EDITORIAL — The legacy of Busang — Tighter rules on foreign projects Regulators and mining industry experts are engaged in much soul-searching, and a good part of this exercise is aimed at finding ways to ensure that a massive fraud such as Bre-X Minerals’ Busang project does not happen again.

While this infamous bungle in the jungle was an extraordinary event, an open discussion on tightening up the rules of the game is taking place in Toronto. Several proposals for reforms have already been submitted by investors and industry experts to a joint committee set up by the Toronto Stock Exchange and the Ontario Securities Commission.

Investor protection has become an increasingly complex matter, especially now that Canadian juniors are taking on mineral projects in far-flung corners of the globe. More than ever, investors must be able to rely on the accuracy of information presented by company officials.

The panel has heard that some investors want better disclosure and the security of knowing that company officials are liable for the content and quality of information when they report a major discovery. Some want independent verification of resource calculations for major finds. Others want the security of knowing that company executives are prepared to stand by the statements made in news releases and annual reports, as well as those made in prospectuses. And investors want the bad news, as well as the good. As one old hand in the game has learned: “It’s not always what they tell you, but what they don’t tell you, that’s important.”

Junior companies are keenly interested in the debate taking place and the various recommendations being proposed, particularly with regard to audits and the quality of disclosure. Their main concern is over-regulation, and that the cost of compliance will make exploration a far more costly exercise than it already is. After all, the raison d’tre of exploration companies is to spend money on the ground — not on a battery of lawyers screening each and every press release. As one mining executive said, “There is no point in having better disclosure rules if the only thing companies have to disclose is that nothing is going on.”

We share the view, held by most junior companies, that massive regulatory change is not required. But, at the same time, we agree that better disclosure would go a long way toward addressing some of the promotional sins of the past. Some changes would cost relatively little to implement. And company officials should be held responsible if the information being presented is later found to be deliberately misleading.

Standardizing the way companies report exploration results is another worthwhile proposal that merits attention. For example, publicly listed companies should not be allowed to use uncertified labs or unconventional assaying techniques. Major new discoveries should be independently audited when the first resource calculations are made.

We also believe that regulators should be given the resources necessary to enforce rules and regulations already in place, as well as those coming down the pipe. This is more important than ever, as law enforcement investigations in foreign countries often fall between jurisdictional cracks.

Elsewhere in Canada, the Alberta Stock Exchange has take steps to tighten rules for companies operating in foreign jurisdictions. Exchange officials say verifying information can be difficult and that companies will have to meet higher listing standards.

Sensible reforms are worth examining, but responsible companies should not have to pay for the sins of irresponsible ones. Only the bad apples should be drummed out of the business.