LETTERS SCOTT V.S. CRANSTONE

Fenton Scott’s letter made my day. I must have done something right if a barrage from an explorationist with his experience fails to improve my data and affect my conclusions.

I first must disown the statement attributed to me that senior companies are better prospectors than junior companies. A careful reading of my article and my subsequent letter to the editor (page 5, March, 1988) will show that my conclusion was quite different; namely, that the seniors and juniors have been equally effective at discovery per exploration dollar spent. My attributions of discovery credit were based, not on recollections, but on exhaustive verification of the facts recorded. When in doubt, I discussed discovery histories with key people directly involved. As I stated in my article, attributing credit is often tricky, but I explained the criteria I used for defining discovery and discoverer. Many of Mr Scott’s remarks imply other criteria. That way lies confusion. One cannot argue fruitfully about events while shifting basic definitions.

Permit me to respond to some of Mr Scott’s individual points, as it may interest many of your readers how people can disagree so extensively on who discovered what, and when.

Mr Scott suggests that of the 123 major discoveries, 31 won’t be profitably mineable at foreseeable prices. I would even raise that number to 41. But my definition of a discovery was “a mineral deposit attractive enough to have warranted the expenditure necessary to establish its tonnage and grade,” a practical definition that has been widely used by many analysts because it minimizes subjective interpretation. It is unfortunate that my table of discoveries entitled “Major Metallic Mineral Deposits Discovered 1946-1982″ was altered in print to Mine Discoveries 1947-1981,” a misleading change in wording. In any case, these sub- economic deposits were found by seniors and juniors in the same ratio as the mineable deposts and, therefore, don’t bias the conclusions.

There is no reason why Revenue Canada tax rules should restrict my definition of a discovery for the purpose of my analysis. Moreover, Mr Scott apparently misunderstands the tax rules: Exploration for new mines on the property surrounding a producing mine is normally considered to qualify for Canadian Exploration Expenditures (cee) provided it is not underground work from existing mine workings or from an extension of those workings driven for exploration purposes, and provided that waste separates a newly discovered deposit from the ore in the original mine. In any case, all of the discoveries listed would have qualified for cee.

As to “joint” discoveries by more than one company, Mr Scott’s proposal — that “the party acting as the operator, the one who initiates the venture, arranges the financing and does the work, should be deemed the discoverer” — is simply not workable and, in some cases, contradictory (the operator who drills the discovery hole did not necessarily initiate the venture).

Mr Scott discusses 11 discoveries that I assigned to seniors but that he claims “were actually made by juniors.” His recollections receive scant support from the facts as I have traced them:

1. Geco — The discovery hole was drilled between Aug 31 and Sept 3, 1953. Geco Mines, which Mr Scott credits with the discovery, was not incorporated until Oct 16 of that year.

2. Granduc — This is a complex and long story. In essence, Helicopter Exploration Co. staked the Granduc surface showing in 1952; Granby Consolidated Mining, Smelting & Power Co. optioned it in 1952 and formed Granduc Mines in March, 1953. I assigned credit for discovery to Granby because it financed the discovery drill hole and initially established a tonnage and grade of the deposit.

3. Brunswick No. 12 — The Brunswick No. 12 joint discovery was a 50/50 venture of Anacon Lead Mines and the St. Joe Lead Co. After the discovery in 1953, St. Joe put up millions of dollars for underground exploration and metallurgical testing before it dropped out eight years later (1961). Anacon Lead Mines qualifies as a senior company: It had been a producing company for five years when the discovery was made in 1953, milling a respectable 650 tons per day at that time. So Brunswick No. 12 could certainly not be described as a discovery by a junior.

4. Galore Creek — Prospectors employed by Hudson Bay Mining & Smelting staked the original surface showings in 1955. Hudson Bay showed little recognition of having made a significant discovery when it dropped 90% of its claims after having drilled (in 1956) only 1,250 ft. Cominco optioned four of the original claims, restaked by private prospectors, in 1960, but these claims earned only a 5% interest in Stikine Copper Ltd. (merging Kennecott, Hudson Bay and Cominco claims). Also in 1960, Kennco Explorations optioned the 16 remaining Hudson Bay claims, staked a further 162 claims and drilled 15,500 ft. I therefore credited Kennecott with the discovery in 1962.

5. Rabbit Lake — The Dynamic Group obtained several permits in 1967 and surveyed them unsuccessfully by airborne scintillometer. Gulf Minerals optioned one permit in 1968 and did an airborne spectrometer survey. The tapes were interpreted by Gulf’s own personnel. Ground follow-up by Gulf prospectors and geologists found a pitchblende boulder train, traced it to its head, and drilled the discovery hole.

6. Fire Tower — In 1954, Dr J. E. Riddell and Dr H. E. Hawkes staked ground for Selco Exploration Ltd. Selco dropped the property the next year, and several other companies subsequently explored it. By 1963, Mount Pleasant Mines had established two minor tin/zinc/copper/lead deposits, one in the North Zone area and another in the Fire Tower No. 7 Zone.

It was not until later that Sullivan Mining Group optioned the property (1967) and discovered two major tungsten / molybdenun / bismuth-bearing porphyry-type deposits, one in 1969 in the Fire Tower area and the other in 1970. I credited Mt. Pleasant (with some poetic licence) with the major North Zone discovery because its work there inspired Sullivan’s later work. I gave Sullivan credit for the major discovery in the Fire Tower Zone.

7. Polaris — J. C. Sproule and Associates found three areas of mineralized rubble spaced over a distance of one mile on Little Cornwallis Island, while mapping oil permits for Bankeno Mines Ltd. Bankeno staked 21 claims and did 623 ft of drilling. In 1961, Bankeno prospected and mapped the island and staked the Eclipse showing in 1963. Cominco optioned the property in 1964. Following gravity and induced polarization surveys, Cominco discovered the Polaris deposit by drilling in 1971. The 1971 annual report of Bankeno’s controlling shareholder, Upper Canada Mines Limited, refers to Polaris as a Cominco discovery.

8. Cinola — Prospectors found surface showings in 1970 and staked the property in 1971. Kennco Explorations (Western) optioned the property in 1971 and Cominco optioned it in 1972. Both companies carried out geological and geochemical work and minor drilling, then dropped their options. No discovery had occurred at this point. Silver Standard Mines Limited optioned the property in 1973 and reoptioned it to Quintana Minerals Corp. (subsidiary of the U.S. oil company). Quintana drilled 43 holes which indicated more than 50 million tons of 0.06 oz gold per ton and 0.1 oz silver per ton.

9. Midwest Lake — Imperial Oil drilled the holes that made the discovery. Numac’s annual reports for 1977 and 1978 state that Imperial Oil was the project operator. Numac’s interest in the deposit was only 25%, so I listed the discoverers as Imperial Oil, Numac and Bow Valley Industries, in that order.

Numac Oil & Gas was by no means a junior company. In the discovery year, 1977, it had a cash flow of $13.1 million and net earnings of $5.4 million ($24.6 million and $10.1 million in 1987 dollars, respectively). Numac annual reports for the period 1974 to 1979 indicated that the only new shares sold were for the employee stock purchase plan. Therefore, Mr Scott’s statement that Numac raised fina
nces through equity sales is in error.

10. Trout Lake, B.C. — From 1969 to 1970, Cascade Molybdenum Mines carried out geological mapping, bulldozer trenching and mapping of showings known since 1902, then dropped its option. Newmont optioned the property in 1975 and, after considerable work, drilled the discovery hole in 1977.

11. Williams Property — The Williams property was staked in 1945 and subsequently patented, but apparently not drilled until 1981 by lac Minerals, to whom I credited this discovery in my article. Mr Scott may be thinking of the adjacent Corona Resources (formerly Lake Superior) property, now the David Bell mine, which was initially explored and drilled in the 1949 to 1951 period, and on which 89,000 tons was established at that time.

The above shows that Mr Scott’s “revised scorecard” rests on thin air indeed. However, I share his sense that prospectors and juniors deserve some part of the glory if they optioned their property to a senior company. In my manuscript, I indicated this with the notations “optioned from prospector” and “optioned from junior,” but these were unfortunately dropped in the printed version.

Mr Scott’s statement that there was virtually no junior exploration financing in Canada between 1963 and 1977 is curious. Over those 14 years, junior companies reported $720 million (1987 dollars) in Canadian exploration expenditures, a total of more than $50 million (1987 dollars) a year. Only in 1976 and 1977 did the total reported drop below $30 million (1987 dollars). That aside, my main conclusion was that the seniors and juniors had comparable success per dollar of exploration funds spent. Timing of expenditures is irrelevant to this conclusion.

Mr Scott refers to what he calls my “employment of questionable numbers from Statistics Canada.” Actually, that agency has never made compilations of exploration expenditures by seniors and juniors separately. I had to do that myself from some 100,000 individual Statistics Canada questionnaires filled out by companies engaged in Canadian mineral exploration over the 36 years from 1947 to 1982. If there is any consistent bias in the expenditure data it would probably result from Statistics Canada’s inability to locate and contact all the juniors. So, the juniors’ expenditure totals may well be understated, whereas their discoveries are not, resulting, if anything, in overstatement of their exploration effectiveness per dollar spent.

I am glad to see that Mr Scott agrees that Energy, Mines and Resources Canada (EMR) must give some serious thought to base metal ore reserves for the future and to the fact that Canada’s base metal reserves will be running out after the mid-1990s. We at EMR first observed this publicly some time ago (see “Too much emphasis on gold?” on page 12 of The Northern Miner’s Oct. 12, 1987, issue, taken from “Outlook for Base-Metal Mining in Canada in the 1990s,” which appeared in the August, 1987, issue of EMR’s Canadian Mineral Industry Monthly Report). Donald A. Cranstone, Mineral Policy Sector, EMR — 30 —