See-threepio

Or should I say CP CP CP oh no!

If you are a Star Wars fan or even a casual observer of the sci-fi movie genre you’ll recognise the shining golden robot C3PO, a stalwart of the films. I reckon it’s about time we adopted C3PO as the new mascot of the resource and reserve estimation community. He embodies everything we strive to be. Golden and gleaming. A robot with an odd sense of humour. Somewhat clueless about the strange political happenings the rest of the galaxy seems obsessed about.?And let’s not forget C3PO is a translator extraordinaire.?

But the most important aesthetic is his name. We will soon all need to be C3PO’s to do our jobs. What started as 1xCP is morphing into CPCP (or C2P) under our very eyes. The Competent Person (forgive me for the sin of abbreviation to CP in direct contravention of the Code) is staring at adding a second CP… the charted professional (I won’t deign that with capitalisation). Once that second CP is added I’m sure it won’t take long for a third bolt-on accessory - maybe the certifiable person. I mean who in their right mind would want to continue to pursue a career in resource and reserve estimation when the standard required is so… banal.

OK (pun intended). Let’s look at the issue. Seemingly under pressure from ASIC, the AusIMM and AIG are trying to “do something about professional standards in the interest of corporate governance”.?Like any good tradesman, when presented with a challenge these august bodies have looked long and hard at their toolbox and selected the ‘right tool for the job’… the JORC Code and the Code’s reliance on the concept of Competency. When there’s a problem, grab a hammer and start flailing about.?If you hit something hard enough and long enough the problem will go away… Sadly it seems the target of all that hammering and bashing is the technical professional. You know… the people who make the deals with investors, set corporate strategy and manage shareholder interest. The people who set budgets and profit objectives… ah. My mistake!

Yes, I’m into full rant mode now.?I remember my first public reporting of an ore reserve - it was before version one of the JORC Code. After weeks of sweating over stacks of cross-sections, planimeter and trusty HP11C in hand, after days of hand-written tabulations, we had it… the number… that singular answer to the meaning of our operational life. But no one had asked what the question was (a bit like Hitchhikers’ Guide to the Galaxy to keep the sci-fi theme running). The powers that be (petatbee, an Anne McCaffrey reference)were not after ‘the best estimate’. They were not chasing ‘the truth’ as dictated by a group of naive geologists drawing random lines on a map. No. The ‘C-Suite’ wanted to avoid scaring the investors and shareholders. At almost all costs keep those who ultimately pay the bills happy. In the end, we looked at our new number, looked at last year’s number, looked at how much we produced and… published almost exactly the same ore reserve estimate as the previous year. Did it matter that we thought we had grown the ore reserve by a considerable margin? Not in the least.?

All those week-ends (ah the days of paid overtime!). We could have just as well gone fishing.?

As a technical professional, that was my introduction to the bigger world of action and consequence.?Before that I was like C3PO. Blithely unaware that something other than doing the best technical job mattered. To be honest it was a shock.?To be honest it was an absolutely fantastic lesson and engendered concepts I have carried with me through my career.

Were the hard-smoking, hard-drinking, hard-bargaining ‘big guys’ (yes a male dominated world in those days…) wrong? Was their decision to ‘hold back’ some of the estimated reserves wrong? Bad? Did the shareholders have ‘the right to know’?

Good question! I will never know. But what I do know is that it was their decision, not mine. I could sit here and debate the strengths and weaknesses of their choice, the right and wrong, the risk and consequence. But… IT WAS THEIR DECISION - NOT MINE.?(Apology for shouting.)

And that is the lesson… business decisions reside with the business owners and their appointed representatives.?Those business owners decide who is in charge and, if they are unhappy with performance they replace them or take on the role themselves. What a business owner does not do is abrogate their responsibility.

So what does this have to do with Competency and the JORC Code? Everything…?

The Code started life as a different beast compared to its current form. Back in the late ‘80’s and early 90’s it was a Code trying to standardise language and terminology. It tried to define a broad set of terms (‘measured’, ‘indicated’, ‘inferred’, ‘proved’ and ‘probable’). That early Code recognised that the responsibility for reporting mineral resources and ore reserves was firmly in the hands of the Board of Directors… here’s the clause “15. While the public release of information concerning a company’s Resources and Ore Reserves remains the responsibility of its Board of Directors, any such release must be based on and fairly reflect a Resource and Ore Reserves report prepared by a Competent Person”

Read it an weep.?Responsibility for reporting is “firmly in the hands of the Board of Directors”.?

And, in my opinion, that is where it belongs. Wholly. With everything that implies. Instead of letting the proverbial fecal matter roll down hill towards those without the authority to stop it, let’s place it back in its rightful place. With the Board.

When you take that as your starting point the question of ‘competency’ changes. It becomes not one but two. A technical competency and a business competency. Do they overlap? Sure. And that is the point. The Board must have an understanding of the work those technical boffins do. They must understand the risks and implications and then decide on the best way to respond. Equally the question of technical competency morphs into being able to communicate risk in a meaningful fashion.?

It’s tough. And that’s the whole problem.?And yet, those old 1980’s Board of Directors I so fondly remember were steeped in exactly the sort of competency I am talking about. They could discuss and understand the resource and reserve risk. They realised that the published numbers - as important as they are - are an ESTIMATE.?Their decision not to increase the ore reserve one year and decrease it the next on the back of fluctuations in metal price, cost or even knowledge was all about assessing risk and responding.?I fear we are in a different world today.

Once we set responsibility where it belongs we can begin to address technical competency. It becomes much simpler. The competency of the person responsible for the technical estimation of resources and reserves is a -subset- of the Board’s overall role. Just like every other function inside the business.?

Which brings me to our professional societies.?To be brutally frank, I do not see a how a professional society that should be advocating for me -as a professional - has any role in setting the bar for a business-related activity.?It seems like a conflict of interest. Here am I, paying my fees and hoping for industry representation and professional development and yet the very organisations that should provide those services are also telling me how to develop my career if I want to reach a certain goal. Hmmm…

I reckon our professional societies would be better off by defining membership levels, in different specialist streams and then working to ensure the membership base was ‘qualified’ in each level. You may think that sounds like telling me what conditions a ‘Competent Person’ must fulfil but it’s not. You may think they already do this, but current practice is a shadow of what it could and arguably should be (look at the hurdles set for Actuaries for example). ?

There is a subtle difference, again driven by the separation of business and technical roles, authority and responsibilities. I think this is something long missing and that the industry is crying out for. Some way to understand if you are an intern, a registrar, a senior registrar or resident (so to speak).?

Think about it… as an investor I could assess the risk profile promoted by the Board.?I could cross check aspects of that stated risk by seeing the level of professional society endorsement of the technical staff. It would put a modicum of control in the investors’ hands. Small, but it could grow over time and as track records become more firmly established.?

But here’s the trick. Those membership levels would need to be hard won. Not just attending some conference where you get drunk at the bar, fall asleep, wake up, naked tied to a bridge and claim 16 professional development hours. Not tuning into a webinar watching the video with the sound on mute so you don’t wake the kids. You know what I mean…

Real membership levels with demonstrated knowledge. Ouch. But if we want to be taken seriously I suspect that’s what we must aim for. Stop paying lip service to competency and demonstrate it! Furthermore, keep,on demonstrating it year-on-year through audit and review by our peers.?

So there’s my rant and my brain dump. Not perfect but it’s there as much to kick along the conversation as it is to be a template.?There are pieces already in place. We need to build on those small pockets of excellence. What we don’t need to a hammer simply because it’s the tool we have in our hands.?

And now for one more piece of heresy… after 10 years I think it safe to say we made some mistakes with the 2012 JORC Code. It was a great step forward for transparency but that step came at a cost to competency. Yes, I can read a ‘table 1’ and ‘see’ what the Competent Person did. In fact I get quite a bit from those tables. But I suspect it’s not what was originally intended…. What I get is an assessment of competency. Nothing more, nothing less. By reading ‘table 1’, I take a first step on understanding if an organisation is serious about their technical work and have grasped the intent as well as the letter of the Code, or if they are floundering in the dark just waiting for the on coming train wreck. As a tool to assess the quality of a project, ‘table 1’ is flawed and yet I reckon that’s what’s investors think it provides.?There is such a vast spread of disclosure that inter-company comparisons are invalid. What’s more, it is not a level playing field. Just ask the small cap vs the majors. You may not even see a ‘table 1’ from the big end of town and if you do… it is an agglomeration of practices from multiple operations that reveals nothing of any true import.

Maybe it’s time to scrap the JORC?Code and start again. This time with a different understanding of our objectives and purpose…

The ball is in your court you up-coming practitioners. At my late stage of my career the question of competency is moot. It matters not to my long term prospects. You on the other hand… you have to live, breathe no work with the future solution. Choose wisely and don’t be afraid to change the rules. After all we live in an era that is addicted to disruption!

We are not robots. Not yet.?We can still give old C3PO a run for his money.