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Saturday, May 10, 1997
Don't let Bre-X tarnish Canada's mining industry
Finding, developing and operating mines is something we do better than anyone else and the track record is there to prove it
By VIVIAN DANIELSON
For The Financial Post
Bre-X Minerals Ltd., the former toast of Bay Street, defied many of nature's laws when it conjured up "the world's largest gold deposit" in the jungles of Borneo. But Mother Nature cannot be fooled for long, and the deposit built on invalid samples collapsed like a house of cards earlier this week when Strathcona Mineral Services reported that preliminary results from its six-hole audit drilling program bore no resemblance to Bre-X's previously announced results.
As Bre-X's Busang wends its way into history as the gold scam of the century, securities regulators and industry organizations are ..//..DELETED..//..
The achievements of Canadian juniors abroad are equally noteworthy and include Arequipa's Pierina gold deposit in Peru, the Bulyanhulu gold find in Tanzania and a host of new copper and copper-gold discoveries in northern Chile.
Bre-X's "find" in Borneo, having gone from boom to bust, no longer makes the list. It will haunt Canadian juniors for some time to come, though there will be positive effects too.
The expectation threshold will be lowered, and a one-million-ounce gold deposit will become respectable again. The overall flight to quality will benefit solid companies with good prospects and good management at the expense of their more heavily promoted, but less substantive, counterparts.
Even so, investors will be seeking reforms, as well as possible compensation for losses, related to the Bre-X fiasco. ...//.. DELETED TEXT..//.. In the wake of the Bre-X fiasco, most industry experts agree that junior companies will find it more difficult to raise capital on Bay Street. The risk-adverse pension funds are likely to lead the flight to more proven and tangible investments. Brokerage firms, already under fire for their role in the Bre-X imbroglio, will probably pull in their horns and stick to the traditional blue-chips, at least for the short term.
It is important, however, that cool heads prevail in the coming weeks and months so Bre-X does not put an end to Toronto's emergence as a world centre for mineral investment, nor quash its junior mining sector.
Rules and regulations may have to be tightened and reforms introduced to increase investor protection. These do not have to be costly or time-consuming.
A number of reforms were in the works before Bre-X went bust. A proposal for tamper-proof sample bags, which would cost only pennies more than those currently in use, has been put forward by an analytical firm. For the past year or so, a committee from the Canadian Institute of Mining and Metallurgy has been developing guidelines for the reporting of reserves and resources that take into account rules used in Australia. The analytical community has an initiative under way aimed at convincing regulators across North America to set guidelines on the use of assay laboratories and assay methods.
The task force set up in the wake of the Bre-X fiasco by the TSE and the OSC will examine the overall need to set standards on how exploration programs should be carried out, and the results reported and disclosed. Industry experts predict the primary focus will be on the need for independent audits of drill results and resource calculations, at least for junior companies.
Others will argue that more rules and regulations are not as necessary as better enforcement of those already in place. This may require the TSE to beef up its market surveillance department and perhaps bring in mining professionals to vet prospectuses and new listings. The OSC, as senior regulator, also may have to strengthen its investigative and enforcement teams. The fallout from Bre-X has already revived the call for a national securities commission.
Bre-X was an aberration that should not be allowed to stain the reputation and remarkable track record of Canada's mining industry at home and abroad.
Mining helped build this nation and still contributes much to our prosperity. As Barrick Gold chairman Peter Munk aptly noted at his company's recent annual meeting, "no single rogue operator ... no single deviant member can change those fundamentals."
Vivian Danielson is editor of The Northern Miner.
P.P.P.S.- Hey, Vivian, maybe the Desert preparred the Dam Bar Way For The Prairie! Get on the band wagon, AZ and Alberta may have THE METAL...Nevada also!
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