EDITORIAL — ‘Desert dirts’ exactly that — NAA should be last word

“The gold exists,” potential investors are told, “but conventional assaying can’t detect it because the metal is associated with platinoids (or encapsulated by other minerals, or tied to microclusters). We’ve developed a proprietary method that shows our property has millions of ounces, but be prepared: the flat-earth society and the mining industry dinosaurs will attempt to discredit our technological breakthrough.”

Each year, more investors fall prey to the “desert-dirt” hucksters who swear they have found a way to detect gold reputable assay laboratories can not detect. One such property in Oregon became, at various times, “the world’s largest platinum deposit” and (in those pre-Bre-X days) “the world’s largest gold deposit.” Many millions of dollars were raised before investors found out that the promoters were living in grand style at their expense.

One of the companies even had its own secret lab in the desert, which churned out such good assay results that a suspicious employee decided to investigate why he was never able to find anything using conventional methods. The answer was simple; the reagents (the chemicals used in the assay process) were loaded with gold. Another company claimed its samples had to be “pre-treated,” ostensibly to crack the complex mineralogy, before being sent for assaying. “Pre-treated” they were: gold was always found in samples after pre-treatment had put it there.

The problem of dirt-pile swindles became so common in the 1980s that the Northwest Mining Association warned that, in 1987 alone, about $250 million was lost to gold scams, most of which involved “black-box” assaying or “pre-treatment” methods.

The desert-dirt promoters argue that they are on the leading edge of technology and that their new assaying and recovery “methods” are actually a scientific breakthrough. That would only be true if their claims were based on scientific fact, which they are not. One company claimed its gold could be detected only when sunspots flared, while another claimed its desert-dirt compounds could cure cancer and AIDS. Then there was the unforgettable “transient gold,” which appeared and disappeared depending on when the analysis took place. Another feature of desert-dirt promotions is that they typically run out of steam after futile and expensive efforts are made to find a “recovery method.” (If you can’t assay it, how can you recover it?) The stories sold to investors were often so bizarre that sophisticated investors and industry people are amazed how anyone could fall for such nonsense. They forget that most people — including many market regulators — have little or no knowledge of how mineral exploration, mining and science really work, so nothing is done and the desert-dirt hucksters continue to peddle their wares. If anything, the lack of action by regulators has generated a desert-dirt boom in the southwestern United States, resulting in losses that probably pass the billion-dollar mark in this decade alone.

Regulators often argue that nothing can be done to prevent these swindlers, who operate on the margins of the industry. Nonsense. Decades ago, cooked assay scams caused untold headaches for the Vancouver Stock Exchange and securities regulators. But the VSE then developed a strict disclosure policy on assaying. The policy forced dirt-pile swindlers to head for other jurisdictions, especially the Nasdaq and the U.S. over-the-counter market, where they proliferate today. The notorious Delgratia Mining voluntarily surrendered its VSE listing just before taking on the Josh property in Nevada, whose gold later proved to be a desert phantom.

North American exchanges could nip the dirt-pile problem in the bud by adopting similar policies, and perhaps taking them one step further.

Companies using proprietary assaying methods or uncertified labs unacceptable to the exchanges should be forced to disclose, on an ongoing basis, the results of conventional (fire-assaying) methods on untreated duplicate samples from a reputable lab.

If the results differ wildly, the exchanges and regulators should send out an independent expert to collect samples and have them assayed using three methods; the unconventional method used by the company, traditional fire assay, and neutron activation analysis (NAA).

Neutron activation works by directly irradiating gold atoms with neutrons, changing their atomic weight and making them unstable. The analyst then measures the intensity of secondary radiation from the activated gold to determine the gold concentration in the sample. If there is gold in the samples, NAA will detect it, no matter how complex the associated mineralogy, no matter how much platinum comes with it, and no matter how small the “microclusters” are. For this reason, American securities regulators have often described the method as “the last word in gold content.” The exchanges can easily formalize NAA’s role to protect investors.

If NAA and fire-assay methods do not find gold, the promotion should be shut down and the company’s principals held accountable. The ugly alternative is to let the dirt-pile swindlers carry on their imposture, and give mining a bad name.