EDITORIAL PAGE (November 18, 1991)

It is remarkable how differently Canada treats its miners compared with its farmers.

In the public’s eyes, farmers are heroes, stewards of the earth, defenders of a simpler, kinder way of life. Miners are dupes of financial barons, pillaging the earth for the profit of a few with blatant disregard for others. That seems to be all the justification necessary to spend billions to subsidize wheat growers in the Prairies while miners are trusted to compete with the rest of the world. Canadian farmers can’t compete with their counterparts elsewhere in the world, so taxpayers have to pay them to keep them in business.

Miners, on the other hand, have always competed in a global economy and excelled. They’ve done it on their own, even though they, too, face competition from countries that subsidize mining heavily.

That makes it all the more painful when Ottawa sells its gold reserves into a falling market as the federal department of finance recently did, selling 370,000 oz. in October alone. When it does that, it is selling the very commodity that the nation’s mining companies are struggling to make a profit from. It is, in fact, lowering the price Canadian gold miners can get for their product.

What would be the reaction if the Canadian Wheat Board started dumping more wheat on to the world market, driving wheat prices lower and forcing farmers out of work?

It has been another tough season for junior mining companies. Efforts to promote the projects they believe in have met with little interest, and those that have raised equity financing worked twice as hard as they would have a couple of years ago. To some degree, of course, raising money is a never-ending business. But the dull markets of late, a poor gold price and a lack of interest from the retail investor have all conspired against companies that rely on equity financing to explore for and develop mineral resources.

But that may be changing. The evidence is not conclusive by any means, but there seems to be significant pent-up demand among investors for a good mining play. They’re still on the sidelines waiting for the right time, but they’re eager to get back in the game.

In Toronto’s financial centre, junior mining companies have been getting scant attention for the past two years. The traditional “show and tell,” where company officials tell invited brokers and investors the reasons why they should buy shares of their company, have been rare. Yet one afternoon recently, two junior companies, Fort Knox Gold Resources and Wheaton River Minerals, each put on such a presentation, both at about the same time but a few city blocks apart. Despite the apparent conflict, both rooms were filled, and there were plenty of questions from guests eager to get full details. While most trading in listed stocks is done on behalf of institutional investors, juniors still rely solely on the retail investor. In a time of recession, retail investors are scarce indeed. Yet statistics from the Securities Industry Association in the U.S. show that trading by small investors is up 18% from 1990 and is at its highest level since the association started keeping statistics in 1987. Institutional investing, by comparison, is up only 7%.

And the recent feasibility study from Aur Resources’ Louvicourt project has reminded many investors that there is no better payoff than a mining stock that does well.

Conclusive evidence? Hardly. But markets are driven by mass psychology, not logic. The future does not follow a predictable course. It seems, however, that the junior mining sector is poised to take off given any upturn in the general economy.