drilling samples and laboratory processed samples, which after crushing or pulverising are used to test for repeatability in the assay results.[4] Duplicates check the sampling in the field and are usually provided with the sample to the laboratory.[5]
[4] Exhibit E/5 (First Report of Mr Jones) page 3 (tb 196).
[5] ts 170 (Mr Stevenson).
'Grade' is sometimes described as 'quality', 'assay', or 'analysis (value)'. It is any physical or chemical measurement of the characteristics of the material of interest in samples or product.[6]
[6] Exhibit 1/2 (JORC Code 2004) page 20 (tb 26).
'Metallurgy' is sometimes described as 'processing', 'beneficiation', 'preparation', or 'concentration'. It refers to the physical and/or chemical separation of constituents of interest from a larger mass of material. It also describes methods employed to prepare a final marketable product from material as mined. Examples of such methods include screening, flotation, magnetic separation, leaching, washing, and roasting.[7]
[7] Exhibit 1/2 (JORC Code 2004) page 20 (tb 26).
'Mineralisation' describes a single mineral or combination of minerals occurring in a mass, or deposit, of economic interest. The term is intended to cover all forms in which mineralisation might occur, whether by class of deposit, mode of occurrence, genesis or composition.[8]
[8] Exhibit 1/2 (JORC Code 2004) page 20 (tb 26).
'Ore Reserves' is a term which is sometimes used in other countries interchangeably with 'Mineral Reserves'. But the term 'Ore Reserves' is preferred under the JORC Code.[9]
[9] Exhibit 1/2 (JORC Code 2004) page 20 (tb 26).
'Oxide', 'Transitional', and 'Sulphide' are three weathering domains.[10] In that order they represent domains as a hole is drilled deeper into the earth. Although the grade of material may be higher in the transitional zone,[11] more material is recovered from the sulphide domain than from the Oxide or Transitional domains;[12] it becomes easier to extract material as one moves down through the weathering zones.[13]
[10] ts 223 (Mr Stevenson).
[11] ts 234 (Mr Jones).
[12] ts 229 (Mr Jones).
[13] ts 232 (Mr Stevenson).
'Recovery' or 'yield' refers to the percentage of material of initial interest that is extracted during mining and/or processing. It is a measure of mining or processing efficiency.[14]
[14] Exhibit 1/2 (JORC Code 2004) page 20 (tb 26).
'Standards' means manufactured homogenous samples with guaranteed accurate metal contents for each of the particular elements that are used to check on assay calibrations.[15] They are certified reference materials.[16] The initial standards are primarily used to determine if there is sample contamination in the laboratory.[17]
[15] Exhibit E/5 (First Report of Mr Jones) page 3 (tb 196).
[16] ts 172 (Mr Kirchner).
[17] ts 178 (Mr Kirchner).
'Tonnage' is sometimes described as 'quantity' or 'volume'. It refers to the amount of material of interest irrespective of the unit of measurement used (which should be stated when figures are reported).[18]
[18] Exhibit 1/2 (JORC Code 2004) page 20 (tb 26).

The mining licences held by Mr Richmond and Kallenia Mines

Mr Richmond is the sole director, and sole shareholder, of Kallenia Mines.[19]
[19] Amended Statement of Agreed Facts and Issues [2], [3].
Kallenia Mines holds four exploration licences known as the Yerrida tenements.[20] The aspect of this litigation concerning the Yerrida tenements settled prior to trial.
[20] Exhibit C (Witness Statement of Mr Richmond) [7].
Mr Richmond holds mining lease M52/597, known as Red Bore, situated south of Doolgunna and about 160 km north of Meekatharra.[21]
[21] Amended Statement of Agreed Facts and Issues [4].
The location of the Red Bore tenement is important to the issues in this case. It adjoins a mining operation of Sandfire Resources NL which is known as the De Grussa project.[22]
[22] Exhibit C (Witness Statement of Mr Richmond) [9].
The adjoining De Grussa project is a copper and gold mining project.[23] The DeGrussa mining operation is approximately 500 m from the nearest boundary of the Red Bore tenement.[24] Sandfire has a concentrator and treatment plant at the site of the DeGrussa mining operation. The plant is approximately 2 km from the mineralisation on the Red Bore tenement.[25]
[23] Exhibit C (Witness Statement of Mr Richmond) [10].
[24] Amended Statement of Agreed Facts and Issues [17]; Exhibit C (Witness Statement of Mr Richmond) [11].
[25] Amended Statement of Agreed Facts and Issues [16].
At current market prices, the approximate 'mineralisation' of the De Grussa project is around $7 billion.[26]
[26] Exhibit C (Witness Statement of Mr Richmond) [13].
The location of Red Bore in relation to the De Grussa project can be seen in the map below extracted from the Sandfire ASX announcement.[27] Although the size and scale are not identical to the original document, the map shows that Sandfire is the registered holder of all tenements which substantially surround Red Bore.[28]
[27] Exhibit 1/26 (Sandfire ASX Announcement) page 25 (tb 173); ts 89 - 90.
[28] Amended Statement of Agreed Facts and Issues [18].

The Agreement between Thundelarra and the defendants

Thundelarra is a Western Australian company which conducts mineral exploration operations.[29]
[29] Amended Statement of Agreed Facts and Issues [1].
On 12 April 2010, Thundelarra entered into a written contract with Mr Richmond and Kallenia Mines.[30] The contract, referred to in submissions as 'the Agreement', was contained in a letter from Thundelarra to Mr Richmond and Kallenia Mines with the subject 'Offer: Option for Farmin and Joint Venture ‑ Red Bore and Yerrida Projects'.[31] The parties to the Agreement are Thundelarra and the defendants, Mr Richmond and Kallenia Mines.[32]
[30] Amended Statement of Agreed Facts and Issues [5].
[31] Amended Statement of Agreed Facts and Issues [6]; Exhibit 1/23 (Offer: Option for Farmin and Joint ‑ Red Bore and Yerrida Projects).
[32] Amended Statement of Agreed Facts and Issues [6].
The Agreement describes Mr Richmond and Kallenia Mines jointly as 'Richmond'. In this section of my reasons I will follow the same description, using 'Richmond' to refer to the defendants.
The first section of the Agreement falls under the heading 'Offer: Option for Farmin and Joint Venture ‑ Red Bore and Yerrida Projects'. Sub‑paragraph (a) provides that the offer is made in relation to:
the 100% legal and beneficial interest which Richmond owns in M52/597 ("Red Bore"), in relation to which [Thundelarra] wishes to earn a 60% legal and beneficial interest and form a joint venture.
Clause 1 of the Agreement provides for Thundelarra to have an exclusive right to conduct legal due diligence in relation to the tenements as notified in writing to Richmond within a two‑week period after acceptance of the offer (defined as Notice).
Clause 3 of the Agreement provides that if Thundelarra gives Notice to Richmond then Richmond will grant Thundelarra an exclusive option (Option) to earn an unencumbered legal and beneficial interest in the tenements, including a 60% interest in Red Bore, by sole funding exploration expenditure for all minerals on the tenements until the making of a decision to mine. In relation to Red Bore, the Option is granted by Richmond to Thundelarra for an option fee of $150,000 plus GST.
Clause 6 provides that subject to the satisfaction of certain conditions, the Option is exercisable for a six‑month period on and from the date of the Notice.
Clause 13 provides that the Option is exercisable during the option period by the issuing of a notice of exercise of option (Option Exercise Notice). It is agreed between the parties that the Option Exercise Notice was issued.[33]
[33] Amended Statement of Agreed Facts and Issues [9].
Clause 14 provides that completion under the Option Agreement (Completion) must take place no later than two business days after the date of the Option Exercise Notice or such other date as the parties agree. It is an agreed fact that Completion occurred on 21 October 2010.[34]
[34] Amended Statement of Agreed Facts and Issues [10].
Clause 16 provides that in various circumstances, including where Thundelarra has not assigned the Option Agreement, Thundelarra shall issue to Richmond or its nominees shares in Thundelarra to the value of $500,000.
Clause 17 provides that on and from Completion, Thundelarra and Richmond will form an unincorporated exploration joint venture in relation to Red Bore (Red Bore Exploration Joint Venture) with initial participating interests as follows:
(i)Thundelarra ‑ 0%;
(ii)Richmond ‑ 100%.
The Red Bore Exploration Joint Venture is referred to in clause 19 as the Red Bore Exploration Joint Venture. The other joint venture which is not the subject of this litigation is the Yerrida Joint Venture.
Clause 20 provides that the object of the Exploration Joint Ventures will be exploration with a view to forming a subsequent mining joint venture for the development, mining and if appropriate, processing of ore derived from the tenements the subject of each Exploration Joint Venture.
Clause 21 provides that during the exploration stage for the Exploration Joint Ventures, Thundelarra will be the manager and will sole fund all exploration expenditure on the tenements, and free carry Richmond until the making of a decision to mine in relation to the establishment of a mine on a specified mining area or mining areas within the tenements the subject of the relevant Exploration Joint Venture. The period described in clause 21 is defined as the Sole Funding Period.
Clause 22 provides that a decision to mine by an Exploration Joint Venture operating committee shall be made on the basis of a simple majority decision based on participating interests held.
Clause 23 fortifies Thundelarra's sole expenditure obligation by providing that during the Sole Funding Period, Thundelarra has sole responsibility for keeping the tenements in good standing and for paying all rates and rents.
Clauses 24, 25 and 26 fall under a section headed 'Red Bore Exploration Joint Venture ‑ additional terms'. These clauses are central to this dispute and are set out in full at [61]. They are concerned with the circumstances in which Thundelarra will earn a 60% participating interest in the Red Bore Exploration Joint Venture (clause 24), and the consequences of earning that interest (clause 25) or of failing to earn that interest (clause 26).
Clauses 32 and 33 provide for security. Clause 32 allows Thundelarra to protect its interest under the Option Agreement prior to earning any interest in the Red Bore tenement by the registration of a caveat over the tenement. Clause 32 also provides that Richmond agrees to deliver, on the request of Thundelarra, executed registrable transfers of the interest earned by Thundelarra. Clause 33 provides that once Thundelarra has earned any interest in the tenements, Richmond may protect its interest by registering a caveat over the tenements.
Clauses 41 to 54 of the Agreement deal with Production Joint Ventures.
Clause 41 provides for Richmond's entitlement, following a decision to mine: (i) to assign its interests in the Exploration Joint Ventures to third parties subject to pre‑emptive rights which Thundelarra has; (ii) to elect to withdraw from the relevant Exploration Joint Venture and, provided Richmond holds an interest in the Joint Venture of 10% or greater, to convert to a 2% gross production royalty on all base and precious metals derived and produced from the relevant Tenements; or (iii) to elect to continue in the relevant Exploration Joint Venture, in which case Thundelarra is responsible for arranging funding and carrying Richmond's cash calls as provided in clause 44.
Clause 42 provides that following a decision to mine, a Production Joint Venture will be formed. The effect of clause 42 is that following a decision to mine, an Exploration Joint Venture changes to a Production Joint Venture. The parties' interests remain the same from the Exploration Joint Venture to the Production Joint Venture. In the case of Red Bore, therefore, the Production Joint Venture will have the following initial participating interests:
(i)Thundelarra ‑ 60%;
(ii)Richmond ‑ 40%.
Clause 49 provides, in effect, for the Exploration Joint Venture to continue in relation to those parts of the tenement which are not the subject of a decision to mine. Clause 49 also provides that Thundelarra will continue to free carry Richmond on those parts of the tenement until the completion of a banking feasibility study.

Events subsequent to the Agreement

On 22 April 2010, Thundelarra wrote to Mr Richmond with the subject 'Notice of satisfaction of results of legal due diligence enquiries ‑ Option for farmin and joint venture ‑ Red Bore and Yerrida Projects', and paid the Option Fee of $250,000 to Mr Richmond and Kallenia Mines. Mr Richmond and Kallenia Mines accepted the payment of the Option Fee.[35]
[35] Amended Statement of Agreed Facts and Issues [8].
On 21 October 2010, Thundelarra wrote to Mr Richmond and Kallenia Mines with the subject 'Option exercise notice ‑ Red Bore and Yerrida Applications'.[36]
[36] Amended Statement of Agreed Facts and Issues [9].
On 21 October 2010, completion under the Agreement occurred.[37] Since that date, Thundelarra has sole funded the exploration of Red Bore.[38]
[37] Amended Statement of Agreed Facts and Issues [10].
[38] Amended Statement of Agreed Facts and Issues [11].
In May 2012, Thundelarra received a report from Runge Ltd entitled 'Mineral Resource Estimate Red Bore Prospect Western Australia ‑ Thundelarra Exploration Limited May, 2012'.[39] This was described at trial as the Runge Report.
[39] Amended Statement of Agreed Facts and Issues [12]; Exhibit 1/30 (Runge Report).
The Runge Report concluded that the deposit was an 'Indicated' Mineral Resource within the guidelines outlined in the 2004 JORC Code.[40]
[40] Amended Statement of Agreed Facts and Issues [13].
On 4 May 2012, after receiving an Executive Summary of the Runge Report and the Resource Statement from Runge, the Plaintiff released to the ASX an announcement with the subject 'JORC Code Compliant Resource at Red Bore'.[41] As I explain below, this release amounted to an acceptance or adoption of the Runge Report and its conclusions.
[41] Amended Statement of Agreed Facts and Issues [14]; Exhibit 1/28 (ASX Release ‑ JORC Code Compliant Resource at Red Bore).
Mr Trevor Stevenson, a Competent Person as defined by the 2004 JORC Code, consented to the inclusion in the Red Bore ASX Announcement of information relating to mineral resources in the form and context in which the information appears in the announcement.[42]
[42] Amended Statement of Agreed Facts and Issues [15].
On 7 May 2012, Thundelarra wrote to Mr Richmond, and copied to Kallenia Mines, a letter with the subject 'Notice of satisfaction or earn‑in – Red Bore Exploration Joint Venture'.[43] In the letter, Thundelarra explained that it had undertaken exploration on Red Bore, sole funded that exploration, and defined a JORC compliant resource at Red Bore. It was asserted that Thundelarra had thus satisfied the earn‑in obligation with respect to Red Bore and thereby earned a 60% unencumbered participating interest in Red Bore. Thundelarra enclosed a transfer form for registration as owner of a 60% legal interest in the Red Bore tenement. Thundelarra requested Mr Richmond to execute the transfer and to return it to Thundelarra for registration.[44]
[43] Amended Statement of Agreed Facts and Issues [20]; Exhibit 1/29 (Notice of satisfaction of Earn In).
[44] Amended Statement of Agreed Facts and Issues [21].
On 30 May 2012, the Runge Report was provided by Thundelarra to Mr Richmond.[45]
[45] Exhibit 1/32.
Mr Richmond refuses to transfer a 60% interest in Red Bore to Thundelarra.

The matters in issue

During the period in which Mr Richmond and Kallenia Mines were still legally represented, the legal representatives of all of the parties agreed a statement of facts and issues. The agreed issues were as follows:[46]
(1)What is the proper construction of the words 'define[d] a JORC compliant resource' in clauses 24, 25, and 26 of the Agreement?
(2)Has Thundelarra 'defined a JORC compliant resource' on Red Bore?
[46] Amended Statement of Agreed Facts and Issues [22].
The parties also agreed that if Thundelarra were to establish its claim that it has earned a 60% interest in the Red Bore tenement, then specific performance would be the appropriate remedy, and that Thundelarra would be entitled to specific performance in that event.[47] Although, as counsel for Thundelarra properly submitted, the assessment of the availability of an order of specific performance is a matter for the Court, I am satisfied that damages would not be an adequate remedy, and that if Thundelarra's case were made out, specific performance would be appropriate.
[47] Amended Statement of Agreed Facts and Issues [23].
Counsel for Thundelarra also, again quite properly, pointed to a possible argument that the 60% interest earned by Thundelarra as referred to in the Agreement might denote an interest in the joint venture rather than an interest in the Red Bore tenement.[48] This point was, understandably, never taken by the defendants, including, apparently, during the substantial period in which they were legally represented. On its proper construction, the interest to which the parties must have been referring in the Agreement is the Red Bore tenement. In any event, 'joint venture' is not a description of a legal concept and[49]
[d]escribing the arrangements as a 'joint venture' does not however have any particular legal consequences. The rights and obligations of the parties remain to be determined by examination of the detail of what they have agreed and done.
[48] ts 91 - 92.
[49] John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1, 21 [44], footnote 63 (the Court).

Issue 1: The proper construction of 'define[d] a JORC compliant resource'

Clauses 24 to 26 provide as follows:
24.During the Sole Funding Period for the Red Bore Exploration Joint Venture, THX [Thundelarra] must, subject to all necessary approvals being obtained, promptly commence exploration on Red Bore to seek to define a JORC compliant resource within two years of Completion (subject to clause 26) in order to earn a 60% participating interest in the Red Bore Exploration Joint Venture.
(Emphasis added).
25.Once THX has defined a JORC compliant resource under clause 24, THX has (subject only to Ministerial consent under the Mining Act 1978 (WA)) earned its 60% participating interest under clause 24 and:
(a)THX may assign its interest in the Red Bore Exploration Joint Venture to third parties subject to the pre‑emptive rights of Richmond in clause 39;
(b)Richmond may elect to assign its interest in the Red Bore Exploration Joint Venture to third parties subject to the pre‑emptive rights of THX in clause 39;
(c)Richmond may elect to convert its 40% participating interest to a 2% gross production royalty on THX's share of revenue from all base and precious metals derived and produced from the relevant Tenements; and
(d)THX must use its best endeavours to complete a bankable feasibility study ('BFS') within three years of Completion.
26.If THX does not define a JORC compliant resource within two years of Completion for reasons within THX's control (or 3 years if for reasons not within THX's control):
(a)THX does not earn any interest in Red Bore;
(b)THX has no further right to earn an interest in Red Bore;
(c)the Red Bore Exploration Joint Venture terminates immediately;
(d)THX must immediately withdraw any caveats lodged to protect its rights under the Option Agreement and appoints Bill Richmond as its attorney to do the same;
(e)any remaining Exploration Joint Ventures continue unaffected; and
(f)Richmond is free to negotiate divestment of Red Bore with third parties free of any interests or rights conferred on THX by the Option Agreement.
The essence of the dispute at trial concerned whether Thundelarra had 'define[d] a JORC compliant resource within two years of Completion [ie two years from 21 October 2010]'.

The competing constructions

Thundelarra's submission is that these words require a determination of a Mineral Resource, in accordance with the JORC Code, by a Competent Person or Persons within the meaning of the JORC Code.[50]
[50] Thundelarra's Opening Submissions [18]; Second Further Amended Statement of Claim [6(i)(B)].
Mr Richmond submitted that there had not been a determination in accordance with the JORC Code. But, in any event, he did not accept Thundelarra's construction of the words of clause 24. Mr Richmond's submission was effectively that either or both of the following were required by the Agreement:
(1)That a Mineral Resource be defined by a process which is compliant with the JORC Code and the Mineral Resource (as defined in the JORC Code) exist, as a matter of fact, independently of any assessment by a particular Competent Person which is not verified.[51]
(2)That there be a resource which complies with the JORC Code and that the resource be 'of such size, quality, form and economic prospectivity so as to be suitable to be the subject of a bankable feasibility study of a usual form and content able to be conducted on it within a period of about three years after completion'.[52]
[51] ts 142 (Mr Richmond).
[52] Re-amended Defence [13.6].
My understanding of Mr Richmond's submission (1), as I have expressed it above, is informed by his submission that (i) a Mineral Resource estimate must be verified by a Competent Person; and (ii) the Mineral Resource estimate must have reasonable prospects for eventual economic extraction.[53]

Mr Richmond's first submission

[53] Closing Submissions of Mr Richmond, page 2.

I reject the construction of clause 24 of the Agreement proposed by Mr Richmond's submission (1). There are five reasons why clause 24 does not compel the conclusion that a Mineral Resource exists in fact independently of an assessment by a Competent Person, or subject to a compliant assessment by a Competent Person which is not 'verified'.
First, there is an inherent contradiction in the submission that there must be a Mineral Resource as defined by the JORC Code, and that such a Mineral Resource, as defined, can exist independently of any determination by a Competent Person.
The reason for this contradiction is that the definition of Mineral Resource in the JORC Code, set out at Annexure 1 to these reasons, is premised upon the opinion of a Competent Person. The JORC Code's definition of Mineral Resource is in terms that are plainly malleable. There are several noteworthy points about the definition.
The opening words of the definition of Mineral Resource might, if read by themselves, support Mr Richmond's submission. Those words focus on whether there is such a concentration of material of intrinsic economic interest 'in such form, quality and quantity that there are reasonable prospects for eventual economic extraction'. But those words are then followed by an acknowledgement that factors such as 'location, quantity, grade, geological characteristics and continuity of a Mineral Resource' might be estimated or interpreted from specific geological evidence. The definition also refers to three sub‑divisions of a Mineral Resource based on 'increasing geological confidence'. The concluding words of the definition emphasise the 'judgement' made, and acknowledge that the judgement might be based upon untested practices or assumptions which are disclosed. Read as a whole, the JORC definition of Mineral Resource is dependent upon imperfect notions of estimation, interpretation, assumption and, ultimately, judgement.
This conclusion is fortified in several respects by the interpretative guidelines in the JORC Code which follow the definition of Mineral Resource. The italicised 'guidelines' are matters which 'do not form part of the Code, but should be considered persuasive when interpreting the [JORC] Code'.[54]
[54] Exhibit 1/2 (JORC Code 2004) page 2 (tb 8).
Those guidelines explain the following matters.
(i)The term 'reasonable prospects for eventual economic extraction' implies a preliminary judgement by a Competent Person in respect of the technical and economic factors likely to influence the prospect of economic extraction, including the approximate mining parameters.
(ii)Material below a selected cut‑off grade can be included '[w]here considered appropriate by the Competent Person', which again emphasises the element of judgement involved in the assessment of a Mineral Resource.
(iii)Concepts in the definition such as 'eventual economic extraction' are also expressly acknowledged in the guidelines to be imprecise. The guidelines explain that the interpretation of the word 'eventual' may vary according to the commodity or mineral involved. For coal, iron ore and bauxite, for example, 'eventual economic extraction' might be envisaged to cover time periods in excess of 50 years, whereas in the case of gold deposits, the concept of 'eventual economic extraction' would have a normal restriction of 'perhaps 10 to 15 years, and frequently to much shorter periods of time'.
There is further matter which supports the evaluative nature of the judgement upon which any conclusion of a Mineral Resource is based. This further matter was one on which the expert evidence was unanimous. The resource classification process involves a weighing up of many items to conclude whether or not it can be said with a sufficient degree of confidence that there is a resource within one of the JORC categories.[55] Those categories, explained below, are (i) an Inferred Mineral Resource; (ii) an Indicated Mineral Resource; and (iii) a Measured Mineral Resource.
[55] ts 219 - 220 (Mr Stevenson, Mr Kirchner & Mr Jones).
This weighing up process is plainly one on which reasonable minds might differ. For instance, Mr Stevenson and Mr Kirchner differed in their conclusions concerning whether the resource was an Inferred Mineral Resource (Mr Kirchner) or an Indicated Mineral Resource (Mr Stevenson). Mr Kirchner acknowledged that Mr Stevenson's view was reasonable. And even Mr Jones, whose evidence was unsatisfactory in a number of respects discussed below, ultimately acknowledged that apart from two matters which he said were exceptions, Mr Stevenson's view was 'within the spectrum of reasonable'.[56]
[56] ts 253 (Mr Jones).
Secondly, the notion that there could be a definitive concept of Mineral Resource, as defined by the JORC Code, is not consistent with the nature and purpose of the JORC Code. The JORC Code explains in its full title that it is a code concerned with reporting. It is the Australasian Code for Reporting of Exploration Results, Mineral Resource and Ore Reserves. The focus of the JORC Code is not on whether Mineral Resource or Ore Reserves actually exist. The focus is upon the circumstances and manner of reporting of a Mineral Resource or Ore Reserve.
In the foreword to the JORC Code, it is explained that the JORC Code 'sets out minimum standards, recommendations and guidelines for Public Reporting in Australasia of Exploration Results, Mineral Resources and Ore Reserves'.[57]
[57] Exhibit 1/2 (JORC Code 2004) page 2 (tb 8).
The JORC Code explains that the main principles governing its operation and application are 'transparency, materiality and competence'.[58]
[58] Exhibit 1/2 (JORC Code 2004) pages 2 - 3 (tb 8 - 9).
Transparency requires that the reader of a Public Report is provided with sufficient information, the presentation of which is clear and unambiguous, to understand the report and is not misled.[59]
[59] Exhibit 1/2 (JORC Code 2004) page 2 (tb 8).
Materiality requires that a Public Report contain all the relevant information which investors and their professional advisers would reasonably require, and reasonably expect to find in the report, for the purpose of making a reasoned and balanced judgement regarding the Exploration Results, Mineral Resources or Ore Reserves being reported.[60]
[60] Exhibit 1/2 (JORC Code 2004) page 2 (tb 8).
Competence requires that the Public Report be based on work that is the responsibility of suitably qualified and experienced persons who are subject to an enforceable professional code of ethics.[61]
[61] Exhibit 1/2 (JORC Code 2004) page 3 (tb 9).
Thirdly, there is no dispute resolution mechanism in the Agreement. The absence of any mechanism to resolve a dispute concerning whether a Mineral Resource does, or does not, exist is a significant factor which militates against a construction of the Agreement that requires Thundelarra to define a Mineral Resource (as defined in the JORC Code) which exists as a matter of fact, or which involves a determination of which opinion of competing Competent Persons should be 'verified' or accepted.
The absence of a dispute resolution mechanism for matters on which reasonable minds might differ leaves the resolution of any disputes arising from such matters to court proceedings. And in circumstances where numerous matters of judgement are involved, the prospect of court proceedings is not a remote one. In construing a commercial mining contract it is unlikely that a reasonable person would consider that the parties had intended such an inherently uncertain situation.
Fourthly, the assumption that clause 24 should be construed to require the existence, in fact, of a Mineral Resource, independently of the determination by a Competent Person, is based upon Mr Richmond's submission that (i) a Mineral Resource estimate must be verified by a Competent Person; and (ii) a Mineral Resource must have reasonable prospects for eventual economic extraction.
I have already explained why the definition of Mineral Resource in the JORC Code involves subjective questions of judgement in relation to (ii): whether or not a Mineral Resource has reasonable prospects for economic extraction.
As to (i), verification, there is nothing in the JORC Code which requires that the estimate of a Mineral Resource be verified by a Competent Person. Mr Richmond's submission about verification was based upon evidence of Mr Jones concerning his understanding of the JORC Code. But there are a number of reasons why I reject Mr Jones' conclusions in his evidence as unreliable.
Contrary to the submission of Mr Richmond and the assumption of Mr Jones, the requirement for verification is not consistent with the meaning or effect of the JORC Code. This is for the three reasons below.
(1)As I have explained, the main principles of the JORC Code are 'transparency, materiality and competence'.[62] None of these principles is verifiability, nor do any of these principles require verification.
(2)Clause 20 of the JORC Code describes the test for an Inferred Mineral Resource in terms which can sometimes exclude verifiability. It explains that the resource is 'inferred from geological evidence and assumed but not verified geological and/or grade continuity' (emphasis added).[63] It also explains that the conclusion is based on information gathered through appropriate techniques such as outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain quality and reliability.
(iii)The guidelines to clause 26 of the JORC Code acknowledge that comment on some matters is important 'where inadequate or uncertain data affect the reliability of, or confidence in… an estimate of Mineral Resources' (emphasis added).[64] Examples given are 'poor sample recovery, poor repeatability of assay or laboratory results, limited information on bulk densities etc'.[65] Again, the Table 1 guidelines refer to reporting an estimate of Mineral Resources based on 'inadequate or uncertain data'.[66]
[62] Exhibit 1/2 (JORC Code 2004) pages 2 - 3 (tb 8 - 9).
[63] Exhibit 1/2 (JORC Code 2004) pages 7 - 8 (tb 13 - 14).
[64] Exhibit 1/2 (JORC Code 2004) page 9 (tb 15).
[65] Exhibit 1/2 (JORC Code 2004) page 3 (tb 9) .
[66] Exhibit 1/2 (JORC Code 2004) page 8 (tb 14).
Fifthly, I do not accept that the extreme example postulated by Mr Richmond supports his proposed construction of clause 24.
The scenario hypothesised by Mr Richmond was as follows:[67]
Any unscrupulous geologist (Competent Person) could report a Mineral Resource as Measured, design a mine etc and, if theoretically economic, achieve a Proven Ore Reserve based on a single "salted" drillhole provided by his client he did not check, and the inference is because he is a Competent Person he is right!
[67] Closing Submissions of Mr Richmond, page 2.

This unlikely scenario does not mean that there must, as a matter of fact, be a Mineral Resource independently of any determination by a Competent Person. That is, the scenario put by Mr Richmond does not require acceptance of Mr Richmond's construction of 'define a JORC compliant resource' in clause 24.
On Thundelarra's construction of clause 24, it is unlikely that a JORC compliant resource would have been defined in Mr Richmond's extreme example.
One reason why, on Thundelarra's construction, the unscrupulous geologist would not have reported in a JORC compliant manner is because it is unlikely the report would be transparent and would contain all material information relevant for the assessment of a Mineral Resource, even those matters requiring a low level of confidence.
There is a remote possibility that the unscrupulous geologist's report might be JORC compliant because the report was transparent, and contained all information material to the relevant assessment, but the only oddity was the absurd conclusion of the geologist that there was a Proven Ore Reserve based on a single '"salted" drillhole provided by his client that he did not check'.
There are several points which should be made about this remote scenario.
One is that a contract is not to be interpreted by reference to extreme possibilities.
Another is that in the circumstances hypothesised by Mr Richmond, there would also be serious consequences for the unscrupulous geologist. The JORC Code guidelines provide that '[c]omplaints made in respect of the professional work of a Competent Person will be dealt with under the disciplinary procedures of the professional organisation to which the Competent Person belongs'.[68]
[68] Exhibit 1/2 (JORC Code 2004) page 5 (tb 11).
A third point is that such an extreme conclusion, even if transparent and accompanied by the information relevant to the assessment of an Ore Reserve, might infringe particular rules of the JORC Code or Australian Securities Exchange Listing Rules which accompany the JORC Code and inform its interpretation.
A fourth point is that the Agreement requires Thundelarra to adopt a determination of a JORC compliant resource by a Competent Person. The JORC Code requires that a company's public report on Mineral Resources be based on, and fairly reflect, the information and supporting documentation from a Competent Person.[69] There was no dispute in this case that the report prepared by the Competent Persons was adopted by Thundelarra in its release to the Australian Securities Exchange on 4 May 2012. But, in the example Mr Richmond gave, concerning an opinion about 'the highest confidence category of reserve estimate',[70] it would be open to a court to find that the opinion of the Competent Person was either not honestly held, or was so unreasonable that it was not within the spectrum of views which could be held by any reasonable Competent Person. This might mean that a company, acting consistently with its obligations under the JORC Code, could not adopt that report.

Mr Richmond's second submission

[69] Exhibit 1/2 (JORC Code 2004) page 4 (tb 10).

[70] Exhibit 1/2 (JORC Code 2004) page 10 (tb 16).

Mr Richmond's second submission is that the words 'define a JORC compliant resource', read with other terms of the Agreement, require that there be a resource which complies with the JORC Code and that the resource be 'of such size, quality, form and economic prospectivity that it is suitable to be the subject of a bankable feasibility study of a usual form and content able to be conducted on it within a period of about three years after completion'.
This submission was made as a matter of construction. At no stage was it suggested, nor could it be suggested, that there was an implied term to this effect.[71]
[71] ts 324; Re-amended Defence [13.6].
Thundelarra concedes that if this construction is correct then the requirements for Thundelarra to earn a 60% interest in Red Bore have not been satisfied. This concession is properly made. The evidence indicated that the resource is not of such a nature that it would have been suitable to be the subject of a bankable feasibility study before 21 October 2013 (which, as I am writing this, is tomorrow). But I also accept Thundelarra's submission that the Agreement cannot be construed to require suitability for a bankable feasibility study as a pre‑condition to Thundelarra earning a 60% interest.
I conclude that Mr Richmond's second submission is not an available construction of clause 24 of the Agreement for three reasons.
First, there are only two references in the Agreement to a 'bankable feasibility study' but neither of those references supports Mr Richmond's construction.
One reference is in clause 25(d), set out above. There are two notable features of clause 25(d) which are contrary to Mr Richmond's proposed construction.
One feature of clause 25(d) is that it operates only once Thundelarra has defined a JORC compliant resource under clause 24 and once Thundelarra has earned its 60% participating interest under clause 24. It is not expressed to be a condition of earning the 60% interest. It is a consequence of it.
The other notable feature of clause 25(d) is that it is a 'best endeavours' obligation. It does not require suitability of the resource for a bankable feasibility study. It requires only that Thundelarra use its best endeavours to complete a bankable feasibility study.
The only other occasion in the Agreement where a 'bankable feasibility study' is mentioned is in clause 49. Mr Richmond did not plead this clause in his defence and he did not refer to it in submissions, which is understandable since, as I explain, it does not assist.
Clause 49 provides as follows:
Following the formation of a Production Joint Venture, the Exploration Joint Venture will continue in relation to the Tenements relevant to the Production Joint Venture excluding the Mining Area, and [Thundelarra] will continue to free carry Richmond on the relevant Tenements outside the Mining Area to completion of a [bankable feasibility study] in relation to other Mining Areas within those tenements.
In other words, an Exploration Joint Venture will continue for those parts of the tenements in respect of which there has been no decision to mine, and Mr Richmond and Kallenia Mines will be free carried to the completion of a bankable feasibility study for the Exploration Joint Venture.
There is nothing in clause 49 which could form the basis for the construction of the Agreement which Mr Richmond and Kallenia Mines advance.
Secondly, the conclusion that Mr Richmond's construction is not open is confirmed by the expert evidence of Mr Kirchner, with which Mr Stevenson and Mr Jones agreed.[72]
[72] ts 246 - 247 (Mr Kirchner, Mr Stevenson & Mr Jones agreeing).
Mr Kirchner explained that the JORC determination of a Mineral Resource was done in a preliminary study. It is possible that this preliminary study might conclude (as did Mr Kirchner) that the resource is an Inferred Mineral Resource. That conclusion, according to non-binding guidelines to clause 20 of the JORC Code, means that confidence in the assessment of a Mineral Resource 'is usually not sufficient to allow the results of the application of technical and economic parameters to be used for detailed planning'.[73]
[73] Exhibit 1/2 (JORC Code 2004) page 8 (tb 14).
Following the preliminary study, a scoping study could be conducted, after which a pre‑feasibility study could be conducted. Finally, a definitive feasibility study could be conducted. It is only the definitive feasibility study which would be taken to the bank.
In any particular case, there might be a real possibility that a determination of suitability for a definitive feasibility study would never be possible within a three‑year period, especially if the determination of a JORC compliant resource were only just made within the two‑year period (or even within a three-year period if there were reasons for the delay outside the control of Thundelarra: clause 26 of the Agreement).
Thirdly, the construction proposed by Mr Richmond, at best, would cause extreme commercial inconvenience for the parties. At worst, the construction renders the clause too uncertain to be enforced.
The commercial inconvenience or uncertainty of this construction arises from the use of vague words in describing Thundelarra's obligation, without any dispute resolution clause or clear yardstick for determination of when the obligation had been satisfied. The ambiguous words, italicised, include 'a resource of such size, quality, form and economic prospectivity that it is suitable to be the subject of a bankable feasibility study of a usual form and content able to be conducted on it within a period of about three years after completion'.
Although a court is not justified in disregarding unambiguous language simply on the basis of a more commercial and businesslike operation, the commercial sense of a construction is a relevant matter in determining what a reasonable person would understand the words of the Agreement to mean.[74]

Thundelarra's submission

[74] Mineralogy Pty Ltd v Sino Iron Pty Ltd [2013] WASC 194 [243]; Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323 [108] (Beech J); Vincent Nominees Pty Ltd v Western Australian Planning Commission [2012] WASC 28 [56] (Beech J).

As I have mentioned, Thundelarra's construction of the words 'define a JORC compliant resource' is that they require a determination of a Mineral Resource, in accordance with the JORC Code. That determination, in accordance with the JORC Code, must be by a Competent Person or Competent Persons, within the meaning of the JORC Code.
In order for a JORC compliant resource to be defined by Thundelarra, as contemplated in clauses 24, 25 and 26, a determination by a Competent Person must be accepted or adopted by Thundelarra. Thundelarra accepted and adopted such a determination in this case.
Thundelarra's construction is the best construction for three reasons.
First, Thundelarra's construction is the only linguistically sensible construction of the words 'define a JORC compliant resource'.
The experts agreed that there is no industry meaning of the words 'a JORC compliant resource' or 'a JORC Code compliant resource' because there is no general agreement on what has to exist as supporting evidence.[75] In the absence of any industry meaning, the starting point for discerning the meaning of the words is their linguistic meaning.
[75] Exhibit E/1, Appendix 6 (Joint Memorandum of the Independent Experts 15 April 2013) page 1 (tb 9).
It is hard to see how the words 'a JORC compliant resource' can mean anything other than 'a resource which is JORC compliant' or, to say the same thing, 'a resource which complies or accords with the JORC Code'. And it was common ground that the meaning of resource was a Mineral Resource under the JORC Code.
The verb 'define' does not change this meaning. The Oxford English Dictionary provides eight definitions of the verb 'define'. A number of the definitions share common characteristics, that to define, like definire means to determine.[76] It encompasses the acts of determining a matter, stating a matter precisely, setting forth the essential nature of something. The Macquarie Dictionary[77] also provides a number of definitions of 'define', all of which are concerned with stating, explaining, determining, clarifying or specifying.
[76] Oxford English Dictionary, full online edition, definitions 1(b), 5(a), 6(a), 6(b).
[77] Macquarie Dictionary, full online edition.
The verb 'define', used in this way, is consistent with the language of the JORC Code of a Competent Person's reporting,[78] declaring,[79] and determining.[80]
[78] Eg Exhibit 1/2 (JORC Code 2004) page 9 (tb 15).
[79] Eg Exhibit 1/2 (JORC Code 2004) page 6 (tb 12).
[80] Eg Exhibit 1/2 (JORC Code 2004) page 8 (tb 14).
Secondly, Thundelarra's construction is a commercial, sensible meaning. It avoids the possibility that a court would need to adjudicate any dispute which might arise where Thundelarra adopts a Mineral Resource as defined by a Competent Person while another Competent Person engaged by the defendants reaches a different conclusion. Conversely, a construction permitting this possibility would be so destructive of certainty that it is not commercially realistic.
Thirdly, Thundelarra's construction should be preferred because each of the first four difficulties identified at [67] ‑ [85] concerning Mr Richmond's construction would have the effect that the Agreement would be too uncertain to be enforced. A construction which renders an agreement certain is generally to be preferred to one which does not.[81] Such an approach accords with the 'traditional doctrine' that in determining whether a clause is void for uncertainty 'courts should be astute to adopt a construction which will preserve the validity of the contract'. [82]
[81] See eg Hammond v Vam Ltd [1972] 2 NSWLR 16, 18 (Sugarman P, Holmes & Mason JJA agreeing); Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429, 436 - 437 (Barwick CJ).
[82] Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571, 589 (Mason J). See also Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101, 111 ‑ 113 [28] ‑ [33] (Ipp J, Pidgeon J agreeing); Able Demolitions and Excavations Pty Ltd v Wilson [2012] WASC 61 [157] (Kenneth Martin J).
Mr Richmond and Kallenia Mines initially defended these proceedings partly on the basis that the Agreement was too uncertain to be enforced.[83] Thundelarra's response was that if the Agreement were uncertain then Mr Richmond and Kallenia were obliged to make restitution of (i) the Option Fee of $250,000 which Thundelarra paid to them, together with (ii) the benefit that the defendants received from an issue of shares by Thundelarra and the expenditure by Thundelarra including $3.32 million on Red Bore.[84] Mr Richmond subsequently abandoned the defence of uncertainty.[85]

The evidence of pre‑contractual negotiations and surrounding circumstances

[83] Defence [17].

[84] Amended Statement of Claim [20] - [21]; Second Further Amended Statement of Claim [16].

[85] ts 127; Re-amended Defence.

I have reached these conclusions on construction without reference to the exhibits concerning pre‑contractual negotiations, exhibits 1/3 to 1/22. Thundelarra objected to the admission of those documents and the paragraphs in Mr Richmond's witness statement[86] relating to them.[87] Thundelarra did, however, consent to them being provisionally admitted, in accordance with the usual practice in this jurisdiction where there is dispute concerning whether terms of an agreement are ambiguous.[88]
[86] Exhibit C (Witness Statement of Mr Richmond) [25] - [45].
[87] Thundelarra's Pre-trial Notice of Objections; Thundelarra's Outline of Closing Submissions [3].
[88] McCourt v Cranston [2012] WASCA 60 [26] (Pullin JA).
Having read these documents, I have concluded that they are not admissible because they are not relevant.
Evidence of pre-contractual negotiations is not admissible for the purpose of drawing inferences about what an agreement means unless that evidence demonstrates knowledge of 'surrounding circumstances'.[89] But it will usually be the case that this evidence will be 'irrelevant to the question which the court has to decide, namely, what the parties would reasonably be taken to have meant by the language which they finally adopted to express their agreement'.[90]
[89] Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253, 284 [98] (Heydon & Crennan JJ) citing Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] AC 1101, 1117 - 1121 [33] - [42] (Lord Hoffmann).
[90] Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] AC 1101, 1117 [33] (Lord Hoffmann).
Even if some of the documents concerning pre‑contractual negotiations were relevant they could only be admissible if the Agreement were ambiguous in some relevant respect. I discussed the authorities, and explained the current state of the law in relation to this requirement of relevant ambiguity in Netglory Ltd v Caratti.[91]
[91] Netglory Ltd v Caratti [2013] WASC 364 [212] - [216].
None of the pre‑contractual negotiation documents sheds any light on what a reasonable person would take the parties to have meant by the words 'define a JORC compliant resource'.
During oral submissions I asked Mr Richmond to identify which of the pre-contractual negotiation documents assisted his case.[92] Mr Richmond later identified exhibit 1/19, which is an email between persons, including Mr Richmond, who were negotiating the Agreement. The relevant sentence upon which Mr Richmond relied reads, 'We have now revised the document to reflect the changes you requested, namely… Richmond free carried to Decision to Mine (clause 3) on Red Bore and Yerrida. The [decision to mine] should be made shortly after the completion of [a bankable finance study] if all goes well'. Mr Richmond said that 'the intent to go [to] economic development rules the JORC Code and the relevance of negotiations in [the] trial bundle ... . It tends to indicate that Thundelarra should have proceeded to [a] bankable feasibility study'.[93]
[92] ts 133.
[93] ts 138.
This email reflects only the subjective opinion of the author, Mr Richardson from Thundelarra, concerning the meaning of clause 3 of the Agreement. It was common ground at trial that Mr Richmond would be free carried to the decision to mine. As for Mr Richardson's subjective opinion that the decision to mine should be made shortly after 'the completion of [a bankable feasibility study]', this does not establish a common understanding that a bankable feasibility study was a pre‑condition to Thundelarra earning a 60% interest. And even if it did, there is no relevant clause in the Agreement which could be construed in such a way.
There is other contextual evidence which appears relevant to interpretation of JORC compliance. This is the Australian Securities Exchange companies update releases, which were included behind the exhibit with the JORC Code.[94]
[94] Exhibit 1/2 (JORC Code 2004) tb 27 - 37.
I did not receive any submissions on these releases. Counsel for Thundelarra explained, as is apparent, that these releases were listing rules which were not part of the JORC Code.[95] They are, however, publications relevant to matters of required compliance with the JORC Code by companies.
[95] ts 337.
None of the experts opined on any of the releases in his report. None of the experts was asked about these releases in cross‑examination. The releases, or any industry approach to them, were not the subject of any item on the agreed agenda for examination of the witnesses.
It was not pleaded by either party, nor was it submitted, that the words 'JORC compliant' in the Agreement mean 'compliant with the JORC Code and also legal rules and guidelines for interpretation of the JORC Code'. Nevertheless, in the absence of submissions on this point, I am content to adopt this meaning. It is an approach which is favourable to Mr Richmond. But the releases do not add anything to the interpretation of the JORC Code which would affect my reasoning in this case.

Issue 2: Did Thundelarra 'define a JORC compliant resource' in Red Bore?

Application of the proper construction

As I have explained, on the proper construction of the Agreement, Thundelarra can only earn the 60% interest in Red Bore if it defines a Mineral Resource, in accordance with the JORC Code. In order to do so, Thundelarra must accept or adopt a determination of a Mineral Resource which, in accordance with the JORC Code, must be by a Competent Person or Competent Persons (as 'Competent Person' is defined in the JORC Code).
In the following sections of my reasons I consider the expert evidence on the basis of my conclusion concerning this construction, set out above. For completeness, however, I also consider the expert evidence on the basis of Mr Richmond's construction of the Agreement. Thus, even though I have rejected Mr Richmond's construction, aspects of my assessment of the expert evidence below consider the correctness of the conclusions in the Runge Report: whether a Mineral Resource exists independently of the assessment of a particular Competent Person.

The focus on the Runge Report

The definition, or determination, of a Mineral Resource which was accepted by Thundelarra was contained in the May 2012 Runge Report, which was provided to Thundelarra. As I have explained, on 4 May 2012 an Australian Securities Exchange announcement, based on the Runge Report, was made by Thundelarra.[96]
[96] Amended Statement of Agreed Facts and Issues [14]; Exhibit 1/28 (ASX Release - JORC Code Compliant Resource at Redbore).
By email on 30 May 2012, Thundelarra sent a copy of the Runge Report to Mr Richmond.[97]
[97] Exhibit 1/32; ts 137 - 138.
These events occurred less than two years after the date of completion of the Agreement on 21 October 2010.
The expert evidence focussed heavily upon whether the Runge Report was JORC compliant, that is, whether the Runge Report complied with the JORC Code. There was also expert evidence, relevant to Mr Richmond's construction, concerning whether the Court could be satisfied that a Mineral Resource, as defined in the JORC Code, exists.

The expert evidence generally

Evidence was given from five experts. The experts called by Thundelarra were Mr Stevenson and Mr Kirchner (particularly in relation to geology) and Mr Warries (particularly in relation to mining engineering). The experts called by the defendants were Mr Jones (particularly in relation to geology) and Mr Procter (particularly in relation to mining engineering).
All five experts were highly qualified. The principal witnesses for Thundelarra were Mr Stevenson (the Competent Person who signed off on the Runge Report) and Mr Kirchner. Both were highly impressive witnesses and extremely objective and persuasive. Mr Stevenson is a qualified applied geologist who has worked in the mining industry for 40 years.[98] Mr Kirchner is a qualified geologist who has working in the mining industry for 26 years.[99] I refer to the experience of Mr Warries, Mr Jones and Mr Procter later in these reasons.
[98] ts 145 (Mr Stevenson).
[99] ts 152 (Mr Kirchner).
With the exception of Mr Jones, I consider that the entirety of the evidence given by the experts was given in an impartial and objective manner and was of considerable assistance. In relation to Mr Jones, however, there were a number of unsatisfactory aspects of his evidence which I explain later in these reasons.
The protocol which the parties agreed for the examination of the experts focussed upon six areas in which the defendants, relying primarily on the evidence of Mr Jones, said that the Runge Report was not JORC compliant. Those six areas were as follows:
(1)The quality assurance and quality control procedures adopted during the geological assessment stage;
(2)The density of the sampling and geological data used;
(3)The quantity and quality of the bulk density data used;
(4)The weathering profile (oxide and transitional material) used;
(5)The metallurgical characteristics of the mineralisation and the treatment for processing; and
(6)The issue of the 'reasonable prospects for eventual economic extraction' including
6.1whether there is a need to consider specific items of potential future expenditure, and the likely cost thereof;
6.2subject to the answer to 6.1 above, whether, and if so to what extent, consideration needs to be given to the following items of potential future expenditure:
6.2.1any additional drilling to obtain further geological information regarding the deposit;
6.2.2 infrastructure costs;
6.2.3costs of restoration of mine site after mining completed;
6.2.4processing plant purchase or lease costs or, if to be contracted to a third party, transport and treatment charges;
6.3whether, and if so to what extent, consideration is to be given to the existence of the processing plant owned by Sandfire Resources NL.
During the oral evidence of the experts it became common ground that these six areas of potential criticism were not independent. Rather, they could be brought within two broad criticisms made by Mr Jones and, to a much lesser extent, Mr Procter.
The first broad area of criticism concerned issue (1), the quality assurance and quality control procedures adopted during the geological assessment stage.
The second broad area of criticism concerned whether, quality assessment and control aside, the Runge Report was correct to conclude that there was an Indicated Mineral Resource. This second criticism requires consideration of all the matters in areas (2) to (6), together with numerous other relevant factors which were not the subject of criticism by Mr Jones. As the evidence proceeded, these matters were sub-divided into the issues presented by (2) to (5), and the separate issue presented by (6).

The two experts called by the defendants: Mr Jones and Mr Procter

Since Mr Richmond's case was heavily dependent upon the evidence of Mr Jones and Mr Procter, I should commence by explaining the limitations of their evidence and the reasons why I do not accept Mr Jones' evidence in several key respects.
Mr Procter gave evidence in a measured, objective manner. He was frank in his answers. However, as he acknowledged, there were serious limitations with the utility of the evidence he gave for these proceedings.
As Mr Procter properly acknowledged, he is neither a Competent Person for the purposes of reporting a Mineral Resource, nor a geologist. He accepted that the focus of his work was on evaluating the economic viability of mining assets for the purpose of calculating an Ore Reserve.[100] This is the step which follows the reporting of a Mineral Resource. A Mineral Resource which is Indicated or Measured (but not Inferred) might move to becoming reported as a Probable Ore Reserve or a Proved Ore Reserve.[101] Mr Procter accepted that he 'doesn't do Mineral Resources' and that, as I explain below, for the exercises he does do in relation to Ore Reserves, the level of detail provided to the Court was greater than he would ordinarily expect to be provided in relation to a Mineral Resource.[102] He performed the detailed exercise because that was what he was asked to do by the defendants.[103]
[100] ts 212 (Mr Procter).
[101] Exhibit 1/2 (JORC Code 2004) pages 5 - 6 (tb 11 - 12).
[102] ts 309 (Mr Procter).
[103] ts 309 (Mr Procter).
I turn to Mr Jones. Mr Jones is highly qualified. He has more than 30 years of experience as a geologist in exploration, prospect evaluation, project development, open pit and underground mining, as well as various management roles. His evidence on a number of technical matters was of great assistance. It was clear. It was usually concise. And it was generally lucid.
Despite his assistance, I consider that Mr Jones' evidence concerning his critical assessments of the Runge Report is unreliable. His answers to questions on the Runge Report were, in several key respects, evasive. In the face of some plain contradictions he refused to make any concessions. The tenor of some of his evidence was to focus on the Runge Report in a very critical manner which can, at best, be described as based on an honestly held but misconceived understanding of the JORC Code. For this reason, I have approached his criticisms of the Runge Report with significant caution.
I provide three examples to illustrate the sources of my concerns with Mr Jones' evidence and his critiques of the Runge Report.
First, Mr Jones maintained positions critical of the Runge Report even in the face of obvious contradiction. For instance, he had expressed the view, critical of the Runge Report, that the JORC Code required that the data used be accurate and verified. I consider this proposition further below, but relevant for present purposes is the fact that Mr Jones maintained this view even after he was asked to take the time overnight to locate where in the JORC Code these proposed requirements are expressed. The following day, after being taken to clause 19 of the JORC Code, Mr Jones ultimately expressed the Rumsfeldian opinion that data 'may be [of] uncertain reliability but you need to verify the level of the reliability' (emphasis added).[104]
[104] ts 203 (Mr Jones).
Secondly, there was a strong critical flavour to Mr Jones' assessment of the Runge Report involving, in several respects, remarks that were made, at best, on the basis of a fundamental misunderstanding of the JORC Code.
One example is the opinion expressed by Mr Jones in his second report that[105]
the density of the sampling and geological data used by Runge (and acknowledged by Coffey) is considered inadequate to model the complex body of mineralisation, resulting in a lack of adequate certainty relating to critical factors such as: location, quantity, geometry, geological characteristics and grade continuity, for an Indicated mineral resource estimate and this disqualifies the Report as being compliant with the JORC Code (2004).
[105] Exhibit A2 (Witness Statement of Mr Jones, 28 September 2013), Annexure 'Response: Red Bore Prospect Mineralisation' page 1.
In his first report, Mr Jones did not mention density of sampling as a basis for criticism of the Runge Report; it was only later, in this remark in his second report, that he raised this as a basis for criticism.[106] Mr Jones said that this was because he wanted to be 'more thorough'.[107]
[106] Exhibit A2 (Witness Statement of Mr Jones, 28 September 2013), Annexure 'Response: Red Bore Prospect Mineralisation' page 1.
[107] ts 216 (Mr Jones).
But in his oral evidence, Mr Jones accepted that this issue of density of sampling would not preclude him from reaching a conclusion that there was an Indicated Mineral Resource.[108] He also accepted Mr Stevenson's conclusion on this point, (as he did with Mr Stevenson's evidence on three other points on the agenda, considered below) as being 'within the spectrum of reasonable'.[109] Ultimately, he agreed that the proposition he was advancing was as follows:[110]
[I]f two people see the same evidence, two competent people see the same evidence and one as a matter of judgment considers that to be an inferred and the other considers it to be indicated, you would say that one of them doesn’t comply with the JORC Code.
[108] ts 204 (Mr Jones).
[109] ts 253 (Mr Jones).
[110] ts 217 - 218 (Counsel for Thundelarra, Mr Jones agreeing).
That view must be based on the premise that the JORC Code requires a single, correct answer to be given to the question of whether a resource is any of Inferred, Indicated or Measured. It assumes that a report which is within the spectrum of reasonable, but from which another Competent Person differs in conclusion, might not be JORC compliant if the other's conclusion is to be preferred by some third party. This is plainly incorrect.
Thirdly, Mr Jones was taken to an article authored by Mr Cairns, a JORC Committee Member.[111] Mr Cairns described case studies where
[i]t may be that future mineral discoveries or the establishment of future infrastructure to achieve the scale or accessibility is required before the reported Mineral Resource becomes feasible for development. It is this potential for a future event which is accommodated by the inclusion of 'eventual' in the 'reasonable prospect for eventual economic extraction' criteria for reporting of Mineral Resources.
[111] Cairns C, 'Failure of Geoscience Australia's "Economically Demonstrated Resources" to Properly Inform Government Policy on Mineral Exploration Incentives', Australian Institute of Geosciences; Exhibit E/9, tb 247.
One of the case studies given by Mr Cairns involved an announcement by a company of a Mineral Resource even though the resource was of insufficient size to justify the construction of a dedicated railway and port loading facility for delivery of product to international markets. Almost five months later, however, the company entered into a joint venture with another company to use the rail and port infrastructure of that other company.
The parallels between this case study from Mr Cairns and this case are obvious. Thundelarra conceded that in the absence of both (i) the geological information of the surrounding tenements known as a result of work undertaken by Sandfire, and (ii) the existence of Sandfire's processing plant at De Grussa, a Competent Person would not have had sufficient evidence to conclude that there were reasonable prospects for eventual economic extraction of the identified mineralisation for the purpose of declaring a Mineral Resource.[112]
[112] Thundelarra's Written Concession dated 15 October 2013.
As to (ii), I explain below that the existence of Sandfire's processing plant, in close proximity, raises a reasonable possibility of the use of Sandfire's plant for processing rather than the incurring of significant capital expenditure costs. Further, even if such an eventuality did not ultimately occur, the later fact of non‑occurrence would not mean that there was non‑compliance by the earlier reliance upon the reasonable possibility of the eventuality in order to declare a Mineral Resource.
After giving the case studies, Mr Cairns concluded that 'a significant proportion of ASX announced Mineral Resources may never be developed as they may never see the "future event" required to justify development'.
Mr Jones accepted the views of Mr Cairns as correct.[113] But he then expressed the view that a resource which had been reported and announced (resources must be JORC compliant to be reported and announced) would later become non‑JORC compliant because the company making the announcement 'may have believed [the reported resources to be JORC compliant] at the time, but they weren’t, obviously, because they never ever got eventually economically developed'.[114]
[113] ts 300 - 304 (Mr Jones).
[114] ts 304 (Mr Jones).
I regret to say that this evidence strikes me as nonsensical. When I asked Mr Jones to clarify this evidence he explained that he reached the conclusion that the report was not JORC compliant, in accordance with his view above, because the announcement meant that stakeholders were misled, at the time of the announcement, about a future event which no-one may have known about.[115] Although I respect Mr Jones' expertise and his many years of experience, I consider that his suggestion that a company had failed to comply with the JORC Code because of future matters which, at the time, might have been unknowable to the company, is absurd. Nothing in the JORC Code requires this conclusion.
[115] ts 314 (Mr Jones).
These three examples of Mr Jones' evidence illustrate why I consider Mr Jones' conclusions to be unreliable. I reiterate that I do not cast any doubt upon his ability or expertise in geology or the assistance he provided me in numerous respects to understand the technical nature of the issues involved. Ultimately, it may be that my concerns with Mr Jones' evidence all stem from his misunderstanding of the operation of the JORC Code. And that misunderstanding might itself have arisen from Mr Jones' own admitted caution in relation to some of the issues involved. To use his own words in the context of his discussion of issues of bulk density he was 'a little bit paranoid'.[116]

The quality assurance and quality control procedures adopted during the geological assessment stage

[116] ts 226 (Mr Jones).

Mr Jones' evidence was that the Runge Report was not JORC Code compliant because the absence of proper QA/QC procedures meant that it was not possible to verify or rely upon the drilling data.[117] Mr Jones said that the 'JORC Code requires that all data used for resource estimation is accurate, unbiased and verified'.[118]
[117] Exhibit A1 (Witness Statement of Mr Jones, 28 June 2013) Annexure 'Report on the Red Bore Mineralisation 28 June 2013' page 3.
[118] Exhibit A1 (Witness Statement of Mr Jones, 28 June 2013) Annexure 'Report on the Red Bore Mineralisation 28 June 2013' page 3.
I reject this conclusion for two reasons.

Mr Jones' conclusion should be rejected because his premise was wrong

The premise of Mr Jones' opinion was incorrect. This premise was that there is a single correct notion of 'verifiability' and 'reliability' which underpins the JORC Code, and without which a report would not be JORC Code compliant. In his oral evidence, Mr Jones elaborated in this way:[119]
The purpose of all this quality control is to allow the competent person to verify the accuracy of the samples, okay. If the samples are not accurate and reliable, you can’t calculate a resource because the information might be incorrect ... this is all about verifying the samples, okay. If the samples are not correct, the resource can’t be calculated.
(Emphasis added).
[119] ts 173 (Mr Jones).
One reason why this premise is incorrect is self‑evident. The concepts of 'verifiability' and 'reliability' are inherently flexible and often subjective concepts. Veritas was the Roman goddess of truth. But, apart from mythology, the concepts of verifiability and reliability are abstract and heavily dependent upon judgement.
In Mr Jones' second report,[120] the absolute language of 'cannot be verified' became more equivocal. He suggested that the quality assurance and quality control 'were inadequate' and had 'insufficient standards, duplicates and blanks' to allow the proper verification. He suggested that a Competent Person would reasonably disqualify the resource estimate as meeting the minimum requirements of the JORC Code.
[120] Exhibit A2 (Witness Statement of Mr Jones, 12 September 2013), 'Response: Red Bore Prospect Mineralisation'.
During oral evidence Mr Jones eventually accepted that issues of quality assessment and quality control involved a 'spectrum' of degrees of confidence where different people might have different degrees of confidence.[121] Mr Jones' evidence came to be expressed in more personal terms: he focused upon his view that he could not verify the accuracy of the 50‑odd holes other than the 11 holes which he considered sufficient, his opinion that the 11 holes were not sufficient, and that he would not use that data in his estimates.[122]
[121] ts 175 - 176 (Mr Jones).
[122] ts 199 (Mr Jones).
Mr Jones' eventual position in oral evidence is more accurate than his earlier absolute statements, but his view is still flawed because the notions of verification and accuracy are not concepts which, by themselves, are required by the JORC Code.
The JORC Code does not require any particular level of verifiability or reliability. Indeed, I have already explained above at [84] ‑ [85] why the abstract concepts of verifiability and reliability are not principles, which, if violated, would cause a report to not be compliant with the JORC Code.
This conclusion should be unsurprising. The JORC Code is a Code concerned with the manner and circumstances of appropriate reporting. It acknowledges degrees of uncertainty and the possibility of reporting matters which might be the subject of a low degree of confidence.
There are (non‑binding) guidelines contained within Table 1 of the JORC Code. That table is set out in Annexure 3 to these reasons. In relation to reporting of Mineral Resources, the guidelines refer to 'relative accuracy/confidence'. These guidelines must be read with clause 19 which refers to reporting of an Inferred Mineral Resource where tonnage can be estimated 'with a low level of confidence'. Table 1 also refers to the use of an approach to estimate a Mineral Resource which is 'deemed appropriate by the Competent Person'.
It is, of course, possible to reach a point at which a conclusion or report has no objective basis on which any reasonable person could say that there is any reliability. This case was far from that point. If that point were reached, the report would be unlikely to be JORC Code compliant. But this lack of compliance would not be for lack of verifiability or reliability: the conclusion might not be transparent, it might not contain material information, or it might infringe particular rules of the JORC Code or Australian Securities Exchange Listing Rules which accompany the JORC Code and inform its interpretation.

Public Reports of Mineral Resources must specify one or more of the categories of 'Inferred', 'Indicated' and 'Measured'. Categories must not be reported in a combined form unless details for the individual categories are also provided. Mineral Resources must not be reported in terms of contained metal or mineral content unless corresponding tonnages and grades are also presented. Mineral Resources must not be aggregated with Ore Reserves.
Public Reporting of tonnages and grades outside the categories covered by the Code is not permitted unless the situation is covered by Clause 18, and then only in strict accordance with the requirements of that clause.
Estimates of tonnage and grade outside of the categories covered by the Code may be useful for a company in its internal calculations and evaluation processes, but their inclusion in Public Reports could cause confusion.
Table 1 provides, in a summary form, a list of the main criteria which should be considered when preparing reports on Exploration Results, Mineral Resources and Ore Reserves. These criteria need not be discussed in a Public Report unless they materially affect estimation or classification of the Mineral Resources.
It is not necessary, when publicly reporting, to comment on each item in Table 1, but it is essential to discuss any matters which might materially affect the reader's understanding or interpretation of the results or estimates being reported. This is particularly important where inadequate or uncertain data affect the reliability of, or confidence in, a statement of Exploration Results or an estimate of Mineral Resources or Ore Reserves; for example, poor sample recovery, poor repeatability of assay or laboratory results, limited information on bulk densities etc.
If there is doubt about what should be reported, it is better to err on the side of providing too much information rather than too little.
Uncertainties in any of the criteria listed in Table 1 that could lead to under‑ or over‑statement of resources should be disclosed.
Mineral Resource estimates are sometimes reported after adjustment from reconciliation with production data. Such adjustments should be clearly stated in a Public Report of Mineral Resources and the nature of the adjustment or modification described.
The words 'ore' and 'reserves' must not be used in describing Mineral Resource estimates as the terms imply technical feasibility and economic viability and are only appropriate when all relevant Modifying Factors have been considered. Reports and statements should continue to refer to the appropriate category or categories of Mineral Resources until technical feasibility and economic viability have been established. If re‑evaluation indicates that the Ore Reserves are no longer viable, the Ore Reserves must be reclassified as Mineral Resources or removed from Mineral Resource/Ore Reserve statements.
It is not intended that re‑classification from Ore Reserves to Mineral Resources or vice versa should be applied as a result of changes expected to be of a short term or temporary nature, or where company management has made a deliberate decision to operate on a non‑economic basis. Examples of such situations might be commodity price fluctuations expected to be of short duration, mine emergency of a non‑permanent nature, transport strike etc.

Annexure 2: Reporting of Ore Reserve JORC Code provisions

[Code is in normal typeface, definitions are in bold, guidelines are in indented italics.]

An 'Ore Reserve' is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified. Ore Reserves are sub‑divided in order of increasing confidence into Probable Ore Reserves and Proved Ore Reserves.
In reporting Ore Reserves, information on estimated mineral processing recovery factors is very important, and should always be included in Public Reports.
Ore Reserves are those portions of Mineral Resources which, after the application of all mining factors, result in an estimated tonnage and grade which, in the opinion of the Competent Person making the estimates, can be the basis of a viable project, after taking account of all relevant Modifying Factors.
Ore Reserves are reported as inclusive of marginally economic material and diluting material delivered for treatment or dispatched from the mine without treatment.
The term 'economically mineable' implies that extraction of the Ore Reserve has been demonstrated to be viable under reasonable financial assumptions. What constitutes the term 'realistically assumed' will vary with the type of deposit, the level of study that has been carried out and the financial criteria of the individual company. For this reason, there can be no fixed definition for the term 'economically mineable'.
In order to achieve the required level of confidence in the Modifying Factors, appropriate studies will have been carried out prior to determination of the Ore Reserves. The studies will have determined a mine plan that is technically achievable and economically viable and from which the Ore Reserves can be derived. It may not be necessary for these studies to be at the level of a final feasibility study.
The term 'Ore Reserve' need not necessarily signify that extraction facilities are in place or operative, or that all necessary approvals or sales contracts have been received. It does signify that there are reasonable expectations of such approvals or contracts. The Competent Person should consider the materiality of any unresolved matter that is dependent on a third party on which extraction is contingent. If there is doubt about what should be reported, it is better to err on the side of providing too much information rather than too little.
Any adjustment made to the data for the purpose of making the Ore Reserve estimate, for example by cutting or factoring grades, should be clearly stated and described in the Public Report.
Where companies prefer to use the term 'Mineral Reserves' in their Public Reports, e.g. for reporting industrial minerals or for reporting outside Australasia, they should state clearly that this is being used with the same meaning as 'Ore Reserves', defined in this Code. If preferred by the reporting company, 'Ore Reserve' and 'Mineral Resource' estimates for coal may be reported as 'Coal Reserve' and 'Coal Resource' estimates.
JORC prefers the term 'Ore Reserve' because it assists in maintaining a clear distinction between a 'Mineral Resource' and an 'Ore Reserve'.
A 'Probable Ore Reserve' is the economically mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource. It includes diluting materials and allowances for losses which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified.
A Probable Ore Reserve has a lower level of confidence than a Proved Ore Reserve but is of sufficient quality to serve as the basis for a decision on the development of the deposit.
A 'Proved Ore Reserve' is the economically mineable part of a Measured Mineral Resource. It includes diluting materials and allowances for losses which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified.
A Proved Ore Reserve represents the highest confidence category of reserve estimate. The style of mineralisation or other factors could mean that Proved Ore Reserves are not achievable in some deposits.
The choice of the appropriate category of Ore Reserve is determined primarily by the relevant level of confidence in the Mineral Resource and after considering any uncertainties in the Modifying Factors. Allocation of the appropriate category must be made by a Competent Person or Persons.
The Code provides for a direct two‑way relationship between Indicated Mineral Resources and Probable Ore Reserves and between Measured Mineral Resources and Proved Ore Reserves. In other words, the level of geological confidence for Probable Ore Reserves is similar to that required for the determination of Indicated Mineral Resources, and the level of geological confidence for Proved Ore Reserves is similar to that required for the determination of Measured Mineral Resources.
The Code also provides for a two‑way relationship between Measured Mineral Resources and Probable Ore Reserves. This is to cover a situation where uncertainties associated with any of the Modifying Factors considered when converting Mineral Resources to Ore Reserves may result in there being a lower degree of confidence in the Ore Reserves than in the corresponding Mineral Resources. Such a conversion would not imply a reduction in the level of geological knowledge or confidence.
A Probable Ore Reserve derived from a Measured Mineral Resource may be converted to a Proved Ore Reserve if the uncertainties in the Modifying Factors are removed. No amount of confidence in the Modifying Factors for conversion of a Mineral Resource to an Ore Reserve can override the upper level of confidence that exists in the Mineral Resource. Under no circumstances can an Indicated Mineral Resource be converted directly to a Proved Ore Reserve (see Figure 1).
Application of the category of Proved Ore Reserve implies the highest degree of confidence in the estimate, with consequent expectations in the minds of the readers of the report. These expectations should be borne in mind when categorising a Mineral Resource as Measured.
Refer also to the guidelines in Clause 23 regarding classification of Mineral Resources.
Ore Reserve estimates are not precise calculations. Reporting of tonnage and grade figures should reflect the relative uncertainty of the estimate by rounding off to appropriately significant figures. Refer also to Clause 24.
To emphasise the imprecise nature of an Ore Reserve, the final result should always be referred to as an estimate not a calculation.
Competent Persons are encouraged, where appropriate, to discuss the relative accuracy and/or confidence of the Ore Reserve estimates. The statement should specify whether it relates to global or local estimates, and, if local, state the relevant tonnage or volume. Where a statement of the relative accuracy and/or confidence is not possible, a qualitative discussion of the uncertainties should be provided (refer to Table 1).
Public Reports of Ore Reserves must specify one or other or both of the categories of 'Proved' and 'Probable'. Reports must not contain combined Proved and Probable Ore Reserve figures unless the relevant figures for each of the categories are also provided. Reports must not present metal or mineral content figures unless corresponding tonnage and grade figures are also given.
Public Reporting of tonnage and grade outside the categories covered by the Code is not permitted unless the situation is covered by Clause 18, and then only in strict accordance with the requirements of that clause.
Estimates of tonnage and grade outside of the categories covered by the Code may be useful for a company in its internal calculations and evaluation processes, but their inclusion in Public Reports could cause confusion.
Ore Reserves may incorporate material (dilution) which is not part of the original Mineral Resource. It is essential that this fundamental difference between Mineral Resources and Ore Reserves is borne in mind and caution exercised if attempting to draw conclusions from a comparison of the two.
When revised Ore Reserve and Mineral Resource statements are publicly reported they should be accompanied by reconciliation with previous statements. A detailed account of differences between the figures is not essential, but sufficient comment should be made to enable significant changes to be understood by the reader.
In situations where figures for both Mineral Resources and Ore Reserves are reported, a statement must be included in the report which clearly indicates whether the Mineral Resources are inclusive of, or additional to the Ore Reserves.
Ore Reserve estimates must not be aggregated with Mineral Resource estimates to report a single combined figure.
In some situations there are reasons for reporting Mineral Resources inclusive of Ore Reserves and in other situations for reporting Mineral Resources additional to Ore Reserves. It must be made clear which form of reporting has been adopted. Appropriate forms of clarifying statements may be:
'The Measured and Indicated Mineral Resources are inclusive of those Mineral Resources modified to produce the Ore Reserves.' Or 'The Measured and Indicated Mineral Resources are additional to the Ore Reserves.'
In the former case, if any Measured and Indicated Mineral Resources have not been modified to produce Ore Reserves for economic or other reasons, the relevant details of these unmodified Mineral Resources should be included in the report. This is to assist the reader of the report in making a judgement of the likelihood of the unmodified Measured and Indicated Mineral Resources eventually being converted to Ore Reserves.
Inferred Mineral Resources are by definition always additional to Ore Reserves.
For reasons stated in the guidelines to Clause 33 and in this paragraph, the reported Ore Reserve figures must not be aggregated with the reported Mineral Resource figures. The resulting total is misleading and is capable of being misunderstood or of being misused to give a false impression of a company's prospects.
Table 1 provides, in a summary form, a list of the criteria which should be considered when preparing reports on Exploration Results, Mineral Resources and Ore Reserves. These criteria need not be discussed in a Public Report unless they materially affect estimation or classification of the Ore Reserves. Changes in economic or political factors alone may be the basis for significant changes in Ore Reserves and should be reported accordingly.
Ore Reserve estimates are sometimes reported after adjustment from reconciliation with production data. Such adjustments should be clearly stated in a Public Report of Ore Reserves and the nature of the adjustment or modification described.

Annexure 3: JORC Code Table 1

Check List of Assessment and Reporting Criteria

[Code is in normal typeface, definitions are in bold, guidelines are in indented italics.]

Table 1 is a check list and guideline which those preparing reports on Exploration Results, Mineral Resources and Ore Reserves should use as a reference. The check list is not prescriptive and, as always, relevance and materiality are overriding principles that determine what information should be publicly reported. It is, however, important to report any matters that might materially affect a reader's understanding or interpretation of the results or estimates being reported. This is particularly important where inadequate or uncertain data affect the reliability of, or confidence in, a statement of Exploration Results or an estimate of Mineral Resources or Ore Reserves.

The order and grouping of criteria in Table 1 reflects the normal systematic approach to exploration and evaluation. Criteria in the first group 'Sampling Techniques and Data' apply to all succeeding groups. In the remainder of the table, criteria listed in preceding groups would often apply to succeeding groups and should be considered when estimating and reporting.

*Criteria*	*Explanation*
*Sampling Techniques and Data* (criteria in this group apply to all succeeding groups)
Sampling techniques.	· Nature and quality of sampling (eg cut channels, random chips etc.) and measures taken to ensure sample representivity.
Drilling techniques.	· Drill type (eg. core, reverse circulation, open‑hole hammer, rotary air blast, auger, Bangka etc.) and details (eg core diameter, triple or standard tube, depth of diamond tails, face‑sampling bit or other type, whether core is oriented and, if so, by what method, etc.).
Drill sample recovery.	· Whether core and chip samples recoveries have been properly recorded and results assessed. · Measures taken to maximise sample recovery and ensure representative nature of the samples. · Whether a relationship exists between sample recovery and grade and whether sample bias may have occurred due to preferential loss//gain of fine/coarse material.
Logging.	· Whether core and chip samples have been logged to a level of detail to support appropriate Mineral Resource estimation, mining studies and metallurgical studies. · Whether logging is qualitative or quantitative in nature. Core (or costean, channel etc.) photography.
Sub‑sampling techniques and sample preparation.	· If core, whether cut or sawn and whether quarter, half or all core taken. · If non‑core, whether riffled, tube sampled, rotary split etc. and whether sampled wet or dry. · For all sample types, the nature, quality and appropriateness of the sample preparation technique. · Quality control procedures adopted for all sub‑sampling stages to maximise representivity of samples. · Measures taken to ensure that the sampling is representative of the in situ material collected. · Whether sample sizes are appropriate to the grainsize of the material being sampled.
Quality of assay data and laboratory tests.	· The nature, quality and appropriateness of the assaying and laboratory procedures used and whether the technique is considered partial or total. · Nature of quality control procedures adopted (eg. standards, blanks, duplicates, external laboratory checks) and whether acceptable levels of accuracy (ie lack of bias) and precision have been established.
Verification of sampling and assaying.	· The verification of significant intersections by either independent or alternative company personnel. · The use of twinned holes.
Location of data points.	· Accuracy and quality of surveys used to locate drill holes (collar and down‑hole surveys), trenches, mine workings and other locations used in Mineral Resource estimation. · Quality and adequacy of topographic control.
Data spacing and distribution.	· Data spacing for reporting of Exploration Results. · Whether the data spacing and distribution is sufficient to establish the degree of geological and grade continuity appropriate for the Mineral Resource and Ore Reserve estimation procedure(s) and classifications applied. · Whether sample compositing has been applied.
Orientation of data in relation to geological structure.	· Whether the orientation of sampling achieves unbiased sampling of possible structures and the extent to which this is known, considering the deposit type. · If the relationship between the drilling orientation and the orientation of key mineralised structures is considered to have introduced a sampling bias, this should be assessed and reported if material.
Audits or review.	· The results of any audits or reviews of sampling techniques and data.
*Reporting of Exploration Results* (criteria listed in the preceding group apply also to this group)
Mineral tenement and land tenure status.	· Type, reference name/number, location and ownership including agreements or material issues with third parties such as joint ventures, partnerships, overriding royalties, native title interests, historical sites, wilderness or national park and environmental settings. · The security of the tenure held at the time of reporting along with any known impediments to obtaining a licence to operate in the area.
Exploration done by other parties.	· Acknowledgment and appraisal of exploration by other parties.
Geology.	· Deposit type, geological setting and style of mineralisation.
Data aggregation methods.	· In reporting Exploration Results, weighting averaging techniques, maximum and/or minimum grade truncations (eg cutting of high grades) and cut‑off grades are usually material and should be stated. · Where aggregate intercepts incorporate short lengths of high grade results and longer lengths of flow grade results, the procedure used for such aggregation should be stated and some typical examples of such aggregations should be shown in detail. · The assumptions used for any reporting of metal equivalent values should be clearly stated.
Relationship between mineralisation widths and intercept lengths.	· These relationships are particularly important in the reporting of Exploration Results. · If the geometry of the mineralisation with respect to the drill hole angle is known, its nature should be reported. · If it is not known and only the down‑hole lengths are reported, there should be a clear statement to this effect (eg. 'down hole length, true width not known').
Diagrams.	· Where possible, maps and sections (with scales) and tabulations of intercepts should be included for any material discovery being reported if such diagrams significantly clarify the report.
Balanced reporting.	· Where comprehensive reporting of all Exploration Results is not practicable, representative reporting of both low and high grades and/or widths should be practised to avoid misleading reporting of Exploration Results.
Other substantive exploration data.	· Other exploration date, if meaningful and material, should be reported including (but not limited to): geological observations; geophysical survey results; bulk samples – size and method of treatment; metallurgical test results; bulk density, groundwater, geotechnical and rock characteristics; potential deleterious or contaminating substances.
Further work.	· The nature and scale of planned further work (eg tests for lateral extensions or depth extensions or large‑scale step‑out drilling).

*Estimation and Reporting of Mineral Resources* (criteria listed in the first group, and where relevant in the second group, apply also to this group)
Database integrity.	· Measures taken to ensure that data has been corrupted by, for example, transcription or keying errors, between its initial collection and its use for Mineral Resource estimation purposes. · Data validation procedures used.
Geological interpretation.	· Confidence in (or conversely, the uncertainty of) the geological interpretation of the mineral deposit. · Nature of the data used and of any assumptions made. · The effect, if any, of alternative interpretations on Mineral Resource estimation. · The use of geology in guiding and controlling Mineral Resource estimation. · The factors affecting continuity of both grade and geology.
Dimensions.	· The extent and variability of the Mineral Resource expressed as length (along strike or otherwise), plan width, and depth below surface to the upper and lower limits of the Mineral Resource.
Estimation and modelling techniques.	· The nature and appropriateness of the estimation technique(s) applied and key assumptions, including treatment of extreme grade values, domaining, interpolation parameters, maximum distance of extrapolation from data points. · The availability of check estimates, previous estimates and/or mine production records and whether the Mineral Resource estimate takes appropriate account of such data. · The assumptions made regarding recovery of by‑products. · Estimation of deleterious elements or other non‑grade variables of economic significance (e.g. sulphur for acid mine drainage characterisation). · In the case of block model interpolation, the block size in relation to the average sample spacing and the search employed. · In the case of block model interpolation, the block size in relation to the average sample spacing and the search employed. · Any assumptions behind modelling of selective mining units. · Any assumptions about correlation between variables. · The process of validation, the checking process used, the comparison of model data to drill hole data, and use of reconciliation date if available.
Moisture.	· Whether the tonnages are estimated on a dry basis or with natural moisture, and the method of determination of the moisture content.
Cut‑off parameters.	· The basis of the adopted cut‑off grade(s) or quality parameters applied.
Mining factors or assumptions.	· Assumptions made regarding possible mining methods, minimum mining dimensions and internal (or, if applicable, external) mining dilution. It may not always be possible to make assumptions regarding mining methods and parameters when estimating Mineral Resources. Where no assumptions have been made, this should be reported.
Metallurgical factors or assumptions.	· The basis for assumptions or predictions regarding metallurgical amenability. It may not always be possible to make assumptions regarding metallurgical treatment processes and parameters when reporting Mineral Resources. Where no assumptions have been made, this should be reported.
Bulk density.	· Whether assumed or determined. If assumed, the basis for the assumptions. If determined, the method used, whether wet or dry, the frequency of the measurements, the nature, size and representativeness of the samples.
Classification.	· The basis for the classification of the Mineral Resources into varying confidence categories. · Whether appropriate account has been taken of all relevant factors i.e. relative confidence in tonnage/grade computations, confidence in continuity of geology and metal values, quality, quantity and distribution of data. · Whether the result appropriately reflects the Competent Person(s)' view of the deposit.
Audits or reviews.	· The results of any audits or reviews of Mineral Resource estimates.
Discussion of relative accuracy/confidence.	· Where appropriate a statement of the relative accuracy and/or confidence in the Mineral Resource estimate using an approach or procedure deemed appropriate by the Competent Person. For example, the application of statistical or geostatistical procedures to quantify the relative accuracy of the resource within stated confidence limits, or, if such an approach is not deemed appropriate, a qualitative discussion of the factors which could affect the relative accuracy and confidence of the estimate. · The statement should specify whether it relates to global or local estimates, and, if local, state the relevant tonnages or volumes, which should be relevant to technical and economic evaluation. Documentation should include assumptions made and the procedure used. · These statements of relative accuracy and confidence of the estimates should be compared with production data, where available.
*Estimation and Reporting of Ore Reserves* (criteria listed in the first group, and where relevant in other preceding groups, apply also to this group)
Mineral Resource estimate for conversion to Ore Reserves.	· Description of the Mineral Resource estimate used as a basis for the conversion to an Ore Reserve. · Clears statement as to whether the Mineral Resources are reported additional to, or inclusive of, the Ore Reserves.
Study status.	· The type and level of study undertaken to enable Mineral Resources to be converted to Ore Reserves. · The Code does not require that a final feasibility study has been undertaken to convert Mineral Resources to Ore Reserves, but it does require that appropriate studies will have been carried that will have determined a mine plan that is technically achievable and economically viable, and that all Modifying Factors have been considered.
Cut‑off parameters.	· The basis of the cut‑off grade(s) or quality parameters applied.
Mining factors or assumptions.	· The method and assumptions used to convert the Mineral Resource to an Ore Reserve (ie either by application of appropriate factors by optimisation or by preliminary or detailed design). · The choice of, the nature and appropriateness of the selected mining method(s) and other mining parameters including associated design issues such as pre‑strip, access, etc. · The assumptions made regarding geotechnical parameters (eg pit slopes, stope sizes, etc.), grade control and preproduction drilling. · The major assumptions made and Mineral Resource model used for pit optimisation (if appropriate). · The mining dilution factors, mining recovery factors, and minimum mining widths used. · The infrastructure requirements of the selected mining methods.
Metallurgical factors or assumptions.	· The metallurgical process proposed and the appropriateness of that process to the style of mineralisation. · Whether the metallurgical process is well‑tested technology or novel in nature. · The nature, amount and representativeness of metallurgical testwork undertaken and the metallurgical recovery factors applied. Any assumptions or allowances made for deleterious elements. · The existence of any bulk sample or pilot scale testwork and the degree to which such samples are representative of the orebody as a whole.
Cost and revenue factors.	· The derivation of, or assumptions made, regarding projected capital and operating costs. · The assumptions made regarding revenue including head grade, metal or commodity price(s) exchange rates, transportation and treatment charges, penalties, etc. · The allowances made for royalties payable, both Government and private.
Market assessment.	· The demand, supply and stock situation for the particular commodity, consumption trends and factors likely to affect supply and demand into the future. · A customer and competitor analysis along with the identification of likely market windows for the product. · Price and volume forecasts and the basis for these forecasts. · For industrial minerals the customer specification, testing and acceptance requirements prior to a supply contract.
Other.	· The effect, if any, of natural risk, infrastructure, environmental, legal, marketing, social or governmental factors on the likely viability of a project and/or on the estimation and classification of the Ore Reserves. · The status of titles and approvals critical to the viability of the project, such as mining leases, discharge permits, government and statutory approvals.
Classification.	· The basis for the classification of the Ore Reserves into varying confidence categories. · Whether the result appropriately reflects the Competent Person(s)' view of the deposit. · The proportion of Probable Ore Reserves which have been derived from Measured Mineral Resources (if any).
Audits or review.	· The results of any audits or reviews of Ore Reserve estimates.
Discussion of relative accuracy/confidence.	· Where appropriate a statement of the relative accuracy and/or confidence in the Ore Reserve estimate using an approach or procedure deemed appropriate by the Competent Person. For example, the application of statistical or geostatistical procedures to quantify the relative accuracy of the reserve within stated confidence limits, or, if such an approach is not deemed appropriate, a qualitative discussion of the factors which could affect the relative accuracy and confidence of the estimate. · The statement should specify whether it relates to global or local estimates, and, if local, state the relevant tonnages or volumes, which should be relevant to technical and economic evaluation. Documentation should include assumptions made and the procedures used. · These statements of relative accuracy and confidence of the estimate should be compared with production data, where available.