EDITORIAL & OPINION — New task force long overdue — The need for guidelines

The Toronto Stock Exchange and the Ontario Securities Commission are forming a task force to examine the need to set standards for mining and exploration companies. Consideration will be given to how exploration programs should be carried out and how results should be disclosed and reported.

Specifically, the committee will examine the use of approved assay laboratories and assay methods, as well as the need to establish criteria for approval of assay labs and methods. The Vancouver Stock Exchange already has such guidelines in place and, assuming juniors will continue to flock to the more senior Toronto exchange, such rules will go a long way toward protecting investors. The task force will examine the need for periodic, independent reporting of reserves and resources, as well as standards for disclosing assay results and procedures so that all information necessary to understand and analyze results is clear.

The initiative follows close on the heels of Freeport McMoRan Copper & Gold’s confirmatory drill program at the Busang project in Indonesia, which failed to produce results similar to those previously reported by Bre-X Minerals.

Because results of an audit drilling program by Strathcona Mineral Services are not yet in hand, some might argue that the appointment of the task force is a knee-jerk reaction to nothing more than a perceived crisis.

We do not share this view, for a variety of reasons, the chief one being that there is now sufficient technical evidence in the public domain to show that a serious problem exists at Busang.

All eight holes drilled by Freeport, four of which twinned holes previously drilled by Bre-X, failed to produce results remotely similar to those achieved by Bre-X. Statistically, had the gold been there, Freeport ought to have had, at the very least, a few “hits.”

Freeport also observed “visual differences” in gold grains between its holes and those of Bre-X. Moreover, Bre-X was advised by Strathcona that there is a “strong possibility that potential resources have been overstated” because of “invalid samples” and assaying of those samples. “Invalid samples” and “visual differences in gold grains” may not mean much to laymen, but in mining jargon such descriptions are tantamount to a charge of tampering.

Equally impossible to ignore is information contained in a report detailing metallurgical testwork on samples from Busang. Tests showed that gold particles were “liberated and mostly 100 to 400 microns in size,” with some particles showing “distinct gold-rich rims with argentian core.” As well, the particle shapes were “mostly rounded with beaded outlines.” These descriptions are all consistent with placer gold, as was the comment that there was “no apparent relationship of grind size with extraction.” Furthermore, it was noted that all samples showed that an excellent gravity response and 91% of the gold could be recovered into a Knelson concentrate.

To the best of our knowledge, there is not a lode gold deposit in the world from which so much gold can be recovered by a simple gravity circuit.

We could, of course, ignore all this technical information and hang on to a thin thread of hope that perhaps, just maybe, Freeport and Strathcona are wrong. We could ignore the metallurgical report with a shrug, and pass off our concerns that Bre-X prepared samples for assaying on-site, as an analyst’s video shows. But hope, for us, is a precarious resting place when the preponderance of evidence points to a serious problem at Busang.

For these reasons, we believe the formation of the task force is neither premature nor unnecessary. On the contrary, if Toronto is to remain a world centre for the raising of capital for investment in worldwide mineral exploration, the initiative is long overdue.