Letters DEBATING THE DISCOVERIES

The following brief look at recent history is prompted by the article, “Debunking a Myth,” by Donald Cranstone which appeared in the January issue of The Northern Miner Magazine. Cranstone’s article states that senior mining companies are better prospectors than junior companies. This conclusion is supported by a lot of data. Much of this data is either highly suspect or erroneous. From the viewpoint of a knowledgeable bystander, whose prospecting days date back to 1947, the year in which Cranstone begins his study, I find great difficulty correlating Cranstone’s “facts” with my recollections. The article implies that in the period 1947 to 1981, 75% of all major Canadian mineral deposits were discovered by senior companies. Not so. Using the same data base as indicated in the article, the actual statistics show that 45% of the legitimate major discoveries during the period were made by prospector/entrepreneurs. The trend since 1981 is even stronger towards the juniors. Junior companies (and senior companies, on their frequent share distribution sales) are restricted by securities regulations on the definition of orebodies. Of the 123 “discoveries” described in the January article, 31 will never be “ore” (mineable at a profit at foreseeable prices) and must be eliminated from any practical list. That leaves 92. Revenue Canada won’t allow exploration deductions for additional ore discoveries on a producing mine’s acreage. If it isn’t a legitimate exploration, it must be carved from the Ottawa list produced by Cranstone. That leaves 85.

There is a grey category where the discovery is partially financed by both senior and junior companies. In actual case, the party acting as operator, the one who initiates the venture, arranges the financing and does the work, should be deemed the discoverer, be it a junior or a senior, but not both. That choice forces a redefinition of the joint discovery category from the Cranstone list. The 10 in that category break down to three discovered by seniors, five by juniors and two that will never qualify as orebodies. I would like to discuss the 11 discoveries that were actually made by juniors, but assigned by Cranstone to senior organizations.

1. Geco — The discovery was made by Geco Mines, an equity-financed company originated by the principals of General Engineering Company.

2. Granduc — The Granduc discovery was initially acquired by Helicopter Explorations, directed by Karl Springer.

3. Brunswick No. 12 — The discovery was staked and drilled by Anacon Lead Mines, directed by M. J. Boylen. The St. Joe Lead Company was the partial financier and later backed out.

4. Galore Creek — The discovery was acquired from prospectors by Hudson Bay and Cominco, later transferred to Kennecott.

5. Rabbit Lake — This uranium discovery was made by a consortium of Calgary equity-financed companies, including Al Swanson’s Dynamic, later acquired by Gulf Minerals.

6. Fire Tower — This mineralization in New Brunswick was originally found by Bill Young and John Riddell’s Mount Pleasant Mines, following up on an unsuccessful Selco geochemical program. (The other Fire Tower showing that Sullivan worked on was dicovered by a junior, Chesterville Mines.)

7. Polaris — The discovery was acquired and initially explored by Jack McBean’s Upper Canada Mines, not Cominco.

8. Cinola — The discovery was originally staked and drilled by entrepreneurs and explored by others, including Falconbridge, before acquisition by Quintana.

9. Midwest Lake — This discovery was originated, acquired and identified by personnel directed by Bill McGregor of Numac Oil & Gas, which acted as operator and raised finances through equity sales, although it did have some production.

10. Trout Lake — The discovery was acquired by Newmont from the prospector-discoverer, initially publicly financed.

11. Williams Property — This was originally drilled in the late 1940s, and thus doesn’t qualify as a “discovery by a major” under Cranstone’s rules.

In summary, my revised scorecard reads like this: Cranstone’s “discoveries” …………………… 123 Subract mineralization ……………………… 31) Subtract mine-site extensions ……………….. (7) Likely discoveries …………………………. 85 (some of these are questionable) Of the 85, the breakdown is this: Senior companies ……………………… 47 (55%) Junior companies ……………………… 38 (45%) These numbers might seem to demonstrate that senior corporations are more successful explor ers than the prospector/entrepreneur. However, this theory doesn’t stand up when we take time into consideration. Between 1964 (the Windfall affair) and 1978 (growth of the Vancouver Stock Exchange), there was virtually no junior exploration financing in Canada. During the remainder of the time discussed (from 1947 to 1963 and from 1978 to 1981), the junior prospector/ entrepreneurs were responsible for 23 of the 46 discoveries. The unreliability of Cranstone’s data interpretation is further eroded by employing questionable numbers from Statistics Canada. Even if these numbers are only directional, they suggest that the junior companies, in directing the expenditures of 21% of the total dollars, managed to obtain 45% of the positive results. In simpler words, juniors are twice as effective as seniors.

Of more immediate importance for policy decisions affecting the rules of senior versus junior companies (such as flow-through financing) is the prediction of future trends. Of the 47 valid discoveries made by senior exploration groups, two out of every three were the result of regional geophysical and geochemical programs. The discoveries of the future will be based on surface prospecting and geological work and deep diamond drilling of geological targets. The junior companies accounted for 60% of geological discoveries in Cranstone’s data and, in any favorable financial climate, should be responsible for even more in the future.

In any selection of excellence between individual initiative and group consensus, history generally favors the individual. If Canada is going to maintain a viable mineral industry, we must rely on the junior companies. Finally, it is time that our government planners gave some serious thought to future ore reserves. It takes an average of seven years from a base metal discovery until production. Our present base metal reserves will be running out around 1994. Fenton Scott, President, La Fosse Platinum Toronto, Ont.