Local decision-makers more responsive

As far as Fenton Scott can see, there is no light at the end of the tunnel for Canada’s junior mining companies.

Already battered by high interest rates, investor apathy, and a large-corporations tax, the juniors are now faced with stagnant gold prices and increasing restrictions on land access.

“If anything, the strong disincentives are growing,” says the 63-year-old president of the Prospectors and Developers Association of Canada (PDAC). Having survived the first few months of a 2-year term as head of the association, Scott has no illusions about the challenges that face him as representative of a collapsing industry. But he does have a few ideas about how to face those challenges.

“Our biggest job is to get our messages across to the people and the decision-makers,” Scott told the The Northern Miner during a recent interview. But instead of working solely with federal bureaucrats, Scott advocates a stronger voice within provinces and smaller communities “The provincial governments are much more co-operative. They’re closer to reality,” said Scott. He added that the Ontario government, although still finding its feet, has shown a reassuring willingness to listen to the PDAC’s concerns.

Scott also favors a resurgence of the old “grub stake” style of prospecting, whereby individuals or senior companies arm prospectors with supplies in return for a stake in any discoveries. (In the old days, “supplies” referred especially to food or “grub.”)

In light of the tight squeeze on equity financing for juniors, this may be the only way to raise risk capital for badly needed new discoveries. “We’re trying to promote this,” Scott said. “The junior companies are inclined to seek higher risks than seniors and the prospectors can take higher risks again.”

There is certainly no shortage of interest in this age-old profession. Just ask the Ontario government, which has been swamped with applications since introducing its successful Prospectors Assistance Program in 1989. The program, which provides up to $10,000 to individuals active in exploration, has already run out of funds for the 1991 season.

Although many would-be prospectors may be unaware of the fact, grubstakers are also treated favorably under the income tax act.

If a prospector receives shares for a property, he or she does not have to pay taxes on those shares until they are sold. Also, prospectors are allowed to write off the costs of a grub stake for income tax purposes. But while there are still junior companies around to fight for, Scott will be busy taking a stand against some of the onerous regulations affecting the group.

In July, 1989, the federal government introduced a tax on “large corporations” meaning any corporation with taxable capital greater than $10 million. Unfortunately for many cash-strapped juniors, the large amounts of operating capital they were able to raise through flow-through financing is now working against them. Although they are not operators, they are taxable under the new law.

“We have approached Ottawa about the very real problems for junior companies with large capitalizations,” Scott told The Northern Miner. “But Ottawa said, don’t bother us, we know what is right.'”

What angers Scott even more, and prompts him to speak in vivid superlatives, is the Interim Measures Agreement between the federal and Ontario governments and the Nishnawbe-Aski-Nation (NAN). The agreement covers all land within the James Bay and Hudson Bay watersheds — about two-fifths of Ontario, including Timmins and Kirkland Lake.

Until negotiations between the two parties are settled, prospectors must give NAN at least 30 days notice before they are eligible for a work permit to explore the land.

A solution to this land claim dilemma will be at least three years in the making. Meanwhile, the agreement is creating unacceptable delays for explorationists already restricted by a short working season. “This poses a horrendous hardship on junior companies and prospectors. That kind of uncertainty and bureaucratic nonsense is much more detrimental to exploration than the settlement of a land claim,” Scott said. He said he would welcome a quick resolution in favor of NAN, which has given every indication that they would welcome exploration in return for royalties. “Our feeling is that land claims are not really our business, providing we still have the right to prospect.”

But when it comes to any mining-related issues, Scott says the PDAC struggles to reach widespread agreement. “Our members are never going to be unanimous,” he said with a smile. “They are prospectors by nature, free thinkers.” So it came as only a small surprise when Scott was presented with an alternate list of candidates for directorship at the association’s recent annual meeting.

“There was a certain feeling that we were not being tough enough with the government, but we were delighted with the get-tough attitude,” Scott said. “It shows there is a strong interest in what we are doing.”

Despite the small rebellion, the original slate of nominees was voted into office by a slim margin.

Married with four children, Scott has had a long and varied career with the mining industry. Born in Fredricton, N.B., he graduated from the University of New Brunswick in 1950 with an M.Sc. in geology.

After several years of work with both senior and junior companies, as well as a 5-year stint as a consultant, Scott joined Imperial Oil in 1969 as chief geologist, Minerals. In 1972, he was named mineral exploration manager for the large oil company.

In addition to his duties as president of the PDAC, Scott runs several junior mining companies, including La Fosse Platinum Group (TSE) and Louvicourt Gold Mines (CDN). When he’s not working, he can be found racing down the ski slopes or aiming for par on the local golf course.