Editorial The long-term view

Those who make such statements distort the truth largely because they don’t have the long-term perspective that those in the mining industry need to have if they want to survive. The daily headlines or sales pitch can’t afford to consider what is really constructive in the long run. They need instant gratification, and that comes from negative news and short selling.

It may be understandable why flow-through is taking some hard knocks. Its runaway success in raising equity financing for mineral exploration during 1986-87 prompted the federal government to rein it in. What’s more, the spate of problems at several new mines in the past year has been used by many as an example of flow-through’s failure.

But on balance, there can be little doubt that flow-through financing has been a boon to the industry and those who invest in it with a long-term view.

A recent study by Donald Cranstone and Andre Lemieux at the federal government’s department of Energy, Mines & Resources offers some interesting figures on the recent history of flow- through financing.

“Mines on 60 mineral deposits where exploration was financed at least in part with flow-through shares have either come into production since 1983 or are currently being prepared for production,” according to their report.

They estimate that those 60 mines will generate about 6,200 direct production jobs and provide 100,000 person-years of work. That’s apart from the estimated 63,000 person-years of direct employment provided by the $3-billion of flow-through funding raised between 1983 and 1988.

Those numbers are impressive, but what is often overlooked is that it takes years of preliminary work to bring a property to the stage where it warrants advanced exploration.

“Even when a mineable deposit has been outlined, the record of the last 40 years shows that, on average, six years elapse before it starts to produce,” say Cranstone and Lemieux.

Those in the industry know that’s true. They know the results of money spent in 1986 and 1987 on mineral exploration will probably not be felt in earnest until the early 1990s. The already impressive success of flow-through funds in creating jobs in parts of Canada where jobs are scarce and in outlining mineable deposits is really just the tip of the iceberg.

It’s easy to point to the impetuous companies that let the enthusiasm of the mid-1980s push them to rush their projects into production. Capital is the key to mine development, but money can’t take the place of the solid work that has to be done on every step on the way to making a mine. They have been the casualties of the flow-through mechanism’s success, and there are likely to be more.

The success stories, however, are the ones that won’t be known until they’ve produced for several years, paid back their capital costs and returned something to shareholders. By that time there’s little glamor left. The news at that point is that a mine is closing, not that it’s had decades of successful operations.

There will always be those who demand that success be instant. We know that isn’t the way things happen in this business. We can only hope that those who are in decision making positions take that same long-term view.

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