LETTER TO THE EDITOR — The search for mines remains a risky venture

Your recent editorial, “The Bitter Taste of Humble Pie” (T.N.M., April 14/97), was far more contrite than present circumstances warrant. A bad situation has been made far worse, not by the more constrained and factual reporting in The Northern Miner but by the presumption of guilt and lynch-Mob hysteria of Toronto’s major newspapers.

Onerous risks of mining and exploration are well-recognized by most knowledgeable explorationists and investors. Perceptions of risk have changed little over the past 221 years, when Adam Smith broached the topic in The Wealth of Nations. That work provides insight into several aspects of the current Bre-X Minerals milieu which are highly relevant to the present situation.

On risk factors, Smith notes, “The discovery of new mines, however, as the old ones come to be gradually exhausted, is a matter of the greatest uncertainty, and such as no human skill or industry can ensure. All indications, it is acknowledged, are doubtful, and the actual discovery and successful working of a new mine can alone ascertain the reality of its value, or even of its existence. In this search, there seem to be no certain limits either to the possible success or to the possible disappointment of human industry.”

In commenting on the magnitude of the risks of mining, at home and abroad, Smith comments, “Mining, it seems, is considered there [Peru, in this reference] in the same light as here [Great Britain], as a lottery, in which the prizes do not compensate the blanks, though the greatness of some tempts many adventurers to throw away their fortunes in such unprosperous projects.” Of mining taxation, Smith says, “The same encouragement is given in Peru to the discovery and working of new gold mines; and in gold the King’s tax amounts to only a twentieth part of the standard metal. It was once a fifth, and afterwards a tenth, as in silver; but it was found that the work could not bear even the lowest of these two taxes. It is rare, however, . . . to find a person who has made his fortune by silver, and it is still rarer to find one who had done so with a gold mine. This twentieth part seems to be the whole rent which is paid by the greater part of the gold mines in Chile and Peru.”

There is very little new to be learned from the Bre-X experience. Let’s keep in mind that risks are formidable in the extreme, and that the “King” and his surrogates have been known to heist the “prizes” via excessive tax policies (as in British Columbia, circa 1978), as well as through more aggressive practices (such as those revealed in Indonesia).

Fraud is as abhorrent to the exploration and mining business as robbery is to banks, and neither industry encourages or welcomes miscreants. A study of history would show that most exploration losses occur through the natural risks of the undertaking, rather than from fraudulent practices.

H. Douglas Hume

Toronto, Ont.