LETTERS TO THE EDITOR Prescription of new remedy for industry’s

Regarding James Wade’s letter “Diagnosis of exploration’s malaise” (T.N.M., Jun. 24/91), I am prompted to add some comments, having managed the Canadian Exploration Incentive Program (CEIP) for 1989 and 1990 in Western Canada.

First, two crucial elements of the diagnosis appear to be missing: the incredible speed with which less-developed countries are revising mining and tax legislation to attract foreign investment, and the transition of centrally planned economies to free-market economies. These two aspects will change the fundamental and traditional role that exploration and mining development has played in the Canadian economy.

I concur that changes in the Income Tax Act would go a long way in making high-risk investments in mining ventures once again attractive.

Suggestions such as “project approval by independent engineers” and “program completion audit by independent professional engineers” should be music to my ears as a consultant. However, the process would add considerable cost and red tape.

To suggest that some independent body provides an assessment of the merits of a particular program is full of pitfalls and liabilities. Even though CEIP had no authority to be judgmental on projects, I could well see the consequences if we questioned the placement of a drill hole or the re-doing of a geochemical survey.

The idea of limiting the number of programs, unless the mineral potential is enhanced to some arbitrary number deserves some further thought. I have personally observed numerous projects where it was clear that prudent management would suggest it was time to “cut and run.”

However, to suggest that some experts can determine that a property’s mineral potential has not been enhanced by the last program(s) is to suggest that most of us don’t know what we are doing if we recommend further work.

Exploration is information gathering; the more you have, the more intelligent are our decisions, whether they are right or wrong.

The two key factors that affect an investment decision in mining ventures are: confidence in the management team and the tax aspect. The latter has been all too dominant at times.

My cure is somewhat different in that I believe the industry should not have a set of arbitrary rules imposed as suggested. Based on my experience, the source of capital (predominantly limited partnerships for flow-through funds) should be the primary technical rule (as it has been). Unfortunately, in most cases, abuses of the past are now in the hands of Revenue Canada and it is the investor who will be called to task, and not the mining company management.

The mining and exploration industry will have to prove to the investing public that it is fully capable of managing its own affairs by prudent decisions. If it can’t, the strictest rules and the most favorable tax legislation in the world will not fix the problem.

J.W. Mustard

Vancouver, B.C.