Investor confidence subject of forum

Efforts to rebuild investor confidence after the Bre-X mining scandal drew both praise and criticism from speakers participating in a special forum titled “Rebuilding Investor Confidence: A Report Card,” at the recent Mining Millennium 2000 conference in Toronto.

The panel discussion was moderated by Neil Hillhouse, a geologist and member of the Mining Standards Task Force. The panelists were: John Kaiser, publisher of the Kaiser Bottom-Fishing Report; Art Ettlinger, mining analyst for Yorkton Securities; and Michael Lawrence, CEO of Minval Associates of Australia.

Kaiser had few, if any, kind words for the new reporting standards recommended by the task force, which, he says, would not have prevented Bre-X from evolving into history’s greatest mining fraud. “Bre-X is not a symbol of inadequate reporting standards that have now been fixed. Bre-X is a symbol of Canadian cowardice and greed, of the Canadian mining industry’s unwillingness to rain on somebody else’s parade, of the geology profession’s failure to heed its gut instincts and declare that the emperor be without clothes. It is a symbol of Canadian awe for the raw power of an onrushing freight train.”

Lawrence responded by taking the position that investors also have a responsibility to educate themselves if they are to benefit from timely and effective disclosure of all material matters, including non-technical ones. “Complacency is a universal sin and Canada has just had its wakeup call,” he said. “Other jurisdictions await theirs. Hence, the rapid response of the Ontario Securities Commission and the Toronto Stock Exchange is to be highly commended, and its updated approach contains many useful lessons for all jurisdictions. Everybody’s an expert in hindsight, but you don’t kick people trying to do the right thing.”

Lawrence also made the case that no one country has all the answers as to how mining fraud can be deterred and detected. “Some, like Australia, have a political and administrative history that produced some natural advantages in the fight to minimize such scandals. They are: one language, a national securities regulator, a national stock exchange, and a national single institute of mining industry professionals having ethics and best practice due diligence codes in place, as well as a national scheme of self-regulatory accreditation/ registration of its technical professionals.” However, he added that while Australia has some natural advantages in combating and limiting fraud, it cannot afford to become complacent.

Ettlinger told delegates that, in his view, analysts should qualify as a Qualified Person, “since we comment on a QP’s ability to carry out an exploration program.” However, he noted that analysts are limited in doing their job by financial constraints, secrecy issues in a competitive business environment and the quality of data received from companies. “People should keep in mind that we don’t have the budget for independent drill verification or large-scale sampling programs.”

The biggest surprise of the event was that many delegates were not familiar with the recommendations of the Mining Standards Task Force, including the role of the Qualified Person. “Clearly more education is needed,” Lawrence concluded.

Mining Millennium 2000 was jointly sponsored by the Prospectors & Developers Association of Canada and the Canadian Institute of Mining, Metallurgy and Petroleum.