umc management - mt robinson 700mt lie, page-7

whilst the example below is not identical to UMCs case it does highlight the fact that the company (and its directors) can be held liable for failure to meet continuous disclosure requirements even 2 or 3 years down the track.

what i take away from this example is that if Mt Robinson happens to be a large deposit in 2 or 3 years time then the directors will be liable for the opportunity cost of those shareholders who decided to sell because of the failure to disclose drill results. If shareholders sell now with the belief that Mt Robinson and other tenements are duds and they later become large economically viable deposits then they should the directors to court as there is no question that the drilling results are material and have affected a lot of peoples judgement on this stock.



Section 674 of the Corporations Act 2001 and ASX Listing Rule 3.1 require an entity, on becoming aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of securities, to immediately notify ASX of that information unless an exception applies. A reasonable person is taken to expect information to have a material effect on the price or value of securities if the information would, or would be likely to, influence persons who commonly invest in securities in deciding whether or not to subscribe for, or buy or sell, the securities.

Deciding whether information is market sensitive and whether it should be disclosed will depend on the relevant factual scenario and is a judgment call each listed company must make individually. In Kim Riley v Jubilee Mines NL, a junior gold explorer, Jubilee Mines NL (Jubilee), was held liable for the losses of a shareholder who had sold shares in reliance on publicly disclosed information.

In 1994, Jubilee received drill data of a high grade nickel find on one of its tenements on which WMC Resources had accidentally drilled. Jubilee, not realising and not investigating the relevance of the data, did not release the results of the find until 1996, following which the company’s share price increased significantly.

Between September 1994 and July 1995, former Jubilee Managing Director Kim Riley, being ignorant of the nickel find, sold 3.4 million shares at an average price of approximately nine cents each. Mr Riley claimed that, had the information been released, he would not have sold his Jubilee shares, but would have retained them and sold them later for between $1.40 and $1.50.

The Court held that the information relating to the nickel find should have been announced to ASX despite the fact that Jubilee was a junior mining explorer with a prime focus on gold not nickel and, being very low on funds, had no intention to commercialise the nickel deposits.

It was found that, while the results did not indicate a commercially significant resource, what they showed was the potential for further exploration. As a junior explorer, this was material information relevant to Jubilee and should have been announced. Furthermore, while the information would have had a greater impact on the share price had Jubilee’s stated intention been to look for nickel, the fact that Jubilee was a gold explorer was not enough to release Jubilee from its obligations to provide the news to the market.

Mr Riley was awarded $1,856,000 in damages plus interest for his trading losses that were occasioned by Jubilee Mines’ failure to disclose price sensitive information to the market in a timely manner.