EDITORIAL — ME advocates “competent person” rule — Making the most of milestones

Several anniversaries relevant to the mining industry — some more pleasant than others — came and went during the first week of May.

The first anniversary of the unmasking of Bre-X Minerals’ fool’s gold deposit in Indonesia made for the least pleasant memory. Burned investors no doubt found the event too painful to recall, and former Bre-X president David Walsh didn’t appear to enjoy it much either. The duped (or duplicitous) promoter was enjoying a Caribbean siesta, but was rudely interrupted by Bre-X’s bankruptcy trustee, which obtained a court order freezing Walsh’s Bahamian assets, as well as assets held there by his wife and three family-owned companies.

A much more satisfying milestone was the centenary of the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), marked by the Institute’s annual meeting in Montreal, the city where the CIM was founded in 1898. With several international organizations taking part in the conference, the CIM centennial drew mining people from all over the world for discussions on everything from assaying procedures to environmental regulations in developing countries.

Also on hand for the event was an officer of the Royal Canadian Mounted Police — a geologist turned scam hunter — who reminded delegates of the centennial anniversary of Sam Steele’s posting to the Chilkoot Pass, which brought law and order to the Klondike gold rush. The gist of his message was that while the RCMP “forgot about mining for 100 years,” last spring’s fraudfests have brought about the mounties’ renewed attention.

With all those mining folks in town, the Montreal Exchange took the opportunity to unveil a new guide for disclosure of exploration results, property transactions and financings, both public and private. Exchange officials described the guide as a tool to facilitate the writing of information to be disclosed in press releases, and say it was designed to help investors better understand mining exploration. The guidelines will apply to the 150 mining companies currently listed on the exchange.

Having been at the receiving end of some peculiar and wordy press releases that provide little information yet take the art of promotion to new heights, we welcome the exchange’s initiative.

In particular, we endorse the exchange’s new requirement that mining companies report the grade and tonnage of specific gold-bearing mineral deposits, not simply the number of ounces of gold. After all, it was this ounces-only promotional approach, more than anything else, that enabled Bre-X Minerals to hypnotize the public.

The guidelines also state that companies should not make comparisons between their deposits and other deposits without substantial geological justification. Had these rules been in effect a few years ago, former Bre-X vice president John Felderhof might have faced quite a challenge in proving the existence of a maar-diatreme deposit large enough to host his “200 million ounces,” plus his “blue-sky potential” for millions more.

Best of all, the guidelines also state that the use of the term”reserves” must be corroborated by an independent study. The company also must disclose the identity of the consultant corroborating the reserves, as well the identify of anyone making resource estimates. The Montreal Exchange has, in effect, brought in a “competent person” rule to ensure individual responsibility for reserve estimates.

These are all welcome changes and the Montreal Exchange deserves credit for bringing them about. While we do not delude ourselves that rules can eliminate scoundrels altogether, it is possible to have — and enforce — regulations that will make it more difficult for them to run their scams.