The Northern Miner Volume 83 Number
36 November 3, 1997
EDITORIAL -- The legacy of Busang -- Tighter rules on
foreign projects Regulators and mining industry experts
are engaged in much soul-searching, and a good part of
this exercise is aimed at finding ways to ensure that a
massive fraud such as Bre-X Minerals' Busang project
does not happen again.
While this infamous bungle in the jungle was an extraordinary
event, an open discussion on tightening up the rules of the game
is taking place in Toronto. Several proposals for reforms have
already been submitted by investors and industry experts to a
joint committee set up by the Toronto Stock Exchange and the
Ontario Securities Commission.
Investor protection has become an increasingly complex matter,
especially now that Canadian juniors are taking on mineral projects in
far-flung corners of the globe. More than ever, investors must be able to
rely on the accuracy of information presented by company officials.
The panel has heard that some investors want better disclosure and the
security of knowing that company officials are liable for the content and
quality of information when they report a major discovery. Some want
independent verification of resource calculations for major finds. Others
want the security of knowing that company executives are prepared to
stand by the statements made in news releases and annual reports, as
well as those made in prospectuses. And investors want the bad news,
as well as the good.
As one old hand in the game has learned: "It's not always what they tell
you, but what they don't tell you, that's important."
Junior companies are keenly interested in the debate taking place and
the various recommendations being proposed, particularly with regard to
audits and the quality of disclosure. Their main concern is
over-regulation, and that the cost of compliance will make exploration a
far more costly exercise than it already is. After all, the raison d'tre of
exploration companies is to spend money on the ground -- not on a
battery of lawyers screening each and every press release. As one
mining executive said, "There is no point in having better disclosure rules
if the only thing companies have to disclose is that nothing is going on."
We share the view, held by most junior companies, that massive
regulatory change is not required. But, at the same time, we agree that
better disclosure would go a long way toward addressing some of the
promotional sins of the past. Some changes would cost relatively little to
implement. And company officials should be held responsible if the
information being presented is later found to be deliberately misleading.
Standardizing the way companies report exploration results is another
worthwhile proposal that merits attention. For example, publicly listed
companies should not be allowed to use uncertified labs or
unconventional assaying techniques. Major new discoveries should be
independently audited when the first resource calculations are made.
We also believe that regulators should be given the resources necessary
to enforce rules and regulations already in place, as well as those coming
down the pipe. This is more important than ever, as law enforcement
investigations in foreign countries often fall between jurisdictional cracks.
Elsewhere in Canada, the Alberta Stock Exchange has take steps to
tighten rules for companies operating in foreign jurisdictions. Exchange
officials say verifying information can be difficult and that companies will
have to meet higher listing standards.
Sensible reforms are worth examining, but responsible companies should
not have to pay for the sins of irresponsible ones. Only the bad apples
should be drummed out of the business. |
