Resource Classification Code: Industry Awaits Shift to JORC from UNFC

What’s in Today’s Article?

• Why in News?
• Need for a Resource Classification Code and a Shift to JORC
• What is the UN Framework Classification for Resources (UNFC)?
• Comparing UNFC and JORC
• Significance of IMIC/JORC

Why in News?

• In a bid to spur private investment in India’s mining sector, representatives of Vedanta Group pushed the Mines Ministry to shift to an investor friendly resource classification code.
• The representatives asked the ministry to consider the adoption of Joint Ore Reserve Committee (JORC) classification, as opposed to the currently used United Nations Framework Classification (UNFC).

Need for a Resource Classification Code and a Shift to JORC

• It is necessary -
  • To assess resources and reserves in a mineral block,
  • To prepare geological reports to facilitate its auction for both exploration and mining, and
  • For a mining company to evaluate its assets.
• Between FY19 and FY23, the mining industry recorded foreign direct investment (FDI) in equity valuing $1.1 billion, just 0.4% of gross equity inflows worth $259 billion.
• According to experts, India’s current resource classification rules based on the UNFC -
  • Have made the prospect of mineral exploration unattractive to private companies,
  • As it fails to provide any degree of economic certainty,
  • Which in turn has hindered the flow of private investment in the sector.
• Experts point out that India’s mining industry has already developed and recommended the Indian Mineral Industry Code (IMIC) in 2019, which is based on the same template as the JORC
  • However, the ministry is yet to formulate rules in line with the IMIC despite informal assurances.
• Both the IMIC and the JORC classification are aligned with the Committee for Mineral Reserves International Reporting Standards (CRIRSCO).
  • Globally, CRIRSCO consists of 15 members including the USA, Australia, Brazil, Canada, Chile, South Africa, and the European Union.
  • Membership to CRIRSCO requires countries to produce reporting codes that comply with the CRIRSCO template.
  • India was admitted to CRIRSCO in 2019 following the recognition of the IMIC as a CRIRSCO-compliant code.

What is the UN Framework Classification for Resources (UNFC)?

• UNFC is an international scheme for the classification, management and reporting of energy, mineral, and raw material resources.
• The UN Economic Commission for Europe's (UNECE) Expert Group on Resource Management (EGRM) is responsible for the development, promotion and further development of UNFC.
• UNFC applies to energy resources including oil and gas; renewable energy; nuclear energy; minerals; injection projects for the geological storage of CO2; groundwater; etc.
• UNFC, in its core principles, encompasses the holistic management of all socio-economical, technological and uncertainty aspects of energy and mineral projects.
• UNFC aims to provide clear and consistent specifications, guidelines and best practices for all energy and mineral sectors.
• As a unique tool for harmonising policy framework, government oversight, industry business process and efficient capital allocation, UNFC is capable of managing the natural resources for realising the objectives on SDGs.

Comparing UNFC and JORC

• JORC Code, developed by mining experts in Australia, is a professional code of practice that promotes robust standards for the public reporting of exploration results, mineral resources and ore reserves.
• Similarity between UNFC and JORC: Proved Mineral (Ore) Reserves has almost the same meaning.
• Differences between UNFC and JORC:
  • Intent: JORC Code is a required minimum standard for Public Reporting. UNFC is to harmonise various standards existing in countries, to facilitate international communication.
    • Unlike UNFC, JORC mandates disclosures pertaining to the economic viability of mining exploration projects.
  • Content: While UNFC introduces the concepts of every class of the resources and reserves, JORC also specifies what kind of report or reporting should be done for public investment.
  • Implement: JORC Code is adopted by professional society. UNFC is a reference for countries who want to make international communication.

Significance of IMIC/JORC

• Unlike other sectors, the mining sector deals with natural processes, the knowledge of which remains incomplete prior to the commencement of mineral extraction.
• It is critical for the Indian mineral sector to communicate effectively and transparently with the investment community, which are essential to earn their trust.
  • This should be done using internationally accepted terminology and definitions, which is incorporated in the IMIC.
• While the UNFC framework allows for the reporting of resources in general, the IMIC and the JORC classification, indicate the likelihood of profitably mining a mineral block at the time of reporting.

Q1) What is the UN Economic Commission for Europe's (UNECE)?

The UNECE was set up in 1947 by ECOSOC as one of the five regional commissions of the United Nations. Its major aim is to promote pan-European economic integration.

Q2) What is the Committee for Mineral Reserves International Reporting Standards (CRIRSCO)?

CRIRSCO is an international advisory body without legal authority, which recognises the truly global nature of the minerals industry and the agreed need for international consensus on reporting standards.

Source: To boost private investment in mining sector, industry awaits shift to investor friendly mineral reporting code | UNECE | UNCEC