A system at work

Market-watchers disillusioned by the scams of the late 1990s had a little light shine on their faces in the past two months, as the Canadian Venture Exchange used its regulatory power to fix a situation that plainly needed fixing: the market speculation surrounding International Wayside Gold Mines and its Cariboo gold property near Wells, British Columbia.

The CDNX halted trading in International Wayside when concerns were raised over the exploration methodology being used at the property. Wayside remains halted, while the Exchange reviews reports by independent consultants.

There is no dispute about the Exchange’s warrant to halt trading in a listed company’s stock. That is a very clear policy that every company knows long in advance. Exchanges exist to provide a transparent market, and the power to hold up a hand and shout “stop” is their principal tool in maintaining that transparency.

Wayside was evaluating known gold occurrences at Cariboo, and drilled into the footwall of a known gold vein, the BC vein. Phyllite rocks in the footwall showed gold values up to 22 grams per tonne. Here was a style of mineralization unlike the veins and replacements the property was known for, offering the promise that a whole new gold zone might be waiting to be discovered. The stock bounded from 60 to the $2 range on the news.

Some visitors to the property felt a cold hand on their necks, though, when they found out Wayside had sent whole cores out for assay. Some recalled an Indonesian project, where that had been a red flag for fraud, and made unflattering comparisons. It was reasonable comment: splitting core is recognized by all Canadian exchanges as an essential part of quality control in exploration — either explicitly, as in the MSTF report, or implicitly, as in the former Vancouver Stock Exchange’s Mining Standards Guidelines.

To its credit, Wayside didn’t stonewall like that other company did a few years ago. It hired one independent consulting firm to do a belated check program — petrographic work and re-sampling on some mineralized intervals. It hired another firm to audit a resource calculation it had previously released to the public.

The first consulting firm confirmed that at least some of the mineralized intervals reported by Wayside checked out; the rocks had gold mineralization in pyritized zones in the phyllite. Sure enough, there is a “new” style of mineralization in the footwall of the BC vein.

The second consultant found the resource calculation of 9.3 million tonnes grading 2.3 grams per tonne was unjustified, and estimated a far more modest 7.9 million tonnes grading 2 grams. Subsequently, Wayside sent out a news release renouncing its earlier use of the estimate.

We do not know, and have no way of knowing, whether the CDNX dictated the renunciation — exchanges have instructed listed companies to disclaim earlier announcements in the past. If Wayside backed away from the estimate on its own initiative, that is a very good thing, because this was an estimate that really did not deserve to be released anyway: it was calculated by someone that then owned International Wayside shares. The company should really have known better than to disclose resource figures that came from a shareholder.

Complaints that the regulators are becoming too nervous, indulging a vain wish to rewrite the Bre-X script, are unfounded: the Exchange is applying existing rules that ought to have been applied in 1997. Closer to home, this newspaper — which has reported candidly on the controversy over International Wayside’s exploration methods — takes considerable pride in its own Bre-X record and isn’t using Wayside to compensate for any three-year-old regrets.

The CDNX, through its patient, ultimately tough, but generally fair treatment of Wayside, is showing it has grown into its role as the country’s venture capital market. The trading halt — far from being an interference with the proper workings of the securities market — is the one immediate action open to an exchange that sees problems with a listed company. In the end, the CDNX has used its referee’s whistle judiciously.